a. State and Federal Costs

States will need to make changes to their Medicaid eligibility systems to comply with the new community engagement requirement, and we expect that this will result in costs to the Federal government and States. Section 71119(e) of the WFTC legislation provides $200 million for States to establish systems necessary to carry section 71119 and other sections of the WFTC legislation, title VII, subtitle B, chapter 1 related to conducting eligibility determinations or redeterminations, which is expected to be spent in 2026. We expect States may have additional costs to upgrade their Medicaid eligibility systems to comply with this section; however, there is limited information on how much States will invest in these systems. To estimate State costs, we reviewed State-submitted Advanced Planning Documents (APDs) from 21 States that contain information on expected spending on eligibility system changes related to community engagement. For these 21 States, we estimate that the average cost reported in the APD is $12.2 million, ranging from $1 million to $47 million. Additionally, based on ( printed page 33452) discussions with the States on their estimated systems costs, we estimate the average cost is between $9 million and $21 million. Additionally, we estimate that a one-time cost for States to upgrade eligibility systems would be $15 million per State, which results in a total estimate of $660 million ($15 million multiplied by 44 States). We expect these costs to occur in 2026. We also project that there will be annual costs to maintain these systems, and we assume that those costs will be 10 percent of implementation costs ($66 million annually). In our estimates, we assume that FFP is available at a 90 percent match rate for design, development, and implementation costs States would be responsible for the remaining 10 percent, consistent with 42 CFR part 433, subpart C ; for ongoing maintenance, the Federal government would pay 75 percent of costs, and the States would pay 25 percent. [ 144 ]

We project that total spending on systems upgrades will be $1.52 billion from 2026 through 2036, with the Federal government paying $1.289 billion and the States paying $231 million. The estimated annual impacts are shown in Table 33.

We note that actual costs may differ from these estimates. Data are very limited and there is a wide range of expected costs across States. Additionally, roughly half of all States have not reported any community engagement system costs in their APDs. States may have additional costs beyond those already requested in the APDs. Moreover, we do not have data on how much States expect to spend beyond implementation. Thus, actual costs may be higher or lower than we estimated.

We also estimate the costs for State systems updates to comply with the new community engagement requirement. We estimate that States' costs will be $231 million from 2026 through 2036, as shown in Table 33. Additionally, this IFC outlines requirements for States (and, where applicable, their contractors, in compliance with statutory single State agency requirements and conflict-of-interest limitations) to collect, verify, maintain, and, in certain instances, report specified information to CMS on the community engagement requirement. Included in this list are requirements related to applicable individuals (§§ 435.551, 435.552), exceptions and specified exclusions (§§ 435.553, 435.554, 435.555), assessing and verifying compliance and noncompliance procedures (§§ 435.556, 435.557, 435.558, 435.912), ex parte verification processes (§ 435.557), and outreach to beneficiaries (§ 435.561). The quantitative costs are reflected in section IV. of this IFC. For ease of reference, and for projection purposes, we include a summary of total costs for the Federal government and States in Table 34 and note that the FFP match rate varies by row. For additional details, see section IV. of this IFC.