In a ruling with national implications, a federal judge has set aside two 1115 waivers that allowed states to impose work requirements on able-bodied Medicaid recipients as a condition of coverage. On March 27, 2019, U.S. District Judge James Boasberg, who previously ruled against the approval of a similar 1115 waiver in Kentucky, handed down a joint opinion in the cases of Gresham v. Azar and Stewart v. Azar, halting work requirements for Medicaid recipients in Arkansas, known as Arkansas Works, and setting aside the reapproved 1115 waiver in Kentucky known as Kentucky HEALTH (the same waiver that had previously been set aside was reapproved by Health and Human Services (HHS) on November 20, 2018, after undergoing minor changes). In both cases, the Court vacated HHS’s approval of the 1115 waivers and remanded the issue back to HHS.

Judge Boasberg’s ruling is the latest development in what has been a several years’ long push for Medicaid reform by Republicans. Since taking office, the Trump administration has prioritized limitations on Medicaid eligibility as a key means of reducing federal Medicaid spending. On March 14, 2017, then HHS Secretary Tom Price wrote a letter to the nation’s governors explaining the administration’s reform initiative. The letter took direct aim at the Medicaid program as it was amended and expanded by the Affordable Care Act and makes clear that there is a new sheriff in town at the Centers for Medicare and Medicaid Services (CMS) – one who will allow states greater latitude to deviate from the federal rules for demonstration projects than was previously allowed under the Obama administration. The letter states that:

“The expansion of Medicaid through the Affordable Care Act to non-disabled, working age adults without dependent children was a clear departure from the core, historical mission of the program…. Today, we commit to ushering in a new era for the federal and state Medicaid partnership where states have more freedom to design programs that meet the spectrum of diverse needs of their Medicaid population …. [T]he best way to improve the long-term health of low income Americans is to empower them with skills and employment.”

Medicaid work requirement 1115 Waivers Approved and Pending as of April 18, 2019

Since receiving the letter, fifteen states have submitted 1115 waiver requests to impose work requirements on able-bodied Medicaid recipients. Of the fifteen states that submitted requests, nine have been approved by HHS (Arizona, Arkansas, Indiana, Kentucky, Michigan, New Hampshire, Ohio, Utah, and Wisconsin) and six are still pending decisions (Alabama, Mississippi, Oklahoma, South Dakota, Tennessee, and Virginia). The waiver requests submitted to HHS would each establish similar Medicaid regimes. Each request seeks to impose work requirements on able-bodied Medicaid recipients and includes an exemption for older adults, typically starting at ages 50 to 65. With the exception of Utah, each state’s waiver request seeks to impose a minimum number of hours recipients must work, seek work, attend school, or perform community service in order to maintain their coverage, and each request would impose these requirements on either the Medicaid expansion population, the traditional Medicaid population, or both. Arkansas is the first state to actually implement its work requirement program, which has now been set aside by the Courts.

Although Judge Boasberg’s ruling is a setback for the Trump Administration and states seeking to impose Medicaid work requirements, it is hardly a death knell for the movement. Both the Trump administration and the individual states are expected to appeal the ruling, which is based not on an evaluation of the merits of work requirements themselves, but instead on a violation of the Administrative Procedures Act (APA) as a result of the Secretary’s failure to consider a key objective of Medicaid: the provision of medical coverage to the needy. As Judge Boasberg stated in his opinion “vacatur is warranted based on procedural deficiencies, as opposed to the Court’s analysis of the merits [of the program].”

Vacatur leaves open several avenues for HHS and the states to proceed with Medicaid work requirements, the most obvious being direct appeal. However, even if Secretary Azar and the states should lose their appeals in the cases of Gresham and Stewart, the states can still resubmit their waiver requests to HHS for a new round of review and approval. In Judge Boasberg’s own words: “this does not mean it will be impossible for the agency to justify its approval of a demonstration project . . . the Court’s decision does not go that far. But after at least two attempts for Kentucky, it has yet to do that analysis.”

Despite Judge Boasberg’s lack of confidence in the Secretary’s decision-making, there is nothing to prevent the Secretary from reconsidering and reapproving the waiver requests and many states have already shown a willingness to proceed, albeit cautiously, notwithstanding the March 2019 ruling.

In Wisconsin, state officials intend to proceed with Medicaid work requirements regardless of the rulings in Gresham and Stewart. In fact, Wisconsin is statutorily required to proceed. In a December 2018 extraordinary session, the Wisconsin state legislature, controlled by Republicans in both houses, passed a law requiring congressional approval in order to withdraw the state’s 1115 waiver request, effectively handcuffing the newly elected Governor, who has expressed his desire to withdraw the state’s application.

In Michigan, work requirements for Medicaid recipients, known as Healthy Michigan, are still expected to proceed as planned. Effective January 1, 2020, recipients of Michigan’s Medicaid expansion program will have to prove that they are working, attending school, or receiving job training in order to maintain enrollment in Medicaid. Although the newly elected Governor Gretchen Whitmer has expressed her opposition to work requirements, she has made it clear that Michigan will continue to implement the new rules with limited changes.

And so the case goes in the states of Arizona, Indiana, Ohio, and Utah, which are all expected to move forward with imposing work requirements on certain Medicaid recipients.
While it has not closed the door entirely, the ruling has succeeded in creating uncertainty, at both the state and federal level, as to whether the Secretary’s approval of the waiver requests will ever withstand judicial scrutiny – and some lawmakers are getting nervous. There are substantial costs associated with designing, implementing, and defending Medicaid work requirements – resources that could be wasted if the state’s 1115 waiver is thrown out by the Courts. There are also political risks; state lawmakers must consider whether it is politically advantageous to begin implementing a Medicaid work requirement program only to have the program halted and potentially thrown out, wasting resources and frustrating constituents. That is why many lawmakers (and potential future plaintiffs) are cautiously eyeing the developments in Arkansas and Kentucky to determine whether or not to proceed.

Now, interested parties have a third case to consider, Philbrick v. Azar, a case arising out of the 1115 waiver approved for implementation in New Hampshire. On March 20, 2019, only seven days before the rulings in Stewart and Gresham, the National Health Law Program, New Hampshire Legal Assistance, and the National Center for Law and Economic Justice filed a lawsuit in the U.S. District Court for the District of Columbia, challenging HHS’s approval of New Hampshire’s Medicaid waiver project, “Granite Advantage”, which seeks to implement some of the harshest work requirements of any of the states that have submitted waiver requests to date (100 hours of work or other qualifying activities each month to maintain coverage). In what is perhaps a foreshadowing of the ruling to come, the case has been assigned to Judge Boasberg’s Court, the same Court that set aside the waivers in Arkansas and Kentucky. That may be why, in its most recent legislative session, the New Hampshire state legislature passed SB290, a bill which would add additional exemptions to the Granite Advantage program for people who are homeless, grandparents who are foster parents for their grandchildren, and full time students. More notably, the bill also contains a provision suspending work requirements if more than 500 people lose coverage as a result of the restrictions.

Once handed down, the ruling in Philbrik v. Azar will be the latest snapshot of the Secretary’s reasoning when deciding whether to approve or deny 1115 waiver requests for Medicaid demonstration projects. It will also be round three of Judge Boasberg’s critique of that reasoning. Meanwhile, as we wait for the decision, we can consider the 1115 waivers approved for Kentucky as a case study for the current state of the movement for Medicaid work requirements: as states request waivers that are approved by CMS and vacated by the Courts, the waiver requests will continue to be refined or limited so as to be more aligned with Medicaid’s objectives and HHS’s reasoning for the approvals will continue to adapt with the Court’s findings. Whether this process will ever result in functional Medicaid programs that include work requirements for recipients is uncertain. What is more certain is that as long as there is an administration that is favorable to limiting Medicaid eligibility, there will be states that seek to implement work requirements for Medicaid recipients and a Secretary who will likely approve them.