November 21, 2025 • 5 Min Read
Executive Summary By 2027, Medicaid agencies, managed care organizations (MCOs), and provider systems will face a historic compliance test: operationalizing and verifying federally mandated Medicaid work and community-engagement requirements across more than 40 states, each with its own eligibility system, reporting platform, and exemption rules. With between 4-8 million Medicaid adults at risk of disenrollment due to fragmented reporting and administrative complexity—not actual noncompliance—the stakes are high. Without a unified compliance architecture, payers, providers, and vulnerable populations will shoulder the cost of systemic inefficiencies and regulatory exposure.
What’s Changed
Federal Overhaul, State Patchwork
The 2025 One Big, Beautiful Bill Act mandates that Medicaid enrollees verify 80 hours/month of employment or qualifying community engagement beginning in 2027, following CMS’s interim final rule in 2026. Exemptions apply for specific populations, but execution falls on states and state systems vary widely. Most states rely on aging, varied eligibility platforms that already struggled under the COVID unwinding workload. With 40+ states now required to implement these rules—and each building its own processes—the compliance landscape becomes exponentially more complex.
Funding Gaps Undermine Equity
Federal administrative funding tied to work requirements is limited, leaving states unevenly equipped—technically and operationally—to handle new verification mandates. Historical precedents, like Arkansas in 2018, foreshadow what’s at risk: over 18,000 enrollees lost coverage due to reporting failures, not actual work violations.
Industry Implications
- Regulatory Exposure
CMS requires proof of compliance; failure to verify across states risks sanctions, funding clawbacks, and audit failures. - Operational Drag
State-specific rules force payers into maintaining redundant workflows, slowing reporting cycles, and inflating costs. - Provider Strain
Clinicians must now support exemption documentation, diverting time from care delivery. - Member Churn
Inconsistent processes jeopardize coverage continuity, destabilizing provider networks and reducing preventive care access.
RGP’s Point of View
Fragmentation Isn’t a Strategy
Compliance infrastructure must evolve from a patchwork to a platform. RGP advocates for building a Multi-State Compliance Backbone: a centralized integration layer that standardizes rule interpretation, automates verification, and scales effortlessly across jurisdictions.
From 40+ Silos to One System of Record
This is not just a regulatory obligation—it’s a digital transformation imperative. Treating this as a federated integration problem unlocks long-term value: operational efficiency, audit resilience, and member trust.
The Multi-State Compliance Framework
01.
Compliance Mapping
Catalog, normalize, and continuously update rule sets across all 41 states.
02.
Control Library
Standardize controls and map them to each state’s eligibility and reporting nuances.
03.
Integration Hub
Build a unified platform that synchronizes Medicaid, workforce, and exemption data flows.
04.
AI-Powered Verification
- AI/ML models validate employment and flag exemptions.
- Natural Language Processing (NLP) makes state documentation auditable and machine-readable.
- Responsible AI protocols ensure fairness and audit defensibility.
05.
Provider Support
Simplify exemption workflows to reduce administrative load on care teams.
06.
Assurance Cycles
Preempt CMS scrutiny with sprint-based readiness audits across jurisdictions.
Risk of Inaction
Failing to modernize compliance across states means compounding liabilities:
- Mass Disenrollments
Coverage loss due to red tape—not rule-breaking. - Regulatory Blowback
Sanctions, withheld payments, and brand erosion from audit failures. - Cost Overruns
Duplicative processes across 41 states mean higher per-member admin spend. - Network Erosion
Provider networks absorb higher uncompensated care burden as coverage gaps widen. - Equity Crisis
Rural, elderly, and low-literacy populations are hit hardest by fragmented systems. - Technology Stagnation
Without AI, compliance costs will grow year-over-year—cementing inefficiencies.
Where to Start
Now is the moment to move from reactive compliance to proactive strategy.
RGP partners with payers to:
- Build a Multi-State Compliance Backbone that makes fragmentation manageable and auditable.
- Deploy AI-enabled verification tools to automate employment checks and protect member access.
- Integrate Medicaid and workforce systems into a single source of regulatory truth.
- Scale operations with on-demand talent pools across AI, compliance, and data engineering.
2027 is coming fast. Let’s transform this mandate into a modernization milestone. Contact our experts today to learn more or get started.