Background on the Kentucky HEALTH Program
The program at issue in this case — Kentucky HEALTH — is part of a broader demonstration program, KY HEALTH. Kentucky sought HHS’s approval for this program under section 1115 of the Social Security Act, which permits the Secretary to waive Medicaid requirements to permit states to implement experimental, pilot or demonstration projects that assist in promoting Medicaid’s objectives. In 2017, HHS informed states that it intended to use these authorities to “review and approve meritorious innovations that build on the human dignity that comes with training, employment and independence.”
HHS approved Kentucky’s proposal in January 2018. Key provisions of Kentucky HEALTH include
- Community-engagement requirements: requiring recipients to work or participate in other qualifying activities for at least 80 hours per month or lose their Medicaid coverage
- Limit on retroactive eligibility: permitting Kentucky to refrain from providing retroactive coverage for three months prior to enrollment in the program, with the exception of “pregnant women and former foster care youth”
- Required monthly premiums: allowing premiums to be based on income or length of enrollment in Medicaid
- Limit on nonemergency transportation: exempting Kentucky from providing nonemergency transportation for the Medicaid expansion population, with the exception of medically frail individuals, former foster care youth and pregnant women
- Reporting requirement: requiring individuals to provide information annually for a redetermination of eligibility and to report any information affecting eligibility within 10 days
- Lockouts: allowing Kentucky to deny coverage for six months if a beneficiary were to earn an income above the federal poverty level and “fail[] to meet her premium or reporting requirements”
Kentucky estimated that the program, which is primarily focused on the Medicaid expansion population, could save approximately $2.2 billion total and reduce the Medicaid population by approximately 95,000 individuals over a five-year period.
The Court’s Decision
After disposing of threshold defenses1, Judge Boasberg held that in order to approve Kentucky HEALTH, the Secretary of HHS was required by section 1115 to find that the program was “likely to assist in promoting” Medicaid’s objectives. One of those objectives, the court held, was providing medical assistance to the specified populations. The Secretary’s “fundamental failure,” in the court’s view, was that he had “ignored that objective in evaluating Kentucky HEALTH.” Because there was no indication in the record that the Secretary had considered the program’s impact on the estimated 95,000 beneficiaries who would lose Medicaid coverage once it took effect, the court held that the Secretary had acted arbitrarily and capriciously in determining that Kentucky HEALTH would further Medicaid’s objectives.
Because the court found the Secretary’s decision to approve Kentucky HEALTH to be severable from the remaining portions of KY HEALTH, the court invalidated the Secretary’s approval of Kentucky HEALTH while leaving the rest of KY HEALTH in place.
What’s Next?
The defendants will now have to determine whether to appeal and whether to seek a stay of the court’s decision pending any such appeal. The procedural nature of the court’s ruling means that further litigation may not be the only way for Kentucky to move forward. HHS and Kentucky may seek to resolve the deficiencies the court identified through further administrative action. This litigation may have implications for other states, as HHS has approved other state waivers including community - engagement or work requirements over the last several months, and more remain pending.
A copy of the district court’s opinion is available here.
1 Defendants challenged plaintiffs’ standing and argued that the Secretary’s section 1115 authority is unreviewable.
