Days before the Medicaid work requirement for Medicaid patients in Kentucky was to take effect, U.S. District Court Judge James Boasberg struck down the requirement in a decision issued June 29, 2018.

Following the enactment of the Affordable Care Act (ACA) and as part of Medicaid expansion, Kentucky submitted an experimental plan called “KY HEALTH” to CMS in July 2017. KY HEALTH included several components, including Kentucky HEALTH. Under the Kentucky HEALTH program, Kentucky would impose “community-engagement” requirements for the Medicaid expansion population and some of the population covered by traditional Medicaid. The new mandate would have required that, as a condition of receiving health coverage, such recipients work or participate in other qualifying activities for at least 80 hours each month. On January 12, 2018, HHS approved Kentucky’s application for Kentucky HEALTH.

In Stewart v. Azar, 18-Civ.-152 JEB (D.D.C. June 29, 2018), fifteen Kentucky residents who were enrolled in Kentucky’s Medicaid program brought an action challenging HHS’s approval of Kentucky HEALTH, asserting that the community-engagement requirement put them and others in danger of losing their health insurance.

The court explained in its June 29, 2018 decision, available here, that although HHS is afforded significant deference in approving pilot Medicaid projects like Kentucky’s, such discretion is still subject to judicial review. Judge Boasberg focused on the basic purpose of Medicaid—reimbursing certain costs of medical treatment for needy persons—and concluded that HHS was required to “adequately consider the effect of any [Medicaid] demonstration project on the State’s ability to help provide medical coverage.”  As to Kentucky HEALTH, HHS did not satisfy this requirement. The court found that this “signal omission” rendered the Secretary’s determination “arbitrary and capricious.”  The court vacated the approval of Kentucky HEALTH and remanded the matter to HHS for further review.

According to the Kaiser Family Foundation waiver tracker, available here, HHS has approved work requirements for Medicaid in four States and an additional seven States have requests awaiting HHS approval. These demonstration projects will likely draw increased scrutiny and attention in the wake of the Stewart v. Azar decision.