To Waive or Not To Waive: The Trump Administration’s Legal Dilemma

To Waive or Not To Waive: The Trump Administration’s Legal Dilemma

If the Trump administration’s sabotage of the Affordable Care Act (e.g., threatening to cut-off cost sharing reduction payments, reducing outreach funding by 90 percent, cutting navigator grants by more than 40 percent) is any guide, Medicaid faces a rocky road in the coming months and years.

After Congress failed in its legislative attempts to dismantle Medicaid by capping its funding, the immediate threats to Medicaid lie with the administration as it considers approving waivers submitted by states pursuant to Section 1115 of the Social Security Act. While some of the waivers coming from the states are indeed proposing innovative approaches to improve Medicaid, some states are seeking waivers to impose harmful cuts and restrictions.

Medicaid operates as a federal-state partnership; the federal government provides states with generous funding, but states must adhere to the provisions of the federal Medicaid statute and regulations. Section 1115 of the Social Security Act, however, allows the Secretary of HHS to waive some requirements of the Medicaid Act so that states can test novel approaches to improving medical assistance for low-income people. To be approved, a waiver must:

  • implement an “experimental, pilot, or demonstration” project;
  • be limited to the subset of Medicaid provisions in one specific section (42 U.S.C. Sec. 1396a);
  • be likely to promote Medicaid’s objectives; and
  • be limited to the extent and period needed to carry out the experiment.

Over the years, courts have enforced these legal limits to the scope of Section 1115 waivers. For example, courts have noted that Section 1115 was not enacted to enable states to save money or to evade federal requirements but rather to test out new ideas and ways of addressing the problems of public benefit recipients.

The administration’s initial HHS Secretary Tom Price signaled a willingness to allow states to dramatically reshape and limit their Medicaid programs using section 1115. We expect his successor will continue on this path. Indeed, the Administration seems on the brink of approving waivers whose main outcomes will be to reduce Medicaid enrollment (thus increasing the numbers of the uninsured) and to unwind the achievement – 30 years in the making – of tying Medicaid coverage to income rather than paternalistic notions of who are the “worthy poor.” The current crop of waiver requests would roll back this progress by conditioning Medicaid (i.e., access to medically necessary health care) on such things as work requirements, drug testing, unaffordable premiums, and high copayments for even emergency use of an emergency department. Several states’ waiver applications (including Ark., Ind., Ky., Maine, Texas, Utah, Wis.) contain some or all of these harmful cutbacks yet the Administration is likely to approve them in whole or in part as early as this month.

These approvals will be problematic. None of them is designed to improve the Medicaid program. Those states that even bother to state a hypothesis focus on saving money rather than improving access.

All this raises some potential legal problems. As noted, section 1115 waivers must be experimental projects that are consistent with the objectives of the Medicaid Act. The stated purpose of Medicaid is to furnish medical assistance and long-term care (such as nursing home care) to low-income individuals.

Instead, the proposals now under consideration are harmful. Take work requirements: In the 50-plus years of Medicaid’s existence and through both Republican and Democratic administrations, HHS has never approved a waiver permitting a mandatory work requirement for Medicaid applicants or enrollees. HHS has always denied these requests, recognizing they reduce access to care. For example, HHS denied work requirement requests from Ariz., Ark., Ind., and N.H. concluding that such requirements are not consistent with Medicaid’s purposes. Lessons from work requirements in TANF reinforce this conclusion. The purpose of Medicaid has not changed, only the administration has changed. Given the limits imposed by section 1115, serious legal questions arise as to whether the HHS secretary has authority to allow a state to impose work requirements.

Mandatory drug testing is also impermissible. Receipt of Medicaid can assist an individual with a substance-use disorder get the treatment needed to stop using drugs and, of course, also provides access to other medically necessary services that the individual needs. Requirements for drug testing that cause people to lose access to care thus conflict Medicaid’s stated purpose.

Notwithstanding this administration’s desire to allow states to restructure their Medicaid programs, Section 1115 does not give the secretary unfettered discretion. The secretary cannot ignore the underlying requirements of the Medicaid Act and has only limited authority to approve Medicaid waivers. If the secretary acts beyond the scope of Section 1115, the approval will be without statutory authorization, and the courts will need to step in.

For more information on Section 1115 waivers, see NHeLP’s Waiver Resources:

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