Recently the US Court of Appeals for the DC Circuit emphatically ruled that the Trump administration’s 2018 approval of a Medicaid demonstration request for Arkansas was arbitrary and capricious. This was the latest slam-dunk rejection in the courts of efforts to impose work requirements on at least some Medicaid beneficiaries through administrative means. It follows earlier rulings at the federal district court level involving Kentucky and New Hampshire, as well as Arkansas.          

It is increasingly obvious that this regulatory bypass to open the door to work requirements (and less coverage of at least able-bodied adults in Medicaid expansion states) just won’t work. So first, a quick summary of the legal writing on the wall; then a preview of what might be next.

When the Centers for Medicare and Medicaid Services (CMS), under the post-consultant direction of administrator Seema Verma, further encouraged Republican-leaning states to consider work requirement waiver requests in January 2018, the proposed rationale was that getting Medicaid enrollees more involved in regular hours of “community engagement” activities, as a condition of continued insurance coverage, would be beneficial to their health. The legal problem was, and is, that the underlying statutory history of Medicaid never recognized “improved health” as a congressionally approved objective of the program. Efforts to graft better health outcomes, let alone increased financial independence for beneficiaries, on to the program as policy objectives justifying work requirements simply could not get past the scrutiny of federal judges. Unlike the earlier 1996 legislative rewrite of federal welfare assistance (TANF, in place of AFDC), or even the authorization of work requirements for some federal food stamp recipients, the Medicaid program has always been limited to prioritizing payment for health services for its lower income enrollees, through insurance coverage.

Friday’s unanimous opinion by senior judge David Sentelle makes all of this statutory background and the DC Circuit Court’s analysis quite clear. Any Medicaid demonstration program still must promote the objectives of Medicaid.

Of course, there is little sense of irony recognized or expressed by pro-Medicaid-expansion advocates: Both before and after the ACA’s substantial expansion of Medicaid over the last decade, the program has been all about pumping out money to Medicaid-participating providers, regardless of whether those payments actually improve the health or broader well-being of its enrollees. So, let’s get on with the program, as Congress intended.

Although Arkansas first submitted its amended Medicaid waiver proposal in June 2017, HHS Secretary Alex Azar approved it in March 2018 under the newer community engagement guidance offered by CMS. The three objectives supporting the Arkansas waiver were said to be improving health outcomes, addressing behavioral and social factors that influence health outcomes, and incentivizing beneficiaries to engage in their own health care and achieve better health outcomes. The community engagement requirements imposed by Arkansas on some Medicaid beneficiaries were supposed to be correlated with improved health and wellness.

But community engagement does not pay the bills through free or low-cost health care coverage. Congress not only selected the ultimate purposes for Medicaid (furnish medical assistance as payment of the cost of health care) but also the appropriate means (provide health care coverage).  

It’s usually difficult to reach the level of “arbitrary and capricious” decision making in the discretionary review of such applications. However, the DC court found that this action “entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.”

What’s next? Less of a head-on assault through overly-broad work requirements and more of a secondary pursuit of other creative reinterpretations of Medicaid financing terminology. A complex combination of Medicaid section 1115 waiver and ACA section 1332 waiver proposals by Georgia that would try to reroute insurance coverage expansion in a private insurance direction through a new state program remains under federal review. More creative use of Medicaid savings to help finance lower cost private insurance expansion alternatives at the state level (so-called megawaivers) have been ruled out by CMS for the time being. A new Healthy Adult Opportunity program launched recently by CMS offers several limited “capped funding” Medicaid expansion options for states.

Whether substantially limited and narrowly targeted work requirements can be successfully attached, or worth the trouble, perhaps as political fig leaves to allow Medicaid-holdout states to belly up finally to the federal funding bar, remains uncertain. The larger obstacle remains that there is no immediate prospect of the current Congress, or ones in the near-term future, amending the statutory purposes of Medicaid, and federal courts remain resistant to blatant disregard of current law through administrative means.

So. It’s back to work, for those who say they want to encourage more work.

This article by Thomas P. Miller first appeared at AEIdeas.