A Missoula man lives on the streets and has seizures. The new federal Medicaid work rule does not count homelessness as a medical condition.

Tywon Pugh, 46, sits outside the Poverello Center in Missoula, Montana, and counts out his pills. He takes one to control the seizures that have knocked him out at work and on the bus. He takes another to manage an alcohol use disorder his body has been fighting for years. Both come from Medicaid, the federal-state health program for low-income Americans. Both could be cut off under a federal rule that took shape this spring.

The Centers for Medicare & Medicaid Services finalized the Medicaid community engagement requirement in May 2026. It asks states to verify that most adult beneficiaries log 80 hours a month of work, school, or volunteer activity to keep coverage. The rule lists the people who do not have to log those hours: adults older than 64, pregnant people, people with certain disabilities, and members of federally recognized tribes. Homelessness is not on the list.

Four states tried to add it. Montana, Arizona, Kentucky, and Utah proposed policies that would have let them exempt homeless beneficiaries from the work test, on the argument that someone without stable housing cannot reasonably meet the reporting and documentation requirements the rule demands. Federal officials rejected the proposals. The Centers for Medicare & Medicaid Services told state Medicaid directors in guidance that homelessness is not a medical condition and the framework is uniform. States cannot widen the exemption category on their own.

The rule's exemption architecture rests on the idea that some people are too sick, too old, or in protected status to be required to prove work. Homelessness, in the rule's accounting, is a circumstance, not a condition. A person can be homeless and otherwise meet the rule's test. A person can also be homeless and unable to log consistent hours, since the work test asks for documentation of paychecks, class schedules, or supervisor sign-off. The rule does not address that gap.

Pugh's case shows the gap in practice. He lost his job in construction in 2023 after a seizure hospitalized him. His wife died in 2025. He has been living on the streets of Missoula and at the Poverello Center since. His seizure disorder is the kind of condition the medical exemption was designed to cover, and he is pursuing a formal disability determination. The wait is months long. His addiction treatment has been waitlisted. He receives bus passes, food, and showers at the shelter. What he does not have is a pay stub.

KFF Health News asked the Centers for Medicare & Medicaid Services whether homeless beneficiaries were considered in the rule's drafting. The agency declined to comment on the record by email but confirmed states must follow the federal framework. Conservative policy groups, KFF Health News reported, frame the work requirement as a test of whether the program serves its intended population. Disability advocates, including the National Health Care for the Homeless Council, have argued the medical-condition test is too narrow and will produce coverage losses among the most vulnerable.

The implementation calendar is short. States have until January 2027 to begin enforcement checks under the CMS nationwide framework. Montana, Arkansas, and Nebraska have already started running beneficiaries through the new reporting system. The KFF Medicaid Work Requirements Tracker lists another ten states in the planning stage. The Center for Health Care Strategies estimates the rule could affect millions of beneficiaries when fully implemented.

For Pugh, the next test is simple. He has to produce documentation of work, school, or volunteer hours by the end of the state's reporting window. If the medical exemption does not come through, and if he cannot meet the work test, the coverage that supplies his seizure medication and his treatment referrals ends. The rule draws a line outside his situation, and the state that wanted to widen that line was told it could not.