On November 20, 2018, the Centers for Medicare & Medicaid Services (“CMS”) again approved the Kentucky HEALTH 1115 demonstration.  Kentucky HEALTH  was the first Section 1115 demonstration that CMS approved with a work and community engagement requirement as a condition of eligibility for coverage under Medicaid.  The demonstration requires certain Medicaid beneficiaries to engage in work or community engagement activities for at least 80 hours per month, or be locked out of coverage for six months.  The demonstration will go into effect on April 1, 2019 and is approved for a 5-year period. 

CMS first announced their support for work and community engagement requirements on January 11, 2018 in a Letter to State Medicaid Directors.  The next day, January 12, 2018, CMS approved the Kentucky HEALTH waiver. (HL Pulse summary here).  Fifteen Kentucky plaintiffs filed a lawsuit against CMS and on June 29, 2018, Judge James Boasberg of the U.S. District Court for the District of Columbia granted an injunction, finding CMS’ approval to be arbitrary and capricious because it didn’t “consider whether Kentucky HEALTH would in fact help the state furnish medical assistance to its citizens, a central objective of Medicaid.” (HL Pulse summary here).  Department of Health & Human Services Secretary Azar did not appeal Judge Boasberg’s ruling.

Instead, on July 19, 2018, CMS opened a new 30-day comment period regarding Kentucky Health and the special terms and conditions that CMS approved on January 12, 2018.  (HL Pulse summary here).  The comment period closed on August 18, 2018 and CMS received over 11,000 comments.  On November 15, 2018, the parties filed a Joint Status Report indicating that CMS was continuing to evaluate Kentucky’s application and submitted comments.   The new approval does not implement significant changes though it does require increased monitoring of the program’s effects.  CMS states that “[r]egardless of the degree to which Kentucky’s demonstration project succeeds in achieving the desired results, the information it yields will provide policymakers real-world data on the efficacy of such policies.”  

The approval letter provides additional background into why CMS believes that Kentucky HEALTH promotes the objectives of the Medicaid program, with a focus on “advancing the health and wellness of the individual” and “helping the individual attain independence.”  More specifically, with the work and community engagement eligibility requirement, Kentucky HEALTH endeavors to prepare Medicaid enrollees for transitioning to private insurance and attaining and sustaining employment.  The Kaiser Family Foundation has found that close to 8 in 10 Medicaid adults are in working families and that they are often employed in jobs and industries that are less likely to offer employer sponsored insurance.  CMS states that the waiver of retroactivity will encourage primary care and test “whether these beneficiaries will be encouraged to obtain and maintain health coverage, even when healthy, and whether there will be a reduction in gaps in coverage when beneficiaries churn on and off Medicaid or sign up for Medicaid only when sick.”  The program also waives non-emergency medical transportation to align with the commercial insurance market, “where this benefit is not typically available.” 

CMS also believes Kentucky HEALTH “promotes the objective of furnishing medical assistance because it provides coverage beyond what Kentucky is required to provide.”  In support, the approval references Governor Bevin’s assertions that he will end Medicaid expansion along with over-the counter-medications, vision services, and dental services if Kentucky HEALTH is not implemented.  In responding to comments, CMS states that “the amended demonstration as a whole is expected to provide greater access to coverage for low-income individuals than would be available absent the demonstration.”  In a footnote, the letter refers to the Medicaid expansion population as an “optional group” under Section 1902(a)(1)(A)(i)(VIII).  However, the expansion population is a mandatory group under the statute.  Following the Supreme Court’s decision in NFIB v. Sebelius, 567 U.S. 519 (2012), HHS is limited in how it may enforce the requirement for a state to expand Medicaid.  To date, 36 states and the District of Columbia have expanded their Medicaid programs. Virginia is set to expand its Medicaid program on January 1, 2019.

Stewart v. Azar (1:18-cv-00152) remains before Judge Boasberg.  The plaintiffs are expected to continue their challenge of Kentucky HEALTH.  Judge Boasberg is also hearing the case of Gresham v. Arkansas (Case No. 1:18-cv-01900), which challenges the Arkansas Works 1115 waiver demonstration that implemented a work or community engagement eligibility requirement.  In the first months of the program, over 12,000 individuals have lost their Medicaid coverage.  In a November 8, 2018 letter to Secretary Azar, the Medicaid and CHIP Payment and Access Commission asked “for a pause in disenrollments in order to make program adjustments to promote awareness, reporting, and compliance.”  The letter also urged HHS to establish mechanisms for evaluation and monitoring of other waivers that include work or community engagement requirements.   To date, CMS has also approved 1115 waivers with a work or community engagement requirements for Indiana, New Hampshire, and Wisconsin.