363 F.Supp.3d 165
D.D.C.2019Background
- Arkansas amended its Medicaid expansion program (Arkansas Works Amendments, AWA) in 2018 to add monthly work/community-engagement reporting (80 hours) and shorten retroactive coverage from three months to one; reporting was required online and noncompliance for three months in a plan year triggers disenrollment.
- Plaintiffs are Arkansas Medicaid beneficiaries (including medically vulnerable and homeless individuals) who allege the work/reporting requirements and loss of coverage harmed or imminently will harm them.
- HHS Secretary approved AWA under Section 1115 demonstration authority; CMS received extensive public comments predicting significant coverage losses and other harms.
- This Court previously vacated a materially similar Kentucky §1115 approval in Stewart v. Azar, 313 F. Supp. 3d 237 (D.D.C. 2018), because the agency failed to consider whether the project would help furnish medical assistance (a core Medicaid objective); HHS reapproved Kentucky on remand and the agency attempted to rely on that record here.
- The district court found HHS’s Arkansas approval arbitrary and capricious for the same reason: the Secretary did not meaningfully address whether AWA would promote or impair Medicaid’s core objective of furnishing medical coverage to the needy, despite record comments projecting coverage loss.
- The court vacated the Secretary’s approval and remanded to HHS, concluding vacatur was appropriate because the legal deficiency was serious and the disruptive consequences of vacatur did not outweigh the ongoing harms to beneficiaries.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HHS’s approval of AWA was arbitrary and capricious for failing to consider whether the project would promote Medicaid’s objective of furnishing medical assistance | Secretary ignored the central Medicaid objective and failed to analyze or rebut record evidence predicting substantial coverage loss | HHS relied on other stated objectives (improving health, incentivizing engagement) and argued it need not quantify coverage effects; later pointed to Kentucky remand justification | Court: Approval arbitrary and capricious—agency failed to consider coverage impacts and offered only conclusory responses to comments |
| Whether other Medicaid objectives (health outcomes, independence, sustainability) could cure the deficiency | Plaintiffs: Other objectives do not excuse failure to analyze core objective of coverage provision | Defendants: Project advances other legitimate objectives; Kentucky reapproval supplies adequate justification | Court: Consideration of other objectives does not cure failure to address coverage impact; agency must analyze core objective |
| Whether the Secretary may rely on the record/reasons developed in the Kentucky reapproval to justify Arkansas approval | Plaintiffs: Arkansas decision must stand or fall on the Arkansas record; post hoc reliance on Kentucky is improper | HHS: Kentucky remand produced reasoning that justifies similar approvals and mitigates need for vacatur here | Court: Rejection—agency cannot supply post hoc rationales from a separate decision; Kentucky record differs materially and that reapproval was insufficient on its own terms |
| Proper remedy when agency action is unlawful: vacatur vs. remand without vacatur | Plaintiffs: Vacatur needed because deficiency is major and beneficiaries suffer ongoing harms (16,000+ lost coverage) | Defendants: Vacatur would be disruptive to data collection and outreach because AWA is already in effect | Court: Vacatur and remand—deficiency serious and disruptive effects do not outweigh harms to beneficiaries; limited administrative disruption and few disenrollments yet made vacatur appropriate |
Key Cases Cited
- National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012) (discusses Medicaid expansion and limits on conditioning existing Medicaid funds)
- Motor Vehicle Manufacturers Association v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (1983) (arbitrary-and-capricious standard requires consideration of important aspects of the problem)
- Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (agency interpretation entitled to deference if statute ambiguous and interpretation reasonable)
- Stewart v. Azar, 313 F. Supp. 3d 237 (D.D.C. 2018) (vacated CMS approval of Kentucky §1115 work requirements for failing to consider whether project would furnish medical assistance)
- SEC v. Chenery Corp., 332 U.S. 194 (1947) (agency action must be judged on the grounds the agency invoked; courts may not accept post hoc rationalizations)
- Allina Health Services v. Sebelius, 746 F.3d 1102 (D.C. Cir. 2014) (vacatur is presumptive remedy for unlawful agency action, but courts may consider disruption and seriousness of defects)