Can States Challenge Federal Medicaid Verification Requirements in Court?

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1.2 million Californians could lose their Medi-Cal coverage by 2027. New federal rules require states to verify Medicaid eligibility every six months instead of annually, plus work requirements that create a paperwork gauntlet most people will fail through no fault of their own. Can California sue to stop this?

California has real options. Some are long shots. Others have already worked in similar cases. None are guaranteed. The answer hinges on which strategy California picks, which judge hears the case, and whether the Supreme Court decides to expand or contract the boundaries of federal power over state programs.

Medicaid sits in a constitutional gray zone. It’s not purely federal (states run it) and not purely state (Washington pays for most of it). The program exists in what scholars call “cooperative federalism“—a system where federal and state governments share power and constantly disagree about who decides what. The verification rules pull that rope harder than anything since the Affordable Care Act.

What California Is Being Told to Do

A new federal law passed in 2025 requires states to verify that Medicaid recipients in the expansion population are meeting work requirements: 80 hours per month of employment, job training, community service, or other approved activities. States have to check compliance either for the month before someone applies or for up to three months prior. At renewal time, which now happens every six months instead of annually, beneficiaries must prove they met the requirements for at least one month during that period.

Someone working irregular hours at two part-time jobs has to document their schedule. A parent doing community service has to get verification forms signed. A student in job training needs official records. Miss a form, lose coverage. Get the paperwork in late, lose coverage. Have a caseworker who’s drowning in double the usual workload make a mistake, lose coverage.

When Arkansas implemented work requirements through a federal waiver in 2018, 18,000 people lost coverage in the first six months. Most weren’t unemployed—they didn’t complete the reporting system correctly. That was with annual verification. California is looking at semi-annual checks for a population fifteen times larger.

The Centers for Medicare & Medicaid Services issued preliminary guidance in September 2024, with supplemental documentation posted in November 2024. The statutory deadline is firm: comply by January 2027 or risk losing federal Medicaid matching funds.

When Does a Condition Become Coercion?

Congress can attach strings to federal money. The decision in National Federation of Independent Business v. Sebelius created a framework that California’s lawyers are studying. Chief Justice Roberts distinguished between modifying an existing program (usually fine) and fundamentally transforming it (potentially coercive). He noted that the Medicaid expansion was such a dramatic departure from the original program that states couldn’t have anticipated it when they first signed up decades ago.

Could the same logic apply to verification rules? California would argue yes: when states joined Medicaid in the 1960s and 70s, they agreed to verify eligibility, but annual checks were the standard. Doubling the frequency, adding work verification on top of income and immigration checks, and doing it all while the federal government provides no additional administrative funding—that’s a transformation states never bargained for.

The counterargument is strong. The new rules don’t threaten to eliminate all Medicaid funding, just condition continued participation on compliance. That’s fundamentally different from the ACA’s “expand or lose everything” ultimatum. And unlike the Medicaid expansion, which created an entirely new eligibility category, they change how often states check the same eligibility criteria they’ve always checked.

The Supreme Court has never fully defined where the line between permissible condition and impermissible coercion sits. NFIB gave us one data point. Everything else is educated guessing.

Can California Even Sue?

Before any court considers the merits, California has to clear a procedural hurdle: does it have standing to bring this lawsuit at all?

Standing doctrine asks whether the plaintiff has suffered the kind of injury that courts are allowed to remedy. For states suing the federal government, it gets complicated.

California has several injuries it can point to. It will incur significant costs administering the new verification system—costs the federal government isn’t fully reimbursing. It has sovereign interests in running its own programs according to its own procedures. And it has interests in its residents’ access to healthcare, which the new rules threaten.

There’s a trap here. If the lawsuit is framed as protecting Medi-Cal recipients from losing coverage, the federal government will argue that California is improperly trying to assert its citizens’ rights rather than its own.

The way around this is to frame the injury as California’s own: it’s being forced to spend money it doesn’t want to spend, administer a program in ways it finds counterproductive, and operate under conditions it never agreed to when it entered the Medicaid partnership. Legal scholars call this the “contractual injury” theory—the idea that California was promised certain terms when it joined the program—and it’s gained traction in recent federalism cases. The standing question is real but surmountable.

What’s Worked: The Work Requirements Cases

California isn’t pioneering this fight. Courts didn’t rule that work requirements are categorically unconstitutional. They ruled that the specific agency approvals were “arbitrary and capricious“—unreasonable and poorly justified.

Courts didn’t say Congress lacks authority to impose work requirements. They said the agency failed to adequately justify how work requirements could be squared with Medicaid’s statutory purpose. It’s a narrower victory, but also a more achievable one.

The problem for California is that Congress has now directly mandated work requirements and semi-annual verification through legislation, not agency waivers. You can challenge an agency for exceeding its statutory authority, but you can’t easily argue that Congress exceeded its own authority when Congress explicitly passed a law. The arbitrary-and-capricious standard doesn’t apply to statutes, only to agency actions implementing them.

California would need to pivot. Instead of challenging the statute itself, challenge how CMS implements it. If the implementing regulations impose specific documentation requirements, deadlines, or procedures that go beyond what the statute clearly mandates, those regulations might be vulnerable to the same arbitrary-and-capricious review that felled the earlier work requirement waivers.

The Administrative Law Opening

Under the new regime, courts independently decide what ambiguous statutes mean. They don’t defer to the agency.

If the statute says states must verify work requirements but doesn’t specify exactly how, and CMS issues regulations imposing detailed documentation requirements that seem unreasonable, courts no longer have to defer to CMS’s judgment. They can decide for themselves whether Congress intended to require those specific procedures.

The “major questions doctrine” is a legal rule that says agencies need clear permission from Congress before making huge policy changes. In West Virginia v. EPA, the Court held that when an agency claims authority to make decisions of vast economic and political significance, it needs clear congressional authorization—not plausible readings of vague statutory language.

Shifting millions of people from annual to semi-annual verification, in a context where states have operated under annual verification for decades, arguably qualifies as economically and politically significant. If CMS tried to justify this through general statutory language about program integrity rather than explicit congressional direction, the major questions doctrine might constrain the agency.

Congress did provide explicit direction through the 2025 reconciliation bill. The major questions doctrine is most powerful when agencies are stretching vague old statutes to claim sweeping new powers. When Congress passed a law explicitly authorizing the action, the doctrine provides less protection.

The implementing regulations will inevitably go beyond the bare statutory text. They’ll specify forms, deadlines, documentation standards, exemption procedures. Those details are where California might find vulnerabilities—places where CMS is interpreting ambiguous statutory language in ways that maximize burden and enrollment loss, without clear congressional mandate for those specific choices.

Recent Court Victories in Related Cases

California isn’t fighting alone, and recent victories in related cases suggest courts are willing to check the Trump administration’s health policy overreach.

In August 2025, a federal court granted a preliminary injunction blocking seven provisions of the Trump administration’s “marketplace integrity” rule, which would have made it harder for people to enroll in ACA coverage. A coalition of twenty-one states argued the rule was unreasonable and poorly justified. Courts agreed, finding that the administration hadn’t adequately justified the dramatic policy changes.

In July 2025, a court granted a preliminary injunction blocking the Trump administration from sharing Medicaid data with ICE for immigration enforcement. California had sued, arguing the data-sharing represented an arbitrary reversal of decades of settled policy without adequate justification. Courts called it a “bolt-from-the-blue” change that violated the Administrative Procedure Act’s requirement for reasoned decision-making.

New York and nineteen other states also successfully challenged HHS Secretary Robert F. Kennedy Jr.’s attempt to exclude gender-affirming care providers from Medicaid, arguing the agency was making substantive policy changes without following proper procedures.

When the Trump administration implements dramatic policy reversals without adequate justification or proper procedures, courts will intervene. The verification rules arguably fit that pattern—a significant departure from established practice imposed without sufficient consideration of the enrollment losses and administrative burdens. Administrative law challenges based on inadequate justification, procedural shortcuts, or arbitrary reversals of settled policy are working. Constitutional challenges to congressional authority are harder.

The Federal Government’s Defense

Congress has explicit constitutional authority under the Spending Clause to attach conditions to federal funding. It’s done so repeatedly throughout Medicaid’s sixty-year history, establishing increasingly specific requirements for how states must determine eligibility. The Congressional Research Service has documented this pattern extensively—Medicaid has always been a program where Congress sets the rules and states implement them.

The new rules are directly related to Medicaid’s purpose. Ensuring benefits go only to eligible individuals is fundamental to program integrity. More frequent verification reduces the risk of paying benefits to people who’ve become ineligible, which protects both federal and state taxpayers.

On the coercion question, the federal government has a strong distinction from NFIB. The verification rules don’t threaten loss of all Medicaid funding—they’re conditions on continued participation. States that refuse to comply can theoretically exit Medicaid entirely (though no state will, because Medicaid represents too large a share of healthcare infrastructure and state budgets). That’s fundamentally different from the ACA’s “expand or lose everything” structure that troubled Chief Justice Roberts.

States agreed to participate in a program where Congress explicitly reserved the right to modify requirements. Section 1396c of the Social Security Act explicitly says Congress can change Medicaid rules whenever it wants. States entered this partnership knowing the terms could change. The verification rules don’t represent an unanticipated transformation; they’re an adjustment to an evolving program.

The federal government will also argue that states have flexibility in implementation. The statute allows states to choose which months during the six-month period beneficiaries must demonstrate compliance. States can design their verification systems. States can grant exemptions for hardship cases. This isn’t commandeering—it’s conditional funding with implementation discretion.

These arguments reflect genuine constitutional principles about federal spending power and cooperative federalism. California faces an uphill battle on the constitutional merits.

Realistic Odds: What California Can Win

A preliminary injunction? Plausible. Maybe even likely if California brings a well-crafted administrative law challenge to implementing regulations.

To get a preliminary injunction, California needs to show: (1) likelihood of success on the merits; (2) irreparable harm without an injunction; (3) that the balance of equities favors relief; and (4) that an injunction serves the public interest. It can make a strong showing on factors 2-4. Evidence that implementation will cause massive enrollment losses—potentially 1.2 million people—creates irreparable harm to both the healthcare system and individual beneficiaries. The balance of equities favors California because delaying implementation allows time to build systems without losing enrollment, while denying relief causes permanent harm.

The harder question is likelihood of success on the merits. Administrative law arguments are stronger than constitutional ones. If CMS implementing regulations impose requirements not clearly mandated by statute, or if the agency failed to adequately consider less burdensome alternatives, or if the regulations were issued without proper procedures, those are all viable grounds for preliminary relief.

A final victory on the merits is much harder, but not impossible.

The best path is challenging implementing regulations as unreasonable and poorly justified—arguing that CMS failed to adequately justify why six-month verification (rather than annual or some other interval) is necessary, or that the agency didn’t seriously consider the predictable enrollment losses, or that specific procedural requirements exceed statutory authorization. These arguments worked in the earlier work requirement cases, and the framework is similar.

A direct constitutional challenge to the statute itself faces long odds. NFIB established that spending conditions can be coercive, but the verification rules don’t obviously meet that standard. They’re burdensome, yes. Potentially devastating for enrollment, absolutely. But constitutionally coercive in the specific sense that NFIB contemplated? That’s a stretch.

The Ninth Circuit, which would hear appeals from federal district courts, has generally been sympathetic to state sovereign interests in Medicaid administration. But the current Supreme Court is skeptical of expansive state authority claims, even as it’s willing to police federal regulatory overreach. If this case reached the Supreme Court, California would face justices more interested in constraining administrative agencies than in expanding state power to resist congressional mandates.

California has maybe a 40-50% chance of winning a preliminary injunction if it brings a well-crafted administrative law challenge. Maybe 25-30% chance of ultimate success on the merits of such a challenge. And perhaps 10-15% chance of success on a direct constitutional challenge to congressional authority. Those aren’t terrible odds for litigation that could protect enrollment for over a million people.

The Strategic Choices California Faces

Timing matters. California can file a pre-enforcement challenge—a lawsuit before the rules actually go into effect—now, seeking to block implementation before the January 1, 2027 effective date. This offers the advantage of potentially preventing enrollment losses before they occur. But pre-enforcement challenges sometimes face “ripeness” problems—courts might say the case is too early to decide because the rules haven’t actually been enforced yet.

Alternatively, California could wait until HHS attempts to enforce the rules or withhold funding, then sue for relief. This avoids ripeness problems but allows harm to occur first.

The multistate coalition approach—what was used in the marketplace integrity case—offers strategic advantages. Twenty-one states presenting a united front demonstrates broad concern about federal overreach and increases the odds that at least one favorable court will grant relief. It also creates opportunities for amicus briefs—written arguments from groups not directly involved in the case—from health policy organizations, provider groups, and other stakeholders, strengthening the record.

Section 1115 waivers give HHS discretion in implementation timing and procedures. The statute allows the Secretary to grant extensions until December 31, 2028 for states demonstrating good faith efforts. California might negotiate for a waiver delaying implementation or allowing alternative verification procedures that achieve program integrity with less burden. When states and the federal government have genuine disagreements about Medicaid administration, they often resolve them through negotiated waivers rather than litigation. It’s less confrontational, faster, and allows both sides to claim victory. The downside is that it requires a federal administration willing to negotiate in good faith.

What Victory Would Look Like

Even if California wins in court, the outcome won’t be a permanent prohibition on verification rules.

A successful challenge typically results in courts sending the rules back to the agency to fix the problems. The agency then has to address the identified deficiencies—provide better justification, consider alternatives more seriously, follow proper procedures—and can reissue modified rules. California might win a year or two of delay, or force CMS to adopt less burdensome procedures, but the underlying statutory mandate remains.

A preliminary injunction is more immediately valuable. It blocks implementation while litigation proceeds, which could take years. During that time, the political situation might shift. Congress could modify the rules. The administration could change. Public attention to enrollment losses might create pressure for relief.

Litigation also serves strategic purposes beyond the courtroom. A lawsuit highlighting the enrollment losses and administrative burdens potentially shapes congressional perceptions, making it politically harder to defend the rules. It signals to the federal government that California won’t simply comply with mandates it views as harmful. And it creates a factual record—expert testimony, evidence of enrollment losses, documentation of administrative costs—that can inform future policy debates.

Litigation isn’t a silver bullet. Even successful cases rarely result in permanent victories. They buy time, force procedural compliance, occasionally block specific provisions. California needs litigation as one tool among several—combined with state legislative action, budget solutions, and federal advocacy—to protect enrollment.

The Bottom Line

Can California challenge federal Medicaid verification rules in court? Yes. It has standing, viable theories, and recent precedents showing courts will check administrative overreach.

Will it win? Maybe. The odds are better for preliminary relief than ultimate victory, better for administrative law challenges than constitutional ones, better for blocking implementing regulations than overturning the statute itself.

Should it try? Almost certainly. The potential enrollment losses are too large, the federal rules too burdensome, and the arguments too viable to simply accept the mandate without challenge. Even if litigation ultimately fails, it buys time and creates pressure for political solutions.

This fight is about whether states have any meaningful say in how they administer programs that serve their most vulnerable residents. It’s about whether Congress can impose any administrative burden it wants, no matter how costly or counterproductive, simply by threatening to withhold federal funds. It’s about the practical reality that paperwork kills enrollment for people who are genuinely eligible but can’t complete bureaucratic mazes.

The new rules will cause people to lose health insurance. Not because they’re ineligible. Because they missed a deadline, couldn’t get a form signed, didn’t understand the process, or fell through administrative cracks. Work requirements and frequent verification exist to reduce enrollment, and they succeed by creating barriers that eligible people can’t clear.

The lawsuit, if it happens, will be framed in constitutional doctrine and administrative law. But it’s about whether states can protect their residents from federal policies designed to make healthcare harder to access. Courts might not see it that way. The law might not support the position. But the question is worth asking, and the fight is worth having. Because 1.2 million people losing health insurance isn’t a policy outcome to accept without resistance, even if the federal government has the authority to demand it.

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