Neighborhood Healthcare Urges CMS to Revise Medicaid Community Engagement Rules to Protect Vulnerable Patients and Support Health Centers

Carter Struck

TARGETED NEWS SERVICE (founded 2004) features non-partisan 'edited journalism' news briefs and information for news organizations, public policy groups and individuals; as well as 'gathered' public policy information, including news releases, reports, speeches. For more information contact MYRON STRUCK, editor, [email protected], Springfield, Virginia; 703/304-1897; https://targetednews.com

WASHINGTON, Aug. 18 -- In response to a federal agency request for information, the following public comment letter was submitted electronically to the regulations.gov site.

July 31, 2026

The Honorable Dr. Mehmet Oz

Centers for Medicare & Medicaid Services

Department of Health and Human Services

Attention: CMS-2454-IFC

P.O. Box 8016

Baltimore, MD 21244-8016

RE: Medicaid Program; Community Engagement Requirement for Certain Individuals

Dear Administrator Oz:

On behalf of Neighborhood Healthcare (Neighborhood), I appreciate the opportunity to provide comments on the CMS interim final rule with comment period (IFC) regarding the Medicaid Program; Community Engagement Requirement for Certain Individuals. For the past 57 years, Neighborhood has provided high-quality, primary and preventive medical, dental, specialty, and behavioral health services to 103,659 patients at 33 sites in San Diego, Riverside, and San Bernardino Counties. With 73% of our patients accessing care through Medicaid today, our patient population is significantly impacted by this IFC. We provide comments with the intent to ensure that patients who are rightfully enrolled in the Medicaid program today do not lose Medicaid coverage due to increased paperwork burden, confusion, or unclear policy.

Summary of Neighborhood Healthcare Recommendations

Community Health Centers (CHCs) like ours aim to be strong partners with CMS and our State Medicaid Agency in ensuring compliance, coverage, and communication with Medicaid beneficiaries. Our comments fall into these categories:

Sec. 435.554(c)(5) - Medical Frailty: We urge CMS to eliminate the separate regulatory requirementthat an individual who is medically frail or has special medical needs additionally demonstrate that the condition "significantly impairs the individual's ability to comply with the community engagement requirement."

Sec.435.554 - Specified Excluded Individuals: We request that CMS further clarify the ex parte verification pathways for American Indians/Alaska Natives (AI/AN), caregivers, and veterans.

Sec.435.552(b) Demonstrating community engagement. Neighborhood encourages CMS to expressly recognize CHCs as eligible volunteer host organizations.

Sec.435.557 - Compliance Verification: Neighborhood strongly recommends that CMS release further guidance to help states define how a "significant impairment" would impact an individual's ability to meet community engagement requirements and to require states to accept a beneficiary's attestation, or other information to verify medical frailty when ex parte information is unavailable.

Sec.435.555 - Hardship Exemptions: We recommend that CMS allow states to elect individual hardship exemptions. The all-or-nothing approach to hardship exemptions unnecessarily constrains states, which may disadvantage our patients.

Sec. 435.561 & Sec.435.562 - State Requirements for Outreach: We urge CMS to promote CHCs as essential partners in outreach efforts for Medicaid beneficiaries.

Health Center Capacity: Neighborhood requests restoration of Navigator funding as a primary mechanism for patient outreach and education.

Sec. 438.58 - Conflict of Interest Safeguards: Neighborhood recommends that CMS clarify how managed care plans may structure contracts with CHCs to deliver outreach, education, navigation, and referral services. CMS should also provide guidance confirming that expenditures for these activities may be included as incurred claims in the medical loss ratio numerator when they qualify as value-added services under Sec. 438.3(e)(1). Providing this clarification would create a sustainable financing pathway for managed care plans to invest in community-based outreach and beneficiary support activities that improve compliance, promote continuity of coverage, and advance beneficiary health outcomes.

Sec. 435.554(c)(5) - Medical Frailty

Neighborhood's biggest concern centers on the medical frailty section. We urge CMS to delete language that was not initially included in the statute, requiring the additional demonstration that a medical condition "significantly impairs the individual's ability to comply with the community engagement requirement." The presence of a qualifying condition in one of the five statutory categories should be sufficient for the exemption, which is consistent with section 71119 and 42 CFR 440.315(f). This additional requirement in the IFC, which is beyond the scope of the statute, will create real administrative burdens for providers and confusion for patients.

First, it is unclear how CHC clinicians would determine significant impairment, as the phrase itself is not defined. Expecting the primary care workforce to acquire competency in functional capacity evaluation within a compressed timeline is unrealistic. In the limited circumstances in which clinicians are trained to assess functional capacity or fitness for duty, such as for commercial driver or pilot licensure, military service, or disability determinations, these assessments rely on specialized training, clearly defined criteria, and established protocols. Neighborhood is concerned that our providers may be asked to make complex functional assessments that are not routinely part of primary care practice, while beneficiaries may face delays or barriers in obtaining appropriate exemptions. This could increase the risk that medically vulnerable individuals lose coverage because of uncertainty in the verification process rather than an accurate assessment of their health status and eligibility for an exception. Mechanisms need to be in place to ensure such determinations are applied consistently across clinicians, CHCs, and states. Unlike disability determination programs, community health centers are neither staffed nor resourced to perform standardized functional capacity evaluations during routine primary care visits. Because this requirement is not accompanied by a standardized methodology or validated assessment tool, clinicians acting in good faith may reasonably reach different conclusions when evaluating similar patients. This creates unnecessary variability in Medicaid eligibility determinations while reducing time available for chronic disease management, preventative care, and acute medical concerns.

Second, determining "significant impairment" becomes an unfunded mandate and detracts from valuable time providing clinical care. Time spent preparing and documenting eligibility attestations cannot be devoted to seeing patients, managing chronic conditions, or coordinating care. In the safety net, where clinician capacity and bandwidth are already overloaded due to continued workforce shortages and staffing challenges, new administrative requirements may further strain limited capacity, complicate efforts to meet quality and performance goals, and contribute to provider burnout. Furthermore, diverting clinical time to eligibility certification and absorbing the coverage losses that follow when eligible patients cannot navigate the documentation threatens both appointment access and health center financial viability.

Third, CHC clinicians are concerned about the liability when there are intersecting exclusions between medical frailty and substance use disorder treatment. Providers are concerned about improper disclosure of patient information, undermining the confidentiality protections 42 CFR Part 2 is designed to secure. In integrated care settings, primary care clinicians routinely coordinate care for patients with co-occurring medical, behavioral health, and substance use disorders. Providers may be uncertain what information is necessary to support a medical frailty determination while remaining compliant with the confidentiality requirements of 42 CFR Part 2. Without clear guidance from CMS, clinicians may either disclose more information than is necessary or avoid documenting relevant information altogether, creating risk for both patients and providers.

Lastly, Neighborhood knows that many of our patients rely on Medicaid to access services and prescription medications that keep them healthy. The threat to the baseline health of families will result in patients returning to the Medicaid and CHIP programs, both sicker and requiring costlier services in future months and years. Because of the access Medicaid provides to manage chronic and complex conditions, patients can manage their health needs, which also supports their ability to maintain employment, volunteer, or attend school. As a result, assessments of functional capacity should consider the extent to which continued access to coverage contributes to an individual's ability to remain healthy and engaged. Failure to account for this relationship could result in coverage losses that ultimately undermine an individual's health status and reduce their capacity to participate in work or other community engagement activities.

At Neighborhood Healthcare, we routinely see patients lose access to medications, specialty care, behavioral health services, and medically necessary procedures following interruptions in Medicaid coverage. These delays frequently result in preventable emergency department visits, hospitalizations, and avoidable disease progression. For example, one patient with abnormal uterine bleeding lost coverage while awaiting surgery and ultimately required multiple emergency department visits and four blood transfusions as an uninsured patient. These experiences demonstrate that maintaining continuous Medicaid coverage is often what enables patients to remain healthy enough to work, care for their families, attend school, and participate in their communities.

Sec.435.554 - Specified Excluded Individuals

Beyond those with serious or complex medical conditions, Neighborhood requests that CMS further clarify appropriate verification pathways for American Indians/Alaska Natives (AI/AN), caregivers, and veterans.

Sec. 435.554(c)(2) American Indian / Alaska Natives

Neighborhood recommends additional avenues beyond the ex parte process for American Indian and Alaska Native (AI/AN) populations to verify exemption. Neighborhood appreciates CMS recognizing American Indian and Alaska Native (AI/AN) populations as excluded individuals from the community engagement requirements. We proudly serve 2,657 AI/AN patients, and Neighborhood reminds CMS that Congress has enacted Indian-specific provisions in multiple laws that remove barriers to ensure improved access and enrollment in Medicaid and CHIP. AI/AN families and individuals encounter enrollment challenges due to remote geographic locations and a lack of access to reliable internet, phone service, and enrollment assisters. We have concerns that the ex parte process will not adequately capture Tribal citizenship documentation to verify exemption status for AI/AN populations.

Sec. 435.554(c)(3) Parents and Caretakers

Neighborhood recommends that States provide guidance to case workers to ensure caregiver exclusions are appropriately captured. Neighborhood appreciates CMS including caregivers in the preamble as a specific excluded individual from community engagement requirements, particularly those caring for older adults. However, Neighborhood is concerned that states may not communicate this clearly, leading to case workers who may not understand the full scope of the exemption reviewing applications. Nearly 1 in 10 (9 percent), or 4.3 million, family caregivers have Medicaid for their own health insurance coverage.

Sec. 435.554(c)(4) Veterans

Neighborhood recommends CMS amend the requirement at Sec.435.554(c)(4) to allow veterans with a partial disability or impairment who otherwise do not qualify for Total Disability based on Individual Unemployability (TDIU) to be exempt from community engagement requirements. In addition, Neighborhood recommends that CMS clarify that veterans with a serious or complex medical condition may be exempted through that pathway. Neighborhood serves over 780 veterans, many of whom have complex health care needs but do not achieve this "total "rating. These individuals may still have severe medical issues that do not fall under the exemptions in this rule but pose a significant barrier to meeting community engagement requirements.

Sec.435.552(b) Demonstrating community engagement.

Neighborhood encourages CMS to expressly recognize CHCs as eligible volunteer host organizations. Doing so would align the Medicaid community engagement framework with other public programs that recognize volunteer service while leveraging an existing nationwide network of community institutions with established volunteer policies. Neighborhood provides a monthly community food distribution in Escondido, where volunteers bag produce, assemble family boxes, and distribute food to community members.

Sec.435.557 - Compliance Verification

Neighborhood strongly recommends that CMS release further guidance to help states define how a "significant impairment" would impact an individual's ability to meet community engagement requirements, and to allow a beneficiary's attestation, or other information to verify medical frailty when ex parte information is unavailable.

As mentioned previously, CHCs like ours are concerned about administering the "significant impairment" provision of the IFC without substantial additional guidance, definition, and training for functional capacity assessments. Assuming this provision remains, our organization strongly recommends that CMS require states to accept additional documentation, even though doing so will also be administratively burdensome for our providers and patients. For example, the State of California allows a sworn statement as a last resort to meet income requirements or place of residence.

Sec.435.555 - Optional exception for short-term hardship events.

Neighborhood recommends that CMS allow states flexibility in determining and administering hardship exemptions. States should be able to elect individual hardship circumstances rather than accepting or declining an "all-or-nothing" package of hardship exemptions. Forcing states to accept all exemptions creates unnecessary administrative and fiscal rigidity that works against state flexibility and, ultimately, against patients. States vary in their administrative capacity, geography, and risk profiles, and may not need to elect each hardship exemption at once. Administratively resource-constrained states could be pushed to opt out of protections they otherwise support, depriving patients of opportunities to benefit from these hardship protections.

Requiring patients to affirmatively request a travel exemption may create unreasonable documentation burdens during acute illness. Instead, Neighborhood requests that CMS require states to accept self-attestation without restrictions. We understand that documentation of leave from employment or absence from community engagement activities is required, but individuals facing a serious or complex medical condition may have difficulty procuring all necessary documentation before traveling outside their community for life-saving care.

Neighborhood requests that CMS automatically grant states a disaster-related exception. When disaster hits, CHCs are often the first source of care available to patients. When hospitals are overwhelmed, roads are impassable, or displaced residents have lost access to their usual providers, CHCs step in to keep patients on their medications, manage chronic conditions, treat acute injuries, and hold communities together, often before formal disaster response systems are even up and running. Rooted in the communities they serve, CHC staff are typically the first to witness what a disaster can take from a patient: their home, their job, their transportation, and more. These same losses are what make it hardest for beneficiaries to meet administrative requirements, such as community engagement rules, in the weeks that follow. For example, CalFresh (SNAP) provides benefit reimbursements to individuals who have lost food in a disaster so they can replace it. Additionally, Covered California allows emergency enrollment for individuals affected by a disaster.

Neighborhood recommends CMS consider extending eligibility for short-term hardship circumstances to individuals whose place of employment lies within the declared or designated disaster area, regardless of county of residence. This would more accurately track the statute's underlying concern to protect individuals whose ability to meet the community engagement requirement has been disrupted by forces outside of their control. Additionally, it would not rely on a residency proxy that may both under-include commuting workers genuinely affected by the disaster or downturn and, in some cases, over- include residents of a large or sparsely affected county who experience no actual disruption at all. In Neighborhood's footprint, it is common for workers in San Diego County to live in the nearby, more affordable Riverside County communities. In the case of a significant fire in Escondido, where many of Neighborhood's Health Centers are located, workers living in Riverside County would be impacted.

Sec. 435.561 & Sec.435.562 - State Requirements for Outreach

We urge CMS to promote CHCs as essential partners in outreach efforts with Medicaid beneficiaries. Neighborhood appreciates that CMS recognizes the important, trusted relationship between CHCs and their patients. However, we remain concerned that the complexity of these requirements, combined with the accelerated implementation timeline, will leave providers, enrollment assisters, and patients themselves confused about what is required. Robust, targeted, and sustained outreach efforts will therefore be essential to ensuring beneficiaries understand their responsibilities and have adequate opportunities to comply with new requirements.

Health Center Capacity

Neighborhood requests restoration of Navigator funding as a primary mechanism for patient outreach and education. Neighborhood has a significant role working with the California Department of Health Care Services (DHCS) to provide outreach to patients and enroll them in health care coverage. However, cuts to the Navigator program have constrained enrollment capacity at CHCs and other trusted community-based organizations.

Sec. 438.58 - Conflict of Interest Safeguards

Neighborhood recommends that CMS clarify how managed care plans may structure contracts with Health Centers to deliver outreach, education, navigation, and referral services. CMS should provide guidance confirming that expenditures for these activities may be included as incurred claims in the medical loss ratio numerator when they qualify as value-added services under Sec. 438.3(e)(1). Providing this clarification would create a sustainable financing pathway for managed care plans to invest in community-based outreach and beneficiary support activities that improve compliance, promote continuity of coverage, and advance beneficiary health outcomes.

Conclusion

Based on Congressional Budget Office estimates for the 2025 reconciliation law, the National Association of Community Health Centers estimates that Medicaid changes will lead to $7.3 billion annually in future uncompensated care costs over the next decade. This is due to an estimated two million existing CHC patients losing coverage, an additional two million newly uninsured patients seeking care at CHCs, and the compliance costs associated with the new eligibility requirements. Neighborhood is already seeing additional uninsured patients, due to changes in Marketplace subsidies and the increased cost of health insurance. Since 2026, our Certified Enrollment Counselors have seen numerous patients who have opted out of coverage because it's no longer affordable due to reduced assistance from the Advanced Premium Tax Credit Subsidy and rising plan costs. Neighborhood is concerned about the unintended consequences of additional uncompensated care demands due to Medicaid coverage losses. Neighborhood notes the urgent need for future federal investments to support CHC sustainability.

Neighborhood appreciates the opportunity to respond to this IFC. CHCs will continue supporting Medicaid and CHIP beneficiaries throughout this process and welcome the opportunity to further collaborate or partner with CMS. If you have any questions, please contact Damaris De La Torre, Outreach and Enrollment Manager, [email protected].

Sincerely,

Rakesh Patel, MD, MBA, FACHE, CPE

Chief Executive Officer

Neighborhood Healthcare - Administration

215 S Hickory St, Escondido, CA 92025 | D: (833) 867-4642 | nhcare.org

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Original text of letter here: https://www.regulations.gov/comment/CMS-2026-2047-42854

TARGETED NEWS SERVICE (founded 2004) features non-partisan 'edited journalism' news briefs and information for news organizations, public policy groups and individuals; as well as 'gathered' public policy information, including news releases, reports, speeches. For more information contact MYRON STRUCK, editor, [email protected], Springfield, Virginia; 703/304-1897; https://targetednews.com