HHS and CMS Sued for Work Requirements in MI Section 1115 Demo

December 03, 2019 - HHS and CMS are being sued over Michigan’s section 1115 demonstration waiver defining the state’s new work requirements.

The plaintiffs, who include individuals who would be impacted by the work requirements, fundamentally argue that HHS and CMS are overstepping their authority in allowing extensive Medicaid work requirements.

“This case challenges the ongoing efforts of the Executive Branch to bypass the legislative process and act unilaterally to fundamentally transform Medicaid, a cornerstone of the social safety net,” the class action complaint begins. “Purporting to invoke a narrow statutory waiver authority that allows experimental projects ‘likely to assist in promoting the objectives’ of the Medicaid Act, the Executive Branch has instead effectively rewritten the statute, ignoring congressional restrictions, overturning a half century of administrative practice, and threatening irreparable harm to the health and welfare of the poorest and most vulnerable in our country.”

The waiver required that any Healthy Michigan Plan (HMP) enrollees from 19 to 62 must spend 80 hours a month working or participating in work-related activities including job training, internships, substance use disorder treatments, and more. The amendment’s exemptions covered those with a dependent under six years old, pregnant women, caretakers of disabled individuals whether or not the individual is a dependent of the caretaker, and “medically frail” enrollees.

In addition, the law sought to require enrollees over 100 percent of the federal poverty line (FPL) with a cumulative 48 months of Medicaid coverage to turn in evidence of their healthy behaviors and pay a higher premium.

READ MORE: Experts Clash Over Medicaid Expansion Eligibility Classification

The plaintiffs are four middle-aged women from various locations across Michigan for whom injuries, homelessness, mental health, irregular work schedules, and transportation issues make them concerned that they cannot meet the new work requirements. For each, certain factors may make them exempt from the work hour requirements. However, they will not know until December, which may not leave them sufficient time to make work arrangements if their requests are denied.

The plaintiffs stated that in some cases the stress and anxiety of waiting to hear whether their exemption will be accepted is exacerbating their existing stress-sensitive health issues.

The plaintiffs also expressed concern about being able to meet the new premium requirement. For one individual, the premium could amount to 5 percent of her income.

According to the complaint, the plaintiffs are not alone in these concerns.

The section 1115 demonstration waiver stated that approximately 400,000 of the 650,000 HMP enrollees, or around six in ten, would be required to comply with the new stipulations. For qualifying individuals, this could mean higher cost-sharing, complying with certain healthy behaviors, potentially gaining employment, and keeping and submitting documents to prove these requirements have been met.

READ MORE: KY Medicaid Work Requirements May Cause Uninsurance If Reinstated

Experts predicted that, due to the work requirements expansion, anywhere from 9 to 27 percent of all HMP enrollees (61,000 to 183,000 Michigan residents), could lose their healthcare insurance. The state knew this when it submitted the waiver amendment, citing the statistic specifically, the complaint pointed out.

Mainly, the complaint argues that the HHS Secretary acted outside of his authority in approving these work requirements and that the requirements go against the Medicaid Act’s objectives and Congress’s intentions.

On a larger scale, the complaint says that the administration’s support for work requirements seeks to undermine a federal statute, the Affordable Care Act, which the executive branch is compelled to protect and enforce under the “Take Care Clause.” The power to transform the Medicaid program lies in Congress’s jurisdiction, not in the HHS, CMS, or White House, the complaint says.

The complaint pointed out that Michigan’s HMP was doing well in 2017 when the state renewed its expansion with no changes. The public payer boasted 650,000 new expansion enrollees, hospitals’ quantity of uncompensated care nearly halved (down to $3.77 million from $7.21 million).

However, in mid-2018, Michigan pursued work requirements. According to the plaintiffs, this decision diverged from 50 years of agency policy and sought to “fundamentally transform Medicaid” in a way that was incongruent with the administration and departments’ powers.

READ MORE: MI Medicaid Plans to Cut PBMs and Use Fee for Service Drug Payments

The response from HHS and CMS has been quiet, but the administration’s historical stance on work requirements has been unequivocally positive.

When CMS first supported the “community engagement” incentives in January 2018, CMS Administrator Seema Verma said,

“States have the opportunity to help individuals improve and enhance the skills that employers truly value. People who participate in activities that increase their education and training are more likely to find sustainable employment, have higher earnings, a better quality of life, and, studies have shown, improved health outcomes.”

Since then, CMS and HHS have greenlighted nine work requirements programs in Arizona, Arkansas, Indiana, Kentucky, Michigan, New Hampshire, Ohio, Utah, and Wisconsin. None of the programs that have been implemented are currently operational.

CMS told HealthPayerIntelligence.com that it would not comment on pending legislation.

Unless it is struck down, Michigan’s work requirement goes into effect January 1, 2020.

This is not the only controversial expansion move the state has initiated lately. Michigan also decided to eliminate its pharmacy benefit managers earlier this year and received backlash from Michigan health plans as a result.