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February 18,  2020

MEDICAID
DC Circuit affirms district court’s rejection of Trump administration approval of Arkansas’ demonstration project imposing work requirements on Medicaid recipients

On February 14, the DC Circuit Court of Appeals upheld the DC District Court’s finding that the Department of Health and Human Services violated the Administrative Procedures Act when it granted waiver requests from Arkansas and Kentucky to establish Medicaid demonstration projects that would restrict eligibility for Medicaid coverage based on failure to meet job-seeking targets. (After oral argument in this appeal, Kentucky discontinued the challenged demonstration project and was granted voluntary dismissal).

Both states had implemented Medicaid expansion, with Arkansas choosing to do so via qualified health plans for which the state paid half of the premiums for eligible enrollees. Arkansas initially received a waiver in 2013 and in 2016 adopted a plan called “Arkansas Works,” that offered voluntary referrals to the Arkansas Department of Workforce Services for enrollees in the Medicaid expansion. According to the Court, in June 2017, Arkansas, “dissatisfied with the level of participation” in Arkansas Works, the state “introduced several new requirements and limitations. The one that received the most attention required beneficiaries aged 19 to 49 to ‘work or engage in specified educational, job training, or job search activities for at least 80 hours per month’ and to document such activities. Certain categories of beneficiaries were exempted from completing the hours, ...” and  “Nonexempt ‘beneficiaries who fail to meet the work requirements for any three months during a plan year will be disenrolled ... and will not be permitted to re-enroll until the following plan year.’” Other changes requested in its waiver established a 3-month delay in benefits following initial application for coverage, elimination of retroactive coverage, and lowering of the income eligibility threshold from 133% to 100% of the FPL. It also sought to eliminate a program which used Medicaid funds to help pay enrollees’ premiums for employer-provided health care.

Secretary Azar approved most of the proposed changes on March 5, 2018, including the work requirements, 30-day retroactive coverage limits, and the elimination of premium assistance for employer-covered health insurance. He did not approve the reduction in income eligibility. The work requirements for persons aged 30 to 49 took effect on June 1, 2018, and for persons aged 20 to 29 on January 1, 2019. Ten plaintiffs sued for declaratory and injunctive relief on August 14, 2018, and the district court found for the plaintiffs on March 27, 2019, vacating the secretary’s approval. At the heart of the district court’s judgment, it held that “In sum, the Secretary’s approval of the Arkansas Works Amendments is arbitrary and capricious because it did not address—despite receiving substantial comments on the matter—whether and how the project would implicate the ‘core’ objective of Medicaid: the provision of medical coverage to the needy.”

The Court of Appeals agreed, finding that the principal basis by which the Secretary approved the waiver was whether the demonstration would meet three objectives other than providing coverage to the needy: “whether the demonstration as amended was likely to assist in improving health outcomes; whether it would address behavioral and social factors that influence health outcomes; and whether it would incentivize beneficiaries to engage in their own health care and achieve better health outcomes.” The Court found that the Medicare statute makes no mention of achieving better health outcomes as its objective. It noted that Congress is quite capable of saying so in the text of a statute when it “wants to pursue additional objectives within a social welfare program ... For example, the purpose section of TANF [Temporary Assistance to Needy Families] explicitly includes ‘end[ing] the dependence of needy parents on government benefits by promoting job preparation, work, and marriage,’ among the objectives of the statute. ... Also, both TANF and the Supplemental Nutrition Assistance Program (SNAP) condition eligibility for benefits upon completing a certain number of hours of work per week to support the objective of ‘end[ing] dependency of needy parents on government benefits’. In contrast, Congress has not conditioned the receipt of Medicaid benefits on fulfilling work requirements or taking steps to end receipt of governmental benefits.”

The Court found that the Secretary’s approvals were arbitrary and capricious for other reasons, including the failure to account for loss of coverage, “which is a matter of importance under the statute.” It rebuked the Department, holding that the “Secretary’s analysis of the substantial and important problem is to note the concerns of others and dismiss these concerns in a handful of conclusory sentences. Nodding to concerns raised by commentators only to dismiss them in a conclusory manner is not a hallmark of reasoned decisionmaking.”

The Court concluded that “Because the Secretary’s approval of Arkansas Works was arbitrary and capricious, we affirm the district court’s judgment vacating the Secretary’s approval.” [Grehsam et al. v. Azar et al. No. 19-5094 & 19-5096, D.C. Cir., February 14, 2020]