Insights

On December 8, 2025, the Centers for Medicare & Medicaid Services (CMS) issued anticipated guidance on Medicaid community engagement requirements, as established in the 2025 budget reconciliation legislation (P.L. 119-21, referred to as OBBBA). This guidance arrives at a pivotal moment, as states begin budget planning and legislative sessions. 

Health Management Associates (HMA) reviewed the guidance in the context of other policy and financing shifts that are affecting the Medicaid program. This article highlights key takeaways, addresses considerations for implementation, and issues for policymakers and healthcare organizations to track. 

Brief Background 

Generally speaking, Section 71119 of OBBBA requires states to implement community engagement requirements as a condition of Medicaid eligibility for individuals in the expansion population ages 19−64 who are neither pregnant nor enrolled in Medicare or any other mandatory Medicaid group. The guidance explains the statutory requirements related to how states verify community engagement, notify applicants and beneficiaries, ensure compliance with federal standards as the January 2027 deadline approaches, and other core components of the policy. 

Starting January 1, 2027, states must require certain Medicaid expansion applicants to demonstrate community engagement for at least one month and may require up to three consecutive months immediately prior to the month of application. If compliance or exemption status is unverifiable at the time of application, states must provide notice and an opportunity to respond. These enrollees will maintain coverage during the response period. States are also expected to establish clear documentation standards and proactive communication processes for applicants and enrollees. 

Three Key Takeaways from the Initial Guidance 

1. Organizations must understand the key dates leading up to January 1, 2027

Limited new funding and tight timelines make January 1, 2027, a critical deadline for implementation. Medicaid organizations need to consider, however, the full sequence of events leading up to that date, including providing required advance notification to individuals about the changes and their eligibility status. Documentation and progress tracking are essential, both for compliance and to demonstrate that CMS deadlines are being met. 

Although the guidance outlines notice and response requirements, it leaves open critical questions about how states will prevent procedural disenrollments, manage increased appeals volume, and mitigate due process legal risk if eligibility and verification systems fail at scale. 

2. Medicaid managed care organizations (MCOs) have a limited role in decision-making but are key to engagement

Medicaid managed care organizations are prohibited from making the determination that an individual has met the community engagement requirement; however, they have an opportunity to support individuals in a range of ways. Recent changes under OBBBA give plans clearer authority to conduct proactive outreach on eligibility and renewal requirements, which strengthens their ability to help members navigate deadlines, reporting expectations, and documentation needs. This capacity will be important because a lack of predictability in enrollment and churn can meaningfully affect the risk profile of plans and, as a result, increase volatility in provider negotiations. 

Plans, providers, community organizations, and state and local agencies can collaborate to develop effective engagement strategies, aligned messaging, and ongoing touch points. Helping members understand what is required—and when—and connecting them with resources to take action will be essential for successful implementation. 

3. States and partner organizations need a global view of IT changes and functionality

CMS emphasizes that the eligibility determinations for the community engagement requirements should function seamlessly with new and existing system functionality. Meeting this expectation requires states to have a deep understanding of whether and how policies can be operationalized in their systems without adding administrative burden for individuals and others that engage with the systems. 

Meeting federal expectations may be particularly challenging for states with county-based Medicaid systems, as implementing these requirements across multiple jurisdictions may necessitate a longer transition period. The OBBBA includes $200 million in total grant funding for implementation activities in 2026, and states can apply for enhanced federal IT funding at the 90/10 or 75/25 rates for certain costs and activities. Federal resources are otherwise limited, so it is critical that states and partner organizations establish a well-defined strategy to maximize available funding to support the system changes required to implement OBBBA eligibility requirements. 

What to Watch 

The guidance arrives as many governors begin releasing their budget proposals and planning for upcoming legislative sessions. Although the guidance provides clear information on the overarching parameters and a preliminary road map, certain critical details are forthcoming. State budgets should reflect the requirements and anticipate the need for rapid system and process development. 

CMS will issue an interim final rule by June 1, 2026, and states must implement the community engagement requirement no later than January 1, 2027. States must comply with these requirements and act quickly to develop, pay for, and implement new systems, policies, and processes—ideally before the latter half of 2026. 

CMS is developing additional guidance in several areas, including: 

• Use of reliable data sources and how to satisfy the definition of engagement 
• Implementation of the requirement to conduct renewals every six months for certain individuals 
• Specific documentation requirements for community engagement 
• Potential role that managed care plans can play unrelated to determining beneficiary compliance 

States and Medicaid organizations should closely monitor these developments and be prepared to adjust their strategies as new information becomes available. 

Connect with Us 

HMA’s experts are trusted problem solvers, partnering with states to navigate the complexities of community engagement planning, even as requirements and details continue to evolve. Drawing on deep state and federal experience, as well as lessons learned from previous large-scale eligibility reforms, our team helps Medicaid-focused organizations quickly design and implement practical, context-specific strategies that align with OBBBA requirements. Whether it’s strategy development, system design, or crafting effective messages, HMA brings a flexible, solutions-oriented approach to maximize continuity of coverage and meet each client’s unique needs. 

Contact our featured experts below to discuss how we can support your team in navigating these changes and building effective engagement strategies. 

On November 5, 2025, the Centers for Medicare & Medicaid Services (CMS) announced that all 50 states had submitted applications to be considered for participation in the Rural Health Transformation Program (RHTP) created under the Budget Reconciliation Act of 2025. States proposed a range of initiatives to strengthen innovation, modernize rural health infrastructure, and address persistent disparities in healthcare access, workforce, and outcomes in rural communities. Funding decisions are expected by December 31, 2025.

The RHTP represents a major federal investment in rural health transformation. For providers, community partners, and other interest holders, applications offer valuable insight into state priorities, partnership models, and the types of initiatives likely to receive funding.

Many state feedback processes are ongoing for providers, community organizations, and other partners. Even after submission, states are refining their proposals and negotiating with CMS. Organizations should review available materials and take advantage of open comment periods or stakeholder meetings to help states prepare for a strong program launch in early 2025.

Health Management Associates (HMA) reviewed state overviews and applications, where available. In this article we highlight key takeaways from this review and the information available through HMA’s Information Services (HMAIS).

Key Issues and Trends

• Breadth of initiatives and focus areas. State initiatives meet the specific categorical CMS requirements and include a range of innovative models, ideas, and investments in building out pilots and infrastructure. The number of initiatives that states have planned also vary, with most proposing four or five, but at least one state has developed 11 planned programs. Many initiatives involved remote patient monitoring and telehealth, including tele-specialty clinics, tele-psychiatry hubs, tele-intensive care unit support, among others. Several states proposed to establish and enhance models involving emergency medical services (EMS). Proposals also include a range of investments in electronic health records (EHRs), data infrastructure, and interoperability to specific provider types and generally in rural communities.
• Subgrant and Partnership Opportunities: Many applications include subgrant programs or call for partnerships with hospitals, clinics, community-based organizations, Tribal entities, and educational institutions. Reviewing state applications can help organizations understand the timelines for upcoming funding and partnership opportunities as well as expectations associated with the state initiatives.
• Diverse governance and implementation models: The tracker reveals a range of governance structures, from state-led advisory boards and interagency task forces to regional hubs and cross-sector partnerships. States are leveraging advisory councils, technical assistance partners, and community engagement frameworks to guide implementation and oversight.

Some states have yet to submit their full applications but still have opportunities to engage and shape state efforts through various methods. Many states have kept open public feedback mechanisms even as they negotiate with CMS on budgets and program details. This situation creates an evolving landscape wherein stakeholders must monitor multiple channels for updates and opportunities.

Why This Matters

HMAIS’ RHTP Inventory provides states, rural communities, and their partners an actionable road map for state initiatives. This inventory covers focus areas for state initiatives, governance models, funding requests, partnership opportunities, and other key information. This tool helps organizations monitor trends and identify where to engage. HMA will continue to follow state activity in this program as states move forward.

Beyond the tracker, HMA offers deep regional market expertise—our consultants understand state-specific priorities and can provide tailored analysis and strategic planning to position your organization for success. Whether you’re exploring telehealth investments, building partnerships, or preparing for new initiatives in rural health transformation, our team can help you navigate the details and seize opportunities.

For questions about the HMAIS RHTP Inventory and to connect with our state-market leads, contact our experts below.

As of November 5^th, states have submitted their applications for the Rural Health Transformation Program (RHTP) – a major federal initiative aimed at addressing persistent healthcare challenges in rural communities. Authorized by the 2025 budget reconciliation bill (OBBBA), the RHTP will distribute $50 billion over the next five years to help rural communities improve healthcare access, quality, and outcomes. All 50 states are eligible. 

This submission marks a key milestone, but it’s just the beginning. The Centers for Medicare & Medicaid Services (CMS) is reviewing applications, and ongoing conversations between states and CMS will shape the final design and implementation of each state’s program. Awards are expected by December 31, 2025, and states – and their partners – must be ready to move quickly early in 2026. 

States must now prepare for a fast-moving design and implementation phase, building on initiatives already underway and refining plans and budgets based on CMS feedback. States will need to staff up quickly and launch new projects in early 2026. With tight fiscal timelines and the risk of forfeiting funds, agencies and community organizations must act decisively. It will be crucial to demonstrate impact on health outcomes within the first half of 2026 will be critical.

Organizations across the healthcare industry should closely monitor how states plan to operationalize their proposals, as these strategies will shape funding flows and partnership opportunities. 

Many state agency leaders will be attending the National Association of Medicaid Directors (NAMD) annual conference November 18-21, 2025. The RHTP applications will be a big topic of conversation, with states sharing ideas and stakeholders discussing challenges and opportunities that could be addressed with RHTP funding. HMA will have a strong presence at NAMD and will be gathering important insights on the federal expectations, program content, and operational strategies that states put in their applications.  

Organizations interested in learning more about their state’s direction – or in becoming part of the implementation conversation – can reach out to HMA experts listed below.

What’s next with the RHTP?

Any state that is approved for RHTP funding requires:

• A strong management structure at the state level, including dashboards and oversight of programs funded through this award
• Defined goals and sustainable initiatives in chronic disease management, primary care, behavioral health, maternal health, digital innovation, workforce initiatives, and other topics
• Demonstrated outcomes that evidence improvements in rural access and health outcomes, as well as the care experience of rural residents

HMA is ready to help. Our team brings deep expertise in tackling the complex challenges of delivering quality healthcare and human services to rural communities. We understand the challenges rural providers face—from workforce shortages and service gaps to transportation hurdles and socio-economic barriers—and can help states and organizations navigate complexities of implementation.  

With broad experience, HMA is a national leader in healthcare consulting, with a multidisciplinary team of over 700 experts experienced in policy, finance, clinical services, analytics, and community engagement. We help rural organizations act decisively and efficiently, meeting the strict deadlines set by the RHTP and minimizing risks such as funding claw-backs. From actuarial and financial skills to clinical and operational expertise, policy, and analytics, HMA can support successful implementation of your State’s Rural Health Transformation program.

Related resources:

• Rural Health Transformation Program Represents a One-Time Opportunity to Reshape Rural Care
• HMA knows rural.
• The Rural Health Transformation Program: Options to Address the Maternity Care Crisis
• HMA toolkit and webinar to advance health equity & access for rural dually eligible individuals
• HMA’s Experts Support States in Rural Health Initiatives

As of October 22, 2025, all but two states—North Carolina and Pennsylvania—had enacted budgets covering fiscal year (FY) 2026, even as the federal landscape has shifted dramatically throughout the year. In particular, passage of the 2025 Budget Reconciliation Act (OBBBA) and the ongoing federal budget impasse are creating significant downstream pressures on state budgets and the programs they support.

A new report from Health Management Associates Information Services (HMAIS) examines enacted state budgets. Of the 48 enacted budgets, 16 cover the 2025‒27 biennium, and three states—Kentucky, Virginia, and Wyoming—approved budgets in 2024 for the FY 2024‒26 biennium.

The HMAIS report highlights state Medicaid funding priorities, initiatives states are pursuing to adapt to new federal Medicaid and other healthcare policy changes, and reforms to strengthen and ensure the sustainability of programs, particularly in states that expect a reduction in the federal share of their Medicaid program.

OBBBA’s Impact on State Budgets

Congress has yet to reach agreement on the federal fiscal year 2026 spending bills, and there are emerging signals of the challenges this impasse will create for states and federally funded public services. For example, this week the US Department of Agriculture’s Food and Nutrition Service notified every state that Supplemental Nutrition Assistance Program (SNAP) benefits will be withheld because of the funding lapse. This unprecedented situation puts immediate pressure on states and community organizations, which may need to intervene to fill gaps in essential services and benefits.

In addition to the funding impasse, OBBBA introduces major changes, particularly for the Medicaid program, including:

• Medicaid Community Engagement/Work Requirements: All states must implement these requirements for certain Medicaid members by December 31, 2026, requiring rapid infrastructure and system changes.
• Eligibility and Redetermination: States must conduct Medicaid eligibility redeterminations every six months for expansion populations, with new verification requirements and narrowed definitions for “qualified” immigrants. States will need to pressure test their systems for increased volume and may need additional capacity to prevent and minimize backlogs.
• Cost Sharing: By 2028, states must apply a cost sharing requirement for Medicaid expansion adults with incomes above 100 percent of the federal poverty level, with some service exemptions. In 2026, states will need to begin efforts to ensure their systems can track this requirement.
• Provider Taxes and Payments: Freezes on provider tax programs, phased reductions in allowable tax rates, and caps on state-directed payments will reduce flexibility and funding.

In addition, the Rural Health Transformation Program and new federal drug pricing initiatives present both opportunities, such as new funding streams, and risks, including administrative complexity and compliance expectations.

Given the scope of federal changes, states face urgent decisions. They must quickly assess and act on these opportunities, often without dedicated budget allocations.

These federal changes, combined with the budget impasse, are forcing many states to revisit approved budgets, adapt policies, and plan for new initiatives and revise programs that were already in effect—often within short timelines and with limited resources.

State-Level Challenges and Adjustments

Notably, most states enacted their budgets before the passage of OBBBA. As a result, these budgets do not fully account for the new federal requirements, funding changes, and administrative expectations that OBBBA introduces. While many OBBBA provisions will not take effect for at least a year, states must now accelerate planning and make rapid adjustments to comply with new mandates. For example, states are expected to expediently and efficiently implement systems and policies to ensure compliance with OBBBA’s statutory requirements, particularly for the Medicaid program.

HMAIS has examined state budgets that will guide states through the next fiscal year, while also watching closely how they respond to new demands during the first full state legislative cycle under OBBBA.

The HMAIS report describes a mix of budget conditions and actions. Many states continue to invest in ongoing healthcare priorities as well as new initiatives, including targeted rate increases for behavioral health, dental, and maternal health services. In addition, states are addressing inefficiencies in program administration broadly. In healthcare specifically, they are revisiting approaches to financing healthcare service delivery to drive more value from organizations, such as implementing alternative payment models in Medicaid programs, as well as considering tools to improve patient outcomes and consumer experiences.

States are using a variety of tools in their Medicaid budgets to manage these pressures, as well as implementing more general cost-reduction and efficiency measures, including:

• Special Legislative Sessions. Some state legislatures, including Colorado’s and New Mexico’s, have reconvened to address emerging gaps.
• Hiring Freezes. Several states, including Alaska, Colorado, Maryland, Massachusetts, New Hampshire, and Washington, have announced hiring freezes, which could complicate OBBBA preparation efforts.
• Pausing or Ending Planned Programs and Benefit Coverage. Oregon announced that it will end its juvenile justice Medicaid reentry program to conserve funding. North Carolina will not cover new weight-loss drugs because of its budget shortfall. The HMAIS report indicates that officials in other states also have signaled that they are planning for similar updates to their programs if required to address budget shortfalls.
• Medicaid Provider Rate Updates. Colorado rolled back a planned Medicaid provider rate increase, while Idaho is decreasing all Medicaid provider rates by 4 percent.
• Coalitions and Advisory Groups. Other states, including Rhode Island, are convening groups charged with analyzing how the federal cuts may affect their state programs and advising the legislature on feasible responses to the changed landscape.

What to Watch

Healthcare organizations are essential partners as states navigate the current federal budget uncertainty and implement OBBBA requirements. Given the challenges cited above, healthcare organizations should be prepared to collaborate and position to anticipate future needs as the exact components of the various policies are in development.

Recommendations for states and healthcare organizations include:

• Do not delay planning. While federal policymakers are developing guidance and regulations, the OBBBA language provides significant information on what states need to do and initial expectations for reporting. States and their partners should be developing options and contingency plans to make expeditious decisions once details are available.
• Monitor and anticipate state actions and develop responses that are ready to go if needed. For example, states may need to make rate reductions, limit enrollment for optional programs, and communicate with beneficiaries about new requirements. Partners should plan to adapt to these changes and assist providers and beneficiaries as needed.
• Prepare for changes in workload. States will need to design, develop, implement, and report on new Medicaid eligibility and enrollment requirements. They will need a workforce that is trained and can read into the policies, systems, and related needs. States will expect their partners to collaborate on efficient approaches to meet workload demands.
• Engage with state officials. States need thoughtful partners to manage and implement the forthcoming changes that will affect Medicaid partners and beneficiaries. Healthcare organizations should bring experience and data-informed ideas and input to facilitate state approaches and decision-making.

Connect with Us
With federal funding reductions and ongoing uncertainty at the national level, states need to pay heightened attention to the frontline of essential healthcare and human services, implementation of OBBBA, and means of addressing gaps left by federal delays. As we approach the 2026 election year—with many governors up for reelection—state budgets will serve as a blueprint for leadership and policy priorities in the next cycle.

HMA is on the frontlines, working with states and healthcare partners to navigate these complexities. HMA has expertise, tools, and insights—from budget contingency planning supports to analysis of public coverage program enrollment and market insights.

The full report is available to HMAIS subscribers. For questions contact our experts below.