Are Medicaid work requirements solving a problem that does not exist to the detriment of the goals of the Medicaid program?
Across the country, states are testing the boundaries of Medicaid with new eligibility requirements. After the Trump administration expressed support for the idea of work requirements, in early 2018, states began to sign on to try out the so-called "community engagement" provisions. These eligibility provisions generally require adults to complete a certain number of hours of employment or other qualifying activities (e.g. job searching) in order to qualify for Medicaid. Although Trump’s CMS has approved several of these work requirements, the federal courts have been less eager to accept the change in policy. To date, the federal district court for the District of Columbia has struck down work requirements in Arkansas, Kentucky, and New Hampshire. But those decisions will be appealed and Thomas Barker—Partner and Co-Chair of the health care practice of Foley Hoag LLP—says these cases pose "a question that may ultimately land before the U.S. Supreme Court." This Strategic Perspective considers the origin of the question and examines the implications of Medicaid work requirements.
How we got here
In some ways, the advent of Medicaid work requirements really begins with the passage of the Patient Protection and Affordable Care Act (ACA). The rationale for their development is tied to an understanding that, traditionally, Medicaid did not cover able-bodied adults. Baker explained that the ACA’s Medicaid expansion changed that—bringing Medicaid coverage to a large number of childless, able-bodied adults. At least in states that have expanded Medicaid—Arkansas, Kentucky, and New Hampshire are among these—the argument, according to Baker, is structured as follows: "If we are going to put childless, able-bodied adults on Medicaid, they need to perform some type of community engagement requirement."
Section 1115 of the Social Security Act is the legal mechanism that states use to approve waivers to test alternate coverage and payment strategies that would otherwise break Medicaid program rules. It is through § 1115 waivers that states have added work requirements to their Medicaid Programs. The section is broad in authority and lacks specific criteria. As a result, the usage of § 1115 waivers has varied significantly between states and successive administrations (see ‘What is the objective of the Medicaid program?’, April 5, 2019). Barker explained that, outside of work requirements, § 1115 has been considered as a mechanism to seek approval for things like "drug testing as a condition of Medicaid eligibility."
This fluctuation in policy was most recently realized when the Trump Administration announced its eagerness to approve Medicaid waivers containing work requirements (see HHS lets states open doors on Medicaid waivers, January 19, 2018; Trump’s CMS endorses Medicaid work requirements, January 11, 2018; see Executive Order promotes work requirements for public assistant programs to reduce poverty, April 11, 2018).
Stewart and Gresham
After the Trump Administration showed eagerness to approve work requirements, sixteen states have moved towards work requirements with six obtaining approval, seven pending, and three set aside by courts. The current status of three of those states—Arkansas, Kentucky, and New Hampshire—is discussed below.
Gresham. 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. HHS approved the waiver.
Medicaid beneficiaries challenged HHS’ decision to approve the waiver. In Gresham v. Azar, the D.C. District Court held that the HHS failed to take into consideration whether 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. The court explained that 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 (see Approval of Arkansas Medicaid work requirements vacated, April 1, 2019).
Stewart. Similarly,a group of Medicaid beneficiaries in Kentucky challenged HHS’s approval of a Kentucky HEALTH Medicaid waiver application which included a community engagement or work requirement as a condition of eligibility. The beneficiaries alleged that the approval of the waiver exceeded HHS statutory authority. Additionally, the beneficiaries argued that the work requirement was neither experimental nor likely to promote the objectives of the Medicaid Act, and, therefore, was unlawful (see Class action says ‘radical’ Kentucky Medicaid work requirement is unlawful, January 25, 2018). The District Court for the District of Columbia in that case—Stewart v. Hargan—agreed with the Medicaid beneficiaries and struck the work requirement down as invalid. The court held that the HHS action was unlawful because the HHS Secretary never adequately considered whether Kentucky’s decision to impose work requirements on some recipients would promote a central objective of Medicaid—helping the state furnish medical assistance to its citizens (see Kentucky’s Medicaid work requirement is invalid, July 9, 2018).
Subsequently, the HHS secretary reapproved the Kentucky HEALTH work requirement and the D.C. District Court revisited its legality. The court concluded that the HHS Secretary’s reapproval of Kentucky HEALTH was arbitrary and capricious for failing to, again, adequately consider the proper objectives of the Medicaid program (see Court again blocks Kentucky’s proposed Medicaid program, March 29, 2019).
Philbrick. Additionally, echoing the earlier rulings of Stewart and Gresham, on July 29, 2019, the District Court for the District of Columbia held—in Philbrick v. Azar—that the New Hampshire Medicaid work requirements program was approved without a proper analysis of the risk and magnitude of potential loss of coverage to beneficiaries (see New Hampshire Medicaid work requirements vacated by district court, July 31, 2019). The court struck down the work requirement in that case as well.
The Stewart and Gresham cases have been appealed to the D.C. Circuit.
The Appeals and the Consequences
What will happen on appeal is an open question. Barker said the outcome may "depend on the panel in the D.C. Circuit." He explained "the courts generally give great deference to the secretary regarding §1115 waivers." He indicated that he "would not be surprised if the D.C. Circuit overturned the decisions." Additionally, he expressed some doubt over whether the Supreme Court would take an appeal of the cases.
But this doesn’t mean the D.C. District decisions will be without an impact. For example, Barker noted that HHS is now producing "much more detailed waiver approvals, discussing the effect of work requirements on Medicaid enrollment in the state." Additionally, he noted that HHS is making sure "states have process in place to prevent people from losing coverage because they cannot report their community engagement." Barker pointed out that this reporting issue was fatal in the Gresham decision.
Barker noted that "the principal goal of the Medicaid program is to make health care coverage available to individuals who cannot otherwise afford it; those are the very first words of §1901 of the Social Security Act." But work requirements seem to oppose that very idea. While acknowledging the arguments made by states that say they would not have expanded Medicaid but for the work requirements, Barker called the requirements "a solution in search of a problem, especially in this economy." Yet, whether work requirements are, in fact, furthering or frustrating the Medicaid program, work requirements are here. Whether the requirements will remain is a question for the courts.
Attorneys: Thomas Barker (Foley Hoag LLP).
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