The Centers for Medicare & Medicaid Services (CMS) suffered a big loss in court last week. The United States Court of Appeals for the D.C. Circuit upheld a lower court ruling that blocked CMS from implementing one of the hallmarks of the Trump Administration’s efforts to restructure the Medicaid program. We first wrote about the agency’s attempts to require some Medicaid recipients to participate in community engagement activities back in 2018. And we have also reported on how a federal district court had twice invalidated those requirements. Well last week, those lower court decisions were upheld.
We have written here before about how the Social Security Act allows the Department of Health and Human Services (HHS) to waive many requirements of the Medicaid program if doing so, in the Secretary of HHS’s judgment, would “promote the objectives of the Medicaid program.” Here at the Medicaid and the Law Blog, we have gone back and found that, since the Administration of President Gerald R. Ford, HHS Secretaries of both political parties have used Medicaid waiver authority to promote their political and policy objectives. For example, the Carter Administration used Medicaid waiver authority to achieve cost control objectives. The Reagan Administration used waiver authority to expand home and community based care services for individuals with disabilities. The Obama Administration used waiver authority to achieve delivery system reform in Medicaid. And by and large, the courts have deferred to the HHS’s Secretary’s judgment that a particular waiver initiative would “promote the objectives” of Medicaid.
Well, that judicial deference came to a screeching halt last week. In a case called Gresham v. Azar, three judges of the D.C. Circuit invalidated the work requirement waiver approval in Arkansas. Although the lower court opinion was very lengthy, the appellate decision was fairly straightforward and to the point.
Remember, a waiver can be approved if it “promotes the objectives” of Medicaid. The three-judge panel in the Gresham case asked a very basic question: what is the “objective” of Medicaid? And they answered it: the principal objective of Medicaid is to provide health insurance coverage to low-income people. Yes, there are subsidiary objectives, but the central objective is to make health insurance coverage available to low-income people. The court held that in approving the Arkansas waiver, HHS did not truly analyze how imposing work requirements for Medicaid beneficiaries would promote that central objective. As a result, the waiver had been properly vacated by the district court judge.
The three-judge panel was a bipartisan group. The opinion was written by Judge Sentelle, who was appointed to the court by President Reagan. He was joined by Judge Pillard (she was appointed by President Obama) and Judge Edwards (he was appointed by President Carter). The Administration now has two options: either appeal the decision to the full D.C. Circuit, or else appeal directly to the Supreme Court. We would not be surprised if the Administration appeals: preserving an Administration’s ability to issue Medicaid waivers is an important source of health policy authority and the Administration will want to protect it. What it means is that we likely have not heard the end of work requirement (or, as the Administration calls them, community engagement) waivers.
 The Trump Administration had also approved work requirement waivers in Kentucky, but when the new governor of Kentucky was elected last November, he revoked the waiver.