Charles Gresham v. Alex Azar, II, 950 F.3d 93

Arkansas administered Medicaid expansion through the "Arkansas Works" §1315 demonstration and in 2017 sought amendments adding strict "community engagement" (work) requirements, eliminating retroactive coverage, lowering eligibility to 100% FPL, and ending employer premium assistance.
CMS approved most amendments in March 2018 but kept the income threshold at 133% FPL, limited retroactive coverage to 30 days (instead of eliminating it), and labeled the work requirement as "community engagement."
Commenters and state data warned the amendments would produce substantial coverage losses; the record later showed over 18,000 enrollees lost coverage within five months among those subject to the work rule.
Plaintiffs (Arkansas residents) sued, and the district court vacated CMS’s approval as arbitrary and capricious because CMS failed to analyze whether the demonstration would promote Medicaid’s primary objective—providing medical coverage.
Kentucky’s similar appeal was dismissed as moot after Kentucky terminated its demonstration; the D.C. Circuit therefore reviewed only Arkansas’s approval and affirmed the district court’s vacatur.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether CMS’s §1315 approval was arbitrary and capricious for failing to analyze effects on Medicaid coverage	Gresham: CMS ignored Medicaid’s primary objective (furnishing medical assistance) and failed to evaluate likely coverage losses	Secretary: CMS permissibly relied on alternative objectives (improving health outcomes, beneficiary engagement) and exercised discretion	Held: Vacated — CMS acted arbitrarily and capriciously by not addressing coverage impact tied to Medicaid’s primary objective
Whether the Secretary’s stated objectives (health outcomes, independence) are valid statutory objectives under Medicaid	Gresham: Primary statutory objective is providing health coverage, not conditioning eligibility on work or financial independence	Secretary: Approving demonstrations to test health-improvement and engagement goals falls within §1315 discretion	Held: Rejected — alternative objectives lack textual support; the statute’s focus is coverage, so CMS may not prioritize non‑statutory goals to the exclusion of coverage analysis
Whether §1315 approvals are unreviewable agency discretion	Gresham: Agency decisions are reviewable under the APA; courts can apply §1315’s "likely to assist in promoting the objectives" standard	Secretary: Claims substantial discretion but does not assert absolute unreviewability	Held: Reviewable — the APA permits review; §1315 provides a law to apply (not committed to agency discretion)

Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012) (background on Medicaid expansion under the ACA)
Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (arbitrary-and-capricious review requires agencies to consider important aspects of a problem)
Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984) (agencies must give effect to clear Congressional intent)
Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402 (1971) (judicial review of administrative action is available except in rare cases committed to agency discretion)
Department of Commerce v. New York, 139 S. Ct. 2551 (2019) (confirming narrow scope of APA’s "committed to agency discretion" exception)
Ark. Dep’t of Health & Human Servs. v. Ahlborn, 547 U.S. 268 (2006) (describing Medicaid as joint federal–state funding for medical care)
MCI Telecommunications Corp. v. American Tel. & Tel. Co., 512 U.S. 218 (1994) (courts must follow the means Congress chose to pursue statutory objectives)
Fresno Mobile Radio, Inc. v. FCC, 165 F.3d 965 (D.C. Cir. 1999) (when a statute lists multiple objectives agencies may prioritize some statutory goals over others)