Three judges on a federal appeals court on Friday seemed set to strike down Medicaid work requirements for Arkansas and Kentucky because the CMS-approved waivers don't line up with Medicaid's objectives.
In oral arguments at the U.S. Court of Appeals fro the District of Columbia Circuit, the three-judge panel vigorously questioned the government's attorney about the purpose of the work requirements and agreed with an earlier ruling that the agency didn't adequately consider the effects the Section 1115 waivers would have on enrollment.
Judge David Sentelle called the work requirements "blackmail," since some states have told the CMS they would not expand Medicaid coverage without those restrictions. But that isn't a justification for approving a waiver, he said.
The "principal goal of the ACA was to expand coverage," said Judge Sentelle, a Reagan appointee.
Medicaid work requirements could lead to thousands of people losing coverage in Arkansas and Kentucky. So far, nine states have received CMS approval to add work requirements to their Medicaid programs and nine additional state waivers are pending.
The judges likely won't weigh in on the broader merits of work requirements in their ruling, because they only need to consider the lack of evidence supporting the waiver approvals.
Judge Cornelia Pillard repeatedly asked the government's counsel Alisa Klein what the purpose of the Medicaid work requirements was, saying the "bottom line" is that the waivers will reduce the number of people with Medicaid coverage.
"People are going to lose coverage because of the pilot program," she said. "You're not addressing that question."
The Trump administration previously argued that by approving the waivers, HHS had enabled Arkansas and Kentucky to expand Medicaid and thus increase coverage.
But Klein maintained that doesn't mean the CMS would approve any waiver a state requests.
"By no means are we saying it's a free-for-all because the expansion was made optional," Klein said. "The federal government is not going to be easily forced to approve projects it doesn't want to approve."
Although the Trump administration argued that it approved the waivers because it believes they will improve Medicaid recipients' health and the financial stability of the program, the judges questioned the boundaries of that discretion.
Judge Pillard asked if the CMS could approve waivers that put restrictions on how much television Medicaid beneficiaries watch "if there were evidence that not watching television makes people healthier."
Klein compared the work requirements to similar provisions for the Temporary Assistance for Needy Families and Supplemental Nutrition Assistance Program that help many Medicaid-eligible people. But Judge Sentelle said those programs were "not applicable at all" because those programs had work requirements written into the law, while the ACA does not. If Congress wanted work requirements included in the ACA, it would have done so.
"Those are all laudable goals, but the question we have here is whether the exceptions further the goal of the statute," Judge Sentelle said.
Judge Harry Edwards agreed but said that "we don't even need to get to the question of work regulations" because they don't account for coverage.
The U.S. Government Accountability Office on Thursday also delivered bad news for work requirement supporters. A new report found the requirements could cost states hundreds of millions of dollars to administer because they require Medicaid enrollees to report work or similar activities such as training to keep their Medicaid coverage.
GAO said that the CMS has been lax in its oversight of work requirement waivers. The watchdog said the agency doesn't consider administrative costs during the waiver approval process or have a way to make sure it doesn't give states too much money to cover the costs of administering work requirements.
GAO recommended that the CMS require states to estimate the administrative costs of proposed waivers and study the risk and oversight of possible overpayments for administrative expenses. But the CMS disagreed with its recommendations, saying that its current policies are good enough given the level of risk associated with the waivers.