Judiciary Gone Rogue: Federal Judge Overreaches in Georgia Medicaid Waiver Case

Another day, another deeply troubling federal court decision. This time a judge has misread Medicaid law to potentially leave 350,000 uninsured Georgians locked out of coverage. Here’s the story.

In late 2020, the Trump administration approved a very limited section 1115 Medicaid expansion demonstration in Georgia with work requirements and premiums. (This 1115 should not be confused with a separate section 1332 waiver Georgia also requested at about the same time.) The work requirements would have resulted in the denial or termination of anyone failing to document 80 hours of work or equivalent activities every month. The premiums, which are expressly prohibited under Medicaid law, would have been charged to individuals and families living between 50% and 100% of the poverty level; a single mother of two with a total household income as low as $960 per month could have been charged premiums. As my colleagues noted in 2020, the impact of these Georgia waivers would have been very anti-family.

In late 2021, before the section 1115 waiver was implemented in Georgia, the Biden administration rescinded work requirements and premiums. This left Georgia clear to implement a clean Medicaid expansion demonstration that was far more advantageous to the state—it would have covered many more people (about 400,000 instead of 50,000) with a much higher matching rate of federal funding – indeed even higher after more federal funding enhancements were included in the American Rescue Plan Act for states that had not previously expanded. As we discussed at the time, instead of taking the easy win and helping 400,000 Georgians, Georgia Governor Brian Kemp sued the Biden administration.

On August 19, 2022, a Federal District Court issued a decision vacating the Biden recission. Governor Kemp won the first round of the lawsuit, but only at the expense of Georgians, who may be stuck with a Medicaid expansion that would cover a small fraction of the population at a much higher cost per person. It’s a bad policy all-around: bad for state residents, as well as Georgia public health, hospitals, and the state economy.

The Federal District Court that decided the case issued a seriously flawed and overreaching decision that is a radical departure from the normally limited role that courts take in reviewing agencies.

To begin with, the decision fundamentally misunderstands section 1115. The judge essentially decided that because prior cases have found that HHS cannot approve section 1115 waivers that reduce coverage, HHS must run a demonstration that the judge believes increases coverage. This is faulty logic. (I’m not allowed to spend a counterfeit dollar, but that doesn’t mean I’m required to spend a legitimate one.) More importantly, it misapplies Medicaid law.

Even if the judge is right that the Georgia demonstration would increase coverage (we’ll come back to that), the 1115 statute says that in the case of a demonstration that increases coverage the agency “may” issue waivers. The judge acknowledges this in a footnote, but has effectively read the law as if it says that, in the case of a demonstration that improves coverage, the agency “shall” or “must” approve a waiver. This isn’t just legal parsing—the statutory language is there for a reason. After all, section 1115 is a pilot authority. This purpose of the authority is for HHS to selectively test new ideas—not to require the agency to approve any and every state idea that could improve coverage in any way. What if all 50 states and DC propose the same coverage pilot? Couldn’t HHS decide that it’s only going to test the new idea in, say, 5 states? Congress sure thinks so—that’s why they wrote may in the law. The judge’s analysis focuses so heavily on trying to dismantle HHS’s discretion to define what is coverage, that she glosses over HHS’s clear statutory discretion to choose which coverage demonstrations to implement.

Of course, in the Medicaid statute, Congress also sets out how childless adults can be covered—namely, with a defined Medicaid expansion. Georgia’s proposal, which covers only a small fraction of that population and adds conditions that Congress forbids (premiums) and does not authorize (work requirements), cannot reasonably be construed to promote coverage as Congress intended. The judge, however, devised her own definition of coverage, abstracted from the Medicaid statute. Then she largely ignored HHS’s freedom to choose which coverage demonstrations to run. And then she ruled against HHS for failing to address her definition in the recission letter. (Hey, no one said judicial overreach was easy!)

The significance of this is hard to overstate: a federal judge is ordering the agency to run a demonstration that the agency thinks does not promote the objectives of the Medicaid program. It’s one thing for a judge to set outer limits when an agency “crosses the line”; it’s quite another thing to order an agency to run an unconventional demonstration, including major and untested policy not authorized in law, which the agency believes is harmful and not legal. One federal judge is effectively commandeering the discretionary authority that Congress vested in an executive branch agency.

Guess what? To pull this off, the judge also gave short shrift to CMS regulations that explicitly authorize CMS to withdraw waivers and no shrift to the Special Terms and Conditions of the Georgia demonstration agreement itself, which—surprise, surprise—explicitly stipulate that “CMS reserves the right to withdraw” authorities or even the demonstration in its entirety if it “would no longer be in the public interest or promote the objectives” of Medicaid.

The implications of this decision are concerning. The good news is that this lone District Court opinion is not a binding precedent that ties the hands of CMS with other states or other federal judges in future cases.

So what comes next?

CMS has 60 days to appeal the decision, if it chooses to do so. Although CMS recently abandoned waiver-related litigation in Texas, allowing a bad court decision to stand, it would be a long-term mistake for CMS to let the Georgia decision survive. A judge has substituted her judgment for that of the agency—effectively usurping the agency’s role. This flies in the face of a century of agency law which prohibits judges from micromanaging agency functions and is a direct attack on separation of powers. The executive branch can ill afford to sit on its hands while the judiciary takes over agency decision-making.

In the meantime, the decision is a stark reminder that CMS must take decisive action to address the amorphous interpretation of many section 1115 standards. As we recently reported, over 50 leading national organizations have urged CMS to issue regulations strengthening 1115 standards, including defining the objectives of Medicaid and how “coverage” should be assessed with more precision. The decision in Georgia should spur CMS to take immediate action.

After all, it appears that if CMS doesn’t write its own 1115 regulations, some members of the judicial branch will be more than happy to step out of their lane and do so.

Leonardo Cuello is a Research Professor at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.