Medicaid Wars: The Unwinding at the One Year Mark (Episode V)

In its first twelve months, the Biden administration has been unwinding the anti-Medicaid actions taken by its predecessor. The unwinding has been slow and methodical, and it is not yet finished. In part, this is because the new management at CMS has necessarily been focused on responding to the COVID-19 pandemic and in part because some federal courts have been hostile to its efforts to correct its predecessor’s mistakes. But it is now clear that regulatory burden, work requirements, and other policies designed to undermine Medicaid coverage do not have much of a future.  Unwinding is a question of when, not whether.

First, as to regulatory burden. The Trump administration took this to new heights, issuing regulations designed to tie up CMS and the rest of HHS in a tangle of procedural requirements. The SUNSET rule puts almost all Medicaid and CHIP regulations at risk of automatic expiration unless HHS “assesses” and “reviews” them.  The Good Guidance rule puts almost all Medicaid and CHIP subregulatory guidance at risk of being automatically rescinded through the use of a guidance repository “trap door.”  Of course, the prior administration waited to finalize these regulations until it was clear that they would not apply to its own administrative actions.  HHS postponed the effective date of the SUNSET rule until March of this year and has proposed to withdraw or repeal it. HHS has also proposed to withdraw or repeal the Good Guidance rule.  Withdrawal or repeal seem the most likely—and certainly the most warranted—outcomes.

Next, work requirements. The Trump administration initially tried to impose work requirements the old-fashioned way, by asking Congress to change the Medicaid statute, which does not permit states to condition Medicaid eligibility on meeting work requirements. When that failed, former CMS Administrator Seema Verma in early 2018 encouraged states to apply for section 1115 waivers to “demonstrate” work requirements.  Over the next few years, 20 states tried to sign up their Medicaid expansion populations, parents in a handful of nonexpansion states, or both. Administrator Verma approved work requirements waivers for 13 of them—Arizona, Arkansas, Georgia, Indiana, Kentucky, Maine, Michigan, Nebraska, New Hampshire, Ohio, South Carolina, Utah, and Wisconsin.

What’s happened since then is complicated—this is Medicaid, after all—but here’s the big picture.  (For the details see the Kaiser Family Foundation’s tracker.) Following a change in Governors, Kentucky and Maine abandoned their waivers.  One state, Arkansas, went ahead with implementation and succeeded in terminating coverage for 18,000 beneficiaries before a federal district court put a stop to it.  Subsequent court orders vacated the Michigan and New Hampshire waivers.  The D.C. Circuit Court of Appeals affirmed the rulings against Arkansas and New Hampshire.  Indiana suspended its work requirements after beneficiaries challenged the approval of its waiver in court.  The effect of all this litigation was to stop the work requirements waivers in their tracks, preserving Medicaid coverage for hundreds of thousands low-income Americans.

When the Biden administration took office, the Arkansas case was on appeal before the Supreme Court and the PHE disenrollment freeze, which effectively blocked states from using work requirements to terminate coverage, was in place.  Since then, the Biden administration has withdrawn former Administrator Verma’s invite to states, rescinded waiver approvals for ten states, and left the pending applications from Alabama, Idaho, Mississippi, Montana, Oklahoma, South Dakota, and Tennessee to be withdrawn or simply wither away.  During this time, not a single beneficiary lost coverage due to work requirements and the associated red tape.  (And as my colleague Joan Alker has pointed out, the Biden administration has also served notice that it will not use section 1115 to allow states to impose premiums on Medicaid beneficiaries that are not permitted under Medicaid law).

Despite this progress, some loose ends remain.  The Arkansas work requirements waiver expired on December 31, 2021, and CMS has approved a new section 1115 demonstration for the state that does not include work requirements. As of this writing, the state’s appeal of the DC Circuit’s ruling against it is still pending before SCOTUS.  In December, the Biden administration withdrew its predecessor’s approval of work and premium requirements under Georgia’s 1115 demonstration; the state has challenged the withdrawal in federal court.

Finally, the ten-year “demonstrations.”  During the last two weeks of the Trump administration, CMS approved extensions of 1115 demonstrations for three defiantly non-expansion states—Florida, Tennessee, and Texas—through 2030.  None of these involves work requirements.  The Tennessee waiver is the ideological poster child for a Medicaid block grant (although it has windfall attributes as well). The Florida and Texas extensions are old-fashioned sweetheart deals, with billions of federal dollars in uncompensated care pool spending to buffer hospitals from their losses on uninsured patients who would have coverage if the states took up Medicaid expansion.

As of this writing, all three ten-year extensions are still in place. Never mind that the statute authorizes extensions of only 3 years or, in the case of demonstrations involving dual eligibles, 5 years.  In April, CMS rescinded the extension of the Texas demonstration and gave the state an opportunity to resubmit its completed application using normal notice and comment procedures. The state, which is in the jurisdiction of the U.S. Court of Appeals for the 5th Circuit, took the matter to a local federal district court judge, who in August enjoined CMS from rescinding the extension.  As my colleagues Leo Cuello and Joan Alker explain, the litigation drama is ongoing and has already had ripple effects beyond Texas.  The Tennessee waiver is also the subject of a federal court suit, this one brought by program beneficiaries. There have not been any developments in this case since the new 30-day federal comment period in August.  The January 2020 CMS guidance inviting states to apply for aggregate or per-capita caps on federal Medicaid matching payments remains in the HHS Guidance Portal. Finally, the 10-year Florida extension remains in place, its status unchanged since Episode IV in this blog series.

There is some uncertainty on how the unwinding will play out, or how long it will take. But this much is clear: If the new CMS management is to achieve its strategic priorities of protecting and expanding coverage, improving access to care, advancing health equity, and promoting innovation—priorities that are essential to a Medicaid program that works—it has no choice but to unwind its predecessor’s anti-Medicaid actions. As the past year has shown, unwinding bad federal Medicaid policy is time-consuming and resource-intensive, and that time and those resources are not available to implement good Medicaid policy. That, unfortunately, will also be the case going forward.

It turns out that governing is hard.  Who knew?

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