By: Alexandra Hembrough, Esq., General Counsel, SGS
On Thursday morning, October 29, 2026, U.S. District Judge Richard Stearns ruled in the June 2026 case, Commonwealth of Massachusetts et. al. v. Oz, that CMS’s interim final rule – which added an additional test to the ‘medical frailty’ exemption to the upcoming Medicaid Community Engagement requirements, stating that those with qualifying diagnoses must also show that their diagnosis ‘significantly impairs’ their ability to comply with the Community Engagement requirements – is “beyond the powers of CMS (ultra vires) and thus contrary to the law.” Meaning, Judge Stearns ruled that CMS wrote a limit into the medical frailty exemption that Congress never gave it the power to write.
Judge Stearns’s ruling emphasized that CMS’s interim final rule forces medically frail people to clear unnecessary hurdles to maintain government-funded health insurance coverage and “unlawfully limited who qualifies as ‘medically frail’ by dictating that the exemption applies only if someone’s…[qualifying] condition significantly impairs the individual’s ability to comply with the community engagement requirement.”
Beginning January 1, 2027, those who receive Medicaid benefits through the Affordable Care Act must now meet certain community engagement or work requirements - meaning, these individuals must be enrolled in 80 hours of work, school, or community service each month. The law included, however, exemptions for individuals who are ‘medically frail’ or otherwise have special medical needs (as defined by the Secretary), including individuals who:
are blind or disabled,
have a substance use disorder,
have a disabling mental disorder,
have a physical, intellectual, or developmental disability that significantly impairs their ability to perform 1 or more activities of daily living; and
have a serious or complex medical condition.
Judge Stearns, in his ruling, said that Congress intended those categories to be a floor, not a ceiling, and while CMS can add people to the exemption, it may not remove people Congress put there already or limit their ability to be exempt by adding an additional test.
It is important to note, however, that Judge Stearns’ ruling only blocks CMS’s additional test it outlined in its interim final rule it released in June. Judge Stearns ruled in favor of CMS on the States’ remaining two challenges in the case, claiming that the following two rules are rational:
States may only use claims and encounter data from the 12 months before an application to verify medical frailty.
A person can self-attest to medical frailty once per continuous period of enrollment, and later checks must rely on data or documents.
Therefore, the remainder of the law is not changed by this ruling and will be enforced nationally on January 1, 2027. See The Medicaid Ruling that Turned on One Word for more information, and join us for our webinar this upcoming Wednesday, November 4, 2026, from 1-2pm CST for more information on how the new Medicaid Rules could affect your organization.
