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Erica Asbell
National Academy of Elder Law Attorneys
NAELA News Journal - NAELA News Online

DC Circuit Affirms District Court Decision That Struck Down Arkansas’ 1115 Medicaid Waiver

By Erica Asbell, Esq.
Published March 2020
In a victory against harmful 1115 Medicaid waivers, the DC Circuit recently affirmed a district court ruling that struck down Arkansas’ proposed 1115 waiver. On February 14, 2020, in a unanimous 3-0 decision, the DC Circuit Court of Appeals ruled that Arkansas’ 1115 Medicaid waiver was “arbitrary and capricious” under the Administrative Procedure Act (APA) because it did not further the principal purpose of Medicaid. The three-judge panel affirmed a district court decision that the Health and Human Services (HHS) Secretary’s approval of the waiver did not further the core objective of the Medicaid program, which is to furnish medical coverage to low-income individuals and families. To read the full DC Circuit decision discussed in this article, Gresham v. Azar II, click here

Waiver Background
On June 30, 2017, Arkansas submitted a request to amend its 1115 demonstration program (Arkansas Works) with additional requirements for the “expansion”1 population, including requiring these beneficiaries to work or engage in job search activities for 80 hours per month, the elimination of all retroactive coverage, and lowering income eligibility from 133 percent to 100 percent of the Federal Poverty Line (FLP). The HHS Secretary then approved the waiver with the work requirements and made two minor adjustments; he allowed retroactive coverage for 30 days and kept eligibility at 133 percent of the FPL. 

Three months after the waiver went into effect, a group of Arkansans filed an action in the District Court for the District of Columbia, challenging the HHS Secretary’s approval of the waiver. The Arkansas lawsuit, Gresham v. Azar, was originally consolidated with another case, Stewart v. Azar, which challenged a similar 1115 waiver submitted by Kentucky. NAELA, along with other disability and older adults’ rights groups, submitted an amicus brief on the harmful impact of the Kentucky waiver. 

During the litigation, Kentucky’s new Governor assumed office, terminated the proposed demonstration project, and requested dismissal of its pending appellate case. Due to dismissal of the Kentucky case, the D.C. Circuit Court of Appeals only addressed the HHS Secretary’s approval of the Arkansas waiver. 

DC Circuit Court of Appeals’ Decision
The DC Circuit Court affirmed the district court’s ruling that the HHS Secretary’s approval of the Arkansas waiver was not “likely to assist in promoting the objectives” of Medicaid, which is to furnish medical care to the needy. Charles Gresham v. Alex Azar, II, No. 19-5094, at 4, 8 (D.C. Cir. 2020, Feb. 14, 2020). It compared this objective to the objectives outlined by the HHS Secretary in approving the Arkansas waiver, which were to improve health outcomes, promote beneficiaries’ financial independence, and engage beneficiaries in their health care. Senior Circuit Judge David Sentelle, who filed the opinion, reasoned that:  

In short, we agree with the district court that the alternative objectives of better health outcomes and beneficiary independence are not consistent with Medicaid. The text of the statute includes one primary purpose, which is providing health care coverage without any restriction geared to healthy outcomes, financial independence or transition to commercial coverage. Id. at 16. 

Based on this analysis, the DC Circuit ruled 3-0 that the HHS Secretary’s approval of the waiver was “arbitrary and capricious” pursuant to the APA. 

Another critical issue addressed by the D.C. Circuit is the HHS Secretary’s disregard for comments submitted by the public that addressed potential negative impacts of the proposed waiver on Arkansans enrolled in Medicaid, including loss of coverage due to the work requirement. Judge Sentelle noted that: “Nodding to concerns raised by commenters only to dismiss them in a conclusory manner is not a hallmark of reasoned decision making.” Id. at 17. The opinion then addresses the court record, which “shows that the Arkansas Works amendments resulted in significant coverage loss. In Arkansas, more than 18,000 people (about 25 percent of those subject to the work requirement) lost coverage as a result of the project in just five months.” Id. at 16. 

Implications of Decision 
The DC Circuit decision is not binding on other states seeking future 1115 Medicaid waivers, as the court limited its analysis to the appeal by Arkansans on the specific waiver proposed in their state. However, this decision may serve as a deterrent to other states who seek similar waivers, especially waivers that implement work requirements that are likely to result in loss of coverage. NAELA will continue to work closely with state chapters to combat proposed 1115 Medicaid waivers that would negatively impact people with disabilities and older adults.

1 “Expansion” population: adults who otherwise would not otherwise qualify for Medicaid due to age, disability, or having dependent children. 
About the Author
Erica Asbell, Esq., is NAELA's Public Policy Associate for State Chapters.