On June 29, 2018, the D.C. federal district court issued a ruling in Stewart v. Azar, a lawsuit brought by a group of Kentucky Medicaid beneficiaries challenging the Secretary of HHS’s approval of a Section 1115 Medicaid waiver that imposes work requirements, monthly premiums up to 4% of income, coverage lockouts, and other provisions on Kentucky’s Medicaid program that could lead to a loss of coverage for 95,000 enrollees. The judge ruled that HHS Secretary Azar violated the Administrative Procedures Act (APA) in approving the waiver by not adequately evaluating whether the requirement that beneficiaries log 80 hours a month of “work and community engagement” furthers the objectives of Medicaid.
In early 2017, CMS Administrator Seema Verma and former HHS Secretary Tom Price sent a letter to governors promoting more flexibility in the design of state Medicaid programs with 1115 waivers to refocus the program on the “truly vulnerable.” Republicans argue that social service programs, such as Medicaid, disincentivize work and favor imposing work requirements as a condition of receiving benefits. The Obama Administration did not allow states to pursue work requirements, which are predicted to make it a serious challenge for low-income individuals and families to retain Medicaid coverage.
CMS issued new guidance in January of 2018 to allow states to “improve Medicaid enrollee health and well-being through incentivizing work and community engagement among non-elderly, non-pregnant adult Medicaid beneficiaries who are eligible for Medicaid on a basis other than disability.” The new guidance indicates that states can require Medicaid recipients to prove, through copious documentation, that they are working, in a job training program, or volunteering in their community.
But…many Medicaid beneficiaries are already working, including those who work full-time year round and still have an annual income low enough that they qualify for Medicaid. [An individual working full-time for the full year making the federal minimum wage will earn an annual salary just over $15,000 or 125% of the FPL; anyone who makes less than 138% FPL is eligible for Medicaid expansion.] Of recipients who work part-time, some cannot find a full-time job, while others have school or family obligations that prohibit their working time. A percentage of working Medicaid enrollees could face serious barriers to completing the reporting requirements due to a lack of access to internet and email. And most beneficiaries who are not working and could be exempt from the work requirements would still have to apply for an exemption to further prove they are unable to work.
The Center on Budget and Policy Priorities examined state proposals to implement work requirements and found that even regularly working low-income individuals on Medicaid might find themselves suffering a lapse in coverage due to irregular hours and gaps in employment that are more common in low-income work. And yet, while some polls have found that Americans favor work requirements, support is likely to decline if the result of work requirements are funding and enrollment cuts (which is the real goal of these proposals…).
The decision in Stewart v. Azar sidesteps a very important questions: does section 1115 of the Social Security Act permit the Secretary of HHS to approve waivers that seek to reduce Medicaid coverage through new eligibility requirements (i.e. work requirements, premiums, lockouts). The court ruled that when the Secretary of HHS fails to determine whether a demonstration project promotes Medicaid’s objective of insuring people, his actions (or inaction) violates federal law. Even though the court has stalled Kentucky’s attempts, nine more states have a 1115 waiver to implement a work requirement under consideration.
There are two likely paths for the Administration to take at this point: they can appeal the decision to the Supreme Court or Secretary Azar could reopen the review of the Kentucky waiver. No matter the path for the Kentucky waiver, this decision has refocused public attention on the objectives of the Medicaid program and makes clear that any demonstration project approval/disapproval must be rooted in a thoughtful consideration of the facts and implications for the population served by Medicaid.
Image from KFF.