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The short answer: Nebraska went first, and your census clock started May 1
Nebraska began enforcing Medicaid work requirements on May 1, 2026, and behavioral health operators in Omaha, Lincoln, and Kearney have roughly 60 to 90 days before census, AR aging, and denial rates start moving the wrong direction. The first meaningful wave of disenrollments will hit claims in Q3 2026, tied to renewals ending July 31 and after.
The trigger is federal, not state. Governor Jim Pillen and CMS Administrator Dr. Mehmet Oz announced in December 2025 that Nebraska would implement H.R. 1’s community engagement requirements roughly eight months ahead of the federal January 2027 deadline. Pillen signed a letter to CMS detailing Nebraska’s intent to implement requirements by May 1, 2026.
Here is the rule in plain terms. Per Nebraska DHHS: “Starting May 1, 2026, members and applicants eligible under Medicaid expansion will have to meet work requirements to keep or get Medicaid coverage.” Adults ages 19 to 64 in the expansion population (Heritage Health Adult) must document 80 hours in a calendar month of qualifying activity, or earn at least $580 in a calendar month, or sit inside an exemption category.
The scale is not theoretical. As of March 2025, there were about 72,000 expansion enrollees in Nebraska who could be affected by the new requirements. The Center on Budget and Policy Priorities projects that around 25,000 people are projected to lose Medicaid coverage from the two provisions, equivalent to a 35 percent decline in the Medicaid expansion population. For SUD and mental health programs in those three cities, that is a census problem with a known fuse length.
Arkansas remains the closest historical comparison. By April 2019, when a federal judge put the policy on hold, 18,000 adults had already lost coverage. Researchers at the Harvard T.H. Chan School of Public Health found the policy did not increase employment over eighteen months of follow-up. The losses were a paperwork failure, not a behavioral one.
Exemption pathways exist on paper. Your admissions team makes them real
Nebraska’s rule includes a medically frail exemption and pathways covering people with substance use disorder and serious mental illness. Neither is automatic.
Under H.R. 1, states must verify individuals’ work or exemption status at application and at every renewal, and KFF’s summary of the reconciliation law confirms that the law requires states to verify at application and at renewal that individuals in the ACA expansion group meet work requirements (80 hours of work activities per month) or exemption criteria. Expansion adults face redeterminations every six months. Twice-a-year exposure to the same paperwork failure that sank Arkansas.
A patient sitting in your Level 3.5 clinically managed residential program, or your Level 2.5 partial hospitalization program (which is outpatient, full stop), does not get exempted because they walked through your door. They get exempted because someone on your admissions or UM team submits the medically frail attestation or hardship documentation to DHHS inside the window. Nebraska’s process includes a list of specific diagnostic codes that an individual must have in their medical records in order to provide an attestation to the Department of Health and Human Services, which then must be reviewed and approved. The list can be amended by DHHS, and the Department may ask for additional supporting documentation.
Miss the window and the patient is disenrolled. Per the Governor’s Office release: “Individuals found non-compliant will receive notice and have 30 days to meet the requirement or claim an exemption before denial or disenrollment.” Thirty days is not a generous window when your patient is in active withdrawal management or has just stepped down to residential.
Arkansas operators learned this the hard way. Providers delivered care in good faith and then ate 30 to 45 days of services because eligibility had quietly terminated. CMS issued an interim final rule in June 2026, and CMS Medicaid Director Dan Brillman said, “If your condition significantly impairs your ability to engage in work and the requirements, then you are likely not subject to the work requirements”. Self-attestation alone will not carry the day. Build the exemption submission into intake. Not into discharge planning. Intake. Day one, next to the ROI and the financial responsibility form.
Pro forma stress tests: what to actually model
If your pro forma assumes a static Medicaid mix, throw it out.
The federal macro is unambiguous. KFF, citing CBO, reports that over ten years, work requirements are estimated to reduce federal Medicaid spending by $326 billion, representing the largest share of the estimated $911 billion in total Medicaid cuts included in the law. CBO’s earlier analysis estimates that 18.5 million people will be subject to work requirements each year, and in 10 years, 5.2 million fewer adults will be enrolled in Medicaid. The Urban Institute, cited by CBPP, projects 4.9 million people are projected to lose Medicaid coverage in 2028 from H.R. 1’s new mandate, and even more people (8 million on average) will lose Medicaid coverage in 2028 due to the combination of work requirements and the megabill’s burdensome requirement that eligibility be redetermined more frequently.
For our Nebraska clients with 40 percent or higher Medicaid concentration, we model three scenarios on the expansion book:
- 12% coverage loss over 12 months (conservative, adjusted downward from Arkansas because Nebraska’s automated verification appears broader)
- 22% loss (mid case, aligned with CBPP’s projection of a 35% expansion-population decline blended across a Medicaid book that is not 100% expansion)
- 30% loss (upper end, consistent with the Urban Institute estimate that about 25,000 Medicaid enrollees in Nebraska could lose their health insurance under the new rules, or about 36% of those subject to the restrictions)
At a 22 percent coverage loss, a 60-bed residential program billing an average $625 per diem on Medicaid sees roughly $1.8M in annualized revenue exposure before you factor in the increased denial rate from eligibility lapses. Days in AR will stretch. We tell clients to budget for days in AR moving from the high 30s into the mid 50s during the first two quarters of implementation, because eligibility verification will be the single largest source of new denials.
For feasibility studies on new builds or acquisitions in work-requirement states, we now require a coverage-churn sensitivity layer. If the deal does not pencil at a 20 percent Medicaid attrition assumption on the expansion book, the deal does not pencil. AHS does not work in California or New York, but the Florida, Tennessee, and Ohio operators we serve are running the same math.
Intake, UM, and payer communication: the workflow changes that actually matter
Three concrete changes your team can implement this quarter.
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Run a real-time eligibility check at admission, then again on day 15 and day 30 of any episode longer than two weeks. DHHS is phasing enforcement by renewal date, not all at once. Per DHHS statements to Nebraska Public Media: “Members with renewal dates in May or June 2026 will not be subject to the requirements. The first group impacted will be those with eligibility periods ending July 31, 2026, with phased implementation continuing through June 2027.” Most billing teams check eligibility once at admission and assume the coverage holds. That assumption is now wrong.
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Designate a single staff member, usually inside UM or admissions, as the exemption submission owner. Their job is to file the medically frail or hardship exemption within 10 days of admission for every Medicaid expansion patient. Track it like you track prior auths. Same urgency, same accountability.
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Open a written line with your Nebraska Medicaid managed care plans (Healthy Blue, Nebraska Total Care, Molina). Ask them, in writing, how they intend to handle claims for episodes that span an eligibility termination tied to work-requirement non-compliance. Get the answer in writing. When the first denials hit, you want a documented payer position to appeal against.
One more piece worth flagging. Nebraska DHHS is running this rollout with no plan to hire new staff members to assist with Medicaid enrollment, and no new state funding allocated to support the additional verification. Sarah Maresh, director of healthcare access at Nebraska Appleseed, said, “We already have in Nebraska significant error issues and processing times, so this is not going to impact just Nebraskans with Medicaid expansion coverage. Everyone with Medicaid is going to see those impacts.” Parity arguments under MHPAEA may also apply where exemption administration is more burdensome for behavioral health conditions than for medical ones. Build a clean documentation trail now. You may need it.
The bigger picture, and a note from Amelia Island
Nebraska is not the story. Nebraska is first, and the federal floor underneath it forces every Medicaid expansion state to follow. The bill President Donald Trump signed last July requires the 42 states, along with the District of Columbia, that fully or partially expanded Medicaid under the 2010 Affordable Care Act to implement a work requirement starting in 2027. Per tracking of the rollout, Montana and Arkansas are scheduled to follow on July 1, 2026, with Iowa set for December 1 and full national enforcement beginning January 1, 2027. If you operate in any of those states, Nebraska is your preview.
Behavioral health operators who built their census strategy around steady Medicaid expansion populations will feel this in clean claim rate, AR aging, and their ability to fund growth. Operators who get out ahead will treat this as an operational redesign rather than a policy headline. Intake workflow, exemption tracking, eligibility re-verification cadence, payer documentation, pro forma sensitivity. None of it is glamorous. All of it decides whether your Medicaid book is a strength or a liability 18 months from now.
AHS is sponsoring the Women in Leadership Luncheon at NAATP National in Amelia Island, May 4 through 6. Allison, Benjamin, Leah, and I will be on site. If you operate in Nebraska, Iowa, Montana, or any of the next-wave states and want to walk through your specific numbers, find us there. Bring your Medicaid concentration percentage and your current days in AR. We can do useful work in 20 minutes.
Frequently asked questions
When does Nebraska’s Medicaid work requirement actually start affecting my patients?
Enforcement began May 1, 2026, but DHHS is phasing exposure by renewal date. Per Nebraska DHHS quoted by Nebraska Public Media: “Members with renewal dates in May or June 2026 will not be subject to the requirements. The first group impacted will be those with eligibility periods ending July 31, 2026, with phased implementation continuing through June 2027.” New applicants on or after May 1, 2026 must verify community engagement or claim an exemption at application. For behavioral health operators, the first meaningful wave of disenrollments hits claims in Q3 2026.
How many Nebraskans are expected to lose Medicaid coverage?
About 72,000 Nebraska expansion enrollees are subject to the requirement (KFF, as of March 2025). CBPP estimates between 28,000 and 41,000 are at risk of losing coverage and projects roughly 25,000 will actually lose coverage, a 35 percent decline in the expansion population. The Urban Institute puts the Nebraska figure at approximately 25,000, or about 36 percent of those subject to the rule. The Arkansas precedent saw 18,000 adults lose coverage before a federal judge halted the policy in April 2019 (Sommers et al., Health Affairs).
Are SUD and serious mental illness patients automatically exempt under the federal rule?
No. H.R. 1 (the 2025 reconciliation law) includes a medically frail category that covers many SUD and SMI patients, but exemptions are not automatic. Per KFF, states must verify individuals’ work or exemption status at application and at every renewal, and expansion adults face redetermination every six months. CMS’s June 2026 interim final rule requires that a medical condition significantly impair the person’s ability to comply with the work requirement. If your admissions or UM team does not submit the exemption documentation, the patient is treated as non-compliant and gets a 30-day cure window before disenrollment, per the Nebraska Governor’s Office release.
What financial impact should a Medicaid-heavy behavioral health operator model?
Run three scenarios on your expansion book: 12 percent coverage loss (conservative), 22 percent loss (mid case, aligned with CBPP’s 35 percent expansion decline blended into a mixed Medicaid book), and 30 percent loss (upper end, aligned with the Urban Institute’s Nebraska estimate of about 36 percent of those subject). At a 22 percent coverage loss, a 60-bed residential program billing $625 per diem on Medicaid faces roughly $1.8M in annualized revenue exposure before eligibility-related denials. Budget for days in AR moving from the high 30s to the mid 50s during the first two quarters. KFF (citing CBO) estimates work requirements alone will reduce federal Medicaid spending by $326 billion over ten years.
References
- Nebraska DHHS: Medicaid Work Requirements
- Office of Governor Jim Pillen: Announcement with CMS Administrator Dr. Oz
- KFF: A Closer Look at the Work Requirement Provisions in the 2025 Federal Budget Reconciliation Law
- KFF: A Closer Look at Nebraska, the First State Planning to Implement a Medicaid Work Requirement
- Center on Budget and Policy Priorities: Nebraska Launching Punitive Medicaid Work Requirements Early
- Sommers et al., Health Affairs (2020): Medicaid Work Requirements In Arkansas: Two-Year Impacts
- Nebraska Public Media: Nebraska DHHS and Advocates Disagree on How Implementation Will Go
- CBS News: Nebraska becomes first U.S. State to enact Medicaid work requirements
- Healthcare Dive: Nebraska rolls out Medicaid work requirements