A technical mismatch sits at the center of the Medicaid medical frailty exemption, and it will help decide whether seriously ill adults keep their coverage automatically or have to prove their limitations by hand.
Federal rules require states to check claims and encounter data from the preceding 12 months before asking an enrollee for anything. But the standard those records must satisfy is functional. Under the interim final rule, states must consider not only whether a person falls into one of the five statutory frailty categories, but also whether the condition significantly impairs the ability to meet the community engagement requirement. A diagnosis alone is not enough.
Claims data were never built to answer that question. A billing record establishes that a clinician diagnosed a condition and delivered a service. It does not record whether the patient can stand for a shift, tolerate a commute, or work 20 hours a week between infusions. The rule requires inferring capacity from records documenting care.
The Distance Between a Billing Code and a Person's Day
The rule requires states to build lists of qualifying conditions, generally in the form of health care code sets, and says those lists will be auditable. Nebraska, the first state to implement the requirement under the 2025 law, published an index of qualifying conditions that runs to roughly 300 pages and thousands of ICD-10, CPT, and HCPCS codes, covering cancers, HIV, diabetes, heart disease, and certain mental health and substance use conditions.
Two people can carry the identical code and live entirely different lives. Well-controlled type 2 diabetes and diabetes with advanced neuropathy and vision loss share a diagnostic family. So do early-stage cancer in remission and metastatic disease under active treatment. The code captures the first fact and none of the second.
Federal officials acknowledged the limit by making clear that diagnosis alone cannot verify medical frailty. The rule offers only high-level examples of what states might do instead, such as algorithms that assign acuity scores from administrative claims, or diagnosis codes combined with utilization, prescription drug, and durable medical equipment data. Utilization is a proxy: frequent hospitalizations suggest a harder illness course. It remains a proxy, and the rule does not set criteria for measuring severity or capacity.
Groups the Records Are Least Likely to Find
KFF's analysis of the exemption identifies where automated determination is most likely to fail, and the pattern is consistent: the exemption will be hardest to verify for exactly the people whose conditions are least visible in billing records.
New applicants and recent enrollees have little or no claims history in the state's system. Someone diagnosed with a serious illness six weeks after enrolling has a thin file regardless of how sick they are.
People with functional limitations and people with behavioral health conditions are specifically harder to identify from claims. Physical function is rarely coded at all, and serious mental illness may be recorded inconsistently. The rule also treats substance use disorder as qualifying regardless of whether someone is in an active treatment program, while excluding people in active recovery for five or more years.
Coding practice adds variation that the enrollee cannot control. Providers do not code uniformly, and a state's list may not include the specific code a clinician chose. A person's exemption can trigger a documentation habit at a clinic they visited months earlier.
The rule also narrowed which conditions qualify at all. Federal officials declined to let states exempt everyone with cancer, HIV, Parkinson's disease or multiple sclerosis as a category, and prohibited states from adding categories of their own, KFF noted. Several states had been building lists on the opposite assumption.
The Burden That Shifts to Patients and Clinicians
When the data cannot resolve the question, the work moves to the household. States may accept self-declaration through 2027 where no reliable information is available. Starting in January 2028, states may accept a self-declaration of medical frailty only once during an enrollment period; documentation is expected at renewal, typically six months later. States must also reverify frailty status at least every 12 months, even for conditions unlikely to change.
Nebraska's approach illustrates the sequence. The state reviews claims roughly 90 days before the end of an enrollee's eligibility period and treats the person as exempt without further action when qualifying codes appear. When claims and other data sources cannot settle it, the enrollee submits a self-declaration form describing the condition and identifying a treating provider.
For clinicians, the functional standard changes what an attestation says. A letter confirming a diagnosis will not satisfy a rule that asks about capacity. Providers may be asked to state that a condition significantly impairs a patient's ability to complete required activity hours, a judgment that sits closer to disability determination than to routine care documentation. When New Hampshire tried a similar approach under an earlier work requirement, enrollees struggled to obtain exemptions in part because primary care providers resisted signing forms declaring patients unable to work.
The people least able to absorb that burden are the ones the exemption exists for. Completing forms, obtaining a provider letter, and tracking a submission are administrative tasks, and administrative tasks are harder during active treatment, a psychiatric crisis, or a disease flare.
Practical Preparation While the Rules Settle
Enrollees who believe they qualify should not assume the state will automatically find them. Keeping a current list of diagnoses, treating clinicians, and recent hospitalizations makes a self-declaration or provider attestation faster to complete when requested.
Raising the question at a routine appointment before the requirement takes effect is more useful than waiting. A clinician who knows an attestation may be needed can document function in the chart in advance rather than reconstructing it later.
Nobody should stop treatment, skip appointments, or change medication because of an eligibility rule. Free enrollment assistance is available through navigators and community health centers, and in most states, legal aid organizations handle Medicaid appeals at no cost. An enrollee who receives a denial has appeal rights, and filing within the state's deadline is what preserves them.
Significant uncertainty remains. A coalition of 26 states is challenging the rule in federal court, arguing, in part, that officials narrowed the definition of frailty beyond what Congress wrote, and a judge declined to pause the requirements while litigation proceeds. States have not finalized how strictly they will read the functional standard. How many people the claims-based screen actually catches will not be measurable until states report their first determinations.
Key Questions Answered
What is the medical frailty exemption? A mandatory exclusion from Medicaid work requirements for people whose qualifying condition significantly impairs their ability to complete the required activity hours.
Why is a diagnosis not enough? The federal rule ties the exemption to functional capacity as well as condition. States must consider whether the person is impaired in meeting the requirement, not only whether a condition exists.
How are states supposed to verify it? By first checking claims and encounter data from the preceding 12 months, then requesting information from the enrollee only if the data cannot resolve the question.
Who is hardest to identify from claims? New applicants with thin records, people with functional limitations, and people with behavioral health or substance use conditions, which are coded inconsistently.
Can enrollees simply attest? States may accept self-declaration through 2027 when reliable data are unavailable. From January 2028, self-declaration of frailty is generally accepted only once per enrollment period.
What might a clinician be asked to provide? A statement addressing capacity rather than diagnosis, describing how the condition impairs the person's ability to meet the activity requirement.
Is any of this final? No. A coalition of 26 states is challenging the rule, and states are still deciding how strictly to apply the functional standard.
