363 F. Supp. 3d 165
D.C. Cir.2019Background
- Arkansas amended its Medicaid expansion program (Arkansas Works Amendments, or AWA) in 2018 to add monthly 80-hour work/community-engagement reporting requirements for most able-bodied adults and to shorten retroactive coverage from three months to one.
- The Secretary of HHS approved AWA under Section 1115 demonstration authority on March 5, 2018; reporting was to be done primarily through an online portal; exemptions existed (e.g., medically frail, pregnant, students).
- Plaintiffs (Arkansas Medicaid recipients) sued in August 2018 challenging the Secretary's approval under the Administrative Procedure Act (APA) and the Constitution, seeking to vacate the approval; the case was related to an earlier challenge to a materially similar Kentucky waiver (Stewart v. Azar).
- The administrative record contained numerous public comments predicting substantial coverage losses and other harms (over 16,000 Arkansans lost coverage for some period after implementation); the Secretary’s approval did not quantify or adequately analyze potential coverage losses.
- The court found the Secretary had failed to consider a central objective of Medicaid—whether AWA would help or hinder furnishing medical assistance to the needy—and therefore acted arbitrarily and capriciously; it vacated the approval and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HHS acted arbitrarily and capriciously by approving AWA under §1115 | Secretary failed to consider whether AWA would promote Medicaid’s core objective of furnishing medical assistance; record shows commenters predicted coverage loss | Approval was reasonable because AWA promotes health outcomes and other Medicaid objectives; no numeric estimate required; later Kentucky remand cured defects | Court held approval arbitrary and capricious for failing to analyze effects on coverage and vacated the approval |
| Whether other statutory objectives (health outcomes, independence) justify approval despite coverage concerns | Coverage is a central Medicaid objective and cannot be ignored even if other goals exist | Other objectives justify the waiver; Chevron deference to agency interpretation | Court rejected substituting other objectives for the core requirement to assess impact on coverage |
| Whether the Kentucky remand and reapproval cure the defect in Arkansas approval | Plaintiffs: Kentucky reapproval does not retroactively justify a defective, distinct Arkansas decision | Defendants: Kentucky remand supplies the needed reasoning and supports sustaining Arkansas approval | Court refused to rely on post-hoc or different-state rationales; Kentucky reapproval did not cure the Arkansas record |
| Appropriate remedy (vacatur vs. remand without vacatur) | Plaintiffs: vacatur warranted because administrative defect is serious and harms to beneficiaries are ongoing | Defendants: vacatur would be disruptive because AWA is implemented and data collection/outreach would be impeded | Court granted vacatur and remand, finding deficiencies serious and disruption insufficient to outweigh beneficiaries' harms |
Key Cases Cited
- Stewart v. Azar, 313 F. Supp. 3d 237 (D.D.C. 2018) (vacated similar Kentucky approval for failing to consider Medicaid’s core objective)
- National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012) (discusses Medicaid expansion and Spending Clause limits)
- Motor Vehicle Manufacturers Ass’n v. State Farm, 463 U.S. 29 (1983) (agency action arbitrary and capricious standard)
- Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (agency deference framework)
- SEC v. Chenery Corp., 332 U.S. 194 (1947) (courts must judge agency action by reasons the agency invoked)
- Allina Health Servs. v. Sebelius, 746 F.3d 1102 (D.C. Cir. 2014) (vacatur is the normal remedy but may be withheld in certain circumstances)