Medicaid Work Requirements: News from the Litigation Front

It has been obvious for several months that the wheels have come off the Medicaid work requirements bus.  The Secretary of HHS has approved “demonstrations” of work requirements in nine states; none of these states is currently implementing.  And no state that accepts the 6.2 percentage point increase in its federal Medicaid matching rate made available by the Families First Act can do so as long as the maintenance of effort (MOE) requirement remains in place.  The litigation over the Secretary’s misuse of the section 1115 demonstration authority marches on, however.

Last week a 3-judge panel of the D.C. Circuit Court of Appeals upheld a lower court decision blocking the New Hampshire Medicaid work requirements “demonstration.”  Technically, the ruling was a summary affirmance;  the panel determined that the D.C. Circuit’s February decision in the  Arkansas work requirements case controlled the result in the New Hampshire case as well.  In both, the approval of work requirements by the Secretary of HHS was “arbitrary and capricious” and therefore invalid.

The ruling was issued by judges appointed by Presidents Reagan, George H.W. Bush, and Trump. (The author of the ruling in the Arkansas case, Judge David Sentelle, was also a member of the panel in the New Hampshire case).  The Secretary, through the Department of Justice, requested the affirmance, and is now expected to ask the Supreme Court to review the D.C. Circuit’s rulings in both the Arkansas and New Hampshire cases.

Why would the Secretary even consider asking the Supreme Court to review the D.C. Circuit ruling?  Of course, no federal agency likes to be told that its actions are “arbitrary and capricious.” And the growing need for Medicaid coverage during the COVID public health and economic crisis, the ideological crusade against Medicaid as a health insurer continues.  But the optics are not great:  the Secretary would, in effect, be asking the Supreme Court to allow states to use red tape to increase the number of low-income Americans without health insurance coverage in the midst of a pandemic—when people need health care—and a recession—when people lose their jobs and their employer health insurance.  And legally, the D.C. Circuit decision is a straightforward application of the Administrative Procedure Act to actions taken by a federal agency, so it’s not at all clear why the Justices would feel the need to review it, especially given the other issues on their plate.

Predicting the future course of litigation is notoriously risky, but here’s one way things might play out.   The Secretary’s request for Supreme Court review, called a “cert petition,” would have to be filed by mid-July.  If it is filed then, the briefing in support of and in opposition to the petition could extend into mid-September, just before the beginning of the October 2020 Term.  The Justices would then decide whether to discuss the petition at one of their private conferences; if no Justice asks for a discussion, the petition would be  automatically denied, and the D.C. Circuit decision would stand.  If the case is scheduled for discussion, and if four Justices decide to take up the case—according to SCOTUSblog the Court accepts only about 80 of the 7000 to 8000 cert petitions it receives each term—the briefing on the merits would begin.  The Secretary, the states, and the beneficiaries would all have an opportunity to weigh in.  If the Court decided to accept the case in mid-October, the briefing would probably not be completed before the end of January 2021.  Then on to oral argument and a decision sometime before the end of the Term in early July 2021.

Bottom line: even if the Supreme Court decides to review the D.C. Circuit decision, it will almost certainly not decide the case before next spring.  And until the Supreme Court acts, the D.C. Circuit decision remains in effect.   To date, all the legal challenges to the Secretary’s approval of work requirements “demonstrations” have been brought in the D.C. Circuit, which specializes in the Administrative Procedure Act; any future cases are likely to be brought there as well.  The D.C. Circuit’s reasoning in the Arkansas case will control.  So even if the Congress, in future legislation, waters down the Families First MOE requirement, the “demonstrations” cannot, as a practical matter, be implemented while the D.C. Circuit ruling stands.  And if there is a change in management at HHS on January 20, 2021, the new Secretary would be able to dispatch the work requirements bus to the junkyard.

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