313 F. Supp. 3d 237
D.C. Cir.2018Background
- In 2010 the ACA expanded Medicaid to cover low-income adults (the "expansion population"); states may opt in and, if they do, must provide "full benefits."
- Section 1115 lets the HHS Secretary approve experimental Medicaid demonstrations and waive certain statutory requirements if a project "in [his] judgment ... is likely to assist in promoting the [Act's] objectives."
- Kentucky submitted an 1115 application (KY HEALTH) with two main elements at issue: (1) "Kentucky HEALTH" — a program imposing community-engagement (work) requirements, premiums, reporting, lockouts, limits on retroactive eligibility and NEMT, and other commercial-like features; and (2) an SUD (substance-use disorder) component to expand reimbursable IMD services. CMS approved the application on January 12, 2018.
- Plaintiffs (fifteen Kentucky Medicaid enrollees) sued under the APA and the Constitution challenging CMS's approval, arguing the Secretary acted arbitrarily and capriciously and exceeded his statutory authority; they sought vacatur of the approval.
- The district court limited review to whether the Secretary lawfully approved Kentucky HEALTH under §1115(a) (Count VIII), found Plaintiffs had standing to seek vacatur, and concluded CMS acted arbitrarily and capriciously because it failed adequately to consider the program's effect on Medicaid coverage (including Kentucky's estimate that ~95,000 people would lose coverage).
- Remedy: the court vacated CMS's approval of Kentucky HEALTH and remanded; the court left the SUD component and other non-Kentucky HEALTH elements of KY HEALTH intact.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Reviewability of §1115 approvals (justiciability) | §1115 approvals are reviewable under the APA; courts can apply legal standards to Secretary's judgment | Secretary's discretion is committed to agency discretion and not judicially reviewable | §1115 approvals are reviewable; there is "law to apply" and APA judicial review applies |
| Standing to pursue vacatur of whole Kentucky HEALTH | Plaintiffs face cognizable economic and coverage injury (premiums, risk of termination) and vacatur would redress | Plaintiffs lack injury or relief would be speculative because state might "unexpand" Medicaid | Plaintiffs have Article III standing to challenge the approval (economic injury from premiums sufficed; relief would redress) |
| Scope of review: project-wide vs individual components | Plaintiffs seek vacatur of the Secretary's approval of Kentucky HEALTH as a whole (not SUD) | Defendants framed challenge as to the entire KY HEALTH package | Court reviews the Secretary's approval of Kentucky HEALTH as the discrete §1115 project approved by CMS |
| Arbitrary-and-capricious review of approval | CMS failed to consider an important statutory objective — whether the project would "furnish ... medical assistance" (coverage impact); ignored Kentucky's 95,000 estimate and public comments | CMS relied on goals like improved health, self-sufficiency, and cost savings; argued those objectives are lawful and sufficient | Agency action arbitrary and capricious: Secretary failed to address a salient statutory objective (effect on coverage), so approval vacated and remanded |
Key Cases Cited
- Nat'l Fed'n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012) (describing ACA Medicaid expansion and its effect on Medicaid)
- Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (arbitrary-and-capricious standard requires consideration of important aspects of problem)
- Chevron U.S.A. Inc. v. Nat'l Res. Def. Council, Inc., 467 U.S. 837 (1984) (framework for judicial deference to agency statutory interpretation)
- Bowen v. Mich. Acad. of Family Physicians, 476 U.S. 667 (1986) (courts presume ability to review executive compliance with statutory commands)
- Webster v. Doe, 486 U.S. 592 (1988) (limited reviewability where statute provides no law to apply)
- United States v. Mead Corp., 533 U.S. 218 (2001) (agency interpretations sometimes receive less deference absent formal adjudication or notice-and-comment rulemaking)
- SEC v. Chenery Corp., 318 U.S. 80 (1943) (agency action must rest on the reasons the agency invoked)
- Nat'l Ass'n of Regulatory Util. Comm'rs v. ICC, 41 F.2d 901 (D.C. Cir. 1930) (cited in administrative-law contexts)