The Trump administration and many states face a complex set of policy decisions in the wake of a federal judge’s decision vacating Medicaid work requirement waivers in Kentucky and Arkansas.
In his paired rulings last week, U.S. District Judge James Boasberg in Washington, D.C., struck at a centerpiece of the administration’s health policy when he ruled that HHS Secretary Alex Azar exceeded his discretionary authority in approving waivers that could lead to tens of thousands of people losing Medicaid coverage. The secretary did not adequately consider the coverage impact, given that the objective of the Medicaid Act is to provide coverage, he wrote.
“We will continue to defend our efforts to give states greater flexibility to help low-income Americans rise out of poverty,” CMS Administrator Seema Verma said in a written statement, although an agency spokesman said March 28 that no appeal decisions have been made yet.
Arkansas Gov. Asa Hutchinson urged an expedited appeal to the U.S. Court of Appeals for the District of Columbia Circuit. After that, the case could head to the U.S. Supreme Court, which probably wouldn’t decide the case until next year at the earliest.
Many Medicaid expansion supporters cheered the rulings, saying they will prevent low-income people—most of whom already have jobs, serve as caregivers, or have serious barriers to employment—from losing badly needed coverage. Healthcare providers say disenrolling people based on work requirements disrupts care and drives up uncompensated-care costs.
The rulings are only binding in Kentucky and Arkansas. But some experts worry Republican governors and legislators in other states will refuse to launch Medicaid expansions—or keep their expansions—if they can’t require nondisabled adults to participate in “community engagement” activities such as work, job training, education or volunteering.
Eight states have work-requirement waivers approved by the CMS, and the agency currently is considering requests from seven others, including five that have not expanded Medicaid.
“If the courts throw those out, does that change the political dynamics in states like Virginia, where legislators now may say this is no longer an attractive trade-off and we’ll walk away?” asked Matt Salo, executive director of the National Association of Medicaid Directors.
Kentucky’s waiver has not yet taken effect. The state projected that it would lead to 95,000 people leaving Medicaid over five years.
The judge ordered an immediate halt to Arkansas’ program, the nation’s first to launch, which resulted in more than 18,000 people losing coverage last year due to noncompliance.
At a news conference March 28, Hutchinson urged lawmakers to renew expansion funding while the government appeals the ruling. “If we give up on this, we give up on the opportunity to lead nationally on giving people a better opportunity for training and access to the job market,” he said.
Hutchinson argued that the program has been successful, with tens of thousands of Arkansans finding jobs and leaving Medicaid due to the work requirement. Yet many adult beneficiaries can’t work consistently and risk losing coverage over time, according to an analysis from the Commonwealth Fund.
Other states including Idaho, Indiana, Michigan, New Hampshire, Ohio and Virginia must decide whether to push ahead with the daunting implementation of a Medicaid work requirement despite many months of legal uncertainty. Ohio reportedly is reviewing the impact of the Boasberg rulings on its waiver program, scheduled to take effect in 2021.
In addition, more legal challenges are likely to follow in those states. A challenge against New Hampshire’s waiver is pending before Boasberg.
“It’s clearly a precedent,” Salo said. “Where one state is clearly stopped from doing this, others will be thinking this could happen to us.”
Hospital groups face their own quandary. Some are working with their states to streamline the work requirement reporting process to minimize coverage losses.
“We would have preferred not to have a work requirement,” said Laura Appel, a senior vice president at the Michigan Health & Hospital Association, whose state is scheduled to start its mandate next January. “But it’s part of our statute, so we want to make it the best possible program and not jeopardize the coverage of 700,000 people in the Healthy Michigan program.”
Other expansion supporters are urging states to drop their work requirements entirely, or at least pause them until the higher courts rule. “You are bargaining for potentially years of litigation and a tremendous implementation challenge,” said Eliot Fishman, senior director of health policy at Families USA. “If you’re a state considering one of these waivers, you have to ask, is it worth all that?”
Trump administration and state Republican officials have justified the work requirements on the grounds that they enhance beneficiary health and financial independence and reduce state Medicaid costs by trimming enrollment.
But Boasberg, an Obama appointee, agreed with the arguments of advocacy groups that those are not the objective of the Medicaid Act, which is to furnish coverage.
“The court cannot concur that the Medicaid Act leaves the secretary so unconstrained, nor that the states are so armed to refashion the program Congress designed in any way they choose,” he wrote in sending the Kentucky waiver back to the CMS for the second time.
Bo Ryall, CEO of the Arkansas Hospital Association, said he hears from his members that uncompensated care has gone up since the work requirement went into effect.
