In a big health policy setback for the Trump administration, a federal judge Wednesday invalidated the CMS approvals of Medicaid work requirement waivers in Kentucky and Arkansas, sending them back to the agency for reconsideration.
U.S. District Judge James Boasberg in Washington, who blocked Kentucky's waiver approval last June, wrote that the HHS secretary exceeded his discretionary authority under the Medicaid Section 1115 waiver program in approving waivers that could lead to tens of thousands of people losing Medicaid 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 HHS and the CMS.
But Judge Boasberg, an Obama administration nominee, expressed doubt about whether the agencies could remedy the problems in the Kentucky waiver approval.
"Given a second failure to adequately consider one of Medicaid's central objectives," he wrote, "the court has some question about HHS' ability to cure the defects in the approval."
Kentucky's waiver—which also includes premium payments, an end to 90-day retrospective coverage, and an end to non-emergency medical transportation—has not yet taken effect.
Boasberg ordered an immediate halt to Arkansas' work requirement program, which went into effect last year and has already resulted in more than 18,000 Medicaid expansion enrollees being dropped from the program for non-compliance with the work and reporting requirements.
Arkansas' Republican Gov. Asa Hutchinson said he is "disappointed" by the ruling and will issue further comment Thursday morning.
The CMS had not yet issued a comment by late Wednesday afternoon.
CMS Administrator Seema Verma has made Medicaid work requirements a centerpiece of the administration's health policy. The CMS has approved work requirement waivers in eight states, and requests are pending from seven others. Maine's new Democratic governor terminated that state's work requirement waiver.
It's not clear yet what impact the rulings, which the Trump administration is likely to appeal, will have on the other states moving forward on work requirement waivers. Advocacy groups in New Hampshire recently filed a similar legal challenge to their state's work requirement waiver, which also has been assigned to Judge Boasberg.
It's also uncertain what the political impact will be if the courts ultimately bar work requirement waivers. In states like Virginia and Utah, work requirements were added to persuade Republican lawmakers to go along with expansion. In other states like Michigan and Ohio, they were incorporated to win GOP support for continuing expansion programs.
HHS and the CMS have approved the waivers on the grounds that they enhance beneficiary health and financial independence and the fiscal sustainability of Medicaid.
In the case of Kentucky's waiver, the Trump administration argued that HHS did not have to consider the issue of whether it would cause people to lose coverage because Kentucky's Republican Gov. Matt Bevin had warned that if the waiver was not granted, he would end the state's entire expansion program.
Judge Boasberg held that beneficiary health and financial independence are not stated objectives of the Medicaid Act in their own right.
"The secretary's failure once again to adequately consider the effects of Kentucky HEALTH on coverage is alone... fatal to the approval," he wrote.
He also forcefully rejected the administration's argument that the threat of ending the entire Kentucky expansion program justified the waiver program's potential loss of some coverage.
Kentucky's Cabinet for Health and Family Services blasted Judge Boasberg's decision.
"The judge illogically concluded that Medicaid is all about paying for healthcare for as many people as possible without regard to whether this coverage actually makes people healthier," the agency said in a written statement. "We emphatically disagree because a healthcare program like Medicaid, by its very nature, must take into account whether it improves people's health. That's the whole point."
In the Arkansas case, Judge Boasberg similarly found that the HHS secretary did not adequately consider the impact of the work requirement waiver on coverage, and that the secretary did not even offer an estimate of coverage loss.
Quoting baseball great Yogi Berra, Judge Boasberg wrote: "It's deja vu all over again."He rejected the Justice Department's claim that halting Arkansas' work requirement program would be disruptive.
"Arkansas might use the time while the program is paused to consider whether and how to better educate persons about the requirements and how to satisfy them," he wrote.
The ruling on Arkansas' waiver program could negatively affect the decision of that state's Republican-controlled Legislature on whether to renew funding for Medicaid expansion for another year, said Bo Ryall, CEO of the Arkansas Hospital Association, which supports expansion and opposes the work requirement.
In Kentucky, expansion supporters fear Bevin will react to the ruling by either trying to end the expansion or by cutting benefits, which he did temporarily after Judge Boasberg first blocked the waiver last year.
But Cara Stewart, chief of staff for the Kentucky House Democratic Caucus, said state law bars Bevin from ending the expansion through executive order, and his action would be immediately challenged in court if he tried to do that.
In addition, Bevin is up for re-election in November, and eliminating coverage for more than 400,000 expansion enrollees may not be politically popular.
"It will increase the chances of him losing in November if he takes such a step," said Steve Beshear, the former Democratic governor of Kentucky who implemented the expansion and whose son Andy is a Democratic contender for the governorship.