Welcome

Biden to Have Tough Time Withdrawing Obamacare, Medicaid Waivers

Jan. 22, 2021, 10:15 AM

The Biden administration will have a tricky time walking back Trump-era waivers that let states enact work requirements for Medicaid, switch program funding to a lump sum, and pull out of Obamacare’s federally funded health insurance marketplace.

With litigation over the waivers pending, Biden’s Department of Health and Human Services will have to not only act fast but be strategic in the reasons it gives for rescinding Trump administration approvals. The Republican-led states that sought out these program changes aren’t likely to accept the about-face without a fight. And those legal battles could be harder to win.

“Everything the Biden administration does will be under intense scrutiny from a judiciary that is stacked with handpicked, conservative judges and that puts a premium on procedural scrupulousness,” said Nicholas Bagley, a law professor at the University of Michigan Law School.

“At the same time, there’s real urgency in actually changing government policy to help people, and it’s a tricky balance,” he said.

Seema Verma, former administrator of the Centers for Medicare & Medicaid Services, may have made that balancing act even harder when she changed the terms of the Medicaid waivers before she left office.

Uncharted Territory

Waivers issued under Section 1115 of the Social Security Act are a discretionary
tool the CMS has to let states try out innovative ways to run their Medicaid programs. Waivers issued under Section 1332 of the Affordable Care Act, meanwhile, allow states to try new ways to increase access to affordable health care.

The CMS has the authority to rescind waivers if a program is no longer promoting the objectives of the law under which it was issued.

“There’s not a lot of precedence for administrations coming in and rescinding prior approvals,” said MaryBeth Musumeci, associate director at the Kaiser Family Foundation’s Program on Medicaid and the Uninsured.

The CMS approved 12 waivers that force Medicaid recipients in certain states to work in order to get coverage, according to the Kaiser Family Foundation’s online tracker. The agency also approved one waiver that allows Tennessee to cap its federal funding for Medicaid in exchange for more flexibility in how it uses those funds.

Terminating such waivers could prove more challenging than rolling back Trump-era regulations.

To roll back a regulation, an agency generally has to put out a new proposed rule that justifies the change and accept public comment. To terminate a Medicaid waiver, the Biden administration would have to notify each state, provide a reason for its rescission, and give the state a chance to request a hearing, according to the terms of the waivers.

But Verma asked states on Jan. 4 to sign a letter agreeing to new terms that would prevent the agency from suspending, terminating, or withdrawing any waiver within nine months of notifying the state of the reversal.

The letters “are nothing more than a hastily-drafted, transparent attempt to tie the hands of the Biden Administration for at least nine months, and entrench your shameful Medicaid legacy after your time as CMS Administrator has ended,” Rep. Frank Pallone Jr. (D-N.J.) and Sen. Ron Wyden (D-Ore.) said in a letter to Verma on Jan. 19.

Though there’s debate on whether Verma’s letter to the states is valid, Bagley said it was issued to both delay the withdrawal of the work requirements and give the Supreme Court an opportunity to rule on their legality.

The high court is expected to hear arguments in March over whether the Trump administration lawfully approved work requirements for Medicaid beneficiaries in Arkansas and New Hampshire. The Biden administration could potentially moot the case by terminating the waivers.

“If the Biden administration hit the ground running, it could have provided hearings on a very short time frame and finally and formally withdrawn the waivers prior to the Supreme Court issuing its decision,” Bagley said. “Now that seems like it could be trickier if they are required to wait nine months as a result of this letter.”

Tennessee Gov. Bill Lee (R)’s office didn’t respond to a request for comment about the future of its waiver.

Contractual Agreement

Ron Klain, President Joseph Biden’s chief of staff, ordered the federal agencies in a memo Wednesday to freeze all regulations that haven’t yet taken effect. But it’s unclear if the regulatory freeze will apply to Verma’s letter of agreement.

“I do not believe it would,” said Ross Margulies, a partner at Foley Hoag LLP, noting that the agreement would already be in effect if it’s been signed by a state.

A waiver is essentially a contract between the federal government and a state. How easy it is to walk back a waiver that’s already been approved depends on the details, terms, and conditions of the waiver itself, which may vary waiver to waiver and state by state.

One factor that will have to be considered is whether states have any “reliance interests” in the Medicaid waivers that have been approved, meaning the agency will have to look at what resources the state expended in developing and implementing the policy, and whether its rescission could affect other programs.

“It will need to to think about whether states have a reliance interest in their waivers and, if so, whether the factors favoring revocation outweigh any such reliance interest,”said Matthew Lawrence, a professor at Emory University School of Law.

But some could argue a state has no reliance interests in a waiver that has been struck down as illegal like several of the work requirement waivers, Lawrence said.

In the Courts

Also under litigation is a waiver the Trump administration issued under Section 1332 of the ACA that allows Georgia to exit Obamacare’s federally funded health insurance marketplace. The program, known as the Georgia Access Model, eliminates the state’s reliance on Healthcare.gov and would force residents to shop around with private insurers for a health-care plan.

When asked if the state would challenge a termination of its waiver, Georgia Gov. Brian Kemp’s office said it would not comment on hypothetical executive branch actions.

The Georgia Access Model will “reduce Georgians’ dependence on the failed promises of the Affordable Care Act, giving low-income Georgians access to affordable care, and increasing competition in the private sector to make more options available throughout the state,” Mallory Blount, a spokeswoman for the governor said in an email.

—With assistance from Chris Brown

To contact the reporter on this story: Lydia Wheeler in Washington at lwheeler@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Alexis Kramer at akramer@bloomberglaw.com

To read more articles log in.

Learn more about a Bloomberg Law subscription.