Health Reform WK-EDGE New Hampshire Medicaid work requirements vacated by district court
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Friday, August 2, 2019

New Hampshire Medicaid work requirements vacated by district court

By Rebecca Mayo, J.D.

A District Court held 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.

Similar to the cases in Arkansas and Kentucky challenging the Medicaid work requirement programs in those states, the court here held that the Secretary of HHS’s decision to approve these programs without even a preliminary analysis of the potential loss of coverage, rendered the decision arbitrary and capricious. The mere mention of the possibility that beneficiaries may lose coverage is not enough, there must be a reasoned analysis (Philbrick v. Azar, July 29, 2019, Boasberg, J.).

The plan. In 2014, New Hampshire expanded Medicaid under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) to include previously uninsured adults whose income is 133 percent of the federal poverty line or less. As a result, the state’s uninsured rate was reduced by 45 percent. In 2018 the state sought a waiver for a project called Granite Advantage that would require most non-disabled adults aged 19 to 64 to complete 100 hours per month of employment or other community activities. The waiver was approved and the new requirements were implemented beginning January 1, 2019, however there were delays in implementation. Beneficiaries were initially required to submit qualifying hours or proof of exemption in June. As of July 8, 17,000 of the 25,000 beneficiaries had not reported any compliance information. This resulted in further delays of full implementation. New Hampshire residents filed a lawsuit claiming that the approval of the proposed community-engagement requirements violated the Administrative Procedures Act and the Constitution and moved for summary judgment.

Coverage analysis. The secretary can only approve demonstration projects that are likely to assist in promoting the objectives of the Medicaid Act. Therefore, he must identify the objectives of the Act and explain why the demonstration is likely to promote them. All parties agree that Medicaid’s core objective is to furnish medical assistance to persons who cannot afford it, so the secretary needed to consider whether the demonstration project would be likely to cause recipients to lose coverage and whether it could cause others to gain coverage. The agency mentioned the possibility of coverage loss in its approval but stating that a factor was considered is not a substitute for considering it. Many commenters address the issue and unanimously agreed that coverage loss would be substantial. Further, when the project was approved, the secretary had the benefit of the data from the first several months of Arkansas’s comparable project which showed that only 12.3 percent of non-exempt persons reported any kind of qualifying activity and 16,900 had lost coverage for some period as a result. Considering New Hampshire’s requirements were more stringent than Arkansas’s, it is reasonable to assume that the Granite Advantage program would lead to more coverage loss than Arkansas’ program. However, the secretary never discussed any of this in his approval letter, which makes this decision arbitrary and capricious.

The secretary claimed that Granite Health was designed to minimize coverage loss due to noncompliance, however other states expressed similar intentions and proved that a program’s intention to avoid coverage loss does not mean that it will do so. Additionally, the secretary only mentioned the intention but did not discuss how the program’s design bears on the actual magnitude of loss. The secretary also claimed that the program promoted coverage because if the demonstration was not approved, the state would discontinue coverage. However, the court found that under this reasoning, states may threaten to de-expand, or completely do away with Medicaid if a waiver is not approved and the secretary could then always approve those waivers no matter how few people remain on Medicaid thereafter, because "any waiver would be coverage promoting compared to a world in which the state offers no coverage at all."

Other goals. The secretary also asserted that the program was justified because it was likely to improve the health of Medicaid recipients. However, the objective of the act is to make healthcare more affordable for needy populations, not to address health generally. The secretary also asserted that the community-engagement requirements would improve beneficiaries’ financial independence. However, the court again noted that financial independence is not an objective of the act and even if it was, the secretary never weighed that benefit against the consequences of coverage loss. Finally, the secretary asserted that the program would enhance the fiscal sustainability of the state’s safety net. However, the court noted that HHS made no finding that it would save the state any amount of money or otherwise make the program more sustainable in some way. Further, the state represented that it did not intend for the demonstration to reduce costs nor did it expect to. The secretary never explained why he thought the program would transition beneficiaries to commercial coverage, given that nearly all Medicaid recipients are already working, unable to work, or find only low-paying jobs that do not offer commercial coverage. Additionally, the work requirements may be met through education or volunteer activities which would not offer commercial coverage. The court noted that most cuts to Medicaid services would reduce the cost of Medicaid and thus advance the sustainability of the program to some extent, "but it would be nonsensical to conclude that any cut therefore always promotes the act’s objectives."

The case is No. 19-773 (JEB).

Attorneys: Catherine A. McKee (National Health Law Program) for Samuel Philbrick. Matthew Charles Skurnik, U.S. Department of Justice, for Alex M. Azar, II.

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