The announcement came Friday from the Centers for Medicare and Medicaid Services, which said it believes the exemption is consistent with the tribes' status as political entities. Early last year, the agency wrote to tribes saying exempting all Native Americans from work requirements could violate equal protection laws.
Tribes across the country pushed back, saying the position ignored Supreme Court decisions that allow federally recognized tribes to be treated differently than others, disregarded the U.S. Constitution and violated treaties. They also cited high unemployment rates on reservations and funding shortfalls at the federal Indian Health Service that Medicaid reimbursements help fill.
The tribal exemption in Arizona sets a precedent for other states with significant Native American populations. Eight states have taken up the Trump administration on its offer to approve work requirements for low-income people on Medicaid. Now that the administration has granted Arizona's request, it's expected to follow suit for any other state seeking the exemption.
Arizona initially wanted to include all Native Americans, which might have raised concerns under civil rights laws that the exemption wasn't allowed based on race, Centers for Medicare and Medicaid Services spokeswoman Yvonne Hylton said. After negotiating, the request was limited to members of federally recognized tribes.
"We have long stressed the importance of meaningful tribal consultation when states are contemplating program reforms, and I'm pleased with how this important process informed Arizona's approach," agency Administrator Seema Verma said.
The Trump administration urged changes to Medicaid programs to encourage work and independence. Others see work requirements as unfairly targeting the working class.
Arizona residents will have a three-month grace period when the work requirements take effect next January. About 120,000 of Arizona's 1.8 million residents on Medicaid, ages 19 to 49, must work or volunteer at least 80 hours a month and report those hours. If not, coverage will be suspended for two months.
Christina Corieri, a senior policy adviser for Arizona Gov. Doug Ducey, said he believes the requirements will improve residents' financial situations, help them engage in communities and become healthier.
"We believe that those who can work should, and we think that's backed up by evidence as well," she said. "This can improve people's lives."
Arkansas implemented work requirements last summer and has seen 18,000 people lose coverage, said Jessica Schubel, a senior policy analyst for the Center on Budget and Policy Priorities.
"It's just one more burden on people who are more likely already working, but are in jobs that are low-wage jobs, and they are relying on Medicaid to help them treat their condition," she said.
The Centers for Medicare and Medicaid Services denied Arizona's request for a five-year limit on coverage for those who fail to meet the work requirements.
Others who are exempt in Arizona include the mentally ill, those with disabilities and pregnant women.
Arizona has 21 federally recognized tribes, whose reservations take up about a quarter of the state. Navajo President Jonathan Nez said approval of Arizona's plan is a victory for all of them.
Victoria Stevens, vice chairwoman of the governing board for the San Carlos Apache Healthcare Corp., said the tribe's hospital stood to lose $15 million in Medicaid funding if tribal members were forced to work or volunteer. About 70 percent of patients there have Medicaid, she said.
She and others worked to pass a law in Arizona last year with similar language. She said classifying tribes as anything but political entities is illegal.
"Native American people are entitled to health care because of treaty rights and settlements when tribes were defeated in war," she said.
In Maine and Wisconsin — two other states with work requirements for Medicaid — tribes can satisfy them by participating in tribal work programs, including traditional subsistence activities. Federal regulators approved the plans last year. Maine also exempts tribal members from paying proposed premiums.
Associated Press writer Marina Villanueve in Augusta, Maine, and Ricardo Alonso-Zaldivar in Washington, D.C., contributed to this report.