United States District Court, District of Columbia
E. BOASBERG United States District Judge.
Court again takes up a challenge to the federal approval of
Kentucky HEALTH, an experimental project proposed by the
Commonwealth of Kentucky intended to “comprehensively
transform” its Medicaid program. The Secretary of
Health and Human Services has authority to approve such
experimental proposals - or “demonstration
projects” - as long as they promote the objectives of
the Medicaid Act. Kentucky HEALTH, which the Secretary
initially approved on January 12, 2018, would condition
Medicaid eligibility for a large portion of its beneficiaries
on work or community-engagement requirements and impose
several additional obligations intended to make Medicaid more
like commercial insurance.
Kentucky residents currently enrolled in the
Commonwealth's Medicaid program, believed HHS's
approval unlawful. In a ruling last summer, this Court
agreed. Finding that the “Secretary never adequately
considered whether Kentucky HEALTH would in fact help the
state furnish medical assistance to its citizens” and
thus promote a central objective of the Medicaid Act, the
Court concluded that this “signal omission render[ed]
his determination arbitrary and capricious.”
Stewart v. Azar, 313 F.Supp.3d 237, 243 (D.D.C.
2018). In particular, it found that the Secretary had not
grappled with Kentucky's estimate that a substantial
number of people were likely to lose coverage under Kentucky
HEALTH. Id. at 260. The Court, consequently, vacated
the approval and remanded to HHS for further review.
bell now rings for round two. Following the Court's
remand and an additional notice-and-comment period, the
Secretary reapproved the program last November, this time
relying on somewhat different reasoning. Plaintiffs now
challenge the reapproval, contending principally that the
Secretary has not remedied the defects that rendered his
prior action unlawful. Specifically, they maintain that he
has still not adequately considered Kentucky HEALTH's
likelihood to cause significant coverage loss. The Secretary,
by contrast, believes that this time around he has cured any
critical omission. Defendants now rely primarily on a new
argument to that effect - namely that, although Kentucky
HEALTH may cause nearly 100, 000 people to lose coverage,
that number will be dwarfed by the approximately 450, 000
people who would suffer that fate if Kentucky ends its
coverage entirely of those who have joined the Medicaid rolls
via the Affordable Care Act, as it has threatened to do if
this project is not approved.
Supreme Court, in holding that Congress could not require
states to adopt that Medicaid expansion by conditioning all
their Medicaid funding on a decision to do so, explained that
the states could not be compelled to engage in a program they
had not bargained for with “a gun to the head.”
Nat'l Fed. of Indep. Business v. Sebelius, 567
U.S. 519, 581 (2012). Kentucky, it seems, has now picked up
that gun by threatening to de-expand Medicaid. Defendants
urge the Court to adopt the proposition that the Secretary
need not grapple with the coverage-loss implications of a
state's proposed project as long as it is accompanied by
a threat that the state will de-expand - or, indeed,
discontinue all of Medicaid. By definition, so this argument
goes, any number of people covered by an experimental
Medicaid program would be greater than the number if there
were no Medicaid at all; as a result, any demonstration
project that leaves any individual on a state's Medicaid
rolls promotes coverage. The Court cannot concur that the
Medicaid Act leaves the Secretary so unconstrained, nor that
the states are so armed to refashion the program Congress
designed in any way they choose. As a consequence, once again
finding the reapproval was both contrary to the Act and
arbitrary and capricious, the Court will vacate it and remand
to HHS for further review.
details of the statutory scheme and the facts of the dispute
will be familiar to readers of the Court's prior Opinion.
See Stewart I, 313 F.Supp.3d 237. The Court
nevertheless offers a brief refresher on both before setting
out the Secretary's actions on remand.
is a cooperative federal-state scheme that aims to provide
medical assistance to certain vulnerable populations.
See 42 U.S.C. § 1396-1. Specifically, Congress
implemented the program “[f]or the purpose of enabling
each state, as far as practicable . . . to furnish (1)
medical assistance . . . [to] individuals whose income and
resources are insufficient to meet the costs of necessary
medical services, and (2) rehabilitation and other services
to help such families and individuals attain or retain
capability for independence and self-care.”
Id. The Centers for Medicare and Medicaid Services
(CMS), a federal agency within HHS, has primary
responsibility for overseeing the Medicaid program. To
receive federal funding, states must submit their
“plans for medical assistance” for the HHS
Secretary's approval. Id. Currently, all states
have chosen to participate in the program.
Medicaid Act sets out certain minimum requirements to which
all state plans must conform. See 42 U.S.C. §
1396a. Those provisions ensure that individuals receive a
minimum level of coverage and stipulate that state plans
“mak[e] medical assistance available” to certain
sets of low-income individuals. See 42 U.S.C. §
1396a(a)(10)(A). Originally, that group included only
pregnant women, children, and their families; some foster
children; the elderly; and people with certain disabilities.
Id. In 2010, the passage of the Affordable Care Act,
colloquially known as Obamacare, gave states a choice to
expand their Medicaid coverage to include additional
low-income adults under the age of 65 who would not otherwise
qualify - a group now commonly referred to as the
“expansion population.” 42 U.S.C. §
also allows states wishing to deviate from either the
original or the additional requirements of Medicaid to obtain
a waiver from the Secretary of HHS. See 42 U.S.C.
§ 1315. Section 1115 of the Social Security Act,
accordingly, permits the Secretary to approve
“experimental, pilot, or demonstration
project[s]” in state plans that would otherwise fall
outside the Medicaid Act's parameters. The Secretary,
however, can approve only those projects that “in [her]
judgment . . . [are] likely to assist in promoting the
[Act's] objectives.” 42 U.S.C. § 1315(a). If a
project, in the Secretary's judgment, passes muster, she
can then waive compliance with the terms of § 1396a
“to the extent and for the period . . . necessary to
enable [the] State . . . to carry out such project.” 42
U.S.C. § 1315(a)(1).
2018, CMS released a State Medical Director (SMD) letter that
indicated its new commitment to “support[ing] state
efforts to test incentives that make participation in work or
other community engagement a requirement for continued
Medicaid eligibility” and that encouraged states to
apply for § 1115 waivers for this purpose. See
AR 90. The Commonwealth of Kentucky submitted one such waiver
application. As the Court has previously detailed, its
application has multiple components. See Stewart I,
313 F.Supp.3d at 246. Relevant here is its Kentucky HEALTH
program, which “applies only to adult beneficiaries who
do not qualify for Medicaid on the basis of a
disability.” Id. (internal quotation marks and
citation omitted). That is, it targets primarily - though not
exclusively - the ACA expansion population. Id.
Kentucky “believed that this project would
‘transform' the state's Medicaid program by,
among other things, predicating Medicaid eligibility for most
of the expansion population on workforce participation or
community service.” Id. (quoting AR 2, 15-16).
one day after releasing the SMD letter, the Secretary
approved Kentucky HEALTH, granting the Commonwealth waivers
to implement the following six features: first, a
community-engagement requirement mandating that beneficiaries
spend at least 80 hours per month on qualifying activities
(including employment, job-skills training, education,
community service, and participation in Substance Use
Disorder (SUD) treatment) or lose Medicaid coverage; second,
elimination - except for pregnant women and former
foster-care youth - of the three-month period of retroactive
eligibility for benefits; third, monthly premiums based on
income and/or length of time enrolled in Medicaid; fourth,
elimination - except for former foster-care youth, pregnant
women, or the medically frail - of the Commonwealth's
obligation to assure non-emergency medical transportation to
and from providers; fifth, reporting requirements; and sixth,
lockouts allowing the Commonwealth to deny coverage for up to
six months to any beneficiary who failed to meet her premium
or reporting requirements and has an income above 100% of the
federal poverty line. Id. at 246-47. The Kentucky
HEALTH program also includes features similar to
health-insurance plans on the commercial market, including
“an incentive and savings account called My
Rewards.” Id. at 247 (citations omitted).
weeks after the Secretary's approval of Kentucky HEALTH,
fifteen Kentuckians headed to Court, filing a nine-count suit
seeking declaratory and injunctive relief on behalf of
themselves and a “statewide proposed class . . . of all
residents of Kentucky who are enrolled in the Kentucky
Medicaid program on or after January 12, 2018.” ECF No.
1 (Complaint), ¶ 33. The Court granted Kentucky's
Motion to Intervene, see Minute Order of March 30,
2018, and the parties subsequently filed competing Motions
for Summary Judgment. See ECF Nos. 33, 50, 51.
Because Kentucky HEALTH was slated to take effect on July 1,
2018, the Court operated on an expedited schedule and issued
its Opinion on June 29, 2018.
found the Secretary's approval, considered as a whole,
arbitrary and capricious because he “never adequately
considered whether Kentucky HEALTH would in fact help the
state furnish medical assistance to its citizens, a central
objective of Medicaid.” Stewart I, 313
F.Supp.3d at 243. Specifically, he not only “failed to
consider adequately the impact of Kentucky HEALTH on Medicaid
coverage, ” but “he entirely failed to consider
Kentucky's estimate that 95, 000 persons would leave its
Medicaid rolls during the 5-year [demonstration]
project.” Id. at 260 (internal quotation marks
and citations omitted). The Court rejected the
Secretary's contention that “he could properly
focus on . . . three alternative criteria” - health and
well-being, cost considerations, and beneficiary
self-sufficiency - in approving the demonstration project.
Id. at 265-66. In light of the Medicaid Act's
“clear emphasis on promoting medical assistance,
” the Court found that “the Secretary could not
reasonably focus on health and well-being instead.”
Id. at 268 (internal quotations omitted). It held
similarly that while cost savings may be one result of the
demonstration project, they “cannot excuse the
Secretary's failure” to consider coverage.
Id. at 271. The Court reasoned similarly regarding
self-sufficiency after expressing “doubts whether such
an objective is proper.” Id. at 271. It
consequently “den[ied] Defendants' Motions for
Summary Judgment, ” “grant[ed] Plaintiffs'
Motion for Summary Judgment . . .[, ] vacate[d] the
Secretary's approval of Kentucky HEALTH, and remand[ed]
to the agency.” Id. at 274.
Action on Remand
the decision in Stewart I, the Secretary returned to
the drawing board and reopened the public-comment period for
Kentucky HEALTH. See AR 25, 499. On November 20,
2018, he reapproved Kentucky HEALTH effective on April 1,
2019, for five years. See AR 6718-19. The program
has essentially the same features as it did before - namely,
a community-engagement requirement; premium payments; a
six-month lockout for failure to complete the redetermination
process or timely report changes to household circumstances;
elimination of retroactive eligibility for most enrollees;
elimination of non-emergency medical transport for most
enrollees; heightened cost-sharing for non-emergency use of
the emergency room; and usage of the My Rewards
account for various benefits. See AR 6756-60; 6762;
6764- 65; 6769; 6770-72; 6773-80. Indeed, the new approval
letter acknowledges as much, naming only four changes: first,
waiving an additional statutory provision of the Act
“in an abundance of caution” to ensure the
program limits retroactive eligibility as contemplated;
second, “[r]evision of the premium requirement for
beneficiaries who are eligible for transitional medical
assistance”; third, “[u]pdated monitoring and
evaluation [provisions]”; and fourth, a
“requirement for Kentucky to submit a demonstration
implementation plan and . . . monitoring protocol.” AR
6723. Defendants have confirmed that those four changes, plus
the “add[ition] [of] certain exemptions for survivors
of domestic violence, ” are the only “substantive
changes to the project.” See ECF No. 130
(Supplemental Filing) at 1-2.
addition to those modest changes in the plan, the Secretary
also altered his rationale for approval. In the November 20
approval letter, he acknowledged that he “may approve a
demonstration project under section 1115 . . . if, in his
judgment, the project is likely to assist in promoting the
objectives of [the Act].” AR 6719. He explained that,
while the Act “makes clear that an important objective
of the Medicaid program is to furnish medical assistance and
other services to vulnerable populations, ”
“there is little intrinsic value in paying for services
if those services are not advancing the health and wellness
of the individual receiving them, or otherwise helping the
individual attain independence.” Id. The
Secretary concluded that his “demonstration authority .
. . allow[ed]” him to approve states' experimenting
“with different ways of improving health outcomes and
strengthening the financial independence of beneficiaries,
” while “at the same time, allow[ing] states to
maintain the long-term fiscal sustainability of their
Medicaid programs and to provide more medical services to
more Medicaid beneficiaries.” AR 6720. He elaborated on
the ways in which Kentucky HEALTH would promote beneficiary
health and financial independence and improve the
sustainability of the safety net. See AR 6723-28.
Regarding the “signal omission” the Court
identified as the Secretary's failure to
“adequately consider whether Kentucky HEALTH would in
fact help the state furnish medical assistance to its
citizens, ” Stewart I, 313 F.Supp.3d at 243,
he reasoned this time around that commenters did not
understand the nature of the coverage loss, that the program
has exemptions and guardrails in place to minimize coverage
loss, that Kentucky is not required to cover the expansion
population in any event, and that the 95, 000 individuals who
may lose coverage are “likely dwarfed by the 454, 000
newly eligible adults who stand to lose coverage” if
the state makes good on its threat to terminate its
participation in the ACA expansion in the absence of the
demonstration project. See AR 6730-32.
question here, of course, is whether this second effort gets
the Secretary over the line. Plaintiffs, not surprisingly,
think not. They have returned to this Court seeking review of
the Secretary's reapproval of Kentucky HEALTH.
See ECF No. 91 (Plaintiffs' MSJ) at 1.
Contending that “the Secretary has failed to remedy the
shortcomings identified” in Stewart I,
Plaintiffs seek summary judgment on their APA claims and
vacatur of the Kentucky HEALTH waiver (and, separately, the
SMD Letter). Id. at 1-2. Defendants - federal and
state - have cross-moved for summary judgment, maintaining
that the reapproval was lawful. See ECF Nos. 108
(HHS MSJ) at 1-5; 110 (Kentucky MSJ) at 1-2. The Court heard
oral argument on March 14, 2019, and because Kentucky HEALTH
will take effect on April 1, has issued this Opinion on an
parties have cross-moved for summary judgment on the
administrative record. The summary-judgment standard set
forth in Federal Rule of Civil Procedure 56(c), therefore,
“does not apply because of the limited role of a court
in reviewing the administrative record.” Sierra
Club v. Mainella, 459 F.Supp.2d 76, 89 (D.D.C. 2006);
see also Bloch v. Powell, 227 F.Supp.2d 25, 30
(D.D.C. 2002), aff'd, 348 F.3d 1060 (D.C. Cir.
2003). “[T]he function of the district court is to
determine whether or not as a matter of law the evidence in
the administrative record permitted the agency to make the
decision it did.” Sierra Club, 459 F.Supp.2d
at 90 (quotation marks and citation omitted). “Summary
judgment is the proper mechanism for deciding, as a matter of
law, whether an agency action is supported by the
administrative record and consistent with the [Administrative
Procedure Act] standard of review.” Loma Linda
Univ. Med. Ctr. v. Sebelius, 684 F.Supp.2d 42, 52
(D.D.C. 2010) (citation omitted).
Administrative Procedure Act “sets forth the full
extent of judicial authority to review executive agency
action for procedural correctness.” FCC v. Fox
Television Stations, Inc., 556 U.S. 502, 513 (2009). It
requires courts to “hold unlawful and set aside agency
action, findings, and conclusions” that are
“arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.” 5 U.S.C. §
706(2). Agency action is arbitrary and capricious if, for
example, the agency “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.” Motor Vehicle Mfrs. Ass'n of U.S.,
Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43
other words, an agency is required to “examine the
relevant data and articulate a satisfactory explanation for
its action including a rational connection between the facts
found and the choice made.” Id. at 43 (quoting
Burlington Truck Lines v. United States, 371 U.S.
156, 168 (1962)) (internal quotation marks omitted). Courts,
accordingly, “do not defer to the agency's
conclusory or unsupported suppositions, ” United
Techs. Corp. v. Dep't of Def., 601 F.3d 557, 562
(D.C. Cir. 2010) (quoting McDonnell Douglas Corp. v.
Dep't of the Air Force, 375 F.3d 1182, 1187 (D.C.
Cir. 2004)), and “agency ‘litigating
positions' are not entitled to deference when they are
merely [agency] counsel's ‘post hoc
rationalizations' for agency action, advanced for the
first time in the reviewing court.” Martin v.
Occupational Safety & Health Review Comm'n, 499
U.S. 144, 156 (1991) (citation omitted). Although a reviewing
court “may not supply a reasoned basis for the
agency's action that the agency itself has not given,
” a decision that is not fully explained may,
nevertheless, be upheld “if the agency's path may
reasonably be discerned.” Bowman Transp., Inc. v.
Arkansas-Best Freight System, Inc., 419 U.S. 281, 285-86
(1974) (citation omitted).
challenge, fortunately, does not require the Court to start
from square one; indeed, this round of litigation resembles
in many respects the one concluded in Stewart I.
Plaintiffs again essentially contend that the Secretary has
sought to “rewrite the Medicaid Act in a way that is
contrary to the program's purpose.” Pl. MSJ at 1.
They elaborate that he has violated the APA because he
“failed to remedy the shortcomings identified” in
Stewart I in again “ignor[ing]” record
evidence that “Kentucky HEALTH's requirements and
benefits cuts are antithetical to Medicaid's core
purpose”: “furnishing medical assistance to those
who are unable to afford the costs of medically necessary
care and services.” Id.
advance those arguments in challenging both the reapproval as
a whole, see ECF No. 88 (Amended Complaint) at 83
(Count VIII under APA), and the individual components of the
program. Id. at 77-83 (Counts II through VII).
Because, as the Court explained previously, the Secretary
must determine under § 1115 “whether a
project would promote the Act's objectives, not
whether each component, viewed in isolation, would, ”
it will again limit its analysis to Count VIII. See
Stewart I, 313 F.Supp.3d at 257 (internal quotation
marks and citation omitted). As they did last time,
Plaintiffs also assert several additional causes of action,
including that the Secretary acted in excess of statutory
authority, that the SMD Letter ought to be vacated as an
improperly promulgated substantive rule, and that Defendants
violated the Take Care Clause. See Pl. MSJ at 34,
43; ECF No. 88 (Amended Complaint) at 83. These claims will
again remain in limbo, as the Court sidesteps resolving them.
moving to the substance of the dispute, the Court will
address two jurisdictional objections - one concerning
standing and one on justiciability.
addressed these issues in depth previously, see Stewart
I, 313 F.Supp.3d at 250- 57, no more than a limited
treatment is required here.
Court takes standing first. Article III restricts the
jurisdiction of federal courts to actual “Cases”
and “Controversies.” U.S. Const., art. III,
§ 2. Not every dispute clears that hurdle. Specifically,
a plaintiff must demonstrate that she suffers: 1) an
injury-in-fact that is 2) caused by the conduct complained of
and is 3) “likely” to be “redressed by a
favorable decision.” Lujan v. Defs. of
Wildlife, 504 U.S. 555, 560-61 (1992). Defendants here
offer no more than a brief objection. They assert, in a
handful of paragraphs, that Plaintiffs lack standing to level
specific challenges at particular components of the Kentucky
HEALTH program, including the waiver of retroactive
eligibility, the lockouts, the waiver of non-emergency
medical transportation, and deductions from the
MyRewards account. See HHS MSJ at 35, 37,
38, 39. Specifically, they argue that Plaintiffs'
injuries-in-fact are too speculative to establish standing as
to those particular components of Kentucky HEALTH.
the Court will examine whether the reapproval as a
whole - rather than its individual components - violates
the APA, it will again consider only whether Plaintiffs have
standing to bring that global challenge. See Davis v.
Fed. Election Comm'n, 554 U.S. 724, 734 (2008)
(“‘[A] plaintiff must demonstrate standing for
each claim he seeks to press' and ‘for each form of
relief' that is sought.”) (quoting Daimler
Chrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006)).
Defendants do not dispute that they do. Although they do cite
a case for the proposition that standing “is not
dispensed in gross, ” HHS MSJ at 35 (citing
Davis, 554 U.S. at 734), it is inapposite here. That
case held only that a plaintiff's standing to challenge
one statutory provision does not necessarily establish her
standing to challenge another.
course, Defendants' lack of objections to standing does
not end the inquiry, since the Court has an independent
obligation to assure itself of its own jurisdiction. See
Floyd v. District of Columbia, 129 F.3d 152, 155 (D.C.
Cir. 1997). It has no trouble here concluding, as it did
previously, that Plaintiffs have established standing to
challenge the reapproval of Kentucky HEALTH as a whole.
See Stewart I, 313 F.Supp.3d at 250-57.
Specifically, it found there that they had established an
economic injury stemming from the rise in their premium
payments the program would entail. Id. at 251-52.
While granting the Government's contention that some of
the named Plaintiffs may be exempt from the premium
requirement, the Court found that at least some of them would
indisputably be required to pay. Id. That is all
that is necessary. See Animal Legal Def. Fund, Inc. v.
Glickman, 154 F.3d 426, 429 (D.C. Cir. 1998) (holding
that in suit brought by multiple plaintiffs, only single
plaintiff must possess standing for case to ...