Today, October 11, 2019, the United States Court of Appeals for the D.C. Circuit is hearing oral arguments in Stewart v. Azar (Case No. 19-5095), an appeal from the federal district court’s rulings invalidating three prior approvals of Section 1115 Waivers in Kentucky and Arkansas that would have implemented work and community engagement requirements as a condition of Medicaid eligibility. The three judge panel consists of Judges Pillard, Edwards, and Sentelle.
Medicaid is the largest government health care program, covering approximately 72 million individuals, including low-income adults without children with household income up to 138% of the federal poverty level as a result of Medicaid expansion under the Affordable Care Act. Section 1115 of the Social Security Act gives the Secretary of HHS the authority to waive certain statutory requirements for demonstration projects that are likely to promote the objectives of the Medicaid program. While Section 1115 Waivers have historically been used to expand Medicaid coverage, waivers including work or community engagement requirements have been projected to result in significant coverage losses. CMS first announced its support for work and community engagement requirements on January 11, 2018 in a Letter to State Medicaid Directors.
The next day, January 12, 2018, the Secretary approved the Kentucky HEALTH waiver. [HL Pulse summary]. Kentucky HEALTH would require non-exempt adults who receive coverage through the Medicaid expansion to complete and report 80 hours per month of qualifying activities, including employment, education, or job training. Arkansas’s program, named the Arkansas Works Amendments, was approved by the Secretary on March 5, 2018 and also requires most able-bodied beneficiaries of Medicaid coverage to complete 80 hours of qualifying work or activities. Non-exempt individuals who fail to report sufficient qualifying hours for 3 consecutive months would be dis-enrolled under the Arkansas Works Amendments. New Hampshire’s Section 1115 program, called Granite Advantage, requires non-disabled adults age 19-64 to complete 100 hours per month of employment or other community activities in order to be eligible for Medicaid coverage. Certain categories of beneficiaries are exempt, including caregivers for dependent children, pregnant women, and the medically frail.
Kentucky and Arkansas
On June 29, 2018, Judge James Boasberg of the United States District Court for the District of Columbia considered Kentucky Health and granted an injunction, finding the Secretary Azar’s approval of the waiver to be arbitrary and capricious by failing to consider the estimated 95,000 individuals who would lose Medicaid coverage under the program. The Court rejected the Secretary’s arguments that individuals may avoid coverage by transitioning to employer-sponsored or commercial coverage based on the lack of research or evidence to support such claims. Judge Boasberg acknowledged community engagement may have long-term benefits, but he took issue with the fact that the Secretary “never discussed how they will promote a transition from Medicaid to commercial coverage.” Notably, the Court did not conclude that a program requiring community engagement would necessarily be incompatible with the Medicaid statute and directed that the Secretary must “adequately consider the effect of any demonstration project on the State’s ability to help provide medical coverage.” [HL Pulse summary] Following the Court’s decision, HHS opened a comment period for Kentucky HEALTH and the Secretary re-approved the waiver on November 20, 2018. [HL Pulse summary]
On March 27, 2019, Judge Boasberg again ruled that the Secretary’s approval of the Kentucky waiver, and this time also approval of the Arkansas Section 1115 Waiver, were arbitrary and capricious due to the Secretary’s failure to consider the impact of the waivers on Medicaid coverage. In vacating the Kentucky waiver for a second time, Judge Boasberg was critical of the Secretary’s failure to address the coverage loss issue raised in the Court’s first opinion, especially since the Court “offered clear guidance that Section 1115 mandated that coverage considerations be a central part of the analysis.” Similarly, in vacating the Arkansas waiver the Court cited CMS’ failure to address potential loss of Medicaid coverage, stating that “weighing the harms these person will suffer from leaving in place a legally deficient order against the disruptions to the State’s data-collection and education efforts due to vacatur renders a clear answer: the Arkansas Works Amendments cannot stand.” [HL Pulse summary]
On April 19, 2019, the United States Court of Appeals for the District of Columbia granted expedited appeal in Gresham v. Azar and Stewart v. Azar. For the upcoming appeal in Gresham and Stewart, the Kentucky Hospital Association alone filed an amicus brief in support of the Trump Administration. Parties who filed amicus briefs for the challengers include the American College of Physicians, AARP Foundation, American Medical Association, and the National Women’s Law Center.
On July 29, 2019, Judge Boasberg found that HHS’ approval of New Hampshire’s efforts to impose work requirements as a condition of Medicaid eligibility was arbitrary and capricious, again citing the state’s failure to consider coverage losses. Like the rulings issued regarding Arkansas and Kentucky efforts to impose similar Section 1115 Waivers, Judge Boasberg again determined that the Secretary had failed to consider coverage losses, stating: “The agency has still not contended with the possibility that the project would cause a substantial number of person to lose their health-care coverage. That omission is particularly startling in light of information before the Secretary about the initial effects of Arkansas’ markedly similar project.” As a result, the Court invalided the approval. [HL Pulse summary].
If the D.C. Court of Appeals reverses Judge Boasberg’s decisions, Medicaid program enrollment will likely decline. The Kaiser Family Foundation estimates an 6%-17% decline in Medicaid enrollment if New Hampshire’s waiver is implemented, resulting in approximately 2600-2700 people losing Medicaid coverage. Appendix A of the Philbrick v. Azar opinion provides other comments and studies projecting similar, if not greater, coverage losses resulting from Medicaid work and community engagement requirements. The Commonwealth Fund’s report found that Medicaid work requirements “could weaken hospitals’ financial positions, especially rural hospitals, in states that implement these requirements as a condition of coverage.”
CMS has approved Medicaid work requirement waivers in nine states, with nine more states pending waivers. Indiana’s “Gateway to Work” program imposes similar work requirements, but only affects about 5% of its Medicaid population: those in Indiana’s expansion program. There are also exemptions for those too sick to work, pregnant women, and caregivers of young children. The National Health Law Program along with Indiana Legal Services filed suit in the U.S. District Court for the District of Columbia, attempting to invalidate the Secretary’s approval.¹ Judge Boasberg has also been assigned to hear this case.
*Special thanks to Rachel Park, Law Clerk and District of Columbia Bar license pending, for her assistance in preparing this post.
¹Rose v. Azar, 1:19cv2848