CMS Provides States Three-Tiered Framework to Determine Medical Frailty Exemptions from Medicaid Work Requirements

Centers for Medicare and Medicaid (CMS) recently released new guidance for states on the medical frailty exclusion from the new Medicaid work and community engagement requirements. In July 2025, H.R. 1(P.L. 119-21), also known as the One Big Beautiful Bill Act, introduced community engagement requirements for certain Medicaid enrollees. To satisfy this requirement, applicable individuals ages 19 through 64 must engage in at least 80 hours per month of qualifying activities, including employment, community service, participation in a work training program, or attendance at school on at least a part-time basis. States have until January 1, 2027, to implement the new requirements.

Individuals who are medically frail, including those with a serious or complex medical condition, disabling mental disorder, substance use disorder, significant disability, or who are blind or meet the Social Security Act disability standard, are exempt from these requirements. However, there is still some ambiguity around what constitutes medical frailty.

To assist states with implementation, CMS issued new guidance that confirms that states may use diagnosis codes, as well as combinations of claims, utilization, pharmacy, DME, service, and other clinical data, to identify individuals as medically frail. In this new guidance, CMS creates a three-tiered verification framework that states have the option of using to determine medical frailty.  

• Tier 1 conditions are those from which the state can confirm that the individual’s ability to comply with the community engagement requirement is significantly impaired based on ICD-10 code data.
• Tier 2 consists of conditions that may indicate an individual is medically frail but additional information is needed to determine if the condition significantly impairs the individual’s ability to comply with community engagement, such as by assessing severity or functional status (e.g., elevated acute care utilization, high-risk polypharmacy, use of certain durable medical equipment) or other factors indicating impairment (e.g., co-morbidities, chronic conditions, acute or temporary conditions like injuries or surgery).
• Tier 3 means there is insufficient OR no information or data to assess medical frailty based on Tier 1 / Tier 2 criteria alone. This should trigger a manual individualized review process where additional documentation may be required prior to deciding on exclusion. The type of documentation may include, but is not limited to:
  • Health records such as medical history, treatment records, progress notes, discharge paperwork, medication lists, and lab or other diagnostic test results;
  • Provider documentation or certification;
  • Managed care plan care management information; and/or
  • Level of care or functional assessment information that is not in a state’s administrative data.

CMS explains that states are not mandated to adopt this tiered system, although they may elect to do so. To learn more about the changes coming to Medicaid in Pennsylvania in January 2027, including the new work and community engagement requirements, please review the Medicaid resources found on the Pennsylvania Department of Humans Services website.