Appeals Court Strikes Down Arkansas Medicaid Work Requirements Approved by Trump Admin

A view of the E. Barrett Prettyman Federal Courthouse that houses the US Court of Appeals for the DC Circuit, on Tuesday, July 22, 2014, in Washington. AP Photo/ Evan Vucci

A federal appeals court has struck down a Trump administration approval of a state plan to add work requirements to the healthcare program that helps with medical costs for some low-income people, known as Medicaid.

A three-judge panel of the U.S. Court of Appeals for the D.C. Circuit upheld a lower court’s ruling that the Department of Health and Human Services (HHS) Secretary Alex Azar has acted in an “arbitrary and capricious manner” when he approved Arkansas’s plan to add work and community engagement requirements to Medicaid.

Under Medicaid, states can choose to deviate from the minimum coverage requirements as long as the HHS secretary approves such a deviation. A secretary can authorize “any experimental, pilot, or demonstration project which, in the judgment of the secretary, is likely to assist in promoting the objectives” of Medicaid, according to the law.

A number states, including Arkansas and Kentucky, requested approvals from HHS to impose work and community engagement requirements as a condition of Medicaid eligibility. Under the plan, Medicaid enrollees are required to work or engage in educational, job training, or job search activities for at least 80 hours per month.

The appeals case is centered on Azar’s approval of the state’s plans, rather than the legality of the work requirements.

Opponents of the states’ move to aid work requirements say this would cause thousands of people to lose coverage. Analysts estimated that about 18,000 people lost coverage in Arkansas while between 86,000 and 136,000 people would lose coverage in Kentucky.

A number of residents from Arkansas and Kentucky under the Medicaid programs sued the Trump administration in separate lawsuits, challenging the decision to approve the plans. The district court found in favor of the individuals, effectively halting the programs. The HHS appealed to the D.C. Circuit court and both cases were consolidated on appeal.

Kentucky, under a new Democratic governor, terminated the work requirements at the end of 2019 and asked to dismiss the case at the appeals court.

Judge David Sentelle, an appointee of President Reagan, wrote in the opinion (pdf) that the HHS secretary did not appropriately consider the statutory purpose if Medicaid, to provide medical coverage to the needy, but instead focused on alternative objectives such as improving health outcomes and encouraging beneficiaries of the program to obtain and maintain employment or undertake community engagement.

“The Secretary’s approval of the Arkansas Works Amendments is arbitrary and capricious because it did not address—despite receiving substantial comments on the matter—whether and how the project would implicate the ‘core’ objective of Medicaid: the provision of medical coverage to the needy,” he wrote.

Sentelle also added that HHS failed to adequately consider whether the state plan would reduce Medicaid coverage or promote the coverage.

“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,” Sentelle wrote.

Friday’s ruling voiding the approval for the state’s plans could possibly threaten similar plans in other states approved by HHS.

The DOJ declined a request for comment.