July 2, 2018

Kentucky cannot implement Medicaid work requirements, federal judge rules

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    Read Advisory Board's take on this story.

    A federal judge on Friday vacated HHS' approval of Kentucky's Medicaid work requirements, blocking the state from implementing the requirements.

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    Background

    HHS in January approved Kentucky's Medicaid waiver request to implement a demonstration program called Kentucky Helping to Engage and Achieve Long Term Health, or Kentucky HEALTH, which would require certain able-bodied adults without dependents to participate in job training or community engagement, such as volunteer work, in order to remain eligible for Medicaid. Affected beneficiaries would have to work or volunteer for at least 20 hours per week to meet the requirements. Overall, able-bodied adults under the program would have to engage in so-called "employment activities" for a minimum of 80 hours a month.

    According to the Wall Street Journal, Kentucky officials have estimated that Kentucky HEALTH would generate $33 million in savings for the state in part because it would reduce its number of Medicaid beneficiaries by about 90,000. The requirements were scheduled to take effect July 1.

    However, the National Health Law Program (NHeLP), Kentucky Equal Justice Center, and the Southern Poverty Law Center filed a lawsuit in Washington, D.C., against HHS and CMS officials that sought to block the waiver's implementation. The groups argued that HHS' approval of the waiver violated the U.S. Constitution and federal law.

    Federal judge vacates waiver's approval, sends waiver request back to HHS

    U.S. District Judge James Boasberg in his ruling issued Friday vacated HHS' approval of Kentucky's waiver request and sent the waiver request back to HHS "for further review."

    Boasberg in the ruling wrote that the HHS "secretary never adequately considered whether Kentucky HEALTH would in fact help the state furnish medical assistance to its citizens, a central objective of Medicaid," adding, "This signal omission renders his determination arbitrary and capricious."

    For instance, Boasberg wrote that the HHS "secretary never provided a bottom line estimate of how many people would lose Medicaid with Kentucky HEALTH in place." He continued, "This oversight is glaring, especially given that the risk of lost coverage was 'factually substantiated in the record.'" Boasberg also wrote that the HHS "secretary never once mention[ed] the estimated 95,000 people who would lose coverage, which gives the court little reason to think that he seriously grappled with the bottom line impact on health care."

    Implications

    According to Axios' "Vitals," the federal judge's ruling does not apply to the other states that have received HHS' approval to implement Medicaid work requirements.

    But Tim Jost, an emeritus professor at Washington and Lee University and an expert on health law, said, "If you read the decision, it's pretty hard to envision any argument that would justify any work requirement program."

    Similarly, Nicholas Bagley, a University of Michigan law professor, said, "Striking down Medicaid work requirements on the legal merits is a big roadblock in the way of instituting such requirements, not only in Kentucky but in any red states that are thinking of moving forward."

    But Sara Rosenbaum, a professor of health law and policy at George Washington University, explained that the ruling does not constitute a "sweeping pronouncement that you can never have a [Medicaid] work requirement. However, she said, the court is very clear that when the [HHS s]ecretary exercises Section 1115 authority, the secretary must show with evidence how the demonstration will advance the core purpose of Medicaid, which is to insure people."

    Next steps

    Adam Meier, secretary of the Kentucky Cabinet for Health and Family Services, said, "While we disagree with the [c]ourt's ruling, we look forward to working with CMS to quickly resolve the single issue raised by the court so that we can move forward with Kentucky HEALTH." Meier added, "Without prompt implementation of Kentucky HEALTH, we will have no choice but to make significant benefit reductions."

    Kentucky Gov. Matt Bevin (R) in January signed an executive order that directed state officials to terminate the state's Medicaid expansion if a court blocks components of the Medicaid waiver. While Bevin has not commented on the order in light of the ruling, WFPL reports that Medicaid beneficiaries in Kentucky who were covered under the state's Medicaid expansion already have lost access to dental and vision care coverage.

    According to Modern Healthcare, the federal Department of Justice (DOJ) likely will request a stay of the judge's ruling to allow the waiver to take effect and to appeal the judge's decision to the U.S. Court of Appeals for the District of Columbia Circuit. CMS Administrator Seema Verma said, "We are conferring with [DOJ] to chart a path forward," adding, "In the meantime, we will continue to support innovative, state-driven policies that are designed to advance the objectives of the Medicaid program by improving health outcomes for thousands of low-income Americans."

    Matt Salo, executive director of the National Association of Medicaid Directors, said, "This is a big roadblock for the four states looking to implement these already approved waivers." He continued, "The court decision acknowledged that there will be appeals, and I suspect this may well end up at the Supreme Court eventually."

    Bagley noted that if the case does reach the Supreme Court it is likely the high court will have a new justice appointed by President Trump. Bagley said, "A staunch conservative [justice] may be more receptive to the kinds of changes the Trump administration is making to Medicaid than a progressive justice" (Baker, "Vitals," Axios, 7/2; Armour, Wall Street Journal, 7/2; Sun/Goldstein, Washington Post, 6/29; Meyer, Modern Healthcare, 6/29; Goodnough, New York Times, 6/29; Kodjak, "Shots," NPR, 6/29; Galewitz, Kaiser Health News, 6/29; Gillespie, WFPL, 7/1; Inside Health Policy, 6/29 [subscription required]).

    Advisory Board's take

    Yulan Egan, Practice Manager, Health Care Advisory Board

    Since this decision is likely to be appealed, it will probably set off an ongoing legal battle on Medicaid work requirements. And while this decision does not automatically transfer to the other states looking to add work requirements, such as Arkansas, Indiana or New Hampshire, it could still have national political and legal implications.

    Should Judge Boasberg's decision be overturned (or should HHS find a way to demonstrate that it has in fact adequately assessed the waiver’s impact on health coverage), the net result of work requirements would almost certainly be fewer individuals on the Medicaid rolls. Many providers in states seeking work-requirement waivers have expressed concerns about a potential uptick in the uninsured rate and increases in uncompensated care. And while a prohibition on work requirements would likely come as welcome news to those organizations, it's also worth noting that a decision against work requirements could cause some states to reverse their decision to maintain or pursue Medicaid expansion—the primary population to which work requirements apply.

    Many hospitals already play an important role in maximizing enrollment in Medicaid today. As the ideological debate on Medicaid continues in the political sphere, provider investment in financial navigation services will be more important than ever before. And with the potential for increases in the uninsured rate, investment in care management resources and community partnerships will be crucial for maintaining access to preventive care and minimizing avoidable use of the emergency department.

    Report: The business case for community partnership

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