Arbitrary and Capricious: Kentucky Can’t Require Medicaid Beneficiaries to Document Work in Order to Have Coverage

Seema Verma, the CMS Administrator, has been relentless in her efforts to rewrite the Medicaid statute by encouraging states to require “able bodied” adults to document work in order to qualify for Medicaid. The resulting blizzard of red tape would predictably lead to large coverage losses and redefine Medicaid as a welfare rather than a health program.

The first state out of the gate was Kentucky, which had its application for a section 1115 waiver to “demonstrate” work requirements approved on January 12, followed by Indiana, Arkansas, and New Hampshire. Kentucky also sought to impose high premiums and lock people out of coverage for failing to complete paperwork. On June 29, the Administrator’s crusade hit a wall: a ruling by a federal District Court in a case brought by the National Health Law Program, the Kentucky Equal Justice Center, the Southern Poverty Law Center, and Jenner & Block on behalf of 16 Kentucky Medicaid beneficiaries.

Judge James Boasberg ruled that the Secretary’s approval of the 1115 waiver was arbitrary and capricious because he failed to address a salient factor – that is, the purpose of the Medicaid program to furnish medical assistance. His order vacates the Secretary’s approval of the Kentucky waiver and remands it to the U.S. Department of Health and Human Services.

The Judge’s 60-page opinion is going to take a little while to digest, and once we’ve had a chance to do that we’ll have more to say on what it might mean for Medicaid beneficiaries in Kentucky and other states.  What we can say now, though, is that CMS and the State of Kentucky are virtually certain to appeal the Judge’s ruling to the federal Court of Appeals for the District of Columbia Circuit.  As a practical matter, the earliest the DC Circuit could hear the appeal is in early September, with a decision coming two or more months after that under an expedited process.

So what happens between now and then?

CMS and the State of Kentucky are likely to ask Judge Boasberg to stay his ruling pending appeal, allowing the State to start implementing its work documentation requirements and other punitive policies as scheduled on July 1. If the Judge, concerned about the potential of large coverage losses, declines to do so, they will probably make the same request of the DC Circuit.  If the DC Circuit also declines to do so, then CMS and the State could ask the Supreme Court to stay Judge Boasberg’s ruling.

While this battle plays itself out, beneficiaries in Arkansas, which has already begun imposing work documentation requirements, and Indiana and New Hampshire, which are scheduled to do so by the end of the year, will need to decide whether to seek help from the federal courts.  And Administrator Verma and other supporters of work documentation may turn to Congress for a change in the Medicaid statute giving states the option to impose such requirements as a condition of eligibility. Stay tuned…

Andy Schneider is a Research Professor at the Georgetown University McCourt School of Public Policy.