R eforms to the Medicaid program, which provides medical assistance for low-income and medically needy individuals, have been proposed during the 115 th Congress. One component of these reforms would allow states to impose some form of "work requirements" on certain categories of individuals as a stipulation for receiving coverage under the program. Both the House-passed American Health Care Act of 2017, H.R. 1628 , and the Better Care Reconciliation Act of 2017, a draft amendment in the nature of a substitute to H.R. In addition to these proposals, which would take the form of legislative amendments to the Medicaid statute, work requirements have also been discussed in the context of waivers granted to states under the existing demonstration authority provided in Section 1115 of the Social Security Act (SSA). Several states have recently sought waivers to impose some type of Medicaid mandatory work incentives under Section 1115, but to date, such a waiver has not been approved by the Secretary. This report examines the scope of authority to grant such waivers under that provision, including the degree to which such waivers may be judicially reviewable and the level of scrutiny courts would apply in such cases. Section 1115 authorizes the HHS Secretary to waive a number of requirements imposed by the SSA, including Medicaid requirements contained in Section 1902, to the extent necessary to allow a state to undertake an "experimental, pilot, or demonstration project which, in the judgment of the Secretary, is likely to assist in promoting the objectives of [Medicaid and other programs authorized by the SSA]." Numerous federal courts have held that the Secretary's decision to grant a waiver is reviewable under the Administrative Procedure Act (APA). As such, the ultimate conclusion reached by a reviewing court assessing whether the HHS Secretary's grant of a waiver under Section 1115 was arbitrary and capricious will likely depend upon the actual administrative record upon which the Secretary made his decision. Further, in examining whether there has been an abuse of agency discretion, courts have held that "[t]he APA does not give the court power 'to substitute its judgment for that of the agency,' but only to 'consider whether the decision was based on consideration of the relevant factors and whether there has been a clear error of judgment.'"
Proposals have been introduced in the 115th Congress to reform the Medicaid program, which provides medical assistance to low-income and needy individuals. One such approach, taken by House-passed H.R. 1628, the American Health Care Act of 2017, would allow states to impose work requirements on certain categories of individuals as a condition of coverage under the Medicaid program. A similar approach is also taken in the discussion draft of the Better Care Reconciliation Act, a proposed amendment in the nature of a substitute to H.R. 1628, which was published by the Senate Budget Committee on June 22, 2017, and updated on June 26, 2017.
In addition to these proposals, which would take the form of legislative amendments to the Medicaid statute, work requirements have also been discussed in the context of waivers granted to states under the existing demonstration authority provided in Section 1115 of the Social Security Act (SSA). Section 1115 authorizes the Secretary of Health and Human Services (HHS) to waive a number of Medicaid requirements to the extent necessary to allow a state to undertake an "experimental, pilot, or demonstration project" that is likely to assist in promoting the objectives of Medicaid. Several states have recently sought waivers to impose some type of Medicaid mandatory work incentives under Section 1115, but to date, the Secretary has not approved such a waiver. This report examines the scope of authority to grant such waivers under Section 1115, including the degree to which such waivers may be judicially reviewable and the level of scrutiny courts would apply in such cases.
Numerous federal courts have held that the Secretary's decision to grant a waiver under Section 1115 is reviewable under the Administrative Procedure Act (APA). Such review uses the deferential "arbitrary and capricious" standard to evaluate the permissibility of agency action. In cases where Section 1115 waivers have been challenged, courts have held that the APA does not empower judges to substitute their judgment for that of the agency, but only to consider whether the Secretary's decision was based on consideration of relevant factors and whether there has been a clear error of judgment. Therefore, a court's evaluation of a particular Section 1115 waiver will likely turn upon the sufficiency of the actual administrative record relied upon by the HHS Secretary when deciding to grant a waiver.