Medicaid Work Experiments—The Policy Context
The effort to institute Medicaid work experiments unfolded against two policy contexts. The first, of course, is the Affordable Care Act itself, which transformed Medicaid (whose contours already had been substantially modified over several decades) into a central feature of a national health insurance system. But more than any other aspect of the ACA, the Medicaid transformation triggered existential ideological reaction, fueled by Chief Justice Roberts’s characterization of expansion, in National Federation of Independent Business v. Sebelius, as “a shift in kind,” an effort to move Medicaid decisively away from its English Poor Law roots, which demand that “able-bodied” adults be deprived of basic help. Although the chief justice’s decision preserved expansion funding, his imagery of a program transformed beyond constitutionally acceptable contours continues to reverberate. Fourteen states still refuse to adopt the expansion, choosing instead to deprive 2.3 million people of health insurance while forgoing billions of dollars in federal financial assistance.
The second policy context for work experiments is a special federal grant of authority, dating to 1962, that empowers the Health and Human Services (HHS) secretary to undertake social welfare experiments involving Social Security Act grant-in-aid programs, later broadened to include Medicaid. This power, codified at § 1115 of the Social Security Act, is undeniably broad. But it hinges on a “judgment of the Secretary,” that the experiment to be undertaken “is likely to assist in promoting the objectives of” the Social Security Act program that is the subject of the experiment. In the case of Medicaid, the program objective is set forth in the opening language of the statute itself, namely, to “furnish medical assistance” to eligible people.
Over many decades, 1115 has been used to test important Medicaid program innovations that in many cases ultimately became law, including expansion of eligibility to include working-age adults excluded from assistance under traditional program rules, coverage reforms, community-based long-term services and supports, and the use of managed care delivery arrangements. Indeed, the Obama administration used 1115 to enable a half-dozen states to adopt the ACA Medicaid expansion under terms somewhat more restrictive than the statute itself permitted.
The March 2017 Governors Letter, the 2017 November Speech, and the Administration’s 2018 Work Experiment Solicitation
Within weeks of taking office, the administration had made its Medicaid strategy known. In a letter to the nation’s governors, then HHS Secretary Tom Price and federal Centers for Medicare and Medicaid (CMS) Administrator Seema Verma wrote, “[t]he expansion of Medicaid through the Affordable Care Act (ACA) to non-disabled, working age adults without dependent children was a clear departure from the core, historical mission of the program.” Effectively labeling the expansion legislation contrary to U.S. policy, they wrote of their commitment to “ushering in a new era for the federal and state Medicaid partnership where states have more freedom to design programs that meet the spectrum of diverse needs of their Medicaid population.” One aspect of this commitment would be to “Support Innovative Approaches to Increase Employment and Community Engagement” in order to “assist eligible low-income adult beneficiaries to improve their economic standing and materially advance in an effort to rise out of poverty.” The language of paternalism effectively masked a clear policy of weaponizing health care, and its withdrawal, as the strategy for dealing with people who failed to make an “effort to rise out of poverty.” In November 2017, the administrator would stand before a meeting of state Medicaid directors vowing to protect Medicaid for “society’s most vulnerable” and “deserving Americans” and rejecting the concept that “a program designed for our most vulnerable citizens should be used as a vehicle to serve working age, able-bodied adults.”
Overwhelming evidence shows that nearly 90 percent of poor Americans work or are looking for work in low-wage jobs without employer benefits and, furthermore, that those who do not work cannot do so for health reasons (their own or those of other family members). Leighton Ku and Erin Brantley, Myths About the Medicaid Expansion and the ‘Able-Bodied’ (Health Affairs Blog, March 6, 2017). Despite the evidence, the administration released its formal “community engagement” experiment solicitation in January 2018. Couched as a strategy for lifting the poor, the solicitation encouraged experiments meeting certain preset rules, including 20 hours per week of paid or voluntary engagement in exchange for Medicaid, narrow exemptions for health or full-time educational reasons, extensive reporting rules, and continual redetermination of eligibility. The solicitation offered no impact estimates of its own, instead theorizing that compulsory work would “result in more beneficiaries being employed or engaging in other productive community engagement, thus producing improved health and well-being.”
Two states—Arkansas and Kentucky—immediately responded. Kentucky projected that 95,000 people would lose coverage, while Arkansas made no attempt at an estimate, nor did the administration require the state to do so. Other states followed, similarly outlining compulsory work rules and frequently providing little or no information regarding the number of people anticipated to lose coverage. The proposals triggered extensive scholarship and impact estimation, virtually all of which were incorporated into the public comment process that the 1115 statute requires. The Trump administration ignored the comments, made no attempt at its own independent estimates, and approved the proposals, with Kentucky being first.
Work Experiments in the Courts
Within weeks of approval, in Stewart v. Azar, advocates challenged the secretary’s approval of the Kentucky experiment, filing their case in the U.S. District Court for the District of Columbia, where all subsequent challenges would be brought. The theory of the challenge was simple, and, in the end, so was the federal court ruling: In approving the demonstration, the HHS secretary had failed to consider the central factor in any 1115 action, namely, whether the experiment would promote the Medicaid program’s objective of insuring the poor. To the administration’s arguments that the experiments were being undertaken to test the goals of health and financial independence, the court responded that however valuable, health and financial independence are not the primary objectives of Medicaid and, whatever their merit, cannot substitute for the central issue in any 1115 decision, namely how the experiment’s adverse impact may be offset by its gains. Because Medicaid’s primary objective is to insure people, the court concluded, HHS approval was arbitrary and capricious since the “Secretary never adequately considered whether Kentucky HEALTH would in fact help the state furnish medical assistance to its citizens” and thus promote the central objective of the Medicaid Act. In particular, the court found, the secretary never grappled with Kentucky’s own estimate that 95,000 people were likely to lose Medicaid coverage under the demonstration.
Because the Stewart decision rested on procedural grounds, the court simply vacated the administration’s approval and allowed the secretary to try again. Stewart II fared no better; once again, the administration simply sidestepped impact and instead invented a new basis for its actions—Medicaid’s fiscal sustainability. While not ruling that health, independence, and fiscal sustainability could never be the subject of a Medicaid experiment, the court set aside the second approval, again on procedural grounds, including the lack of any evidence of how stripping insurance from thousands of working-age adults (whose Medicaid coverage was 90 percent financed by the federal government under the terms of the ACA) would help make Medicaid fiscally sustainable.
On the same day the decision in Stewart II was issued, the court handed down its decision in Gresham v. Azar, which challenged the HHS secretary’s Arkansas approval. By the time the Gresham ruling was filed, the state’s experiment was several months underway. Although Arkansas had provided the government with no impact estimate, an independent study published in the New England Journal of Medicaid reported on the experiment’s initial results. By the time of the legal challenge, over 17,000 Medicaid beneficiaries already had lost coverage. Furthermore, the chaotic implementation process meant that over 95 percent of those losing coverage either were working or qualified for an exemption. Not surprisingly perhaps, Gresham suffered the same fate as in the Stewart cases, as did a subsequent challenge involving New Hampshire’s approval, Philbrick v Azar.
Between the time that the D.C. Circuit was set to hear the government’s appeal in Stewart and Gresham, Kentucky’s governor—the lead architect of the state’s work experiment—had lost his re-election bid, and his successor had formally notified the administration that the state was dropping the experiment. This left Arkansas as the lone case on appeal. But in a unanimous opinion, a three-judge panel, including one of the D.C. Circuit’s most conservative judges, concluded that the trial court was “indisputably correct [in finding] that the principal objective of Medicaid is providing health care coverage.” Following the approach established by the lower court, the D.C. Circuit found that the secretary’s approval of the Arkansas’s experiment was arbitrary and capricious because it ignored the prospect of coverage loss in favor of alternative objectives. Most interestingly perhaps, by the time of the arguments and in its briefs, the administration had abandoned any pretext of helping the poor and focused nearly exclusively on Medicaid sustainability as the goal—but once again without evidence that eliminating coverage either would make the program sustainable or outweigh the statutory interest in insuring the poor.
A win for the president in the coming election could bring a resurgence to Medicaid work experiments, as a newly emboldened White House, believing itself validated by the election results, renews punishment as health policy with a vengeance. But for the time being, the absence of reasoned decision-making has halted the effort to strip coverage from countless Americans on the pretext of lifting up the poor and making Medicaid financially sustainable.
In fact, however, § 1115 experiments hinge on state partners willing to carry them out. In the face of the court rulings, nearly all other states with approved or pending work experiment proposals have fallen silent. But not entirely: One state, Oklahoma, has persisted in its effort to secure approval for a sweeping experimental proposal to turn Medicaid from a legal entitlement into a block grant, replete with work requirements.
Whether in the face of sickness, death, and collapsing economies, especially for the lowest wage earners, any state—or the Trump administration for that matter—will persist in a policy of punishment cannot be known. But the COVID-19 pandemic has conclusively erased any pretext that depriving impoverished Americans of health care could yield more benefit than harm. Furthermore, and especially in light of the DACA ruling underscoring the enduring importance of reasoned government decision-making, future courts, no matter how conservative, could not conclude that the administration has offered justifiable grounds for such a thoroughly baseless and immoral initiative.