Title XIX of the Social Security Act (SSA) has provided medical care assistance to certain vulnerable populations under a cooperative federal-state arrangement, approved by the Secretary of Health and Human Services (HHS). In 2010 Congress passed the Affordable Care Act (ACA) (“Obamacare”) that expanded Medicare coverage to include an additional group of low-income adults under the age of 65. While all states were obliged to comply with the Medicaid Act, states had a choice on whether to expand Medicaid. States that chose to participate in the program and comply with minimum federal requirements, such as expanding coverage, received funding from the federal government to provide the care.

In certain narrow cases, states were permitted to waive certain Medicaid Act requirements under § 1115 of the SSA, but only when the waiver promoted the objectives of the Medicaid Act. Otherwise, states were forbidden from picking and choosing individuals within a covered group. Arkansas was one of the first states to expand Medicare after the ACA was passed, starting in January 2014 to include adults under the age of 65 through private care. The expansion was renamed “Arkansas Works” (AW) when it was renewed in in 2016 and extended through 2021. At this time, Arkansas requested to institute a work requirement in Medicaid as a requirement for health coverage, which was denied by the Center for Medicare and Medicaid Services (CMS) because it was inconsistent with the purposes of the Medicaid program.

However, in 2017 the Trump Administration called on federal agencies to undo the ACA and introduced another purpose to Medicare, which was to promote enrollees to work. This resulted in CMS inviting states to implement exceptions to the SSA. In March 2017, Arkansas Governor Asa Hutchinson proposed amendments to the AW to institute a work requirement and shrink retroactive health coverage. Changing its original position from 2016, the Secretary of the HSS approved the Arkansas Works Amendments (AWA), including the work condition, on March 5, 2018.

On August 14, 2018, three individuals filed a lawsuit against HHS and CMS in the US District Court for the District of Columbia. The plaintiffs alleged violations of the Administrative Procedure Act (APA) and the SSA by the federal government in approving the AWA in March 2018. The AWA, according to the plaintiffs, sought to undermine the ACA and the expansion of Medicaid through a fundamental alteration of those statues. The plaintiffs claimed that the AWA was in violation of the Take Care Clause of the Constitution, which limits presidential power from rewriting congressional statutes, and ensures execution of laws passed by the Congress. All three plaintiffs were beneficiaries of Medicaid who lost or risked losing medical coverage due to changes in the AW program, which required 80 hours of employment per month for able-bodied adults from 19-49, reported online, as a requirement for health coverage. One of the plaintiffs lost his Medicaid coverage and subsequently his job after he failed to meet the AWA work requirement by not reporting his compliance in June 2018. The two other plaintiffs, employed at the time of the lawsuit, anticipated losing their Medicare coverage due to the new work requirements.

The plaintiffs alleged that the HHS violated the US Constitution and federal laws in approving the Medicaid work requirement and that the SSA did not permit the Secretary of HHS to waive federal Medicaid requirements. Represented by Legal Aid of Arkansas, Southern Poverty Law Center, and the National Health Law Program, the plaintiffs sought declaratory and injunctive relief from the AWA and attorney fees. The case was assigned to Judge James E. Bosaberg.

On November 5, 2018, the plaintiffs filed an amended complaint with additional plaintiffs who also faced loss of coverage. The plaintiffs moved for summary judgment on the same day, asking the court to strike down the Medicaid work requirement, alleging that the federal government approved the requirements without due process. The state of Arkansas also intervened as a defendant on November 30, 2018.

Judge Bosaberg held that government action was arbitrary and capricious if the government failed to adequately consider an important aspect of a problem under the Administrative Procedure Act (APA), which requires courts to set aside government actions that are “arbitrary, capricious” or unlawful. The court stated that the Secretary had a duty to determine whether the proposed AWA would promote the objectives of Medicaid, including whether it advances or hinders health coverage to the needy. In considering the merits of the plaintiff’s claims, Judge Bosaberg considered whether the Secretary, in concluding that the AWA program promoted the objectives of the Medicaid Act, acted arbitrarily or capriciously.

This challenge was previously considered in a separate suit in Stewart v. Azar, where the court determined if an agency had adequately considered whether a waiver proposal from Kentucky would advance medical assistance to its citizens. The court in Stewart v. Azar vacated the waiver in question, which also included a work requirement, because the agency failed to sufficiently consider the impact of the proposed project on Medicaid coverage.

On March 27, 2019, the court found that the Secretary of the HHS failed to adequately consider how the AWA would lead to loss of coverage for a substantial number of Arkansas residents, including the needy. Because coverage to the needy was a core objective of Medicaid, the court held that the AWA did not advance the purpose of Medicaid. Therefore, its approval was arbitrary and capricious. Correspondingly, the court granted the plaintiffs’ motion for summary judgment and denied the defendants’ cross-motions on April 10, 2019. Like the holding in Stewart v. Azar, the approval for Arkansas’s program was also vacated. 363 F.Supp.3d 165.

On April 10, 2019, the federal defendants and the state of Arkansas each appealed to the U.S. Court of Appeals for the District of Columbia Circuit, docketed as 19-5094 (federal defendants’ appeal) and 19-5096 (state of Arkansas’s appeal). The parties briefed the appeal and oral arguments were held on October 11, 2019.

On February 14, 2020, the Court of Appeals affirmed the district court's judgment vacating the Secretary's approval of the Arkansas Works Amendments. See Gresham v. Azar, 950 F.3d 93 (D.C. Cir. 2020). The decision applied to both appeals as a consolidated matter. Written by Senior Circuit Judge Sentelle, the opinion emphasized that providing healthcare coverage is the primary purpose of Medicaid. The defendants' alternative objectives of better health outcomes, financial independence, and transition to commercial coverage, on the other hand, were not consistent with Medicaid. The appellate court found the Secretary's approval of the Arkansas program to be arbitrary and capricious due to the failure to consider whether the program would result in loss of coverage, an important aspect of the approval analysis.

Averyn Lee - 04/03/2019
Kat Zhao - 03/12/2020


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