Judge sides with NC to block Trump administration rule on Medicaid eligibility

Ronni Butts, The News & Observer (Raleigh) on Oct 29, 2026

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A federal judge ruled Thursday in favor of Attorney General Jeff Jackson and a group of 22 other Democratic-led states and Washington, D.C., in a lawsuit against the Trump administration over changes to Medicaid eligibility for people with severe illnesses.

In June, the Centers for Medicare and Medicaid Services announced changes to how states assess enrollees who are medically frail, further complicating the enforcement of new 80-hour monthly Medicaid work requirements enacted by the One Big Beautiful Bill Act.

The rule issued by CMS would change how the N.C. Department of Health and Human Services would determine who is medically frail or has a severe illness or disability. States would have to determine whether an individual’s illness prevented them from working, rather than exempting them from work because of their condition using diagnosis codes.

U.S. District Judge Richard Stearns ruled that the rule forced states to make “costly and intensive alterations to their eligibility verification systems.”

States no longer have to follow this rule after Stearns issued a permanent injunction against the rule’s enforcement. Stearns ruled that CMS did not have the authority to require work by people who met Congress’ definition of medical frailty. Additionally, the court ruled that CMS went too far in adding an additional barrier to community-service exemptions.

There are about 64,000 Medicaid enrollees in the state with severe illness, according to Jackson’s office.

After the new rule was announced in June, North Carolina Medicaid had to alter its administrative systems, which it was already updating to accommodate the new work requirements before a Jan. 1 deadline.

“When we filed this lawsuit, I told people battling cancer and other serious illnesses to focus on getting better and let us handle the legal fight,” Jackson said in a press release. “Today, we won that fight.

“Congress specifically protected these patients, and CMS broke the law by trying to take that protection away. The judge agreed and struck down the restriction.”

Three million people are enrolled in Medicaid in North Carolina. More than 700,000 have enrolled since the state expanded Medicaid in 2023.

The work requirements and tightened medical frailty definition announced in June led Melanie Bush, deputy secretary for NC Medicaid, to project about 255,000 people could lose Medicaid coverage, The News & Observer previously reported.

Bush previously told The N&O that the new federal law is “incredibly confusing” and said it is the “biggest change to Medicaid eligibility ever.”

Because states may, again, have to alter their eligibility systems, the court has given them a 6-month extension for enforcing medical frailty determinations.

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