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Rationale for Medicaid Work Requirement Held to Be Arbitrary and Capricious
By Joseph Fawbush, Esq. on February 19, 2020 | Last updated on February 20, 2020

What is the purpose of Medicaid? That was the heart of a question before the D.C. Circuit Court of Appeals regarding whether federal law allows states to implement work requirements for some Medicaid enrollees.

The U.S. Centers for Medicare and Medicaid Services began allowing states to implement work requirements for Medicaid beneficiaries in 2018. Under these "demonstration" programs, states could petition the Department of Health and Human Services Secretary to waive Medicaid minimum coverage requirements, provided the state engaged in a program that "promotes the objectives" of Medicaid. Arkansas was one of several states to implement such a program.

Under "Arkansas Works," people enrolled in Medicaid aged 19 to 49 had to look for a job, go to school, or attend job training unless they met one of the exceptions. They had to document their efforts. Failure to do so would result in lost coverage. Approximately one-fourth of Medicaid enrollees lost coverage in the five months after Arkansas Works took effect.

Provide Coverage, or Provide Good Health Outcomes?

Arkansas residents challenged the HHS Secretary's rationale for granting these waivers, claiming that implementing work requirements was not a primary purpose of Medicaid. Both the federal district court and the D.C. Circuit Court of Appeals agreed. According to the unanimous panel, the primary purpose of Medicaid is to enable states to provide medical services to people who otherwise can't afford it. In approving Arkansas Works, the Secretary failed to use this standard. Instead, he used his discretion to judge whether the programs would improve health outcomes.

However, the panel noted that Congress explicitly enumerated Medicaid's purpose, which "is providing health care coverage without any restriction geared to healthy outcomes, financial independence or transition to commercial coverage."

Arbitrary and Capricious

When examining work requirements in accordance with Medicaid's actual purpose, the panel found the Secretary's reasoning to be arbitrary and capricious, since it did not take into account the number of people who would lose coverage after Arkansas Works became implemented. Instead, any concerns were dismissed "in a handful of conclusory sentences," Senior Circuit Judge David Sentelle wrote.

Kentucky had implemented a similar program to Arkansas but abandoned it after the state lost in federal district court. As yet, it is unclear if Arkansas will appeal to the Supreme Court. Other states' Medicaid work requirement programs are similarly being challenged, but Arkansas was the first to implement its program, and this case will control the others.

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