Hand holding pencil drawing a path.

Roll Back Harmful Section 1115 Waivers: Charting the Path Forward

By Sidney D. Watson

On March 18, 2021, the U.S. Department of Health and Human Services (HHS) sent formal notices to Arkansas and New Hampshire that it was withdrawing their Section 1115 waivers that allowed the states to require poor adults to work as a condition of Medicaid coverage.  

This appears to be the first time that HHS has invoked its authority to rescind an approved 1115 waiver. It won’t be the last. 

Waiver withdrawals provide a path forward for the Biden administration to end a grab bag of Trump-era Section 1115 waivers that create a risk of loss in coverage and harm to Medicaid beneficiaries.  

Section 1115 of the Social Security Act gives the Secretary of HHS authority to waive specific provisions of the Medicaid Act to allow states to conduct time-limited demonstration projects that further the objectives of the Medicaid program. 

Under the statute and regulations, the Secretary also has the responsibility to monitor Section 1115 waivers, and may withdraw waivers “based on a finding that the demonstration project is not likely to achieve the statutory purpose.” All Section 1115 demonstration approvals contain a Special Term and Condition (STC) in which the Centers for Medicare & Medicaid Services (CMS) reserves the right to withdraw waivers at any time it determines that continuing the waivers would no longer be in the public interest or promote the objectives of the Medicaid Act.

In the two letters of withdrawal, CMS finds that the Arkansas and New Hampshire work requirement waivers are not likely to achieve the objectives of Medicaid because they pose “risks of significant coverage losses and harm to beneficiaries.” Over eight pages, CMS marshals ample evidence to support both the size of the coverage losses and the myriad harms to beneficiaries posed by work requirements. CMS notes that events unfurled in Arkansas with a “rapid, significant coverage loss without an increase in employment or other community engagement.” The analysis wraps up by emphasizing how the COVID-19 pandemic and its aftermath have disproportionately burdened low-wage workers, increasing the risks of coverage losses and harms.

The Arkansas Attorney General has indicated the state will challenge the waiver withdrawal. Arkansas did not attempt to invoke now-rescinded and illegal “preliminary appeal” procedures created by Trump-administration CMS Administrator Seema Verma in a January 4, 2021, letter of “agreement” to Arkansas and the other 46 states with Section 1115 waivers.

The state had 30 days — which ended April 17 — to appeal the withdrawal to the HHS Departmental Appeals Board (DAB). (Arkansas has not announced an appeal to the DAB, and CMS has made no official announcement yet of a DAB filing.) 

If the state has filed an appeal and the DAB upholds CMS’s withdrawal, Administrative Procedure Act judicial review is available. The issue will be whether the Secretary acted arbitrarily and capriciously in revoking the work waivers in light of the evidence of significant coverage losses and attendant harms. 

Waiver withdrawals provide HHS a way out of the Becerra v. Gresham litigation.

Waiver withdrawals provide CMS a path forward to end the Trump-era work requirements waivers without the need for the Supreme Court to address the issues posed in Becerra v. Gresham. In Becerra, now pending before the Supreme Court, the issue is whether the prior Trump Administration’s Secretary of HHS acted arbitrarily and capriciously in approving the Arkansas and New Hampshire waivers. The Trump administration argued that the Secretary could ignore the harms imposed by a substantial loss of Medicaid coverage to pursue other goals, a policy agenda the Biden Administration has rejected. In light of CMS’s withdrawal of Arkansas and New Hampshire’s work requirements waivers, the Biden Department of Justice (DOJ) asked the Court to vacate the judgments of the court of appeals and remand the case to HHS.  

In response, on April 5, the Supreme Court entered an order putting the cases “in abeyance pending further order of the Court.” The Court may be considering whether to issue an narrow opinion on the merits, an alternative suggested by DOJ, that addresses language in the court of appeals decision to clarify that Section 1115 does not prohibit the Secretary from approving demonstrations that use indirect means or encourage healthy outcomes, as long as the Secretary concludes that the project is likely to promote Medicaid’s overarching objective of providing health care coverage.

These won’t be the last Section 1115 waiver withdrawals.

The Arkansas and New Hampshire waiver withdrawals won’t be the last. On February 12, 2021, HHS sent nine other states letters notifying them that it had preliminarily determined their work requirement waivers did not promote the objectives of the Medicaid Act. The states had 30 days to respond. CMS should be moving forward soon to withdraw these waivers, too.

None of these states is enforcing a work requirement. All are under a maintenance of effort requirement that prevents them from terminating people from Medicaid for the duration of the COVID-19 public health emergency. But these work waivers need to be rolled back before the public health emergency ends.

Additionally, the waiver withdrawal process provides CMS a path forward to evaluate, and, where appropriate, end an assortment of Trump and Obama-era waivers that prior research has shown create risks of loss of coverage and harm to Medicaid beneficiaries. These include waivers that:

  • impose premiums and copays higher than otherwise allowed by federal law,
  • delay coverage until premiums are paid,
  • lock people out of Medicaid coverage for periods,
  • remove coverage for non-emergency transportation to and from medical care,  
  • eliminate Medicaid’s three-month retroactive coverage, 
  • require people to “earn” covered benefits through “healthy behaviors,” 
  • restrict enrollees’ free choice of a family planning provider, and
  • block grant Medicaid financing.

The waiver withdrawal process requires that CMS conduct a thorough, evidence-based evaluation. The withdrawal must be supported by a finding that the waivers are no longer in the public interest or do not promote the Medicaid Act’s objectives. 

The Trump administration never analyzed these waivers to determine what impact they had on coverage and care. The Biden administration can and should do so, in order to strengthen Medicaid and protect the low-income people who rely on it for coverage and care.

Sidney D. Watson, JD is Jane and Bruce Robert Professor of Law and Director of the Center for Health Law Studies at Saint Louis University School of Law.

The Petrie-Flom Center Staff

The Petrie-Flom Center staff often posts updates, announcements, and guests posts on behalf of others.

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