Vermont Business Magazine As part of a coalition of 23 other attorneys general and two governors, Attorney General Charity Clark today announced a lawsuit over the Trump Administration’s unlawful implementation of new Medicaid work requirements included in the One Big Beautiful Bill Act, HR.1. Specifically, the lawsuit challenges provisions of an interim final rule published by the U.S. Department of Health and Human Services (HHS) and Centers for Medicare & Medicaid Services (CMS) on June 3, 2026.
Medicaid is the nation’s safety net health care program for low-income Americans and is jointly funded by states and the federal government, with the federal government providing at least 50% of the cost of services. The coalition is seeking to block implementation of the interim final rule’s illegal provisions and to have them ultimately struck down.
“This rule unlawfully forces Vermonters with serious medical conditions to meet new work requirements in order to maintain Medicaid coverage, despite Congress’s clear statement that they would be exempt,” said Attorney General Clark. “CMS cannot create a rule that is contrary to the law Congress passed. If implemented, some of the most vulnerable Vermonters will lose Medicaid coverage they are legally entitled to. The impact will not only be devastating for these individuals; it will also drive up health care costs in our state.”
Congress created exemptions from Medicaid’s work requirements to ensure that people with serious illnesses and disabilities do not lose coverage or face interruptions in care. Despite months of working with states on implementation, CMS surprised states with the interim final rule, “Community Engagement Requirement for Certain Individuals,” which adopted a new interpretation of key terms like “medically frail” and makes it harder for medically vulnerable individuals to be excused from the work requirements.
While the work requirement provision applies beginning January 1, 2027, states must notify Medicaid recipients about these changes by August 31, 2026, and need significant lead time to prepare those communications. They cannot wait for CMS to address the deficiencies through the ongoing rulemaking process. States have already made substantial investments in reliance on the plain language of HR.1 and CMS’s prior guidance and now face the risk of harsh financial penalties for noncompliance with the interim final rule.
The interim final rule makes other changes that increase administrative burdens, create unnecessary red tape, and put eligible people at risk of losing their health coverage — including those who are already working or qualify for an exemption. The rule disregards substantial evidence that should have been considered, fails to adequately evaluate reasonable alternatives, and does not give states clear or workable guidance. Past Medicaid work requirement programs have shown that added red tape causes eligible people to lose coverage, placing greater strain on state Medicaid programs, safety net providers, and emergency rooms, while increasing costs as more medically frail residents become uninsured.
In today’s lawsuit, the coalition alleges that the interim final rule:
- Unlawfully narrows Congress's protections for medically frail Medicaid recipients.
- Violates the Administrative Procedure Act by ignoring substantial evidence that work reporting requirements cause eligible individuals to lose health care coverage because of administrative barriers rather than a failure to work.
- Fails to adequately consider the significant harms that will be imposed on states, Medicaid beneficiaries, healthcare providers, and state health care systems.
- Unconstitutionally coerces states by imposing new compliance requirements after states had already begun implementing HR.1 based on the statute’s plain language and CMS's prior guidance.
Attorney General Clark is joined in the lawsuit by the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Hawai‘i, Illinois, the governor of Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, the governor of Pennsylvania, Rhode Island, Virginia, Washington, and Wisconsin.
This lawsuit is the 53rd case Attorney General Clark has brought against the Trump Administration since President Trump took office in January 2025. For more information on actions taken by the Attorney General on behalf of Vermonters, visit the AG's website.
6.29.2026. Attorney General’s Office | 109 State Street | Montpelier, VT 05609-0101 | ago.vermont.gov
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