By David M. Goldfarb and Ron M. Landsman, Esq., CAP
Low-income Kentuckians won a signal victory last month in a suit challenging the Trump Administration’s attempt to undo Medicaid by administrative sleight of hand. It’s also a big win for Americans concerned about the ability of the executive branch to ignore the mandate of Congress.
A federal district court in D.C., in a suit spearheaded by the National Health Law Program, Kentucky Equal Justice Project, and the Southern Poverty Law Center, ruled that the Secretary of Health and Human Services’ (HHS) approval of a Kentucky waiver to eliminate Medicaid benefits and protections – in the name of introducing Medicaid beneficiaries to life in the private insurance world – violated the Federal Medicaid law. Stewart v. Azar, U.S. Dist.Ct., D.C. Civil Action No. 18-152 (JEB), June 29, 2018.
NAELA joined Justice in Aging, AARP, AARP Foundation, and the Disability Rights and Education Defense Fund with an amicus brief supporting the plaintiff’s motion.
The suit was brought by 15 Kentucky Medicaid beneficiaries who feared losing their benefits. The suit was originally against the Secretary of the Dept. of Health and Human Services; Kentucky intervened as a defendant.
The suit challenged the HHS Secretary’s approval earlier this year of a Kentucky Medicaid “waiver” proposal to “comprehensively transform” its Medicaid program to look more like commercial insurance. It would have imposed a combination of news limits, including work and reporting requirements, elimination of retroactive coverage, increases in premiums, limits on non-emergency medical transportation, and a 6-month lock-out period for beneficiaries who made procedural errors.
The factual basis to the district court’s decision was the program’s own assessment that the changes would cause around 95,000 low-income Kentuckians to lose Medicaid coverage.
The decision turned on whether a proposal that reduces coverage can promote the Act’s objectives since, to win approval, a waiver must be an “experimental, pilot, or demonstration project” that “is likely to assist in promoting the [Act’s] objectives.”
The court held that it could not. The objective of the Medicaid program was to provide health care to people, including specific medical services, and the agency’s failure to assess and explain how a reduction in the Medicaid population would promote that fundamental objective was fatal.
The state sought to avoid that attack by saying the waiver would promote health, rather than provide health services. It claimed that its proposals would improve “health outcomes” by addressing “behavioral and social factors” that affect health, “incentivize beneficiaries to engage in their own healthcare,” and familiarize them with what they would encounter in the commercial market “and thereby facilitate smoother ... transition to commercial coverage.” The plaintiffs attacked the assumptions that supported the connection between less Medicaid coverage and fewer services, on the one hand, and better health outcomes, on the other, but the court said it need not enter that thicket:
[T]his focus on health is no substitute for considering Medicaid’s central concern: covering health costs. While improving public health and health outcome might be one consequence of “furnishing ... medical assistance,” the Secretary cannot choose his own means to that end.
Slip op. at 44.
This error in defining and addressing the fundamental purpose of the Act exposed the Secretary’s approval to review under the arbitrary and capricious standard, which requires that an agency “examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.”
The United States sought to argue that the Secretary could be allowed to redefine the objective of Medicaid, “furnishing medical assistance,” to the more amorphous “promoting health.” That is, the court held, “little more than a sleight of hand.” The focus on promoting health “is no substitute for considering Medicaid’s central concern: covering health costs.”
According to the Court, “the Secretary’s interpretation here runs counter to the statute’s plain text, its structure, and legislative history.” Thus, it is not entitled to deference, because interpretation cannot fall “outside the bounds of reasonableness.”
Given the Secretary’s misdirected attempt to redefine the purpose of the Medicaid statute, he did not bother to inquire into the impact, let alone the promotion of health care coverage. Approving the Kentucky waiver was thus arbitrary and capricious.
The court rejected other arguments seeking to circumvent the “purposes” argument, for example, that some of the 95,000 might get coverage in other ways. There was neither analysis or discussion of such rationales, so that they could not salvage the Secretary’s approach.
It is likely the United States will appeal the ruling, but for now, it is a major setback for the Administration and those states seeking to impose eligibility restrictions and benefit cuts contrary to the will of Congress.
About the Authors
David Michael Goldfarb, Esq., is NAELA’s Senior Public Policy Manager. Ron M. Landsman, Esq., CAP, is a NAELA Fellow and former member of the NAELA Board of Directors.