Medicaid Work Requirements: Another Win for Beneficiaries, Another Loss for CMS

CMS Administrator Seema Verma is visibly proud of her agency’s Medicaid and CHIP scorecard, which she claims has ushered in “a new era of accountability and transparency in Medicaid”.  The scorecard includes measures of, among other things, federal administrative accountability; one of those measures reports the percentage of Section 1115 demonstration applications that CMS approved in six months or less.  Here’s a suggestion for another metric for the scorecard: the number of approvals of Section 1115 work requirements demonstrations that have been vacated and remanded to the Secretary by the federal courts.

Yesterday Judge James Boasberg of the U.S. District Court for the District of Columbia ruled that the Secretary’s approval of New Hampshire’s work reporting requirements demonstration under Section 1115 was “arbitrary and capricious” under the Administrative Procedures Act.  Accordingly, he vacated the Secretary’s approval and remanded the matter back to the Secretary.  As a result, no New Hampshire Medicaid beneficiaries will lose their coverage due to failure to meet work reporting requirements.

This was the fourth such approval that Judge Boasberg has determined to be “arbitrary and capricious.”  The first involved Kentucky; then came Arkansas and, for the second time, Kentucky.

The scorecard so far: Beneficiaries 4, CMS 0.

The imposition of work reporting requirements has been a quest for Administrator Verma since coming to CMS in 2017.  And by any measure, she has been pushing approvals out the door expeditiously, green-lighting “demonstrations” in nine states (AZ, AR, IN, KY, MI, NH, OH, UT, WI).  Only one state—Indiana—is currently implementing work reporting requirements; beneficiaries there are not scheduled to begin losing coverage until January 2020 (unless of course, a court intervenes).

As my colleague Joan Alker recently observed, approvals of new waivers have stalled, and work reporting requirements have lost the Big Mo, at least for the time being.  Judge Boasberg’s decisions in the Arkansas and Kentucky cases have almost certainly contributed to this slowdown—the Department of Justice lawyers, who have to defend the Secretary’s actions, do not like to lose—and his ruling in the New Hampshire case is likely to put even more pressure on the brakes.

The slowdown matters.  Researchers at George Washington University have estimated that, if the nine approved states are allowed to proceed, between 589,000 and 811,000 beneficiaries would lose their Medicaid coverage after 12 months.  These estimates, of course, do not reflect the coverage losses that would follow if the 6 non-expansion states with applications pending before the Administrator (AL, MS, OK, SC, SD, TN) and Virginia were approved and allowed to implement.

The Judge’s reasoning in the New Hampshire case follows closely on his decisions in the Arkansas and Kentucky cases.  As the Judge noted, “we have all seen this movie before.”  He explained again that under Section 1115, the Secretary is required to determine that a demonstration is “likely to assist in promoting the objectives of” the Medicaid statute.  He reaffirmed that the provision of Medicaid coverage is a “core objective” of the Medicaid statute. He repeated the experience in Arkansas, where 16,900 beneficiaries lost coverage as a result of the imposition of work reporting requirements.  He noted that as of July 8 (two weeks before the hearing on the case and three weeks before his decision) about 17,000 of the 25,000 non-exempt Medicaid beneficiaries had not reported compliance information to the state Medicaid agency, which suspended the requirements until September 30.  He referenced the “numerous” public comments in the record projecting coverage losses, listing them in an Appendix to his opinion. (Note to self: comments matter).  He reviewed the Secretary’s approval letter for any indication that the Secretary considered coverage loss but did not find any. He ruled that the Secretary’s approval was “arbitrary and capricious.”  Full stop.

CMS has appealed the Arkansas and Kentucky decisions to the D.C. Circuit Court of Appeals, which historically has specialized in cases involving application of the Administrative Procedure Act to federal agency conduct.  The cases have been consolidated and fully briefed; oral argument has been set for Friday October 11. (The Department of Justice has not yet indicated whether it will appeal the New Hampshire decision as well).  It is, of course, uncertain when (or how) the Court of Appeals will rule.  Until it does, tens of thousands of Medicaid beneficiaries in Arkansas, Kentucky, and New Hampshire will not lose their coverage due to work reporting requirements.  And hopefully after it does, tens if not hundreds of thousands of beneficiaries in other states will avoid losing their Medicaid coverage as well.

Now THERE are some numbers worth putting on the Medicaid scorecard.

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