CMS guidance details how states can apply the Medicaid medical frailty exemption

New guidance from CMS explains how states can operationalize the medical frailty exemption to the Medicaid work requirement.

Per the guidance, the intent is for states to identify medically frail beneficiaries proactively through claims and other existing data to the degree possible, thereby alleviating the administrative burden and risk of coverage loss facing those beneficiaries.

It remains to be seen whether the medical frailty exemption, as initially described in an interim final rule with comment period (IFC) that was published June 3, is on sure footing. A lawsuit filed Sept. 18 in Maryland federal court by physician advocacy groups, individual Medicaid enrollees and a municipality is seeking to have the relevant provisions paused and ultimately vacated before the Jan. 1, 2027, nationwide start of the work requirement.

A successful outcome could cause implementation of the medical frailty exemption to track more closely with the language in the One Big Beautiful Bill Act (OBBBA), which allows for a broader exemption compared with CMS’s regulations.

“We should not and must not be implementing policies that place this already vulnerable population at increased risk of interrupted treatment, disrupted coverage or losing healthcare access altogether,” Jan Carney, MD, MPH, president of one of the plaintiff organizations, the American College of Physicians, said in written comments.

Who qualifies for the Medicaid medical frailty exemption?

The IFC was issued in early June to implement regulations for the Medicaid work requirement, formally known as the community engagement requirement. Congress legislated the requirement as part of the OBBBA.

In the September guidance, CMS reiterates that medical frailty requires both a qualifying condition and impairment of the beneficiary’s ability to comply with the work requirement. The qualifying conditions are:

• Blindness or disability (statutory definition)
• Substance use disorder
• Disabling mental disorder
• Physical, intellectual or developmental disability significantly impairing at least one activity of daily living (ADL)
• Serious or complex medical condition

States cannot expand the medical frailty exemption beyond those five categories but are expected to develop their own lists of sub-diagnoses, disorders and other conditions by which to identify medically frail individuals. A state’s list must be auditable, justifiable and consistent with CMS’s definition, and should be subject to revision over time.

The lists of diagnoses should not be seen to represent a hard cutoff regarding what constitutes medical frailty. A beneficiary should have a reasonable process through which to be considered for the exemption even if the diagnosis is not on the state’s list.

States are encouraged to identify medical frailty using existing data

States should try to establish medical frailty through ex parte verification, meaning they should use information they have on hand rather than asking beneficiaries to prove their eligibility for the exemption. Such data could include adjudicated claims, managed-care encounter data and health information exchange (HIE) data.

“These data sources and any logic or methodologies need to be linked to eligibility and enrollment systems, which involves significant coordination among clinical, IT, policy, data systems, and eligibility operations staff,” the guidance reads. “States may phase-in data sources (e.g., HIEs, etc.) to complement more readily available administrative data sources (e.g., claims and encounter data) to improve data matching processes for identifying medically frail individuals.”

However, beneficiaries may have to supply documentation when those sources are unavailable or the ex parte information shows inconsistencies.

As stipulated in the IFC, states in 2027 can opt to allow beneficiaries to provide self-attestation (under penalty of perjury) whenever a status update takes place. Starting in 2028, self-declaration can apply only once during a beneficiary’s continuous enrollment period. Medical frailty must be reverified at least annually.

CMS states in the guidance, “We also recognize that medical frailty is one of several exclusions [i.e., exemptions] that states will be evaluating to determine if an applicant or beneficiary qualifies as a specified excluded individual and encourage states to design their process in such a way that minimizes administrative burden, considering factors such as the availability of data and the likelihood an individual has reasonably available documentation if data are not available.”

An advisable tactic for states, according to the guidance, is to first seek out other exemptions for which documentation is readily accessible, such as exemptions for parents of a child younger than 14; pregnancy; or American Indian status.

CMS offers states a three-tier framework for medical frailty determinations

The new guidance describes an optional framework for states to use in implementing the medical frailty exemption.

In the three-tiered approach, Tier 1 cases refer to those where existing data are sufficient to assess the condition as significantly impairing a beneficiary’s ability to comply with the work requirement. For example, certain ICD-10 codes could suitably establish medical frailty.

Tier 2 cases would require more legwork, specifically additional evidence of severity or functional impairment (e.g., through data on utilization, medications, durable medical equipment, comorbidities or other claims information).

In Tier 3 scenarios, states would have to proceed to individualized manual review due to an absence of needed documentation. Such processes could entail requests for documentation from beneficiaries, likely meaning their providers. CMS uses the example of patients who have moderately uncontrolled diabetes and early neuropathy but perform all ADLs independently and have no recent hospitalizations or emergency department visits.

In such an instance, “Medical frailty cannot be determined based on administrative data as severity is indeterminate or not likely,” the guidance states. “Manual review would be required before the beneficiary could be classified as medically frail based on diabetes or neuropathy.”

Provider documentation could influence medical frailty determinations

Implications for providers are apparent in the guidance.

Although the ultimate determination on medical frailty rests with state Medicaid agencies, providers’ accuracy in diagnosis coding, encounter submission and documentation of functional limitations likely will influence whether some potentially exempt patients are identified as such.

Among Tier 2 cases, for example, durable medical equipment, pharmacy, rehabilitation and other claims can establish functional impairment where a diagnosis alone is not sufficient.

For Tier 3, CMS cites medical histories, treatment records, progress notes, discharge records, medication lists, diagnostic results, and provider documentation or certification as evidence that may need to be furnished at the request of state Medicaid programs.

“Health systems need to be aware of this medical frailty documentation issue and how they’re incorporating that into their workflows,” Katie Gilfillan, MSW, CHFP, director of healthcare finance policy and education with HFMA, said during a recent episode of the Voices in Healthcare Finance podcast.