Public comment on proposed ‘Pathway to Prosperity’ Section 1115 Medicaid waiver amendment

In 2019, a federal judge invalidated the Arkansas Works Medicaid work requirement on procedural grounds, arguing it did not advance the core objectives of the Medicaid program.³³ As stated in Gresham v. Azar, “…the Secretary’s failure to consider the effects of the project on coverage alone renders his decision arbitrary and capricious; it does not matter that HHS deemed the project to advance other objectives of the act.”³⁴ The D.C. Circuit affirmed Judge Boasberg’s decision in the district court, noting that the “principal objective” of Medicaid is “providing health care coverage.”³⁵

Encouragingly, DHS is cognizant of this legal framework. However, its attempts to rectify it are legally insufficient.

DHS’s overreliance on the recent Loper Bright Enterprises v. Raimondo decision seems to imply that the abandoning of the Chevron deference might provide adequate cover to approve the waiver without addressing the core challenges of the Gresham decision. Indeed, as the Loper decision pertained to agency discretion, it is less relevant in instances where the underlying statute is clear, such as in this case.

More concerningly, DHS notes that, “The Amendment makes significant policy and procedural changes from the previous version to respond to the question of coverage.”³⁶ In other words, DHS has substantially watered down the work requirement from mandating a minimum number of hours towards work or work-related activities with substantial sanctions for noncompliance into a subjective evaluation of progress towards PDPs. 

However, this would not be sufficient to meet the Gresham precedent. In a sense, these watered down changes would give Arkansas the worst of both outcomes: a weaker work requirement but one that would still have an effect of marginally reducing coverage (assuming DHS does intend to remove anyone from the program at all) and thus be inconsistent with Gresham.

Additionally, DHS’s emphasis on work promoting health, while true, is not of substantial legal value as “alternative objectives” do not negate the waiver’s impact on the primary objective of promoting coverage, as alluded to in the D.C. Circuit case.³⁷

As a result, simply refiling a similar 1115 waiver—but with a weaker work requirement—will likely result in the same unfortunate legal outcome that occurred in 2019. So long as coverage expansion remains the primary objective of the Medicaid program and the waiver has an effect that could reduce coverage, these two principles will remain incompatible.

However, there is a legal pathway available to DHS to reconcile this matter and place the waiver request on more solid legal footing.

In 2021, Georgia achieved a legal victory over the Biden administration in implementing a work requirement that was coupled with a partial expansion of Medicaid coverage.³⁸ The reasoning behind the court’s decision in Georgia v. Lasure was that Georgia’s Medicaid work requirements were coupled with an expansion of coverage that otherwise did not exist in its state plan.³⁹ The baseline of coverage, so to speak, was zero—since the expansion population was not part of Georgia’s state Medicaid plan—so any conditions imposed by a waiver (such as a work requirement) on able-bodied adults still achieved the primary objective of the Medicaid program in expanding coverage through its waiver.⁴⁰

In other words, by allowing able-bodied adults to join Medicaid so long as they fulfilled the work requirement, Georgia was effectively advancing a core objective of Medicaid in the court’s eyes by extending health coverage to these compliant adults.

Suddenly, Georgia’s approach is then seen as an extension of coverage, not a reduction of coverage.

Arkansas could adopt a similar strategy: If the appropriate baseline was reset by DHS in removing the expansion population from its state plan and reintroducing it in a waiver, the waiver request would be viewed as offering coverage to individuals who would otherwise not qualify for Medicaid—even if that coverage were conditioned on a work requirement. 

Consistent with Georgia v. Lasure, DHS could amend the state plan to remove the expansion population and submit a revised waiver request to reassert coverage with a work requirement in tandem to avoid any disruption in coverage due to sequencing.

Concerningly, internal DHS communications argue that the “current inclusion of expansion populations in SPAs [State Plan Amendments] is for” the limited number of expansion enrollees in fee-for-service Medicaid (due to being designated as medically frail or awaiting QHP assignment).⁴¹ DHS here confuses the state plan benefit package with eligibility under the state plan. Contrary to DHS’s interpretation, the eligibility of the entire expansion population is included in the state’s Medicaid plan as an approved SPA.⁴²

DHS’s internal communications also argue that sequencing the removal of coverage from the state plan coupled with the reintroduction of coverage via a waiver could also “prevent coverage during an interim period…because it poses a gap in coverage.” Again, this is not accurate. There would be no gap in coverage at all if DHS sequenced the removal of the expansion population from the state plan to take effect immediately in concert with the effective date of the waiver, thereby preventing any disruption in coverage.

DHS argues that Arkansas’s case “differs from Georgia” because “Georgia expanded benefits through a waiver to people who were not already accessing them.”⁴³ This misinterprets the court’s decision to examine the waiver’s impact of expanding coverage relative to the baseline of coverage reflected in the state plan; not relative to whether or not people were accessing Medicaid services previously.

DHS also expresses internal concern about litigation being brought on to determine “whether once a state expands, can it go back.”⁴⁴ Not only does federal guidance dating back to the Obama administration clearly state that “if a state covers the expansion group, it may decide later to drop the coverage,” but this point is irrelevant since the proposal to remove expansion from the state plan and simultaneously reintroduce it via a waiver request would not “go back” on expansion.⁴⁵

Separately, some elements of DHS’s waiver may actually place it on even more precarious legal footing than the Arkansas Works waiver. For example, while DHS suggests that beneficiaries will be marked as “on track” or “not on track” (and thus in need of PDP services) based on a variety of factors, it does not include any explicit exemptions for key populations such as caregivers caring for elderly family members, individuals who are physically or mentally unfit for employment, individuals participating in substance abuse programs, pregnant women, those already meeting a work requirement in another welfare program, and more.⁴⁶ In fact, DHS clearly states, “There are no exemptions to participation.”⁴⁷

The absence of any real exemptions for certain categories of individuals or for good cause makes the amendment more likely—not less likely—to face a legal challenge. Opponents of the amendment could make the argument that the absence of any explicit exemptions lumps all enrollees together, failing to distinguish between the unique circumstances of, for example, a childless 30-year-old and a single parent of a three-year-old. These individuals would be left to, in part, the subjective analysis of success coaches.

The exclusion of any such exemptions is a testament to the waiver’s legal vulnerability, not its legal resiliency.