Judge Strikes Down Kentucky’s Medicaid Work Rules

Dr. Van Breeding, director of medical affairs at a hospital in Whitesburg, Ky., examining a patient. Nearly one in three of Kentucky residents receive Medicaid benefits, and the state estimated that about 350,000 Kentuckians would have been affected by the new work rules.

WASHINGTON — A federal judge on Friday blocked Kentucky’s closely watched plan to require many Medicaid recipients to work, volunteer or train for a job as a condition of coverage.

The state had been poised to start carrying out the new rules next week and to phase them in fully by the end of this year.

Judge James E. Boasberg of Federal District Court for the District of Columbia, an Obama appointee, ruled that the Trump administration’s approval of the plan had been “arbitrary and capricious” because it had not adequately considered whether the plan would “help the state furnish medical assistance to its citizens, a central objective of Medicaid.”

The ruling in the Kentucky case is the first on this issue, but it will almost certainly not be the last; the question may wind up before a more conservative Supreme Court with two Trump appointees. Three other states have already gotten permission from the Trump administration to impose work requirements, and seven more have asked for clearance to do so.

Gov. Matt Bevin of Kentucky, a Republican, has said that if he ultimately loses in court, he will end the Medicaid expansion in Kentucky. But instead of announcing plans to appeal the ruling Friday, the state’s top health official said he would work with the Trump administration to “quickly resolve the single issue raised by the court so that we can move forward.” The official, Adam Meier, added that if the new rules could not be quickly implemented, “we will have no choice but to make significant benefit reductions.”

Seema Verma, chosen by President Trump to run the Centers for Medicare and Medicaid Services, called the decision “disappointing” and said she would confer with the Justice Department “to chart a path forward.”

The debate over requiring poor people to work to keep their health insurance encapsulates fundamentally different visions of the role of Medicaid, a program jointly funded by federal and state governments that now covers one in five Americans. Many Republicans see it as a welfare program that should be conditioned on participants working if they are able, while Democrats consider it a crucial element of the government safety net for the poor.

Requiring Medicaid recipients to work — and to pay monthly premiums, which was also part of Kentucky’s plan — would have significantly reduced the number of people with coverage, many experts predicted. People could lose their health benefits if they were deemed able to work or volunteer but did not, or were unable to keep up with premium payments or provide the documentation every month to prove they had worked the required 80 hours.

Mr. Bevin, a vocal opponent of the Affordable Care Act, took office after his Democratic predecessor enthusiastically expanded Medicaid under the law. He has argued that the program was created for only the most vulnerable citizens — those who aren’t merely poor, but also disabled, elderly, pregnant or younger than 21. Mr. Bevin and a growing number of mostly Republican governors believe that adults with no disabilities, millions of whom became eligible for Medicaid under the health law, should work or otherwise engage in their community to keep their coverage.

More than 400,000 Kentuckians have joined Medicaid since 2014 as a result of the expansion, and the state estimated that some 350,000 of them — about a quarter of its overall Medicaid population — would be subject to the new work rule. But many recipients already have jobs or otherwise would meet the requirement. The state had planned to grant exemptions to people it deemed medically frail or who were pregnant, in school, or the primary caregiver of a dependent child or disabled family member.

Advocates for the poor say that even many working Medicaid recipients would have lost coverage because of the new documentation requirements. Kentucky itself has estimated that 95,000 fewer residents would have been enrolled in Medicaid within five years, although its lawyers said many of those people would have found jobs that offered insurance. Regardless, the plaintiffs used Kentucky’s estimate to argue that work requirements would have thwarted the purpose of Medicaid.

The Trump administration approved Kentucky’s plan in January, shortly after Ms. Verma announced a major policy shift letting states require many adults to work or participate in other “community engagement activities” as a condition of eligibility for Medicaid.

Weeks later, the National Health Law Program, the Kentucky Equal Justice Center and the Southern Poverty Law Center filed the suit on behalf of 16 Medicaid beneficiaries in the state.

The work requirement has drawn the most interest. Arkansas, Indiana and New Hampshire have won permission to follow in Kentucky’s footsteps, and seven other states are waiting for the Trump administration to decide whether they can, too. Those states are Arizona and Ohio, which have expanded Medicaid, and Kansas, Maine, Mississippi, North Carolina, Utah and Wisconsin, which have not and would direct their work requirement at the small number of adults who were not disabled, mostly mothers of dependent children.

Michigan, Virginia and several other states were also planning to pursue work requirements but had not yet submitted applications.

“The Trump administration’s attempt to transform the Medicaid program through executive action has been restrained,” said Jane Perkins, the legal director for the National Health Law Program, which provides legal services for the poor. “The purpose of the Medicaid Act is to furnish medical assistance, and this approval could not stand because it was doing just the opposite — restricting coverage.”

Although Judge Boasberg’s ruling affects only Kentucky, advocacy groups will likely challenge other states’ requirements and his decision could influence those cases. Mr. Bevin said last week that the legality of work requirements “will be decided in the Supreme Court, almost without question.”

The Trump administration and the state of Kentucky, which intervened in the case, had asked Judge Boasberg to throw out the case on grounds that Congress gave the health and human services secretary broad discretion to approve Medicaid demonstration projects. Lawyers for the administration also argued that the secretary, Alex M. Azar II, provided plenty of evidence that working improves health.

Judge Boasberg disagreed. “While the ultimate decision whether to grant approval rests with the secretary, his discretion is not boundless,” he wrote. He also said the important thing to consider was not whether work requirements would improve health, but whether they would “furnish medical assistance” to the poor, as the Medicaid statute states as its goal.

“At bottom,” the judge concluded, “the record shows that 95,000 people would lose Medicaid coverage, and yet the secretary paid no attention to that deprivation.”

The work requirement was to take effect next week in Campbell County, just south of Cincinnati, Ohio. Two other counties in northern Kentucky were tophase the program in by Labor Day, and most by the end of the year.

Kentucky’s uninsured rate fell to 5.1 percent in 2016, according to the most recent census data, from 16.3 percent in 2013, the year before Medicaid expanded there. It was among the steepest drops in the nation.

The state had been moving forward with its plan despite the lawsuit, investing millions of dollars in a new online system where residents could log their work or “community engagement” hours, take online health or financial literacy courses as a way to prevent losing their coverage if they skipped premium payments, and list “healthy behaviors,” such as preventive screenings, that would help them earn “rewards dollars” they could use for teeth cleanings or vision checks.

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