Medicaid Lifetime Limit Proposal Sets Stage for Legal Battle

A request from Arizona to introduce lifetime limits on Medicaid coverage could test the boundaries of the Trump administration’s authority to reshape the program, leaving the door open for similar restrictions across the country as well as legal challenges opposing them, lawyers say.

Arizona, Arkansas, and Ohio in recent months submitted applications to the Centers for Medicare & Medicaid Services to amend their Medicaid benefit to include work requirements for certain able-bodied adults. Unlike Arkansas and Ohio, Arizona went a step further by requesting a five-year lifetime limit on benefits for that population.

The move came as both federal and state lawmakers are discussing potential reforms to reduce the costs associated with providing Medicaid coverage to nearly 79 million primarily low-income Americans. Proposals have included everything from instituting work requirements and per-beneficiary spending caps to tightening up federal funding gained through state taxes.

According to Arizona’s waiver request, the five-year maximum lifetime coverage limit would become effective on the date of approval by the CMS and wouldn’t include previous times a person received Medicaid benefits.

For example, if a child was enrolled under Arizona’s Medicaid benefit for 10 years before he or she turned 19, that period would not count toward the lifetime limit, the application said.

“Similarly, the time during which an exemption to the work requirement applied would not count toward the lifetime limit,” it said.

At Odds With Medicaid Statute?

Arizona’s waiver application could be at odds with the Medicaid statute, which entitles beneficiaries who qualify for the program to a guarantee that the services they are approved for are covered by the government, said Tonya Moore, a former policy adviser with the State Demonstrations Group at the Center for Medicaid & CHIP Services.

The CMS historically has rejected similar waivers sought by states seeking to restrict access to coverage because they contravene Medicaid’s objective as an entitlement program, Moore said.

For example, in 2018, former CMS Administrator Seema Verma shot down a comparable proposal from Kansas, noting the agency would only approve waivers “designed to support a pathway out of poverty for individuals and promote overall health and well-being.”

To date, the CMS has never approved a state’s request to impose a lifetime limit.

Despite this precedent, Moore says it’s unclear whether the new Trump administration will rule the same way.

“I would not be surprised if they approve it,” said the lawyer and current associate principal at the consulting firm Health Management Associates. “This is a whole different regime, and I really can’t say that what Trump One did is a guiding principle for what may happen.”

Debate Over Program’s Purpose

Arizona seeks to introduce its lifetime limit on Medicaid benefits through what’s known as a Section 1115 demonstration waiver. These waivers allow states to experiment with programs that forgo certain statutory requirements of Medicaid if the health and human services secretary finds that the waiver promotes the program’s objectives.

Moore says several states are likely keeping a close eye on Arizona’s application process. If approved, she expects to see the floodgates open for like-minded states to apply for similar programs.

“Everybody’s watching this five-year limit,” said Moore.

The prospect of CMS approving such a waiver would reignite the legal debate over whether restrictions on benefits like work requirements and lifetime limits promote the objectives of the Medicaid program, said Barak Richman, professor of business law at George Washington University Law School.

Richman points to Gresham v. Azar. In that case, then-HHS Secretary Alex Azar argued that Arkansas’s and Kentucky’s work requirements fulfilled Medicaid’s statutory objective to improve health outcomes by addressing behavioral and social factors that influence health outcomes and by incentivizing beneficiaries to engage in their own health care.

However, the US District Court for the District of Columbia vacated the HHS approval of those waivers as arbitrary and capricious, and the D.C. Circuit in 2020 affirmed that decision, noting that the Medicaid statute identified “furnishing health care coverage” as the program’s primary objective.

The US Supreme Court in 2022 vacated that judgment with instructions that the case be dismissed as moot in the wake of the Biden administration’s revocation of work requirement waivers approved under Trump.

Legal Battles Likely

Courts could see a new round of litigation if lifetime limits are approved under HHS Secretary Robert F. Kennedy Jr., Richman and other health policy watchers say.

Michael F. Cannon, director of health policy studies at the CATO Institute, cautions that states approved for these waivers would likely face the same legal roadblocks as those seeking to impose work requirements under President Donald Trump’s first term.

“There are some provisions that they can waive, but not basic eligibility rules for such a drastic change as a five-year limit,” Cannon said. “I say that as someone who supports a five-year limit, but I don’t see how it’s consistent with the Medicaid statute.”

That said, Cannon says there is still merit in states pursuing policies with a slim chance of success in court. He said he has personally advised states to submit waiver requests they know are going to fail.

“The rationale for doing that,” said Cannon, “is you show how little flexibility states have under the Medicaid program and how the federal Medicaid program is so rigid that it does not allow for common-sense provisions like work requirements.”

“You do that enough, and you build support for reforming the program,” he said.