922 F. Supp. 2d 836
D. Ariz.2013Background
- Arizona AHCCCS administers Medicaid expansion for childless adults with higher copayments under a 2011 Section 1115 demonstration approved by the Secretary.
- Copayments include higher charges for prescriptions, office visits, and nonemergency ER use; providers may refuse service for nonpayment in some cases.
- Plaintiffs, Arizona AHCCCS eligible individuals, challenged the Copayment Rule as violating the Medicaid Act and APA, and alleged improper notices.
- Newton-Nations v. Betlach/Beño framework governs Secretary’s three-pronged review for 1115 demonstrations; prior Ninth Circuit rulings affected scope of challenge.
- The district court certified a class, denied preliminary injunction, and is now ruling on cross-motions for summary judgment and remand versus vacatur.
- Key issue is whether the 2011 approval, considering the project as a whole, was arbitrary and capricious under the APA and federal Medicaid law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Secretary’s Section 1115 approval was arbitrary and capricious | Plaintiffs argue the record lacks a demonstrated research/demonstration value for copayments. | Secretary contends the project has demonstration value and advances Medicaid objectives. | Summary judgment denied on this aspect; remand for re-evaluation. |
| Whether the project as a whole furthers Medicaid objectives under 1115(a)(2)(A) | Project’s cost-sharing is not demonstratively tied to new information; Ku declaration shows no novel testing. | Cost savings and coverage expansion support broader objectives and overall demonstration value. | Partially granted for first two requirements; remand ordered to reassess objections. |
| Whether the extent and duration requirement under 1115(a)(2)(A) was properly considered | Approval spanned beyond the proposed evaluation and was statewide, potentially overbroad. | Statutory language allows Secretary to set extent and period; no clear error. | Not arbitrary or capricious; no vacatur on this basis. |
| Whether the copayment notices to beneficiaries complied with due process | Notices lacked specificity and adequate information for contesting the changes; timeliness disputed. | Notices sufficiently informed affected individuals about the rule change and basis; timeliness shown via plan notices. | Notwithstanding disputes over some notices, the notices were adequate; Betlach’s cross-motion granted. |
| Whether a remand with or without vacatur is appropriate | Vacatur of the Copayment Rule is necessary to cure APA violations. | Remand without vacatur preserves ongoing health benefits while allowing reconsideration. | Remand without vacatur ordered; full project re-evaluation required within 60 days. |
Key Cases Cited
- Beno v. Shalala, 30 F.3d 1057 (9th Cir. 1994) (requires a showing the project has a research or demonstration value)
- Newton-Nations v. Betlach, 660 F.3d 370 (9th Cir. 2011) (expansion-population cost-sharing; Supreme framework for 1115 review)
- Spry v. Thompson, 487 F.3d 1272 (9th Cir. 2007) (cost-sharing limits; expansion population not protected by §1396o)
- Soskin v. Reinertson, 353 F.3d 1242 (10th Cir. 2004) (due process rights for affected benefits changes in Medicaid context)
- River Runners for Wilderness v. Martin, 593 F.3d 1064 (9th Cir. 2010) (axiomatic deference to agency decisions; APA review standards)