Court Strikes Down Work Requirements in Kentucky and Arkansas

Manatt on Health: Medicaid Edition

Over the past month, there has been significant activity related to the future of requirements that condition Medicaid eligibility on work/community engagement (CE).  In both the policy arena and in court, the Trump administration is continuing to defend its position in support of such waivers, and state legislators are considering bills to establish work/CE requirements with mixed results.

Administration Seeks to Expand Work/CE Requirements Legislatively

To date, the Centers for Medicare & Medicaid Services (CMS) has used its waiver authority to authorize work requirements for states seeking them, emphasizing its desire to respond to state requests for such authority. The administration included in its fiscal year (FY) 2020 President’s Budget a legislative proposal to require all “able-bodied, working-age adults” to meet work/CE requirements as a condition of Medicaid eligibility.1 Although this proposal is not likely to be adopted by the divided Congress, it reaffirms the administration’s unwavering commitment to Medicaid work/CE requirements.

Defending the proposal before Congress, Department of Health and Human Services (HHS) Secretary Alex Azar in mid-March suggested that the over 18,000 individuals who have lost coverage in Arkansas since the state’s requirements went into effect may have found jobs; his statements were roundly criticized by stakeholders, who pointed to recent state jobs data suggesting only a small fraction of people who lost coverage gained jobs or other health coverage.

Federal District Court Strikes Down Work Requirements in Kentucky and Arkansas

In two opinions issued Wednesday, March 27, a federal judge struck down CMS’s approval of waivers containing work/CE requirements in Kentucky (Stewart v. Azar) and Arkansas (Gresham v. Azar). Eight other states have CMS approval to implement similar work/CE requirements in their Medicaid programs,2 including New Hampshire, which also has a pending lawsuit before the same judge who decided the Kentucky and Arkansas cases. Six additional states are awaiting CMS approval to implement work/CE requirements.3

This week’s decision was the second time Judge James Boasberg of the U.S. District Court in the District of Columbia vacated CMS approval of the Kentucky work/CE requirements. Last year, Judge Boasberg held that, in approving waivers for Medicaid demonstration programs, CMS had to consider whether the waiver would promote a key objective of the Medicaid statute: furnishing “medical assistance.” When CMS first approved the Kentucky waiver, Judge Boasberg concluded that CMS had not adequately considered the impact work/CE requirements would have on access to Medicaid coverage. In last year’s opinion, Judge Boasberg set aside CMS’s approval and remanded the matter to CMS for further consideration. CMS opened a second comment period and again approved the waiver, this time providing additional justifications for the waiver. Nonetheless, Judge Boasberg concluded that CMS had still failed to adequately justify its approval, and again vacated and remanded the matter to CMS. On the same day, Judge Boasberg also set aside the Arkansas approval with a remand to CMS for reconsideration. Because Arkansas had begun implementing work/CE requirements, it will need to stop, pending further judicial or administrative action. The decision challenging Arkansas’s waiver also vacates CMS’s approval of the state’s request to waive retroactive eligibility. Other elements of Arkansas’s long-standing Medicaid waiver, including its qualified health plan premium assistance program, are unaffected by the ruling.

Although the decisions have been remanded to CMS, CMS told Judge Boasberg that it does not intend to reconsider the Kentucky or Arkansas waivers until after his decision is reviewed in an appeal. In light of that, Judge Boasberg entered judgment in both cases on April 4, giving CMS and the states 60 days to appeal.

Because district court decisions do not create new legal precedent, CMS is free to continue approving similar work/CE requirements in additional states—indeed, CMS approved Utah’s waiver containing work/CE requirements just two days after Judge Boasberg’s decision. To the extent these approvals are challenged in court, however, many are likely to be vulnerable. Future challengers will be able to sue in D.C. federal court and ask that their cases be treated as related to the Kentucky and Arkansas cases, and thereby assigned to Judge Boasberg.

No judge has ruled that work/CE requirements are per se illegal in Medicaid; Judge Boasberg ruled only that CMS failed to provide a rational explanation for how these particular waivers are in furtherance of Medicaid’s objective of providing health coverage, leaving open the possibility that CMS could someday approve a waiver that advances that objective. However, in light of Kentucky’s concession that it expects 95,000 people to lose coverage and the evidence of coverage loss in Arkansas, and having failed twice to convince Judge Boasberg that the Kentucky waiver supports coverage, CMS may face increasingly long odds in this district court. But Judge Boasberg’s decisions are not likely to remain the final legal word for long, with the states and CMS apparently ready to seek review in the Court of Appeals for the D.C. Circuit.

State Legislatures Consider Introducing Work/CE Requirements

State policymakers around the country continue to debate whether to impose work/CE requirements in their states, and are watching federal developments as they make decisions. In some states, work/CE requirements are a key component of legislative proposals to newly expand Medicaid, while other states seek to impose work/CE requirements for certain enrollee groups already eligible for Medicaid.

In at least one state—Mississippi—the governor put Medicaid expansion discussions on hold, pending resolution of legal challenges to work/CE requirements in other states. Other Republican-led legislatures considered implementing Medicaid work/CE requirements this legislative session and ultimately did not pass such requirements. Wyoming legislators in the House voted down a bill that they had initially supported; due to bipartisan concerns about the policy, the House Republican leader reportedly characterized the bill as creating “[coverage] cliffs or booby traps.”4 In West Virginia, lawmakers ended their legislative session without action on work/CE requirements legislation. However, several other states—including Florida, Idaho, Montana and Nebraska—are still considering work/CE requirements. Utah overrode its voter-approved Medicaid expansion ballot initiative by limiting coverage to beneficiaries with incomes at or below 100% of the Federal Povery Level (FPL) and has just received CMS approval to impose work/CE requirements on that population. As states near the end of their legislative sessions, work/CE requirements will continue to be a key measure to watch.5

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For additional information on legal activity related to Medicaid work/CE requirements, please see Manatt’s recent publication on “Work Requirements Litigation” for the Robert Wood Johnson Foundation’s State Health and Value Strategies program.

1 The FY 2020 President’s Budget includes several administrative and legislative proposals that would cut Medicaid spending by $1.54 trillion over ten years. For more information, see the HHS Budget in Brief, available at: https://www.hhs.gov/sites/default/files/fy-2020-budget-in-brief.pdf.

2 Arizona, Arkansas, Indiana, Kentucky, Maine, Michigan, New Hampshire, Ohio, Utah and Wisconsin have CMS approval to implement work/CE requirements, although Maine has decided not to implement them.

3 States with pending waiver requests include Alabama, Mississippi, Oklahoma, South Dakota, Tennessee and Virginia.

4 As reported by Inside Health Policy on February 28, 2019.

5 Seventeen states’ legislative sessions have already ended, or will end in April. Another 14 states’ sessions will end in May. See: National Conference of State Legislatures, “2019 Legislative Session Calendar,” updated on March 22, 2019, available at: http://www.ncsl.org/Portals/1/Documents/NCSL/2019_session_calendar.pdf.