Charles Gresham v. Alex Azar, II
N/A (2020)
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Rule of Law:
Under the Administrative Procedure Act, the Secretary of Health and Human Services acts arbitrarily and capriciously when approving a state's Medicaid demonstration project waiver if the Secretary fails to consider whether the project promotes Medicaid's primary statutory objective of furnishing medical assistance and providing health care coverage.
Facts:
- Arkansas expanded Medicaid coverage to low-income adults effective January 1, 2014, through participation in private health plans, with the state paying premiums.
- On June 30, 2017, Arkansas applied to amend its existing Medicaid waiver to introduce a new version of its 'Arkansas Works' program.
- The proposed Arkansas Works program required non-exempt beneficiaries aged 19 to 49 to work or engage in specified educational, job training, or job search activities for at least 80 hours per month and to document these activities, with non-compliance leading to disenrollment after three months.
- Arkansas Works also proposed to eliminate retroactive coverage, lower the income eligibility threshold from 133% to 100% of the federal poverty line, and eliminate a program assisting beneficiaries in paying premiums for employer-provided health care coverage.
- On March 5, 2018, the Secretary approved most of the new Arkansas Works program, including the work requirements (labeled 'community engagement') and limiting retroactive coverage to thirty days before enrollment, but did not permit Arkansas to lower the income eligibility threshold.
- In the approval letter, the Secretary analyzed whether Arkansas Works would promote three objectives: improving health outcomes, addressing behavioral and social factors influencing health, and incentivizing beneficiaries to engage in their own health care, but did not analyze whether the project would reduce Medicaid coverage.
- The new work requirements took effect for those aged 30 to 49 on June 1, 2018, and for those aged 20 to 29 on January 1, 2019.
- In Arkansas, over 18,000 people, approximately 25% of those subject to the work requirement, lost coverage within five months of the project's implementation.
Procedural Posture:
- Charles Gresham and nine other Arkansans filed an action for declaratory and injunctive relief against the Secretary of Health and Human Services (HHS) in the United States District Court for the District of Columbia on August 14, 2018.
- On March 27, 2019, the District Court entered judgment vacating the Secretary’s approval of the Arkansas Works program.
- The District Court's opinion supporting its judgment relied on its prior decision concerning Kentucky's similar demonstration, Stewart v. Azar, 313 F. Supp. 3d 237 (D.D.C. 2018) (Stewart I), which held that Medicaid's objective was to 'furnish . . . medical assistance.'
- The District Court concluded that the Secretary’s approval was arbitrary and capricious because it failed to address whether the project would promote Medicaid's core objective of providing medical coverage to the needy, despite substantial comments raising concerns about coverage loss.
- Final judgment was entered by the District Court on April 4, 2019.
- The Secretary of HHS, along with the State of Arkansas, filed a notice of appeal on April 10, 2019, to the United States Court of Appeals for the District of Columbia Circuit (federal appellants and State of Arkansas, appellant, respectively).
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Issue:
Does the Secretary of Health and Human Services act arbitrarily and capriciously under the Administrative Procedure Act when approving a state's Medicaid demonstration project waiver under 42 U.S.C. § 1315(a) without analyzing whether the project promotes Medicaid's primary objective of furnishing medical assistance, even if it aims to achieve other objectives like improved health outcomes or beneficiary independence?
Opinions:
Majority - Senior Circuit Judge Sentelle
Yes, the Secretary of Health and Human Services acts arbitrarily and capriciously when approving a state's Medicaid demonstration project waiver under 42 U.S.C. § 1315(a) without analyzing whether the project promotes Medicaid's primary objective of furnishing medical assistance, even if the Secretary intends to promote other objectives like improved health outcomes or beneficiary independence. The court affirmed the district court's judgment, holding that the principal objective of Medicaid, as established by 42 U.S.C. § 1396-1 and consistent judicial precedent, is to furnish medical assistance and provide health care coverage for individuals who cannot afford it. The Secretary's discretion under § 1315(a) to approve 'experimental, pilot, or demonstration project[s]' is limited by the requirement that they be 'likely to assist in promoting the objectives' of Medicaid. The Secretary's approval of Arkansas Works was arbitrary and capricious under the Administrative Procedure Act because it 'entirely failed to consider an important aspect of the problem'—namely, the project's foreseeable impact on coverage loss—despite significant public comments raising concerns about potential disenrollment and evidence of substantial coverage losses. The court found that the Secretary's identified objectives (improving health outcomes, addressing behavioral and social factors, and incentivizing beneficiary engagement) were not the primary, statutorily defined objectives of Medicaid. While health outcomes and coverage may be connected, the statute's text consistently focuses on providing access to health care coverage. The court rejected the argument that the term 'independence' in § 1396-1 refers to financial independence from government benefits, clarifying it refers to functional independence through rehabilitative services. Furthermore, the court found no congressional intent to incorporate work requirements, similar to those in other welfare programs like TANF or SNAP, into Medicaid through 42 U.S.C. § 1396u-1(b)(3)(A).
Analysis:
This case significantly reinforces the foundational purpose of Medicaid, limiting the Secretary of HHS's discretion in approving waivers that may undermine the program's primary objective of providing medical assistance. It establishes that attempts to introduce work requirements or other conditions that lead to substantial coverage loss, even if framed as promoting 'better health outcomes' or 'independence,' must be critically evaluated against Medicaid's core statutory mandate. Future waiver applications will likely face heightened scrutiny to ensure they do not create barriers to health care access, potentially curtailing states' abilities to experiment with programs that risk beneficiary disenrollment. This ruling underscores that agencies are bound by congressional intent regarding both the ultimate purposes and the prescribed means of social welfare programs.
