Appeals Court Strikes Down AR Medicaid Work Requirements

February 19, 2020 - The US Court of Appeals dealt a blow to Medicaid work requirements when the judges presiding over Gresham v Azar upheld the lower court decision to invalidate Arknsas’s Medicaid work requirements.

“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,” the written decision said. “Because the Secretary’s approval of the plan was arbitrary and capricious, we affirm the judgment of the district court.”

The appeals court found that the main objective of Medicaid is to provide healthcare coverage. Secretary Azar, the court stated, dismissed the predictions that the principle objective of Medicaid would be thwarted by focusing on three alternative objectives. Secretary Azar found that the demonstration would improve patient outcomes, address social determinants of health, and motivate beneficiaries to be involved in their health care and outcomes.

But these objectives, while also needed, cannot trump Medicaid’s stated purpose: to provide healthcare coverage.

“We agree with the district court that the alternative objectives of better health outcomes and beneficiary independence are not consistent with Medicaid,” said the appeals court. “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.”

The appeals court also agreed that the decision was arbitrary and capricious.

“Nodding to concerns raised by commenters only to dismiss them in a conclusory manner is not a hallmark of reasoned decisionmaking,” the appeals court contended.

In January 2014, Arkansas expanded its Medicaid program under the ACA. Two years later, the state submitted a 1115 Medicaid demonstration that added work requirements to the Medicaid program. 

The demonstration required that 19 to 49 year old beneficiaries spend 80 hours each month in a job or qualifying job-related activity. The consequence for failing to record and submit these hours for three months was disenrollment and exclusion from Medicaid until the next plan year. 

In addition to this measure, Arkansas limited retroactive coverage to thirty days, and cut a program that helped beneficiaries cover employer-sponsored health plans’ premiums, sending all beneficiaries with employer-sponsored health plans to a qualified health plan on the state health insurance marketplace instead. 

These were not the only changes the state sought but these were the alterations that Secretary of the Health and Human Services (HHS) Department, Alex Azar, would allow.

Though many raised concerns about the new rule’s impact on coverage, Secretary Azar approved the rule. He pointed to Arkansas’s exemptions and outreach plan as evidence that the state’s Medicaid population would not suffer major losses.

Less than a year after it went into effect, 18,000 Arkansans had lost coverage. Studies later tied these losses directly to the work requirements. The program was stopped and the investigation ensued.

The impacts of this appeals court decision can already be seen. 

Kentucky’s work requirements program—which the state was considering reinstating and which was also a part of the Gresham v Azar lawsuit—came to an end in December 2019 when the state settled its part in the suit and backed out.

Michigan is also facing a lawsuit between beneficiaries and CMS and HHS over the state’s work requirements. Experts estimate that anywhere from 9 to 27 percent of Michiganders could lose their healthcare coverage due to the Medicaid expansion.

Other states’ work requirements programs are now on the chopping block. Indiana and states with Medicaid work requirements are concerned about the effects of Arkansas’s lawsuit. A precedent has been set.

The case could continue on to the Supreme Court but the ripple effects can already be recognized.