Work Requirement Legal Fray Centers on Purpose of Medicaid

A federal appeals court is being asked to decide the true purpose of Medicaid in fights over state requirements that force people to work, volunteer, or go to school in order to qualify for the health-care program.

The Department of Health and Human Services is battling alongside officials in Arkansas and Kentucky to maintain these new state mandates, which opponents say put health coverage at risk for more than 100,000 low-income people in the two states. The court’s ruling also could determine the fate of other states’ requests to impose similar requirements.

A federal district court judge in March ruled HHS Secretary Alex Azar unlawfully approved state plans that require certain adult Medicaid recipients to participate in their community for 80 hours each month by working, looking for work, participating in job-skills training, getting an education, or performing community service.

The U.S. Court of Appeals for the District of Columbia Circuit on Oct. 11 will hear why the federal and state governments want those decisions reversed.

The breadth of the HHS secretary’s authority under the Social Security Act is at issue, but Arkansas said in its brief that the cases “are ultimately about whether Medicaid exists to promote healthy outcomes or merely to provide health care coverage.”

“The government is saying that what Medicaid is really about is making people healthier, and that’s really interesting because that’s what we say it’s not about,” said Sam Brooke, deputy legal director at the Southern Poverty Law Center, who is part of a coalition of attorneys representing the state residents challenging the new requirements.

“Ultimately, that’s what everyone wants, but what the Medicaid statute actually is about is providing health services to certain individuals of course with the expectation that that in and of itself will make people healthier,” Brooke said.

Program’s Purpose

Section 1115 of the Social Security Act gives the HHS secretary the power to approve “any experimental, pilot, or demonstration project” proposed by a state that, “in the judgment of the secretary, is likely to assist in promoting the objectives” of the Medicaid program.

The HHS has acknowledged that providing vulnerable populations with health coverage is an important objective of Medicaid.

But the department said in its approval letter for Kentucky’s program that “there is little intrinsic value in paying for services if those services are not advancing the health and wellness of the individual receiving them, or otherwise helping the individual attain independence.”

In its approval letter for Arkansas’s program, the Centers for Medicare & Medicaid Services said the state’s demonstration “is likely to assist in improving health outcomes through strategies that promote community engagement and address certain health determinants.”

But when Judge James Boasberg of the U.S. District Court for the District of Columbia tossed out the approvals for Kentucky and Arkansas, he said health and financial independence are not freestanding objectives of Medicaid. And even if they were, he said, Azar failed to consider how many people could lose coverage under the state programs.

Over 18,000 people lost their Medicaid coverage in Arkansas in the five months the requirements were in effect before they were blocked by the court. Kentucky, meanwhile, estimates 95,000 adults would lose coverage.

What Medicaid is truly about is a key question the court will have to grapple with, Brooke said.

The federal government argues that the Affordable Care Act authorized grants for states that give Medicaid recipients incentives for various “healthy behaviors,” and that the American Congress of Obstetricians and Gynecologists and other public-health organizations have recognized that improving “health outcomes” is a proper objective of a Medicaid demonstration.

“There should thus be no doubt that improving beneficiary health is a legitimate objective of a Medicaid demonstration,” Department of Justice attorneys said in their brief.

Rival Camps

The new requirements have put health industry groups in opposing camps.

The Kentucky Hospital Association said it supports Kentucky’s pilot project.

“It’s limited in scope, it’s directed only toward able-bodied individuals and if someone is wrongly denied access to Medicaid benefits, there’s opportunity to appeal that and for opportunities to be heard,” said Wes Butler, outside counsel for the association and former counsel for Kentucky’s Cabinet for Health and Family Services.

“So under those criteria, the hospital association felt it was important to allow the Medicaid program to experiment with the project that they had designed,” Butler said.

But the Arkansas Hospital Association joined a friend of the court brief filed by a coalition of health groups, including the American Heart Association and the American Medical Association, asking the appeals court to uphold the lower court’s decisions to toss out Arkansas’s plan.

Conditioning eligibility on employment will lead to mass disenrollment and dramatically worsen health outcomes, and its reporting requirements jeopardize coverage for those who are gainfully employed, the groups said.

The Kentucky Governor’s Office, which is being represented by its own attorneys, did not respond to a request for comment. The Arkansas Attorney General’s Office also declined to comment ahead of arguments in the case.

Pending Waivers

Arkansas and Kentucky aren’t the only states trying to enact a work or community engagement requirement.

The HHS has approved work requirements in nine other states, including New Hampshire and Indiana, since January 2018. Boasberg tossed out its approval of the New Hampshire requirements July 29, and a legal challenge was brought against Indiana’s requirements Sept. 23.

“All the states they’ve approved so far are states that have already expanded Medicaid under the Affordable Care Act,” said Joan Alker, a research professor at Georgetown University’s Health Policy Institute.

The ACA, bolstered by a 2012 Supreme Court ruling, allows states the option of expanding their Medicaid programs to cover all individuals under the age of 65 with incomes below 133% of the poverty line.

Arkansas’s work and community engagement requirements for Medicaid apply only to the adult expansion population. Kentucky’s requirements apply to the Medicaid adult expansion population and some parents of dependent children within the traditional Medicaid program, but only if the parent is not the primary caregiver.

In addition, there are six states that are not expansion states that have work requirement waiver requests pending: Alabama, Mississippi, Oklahoma, South Carolina, South Dakota, and Tennessee, Alker said.

If the court upholds the waivers in Kentucky and Arkansas, Alker said she fears it may embolden the administration to approve those waivers as well.

In those states, she said, only low-income parents or caretakers would be subject to the work requirements. In some of these states, like Mississippi, the poverty line for Medicaid eligibility is so low that working 20 hours a week would make these parents too wealthy to qualify for the program, Alker said.

“That would be, honestly, one of the worst policies I’ve heard of that will target the poorest families,” she said.

The cases are Gresham v. Azar, D.C. Cir., No. 19-5094, 10/11/19 and Stewart v. Azar, D.C. Cir., No. 19-5095, 10/11/19