Federal Judge Strikes Down Medicaid Work Rules in Kentucky, Arkansas

A federal judge today tossed out work requirements created by Kentucky and Arkansas for people to receive Medicaid benefits, writing in separate opinions that HHS approval of both programs failed to consider the core purpose of Medicaid—to provide healthcare for the needy. Both programs, which were approved under waivers, were remanded to HHS for another look.

In separate opinions, US District Judge James Boasberg found that disruptions to the Medicaid programs, Arkansas Works and Kentucky HEALTH, were not taken lightly but did not outweigh the claims of individual plantiffs who had lost coverage in Arkansas or who might lose it in Kentucky, where the program has been on hold. In the opinion regarding Arkansas, where more than 16,000 people lost Medicaid in 2018, Boasberg wrote, "the disruption of Arkansas's administration of its Medicaid program must be balanced against the harms that Plaintiffs and persons like them will experience if the program remains in effect."

Boasberg granted plaintiffs full relief, agreeing that HHS Secretary did not act reasonably in allowing states to create work requirements for beneficiaries to receive healthcare. Orders sending both state waivers back to HHS are expected today.

Programs in the 2 states have different features but a common purpose: beneficiaries must prove they are working or taking part in a qualifying community service project of 80 hours a month, or an exemption to continue to receive benefits. The Arkansas opinion lays out the strict requirements and the plight of plaintiffs who failed to meet them. Beneficiaries here who fail to report work status for 3 months are locked out of the program for the rest of the calendar year.

One Arkansas plaintiff, 40-year-old Adrian McGonigal, understood he had to show proof of work and did so once, despite a lack of access and facility with computers. But McGonigal did not grasp that this step had to be repeated monthly, and after failing to report his employment for 3 months, he lost coverage in October 2018. He found out at the pharmacy counter when he learned his coverage had lapsed and he could not pay for $800 of prescriptions. When health issues flared up as a result, he missed several days at work, and then lost his job.

Kentucky’s plan has not taken effect, after a group of Medicaid enrollees sought and received an injunction to block it. HHS made another try at approving Kentucky’s program in November 2018, but this ruling sends the commonwealth and regulators back to the drawing board. Kentucky’s rules were projected to remove up to 95,000 people from Medicaid.

In his opinions, Boasberg noted both the “arbitrary and capricious” nature of the HHS approvals and the lack of focus on the core mission of Medicaid. In the Arkansas opinion, he wrote that Azar found only a single element that might promote health coverage, which stated, “a more limited period of retroactive eligibility will encourage beneficiaries to obtain and maintain health coverage, even when they are healthy.”

In the Kentucky opinion, Boasberg states that the Azar made no finding that Kentucky’s changes would promote fiscal sustainability to Medicaid, such as by achieving savings, even though budget contraints were among Kentucky’s stated reasons for the requirements. Azar, the judge wrote, “unreasonably prioritized program savings without weighing those against the consequences of lost coverage, rendering his determination arbitrary and capricious.”

The desire to connect Medicaid health benefits to work requirements has long been a goal of conservatives, but the language of Boasberg’s opinions relays the reasons why advocates for the poor have been predicting this decision; they have insisted that health benefits and work should not be linked. This was a reason the Obama administration would not approve a Medicaid expansion plan with work requirements under Pennsylvania’s former Republican governor.

Prior to the Trump administration, Medicaid 1115 waivers always had to demonstrate no net loss of coverage, and the situation in Arkansas invited scrutiny. In addressing the state’s arguments that its education and outreach efforts would be adversely affected, Boasberg wrote, “It bears mentioning here … that the State’s outreach efforts may well be falling severely short.” Only 12.3% of those not exempt from requirements reported any qualifying activity, the opinion states.

“Arkansas,” he wrote, “might use the time while the program is paused to consider whether and how to better educate persons about the requirements and how to satisfy them.”