DC Circuit Panel Rejects Arkansas Medicaid Work Rules

February 15, 2020

Writing for the panel, Judge David Sentelle said HHS Secretary Alex Azar ignored predictions that thousands of people would lose their healthcare coverage.

A 3-judge panel at the US District Court of Appeals in the District of Columbia rejected Arkansas’ Medicaid work requirements today, with the judges finding that the Trump administration simply ignored how many people would lose healthcare coverage.

The decision by the panel affirms a 2019 lower court ruling. In Gresham v. Azar, a lower court judge found HHS Secretary Alex Azar’s approval of Arkansas’ work requirements “arbitrary and capricious.” Writing for the appellate panel, Judge David Sentelle said that HHS violated the Administrative Procedures Act, in part by failing to fully consider warnings from those who weighed in against the proposal.

The case had initially been consolidated with a challenge to Medicaid work rules from Kentucky, but the court deemed that case moot, after Kentucky’s new governor canceled the plan.

Arkansas was the third state to pursue work or community service requirements for those who had received health coverage under Medicaid expansion, after the Trump administration rolled out the policy in 2018. The program, called Arkansas Works, called for those age 19 to 49 to spend 80 hours a month working, or be engaged in other approved activities, such as volunteer work or job hunting.

The state and the federal government appealed after US District Judge James Boasberg struck down the requirement in March 2019. Today, Arkansas Gov. Asa Hutchinson told the Arkansas Democrat-Gazette that the state would appeal the ruling to the US Supreme Court.

“It is difficult to understand how this purpose is inconsistent with federal law,” Hutchinson told the newspaper. “The court’s ruling undermines broad public support for expanded health coverage for those struggling financially.”

However, advocates argued otherwise, predicting from the start that the program’s reporting requirements would fall hardest on the working poor and those who should be exempt from any reporting. Arkansas acknowledged by November 2018 that 12,000 people had lost coverage for not meeting the requirements. Advocates said that many of those kicked off the rolls were, in fact, already exempt from the rules; thousands were unable to follow requirements or did not know they had lost coverage until they tried to obtain medical care.

The opinion states, “A critical issue is the Secretary’s failure to account for loss of coverage, which is a matter of importance under the statute. The record shows that the Arkansas Works amendments resulted in significant coverage loss.”

Historically, the opinion states, the key requirement for states seeking Medicaid waivers is demonstrating that the change will lead to more people or substantially the same number of people being covered. Instead, the court found that Azar, in approving Arkansas’ program, failed to consider its effect on how many people would lose coverage—instead, he relied on 3 other criteria—health outcomes, improved social and behavioral factors, and incentivizing engagement in health.

These factors might be laudable, but they are not a substitute for what is required by law. But Azar and others at HHS simply ignored both requirements and dire predictions, the opinion states: “Despite acknowledging at several points that commenters had predicted coverage loss, the agency did not engage with that possibility.”

Jane Perkins, legal director for the National Health Law Program, which brought the case with other nonprofits including the Southern Poverty Law Center, issued a statement: “We are gratified by the court’s ruling today. It means that thousands of low-income people in Arkansas will maintain their health insurance coverage — coverage that enables them to live, work, and participate as fully as they can in their communities.”

Kevin De Liban, attorney at Legal Aid of Arkansas, also praised the ruling, stating, “The Court recognized the tragic harm that these work requirements have caused people in Arkansas doing their best to get ahead. Now, more than two hundred thousand Arkansans on the program can rest easier knowing that they’ll have health care when they need it.”