A federal appellate court Friday shot down the CMS' approval of Arkansas' Medicaid work requirement, dealing a major blow to the Trump administration's Medicaid policy centerpiece of requiring beneficiaries to work as a condition of receiving benefits.
In a unanimous ruling, a three-judge panel for the U.S. Court of Appeals for the District of Columbia Circuit upheld a lower court decision that HHS' approval of the Medicaid work requirement in Arkansas was arbitrary and capricious and not consistent with the primary objective of the Medicaid statute.
A similar waiver in Kentucky also was blocked by a lower court. But that state's new Democratic governor recently terminated its Medicaid work requirement program and withdrew from the appeal.
The D.C. Circuit opinion, written by Republican-appointed Judge David Sentelle, said the lower court "is indisputably correct that the principal objective of Medicaid is providing healthcare coverage."
The Trump administration in its approvals of Section 1115 waiver requests from Arkansas and other states said requiring beneficiaries to report 80 hours a month of work or "community engagement" activities would lead to improved health outcomes and well-being for beneficiaries.
But the panel rejected that rationale.
"We agree with the district court that the alternative objectives of better health outcomes and beneficiary independence are not consistent with Medicaid," Sentelle wrote.
CMS Administrator Seema Verma has aggressively promoted the administration's policy of encouraging Medicaid work requirements. Ten states have won work requirement waiver approvals, while nine more are seeking similar approvals.
Verma and other administration officials frequently have criticized the Affordable Care Act's expansion of coverage to low-income adults with incomes up to 138% of the federal poverty level as outside the scope of the Medicaid statute.
But the D.C. Circuit said the ACA's coverage expansion "to a larger group of Americans is consistent with Medicaid's general purpose of furnishing health care coverage."
Michigan and Ohio currently are launching programs requiring Medicaid expansion beneficiaries to report work or community engagement activities. Advocacy groups recently sued to challenge Michigan's program.
The CMS said it's reviewing and evaluating the opinion and determining its next steps.
"The CMS remains steadfast in our commitment to considering proposals that would allow states to leverage innovative ideas," the agency said in a written statement.
Jane Perkins, legal director of the National Health Law Program, which spearheaded the legal challenge to the work requirement waivers, praised the ruling on Friday.
"It means that thousands of low-income people in Arkansas will maintain their health insurance coverage—coverage that enables them to live, work, and participate as fully as they can in their communities," she said.
Arkansas's Republican leaders had hoped to reinstate the work requirement program, which was blocked by U.S. District Judge James Boasberg last March after more than 18,000 Arkansas Medicaid expansion enrollees lost coverage in 2018.
"Arkansas implemented a work requirement in order to help recipients get worker training and job opportunities while receiving benefits," Arkansas Gov. Asa Hutchinson said in a written statement. "It is difficult to understand how this purpose is inconsistent with federal law … Hopefully, the Supreme Court will review today's ruling but as it stands the Arkansas Works program will be less effective in helping recipients gain independence."
The appellate panel said that instead of analyzing whether the work requirement demonstration would promote the objective of providing coverage, the HHS secretary identified three alternative objectives—improving health outcomes, addressing behavioral and social factors, and incentivizing beneficiaries to engage in their own healthcare.
"These three alternative objectives all point to better health outcomes as the objective of Medicaid, but that alternative objective lacks textual support," Sentelle wrote. "Indeed, the statute makes no mention of that objective."
Some experts believe the ruling will affect other state's waiver requests, even though it does not formally apply to them.
Nicholas Bagley, a University of Michigan law professor who has closely followed the work requirements litigation, said Friday's ruling marks "the end of the road for work requirements at least until the Supreme Court has an opportunity to weigh in."
He said the opinion minces no words in saying the Trump administration can't approve waivers that would result in kicking tens of thousands of people off program. It might also block variations like Utah's waiver, which requires Medicaid expansion enrollees to report that they have applied for employment but does not require them to actually be employed.
"They might try to go ahead with something different like Utah," Bagley said. "But it's very difficult to see how any waiver whose adoption would result in loss of coverage could possibly be approved."
The office of Democratic Gov. Gretchen Whitmer of Michigan did not respond to requests for comment about how the ruling would affect her state's waiver program.
The office of Utah Republican Gov. Gary Herbert said the appellate ruling doesn't have an immediate effect on the state's Medicaid program. In addition, Herbert's office said, its community engagement requirement "is much more lenient" than Arkansas' requirement.