Health Reform WK-EDGE Approval of Arkansas’s Medicaid demonstration was arbitrary, capricious
News
Wednesday, March 4, 2020

Approval of Arkansas’s Medicaid demonstration was arbitrary, capricious

By Elena Eyber, J.D.

Approval of Arkansas’s Medicaid demonstration was arbitrary and capricious when the Secretary of HHS failed to analyze whether the demonstration would promote Medicaid’s primary objective of providing healthcare coverage.

The appellate court for the District of Columbia affirmed the district court’s judgment vacating the Secretary’s approval of Arkansas’s demonstration program because it was arbitrary and capricious. The Secretary failed to analyze whether the demonstrations would promote Medicaid’s primary objective of providing healthcare coverage. The appellate court held that the Secretary’s failed to consider whether the project would result in coverage loss (Gresham v. Azar, February 14, 2020, Sentelle, D.).

Procedural history. Residents of Kentucky and Arkansas brought an action against the Secretary of HHS, contending that the Secretary acted in an arbitrary and capricious manner when he approved Medicaid demonstration requests for Kentucky and Arkansas. The district court for the District of Columbia held that the Secretary did act in an arbitrary and capricious manner because he failed to analyze whether the demonstrations would promote the primary objective of Medicaid—to furnish medical assistance. Kentucky terminated the challenged demonstration project and moved for voluntary dismissal. The appellate court for the District of Columbia affirmed the judgment of the district hold holding that the Secretary’s authorization of Arkansas’s demonstration was unlawful.

Objective of Medicaid. The appellate court held that the district court was correct that the principal objective of Medicaid is providing health care coverage. The Secretary’s discretion in approving or denying demonstrations is guided by the statutory directive that the demonstration must be likely to assist in promoting the objectives of Medicaid under 42 U.S.C. §1315. The purpose of the Medicaid statute is to furnish (1) medical assistance on behalf of families with dependent children and of aged, blind, or disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services, and (2) rehabilitation and other services to help such families and individuals attain or retain capability for independence or self-care.

Instead of analyzing whether the demonstration would promote the objective of providing coverage, the Secretary identified three alternative objectives: "whether the demonstration as amended was likely to assist in improving health outcomes; whether it would address behavioral and social factors that influence health outcomes; and whether it would incentivize beneficiaries to engage in their own health care and achieve better health outcomes." The appellate court noted that these three alternative objectives all point to better health outcomes as the objective of Medicaid, but the statute makes no mention of that alternative objective.

The appellate court agreed with the district court that the alternative objectives of better health outcomes and beneficiary independence are not consistent with Medicaid. The text of the statute includes one primary purpose, which is providing health care coverage without any restriction geared to healthy outcomes, financial independence or transition to commercial coverage.

Arbitrary and capricious approval. The court found the Secretary’s analysis and approval of Arkansas’s demonstration arbitrary and capricious. The loss of coverage for beneficiaries was an important aspect of the demonstration approval because coverage is a principal objective of Medicaid and because concerns were raised about the loss of coverage. The Secretary failed to account for loss of coverage, which is a matter of importance under the statute. The record showed that the demonstration amendments resulted in significant coverage loss. The Secretary’s analysis considered only whether the demonstrations would increase healthy outcomes and promote engagement with the beneficiary’s health care. The Secretary disregarded the statutory purpose in his analysis and prioritized non-statutory objectives. The appellate court held that the Secretary’s failure to consider whether the project will result in coverage loss was arbitrary and capricious.

The case is No. 19-5094.

Attorneys: Samuel Brooke (Southern Poverty Law Center) for Charles Gresham. Alisa B. Klein, U.S. Department of Justice, for Alex Michael Azar, II.

Cases: CaseDecisions AccessNews AgencyNews DemonstrationProjectNews GeneralNews MedicaidNews DistrictofColumbiaNews NewsFeed

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More

Health Reform WK-EDGE: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on health reform legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.