Providers win reprieve as courts deal blow to Medicaid work requirements in Arkansas

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Crystal Yednak Senior Manager, Health Research Institute, PwC US February 21, 2020

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A federal appeals panel in the DC Circuit upheld a lower court’s ruling blocking work requirements for Medicaid beneficiaries in Arkansas, saying that such programs are not in line with the core goal of the Medicaid law: to provide assistance to people who cannot afford care.

“The district court is indisputably correct that the principal objective of Medicaid is providing health care coverage,” Senior Circuit Judge David B. Sentelle wrote for the court. While Congress has added work requirements to other assistance programs for low-income Americans, it has not done so with Medicaid, Sentelle wrote. “When Congress wants to pursue additional objectives within a social welfare program, it says so in the text,” he wrote.

Under Arkansas’ work requirement demonstration project, able-bodied adults aged 19 to 49 in the Medicaid expansion population would have to report 80 hours of work or other qualifying activities. Some exemptions were built in for students and persons in treatment for substance abuse, but those who were not exempt could lose Medicaid coverage if they did not meet the reporting requirements for three months in a year.

The Trump administration has been encouraging states to apply for Section 1115 waivers for programs imposing certain requirements, including proof that they are engaged in work or worklike activities, on some Medicaid beneficiaries. The federal appeals court wrote that the administration improperly ignored the impact of the Arkansas program on Medicaid coverage while emphasizing the correlation between employment and health.

After the National Health Law Program, Legal Aid of Arkansas, and the Southern Poverty Law Center filed suit on behalf of Medicaid enrollees, a US district judge in DC ruled in March 2019 that HHS Secretary Alex Azar, named as a defendant in the lawsuit, acted in an “arbitrary and capricious” manner because he did not properly consider whether the work requirement would affect the chief objective of Medicaid: to give people who could not afford it assistance for medical care.

Kentucky had also been part of the legal challenge, but the state’s new governor ended the program, and it was dismissed from the case. HHS has not indicated whether it will appeal.

HRI impact analysis

The ruling may suggest difficulty for HHS’ legal defense of work requirements, as many states have paused their own programs or been in limbo waiting to see the outcome of this case. CMS has been encouraging states to add work requirements, with Kaiser Family Foundation data showing 20 states in some form of pursuit of the program.

In its opinion, the appeals panel pointed to data showing that the program, called Arkansas Works,  resulted in more than 18,000 people losing coverage in five months, which amounts to about a quarter of those who fall under the requirements.

The impact of work requirements programs, if implemented, would be felt by healthcare providers, which would see more people without insurance seeking treatment at hospitals and emergency rooms, driving up uncompensated care.

Under the program, providers also likely would have to deal with a surge in Medicaid beneficiaries losing coverage in the middle of treatment as they fail to show, month to month, that they have worked the minimum number of hours to maintain coverage. 

Medicaid managed care organizations, which receive capped payments per enrollee, also stand to be affected by a shrinking number of beneficiaries and the increased complexity in maintaining coverage month to month.

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Trine K. Tsouderos

HRI Regulatory Center Leader, PwC US

Tel: +1 (312) 241 3824

Crystal Yednak

Senior Manager, Health Research Institute, PwC US

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