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Philbrick v. Azar

United States District Court, District of Columbia

July 29, 2019

SAMUEL PHILBRICK, et al., Plaintiffs,
v.
ALEX M. AZAR II, et al., Defendants.

          MEMORANDUM OPINION

          James E. Boasberg, United States District Judge.

         In November 2018, the Secretary of Health and Human Services approved the State of New Hampshire's proposal to impose work requirements on a significant share of its Medicaid recipients. Under the proposal, most non-disabled Medicaid beneficiaries ages 19 to 64 would be required to demonstrate that they have completed 100 hours of qualifying employment or other “community-engagement” activities each month (or show that they satisfy an exemption) or risk losing their health-care coverage. Four New Hampshire residents have challenged the Secretary's approval in this Court, arguing that it violates the Administrative Procedure Act and the Constitution.

         The issues presented in this case are all too familiar. In the past year or so, this Court has resolved challenges to similar programs in Kentucky and Arkansas, each time finding the Secretary's approval deficient. See Stewart v. Azar, 366 F.Supp.3d 125, 131 (D.D.C. 2019) (Stewart II); Gresham v. Azar, 363 F.Supp.3d 165, 169 (D.D.C. 2019); Stewart v. Azar, 313 F.Supp.3d 237, 243 (D.D.C. 2018) (Stewart I). The overriding shortcoming in the agency's decisions in those cases was its failure to adequately consider the requirements' effects on Medicaid coverage. Despite conceding that providing medical care to the needy is “Medicaid's core objective, ” Gresham, 363 F.Supp.3d at 176 (citation omitted), HHS did not “offer its own estimates of coverage loss or grapple with comments in the administrative record projecting that the proposal would lead a substantial number of residents to be disenrolled from Medicaid.” Id. at 175 (cleaned up).

         Plaintiffs argue that the Secretary's approval of New Hampshire's plan suffers from the same deficiency and thus must meet the same fate. The Court concurs. On their face, these work requirements are more exacting than Kentucky's and Arkansas's, mandating 100 monthly hours - as opposed to 80 - of employment or other qualifying activities. They also encompass a larger age range than in Arkansas, which applied the requirements only to persons 19 to 49. Yet the agency has still not contended with the possibility that the project would cause a substantial number of persons to lose their health-care coverage. That omission is particularly startling in light of information before the Secretary about the initial effects of Arkansas's markedly similar project - namely, that more than 80% of persons subject to the requirements had reported no compliance information for the initial months, and nearly 16, 900 people had lost coverage. The agency's rejoinders - that the requirements advance other asserted purposes of Medicaid, such as the health and financial independence of beneficiaries and the fiscal sustainability of the safety net - are identical to those this Court rejected with respect to HHS's 2018 approval of Kentucky's program. Perhaps seeing the writing on the wall, the Government conceded at oral argument that its reasoning was deficient in these respects under the analysis in the Court's prior Opinions.

         In short, we have all seen this movie before. The Secretary has significant discretion to approve demonstration projects that promote the objectives of the Medicaid Act, and it is not for the Court to second guess his policy decisions or substitute its judgment for his. “But courts retain a role, and an important one, in ensuring that agencies have engaged in reasoned decisionmaking.” Judulang v. Holder, 565 U.S. 42, 53 (2011). At the heart of this review is an assessment of “whether the decision was based on a consideration of the relevant factors.” Id. (citation omitted). For the fourth time, HHS has fallen short of this fundamental administrative-law requirement. The Court will, accordingly, grant summary judgment to Plaintiffs and vacate the Secretary's approval of New Hampshire's community-engagement requirements.

         I. Background

         The Court begins with a now-familiar overview of the relevant history and provisions of the Medicaid Act. It then turns to New Hampshire's challenged plan before concluding with the procedural history of this case.

         A. 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 86 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'n of Indep. Business v. Sebelius, 567 U.S. 519, 538 (2012). Of relevance here, that statute required participating states to expand Medicaid coverage to additional low-income adults under 65 who did not previously 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); id. § 1396c. That was originally so for the ACA expansion population as well. Id. § 1396c. In NFIB, however, the Supreme Court held that Congress could not, consistent with the Spending Clause of the Constitution, condition a state's entire Medicaid funds on its agreeing to the expansion. See 567 U.S. at 584-85. As a result, 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 the state, conversely, does decide 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 require[] 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 up to three months of retroactive coverage once a beneficiary enrolls, 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).

         Both before and after the passage of the ACA, a state accepting federal Medicaid funds is not entirely locked in; instead, if it wishes to deviate from certain of the Act's requirements, it can seek a waiver from the Secretary of HHS. See 42 U.S.C. § 1315. In particular, Section 1115 of the Social Security Act allows the Secretary to approve “experimental, pilot, or demonstration project[s] which, in [his] judgment . . ., [are] likely to assist in promoting the [Act's] objectives.” 42 U.S.C. § 1315(a). As conceived, experimental projects were “expected to be selectively approved by the Department and to be those which are designed to improve the techniques of administering assistance.” S. Rep. No. 1589, 87th Cong., 2d Sess. 19, reprinted in 1962 U.S.C.C.A.N. 1943, 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. New Hampshire Granite Advantage

         In 2014, New Hampshire, like many states, expanded Medicaid under the AC A to previously uninsured adults whose income is 133 percent of the federal poverty line or less. See AR 17; AR 1949. More than 53, 000 individuals have received coverage as a result, helping to reduce the State's uninsured rate by 45 percent. Id. at 4384. Since 2015, the State has covered this population through Section 1115 demonstration projects that deviate from traditional Medicaid delivery mechanisms - first adopting a premium-assistance model and later shifting to a managed-care system. Id. at 4379. While New Hampshire has had an interest in work requirements dating back to 2016, id at 99, it proposed to amend its demonstration to add the work and community-engagement requirements under consideration in this suit in 2018. Id. at 4377.

         As proposed, the project - now called Granite Advantage - requires most non-disabled adults aged 19 to 64 to complete 100 hours per month of employment or other community activities. Id. at 4. Certain categories of beneficiaries are exempt, including caregivers for a dependent child, pregnant women, and the medically frail. Id. at 5. If a beneficiary does not demonstrate compliance with the work requirements in a particular month, she will be sent a notice stating that her Medicaid will be terminated the following month if she does not make up the hours or show that she qualifies for an exemption. Id. Once a beneficiary's coverage is suspended, it can be reactivated by completing 100 hours of qualifying activities or obtaining an exemption. Id. at 5, 7. Separately, New Hampshire requested as part of these amendments that HHS allow the State to eliminate all retroactive coverage. Id. at 4377.

         The Secretary approved the amendments on November 30, 2018, explaining that they promoted the purposes of the Medicaid Act because they would improve the “health and wellness” of beneficiaries and enhance the “fiscal sustainability of the Medicaid program.” Id. at 1-2. With respect to commenters' concerns that some beneficiaries would lose coverage, the agency responded that “the demonstration will provide coverage to individuals that the state is not required to cover” - namely, the ACA expansion population. Id. at 10. Indeed, because “the state plans to end its current coverage of the new adult group” in the event the project were not approved, HHS says, Granite Advantage necessarily increases coverage. Id. at 6, 10. The agency further explained that the requirements were “not designed to encourage” coverage loss and are “intended to [be] achievable, ” citing certain exemptions and safeguards that are meant to reduce the likelihood of persons improperly losing their Medicaid. Id. at 10-11.

         While the new requirements could have been implemented under this approval beginning January 1, 2019, id. at 1, they have still not been put into full effect. New Hampshire, after several initial delays, required beneficiaries to submit qualifying hours or proof of an exemption this past June. See ECF No. 1 (Complaint), ¶ 10. Under that timeframe, persons who did not satisfy the reporting obligations would lose their coverage on August 1. Id. As of July 8, 2019, however, approximately 17, 000 non-exempt beneficiaries (out of about 25, 000 total) had not reported any compliance information to the New Hampshire Department of Health and Human Services. See ECF No. 44-2 (Jeffrey A. Meyers Letter, July 8, 2019) at 3. Citing this consideration and emphasizing the difficulty the State has had in communicating with persons subject to the community-engagement requirements, the Department announced that it was further delaying implementation until September 30, 2019. See ECF No. 44 (Notice) at 2. Under the new implementation plan, Medicaid beneficiaries who do not report compliance with the requirements would lose coverage beginning December 1. Around the same time, the New Hampshire Legislature amended the program in several respects, including by expanding the scope of the exemptions. The State explained that it plans to seek reapproval of such amendments from CMS over the next several months. See Oral Argument Transcript (Provisional) at 3, 17.

         2. Other CMS Approvals

         New Hampshire is not the only state that has been interested in work requirements. As noted at the start, CMS has approved similar proposals submitted by Kentucky and Arkansas, each of which has been challenged and struck down in this Court. Kentucky's program - called Kentucky HEALTH - mirrors New Hampshire's in many respects. As relevant here, it requires non-exempt adults aged 19 to 64 who receive coverage through the expansion to complete and report 80 hours per month of qualifying activities, such as employment, education, or job training. See Stewart I, 313 F.Supp.3d at 246. The failure to do so or to report an exemption results in the termination of Medicaid coverage. Id. at 246-47.

         Before the requirements took effect in the Commonwealth, several Medicaid recipients sought judicial review of HHS's approval. Id. at 248. They argued, among other things, that the agency had failed to adequately explain why Kentucky HEALTH promoted the objectives of Medicaid and that the approval of the project exceeded the Secretary's statutory authority. The Court agreed with Plaintiffs in one central and dispositive respect: “[T]he Secretary never adequately considered whether Kentucky HEALTH would in fact help the state furnish medical assistance to its citizens, a central objective of Medicaid.” Id. at 243. It therefore vacated the Secretary's approval and remanded the matter to the agency for further consideration. Id. at 273-74. HHS subsequently reopened the comment period and reapproved Kentucky's project on November 20, 2018. The agency reasoned, along substantially similar lines as it did ten days later when it approved New Hampshire's project, that Kentucky HEALTH advanced the Medicaid Act's objectives because it would 1) promote the health and financial independence of beneficiaries, a justification the Court had found wanting in the first round, 2) increase coverage because it allows Kentucky to cover the expansion population when it would not do so otherwise, and 3) advance the fiscal sustainability of the state's Medicaid program. See Stewart II, 366 F.Supp.3d at 138. Believing these justifications still unsatisfactory, the Bluegrass State plaintiffs returned to this Court, which again concurred. Concluding that the agency's previous rationales fared no better and that its new explanation still failed to grapple with the possibility of coverage loss, the Court vacated the approval. Id. at 138-39.

         Arkansas's project, named the Arkansas Works Amendments, followed a similar, although abbreviated, path. The State proposed to require most able-bodied beneficiaries in the expansion population aged 19 to 49 to complete 80 hours of qualifying employment or other activities. See Gresham, 363 F.Supp.3d at 172. Non-exempt individuals who did not report sufficient qualifying hours for three consecutive months in a calendar year would be disenrolled from Medicaid for the remainder of that year. Id. The Secretary approved the requirements on March 5, 2018, and their roll-out was staged through 2018 and early 2019. Id. During the first six months after implementation, however, “only a small percentage of the persons required to report compliance . . . actually did so” - in October 2018, only 12.3% reported any kind of qualifying activities - and more than 16, 900 persons lost Medicaid coverage for some period of time as a result. Id Several beneficiaries challenged the program under the APA, and, finding the Secretary's explanation deficient for the same reasons as in its first Kentucky decision, the Court vacated his approval. Id at 175. The Court's decisions as to both of those cases are now on appeal before the D.C. Circuit. See Nos. 19-5094, 19-5095, 19-5096, 19-5097. No. oral argument date has yet been set.

         C. Procedural History

         Believing with Shakespeare that what's past is prologue, four New Hampshire residents filed this lawsuit on March 20, 2019. Like the plaintiffs in Arkansas and Kentucky, they assert that the Secretary's approval of the proposed community-engagement requirements violates the APA and the Constitution. Because it was designated as related to Stewart and Gresham, the case was directed to this Court. See ECF Nos. 2-3. The State of New Hampshire has since intervened as a Defendant, and ...


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