Federal Judge Reinstates Georgia Section 1115 Waiver

King & Spalding

On August 19, 2022, the United States District Court for the Southern District of Georgia reinstated “Georgia Pathways,” a Section 1115 demonstration waiver which requires individuals, among other conditions, to complete 80 hours per month of qualifying activities like work or education in order to be eligible for Medicaid. CMS has sixty days to file an appeal, with a deadline of October 18, 2022. Should CMS choose not to go forward with an appeal, Georgia will then have a new Medicaid expansion population created by the work requirements in Georgia Pathways.

CMS initially approved Georgia Pathways in October 2020 under the Trump Administration. CMS’s position at that time was that the demonstration would increase Medicaid coverage, that the conditions of coverage were attainable, and that the resulting expansion in healthcare coverage would be beneficial during the pandemic. Specifically, the demonstration requires that applicants earn less than a hundred percent of the federal poverty line, complete and report a minimum of eighty hours of “qualifying activities” – meaning employment, job training, community service, or certain kinds of education – in the previous month, and then maintain that pace each month to maintain eligibility. Lastly, the demonstration requires that applicants earning above 50 percent of the federal poverty line must pay a small monthly premium. A few months later, CMS under the Biden Administration made a preliminary announcement that it was considering withdrawing its approval for Georgia Pathways. The Agency stated that it had determined that allowing the work and community engagement requirements to take effect in Georgia would not promote the objectives of the Medicaid program because of the ongoing COVID-19 pandemic. CMS then formally rescinded its approval of Georgia Pathways in December 2021.

The federal judge in the Southern District of Georgia found the Agency’s decision to rescind approval of Georgia Pathways to be arbitrary and capricious under the Administrative Procedure Act. The Court outlined six critical errors committed by the Agency which resulted in the arbitrary and capricious finding. First, the Court notes that CMS failed to consider or weigh the likely possibility that rescinding would mean less Medicaid coverage in Georgia. Second, CMS measured Georgia Pathways against a baseline of full Medicaid expansion, rather than taking the demonstration on its own terms—as the statute and regulations require. Third, the Court stated that CMS doubled down on that error by judging Georgia Pathways according to fundamentally inapt comparisons. For example, comparing Georgia Pathways to demonstrations which deployed work requirements that could only be coverage reducing. Fourth, CMS relied on “health equity,” which the Court emphasized as not being mentioned in the relevant statute as a factor for determining a demonstration’s approval. Fifth, the Court notes that CMS ignored its obligation to consider and weigh potential reliance interests when changing its mind. Finally, CMS ultimately failed to explain the Agency’s reasons for changing its mind about the key issues underlying the approval.

Thus, in finding that the Agency’s decision to rescind its approval of Georgia Pathways was arbitrary and capricious on numerous, independent grounds, the Court held the recission unlawful and set it aside. Whether CMS chooses to move forward with an appeal may provide insight into the Agency’s evolving position on Medicaid work requirements, and other states’ decisions to pursue similar demonstration projects.

The decision is available here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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