Federal Appeals Court Rules Against Medicaid Work Requirements

Ken Terry

February 18, 2020

A federal appeals court in Washington, DC, last week upheld a lower court ruling that the government's approval of a Medicaid work requirement in Arkansas violated the primary intent of the Medicaid law — a decision that could have a "chilling" effect on other states seeking waivers to implement the work program.

In a unanimous decision, a three-judge appeals court panel last week agreed with a federal district court that US Department of Health and Human Services Secretary Alex Azar exceeded his authority when he granted a waiver request from Arkansas requiring Medicaid recipients aged 19 to 49 to "work or engage in specified educational, job training, or job search activities for at least 80 hours a month" in order to keep their Medicaid benefits.

Azar's approval of a similar waiver request by Kentucky was also part of the suit. However, that component was dismissed after Kentucky terminated its work requirement program, following the election of Democratic Governor Andy Beshear.

Arkansas instituted its new work requirements for those aged 30 to 49 on June 1, 2018, and for those aged 20 to 29 on January 1, 2019. The district court issued the ruling that stopped the state's program on March 27, 2019.

The US Court of Appeals for the DC Circuit, in an opinion written by Judge David Sentelle, a Reagan appointee, agreed with the lower court that Azar's approval of the Arkansas Medicaid work requirement was "arbitrary and capricious" and not consistent with the primary goal of Medicaid.

When Azar approved the waivers for Arkansas and Kentucky, the district court found, he'd failed to analyze whether they would advance the main objective of Medicaid, which is to provide medical assistance. Moreover, he had not considered the possibility that the program would result in a loss of coverage, the lower court said.

In Arkansas, more than 18,000 people, about 25% of those subject to the work requirement, lost their Medicaid coverage in just 5 months, Sentelle noted.

The government has argued that Arkansas's work mandate would improve health outcomes, address social determinants of health, and incentivize Medicaid beneficiaries to engage in their own healthcare and achieve better outcomes, Sentelle said. None of those objectives is specified in the Medicaid statute, he observed.

Arkansas and the federal government have also construed Azar's approval letter as encouraging Medicaid recipients to transition to jobs that provide private insurance, Sentelle said. However, nothing in the Medicaid law supports that objective, either, he pointed out.

The Centers for Medicare and Medicaid Services (CMS), which has made the work requirement waivers the centerpiece of its Medicaid policy, has not decided whether to appeal the appellate court ruling to the Supreme Court or ask for an en banc rehearing in the DC appeals court.

"CMS is reviewing and evaluating the opinion and determining next steps. CMS remains steadfast in our commitment to considering proposals that would allow states to leverage innovative ideas," an agency spokesperson told Medscape Medical News

Could Have "Chilling" Effect on Waivers

So far, three states — Arkansas, Kentucky, and New Hampshire — have had their Medicaid work requirement waivers set aside by the courts, according to the Kaiser Family Foundation.

CMS has approved waivers for seven other states, of which three — Indiana, Michigan, and Utah — have implemented them. Arizona, Ohio, South Carolina, and Wisconsin have not yet implemented their approved waivers. Ten other states have applied for waivers that have not yet been approved.

The DC appeals court ruling on work requirement waivers is the first at the appellate level, noted MaryBeth Musumeci, an associate director at the Kaiser Family Foundation Program on Medicaid and the Uninsured.

The decision will have a major impact on the future of the state programs that are in various stages of approval and implementation, she told Medscape Medical News.

Following the decision that overturned New Hampshire's Medicaid work requirement, the government appealed. Now both sides in the New Hampshire case must file motions with the appellate court within 30 days of the Arkansas decision indicating how they think the court should proceed in light of the ruling in the Arkansas case, Musumeci said.

Meanwhile, court challenges have also been mounted against the work requirement programs in Indiana and Michigan. These cases are being heard by the same district court judge who ruled on the Arkansas and Kentucky initiatives, Musumeci noted.

The court asked the two sides whether their cases with regard to work criteria were materially different from those in the other states. Because the government has conceded that they are not, she said, the judge is likely to rule in favor of the plaintiffs, following the appeals court reasoning.

That's not to say that the appeals court decision now applies to every state, she cautioned. "The court hasn't directly said that all work requirement waivers are unlawful. But it has had a chilling effect, and we've seen some states such as Arizona pause their implementation, waiting to see what will happen in the courts."

CMS has not stopped approving waivers since the state work requirements started being legally challenged, Musumeci pointed out. But, in the wake of the appeals court decision, it's possible that CMS might decide to halt the program, she said.

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