MEMORANDUM OPINION
JAMES
E. BOASBERG, UNITED STATES DISTRICT JUDGE
Adrian
McGonigal is 40 years old and lives with his brother in Pea
Ridge, Arkansas. He used to have a job working in the
shipping department of Southwest Poultry, a food-service
company located nearby, although he received no medical
insurance through his employer. Like many Americans, he has
several serious medical conditions. Beginning in 2014,
McGonigal was able to receive medical care - including
regular doctor visits and numerous prescription drugs -
through the state's expanded Medicaid program. In
mid-2018, however, McGonigal learned that he would be subject
to new work requirements, which he would have to report
online, as a condition of receiving health benefits. These
were imposed by the Arkansas Works Amendments (AWA), approved
by the U.S. Secretary of Health and Human Services in March
2018. Despite his lack of access to, and difficulty working
with, computers, he was able to report his employment in June
2018, but he did not know he needed to continue to do so each
month. As a result, when he went to pick up his prescriptions
in October, the pharmacist told him that he was no longer
covered, and his medicines would cost him $800. In the
absence of Medicaid, he could not afford the cost of the
prescriptions and so did not pick them up. His health
conditions then flared up, causing him to miss several days
of work, and Southwest Poultry fired him for his absences. He
thus lost his Medicaid coverage and his job.
Anna
Book is 38 years old and lives in Little Rock. She currently
rents a room in an apartment but was homeless for most of the
last eight years. In July 2018, she got a job as a dishwasher
in a restaurant, for which she works about 24 hours each
week. Before that, she was unemployed for two years. She
nevertheless also had health care provided through
Arkansas's Medicaid program, which a local pastor helped
her sign up for in 2014. Book learned last August that,
pursuant to AWA, she would have to report 80 hours each month
of employment or other activities to keep that coverage.
While she reported her compliance in August and September
with the pastor's help - she does not have reliable
internet access - Book has several health conditions and
worries that she will not maintain sufficient hours at her
job to keep her coverage.
Russell
Cook is 26 and also lives in Little Rock. He is currently
homeless. While he has spent time working as a landscaper, he
is not presently employed and has minimal job prospects. The
state's Medicaid program has previously given him access
to health care for various health conditions, including a
torn Achilles tendon and serious dental problems. Cook,
however, does not believe he will be able to comply with the
new AWA work requirements, which began applying to him in
January 2019. Lacking access to the internet or a phone, he
also worries that he will be unable to report compliance with
those requirements. He thus expects to lose his Medicaid
coverage.
These
are three of the ten Arkansans who come to this Court seeking
to undo the work requirements the state added in 2018 to its
Medicaid program. They sued the Secretary of Health and Human
Services in August 2018, arguing that the federal
government's approval of the state's new requirements
violated the Administrative Procedure Act and the
Constitution.
Plaintiffs'
suit does not offer an issue of first impression. Indeed,
this Court just last summer considered a challenge to the
Secretary's approval of very similar changes to
Kentucky's Medicaid program - including work or
“community engagement” requirements - in
Stewart v. Azar, 313 F.Supp.3d 237 (D.D.C. 2018)
(Stewart I). There, it vacated the agency's
decision because it had not adequately considered whether the
program “would in fact help the state furnish medical
assistance to its citizens, a central objective of
Medicaid.” Id. at 243. Plaintiffs point to the
identical deficiency in the record in this case. Despite the
protestations in its (and intervenor Arkansas's)
briefing, HHS conceded at oral argument that the
administrative decision in this case shares the same problem
as the one in Stewart I. See Oral Argument
Transcript at 6-7. The Court's job is thus easy in one
respect: the Secretary's approval cannot stand.
Yet a
separate question remains: what is the proper remedy? In
Stewart I, the Court vacated the approval and
remanded to the Secretary. Here, however, the Government
argues that vacatur is improper both because, unlike
Kentucky, AWA is already active and halting it would be quite
disruptive, and because any error is easily fixed, just as it
has been for Kentucky. The challengers disagree, positing
that the deficiency in the approval is substantial and that
any resulting disruption is outweighed by the ongoing harms
suffered by the more than 16, 000 Arkansans who have lost
their Medicaid coverage. Given the seriousness of the
deficiencies - which, as this Court explains in a separate
Opinion issued today, the remand in Kentucky did not
cure - and the absence of lasting harms to the Government
relative to the significant ones suffered by Arkansans like
Plaintiffs, the Court will vacate the Secretary's
approval and remand for further proceedings.
I.
Background
As it
did in Stewart I, the Court begins with an overview
of the relevant history and provisions of the Medicaid Act.
See 313 F.Supp 3d. at 243-44. It then turns to
Arkansas's challenged plan before concluding with the
procedural history of this case.
A.
Legal Background
1.
The Medicaid Act
Since
1965, the federal government and the states have worked
together to provide medical assistance to certain vulnerable
populations under Title XIX of the Social Security Act,
commonly known as Medicaid. See 42 U.S.C. §
1396-1. The Centers for Medicare and Medicaid Services (CMS),
a federal agency within the Department of Health and Human
Services, has primary responsibility for overseeing Medicaid
programs. Under the cooperative federal-state arrangement,
participating states submit their “plans for medical
assistance” to the Secretary of HHS. Id To
receive federal funding, those plans - along with any
material changes to them - must be “approved by the
Secretary.” Id; see also 42 C.F.R.
§ 430.12(c). Currently, all states have chosen to
participate in the program.
To be
approved, state plans must comply with certain minimum
parameters set out in the Medicaid Act. See 42
U.S.C. § 1396a (listing 83 separate requirements). One
such provision requires state plans to “mak[e] medical
assistance available” to certain low-income
individuals. Id. § 1396a(a)(10)(A). Until
recently, that group included pregnant women, children, and
their families; some foster children; the elderly; and people
with certain disabilities. Id In 2010, however,
Congress enacted the Patient Protection and Affordable Care
Act (ACA), colloquially known as Obamacare, “to
increase the number of Americans covered by health
insurance.” Nat'l Fed. of Indep. Business v.
Sebelius, 567 U.S. 519, 538 (2012). Under that statute,
states can expand their Medicaid coverage to include
additional low-income adults under 65 who would not otherwise
qualify. See 42 U.S.C. §
1396a(a)(10)(A)(i)(VIII).
Generally,
a state must cover all qualified individuals or forfeit its
federal Medicaid funding. Id. §
1396a(a)(10)(B). That was originally so for the ACA expansion
population as well. See 42 U.S.C. § 1396c. In
NFIB, however, the Supreme Court held that Congress
could not, consistent with the Spending Clause of the
Constitution, condition previously appropriated Medicaid
funds on the state's agreeing to the expansion.
See 567 U.S. at 584-85. The result was that states
could choose not to cover the new population and
lose no more than the funds that would have been appropriated
for that group. Id. at 587. If, however, the state
decided to provide coverage, those individuals would become
part of its mandatory population. Id. at 585- 87
(explaining that Congress may “offer[] funds under the
Affordable Care Act to expand the availability of health
care, and requir[e] that States accepting such funds comply
with the conditions on their use”). In that instance,
the state must afford the expansion group “full
benefits” - i.e., it must provide
“medical assistance for all services covered under the
State plan” that are substantially equivalent “in
amount, duration, or scope . . . to the medical assistance
available for [other] individual[s]” covered under the
Act. See 42 U.S.C. § 1396d(y)(2)(B); 42 C.F.R.
§ 433.204(a)(2).
The
Medicaid Act, in addition to defining who is
entitled to coverage, also ensures what coverage
those enrolled individuals receive. Under § 1396a,
states must cover certain basic medical services,
see 42 U.S.C. §§ 1396a(a)(10)(A),
1396d(a), and the statute limits the amount and type of
premiums, deductions, or other cost-sharing charges that a
state can impose on such care. Id. §
1396a(a)(14); see also id. § 1396o.
Other provisions require states to provide three months of
retroactive coverage once a beneficiary enrolls, see
id. § 1396a(a)(34), and to ensure that recipients
receive all “necessary transportation . . . to and from
providers.” 42 C.F.R. § 431.53. Finally, states
must “provide such safeguards as may be necessary to
assure” that eligibility and services “will be
provided, in a manner consistent with simplicity of
administration and the best interests of the
recipients.” 42 U.S.C. § 1396a(a)(19).
2.
Section 1115 of Social Security Act
Both
before and after the passage of the ACA, a state is not
entirely locked in; instead, if it wishes to deviate from the
Medicaid Act's requirements, it can seek a waiver from
the Secretary of HHS. See 42 U.S.C. § 1315. In
enacting the Social Security Act (and, later, the Medicaid
program within the same title), Congress recognized that
statutory requirements “often stand in the way of
experimental projects designed to test out new ideas and ways
of dealing with the problems of public welfare
recipients.” S. Rep. No. 1589, 87th Cong., 2d Sess. 19,
reprinted in 1962 U.S.C.C.A.N. 1943, 1961-62. To
that end, § 1115 of the Social Security Act allows the
Secretary to approve “experimental, pilot, or
demonstration project[s]” in state medical plans that
would otherwise fall outside Medicaid's parameters. The
Secretary can approve only those projects that “in
[his] judgment . . . [are] likely to assist in promoting the
[Act's] objectives.” 42 U.S.C. § 1315(a). As
conceived, demonstration projects were “expected to be
selectively approved by the Department and to be those which
are designed to improve the techniques of administering
assistance.” Supra S. Rep. No. 1589 at 1962.
Once the Secretary has greenlighted such a project, he can
then waive compliance with the requirements of § 1396a
“to the extent and for the period . . . necessary to
enable [the] State . . . to carry out such project.”
Id. § 1315(a)(1).
While
the ultimate decision whether to grant § 1115 approval
rests with the Secretary, his discretion is not boundless.
Before HHS can act on a waiver application, the state
“must provide at least a 30-day public
notice[-]and[-]comment period” regarding the proposed
program and hold at least two hearings at least 20 days
before submitting the application. See 42 C.F.R.
§§ 431.408(a)(1), (3). Once a state completes those
prerequisites, it then sends an application to CMS.
Id § 431.412 (listing application
requirements). After the agency notifies the state that it
has received the waiver application, a federal 30-day
public-notice period commences, and the agency must wait at
least 45 days before rendering a final decision. Id
§§ 431.416(b), (e)(1).
B*
Factual Background
1.
Arkansas Works Amendments
Arkansas's
Medicaid program dates back to 1970. For most of the
program's history, the state maintained among the most
stringent eligibility thresholds in the nation for adults,
covering only the aged, disabled, and parents with very low
incomes. See ECF 53-6, Exh. 54 (Ark. Health Care
Independence Program Interim Report) at 16. That changed with
the passage of the AC A. While states had a choice after
NFIB not to expand Medicaid, Arkansas was one of
those that opted to do so. Under its expansion program, which
began January 1, 2014, Medicaid-eligible persons were given
the opportunity to enroll in private insurance plans financed
by the state. See AR 71. In its first two years, the
program provided health coverage to more than 278, 000 newly
eligible individuals, helping to lower the uninsured rate
from 19% to 11%. See AR 1274. The program became
known as Arkansas Works in January 2017.
That
month featured another significant change in the political
landscape, as the Trump administration took over from
President Obama. In March 2017, then-Secretary Thomas Price
and CMS Director Seema Verma sent a letter to all 50
governors announcing the administration's view that the
ACA's expansion of Medicaid was “a clear departure
from the core, historical mission of the program.”
See AR 85. They thus alerted states of the
agency's “intent to use existing Section 1115
demonstration authority” to help revamp Medicaid.
See AR 86. Together they promised to find “a
solution that best uses taxpayer dollars to serve”
those individuals they deemed “truly vulnerable.”
Id. Heeding HHS's call, Governor Asa Hutchinson
proposed three substantial amendments to Arkansas Works under
Section 1115. See AR 2057. First, he proposed to
shift income eligibility for the expansion population from
133% to 100% of the Federal Poverty Line. Id.
Second, he proposed to “institute work requirements as
a condition” of continued Medicaid coverage.
Id. Third, he proposed to eliminate retroactive
health coverage. Id. The state did not estimate the
effects these amendments would have on Medicaid coverage. CMS
held a public-comment period from July 11 to August 10, 2017,
and numerous organizations offered their views and analysis
of the changes.
On
March 5, 2018, the Secretary approved the work requirements
and limits to retroactive coverage, concluding that they were
“likely to assist in improving health outcomes”
and “incentivize beneficiaries to engage in their own
health care.” AR 2-4. Under the new work requirements,
most able-bodied adults in the Medicaid expansion population
ages 19 to 49 must complete each month 80 hours of employment
or other qualifying activities - or earn income equivalent to
80 hours of work. Id. Compliance was required to be
reported monthly through an online portal. See AR
29. Various groups of persons are exempt, including the
medically frail, pregnant women, full-time students, and
persons in drug- or alcohol-treatment programs. See
AR 28. Nonexempt individuals who do not report sufficient
qualifying hours for any three months in a plan year are
disenrolled from Medicaid for the remainder of that year and
not permitted to re-enroll until the following plan year.
See AR 14, 30-31. The work requirements took effect
for persons age 30 to 49 on June 1, 2018, and for persons age
20 to 29 on January 1, 2019. See ECF No. 26-3
(Arkansas Works Eligibility and Enrollment Monitoring Plan)
at 7-8. As to retroactive coverage, the Secretary approved a
reduction from the three months required by the Act to one
month; the more drastic proposal of eliminating such coverage
entirely was abandoned, as was the Governor's request to
reduce eligibility down to 100% of the FPL. See AR
12, 22.
According
to Arkansas's Department of Human Services, only a small
percentage of the persons required to report compliance with
the work requirements actually did so during the first six
months of the program. In October, for example, only 12.3%
(1687 out of 13653) of persons not exempt from the
requirements reported any kind of qualifying activity.
See ECF No. 42-1 (Arkansas Works Reports
June-November 2018) at 47, 52. Since the program began, more
than 16, 900 individuals have lost Medicaid coverage for some
period of time for not reporting their compliance.
Id at 18, 27, 36, 45. It is not known what
percentage of these individuals completed the work
requirements but did not report versus those who did not
engage in the work itself.
2.
Kentucky HEALTH
Arkansas
was not the only state interested in the new
administration's proposal to rethink the Medicaid
Expansion. The Commonwealth of Kentucky proposed a
demonstration project - called Kentucky HEALTH - with similar
community-engagement requirements and cutbacks to retroactive
coverage. (It also contained other elements not relevant
here.) Kentucky, unlike Arkansas, did estimate the coverage
effects of its project, explaining that thousands of persons
would lose their Medicaid benefits over the course of the
project; indeed, their estimate corresponded to about 95, 000
persons losing Medicaid for one full year. As it did in
Arkansas, the Secretary approved that project on the ground
...