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Federal appeals panel questions if work rules uphold principles of Medicaid

A panel of federal appeals court judges seemed skeptical that Medicaid work requirement waivers in Kentucky and Arkansas uphold the principles of the Medicaid program.

While the federal government argued that the waivers promote the objectives of Medicaid, the three-judge panel questioned the argument's premise during an Oct. 11 hearing in Washington, D.C., and alluded to a lower court's ruling that struck down the waivers. The panel also questioned whether the government adequately considered the impact to Medicaid beneficiaries before approving the waivers.

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Medicaid is the dual state- and federally run health insurance program for people with low income, a wide population that includes children and the elderly. Work requirements mandate that individuals work or participate in community engagement activities like school or volunteering for a set number of hours each month to remain eligible for Medicaid.

Judge James Boasberg for the U.S. District Court for the District of Columbia, who has ruled against work requirements four times, struck down Kentucky's and Arkansas' waivers in March.

The matter is now before the U.S. Court of Appeals for the District of Columbia Circuit. At the heart of the panel's questioning is whether U.S. Department of Health and Human Services Secretary Alex Azar adequately considered the impact that Medicaid work requirements would have on beneficiaries.

Leonardo Cuello, director of health policy for the National Health Law Program, a legal organization that was part of the appeal, said in an interview that the cases were pretty straightforward according to standards under the Administrative Procedures Act. Agencies are allowed to make changes to programs like Medicaid through a section 1115 waiver, which is how the work requirements were submitted to HHS. But to be approved, the changes must adequately consider impacts and not ignore the principles of that program, Cuello said.

Because promoting coverage is an essential part of the Medicaid program, Azar was found to have violated standards outlined in the APA by not adequately considering the risk that the work requirements would cause a loss of coverage, according to Cuello.

Boasberg made the same argument in both of his previous rulings for Kentucky and Arkansas, pointing to the more than 18,000 people who lost coverage in Arkansas in 2018 after that state's policy went into effect.

While work requirements never took effect in Kentucky, the state estimated that as many as 95,000 people could lose Medicaid coverage, according to court documents.

Alisa Klein, who argued before the court for the U.S. Department of Justice, said the intent of the waivers was to encourage employment, which could help people gain commercial coverage, thereby improving their health.

Multiple judges pushed back on this reasoning. Judge David Sentelle said while encouraging employment and access to commercial insurance are "laudable goals," they are not principles of the Medicaid program as defined by the statutes.

Klein also argued that the waivers are meant to be experiments to test out new programs or policies. However, Judge Harry Edwards noted evidence that shows work requirements are costing people coverage and this point cannot be ignored to achieve goals that are not defined to be principles of Medicaid.

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Jane Perkins, legal director of the National Health Law Program, said in an interview that because evidence already exists that work requirements do not function as intended, HHS is not truly looking to test a hypothesis.

"This is approval in search of an experiment," Perkins said. "We still don't know what the experiment is."

Klein argued that work requirements for Medicaid are similar to those in other programs, such as Temporary Assistance for Needy Families and the Supplemental Nutrition Assistance Program. But Sentelle said Congress specifically built those requirements into the statutes and did not for Medicaid.

Eliot Fishman, senior director of health policy for Families USA, a health policy organization, told S&P Global Market Intelligence that the court's decision will have a critical impact on whether work requirements in other states go forward.

Indiana is currently the only state with a work requirements program in effect.

The National Health Law Program is challenging Indiana's policy in the D.C. District Court as well. Along with the Indiana case, the organization has been attached to lawsuits challenging the policy in Kentucky, Arkansas and New Hampshire.

Perkins said the timing of the panel's decision should not interfere with the timing of the Indiana case.

"We need to move forward with Indiana now because at the end of December people are going to start losing coverage," Perkins said. "We don't want a delay."