Kevin Corinth is a senior fellow at the American Enterprise Institute.
Medicaid is getting a justified makeover on Jan. 1, when most states will begin implementing a work requirement as a condition of receiving benefits. The roughly trillion-dollar safety-net program had grown beyond its original purpose when legislatures chose to expand coverage to non-disabled working-age adults — many of whom don’t work and instead spend several hours per day watching television and playing video games. The goal of Republicans’ reform, a component of the One Big Beautiful Bill, is therefore laudable: Encourage adults to enter the labor force and potentially transition them to employer-provided health insurance.
Despite the hysterics, the new requirement is quite flexible. The number of people exempted — pregnant women, parents with a child under age 14, caretakers of those with disabilities and various others — is expansive. The law also allows states to choose how frequently Medicaid recipients must demonstrate compliance. According to a March survey, the majority of states plan to require the minimum of one qualifying month during each six-month period. (In other words, recipients only need to prove they’re working two months out of the year.) The requirement can be satisfied by working, training or volunteering 80 hours a month or by enrolling at least half-time in school. People could alternatively demonstrate countable household income of at least $580 a month — that is, $7.25, the federal minimum wage, multiplied by 80 hours.
The latter provision has the advantage of reducing the administrative burden on states that may find it easier to verify recipients’ incomes rather than the number of hours they’ve worked. But it creates a loophole. The definition of income is broader than that of earnings from work, meaning the work requirement could be satisfied without actually working. One source, gross gambling winnings, could be especially prone to abuse.
As is the case for income that is counted when filing taxes, gross gambling winnings count as income for purposes of qualifying for Medicaid. Based on the Centers for Medicare and Medicaid Services’ interim final rule, they will soon count toward satisfying the Medicaid work requirement, too. That sum represents the profit above and beyond the original stakes on winning gambles without netting out losses. As long as they are made during different “sessions,” a wager that wins $100 in profit and a separate wager that loses $100 would still yield gross winnings of $100, even though there was no net gain.
This treatment tends to frustrate recreational gamblers, who can end up owing federal income tax even when they come out behind overall for the year. It can, however, be a boon to Medicaid recipients by making it easier to satisfy the work requirement. Every dollar they win from a distinct wager puts them closer to reaching the $580 threshold without losing ground when they have an unlucky night. Gamble enough, and they could potentially avoid being required to work at all.
Inadvertently encouraging Medicaid recipients to gamble to retain coverage is a serious problem. A recent Gallup survey found that 40 percent of Americans with annual household incomes below $50,000 gambled at least once in the past year. The industry is also proliferating: The share of men under 30 betting on sports online more than doubled between 2022 and 2025, according to a Pew survey. The last thing low-income adults reliant on Medicaid need is a reason to start or continue gambling.
Unfortunately, the problem is worse than simply encouraging such behavior. A clever Medicaid recipient could use the same loophole to avoid the work requirement with no risk of losing a significant amount of money by betting on both sides of an event. He could, for example, place one bet that a football team covers the spread (the number of points by which it is expected to win) and another that it won’t. One wager will win, the other won’t. It’s a foolish strategy for most gamblers because it offers no chance of making a profit, but a Medicaid recipient could nevertheless use it to avoid the work requirement.
In a recent analysis for the American Enterprise Institute, I detailed that betting about $640 on each side of a football game’s spread — or a total of roughly $1,300 across the two bets — would be sufficient to guarantee $580 of gross gambling winnings regardless of the outcome. Whoever did so would wind up about $60 poorer because of the sports book’s take, but he would face no risk of additional losses.
In most states, undertaking this strategy one time during every six-month period would satisfy the work requirement. Many people will either be unaware of this loophole or averse to exploiting it. Others may find it difficult to come up with $1,300 to place the bets, though some might borrow funds from parents or friends or have access to private sources like credit cards or payday lenders. Aside from any borrowing costs and the roughly $60 betting loss, the funds could be repaid as soon as the bets are resolved.
Regardless, the possibility that a law intended to encourage employment could instead incentivize some Medicaid recipients to gamble is a serious concern that Congress shouldn’t wait to address. The simple solution is to exclude gross winnings from income used to satisfy the work requirement. Surely lawmakers of all stripes can agree: Work requirements should reward working, not gambling.
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