By Rebecca Mayo, J.D.
HHS’s failure to consider the risk to coverage when approving waivers to the Medicaid program that allowed work requirements, constituted an arbitrary and capricious decision.
The work requirement amendment to the Arkansas Medicaid Program was vacated by the U.S. District Court in the District of Columbia. The court found that in approving Arkansas’s proposed amendments to the program as waivers to the Medicaid program, HHS failed to take into consideration wither the amendments would promote the objectives of the Medicaid Act. HHS’s failure to consider whether beneficiaries would lose coverage, and what the impact would be, rendered the decision arbitrary and capricious (Gresham v. Azar, March 27, 2019, Boasberg, J.).
The amendments. The governor of Arkansas sought a waiver from HHS for three proposed amendments to Arkansas’s Medicaid program which included a work requirement as a condition of continued Medicaid coverage. Under the work requirements, most able-bodied adults ages 19 to 49 were required to complete 80 hours of employment or other qualifying activities each month or earn income equivalent to 80 hours of work. Nonexempt individuals were required to report monthly through an online portal and failure to report sufficient qualifying hours for any three months in a plan year were disenrolled from Medicaid for the remainder of the year and not permitted to re-enroll until the follow plan year. HHS approved the waiver for these requirements.
Since the program began, more than 16,900 individuals have lost Medicaid coverage for some period of time for not reporting their compliance. Ten Arkansans sued HHS in August 2018, arguing that the approval of the state’s new requirements violated the Administrative Procedure Act (APA) and the Constitution.
Medicaid objectives. The question here is whether HHS acted arbitrarily or capriciously in concluding that the amendments were likely to assist in promoting the objectives of the Medicaid Act. The state indicated that Medicaid coverage is a Medicaid objective that is readily apparent from the substantive provisions of the statute. HHS refers to the provision of medical care to eligible persons as Medicaid’s "core" objective. HHS’s approval letter explained that it approved the amendments based on whether they would assist in improving health outcomes, address behavioral and social factors that influence health outcomes, and incentivize beneficiaries to engage in their own health care and achieve better health outcomes. The court noted that the consideration of whether the project would help or hurt in funding medical services for the needy was missing from the list of considerations. While HHS argued that it had no obligation to offer any explanation of the decision to approve a waiver, the court held that where an agency decision is judiciable reviewable the government must give a reason that a court can measure against the arbitrary and capricious standard of the APA.
Risk to coverage. To adequately analyze the issue of coverage, HHS needed to consider whether the amendments would likely cause recipients to lose coverage and whether it would cause others to gain coverage. HHS did neither. The HHS approval letter indicates that several commenters had predicted coverage loss, however the letter failed to address whether that coverage loss would occur as predicted. While the government is not required to recite and refute every objection submitted in opposition to a proposed demonstration, the agency cannot entirely fail to consider an important aspect of the problem that is repeatedly raised in the comment period. The government is also not required to provide a numeric estimate of coverage loss, although the court noted the agency tasked with supervising Medicaid programs in all 50 states should be able to do just that. However, where commenters provide coverage predictions, the government should explain whether it agrees with the predictions and whether the loss would be minor or substantial and how that weighs against the advancement of other Medicaid objectives.
Other objectives. The state and HHS argued that the amendments advance other objectives of the Medicaid Act by improving health outcomes and promoting independence and self-sufficiency. However, the court was firm in holding that if the state and HHS admit that ensuring Medicaid coverage for the needy is a key objective of the Act, then HHS’s failure to consider the effects of the amendments on coverage alone renders the decision arbitrary and capricious; it does not matter that HHS deemed the project to advance other objectives of the Medicaid Act. The state additionally argued that the provision of Medicaid coverage is in irreconcilable tension with other purposes of the Medicaid Act. The court was puzzled how the objectives of a statue all sides agree was designed to provide free or low-cost medical care to the needy could nevertheless stand in irreconcilable tension with the goal of providing free or low-cost medical care to that population.
Thus, the court vacated the Secretary’s approval of the work requirements and remanded the issue back to HHS.
The case is No. 1:18-cv-01900-JEB.
Attorneys: Ian Heath Gershengorn (Jenner & Block LLP) for Charles Gresham. James Mahoney Burnham, U.S. Department of Justice, for Alex M. Azar, II.
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