Judge strikes CMS frailty definition as Medicaid work rules move ahead
A federal court ruling has thrown the Medicaid frailty exemption into sharper conflict just as states prepare to enforce new work requirements. On Oct. 29, U.S. District Judge Richard Stearns in Boston struck down the Trump administration’s narrower definition of who counts as “medically frail” under the new rules, saying the Centers for Medicare & Medicaid Services overstepped its authority and acted contrary to law. The decision narrows one of the most important safety valves in the work requirement structure, especially for adults whose chronic illness, mental health conditions, disability, or treatment burden may make monthly reporting or work hours unrealistic.
The ruling does not stop the broader work requirements from taking effect in January. It does, however, remove the federal definition that tied frailty to a condition that “significantly impairs” a person’s ability to comply. In practical terms, the decision opens the door to broader state discretion and deeper disagreement over how functional limitation should be measured. For physicians, the immediate concern is not abstract legal theory. It is whether a patient with complex disease remains covered long enough to continue treatment.
Indiana and Michigan have already built claims-based exemption systems
Indiana and Michigan had already published details on how they plan to sort patients into exemption categories, and both systems depend heavily on claims data. In Indiana, most adults ages 19 to 64 in the Healthy Indiana Plan must log 80 hours a month of work, school, job training, or volunteering, or earn at least $580 a month, unless exempt. Michigan’s Healthy Michigan Plan uses a similar framework for adults affected by the state’s new work rule.
Both states begin with administrative data, which places physicians at the center of the coding chain whether or not they are asked to make the final decision. Diagnoses entered into claims can determine whether a patient is flagged as medically frail, referred for review, or left to navigate a work reporting process that may not fit their health status. In medicine, the distinction between a coded condition and a lived functional limitation is often wide. A patient can have diabetes, asthma, depression, inflammatory disease, or a malignancy and still struggle to document why the condition makes a work requirement unsafe or impossible.
Indiana’s process is built around a claims-review tool called MARA, short for Milliman Advanced Risk Adjusters. The first tier flags members with a diagnosis on a state list. The second tier weighs qualifying conditions together with treatments, services, or supports. Members the tool misses move to manual review, where a patient, physician, clinician, managed care organization, or the state can refer a case. State clinical staff then review medical records, treatment notes, medication lists, and laboratory results.
A Sept. 30 run of the tool estimated nearly 140,000 of about 475,000 HIP members would qualify through the first two tiers. Indiana also expects nearly a quarter of projected frail members to qualify through disabling mental disorders, a category without a first-tier pathway. Diabetes, meanwhile, no longer counts as frailty in Indiana, even though CMS had used it as an example in each tier of federal guidance. In a claims-based regime, the removal of a common diagnosis can have immediate consequences for access.
Michigan’s data review is broader, but still leaves gaps
Michigan’s approach also relies on claims, health plan encounter data, and selected enrollment information matched against a published list of conditions, treatments, procedures, and equipment. Category 1 conditions qualify on their own. Category 2 conditions need more evidence, such as hospital stays or repeated high-intensity outpatient care. Stays of 30 days or more in a hospital, hospice, nursing facility, or psychiatric facility trigger automatic exemption, and exemptions identified through the data last 12 months.
The state also allows members whose conditions do not appear in the data to self-report through the MI Bridges portal without documentation in 2027. New applicants face the requirement Jan. 1, while current enrollees face it at renewals on or after March 1, 2027. Eligibility checks move to every six months, and retroactive coverage shrinks from three months to one. Those changes will not be invisible in exam rooms. They will alter when patients seek care, how often they renew, and how much administrative friction surrounds every specialist visit, refill, and hospital discharge.
Functional impairment is the clinical fault line
The legal fight centers on a deeper medical problem: claims data are an imperfect proxy for function. A diagnosis code can reveal disease burden, but it often misses fatigue, cognitive slowing, unstable mood, gait impairment, treatment toxicity, or the cumulative effect of polypharmacy. The administration argued that diagnosis alone is too broad, asking whether “asthmatics and diabetics” have a serious or complex disorder if they are not functionally limited. Physicians have countered that many patients with severe disease do not present with neat, codable functional markers until care is already disrupted.
The American Medical Association has argued that the “significantly impairs” standard goes beyond what Congress intended and that claims data often miss functional limits. That concern is not academic for oncology, primary care, psychiatry, nephrology, or any specialty that follows patients with fluctuating capacity. A patient may appear stable in a snapshot visit and still be unable to sustain work hours, keep appointments, or complete paperwork tied to Medicaid renewal. Coverage policy that depends on documentation rather than longitudinal clinical reality will miss those cases first.
One sentence captures the bedside consequence plainly: coding errors can become coverage losses.
Practices now face a documentation burden without being the deciding authority
CMS told Politico in June that physicians are not responsible for deciding who must meet the work requirement; states hold that authority. Yet the burden is still arriving in the clinic. Barbara McAneny, MD, an oncologist and CEO of an oncology practice in New Mexico, said clinicians need very specific guidance and called the process an unfunded administrative burden.
That concern is easy to understand. The patient facing a six-month exemption clock does not need a policy lecture. They need a note that accurately captures the severity, treatment intensity, disability status, and functional consequences of their illness. Practices will need to document chronic illness, mental health conditions, and substance use disorders with enough specificity that claims matching does not erase them. In Indiana, that may also mean referring patients who appear to qualify but are not flagged, then sending records for manual review.
Researchers have urged states to supplement data matching with self- and provider attestation, noting that 34% of Medicaid enrollees report a disability but only 10% qualify through a disability determination. An August survey of 1,225 Medicaid members by Aeroflow Health found that 44% were not prepared to submit the required documentation. Those numbers point to a familiar administrative failure: the people most likely to need an exemption are often least prepared to document it.
The new rules will depend on state implementation details
State officials have already warned that frailty status can change over time. Sunshine Beam, director of Indiana’s Division of Family Resources, said someone medically frail today may not be medically frail by January. The statement reflects the volatility of the new system rather than stability. Health status can worsen, improve, or be misclassified depending on what enters the claims file.
For physicians, the next steps are procedural but consequential. Accurate coding, careful documentation of function, and fast responses to state requests will matter more in the months ahead. Indiana officials say new forms are in development, and Michigan says more information is coming in 2027. The court ruling leaves the federal definition in doubt while the rest of the work requirements advance, and the unresolved question is how many vulnerable patients will lose coverage before the exemption process catches up with their clinical reality.