On March 27, 2019, U.S. District Court Judge James Boasberg for the District of Columbia issued two opinions that struck down the Secretary of HHS’s approval of Medicaid work requirement waivers in Kentucky and Arkansas.   Plaintiffs in each state challenged the work requirements, which were expected to result in significant numbers of enrollees being ineligible for Medicaid.  Plaintiffs alleged that the Secretary’s approval of these requirements was antithetical to the purpose of Medicaid, which is to cover vulnerable persons in need of medical assistance.  The court agreed.  Judge Boasberg found that the Secretary did not adequately consider the coverage impact when approving these requirements in light of this purpose.  The rulings call into question the legality of the Medicaid work requirements that have been approved in other states.

Medicaid is a cooperative federal-state program that aims to provide medical assistance to certain vulnerable populations; traditionally pregnant women, children, disabled, and the elderly.  Under the Affordable Care Act, certain states expanded Medicaid eligibility to certain low-income individuals under the age of 65.  The Medicaid statute sets out certain minimum requirements relating to promoting health assistance to vulnerable populations to which all state plans must conform.  See 42 U.S.C. § 1396a.  States may also seek approval for experimental proposals, called “demonstration projects” as long as they are consistent with the objectives of the Medicaid statute. 

Kentucky

The State of Kentucky, following its adoption of Medicaid expansion, submitted a demonstration project called “Kentucky HEALTH” to CMS for approval in July 2017.  Certain amendments conditioned Medicaid eligibility on work or community engagement requirements.  The Secretary approved the project in early 2018.  The work requirements were estimated to cause nearly 100,000 people to lose Medicaid eligibility.  Plaintiffs challenged the Secretary’s approval of the work requirements as unlawful, alleging that the Secretary had not meaningfully considered Kentucky’s estimate that nearly 100,000 people were likely to lose coverage under the new requirements.

Judge Boasberg, upon initially hearing the case, agreed with Plaintiffs.  He ruled that the “Secretary never adequately considered whether Kentucky HEALTH would in fact help the state furnish medical assistance to its citizens” which is a central objective of the Medicaid statute.  Stewart v. Azar, 313 F. Supp. 3d 237, 243 (D.D.C. 2018) (Stewart I).  Judge Boasberg concluded that this “signal omission render[ed] [the Secretary’s] determination arbitrary and capricious.”  The Court therefore vacated the Secretary’s approval and remanded to HHS for further review.  Upon remand, the Secretary approved Kentucky HEALTH for a second time in November 2018.  Another lawsuit followed and the Secretary was once again forced to defend his approval before Judge Boasberg.

This time, the Secretary defended his approval of the demonstration by “rel[ying] primarily on a new argument to that effect — namely that, although Kentucky HEALTH may cause nearly 100,000 people to lose coverage, that number will be dwarfed by the approximately 450,000 people who would suffer that fate if Kentucky ends its [Medicaid Expansion] . . . as it has threatened to do if this project is not approved.”  In other words, the Secretary argued that any reduction in coverage under the new requirements would be better than the alternative; the threat of de-expanding Medicaid or discontinuing Medicaid participation all together.  Judge Boasberg, again, sided with Plaintiffs, finding that the Medicaid statute does not leave the Secretary or the states so much latitude “to refashion the program Congress designed in any way they choose.” 

The court’s opinion is available here.

Arkansas

Following the ACA, Arkansas expanded Medicaid by offering “Arkansas Works.”  On March 5, 2018, the Secretary approved amendments to Arkansas Works which included new work requirements. Under the new work requirements, most able-bodied adults in the Medicaid expansion population ages 19 to 49 must complete each month 80 hours of employment or other qualifying activities or earn income equivalent to 80 hours of work.  Unlike the Kentucky litigation which contained estimates of coverage loss, the work requirements under Arkansas Medicaid had already taken effect.  Since the requirements took effect June 1, 2018, more than 16,900 individuals have lost Medicaid coverage for some period of time for not reporting their compliance. 

Plaintiffs sued, asserting that the Secretary did not sufficiently consider whether the work requirements would promote the objectives of Medicaid, including how it would affect the provision of medical assistance to the needy.  Consistent with his ruling in Stewart, Judge Boasberg agreed with Plaintiffs.  Judge Boasberg concluded that “the Secretary’s failures here are nearly identical to those in Stewart I” and set forth a similar analysis which resulted in vacatur of the Secretary’s approval and remand to HHS for further review. 

The court’s opinion is available here.

Applicability to Other State Programs

These two decisions jeopardize the legality of other states’ Medicaid work requirements.  HHS has approved Medicaid work requirements in nine states with an additional six states having requests pending HHS approval.  In short, the Medicaid work requirements, a cornerstone of the Trump Administration’s Medicaid agenda, were likely approved by the Secretary in a similar manner as those in Kentucky and Arkansas: quickly and arguably lacking the considerations of the effect on coverage loss for Medicaid enrollees.  Following the two decisions from the court, Administrator Verma indicated in a statement that the rulings would not dissuade efforts to approve Medicaid work requirements in other states.