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Kentucky, Arkansas Medicaid work requirement cases heard in federal court

Nine months after a federal judge blocked Kentucky's Medicaid work requirements from taking effect, the same judge heard oral arguments for cases challenging work requirements in both Kentucky and Arkansas.

Judge James Boasberg for the U.S. District Court for the District of Columbia heard both cases March 14, and his rulings could impact the future of the controversial policy.

On March 11, the Trump administration proposed a nationwide Medicaid work requirement policy as part of the administration's fiscal year 2020 budget proposal, a move that brought near instant criticism from Democratic lawmakers.

Andy Schneider, a research professor with Georgetown University's McCourt School of Public Policy and a former Medicaid policy adviser under the Obama administration, told S&P Global Market Intelligence that the two cases are technically separate, but the rulings are somewhat intertwined and center on one main argument: whether work requirements uphold Medicaid's principals.

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Medicaid is the joint state- and federal-run health insurance program for low-income Americans. Work requirement waivers mandate that recipients work a specific number of hours per month in exchange for Medicaid eligibility. The policy has not been a traditional part of Medicaid, but in early 2018, the Trump administration expressed support for state Medicaid directors who wanted to implement work requirements.

James Burnham, deputy assistant attorney general for the Department of Justice, argued for the defense that the requirements are meant to help people find work and "make peoples' lives better," which federal officials have consistently used as a defense for the policy.

However, the judge pushed back against this reasoning. "It's easy to talk about it in a broad brush ... but that's not the purpose of Medicaid," Boasberg said, drawing some laughter from the court's gallery.

As Medicaid operates at both the state and the federal level, states can adapt their program through waivers approved by the U.S. Department of Health and Human Services. These changes can include pilot or experimental demonstrations, but according to the Centers for Medicare and Medicaid Services, they must uphold the principles of the Medicaid program, including the expansion of eligibility and improved care.

Ian Gershengorn, lead attorney for the plaintiffs, argued that work requirements directly counter Medicaid's purpose, citing the thousands of Arkansans who lost Medicaid eligibility in 2018.

"This isn't theoretical. The actual experience in Arkansas is in the record," Gershengorn said. "We're talking about massive coverage loss."

Burnham argued that the HHS secretary has the authority to approve waivers and demonstrations that are experimental, and that people losing coverage may, in fact, be a result of a state's experimental program. Burnham added that Arkansas' program is still in its first year and argued that the full three-year demonstration should be allowed to finish.

Arkansas' work requirements took effect in June 2018, and by December 2018, more than 18,000 people had lost Medicaid eligibility. The program only applied to a portion of the state's Medicaid population in 2018 and expanded to the entire population Jan. 1. Health policy experts have suggested that this will lead to even more people losing coverage in 2019.

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Eliot Fishman, the senior director of health policy at Families USA, a healthcare policy organization, estimated that up to 50,000 people could lose coverage in Arkansas in 2019. Fishman added that because people could go as long as nine months without coverage, the requirements will lead to larger public health problems across the state.

"It starts with health problems, and it continues until people are not getting life-threatening conditions diagnosed or treated," Fishman said.

Gershengorn told reporters after the hearing that Boasberg's original ruling came before anyone had lost coverage in Arkansas. Gershengorn said the fact that 18,000 people lost Medicaid eligibility changes Kentucky's case "tremendously."

"[HHS Secretary Alex Azar] can't avoid confronting the fact that tens of thousands of people are losing Medicaid coverage," Gershengorn said. "That's not just a guess. It's not a prediction. It's a fact."

Kentucky's waiver changes 'superficial'

When Boasberg blocked Kentucky's waiver in June 2018, he ruled that HHS Secretary Alex Azar did not appropriately consider the 95,000 people estimated to lose coverage if the requirements took effect. Kentucky's waiver was then resubmitted and re-approved by CMS.

Fishman said the changes to the waiver were "extremely superficial" and does not believe Boasberg will change his decision.

At the time of CMS' reapproval of Kentucky's waiver in November 2018, a CMS spokesperson told S&P Global Market Intelligence that very little had been changed between the two waivers.

Burnham said work requirements are preserving the state's Medicaid program because they free up Medicaid funds for those who really need Medicaid. Burnham added that Kentucky's Republican Gov. Matt Bevin is considering de-expanding Medicaid if work requirements are not allowed to be implemented, which could result in over 400,000 people losing coverage. Therefore, Burnham argued, fewer people would lose coverage through work requirements than if expansion was fully rolled back.

Gershengorn told reporters after the hearing that Bevin does not have the authority to de-expand Medicaid. The attorney re-emphasized that in both cases, work requirements go against the objectives of Medicaid mandated by Congress.

"Medicaid is a statute that is not designed to give states the freedom to pursue health in the abstract," Gershengorn said. "It's Congress' judgment that the way to help people is through healthcare coverage, and I think the judge understood that."

Boasberg said he will issue both opinions before the end of March. Kentucky's requirements are scheduled to take effect April 1.