The appellate court ruled that HHS Secretary Alex Azar's approval of a Section 1115 waiver for Arkansas was "arbitrary and capricious."
A key healthcare policy initiative of the Trump administration suffered a major setback on Friday when a federal appeals court slapped down the administration's efforts to allow Arkansas to impose work requirements on "able-bodied adult" Medicaid beneficiaries.
The three-judge panel at the U.S. Court of Appeals for the District of Columbia upheld a lower court when they ruled unanimously for the plaintiffs in Gresham v. Azar.
The appeals court said that the Department of Health and Human Services granted Arkansas' Section 1115 waiver for work requirements without considering its full effect on the Medicaid program and beneficiaries, a violation of the federal Administrative Procedure Act.
In a 19-page ruling, Judge David Sentelle, a Reagan appointee, called HHS Secretary Alex Azar's waiver approval process "arbitrary and capricious" and said HHS ignored concerns raised by stakeholders and beneficiaries about the potentially negative impact the waiver would have on coverage.
"In total, the Secretary's analysis of the substantial and important problem is to note the concerns of others and dismiss those concerns in a handful of conclusory sentences," Sentelle wrote. "Nodding to concerns raised by commenters only to dismiss them in a conclusory manner is not a hallmark of reasoned decision making."
It is not clear if the federal government intends to appeal the ruling, which could eventually be heard in the U.S. Supreme Court. Calls to the Centers for Medicare & Medicaid Services were not returned on Friday afternoon.
Stewart v. Azar consolidated suits from Arkansas and Kentucky that challenged waiver approvals for Medicaid beneficiaries. The court dismissed the Kentucky complaint after newly elected Democratic Gov. Andy Beshear ended the work requirement program in that state.
Jane Perkins, legal director of the National Health Law Program, a co-counsel for the plaintiffs, said she was "gratified" by the ruling.
"It means that thousands of low-income people in Arkansas will maintain their health insurance coverage — coverage that enables them to live, work, and participate as fully as they can in their communities," she said.
"Section 1115 of the Social Security Act only allows the Secretary to approve experimental projects that further the Medicaid Act's purpose," she said. "As Judge Sentelle's opinion repeatedly notes, the text of the Medicaid Act is clear as to this purpose – to provide health care coverage. The agency was bound by the purpose Congress selected and could not change it as it attempted to do. Only Congress can do that."
Allowing states to impose work requirements for "able-bodied adults" on Medicaid has been a key, but contentious, policy initiative by the Trump administration.
CMS Administrator Seema Verma has repeatedly defended the "dignity and pride that is derived from work—for paying one's own way—and I believe it is the desire of nearly every American to achieve financial independence."
"Our default position must always be to help and encourage those who are able to lift themselves up and find their footing again," she said.
However, critics of the work requirements dismiss them largely as either a stunt or a back doorway to pare the Medicaid rolls.
The Centers on Budget and Policy Priorities has said the work requirements would kick many low-income adults off Medicaid "including people who are working or are unable to work due to mental illness, opioid or other substance use disorders, or serious chronic physical conditions, but who cannot overcome various bureaucratic hurdles to document that they either meet work requirements or qualify for an exemption from them."
“Nodding to concerns raised by commenters only to dismiss them in a conclusory manner is not a hallmark of reasoned decision making.”
Judge David Sentelle, U.S. Court of Appeals for the District of Columbia
John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.
The appeals court said HHS granted Arkansas' Section 1115 waiver for work requirements without considering its full effect on the Medicaid program and beneficiaries, a violation of the Administrative Procedure Act.
Judge David Sentelle, writing for the court, said HHS ignored concerns raised by stakeholders and beneficiaries about the waiver's potentially negative impact on coverage.