Petition for Writ of Certiorari — Xavier Becerra, Secretary of Health and Human Services, et al., Petitioners v. Charles Gresham, et al.

Supreme Court briefJul 13, 2020

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No.

In the Supreme Court of the United States

ALEX M. AZAR II, SECRETARY OF

HEALTH AND HUMAN SERVICES, ET AL., PETITIONERS

CHARLES GRESHAM, ET AL.

ALEX M. AZAR II, SECRETARY OF

HEALTH AND HUMAN SERVICES, ET AL., PETITIONERS

SAMUEL PHILBRICK, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

JEFFREY B. WALL

Acting Solicitor General

Counsel of Record

EDWIN S. KNEEDLER

Deputy Solicitor General

JONATHAN C. BOND

Assistant to the Solicitor

General

MARK B. STERN

ALISA B. KLEIN

Attorneys

Department of Justice

Washington, D.C. 20530-0001

SupremeCtBriefs@usdoj.gov

(202) 514-2217

QUESTION PRESENTED

The Social Security Act, 42 U.S.C. 301 et seq., authorizes the Secretary of Health and Human Services to approve “any experimental, pilot, or demonstration project” proposed by a State that, “in the judgment of the

Secretary, is likely to assist in promoting the objectives” of the Medicaid program. 42 U.S.C. 1315(a). Exercising that authority, the Secretary approved demonstration projects in Arkansas and New Hampshire designed to test whether certain requirements promote

those objectives by requiring certain working-age, nondisabled adults to engage in work or skill-building activities (such as job-skills training or general education)

as a condition of continued eligibility for Medicaid benefits. The Secretary determined that such requirements may help beneficiaries transition to employersponsored or federally subsidized commercial coverage

and may lead to improved beneficiary health, which in

turn may help States conserve resources that can be redirected to providing other coverage. The court of appeals held the Secretary’s approvals unlawful. It concluded that “the principal objective of Medicaid is

providing health care coverage,” and that the Secretary

had failed adequately to consider whether the projects

would further that objective. App., infra, 9a-10a; see id.

at 12a-21a. The question presented is as follows:

Whether the court of appeals erred in concluding

that the Secretary may not authorize demonstration

projects to test requirements that are designed to promote the provision of health-care coverage by means of

facilitating the transition of Medicaid beneficiaries to

commercial coverage and improving their health.

(I)

PARTIES TO THE PROCEEDING

Petitioners in this Court are Alex M. Azar, in his official capacity as Secretary of Health and Human Services; Seema Verma, in her official capacity as Administrator of the Centers for Medicare & Medicaid Services; the United States Department of Health and Human Services; and the Centers for Medicare & Medicaid

Services—all of which were defendants in the district

court, appellants in the court of appeals in Nos. 19-5094

and 19-5293, and appellees in the court of appeals in

Nos. 19-5096 and 19-5295.

Respondents in this Court are Charles Gresham, Cesar Ardon, Marisol Ardon, Adrian McGonigal, Veronica

Watson, Treda Robinson, Anna Book, Russell Cook, and

Jamie Deyo, who were the plaintiffs in the district court

and appellees in the court of appeals in Nos. 19-5094 and

19-5096; the State of Arkansas, which intervened as a defendant in the district court and was an appellant in the

court of appeals in No. 19-5096; Samuel Philbrick, Ian

Ludders, Karin Vlk, and Joshua Vlk, who were plaintiffs

in the district court and appellees in the court of appeals

in Nos. 19-5293 and 19-5295; and the New Hampshire Department of Health and Human Services, which intervened as a defendant in the district court and was an appellant in the court of appeals in No. 19-5295.

(II)

RELATED PROCEEDINGS

United States District Court (D.D.C.):

Gresham v. Azar, No. 18-cv-1900 (Apr. 4, 2019)

Philbrick v. Azar, No. 19-cv-773 (Aug. 27, 2019)

United States Court of Appeals (D.C. Cir.):

Gresham v. Azar, Nos. 19-5094 and 19-5096

(Feb. 14, 2020)

Philbrick v. Azar, Nos. 19-5293 and 19-5295

(May 20, 2020)

(III)

TABLE OF CONTENTS

Page

Opinions below .............................................................................. 2

Jurisdiction .................................................................................... 2

Statutory provisions involved...................................................... 2

Statement ...................................................................................... 3

A. Statutory background............................................... 3

B. The present controversies........................................ 8

Reasons for granting the petition ............................................. 16

I. The court of appeals’ decisions invalidating

the demonstration projects are incorrect................. 18

A. The Secretary has broad statutory authority

to approve projects to test features that in his

judgment are likely to assist in promoting the

objectives of Medicaid............................................. 18

B. The Secretary properly approved demonstration projects to test work and other requirements that might enable States to stretch

scarce Medicaid resources further........................ 21

C. The court of appeals fundamentally misconstrued the Secretary’s authority under

42 U.S.C. 1315.......................................................... 29

II. The court of appeals’ rulings present a question of

substantial practical importance that warrants

this Court’s review ..................................................... 33

Conclusion ................................................................................... 35

Appendix A — Court of appeals opinion (Feb. 14, 2020)...... 1a

Appendix B — Court of appeals order (May 20, 2020) ....... 20a

Appendix C — District court memorandum opinion

(Mar. 27, 2019) ........................................... 22a

Appendix D — District court memorandum opinion

(July 29, 2019) ............................................ 64a

Appendix E — Statutory provisions................................... 107a

Appendix F — HHS letter to Cindy Gillespie

(Mar. 5, 2018) ........................................... 129a

(V)

Table of Contents—Continued:

Page

Appendix G — HHS letter to Henry D. Lipman

(Nov. 30, 2018) ......................................... 144a

TABLE OF AUTHORITIES

Cases:

Aguayo v. Richardson, 473 F.2d 1090 (2d Cir. 1973),

cert. denied, 414 U.S. 1146 (1974) ........................... 7, 21, 31

Alexander v. Choate, 469 U.S. 287 (1985) ....................... 4, 23

Armstrong v. Exceptional Child Ctr., Inc.,

575 U.S. 320 (2015).............................................................. 23

Bowen v. Massachusetts, 487 U.S. 879 (1988) ...................... 3

C.K. v. New Jersey Dep’t of Health & Human Servs.,

92 F.3d 171 (3d Cir. 1996) .................................................. 20

FCC v. Fox Television Stations, Inc.,

556 U.S. 502 (2009).............................................................. 20

FCC v. National Citizens Comm. for Broad.,

436 U.S. 775 (1978).............................................................. 20

King v. Burwell, 135 S. Ct. 2480 (2015)............................... 27

National Fed’n of Indep. Bus. v. Sebelius,

567 U.S. 519 (2012)........................................................ 3, 4, 5

New York State Dep’t of Soc. Servs. v. Dublino,

413 U.S. 405 (1973).............................................................. 22

Pharmaceutical Research & Mfrs. of Am. v. Walsh,

538 U.S. 644 (2003).............................................................. 22

Spry v. Thompson, 487 F.3d 1272 (9th Cir. 2007) .............. 35

Stewart v. Azar:

313 F. Supp. 3d 237 (D.D.C. 2018) ........................... 10, 11

366 F. Supp. 3d 125 (D.D.C. 2019),

appeal dismissed, Nos. 19-5095 and 19-5097

(D.C. Cir. Jan. 8, 2020) .................................. 10, 11, 12

VII

Case—Continued:

Page

Webster v. Doe, 486 U.S. 592 (1988)..................................... 19

Statutes and regulations:

Act of July 25, 1962, Pub. L. No. 87-543, Tit. I, § 122,

76 Stat. 192 (42 U.S.C. 1315 (1964) ..................................... 6

Patient Protection and Affordable Care Act,

Pub. L. No. 111-148, 124 Stat. 119 ...................................... 4

Tit. II, Subtit. A, sec. 2001(a)(1)(C),

§ 1902(a)(10)(A)(i)(VIII), 124 Stat. 271

(42 U.S.C. 1396a(a)(10)(A)(i)(VIII)

(Supp. V 2011)) ............................................................ 4

Tit. IV, Subtit. B, § 4108(a), 124 Stat. 561-562 ............. 29

Personal Responsibility and Work Opportunity

Reconciliation Act of 1996, Pub. L. No. 104-193,

110 Stat. 2105 ........................................................................ 7

Social Security Act, 42 U.S.C. 301 et seq.:

Tit. IV:

42 U.S.C. 601 et seq...................................................... 6

42 U.S.C. 607 ...................................................... 7, 114a

42 U.S.C. 607(c)................................................ 25, 119a

42 U.S.C. 607(d) ................................................. 7, 122a

Tit. XI:

42 U.S.C. 1315 ................................................... passim

42 U.S.C. 1315(a) ................18, 19, 22, 23, 29, 30, 125a

42 U.S.C. 1315(a)(1)............................5, 6, 17, 19, 125a

42 U.S.C. 1315(a)(2)(A) ..................................... 6, 125a

Tit. XIX, 42 U.S.C. 1396 et seq..................................... 3, 5

42 U.S.C. 1396(e)(14)(I)............................................. 26

42 U.S.C. 1396-1......................................... 21, 22, 126a

42 U.S.C. 1396a .....................................5, 16, 17, 18, 19

42 U.S.C. 1396a(a) ....................................................... 3

VIII

Statutes and regulations—Continued:

Page

42 U.S.C. 1396a(a)(10) ................................................. 3

42 U.S.C. 1396a(a)(10)(A)(i)(VIII) ........................... 26

42 U.S.C. 1396a(a)(17) ................................................. 3

42 U.S.C. 1396a(b) ....................................................... 3

42 U.S.C. 1396c (2006)................................................. 4

42 U.S.C. 1396d(y)(1) (Supp. V 2011) ........................ 4

42 U.S.C. 1396u-1(b)(3) ..................................... 7, 127a

42 U.S.C. 1396u-1(b)(3)(A).......................... 7, 25, 127a

Social Security Amendments of 1965,

Pub. L. No. 89-97, sec. 121(c)(3), § 1115,

79 Stat. 352 (42 U.S.C. 1315 (Supp. I 1965)........................ 6

7 U.S.C. 2015(o) ....................................................... 7, 25, 107a

26 U.S.C. 36B ......................................................................... 27

28 U.S.C. 1391(e)(1)............................................................... 34

7 C.F.R. 273.24................................................................... 7, 25

45 C.F.R.:

Section 261.30 .................................................................... 7

Sections 261.30-261.32..................................................... 25

Miscellaneous:

Rebecca M. Blank, Evaluating Welfare Reform in

the United States, 40 J. Econ. Literature 1105

(Dec. 2002) ......................................................................... 6, 7

Centers for Medicare & Medicaid Services, HHS:

Federal Poverty Level (FPL),

https://go.usa.gov/ xwt9D

(last visited July 13, 2020)......................................... 26

Frequently Asked Questions on Exchanges,

Market Reforms, and Medicaid

(Dec. 10, 2012), https://go.usa.gov/xmN4j........... 5, 29

Miscellaneous—Continued:

Page

Congressional Budget Office, An Analysis of Health

Insurance Premiums Under the Patient Protection and Affordable Care Act (Nov. 30, 2009),

https://go.usa.gov/xpfCH ................................................... 27

Letter from Paul Mango, Chief Principal Deputy

Administrator and Chief of Staff, CMS, to Carol H.

Steckel, Commissioner, Kentucky Dep’t for

Medicaid Servs. (Nov. 20, 2018),

https://go.usa.gov/xwHTq.................................................. 11

Letter from Andrew M. Slavitt, Acting Administrator, CMS, to Thomas Betlach, Director, Arizona

Health Care Cost Containment Sys.

(Sept. 30, 2016), https://go.usa.gov/xmNDx................. 8, 29

Medicaid & CHIP Payment & Access Comm’n,

Report to Congress on Medicaid and CHIP

(June 2017), https://go.usa.gov/xfCmY............................... 4

Medicaid Program; Review and Approval Process

for Section 1115 Demonstrations,

77 Fed. Reg. 11,678 (Feb. 27, 2012) .................................. 20

Nirmita Panchal et al., The Implications of COVID-19

for Mental Health and Substance Use, Kaiser

Family Found. (Apr. 21, 2020),

https://www.kff.org/coronavirus-covid-19/issuebrief/the-implications-of-covid-19-for-mentalhealth-and-substance-use/ ........................................... 28

S. Rep. No. 1589, 87th Cong., 2d Sess. (1962)................. 6, 19

In the Supreme Court of the United States

No.

ALEX M. AZAR II, SECRETARY OF

HEALTH AND HUMAN SERVICES, ET AL., PETITIONERS

CHARLES GRESHAM, ET AL.

ALEX M. AZAR II, SECRETARY OF

HEALTH AND HUMAN SERVICES, ET AL., PETITIONERS

SAMUEL PHILBRICK, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

The Acting Solicitor General, on behalf of the Secretary of Health and Human Services, et al., respectfully

petitions for a writ of certiorari to review the judgments

of the United States Court of Appeals for the District of

Columbia Circuit in these cases. Pursuant to this

Court’s Rule 12.4, the United States is filing a “single

petition for a writ of certiorari” because the “judgments

* * * sought to be reviewed” are from “the same court

and involve identical or closely related questions.”

Sup. Ct. R. 12.4.

(1)

OPINIONS BELOW

The opinion of the court of appeals in Gresham v.

Azar, Nos. 19-5094 and 19-5096 (App., infra, 1a-19a) is

reported at 950 F.3d 93. The opinion of the district court

(App., infra, 22a-63a) is reported at 363 F. Supp. 3d 165.

The order of the court of appeals in Philbrick v.

Azar, Nos. 19-5293 and 19-5295 (App., infra, 20a-21a) is

not published in the Federal Reporter but is available

at 2020 WL 2621222. The opinion of the district court

(App., infra, 64a-106a) is reported at 397 F. Supp. 3d 11.

JURISDICTION

The judgment of the court of appeals in Gresham

was entered on February 14, 2020.

The judgment of the court of appeals in Philbrick

was entered on May 20, 2020.

On March 19, 2020, the Court extended the time

within which to file any petition for a writ of certiorari

due on or after that date to 150 days from the date of

the lower-court judgment, order denying discretionary

review, or order denying a timely petition for rehearing.

The effect of that order was to extend the deadline for

filing a petition for a writ of certiorari in Gresham to

July 13, 2020, and to extend the deadline in Philbrick to

October 17, 2020.

In both Gresham and Philbrick, the jurisdiction of

this Court is invoked under 28 U.S.C. 1254(1).

STATUTORY PROVISIONS INVOLVED

Pertinent statutory provisions are reprinted in the

appendix to this petition. App., infra, 107a-128a.

STATEMENT

A. Statutory Background

1. The Medicaid program, enacted in 1965 as Title

XIX of the Social Security Act, 42 U.S.C. 1396 et seq.,

“is a cooperative endeavor in which the Federal Government provides financial assistance to participating

States to aid them in furnishing health care to needy

persons,” Bowen v. Massachusetts, 487 U.S. 879, 883

(1988) (citation and internal quotation marks omitted).

To participate in Medicaid and receive federal funding,

a State must submit a plan for medical assistance that

meets various statutory requirements, which must be approved by the Secretary. 42 U.S.C. 1396a(a) and (b). The

State’s plan, once approved, defines the categories of

persons who are eligible for benefits under the plan and

the types of medical services that are covered. 42 U.S.C.

1396a(a)(10) and (17). “By 1982 every State had chosen

to participate in Medicaid.” National Fed’n of Indep.

Bus. v. Sebelius, 567 U.S. 519, 542 (2012) (NFIB ).

Since Medicaid’s enactment in 1965, federal law has

required that participating States’ plans cover certain

specified benefits for particular populations, while giving States the option to cover certain additional populations, additional benefits, or both. See NFIB, 567 U.S.

at 541-542. Under the traditional Medicaid program, a

State’s plan was required to provide coverage for discrete categories of low-income individuals: persons who

are disabled or blind, the elderly, children, parents of

dependent children, and pregnant women. See ibid.;

42 U.S.C. 1396a(a)(10). Beyond those categories of required coverage, States may elect (with the approval of

the Department of Health and Human Services (HHS))

to cover additional individuals, services, or both. Indeed, the majority of Medicaid spending is for optional

populations and optional benef its. 1 And even with respect to mandatory coverage, States have substantial

discretion to set limits on the amount, scope, and duration of coverage, as long as the care and services are

provided in the best interests of the beneficiaries. See,

e.g., Alexander v. Choate, 469 U.S. 287, 303 (1985) (upholding State’s decision to reduce the number of annual

inpatient hospital days for which the State would pay on

behalf of Medicaid recipients).

2. Before 2010, “[t]here [wa]s no mandatory coverage

for most childless adults, and the States typically d[id]

not offer any such coverage.” NFIB, 567 U.S. at 575

(opinion of Roberts, C.J.). In 2010, Congress enacted the

Patient Protection and Affordable Care Act (ACA), Pub.

L. No. 111-148, 124 Stat. 119, which provided (as relevant

here) that, as of 2014, States would be required to expand

their Medicaid programs to cover all individuals under

the age of 65 who had incomes up to 133% of the federal

poverty level. See NFIB, 567 U.S. at 542; ACA Tit. II,

Subtit. A, sec. 2001(a)(1)(C), § 1902(a)(10)(A)(i)(VIII),

124 Stat. 271 (42 U.S.C. 1396a(a)(10)(A)(i)(VIII) (Supp.

V 2011)). The ACA provided for additional federal funding for most (and initially all) of the increased cost of furnishing that expanded overage; a State that did not expand its Medicaid plan to cover that additional population could lose all of its Medicaid funds. See NFIB,

567 U.S. at 542 (citing 42 U.S.C. 1396c (2006); 42 U.S.C.

1396d(y)(1) (Supp. V 2011)).

In NFIB, however, a majority of this Court concluded

that Congress could not condition a State’s traditional

See, e.g., Medicaid & CHIP Payment & Access Comm’n,

Report to Congress on Medicaid and CHIP 2, 4, 16 (June 2017),

https://go.usa.gov/xfCmY (optional coverage accounted for more than

52% of all Medicaid spending in FY2013).

Medicaid funding on its compliance with that new adulteligibility expansion requirement. See 567 U.S. at

575-585 (opinion of Roberts, C.J.); id. at 671-689 (Scalia,

Kennedy, Thomas, and Alito, JJ., dissenting (joint dissent)). A different majority of the Court concluded that

the ACA provision conditioning a State’s traditional

Medicaid funding on its adopting the expansion was severable from the rest of the ACA. See id. at 585-588 (opinion of Roberts, C.J.); id. at 645-646 (Ginsburg, J., concurring in part, concurring in the judgment in part, and dissenting in part). Following NFIB, as many States were

evaluating whether to participate in the ACA’s expansion

of adult eligibility, HHS acknowledged that coverage of

the expansion population was optional and that States

have “flexibility to start or stop the expansion.” Centers

for Medicare & Medicaid Services (CMS), HHS, Frequently Asked Questions on Exchanges, Market Reforms, and Medicaid 11 (Dec. 10, 2012) (CMS FAQ ),

https://go.usa.gov/xmN4j.

3. Although state Medicaid plans generally must

comply with the requirements set forth in 42 U.S.C.

1396a, the Secretary may waive the statute’s requirements temporarily to allow a State to test variations

from the generally applicable requirements. 42 U.S.C.

1315(a)(1). Section 1315 provides in relevant part that,

“[i]n the case of any experimental, pilot, or demonstration

project which, in the judgment of the Secretary, is likely

to assist in promoting the objectives of ” Title XIX of the

Social Security Act—i.e., the Medicaid statute—“in a

State or States * * * the Secretary may waive compliance

with any of the requirements of * * * section 1396a of

[Title 42] * * * to the extent and for the period he finds

necessary to enable such State or States to carry out such

project.” Ibid.; see 42 U.S.C. 1315(a)(2)(A) (the Secretary may treat state expenditures for an approved

demonstration project as expenditures that are eligible

for federal funding even though they would not otherwise qualify).

The waiver authority conferred by Section 1315 predated Medicaid. It was enacted in 1962 to facilitate

demonstration projects under other programs governed

by the Social Security Act—such as grants to States to

provide old-age benefits and the former Aid to Families

with Dependent Children (AFDC) program (since replaced by Temporary Assistance for Needy Families

(TANF), see 42 U.S.C. 601 et seq.). See Act of July 25,

1962, Pub. L. No. 87-543, Tit. I, § 122, 76 Stat. 192

(42 U.S.C. 1315 (1964)). Congress sought to ensure that

federal requirements would not “stand in the way of experimental projects designed to test out new ideas and

ways of dealing with the problems of public welfare recipients.” S. Rep. No. 1589, 87th Cong., 2d Sess. 19

(1962) (Senate Report). When Congress established the

Medicaid program in 1965, it amended Section 1315 to

authorize waivers of the Medicaid statute’s requirements as well. See Social Security Amendments of

1965, Pub. L. No. 89-97, sec. 121(c)(3), § 1115, 79 Stat.

352 (42 U.S.C. 1315 (Supp. I 1965)).

Demonstration projects and accompanying waivers

approved under Section 1315 by HHS and its precursor

in other federal benefit programs have previously been

used to test work requirements that Congress later

adopted. By 1996, the Secretary had approved demonstration projects for dozens of States that imposed work

requirements as a condition of receiving AFDC benefits. See Rebecca M. Blank, Evaluating Welfare Reform in the United States, 40 J. Econ. Literature 1105,

1106 (Dec. 2002) (noting that 27 States had such demonstrations). In an opinion by Chief Judge Friendly, the

Second Circuit upheld the approval of such a demonstration project. See Aguayo v. Richardson, 473 F.2d

1090, 1103-1108 (1973), cert. denied, 414 U.S. 1146

(1974).

Informed by the experience of those demonstration

projects, Congress enacted the Personal Responsibility

and Work Opportunity Reconciliation Act of 1996, Pub.

L. No. 104-193, 110 Stat. 2105, which established work

and work-related requirements for certain recipients of

benefits under both the TANF program that replaced

AFDC, 42 U.S.C. 607, and the Supplemental Nutrition

Assistance Program (SNAP), formerly known as the

Food Stamp Program, 7 U.S.C. 2015(o). Congress also

incorporated such requirements to a limited extent in

the Medicaid statute itself, providing that a State may

terminate the Medicaid benefits of certain adults whose

TANF benefits are terminated for failure to comply

with TANF’s work-related requirements. 42 U.S.C.

1396u-1(b)(3)(A). The experience of the demonstration

projects in which States were permitted to experiment

with work-related requirements for AFDC was “a major reason why policymakers supported work-oriented

welfare reform in the 1990s.” Blank 1122. 2

Although the TANF, SNAP, and Medicaid statutes use the shorthand label of “work” requirements, 7 U.S.C. 2015(o); 42 U.S.C. 607,

1396u-1(b)(3), those requirements may be fulf illed either by working or

by engaging in skill-building activities that enhance a person’s employability, such as vocational education, community service, and job-skills

training. See 7 U.S.C. 2015(o ); 42 U.S.C. 607(d), 1396u-1(b)(3)(A);

7 C.F.R. 273.24; 45 C.F.R. 261.30.

B. The Present Controversies

The ACA’s optional expansion of adult eligibility for

Medicaid brought large numbers of working-age, nondisabled adults into States’ Medicaid programs. As States

began to participate in that expansion, some requested

that HHS approve demonstration projects to test work

and skill-building requirements. HHS initially denied

such requests. 3 HHS later revisited the issue, however,

and in 2018 it began approving certain Medicaid demonstrations that incorporated work and skill-building (also

called “community engagement,” App., infra, 4a-5a (citation omitted)) requirements similar to those Congress had

adopted in the context of TANF and SNAP.

These cases concern demonstration projects the Secretary approved for two States: Arkansas and New

Hampshire. Similar demonstration projects have been

approved for seven other States (Arizona, Indiana,

Michigan, Ohio, South Carolina, Utah, and Wisconsin),

and ten others are pending before HHS (Alabama,

Georgia, Idaho, Mississippi, Montana, North Carolina,

Nebraska, Oklahoma, South Dakota, and Tennessee). 4

1. a. Gresham concerns the Secretary’s approval in

2018 of an amendment requested by Arkansas to an existing demonstration project (Arkansas Works) that HHS

had previously approved. App., infra, 4a-7a, 129a. The

existing project had included a voluntary work-referral

program to assist enrollees in seeking employment. Id. at

134a-135a. Arkansas had found, however, that its existing

See, e.g., Letter from Andrew M. Slavitt, Acting Administrator, CMS, to Thomas Betlach, Director, Arizona Health Care

Cost Containment Sys. (Sept. 30, 2016) (Arizona 2016 Letter),

https://go.usa.gov/xmNDx.

HHS also approved similar demonstrations projects for Kentucky

and Maine, but those States have terminated their projects.

voluntary-referral approach was ineffective; although

23% of enrollees who took advantage of the referral became employed, “only 4.7 percent of beneficiaries followed

through with the referral” and took advantage of the programs the State offered. Id. at 135a.

In June 2017, in light of that experience, Arkansas applied to HHS for approval to amend the existing Arkansas Works program to experiment with work and skillbuilding requirements. App., infra, 3a, 129a-135a. As

relevant here, the proposed amendment requires certain adult Medicaid beneficiaries to spend at least 80

hours per month performing activities that include

working, looking for work, job-skills training, education, and community service. Id. at 13a. The requirement applies only to the ACA’s adult-expansion population, and it contains exemptions for beneficiaries who

are medically frail or pregnant, are caring for a dependent child under age six, are participating in a substancetreatment program, or are full-time students. Gresham

Administrative Record (A.R.) 21, 28. Arkansas explained that the proposed changes were expected to “increase the sustainability of the Arkansas Works program,” to “test innovative approaches to promoting personal responsibility and work,” to “encourag[e] movement up the economic ladder, and [to] facilitat[e] transitions from Arkansas Works to employer-sponsored insurance” or individual coverage offered on an ACA Exchange. Id. at 2057; see id. at 2058-2120. 5

In addition to the work and skill-building requirements, Arkansas’s demonstration project includes a provision that limits retroactive Medicaid coverage to a period of 30 days. App., infra, 136a.

That limitation is “intended to increase continuity of care by reducing gaps in coverage when benef iciaries churn on and off of Medicaid or sign up for Medicaid only when sick.” Ibid.; see id. at 142a.

In March 2018, the Secretary approved Arkansas’s

proposed amendments (with modifications not at issue

here) for a three-year period beginning June 1, 2018.

App., infra, 4a-6a, 129a-143a; see id. at 6a (work requirements to take effect in January 2019 for those aged

20-29). HHS’s approval letter observed that the work

and skill-building requirements would (among other

things) “facilitate transitions between and among” Arkansas’s Medicaid program, commercial (including

employer-sponsored) insurance, and coverage through

the Exchange established under the ACA. Id. at 130a;

see Gresham A.R. 14-15.

b. In August 2018, the plaintiffs in Gresham (who are respondents here)—nine Arkansas Medicaid beneficiaries—

brought suit challenging the Secretary’s approval of the

2018 amendments to Arkansas’s demonstration project,

including its work and skill-building requirements. App.,

infra, 6a, 22a-24a, 33a; Gresham Am. Compl. ¶¶ 13-21.

Arkansas intervened to defend its project. Gresham

D. Ct. Docket entry (Sept. 6, 2018). In March 2019, after

the 2018 amendments had been in effect for nearly ten

months, the district court granted summary judgment

for the plaintiffs, vacated the Secretary’s approval of

the amendments, and remanded to the agency for further proceedings. App., infra, 22a-59a.

The district court in Gresham relied on two decisions

it had issued in related litigation challenging the Secretary’s approval of a demonstration project in Kentucky.

See App., infra, 24a-25a, 37a-52a (discussing Stewart v.

Azar, 313 F. Supp. 3d 237 (D.D.C. 2018) (Stewart I ), and

Stewart v. Azar, 366 F. Supp. 3d 125 (D.D.C. 2019) (Stewart II ), appeal dismissed, Nos. 19-5095 and 19-5097 (D.C.

Cir. Jan. 8, 2020)). In Stewart I, the court vacated HHS’s

approval of Kentucky’s demonstration project that included similar work and skill-building requirements.

313 F. Supp. 3d at 250-274. The court concluded that the

agency had not adequately considered “the effect of [the]

demonstration project on the State’s ability to help provide medical coverage,” which the court identified as the

principal objective of the Medicaid statute. Id. at 272;

see id. at 259-274.

On remand, HHS reopened the comment period regarding Kentucky’s proposed demonstration project, and

in November 2018, after reviewing additional comments,

it reapproved the project. See Letter from Paul Mango,

Chief Principal Deputy Administrator and Chief of

Staff, CMS, to Carol H. Steckel, Commissioner, Kentucky Dep’t for Medicaid Servs. (Nov. 20, 2018),

https://go.usa.gov/xwHTq. In March 2019, the district

court in Stewart II again granted summary judgment to

the plaintiffs and vacated HHS’s reapproval. See Stewart II, 366 F. Supp. 3d at 135-156. The court acknowledged the Secretary’s determination that work and

skill-building requirements are likely to advance the

statutory objective of providing coverage. See id. at

134, 148. As the agency had explained, by facilitating

the transition of adults from Medicaid to commercial

coverage, such requirements enhance the f iscal sustainability of a State’s Medicaid program and free up scarce

resources that may be used to provide coverage to other

needy persons—including optional coverage for the

ACA’s adult-expansion population itself. See ibid. The

court also agreed that HHS may “take into account f iscal sustainability in determining under [Section 1315]

whether a demonstration project promotes the objectives of the Act.” Id. at 149. But the court concluded

that the Secretary may not approve a demonstration

project based on that rationale without making a finding

supported by substantial evidence that the project will

in fact result in savings for the State. Ibid.

In its decision in Gresham, issued the same day as

Stewart II, the district court similarly concluded that

HHS had failed adequately to address “whether and

how [Arkansas’s] project would implicate the ‘core’ objective of Medicaid: the provision of medical coverage

to the needy.” App., infra, 51a. The Gresham court

acknowledged the government’s contention that the

work and skill-building requirements, like those in Kentucky, will “help adults ‘transition from Medicaid to

f inancial independence,’ thereby enhancing ‘the f iscal

sustainability of Arkansas’s Medicaid program’—an objective of the Act.” Id. at 49a (citation omitted). But the

court rejected that contention. Id. at 49a-51a. The

court first reasoned that HHS’s letter approving Arkansas’s demonstration project had not specifically articulated the f iscal-sustainability rationale on which the

agency had elaborated in its letter reapproving Kentucky’s demonstration project. Id. at 59a. But the court

nevertheless went on to address that contention on its

merits and rejected it for the reasons stated in its simultaneous decision in Stewart II. Id. at 50a.

2. a. Philbrick concerns the Secretary’s approval in

2018 of an amendment requested by New Hampshire to

an existing demonstration project (now called Granite

Advantage) that HHS had previously approved and

through which New Hampshire had provided coverage

for the ACA’s optional expansion population. App., infra, 70a. New Hampshire proposed to add a requirement

that certain adult Medicaid beneficiaries spend 100

hours per month in work or skill-building activities like

those required under the Arkansas project. See id. at

150a. As in Arkansas’s project, that requirement applies

only to the ACA’s adult-expansion population, and it is

subject to exemptions similar to those in the Arkansas

project. See ibid. In November 2018, the Secretary approved the New Hampshire project for a five-year period

beginning January 1, 2019. See id. at 144a-171a. 6

b. In March 2019, the plaintiffs in Philbrick (who are

respondents here)—four New Hampshire Medicaid

beneficiaries—brought suit challenging the Secretary’s

approval of New Hampshire’s demonstration project.

App., infra, 75a; Philbrick Compl. ¶¶ 16-19. The New

Hampshire Department of Health and Human Services

intervened to defend its project. Philbrick D. Ct. Docket

entry (Apr. 25, 2019). Following its decisions in Stewart

II and Gresham, the district court granted summary

judgment for the Philbrick plaintiffs and vacated the

Secretary’s approval of New Hampshire’s demonstration project. See App., infra, 64a-106a.

As in its prior decisions, the district court in Philbrick

concluded that the Secretary had “failed to adequately

consider” the “core objective of the Medicaid Act” of

“furnish[ing] health-care coverage to the needy.” App.,

infra, 80a; see id. at 79a-98a. And as in Gresham, the

court again relied on its decision in Stewart II in rejecting the government’s contention that work and skillbuilding requirements advance that objective by enhancing the f iscal sustainability of a State’s Medicaid program

and by facilitating the transition of Medicaid recipients to

other coverage. See id. at 90a-97a. The Philbrick court

“offer[ed] an abbreviated restatement of ” that reasoning.

Id. at 80a.

New Hampshire’s project also includes a limitation on retroactive coverage. App., infra, 144a.

3. The federal government and the States appealed. 7

a. The court of appeals in Gresham affirmed. App.,

infra, 1a-19a. It agreed with the district court that “the

principal objective of Medicaid is providing health care

coverage.” Id. at 9a-10a; see id. at 9a-12a. The court of

appeals concluded that, in approving Arkansas’s demonstration project under Section 1315, the Secretary had focused instead on “three alternative objectives”: “ ‘improving health outcomes,’ ” “ ‘address[ing] behavioral and social factors that influence health outcomes,’ ” and “ ‘incentiviz[ing] beneficiaries to engage in their own health care

and achieve better health outcomes.’ ” Id. at 12a (citation

omitted). The court concluded that those goals are not objectives of the Medicaid program in and of themselves

within the meaning of Section 1315. Id. at 13a.

The court of appeals then addressed the government’s contention that the work and skill-building requirements would promote the objective of providing

health coverage by facilitating transitions of Medicaid

beneficiaries to commercial coverage and, in turn, enhancing the f iscal sustainability of Arkansas’s Medicaid

program and enabling the State to spend scarce resources on other needy individuals. App., infra,

13a-16a. The court read HHS’s approval letter not to

have relied on that rationale in approving Arkansas’s

demonstration project, stating that the letter did not

discuss commercial coverage and describing the rationale as a “post hoc rationalization[ ].” Id. at 14a; see

id. at 13a-14a. But instead of remanding for the agency

The federal government and Kentucky also appealed the district

court’s judgment in Stewart II, and that appeal was briefed and argued together with Gresham. But the Stewart II appeal became

moot when Kentucky terminated the demonstration project at issue

in that case. App., infra, 7a.

to provide additional explanation concerning that rationale, the court proceeded to address and reject that

rationale on its merits. Id. at 14a-16a.

The court of appeals held that the Secretary could

not properly “have rested his decision on the objective

of transitioning beneficiaries away from government

benefits through either financial independence or commercial coverage.” App., infra, 14a. The court did not

question the central premises of the government’s argument on this point: that States’ Medicaid dollars are

finite; that requirements that help beneficiaries transition to commercial coverage free up scarce resources,

which can then be used to provide health-care coverage

to other needy persons; and that the demonstration’s

requirements may facilitate such transitions. See id. at

14a-16a. Instead, the court held that HHS could not

rely on “financial independence or transition to commercial coverage” because those goals are not themselves statutory objectives of the Medicaid program.

Id. at 16a; see id. at 14a-16a. The court stated that

“[t]he text of the statute includes one primary purpose,

which is providing health care coverage.” Id. at 16a. And

it noted that, unlike in the TANF and SNAP programs—

where Congress has enacted work and work-related

requirements—in the Medicaid statute “Congress has

not conditioned the receipt of Medicaid benefits on fulfilling work requirements or taking steps to end receipt

of governmental benefits.” Id. at 14a.

Having thus “defined” “the objective of Medicaid,”

the court of appeals held that the Secretary’s approval

of Arkansas’s demonstration project was arbitrary and

capricious for failing to consider the potential effect of

such requirements on coverage. App., infra, 16a; see

id. at 16a-19a. The court cited public comments during

the approval process that had described “the potential

for substantial coverage loss” and data postdating the

Secretary’s approval of Arkansas’s project indicating

that approximately one-fourth of beneficiaries subject

to the work requirement lost coverage following its implementation. Id. at 16a-17a. The court did not separately analyze the demonstration’s limit on retroactive

coverage, see p. 9 n.5, supra, but it affirmed the judgment vacating that aspect as well.

b. The appeals in Philbrick were held in abeyance

pending the court of appeals’ decision in Gresham. Following the court’s decision in Gresham, the government

moved unopposed for summary affirmance in Philbrick,

without prejudice to seeking further appellate review.

App., infra, 20a-21a. The government observed that

Gresham had “rejected the agency’s view” that “ ‘healthy

outcomes, financial independence [and] transition to

commercial coverage’ ” are “valid objectives for a demonstration project because they are potential means of

achieving the concededly valid purpose of providing

more health care coverage to the needy in a world of

limited resources.” Philbrick Gov’t C.A. Mot. for Summ.

Affirmance 4 (Mar. 12, 2020) (citation omitted). A panel

of the court of appeals, which included the author of the

Gresham decision, granted the motion, citing the government’s acknowledgment that “the disposition of this

case is controlled by” Gresham. App., infra, 20a-21a.

REASONS FOR GRANTING THE PETITION

In establishing the Medicaid program, Congress

prescribed a wide range of requirements that a State’s

Medicaid program must satisfy. 42 U.S.C. 1396a. But

Congress also authorized the Secretary to approve experiments by States that in the Secretary’s judgment

are “likely to assist in promoting the objectives” of Medicaid and to “waive compliance with any of the requirements” in Section 1396a that he “finds necessary to enable” such an experiment. 42 U.S.C. 1315(a)(1). Notwithstanding that broad statutory authority, the court of

appeals has concluded that the Secretary may not exercise his power to permit a State to test requirements designed to free up scarce Medicaid resources, which allows the State to provide coverage to other needy persons.

The court of appeals’ decisions are incorrect and warrant this Court’s review. The court’s holding that HHS

may not approve requirements that may serve as means

to the ultimate end of providing coverage reflects a fundamental misreading of the statutory text and context.

And its conclusion that work and skill-building requirements specifically are impermissible objects of experimentation in this context cannot be squared with history. Following past experiments with such requirements in another federal benefit program—approved

under the same statutory authority, Section 1315—

Congress codified such requirements in other statutes.

The court of appeals’ holding that Section 1315 does

not permit such demonstration projects also casts a

shadow on multiple other States’ approved or pending

demonstration projects. And its reasoning threatens to

impede innovations that may make States’ Medicaid

programs more effective and sustainable. Nor is there

any reason to await conflicting decisions from other

courts: under the applicable venue statute, future plaintiffs will have the ability and incentive to bring suit in

the same district. The petition for a writ of certiorari

should be granted.

I. THE COURT OF APPEALS’ DECISIONS INVALIDATING

THE DEMONSTRATION PROJECTS ARE INCORRECT

The court of appeals concluded that the Secretary

may not approve a Medicaid demonstration project under 42 U.S.C. 1315 to test whether work-related and

other requirements can serve as a means of achieving

the objective of providing health coverage. App., infra,

12a-16a. That conclusion is incorrect and rests on a basic

misunderstanding of Section 1315’s text, context, and purpose.

A. The Secretary Has Broad Statutory Authority To Approve

Projects To Test Features That In His Judgment Are Likely

To Assist In Promoting The Objectives Of Medicaid

As a condition of participating in the Medicaid program and receiving federal financial assistance, the Medicaid statute requires a State to submit a plan for its program that comports with a wide array of detailed statutory requirements. See 42 U.S.C. 1396a. As it had done

in the context of other federal benefit programs, however,

Congress recognized that allowing experimentation with

variations from those requirements could yield lessons

and experience that might improve the Medicaid program

itself. Section 1315 authorizes the Secretary to approve

experiments, called “demonstration project[s],” designed

to test variations that might better serve the Medicaid

statute’s overarching aims. 42 U.S.C. 1315(a). It provides

in relevant part:

In the case of any experimental, pilot, or demonstration project which, in the judgment of the Secretary, is likely to assist in promoting the objectives of

* * * [Title XIX of the Social Security Act, i.e., the

Medicaid statute] * * * in a State or States—

(1) the Secretary may waive compliance with

any of the requirements of section * * * 1396a of

this title * * * to the extent and for the period he

finds necessary to enable such State or States to

carry out such project.

42 U.S.C. 1315(a)(1).

That conferral of authority is conspicuous for its

breadth and for the discretion it entrusts to the agency.

Section 1315(a) permits “any * * * demonstration project” that the Secretary deems “likely to assist in promoting the objectives of ” Medicaid. 42 U.S.C. 1315(a). And it

authorizes waiving compliance with “any * * * requirements” imposed by Section 1396a “to the extent and for

the period [the Secretary] finds necessary.” 42 U.S.C.

1315(a)(1). The text makes clear Congress’s intent to give

the Secretary broad discretion to authorize experiments

in this context. The provision’s history confirms that intention. See Senate Report 19 (Section 1315(a) was enacted to ensure that federal requirements would not

“stand in the way of experimental projects designed to

test out new ideas and ways of dealing with the problems of public welfare recipients”).

The wide latitude that Section 1315’s text accords the

Secretary leaves a correspondingly limited role for courts.

The provision’s text permitting the Secretary to approve

any project that, “in the judgment of the Secretary,” is

“likely to assist in promoting the objectives” of Medicaid,

42 U.S.C. 1315(a), and to determine the scope and duration of waivers of the statutory requirements as he “finds

necessary,” 42 U.S.C. 1315(a)(1), “exudes deference” to

the Secretary’s determination. Webster v. Doe, 486 U.S.

592, 600 (1988). And Section 1315’s language referring

to a project the Secretary deems “likely to assist in promoting” Medicaid’s objectives (42 U.S.C. 1315(a)) calls

for an “agency’s predictive judgment,” which this Court

has long recognized “merits deference.” FCC v. Fox

Television Stations, Inc., 556 U.S. 502, 521 (2009); see

FCC v. National Citizens Comm. for Broad., 436 U.S.

775, 813-814 (1978). The statutory text and context thus

establish that any judicial review of the Secretary’s determination must be highly deferential.

The appropriate degree of deference is greater still

because demonstration projects are time-limited experiments that can “influence policy making at the State and

Federal level, by testing new approaches that can be

models for programmatic changes nationwide or in other

States.” Medicaid Program; Review and Approval Process for Section 1115 Demonstrations, 77 Fed. Reg.

11,678, 11,680 (Feb. 27, 2012). The purpose of such experiments is not to impose permanent policies that the

agency has concluded will achieve a particular outcome,

but instead to test a hypothesis. And an experiment can

further the statute’s goals whether or not it yields the

results the agency anticipates—either by validating a

hypothesis that might lead to new innovations, or by refuting a hypothesis, helping Congress and HHS avoid

mistaken policies. Demonstrations “can document policies that succeed or fail,” and “the degree to which they

do so informs decisions about the demonstration at issue, as well as the policy efforts of other States and at

the Federal level.” Id. at 11,679; accord C.K. v. New

Jersey Dep’t of Health & Human Servs., 92 F.3d 171,

187 (3d Cir. 1996) (Section 1315 “experiments are supposed to demonstrate the failings or success of such

programs”). The costs and risks of such experimentation are much smaller at the state level than on a nation-

wide basis, and the experiments take place under a statute that affords States flexibility in designing their own

Medicaid programs to begin with.

Any judicial review of decisions approving demonstration projects is accordingly circumscribed. As Chief

Judge Friendly observed in Aguayo v. Richardson,

473 F.2d 1090 (2d Cir. 1973), cert. denied, 414 U.S. 1146

(1974), “it is legitimate for an administrator to set a lower

threshold for persuasion when he is asked to approve a

program that is avowedly experimental and has a fixed

termination date than a proposal * * * which is irreversible.” Id. at 1103 (footnote omitted); see id. at

1103-1108 (upholding approval under Section 1315 of a

demonstration project that established work requirements for AFDC recipients). Judicial review consists

only of asking “whether the Secretary had a rational basis for determining” that the demonstrations at issue

were “ ‘likely to assist in promoting’ ” the objective of

providing health care coverage. Id. at 1105.

B. The Secretary Properly Approved Demonstration Projects

To Test Work And Other Requirements That Might Enable

States To Stretch Scarce Medicaid Resources Further

1. The Secretary acted well within his broad authority under Section 1315 in approving Arkansas’s demonstration project at issue in Gresham and New Hampshire’s project at issue in Philbrick. The court of appeals stated that “the principal objective of Medicaid is

providing health care coverage.” App., infra, 9a-10a

(citing 42 U.S.C. 1396-1). Assuming arguendo that providing such coverage is the exclusive objective of the

Medicaid program, the Secretary has appropriately determined that testing measures designed to help States

stretch their Medicaid dollars—in turn enabling States

to expand or maintain coverage for needy individuals—

is “likely to assist in promoting” (42 U.S.C. 1315(a)) that

objective.

A State’s provision of health-care coverage through

its Medicaid program depends on finite state resources.

That is why Congress authorized federal financial assistance for States. That understanding is also reflected

in the very provision on which the court of appeals relied. Section 1396-1 authorizes federal funding “[f ]or

the purpose of enabling each State, as far as practicable

under the conditions in such State, to furnish” both

“medical assistance on behalf of families with dependent children and of aged, blind, or disabled individuals,

whose income and resources are insufficient to meet the

costs of necessary medical services,” and certain “rehabilitation and other services” for “such families and individuals.” 42 U.S.C. 1396-1 (emphasis added).

As this Court has recognized, requirements that enable States to stretch limited resources promote the objectives of public-welfare programs. In upholding a State’s

work requirements in the context of the AFDC program, this Court emphasized that States may “attempt

to promote self-reliance and civic responsibility” in order “to assure that limited state welfare funds be spent

on behalf of those genuinely incapacitated and most in

need, and to cope with the f iscal hardships enveloping

many state and local governments.” New York State

Dep’t of Soc. Servs. v. Dublino, 413 U.S. 405, 413 (1973).

A plurality of the Court echoed that understanding in

the context of Medicaid in Pharmaceutical Research &

Manufacturers of America v. Walsh, 538 U.S. 644,

666-667 (2003), which upheld drug-rebate and priorauthorization requirements that were designed to keep

borderline populations out of Medicaid and thus conserve scarce state resources.

Opportunities for stretching limited state resources

are particularly significant in the context of Medicaid,

given the discretion the statute affords to States to tailor

their Medicaid programs. Although coverage for certain

categories of individuals and for certain benefits is mandatory, States are otherwise generally free to provide additional coverage. Indeed, the majority of Medicaid

spending goes toward optional benefits and populations that States have elected but are not required to

cover—including, of particular relevance here, the adultexpansion population that became optional as a result of

this Court’s decision in NFIB. See pp. 3-4, supra. And

even with respect to coverage that is mandatory, the Medicaid statute gives States significant latitude to determine

the amount, scope, and duration of coverage, see Alexander v. Choate, 469 U.S. 287, 303 (1985), and the rates they

pay providers, see Armstrong v. Exceptional Child Ctr.,

Inc., 575 U.S. 320, 328 (2015); see also App., infra, 147a

n.1 (noting States’ “considerable flexibility in the design

of their Medicaid programs,” including to provide optional

coverage).

Every Medicaid dollar a State saves is a dollar that

it can spend providing coverage for additional individuals or providing additional benefits. Savings also may

enable a State that faces financial strain and is considering paring back its optional coverage to continue

providing some or all of that coverage. Demonstration

projects that test whether particular adjustments to the

Medicaid statute’s default requirements can yield such

savings in a manner compatible with the broader statutory framework thus can “assist in promoting” the “objective[ ]” (42 U.S.C. 1315(a)) of providing coverage. As

HHS explained, demonstration projects “provide an op-

portunity for [S]tates to test policies that ensure the f iscal sustainability of the Medicaid program, better ‘enabling each [S]tate, as far as practicable under the conditions in such [S]tate’ to furnish medical assistance, while

making it more practicable for [S]tates to furnish medical assistance to a broader range of persons in need.”

App., infra, 146a; see id. at 165a.

2. The Secretary acted well within his discretion

under Section 1315 in determining that the Arkansas

and New Hampshire demonstration projects are likely

to assist in promoting Medicaid’s objectives. The challenged work and skill-building requirements test whether

such requirements can help States stretch their limited

Medicaid resources further. App., infra, 145a-148a,

153a-156a; see id. at 129a-136a.

a. Both demonstration projects require certain

working-age, nondisabled adults to engage in a specified number of hours of work or skill-building activities

(such as job-skills training or education). See App., infra, 130a-132a, 148a-150a. Arkansas’s project, for example, requires individuals within the ACA’s expansion

population (subject to various exemptions) to spend at

least 80 hours per month working or performing other

activities such as seeking work, job-skills training or

other education, or community service. See id. at 130a;

see also id. at 149a-150a (New Hampshire project requiring 100 hours per month, subject to similar limitations and exemptions).

Those requirements are modeled on work requirements that have been statutory conditions of eligibility

since 1996 for cash assistance under the TANF program

and food assistance under SNAP—conditions that Congress enacted following demonstration projects experi-

menting with such requirements under the AFDC program that TANF replaced. See pp. 6-7, supra. Under

TANF, a State may require 30 hours per week of qualifying activities for a one-parent family (on average,

120 hours per month) and 35 hours per week (140 hours

per month) for a two-parent family. 42 U.S.C. 607(c);

45 C.F.R. 261.30-261.32; see 42 U.S.C. 1396u-1(b)(3)(A).

The Medicaid statute itself incorporates TANF’s requirement to an extent, permitting a State to terminate the

Medicaid benefits of certain adults whose TANF benefits

are terminated for failure to comply with TANF’s workrelated requirements. 42 U.S.C. 1396u-1(b)(3)(A). And

under SNAP, able-bodied adults without dependents

must engage in at least 20 hours per week (on average, 80

hours per month) of work or certain other activities to receive SNAP benefits for more than three months in a

36-month period. 7 U.S.C. 2015(o); 7 C.F.R. 273.24.

b. As HHS explained, demonstration projects under

Medicaid enable the States to test whether and to what

extent such work and skill-building requirements can

help enable a State “to stretch its limited Medicaid resources.” App., infra, 155a. Enabling a State to conserve its resources, HHS observed, “w[ould] assist in

ensuring the long-term f iscal sustainability of the program and preserving the health care safety net for those

* * * residents who need it most.” Id. at 155a-156a. And

it could “allow[ ] [a] [S]tate to provide services to Medicaid beneficiaries that it could not otherwise provide.”

Id. at 156a. For example, New Hampshire had informed HHS that, without the ability to undertake the

demonstration project, it would be required to terminate coverage of the expansion population. Id. at 155a.

HHS found that “[i]t furthers the Medicaid program’s

objectives to allow [S]tates to experiment with innovative means of deploying their limited state resources in

ways that may allow them to provide services beyond

the legal minimum.” Id. at 156a; see id. at 165a.

HHS has identified two potential ways by which

work and skill-building requirements could help enable

States to stretch limited Medicaid resources, which the

demonstration projects would test.

i. First, including those requirements would “help

the [S]tate[s] and CMS evaluate whether” they enable

non-exempt adults in the expansion population to “transition from Medicaid to financial independence and

commercial insurance.” App., infra, 151a. The requirements are designed to give covered individuals a strong

incentive to acquire the skills and experience needed for

sustained employment. See id. at 132a-136a, 145a-147a,

151a-153a, 159a. Sustained employment may in turn

cause a Medicaid beneficiary’s income to increase above

the threshold for Medicaid eligibility—approximately

$17,600 for a single-person household—freeing up the

funds the State would otherwise spend providing coverage to that individual to provide coverage for others. See

id. at 153a, 155a-156a; see also 42 U.S.C. 1396(e)(14)(I),

1396a(a)(10)(A)(i)(VIII); CMS, HHS, Federal Poverty

Level (FPL), https://go.usa.gov/xwt9D.

As HHS further explained, an individual who loses eligibility for Medicaid because he or she obtains sustained

employment and increased income may obtain commercial health-care coverage. App., infra, 153a. The individual “may receive an offer of employer-sponsored insurance.” Ibid. Alternatively, the individual may obtain

federally subsidized coverage through an Exchange.

Ibid. To make such coverage more affordable, Con-

gress has authorized billions of dollars in annual premium tax credits to help individuals pay for insurance

sold on the Exchanges. See 26 U.S.C. 36B. The vast

majority (approximately 87%) of people who buy coverage on an Exchange do so with tax credits. See King v.

Burwell, 135 S. Ct. 2480, 2493 (2015). For example, for

individuals whose household income is below 200% of

the federal poverty level, the tax credit covers approximately 80% of the premium. 8

HHS determined that, if the work and skill-building

requirements operate as intended—by “help[ing] individuals achieve financial independence and transition

into commercial coverage”—then “the demonstration[s]

may reduce dependency on public assistance while still

promoting Medicaid’s purpose of helping [S]tates furnish medical assistance by allowing [the States] to

stretch [their] limited Medicaid resources.” App., infra,

155a. “[A]llow[ing] [S]tates to experiment” with the requirements to examine whether in fact they function in

that fashion thus “furthers the Medicaid program’s objectives.” Ibid.

ii. Second, HHS determined that work and skillbuilding requirements may lead to increased health and

wellness of beneficiaries, which in turn reduces the cost of

providing them health-care coverage. See App., infra,

145a-156a, 151a-154a. As HHS explained, “measures designed to improve health and wellness may reduce the volume of services furnished to beneficiaries, as healthier,

more engaged beneficiaries tend to receive fewer medical

services and are generally less costly to cover.” Id. at

146a. “Promoting improved health and wellness” thus

See Congressional Budget Office, An Analysis of Health Insurance Premiums Under the Patient Protection and Affordable Care

Act 19-20 (Nov. 30, 2009), https://go.usa.gov/xpfCH.

“ultimately helps to keep health care costs at more sustainable levels,” further enabling a State to “stretch its

limited Medicaid resources.” Id. at 155a. And an overarching purpose of “furnish[ing] medical assistance and

other services to vulnerable populations” is “advancing

the health and wellness of the individual receiving them.”

Id. at 145a.

As HHS has additionally explained, “research has

shown” that the types of activities required by the work

and skill-building requirements are “correlated with improved health and wellness.” App., infra, 133a-134a.

And “CMS has long supported policies that recognize

meaningful work as essential to,” among other things,

the “well-being” and “improved health of people with disabilities.” Id. at 134a. HHS accordingly determined that

States “should be able to design and test incentives,” including work and skill-building requirements, for Medicaid beneficiaries to undertake those activities, potentially resulting in improved health for beneficiaries and

lower per capita costs for States. Ibid. 9

Permitting States to experiment with that approach

comported with Congress’s own judgments and HHS’s

past practice. In the ACA, Congress authorized grants

for States that give Medicaid beneficiaries incentives

for various “healthy behaviors,” including “[c]easing use

Recent research during the COVID-19 pandemic indicates that

factors such as a lack of economic participation, social isolation, and

other economic stressors have negative impacts on mental and

physical health. See, e.g., Nirmita Panchal et al., The Implications

of COVID-19 for Mental Health and Substance Use, Kaiser Family

Found. (Apr. 21, 2020), https://www.kff.org/coronavirus-covid19/issue-brief/the-implications-of-covid-19-for-mental-health-andsubstance-use/. Structured properly, community-engagement incentives and requirements that increase such participation may

have a positive effect on beneficiary health and economic mobility.

of tobacco products,” “[c]ontrolling or reducing their

weight,” “[l]owering their cholesterol,” or “[a]voiding

the onset of diabetes or, in the case of a diabetic, improving the management of that condition.” ACA Tit.

IV, Subtit. B, § 4108(a), 124 Stat. 561-562. In 2012, HHS

had encouraged States to develop demonstration projects “aimed at promoting healthy behaviors” and “accountability tied to improvement in health outcomes.”

CMS FAQ 15. And in 2016, HHS approved an Arizona

project requiring Medicaid recipients to pay premiums,

which recipients could avoid by adopting healthy behaviors. 10

The Secretary thus had an ample basis to determine

that permitting the States to test the work and skillbuilding requirements is “likely to assist in promoting

the objectives” of Medicaid. 42 U.S.C. 1315(a). Under

the statute’s plain terms, nothing more was required.

C. The Court Of Appeals Fundamentally Misconstrued

The Secretary’s Authority Under 42 U.S.C. 1315

The court of appeals nevertheless concluded that the

Secretary exceeded his authority under 42 U.S.C. 1315

by allowing the States to test whether work and skillbuilding requirements (among others) advance the Medicaid statute’s objectives. App., infra, 9a-16a, 20a-21a.

That conclusion rests on a basic misunderstanding of

Section 1315.

1. The court of appeals in Gresham began from the

premise that “the primary objective of Medicaid is to provide access to medical care.” App., infra, 12a. Even assuming arguendo that providing access to medical care is

the program’s exclusive objective, the court mistakenly

Arizona 2016 Letter 1-3. As noted above, in its 2016 letter, HHS

declined to approve a work requirement. Ibid.; see p. 8 n.3, supra.

concluded that in exercising his authority under Section

1315 the Secretary must focus exclusively on “providing

health care coverage” simpliciter and not on measures

that may be means to that end. Id. at 9a-10a; see id. at

12a-16a. The court held that the Secretary could not lawfully “rest[ ] his decision” to allow the testing of work and

skill-building requirements “on the objective of transitioning beneficiaries away from government benefits

through either financial independence or commercial

coverage.” Id. at 14a. Doing so, the court reasoned, would

contravene Medicaid’s “one primary purpose, which is

providing health care coverage without any restriction

geared to healthy outcomes, financial independence, or

transition to commercial coverage.” Id. at 16a.

That remarkably cramped reading of the Secretary’s

authority cannot be reconciled with Section 1315. Nothing in that provision precludes the Secretary from approving demonstration projects to test measures that may

help indirectly advance the Medicaid objective of providing coverage. To the contrary, the text authorizes “any

* * * demonstration project which, in the judgment of

the Secretary, is likely to assist in promoting the objectives of ” Medicaid. 42 U.S.C. 1315(a) (emphasis added).

That language naturally encompasses measures that are

means to achieve the Medicaid objective of furnishing

medical assistance.

Context reinforces that reading. Section 1315 authorizes experiments to test whether particular adjustments

to the default Medicaid requirements advance the statute’s aims. In that setting, it makes perfect sense that

Congress allowed projects to evaluate measures one step

removed from the provision of coverage itself. It is implausible, moreover, that Congress failed to appreciate

the potential interplay of various aspects of a State’s Medicaid program on its ability to provide coverage, or that

Congress intended the Secretary to ignore those interactive effects. Cf. Aguayo, 473 F.2d at 1103-1104 (upholding

AFDC demonstration project incorporating work requirement and explaining that “Congress must have realized” that paying benefits to families that were able to

earn income would “diminish the funds available for cases

where they were not”).

The court of appeals’ reliance on the fact that the

Medicaid statute, unlike the TANF and SNAP statutes,

generally does not itself expressly condition eligibility

on working as a means of “ending the dependence of

needy parents on government benefits,” App., infra,

14a (brackets and citation omitted), was misplaced for

similar reasons. Those are permanent provisions applicable nationwide. This case involves temporary, Statespecific experiments. Moreover, the Secretary here

noted the potential of work requirements to reduce dependency on public assistance not merely as an end in

itself but also as a means of helping stretch limited Medicaid funds further. See pp. 26-27, supra. The court’s

reliance on those other programs’ work requirements is

even more puzzling, given that they are the outgrowth

of earlier AFDC demonstration projects approved under Section 1315 on which the projects at issue here are

modeled.

2. The court of appeals in Gresham went on to hold

that the Secretary’s approval of Arkansas’s demonstration project was arbitrary and capricious, but that holding rested on the court’s misunderstanding of Section

1315. App., infra, 16a-19a. The court concluded that

“the Secretary disregarded th[e] statutory purpose” of

providing coverage. Id. at 19a. But that conclusion fails

to account for the Secretary’s judgment that work and

skill-building requirements (among others) can be

means of helping States to provide coverage.

The court of appeals’ summary affirmance of the district court’s order vacating the Secretary’s approval in

Philbrick—by a panel that included the author of

Gresham—confirms that its rejection of the Secretary’s

approvals rests on its misreading of the statute. HHS’s

letter approving New Hampshire’s demonstration project in Philbrick made unmistakably clear the Secretary’s judgment that the project, including its work and

skill-building requirements, would advance the Medicaid objective of furnishing coverage by means of

“[h]elping the [S]tate stretch its limited Medicaid resources.” App., infra, 155a. The district court in Philbrick acknowledged the Secretary’s determination but rejected it because in the court’s view the record did not contain a definitive finding by HHS supported by substantial

evidence showing that the project would in fact achieve

that result. See id. at 88a-95a. That analysis overlooked

the critical feature of demonstration projects as experiments, designed to test whether such hypotheses are true.

As the government acknowledged on appeal in Philbrick, however, the court of appeals’ intervening decision in Gresham “control[ led]” because that decision

had categorically “rejected the agency’s view” that

“ ‘healthy outcomes, financial independence or transition to commercial coverage’ ” are “valid objectives for

a demonstration project because,” among other reasons, “they are potential means of achieving the concededly valid purpose of providing more health care coverage to the needy in a world of limited resources.” Philbrick Gov’t C.A. Mot. for Summ. Affirmance 4. The court

of appeals evidently agreed: it granted the government’s

request for summary affirmance on the ground that

Gresham “controlled.” App., infra, 20a. 11

II. THE COURT OF APPEALS’ RULINGS PRESENT A

QUESTION OF SUBSTANTIAL PRACTICAL IMPORTANCE

THAT WARRANTS THIS COURT’S REVIEW

The court of appeals’ decisions erroneously invalidating the Secretary’s approvals of two States’ demonstration projects present an issue of exceptional importance to the federal government and States that

have obtained, are seeking, or may seek approval for

such projects. Most immediately, the decisions below

preclude Arkansas and New Hampshire from undertaking experiments to test adjustments to their statewide

Medicaid programs that the States and the Secretary

determined may have significant value. While those

demonstration projects remain in limbo, the States are

deprived of the advantages that their projects may produce, and the Secretary and other States are deprived

of the lessons and experience that those experiments

may yield. If this Court grants review and reverses the

judgments below, the States will be able to implement

those projects once public-health conditions related to

COVID-19 allow.

For the same reason, although the court of appeals in Gresham

alternatively (and erroneously) held that the Secretary had not adequately articulated the agency’s position that stretching resources is

a means of achieving the objective of providing coverage, App., infra,

12a-13a, that additional holding does not diminish the court’s error in

interpreting the statute. The Gresham court went on to address the

Secretary’s position on the merits. Id. at 13a-16a. And on that basis,

in Philbrick, it summarily affirmed the district court’s judgment vacating the Secretary’s approval of New Hampshire’s demonstration

project, which had set forth the Secretary’s position in considerable

detail. Id. at 20a-21a.

In addition, the decisions below will jeopardize, and

might prove fatal to, as many as 17 other States’ demonstration projects that incorporate similar requirements

and that have been approved or for which approval is

pending. See p. 8, supra. If the court of appeals’ decision

in Gresham is allowed to stand, it very likely will be binding in litigation over any of those other projects. Under

the applicable venue statute, any plaintiff challenging

the Secretary’s approval of other projects may likewise

bring suit in the District Court for the District of Columbia. See 28 U.S.C. 1391(e)(1). And because Gresham is

now controlling circuit precedent, plaintiffs have every

reason to do so. Suits filed in that district challenging

approved demonstration projects in Indiana and Michigan are already underway. 12 No sound reason exists to

await decisions from other courts of appeals in suits that

are unlikely to be brought elsewhere. This Court should

review the D.C. Circuit’s holding before it becomes entrenched as a de facto nationwide rule.

Moreover, the court of appeals’ reasoning casts a

cloud over other demonstration-project components beyond the work and skill-building requirements centrally

at issue in these cases. A separate provision of the Arkansas demonstration project limits retroactive coverage for members of the ACA’s adult-expansion population to a period of 30 days. See App., infra, 131a. That

provision is similar to limits on retroactive coverage

that HHS previously approved as part of other demonstration projects. See, e.g., C.A. App. 132, 134, 137, 143;

see also App., infra, 149a, 155a-156a (New Hampshire).

As the Secretary explained, it is designed to encourage

See Rose v. Azar, No. 19-cv-2848 (D.D.C. f iled Sept. 23, 2019)

(Indiana project); Young v. Azar, No. 19-cv-3526 (D.D.C. f iled Nov.

22, 2019) (Michigan project).

beneficiaries to obtain and maintain health coverage,

even when healthy, which in turn may increase use of

preventive services that improve health outcomes.

App., infra, 136a, 141a-142a, 153a-154a, 169a. Without

specifically addressing that limitation, the court of appeals vacated the approval of it as well.

By severely curtailing the Secretary’s authority to

approve demonstration projects, the decisions below

may have the unintended consequence of discouraging

States from providing optional Medicaid coverage. It is

not unusual for a State to pair optional coverage with a

demonstration project that tests new requirements.

See, e.g., Spry v. Thompson, 487 F.3d 1272, 1276 (9th

Cir. 2007). The uncertainty engendered by the decision

below and the risk of protracted litigation that prevents

implementation of a demonstration project may dissuade other States from electing to provide or maintain

optional coverage, undermining what the court of appeals described as Medicaid’s core aim.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted.

JEFFREY B. WALL

Acting Solicitor General

EDWIN S. KNEEDLER

Deputy Solicitor General

JONATHAN C. BOND

Assistant to the Solicitor

General

MARK B. STERN

ALISA B. KLEIN

Attorneys

JULY 2020

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 19-5094

Consolidated with 19-5096

CHARLES GRESHAM, ET AL., APPELLEES

ALEX MICHAEL AZAR, II, SECRETARY,

UNITED STATES DEPARTMENT OF HEALTH AND

HUMAN SERVICES IN HIS OFFICIAL CAPACITY, ET AL.,

APPELLANTS

STATE OF ARKANSAS, APPELLEE

Argued:

Decided:

Oct. 11, 2019

Feb. 14, 2020

Appeals from the United States District Court

for the District of Columbia

(No. 1:18-cv-01900)

Before: PILLARD, Circuit Judge, and EDWARDS

and SENTELLE, Senior Circuit Judges.

Opinion for the Court filed by Senior Circuit Judge

SENTELLE.

SENTELLE, Senior Circuit Judge: Residents of

Kentucky and Arkansas brought this action against the

Secretary of Health and Human Services. They contend that the Secretary acted in an arbitrary and capri(1a)

cious manner when he approved Medicaid demonstration requests for Kentucky and Arkansas. The District

Court for the District of Columbia held that the Secretary did act in an arbitrary and capricious manner because he failed to analyze whether the demonstrations

would promote the primary objective of Medicaid—to

furnish medical assistance. After oral argument, Kentucky terminated the challenged demonstration project

and moved for voluntary dismissal. We granted the

unopposed motion. The only question remaining before us is whether the Secretary’s authorization of Arkansas’s demonstration is lawful. Because the Secretary’s approval of the plan was arbitrary and capricious,

we affirm the judgment of the district court.

Background

Originally, Medicaid provided health care coverage

for four categories of people: the disabled, the blind, the

elderly, and needy families with dependent children.

42 U.S.C. § 1396-1. Congress amended the statute in 2010

to expand medical coverage to low-income adults who

did not previously qualify. Id. at § 1396a(a)(10)(A)(i)(VIII);

NFIB v. Sebelius, 567 U.S. 519, 583 (2012). States

have a choice whether to expand Medicaid to cover this

new population of individuals. NFIB, 567 U.S. at 587.

Arkansas expanded Medicaid coverage to the new population effective January 1, 2014, through their participation in private health plans, known as qualified health

plans, with the state paying premiums on behalf of

enrollees. Appellees’ Br. 14; Gresham v. Azar, 363

F. Supp. 3d 165, 171 (D.D.C. 2019).

Medicaid establishes certain minimum coverage

requirements that states must include in their plans.

42 U.S.C. § 1396a. States can deviate from those requirements if the Secretary waives them so that the

state can engage in “experimental, pilot, or demonstration project[s].” 42 U.S.C. § 1315(a). The section authorizes the Secretary to approve “any experimental, pilot, or demonstration project which, in the judgment of

the Secretary, is likely to assist in promoting the objectives” of Medicaid. Id.

Arkansas applied to amend its existing waiver under

§ 1315 on June 30, 2017. Arkansas Administrative Record 2057 (“Ark. AR”). Arkansas gained approval for

its initial Medicaid demonstration waiver in September

2013. In 2016, the state introduced its first version of

the Arkansas Works program, encouraging enrollees to

seek employment by offering voluntary referrals to the

Arkansas Department of Workforce Services. Dissatisfied with the level of participation in that program, Arkansas’s new version of Arkansas Works introduced

several new requirements and limitations. The one

that received the most attention required beneficiaries

aged 19 to 49 to “work or engage in specified educational, job training, or job search activities for at least

80 hours per month” and to document such activities.

Id. at 2063. Certain categories of beneficiaries were

exempted from completing the hours, including beneficiaries who show they are medically frail or pregnant,

caring for a dependent child under age six, participating

in a substance treatment program, or are full-time students. Id. at 2080-81. Nonexempt “beneficiaries who

fail to meet the work requirements for any three months

during a plan year will be disenrolled . . . and will

not be permitted to re-enroll until the following plan

year.” Id. at 2063.

Arkansas Works included some other new requirements in addition to the much-discussed work requirements. Typically, when someone enrolls in Medicaid,

the “medical assistance under the plan . . . will be

made available to him for care and services included under the plan and furnished in or after the third month

before the month in which he made application.” 42

U.S.C. § 1396a(a)(34). Arkansas Works proposed to

eliminate retroactive coverage entirely. Ark. AR 2057,

2061. It also proposed to lower the income eligibility

threshold from 133% to 100% of the federal poverty line,

meaning that beneficiaries with incomes from 101% to

133% of the federal poverty line would lose health coverage. Id. at 2057, 2060-61, 2063. Finally, Arkansas

Works eliminated a program in which it used Medicaid

funds to assist beneficiaries in paying the premiums for

employer-provided health care coverage. Id. at 2057,

2063, 2073. Arkansas instead used Medicaid premium

assistance funds only to help beneficiaries purchase a

qualified health plan available on the state Health Insurance Marketplace, requiring all previous recipients

of employer-sponsored coverage premiums to transition

to coverage offered through the state’s Marketplace.

Id. at 2057, 2063, 2073.

On March 5, 2018, the Secretary approved most of

the new Arkansas Works program via a waiver effective

until December 31, 2021, but with a few changes. He

approved the work requirements but under the label of

“community engagement.” Id. at 2. The Secretary

authorized Arkansas to limit retroactive coverage to

thirty days before enrollment rather than a complete

elimination of retroactive coverage. Id. at 3, 12. He

also approved Arkansas’s decision to terminate the

employer-sponsored coverage premium assistance program. Id. at 3. The Secretary did not, however, permit Arkansas to limit eligibility to persons making less

than or equal to 100% of the federal poverty line. Id.

at 3 n.1, 11. Instead, the Secretary kept the income eligibility threshold at 133% of the federal poverty line.

Id. at 3 n.1, 11.

In the approval letter, the Secretary analyzed whether

Arkansas Works would “assist in promoting the objectives of Medicaid.” Id. at 3. The Secretary identified

three objectives that he asserted Arkansas Works would

promote: “improving health outcomes; . . . address[ing] behavioral and social factors that influence health

outcomes; and . . . incentiviz[ing] beneficiaries to

engage in their own health care and achieve better

health outcomes.” Id. at 4. In particular, the Secretary stated that Arkansas Works’s community engagement requirements would “encourage beneficiaries to

obtain and maintain employment or undertake other

community engagement activities that research has

shown to be correlated with improved health and wellness.” Id. Further, the Secretary thought the shorter

timeframe for retroactive eligibility would “encourage

beneficiaries to obtain and maintain health coverage,

even when they are healthy,” which, in turn, promotes

“the ultimate objective of improving beneficiary health.”

Id. at 5. The letter also summarized concerns raised

by commenters that the community engagement requirement would “caus[e] disruptions in care” or “create

barriers to coverage” for beneficiaries who are not exempt. Id. at 6-7. In response, the Secretary noted

that Arkansas had several exemptions and would “implement an outreach strategy to inform beneficiaries

about how to report compliance.” Id.

The new work requirements took effect for those

aged 30 to 49 on June 1, 2018, and for those aged 20 to

29 on January 1, 2019. Gresham, 363 F. Supp. 3d at

172. Charles Gresham along with nine other Arkansans filed an action for declaratory and injunctive relief

against the Secretary on August 14, 2018. The district

court on March 27, 2019, entered judgment vacating the

Secretary’s approval, effectively halting the program.

Gresham, 363 F. Supp. 3d at 176-85. In its opinion supporting the judgment, the district court relied on Stewart v. Azar, 313 F. Supp. 3d 237 (D.D.C. 2018) (Stewart

I), which is the district court’s first opinion considering

Kentucky’s similar demonstration, Gresham, 363 F. Supp.

3d at 176. In Stewart I, the district court turned to the

provision authorizing the appropriations of funds for

Medicaid, 42 U.S.C. § 1396-1, and held that, based on the

text of that appropriations provision, the objective of

Medicaid was to “furnish . . . medical assistance” to

people who cannot afford it. Stewart I, 313 F. Supp. 3d

at 260-61.

With its previously articulated objective of Medicaid

in mind, the district court then turned to the Secretary’s

approval of Arkansas Works. First, the district court

noted that the Secretary identified three objectives that

Arkansas Works would promote: “(1) ‘whether the

demonstration as amended was likely to assist in improving health outcomes’; (2) ‘whether it would address

behavioral and social factors that influence health outcomes’; and (3) ‘whether it would incentivize beneficiaries to engage in their own health care and achieve better

health outcomes.’ ” Gresham, 363 F. Supp. 3d at 176

(quoting Ark. AR 4). But “[t]he Secretary’s approval

letter did not consider whether [Arkansas Works] would

reduce Medicaid coverage. Despite acknowledging at

several points that commenters had predicted coverage

loss, the agency did not engage with that possibility.”

Id. at 177. The district court also explained that the

Secretary failed to consider whether Arkansas Works

would promote coverage. Id. at 179. Instead, the

Secretary considered his alternative objectives, primarily healthy outcomes, but the district court observed

that “ ‘focus on health is no substitute for considering

Medicaid’s central concern:

covering health costs’

through the provision of free or low-cost health coverage.” Id. (quoting Stewart I, 313 F. Supp. 3d at 266).

“In sum,” the district court held:

the Secretary’s approval of the Arkansas Works

Amendments is arbitrary and capricious because it

did not address—despite receiving substantial comments on the matter—whether and how the project

would implicate the “core” objective of Medicaid:

the provision of medical coverage to the needy.

Id. at 181. The district court entered final judgment on

April 4, 2019, and the Secretary filed a notice of appeal

on April 10, 2019.

This case was originally a consolidated appeal from

the district court’s judgment in both the Arkansas and

Kentucky cases. The district court twice vacated the

Secretary’s approval of Kentucky’s demonstration for

the same failure to address whether Kentucky’s program would promote the key objective of Medicaid.

Stewart v. Azar, 366 F. Supp. 3d 125, 156 (D.D.C. 2019)

(Stewart II); Stewart I, 313 F. Supp. 3d at 274. On December 16, 2019, Kentucky moved to dismiss its appeal

as moot because it “terminated the section [1315] demonstration project.” Intervenor-Def.-Appellant’s Mot. to

Voluntarily Dismiss Appeal 1-2 (Dec. 16, 2019), ECF No.

1820334. Neither the government nor the appellees

opposed the motion. Gov’t’s Resp. (Dec. 18, 2019),

ECF No. 1820655; Appellees’ Resp. (Dec. 20, 2019),

ECF No. 1821219.

Although the Secretary has considerable discretion

to grant a waiver, we reject the government’s contention

that such discretion renders his waiver decisions unreviewable. The Administrative Procedure Act’s (APA)

exception from judicial review for an action committed

to agency discretion is “very narrow,” Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 410

(1971); see also Dep’t of Commerce v. New York, 139

S. Ct. 2551, 2568 (2019), barring judicial review only in

those “rare instances” where “there is no law to apply,”

Overton Park, 401 U.S. at 410 (internal quotation marks

and citation omitted). The Medicaid statute provides

the legal standard we apply here: The Secretary may

only approve “experimental, pilot, or demonstration

project[s],” and only insofar as they are “likely to assist

in promoting the objectives” of Medicaid, 42 U.S.C.

§ 1315(a). Section 1315 approvals are not among the

rare “categories of administrative decisions that courts

traditionally have regarded as committed to agency discretion.” Dep’t of Commerce, 139 S. Ct. at 2568.

Additionally, the government asked that we address

“the reasoning of the district court’s opinion in Stewart

and the underlying November 2018 HHS approval of the

Kentucky demonstration,” and second that we vacate

the district court’s judgment against the federal defendants in the Kentucky case Stewart II, 66 F. Supp. 3d 125.

Gov’t’s Resp. 1-2. The appellees opposed both of those

additional requests. Appellees’ Resp. 1-4. We granted

the motion to voluntarily dismiss but declined to vacate

the district court’s judgment against the federal defendants in Stewart II. As to the government’s first request, we do not rely on the Secretary’s reasoning in the

November 2018 approval of Kentucky’s demonstration

when considering the Secretary’s approval of Arkansas’s demonstration.

“We review de novo the District Court’s grant of

summary judgment, which means that we review the

agency’s decision on our own.” Castlewood Prods.,

L.L.C. v. Norton, 365 F.3d 1076, 1082 (D.C. Cir. 2004).

Therefore, we will review the Secretary’s approval of

Arkansas Works in accordance with the Administrative

Procedure Act and will set it aside if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A); see also C.K.

v. New Jersey Dep’t of Health & Human Servs., 92 F.3d

171, 181-82 (3d Cir. 1996) (applying the arbitrary and capricious standard of review to a waiver under § 1315);

Beno v. Shalala, 30 F.3d 1057, 1066-67 (9th Cir. 1994)

(same); Aguayo v. Richardson, 473 F.2d 1090, 1103-08

(2d Cir. 1973) (same). An agency action that “entirely

failed to consider an important aspect of the problem,

offered an explanation for its decision that runs counter

to the evidence before the agency, or is so implausible

that it could not be ascribed to a difference in view or

the product of agency expertise” is arbitrary and capricious. Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State

Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).

II.

DISCUSSION

Objective of Medicaid

The district court is indisputably correct that the

principal objective of Medicaid is providing health care

10a

coverage. The Secretary’s discretion in approving or

denying demonstrations is guided by the statutory directive that the demonstration must be “likely to assist

in promoting the objectives” of Medicaid. 42 U.S.C.

§ 1315. While the Medicaid statute does not have a

standalone purpose section like some social welfare statutes, see, e.g., 42 U.S.C. § 601(a) (articulating the purposes of the Temporary Assistance for Needy Families

program); 42 U.S.C. § 629 (announcing the “objectives”

of the Promoting Safe and Stable Families program), it

does have a provision that articulates the reasons underlying the appropriations of funds, 42 U.S.C. § 1396-1.

The provision describes the purpose of Medicaid as

to furnish (1) medical assistance on behalf of families

with dependent children and of aged, blind, or disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services, and (2) rehabilitation and other services to help

such families and individuals attain or retain capability for independence or self-care.

Id. In addition to the appropriations provision, the

statute defines “medical assistance” as “payment of part

or all of the cost of the following care and services or the

care and services themselves.” 42 U.S.C. § 1396d(a).

Further, as the district court explained, the Affordable

Care Act’s expansion of health care coverage to a larger

group of Americans is consistent with Medicaid’s general purpose of furnishing health care coverage. See

Stewart I, 313 F. Supp. 3d at 260 (citing Pub. L. No. 111148, 124 Stat. 119, 130, 271 (2010)). The text consistently focuses on providing access to health care coverage.

11a

Both the First and Sixth Circuits relied on Medicaid’s

appropriations provision quoted above in concluding

that “[t]he primary purpose of Medicaid is to enable

states to provide medical services to those whose ‘income and resources are insufficient to meet the costs of

Pharm. Research &

necessary medical services.’ ”

Mfrs. of Am. v. Concannon, 249 F.3d 66, 75 (1st Cir.

2001) (quoting 42 U.S.C. § 1396 (2000)), aff ’d, 538 U.S.

644 (2003); Price v. Medicaid Dir., 838 F.3d 739, 742 (6th

Cir. 2016). Similarly, the Ninth Circuit relied on both

the appropriations provision and the definition of “medical assistance” when describing Medicaid as “a federal

grant program that encourages states to provide certain

medical services” and identifying a key element of “medical assistance” as the spending of federally provided

funds for medical coverage. Univ. of Wash. Med. Ctr.

v. Sebelius, 634 F.3d 1029, 1031, 1034-35 (9th Cir. 2011).

Beyond relying on the text of the statute, other

courts have consistently described Medicaid’s objective

as primarily providing health care coverage. For example, the Third Circuit succinctly stated, “We recognize, of course, that the primary purpose of medicaid is

to achieve the praiseworthy social objective of granting

health care coverage to those who cannot afford it.” W.

Va. Univ. Hosps., Inc. v. Casey, 885 F.2d 11, 20 (3d Cir.

1989), aff ’d, 499 U.S. 83 (1991). Likewise, the Supreme

Court characterized Medicaid as a “program . . .

[that] provides joint federal and state funding of medical

care for individuals who cannot afford to pay their own

medical costs.” Ark. Dep’t of Health & Human Servs.

v. Ahlborn, 547 U.S. 268, 275 (2006); see also Virginia ex

rel. Hunter Labs., L.L.C. v. Virginia, 828 F.3d 281, 283

(4th Cir. 2016) (quoting Ahlborn in the section of the decision explaining the important aspects of Medicaid).

12a

The statute and the case law demonstrate that the

primary objective of Medicaid is to provide access to

medical care. There might be secondary benefits that

the government was hoping to incentivize, such as

healthier outcomes for beneficiaries or more engagement in their health care, but the “means [Congress] has

deemed appropriate” is providing health care coverage.

MCI Telecomms. Corp. v. Am. Tel. & Tel. Co., 512 U.S.

218, 231 n.4 (1994). In sum, “the intent of Congress is

clear” that Medicaid’s objective is to provide health care

coverage, and, as a result, the Secretary “must give effect to [that] unambiguously expressed intent of Congress.” Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984).

Instead of analyzing whether the demonstration

would promote the objective of providing coverage,

the Secretary identified three alternative objectives:

“whether the demonstration as amended was likely to

assist in improving health outcomes; whether it would

address behavioral and social factors that influence

health outcomes; and whether it would incentivize beneficiaries to engage in their own health care and achieve

better health outcomes.” Ark. AR 4. These three alternative objectives all point to better health outcomes

as the objective of Medicaid, but that alternative objective lacks textual support. Indeed, the statute makes

no mention of that objective.

While furnishing health care coverage and better

health outcomes may be connected goals, the text specifically addresses only coverage. 42 U.S.C. § 1396-1.

The Supreme Court and this court have consistently reminded agencies that they are “bound, not only by the

ultimate purposes Congress has selected, but by the

13a

means it has deemed appropriate, and prescribed, for

the pursuit of those purposes.” MCI Telecomms., 512

U.S. at 231 n.4; see also Waterkeeper All. v. EPA, 853

F.3d 527, 535 (D.C. Cir. 2017); Colo. River Indian Tribes

v. Nat’l Indian Gaming Comm’n, 466 F.3d 134, 139-40

(D.C. Cir. 2006). The means that Congress selected to

achieve the objectives of Medicaid was to provide health

care coverage to populations that otherwise could not afford it.

To an extent, Arkansas and the government characterize the Secretary’s approval letter as also identifying

transitioning beneficiaries away from governmental

benefits through financial independence or commercial

coverage as an objective promoted by Arkansas Works.

Ark. Br. 14, 37-42; Gov’t Br. 24-25, 32. This argument

misrepresents the Secretary’s letter. The approval

letter has a specific section for the Secretary’s determination that the project will assist in promoting the objectives of Medicaid. Ark. AR 3-5. The objectives articulated in that section are the health-outcome goals

quoted above. That section does not mention transitioning beneficiaries away from benefits. The district

court’s discussion of the Secretary’s objectives confirms

our interpretation of this letter. It identifies the Secretary’s alternative objective as “improv[ing] health

outcomes.” Gresham, 363 F. Supp. 3d at 179. There

is no reference to commercial coverage in the Secretary’s approval letter, and the only reference to beneficiary financial independence is in the section summarizing public comments. In response to concerns about

the community engagement requirements creating barriers to coverage, the Secretary stated, “Given that employment is positively correlated with health outcomes,

it furthers the purposes of the Medicaid statute to test

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and evaluate these requirements as a means to improve

beneficiaries’ health and to promote beneficiary independence.” Ark. AR 6. But “[n]owhere in the Secretary’s approval letter does he justify his decision based

. . . on a belief that the project will help Medicaideligible persons to gain sufficient financial resources to

be able to purchase private insurance.” Gresham, 363

F. Supp. 3d at 180-81. We will not accept post hoc rationalizations for the Secretary’s decision. See State

Farm, 463 U.S. at 50.

Nor could the Secretary have rested his decision on

the objective of transitioning beneficiaries away from

government benefits through either financial independence or commercial coverage. When Congress wants

to pursue additional objectives within a social welfare

program, it says so in the text. For example, the purpose section of TANF explicitly includes “end[ing] the

dependence of needy parents on government benefits by

promoting job preparation, work, and marriage” among

the objectives of the statute. 42 U.S.C. § 601(a)(2).

Also, both TANF and the Supplemental Nutrition Assistance Program (SNAP) condition eligibility for benefits upon completing a certain number of hours of work

per week to support the objective of “end[ing] dependence of needy parents on government benefits.” 42

U.S.C. §§ 601(a)(2), 607(c) (TANF); 7 U.S.C. § 2015(d)(1)

(SNAP). In contrast, Congress has not conditioned the

receipt of Medicaid benefits on fulfilling work requirements or taking steps to end receipt of governmental

benefits.

The reference to independence in the appropriations

provision and the cross reference to TANF cannot support the Secretary’s alternative objective either. The

15a

reference to “independence” in the appropriations provision is in the context of assisting beneficiaries in

achieving functional independence through rehabilitative and other services, not financial independence from

government welfare programs. 42 U.S.C. § 1396-1.

Medicaid also grants states the “[o]ption” to terminate

Medicaid benefits when a beneficiary who receives both

Medicaid and TANF fails to comply with TANF’s work

requirements. See 42 U.S.C. § 1396u-1(b)(3)(A). The

provision gives states, therefore, the ability to coordinate benefits for recipients receiving both TANF and

Medicaid. It does not go so far as to incorporate TANF

work requirements and additional objectives into Medicaid.

Further, the history of Congress’s amendments to

social welfare programs supports the conclusion that

Congress did not intend 42 U.S.C. § 1396u-1(b)(3)(A) to

incorporate TANF’s objectives and work requirements

into Medicaid. In 1996, SNAP already included work

requirements to maintain eligibility. 7 U.S.C. § 2015(d)(1)

(1994). Also in 1996, Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act,

which replaced Aid to Families with Dependent Children with TANF and added work requirements. Personal Responsibility and Work Opportunity Reconciliation Act of 1996, Pub. L. No. 104-193, sec. 103, § 407, 110

Stat. 2105, 2129-34. At the same time, it added 42

U.S.C. § 1396u-1(b)(3)(A) to Medicaid. Id. at sec. 114,

§ 1931, 110 Stat. at 2177-80. The fact that Congress did

not similarly amend Medicaid to add a work requirement for all recipients—at a time when the other two

major welfare programs had those requirements and Congress was in the process of amending welfare statutes—

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demonstrates that Congress did not intend to incorporate work requirements into Medicaid through § 1396u1(b)(3)(A).

In short, we agree with the district court that the alternative objectives of better health outcomes and beneficiary independence are not consistent with Medicaid.

The text of the statute includes one primary purpose,

which is providing health care coverage without any restriction geared to healthy outcomes, financial independence or transition to commercial coverage.

The Approvals Were Arbitrary and Capricious

With the objective of Medicaid defined, we turn to the

Secretary’s analysis and approval of Arkansas’s demonstration, and we find it wanting. In order to survive arbitrary and capricious review, agencies need to address

“important aspect[s] of the problem.” State Farm, 463

U.S. at 43. In this situation, the loss of coverage for

beneficiaries is an important aspect of the demonstration approval because coverage is a principal objective

of Medicaid and because commenters raised concerns

about the loss of coverage. See, e.g., Ark. AR 1269-70,

1277-78, 1285, 1294-95.

A critical issue in this case is the Secretary’s failure

to account for loss of coverage, which is a matter of importance under the statute. The record shows that the

Arkansas Works amendments resulted in significant

coverage loss. In Arkansas, more than 18,000 people

(about 25% of those subject to the work requirement)

lost coverage as a result of the project in just five months.

Ark. Dep’t of Human Servs., Arkansas Works Program 8

(Dec. 2018), https://humanservices.arkansas.gov/images/

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uploads/011519_AWReport.pdf. Additionally, commenters on the Arkansas Works amendments detailed the potential for substantial coverage loss supported by research evidence. Ark. AR 1269-70, 1277-78, 1285, 129495, 1297, 1307-08, 1320, 1326, 1337-38, 1341, 1364-65,

1402, 1421. The Secretary’s analysis considered only

whether the demonstrations would increase healthy outcomes and promote engagement with the beneficiary’s

health care. Id. at 3-5. The Secretary noted that

some commenters were concerned that “these requirements would be burdensome on families or create barriers to coverage.” Id. at 6. But he explained that Arkansas would have “outreach and education on how to

comply with the new community engagement requirements” and that Centers for Medicare and Medicaid

Services could discontinue the program if data showed

that it was no longer in the public interest. Id. The

Secretary also concluded that the “overall health benefits to the [a]ffected population . . . outweigh the

health-risks with respect to those who fail to” comply

with the new requirements. Id. at 7. While Arkansas

did not have its own estimate of potential coverage loss,

the estimates and concerns raised in the comments were

enough to alert the Secretary that coverage loss was an

important aspect of the problem. Failure to consider

whether the project will result in coverage loss is arbitrary and capricious.

In total, the Secretary’s analysis of the substantial

and important problem is to note the concerns of others

and dismiss those concerns in a handful of conclusory

sentences. Nodding to concerns raised by commenters

only to dismiss them in a conclusory manner is not a hallmark of reasoned decisionmaking. See, e.g., Am. Wild

Horse Pres. Campaign v. Perdue, 873 F.3d 914, 932

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(D.C. Cir. 2017) (critiquing an agency for “brush[ing]

aside critical facts” and not “adequately analyz[ing]” the

consequences of a decision); Getty v. Fed. Savs. & Loan

Ins. Corp., 805 F.2d 1050, 1055 (D.C. Cir. 1986) (analyzing whether an agency actually considered a concern rather than merely stating that it considered the concern).

True, the Secretary’s approval letter is not devoid of

analysis. It does contain the Secretary’s articulation of

how he thought the demonstrations would assist in promoting an entirely different set of objectives than the

one we hold is the principal objective of Medicaid. In

some circumstances it may be enough for the agency to

assess at least one of several possible objectives. See

Fresno Mobile Radio, Inc. v. FCC, 165 F.3d 965, 971

(D.C. Cir. 1999). But in such cases, the statute lists

several objectives, some of which might lead to conflicting decisions. Id.; see also Melcher v. FCC, 134 F.3d

1143, 1154 (D.C. Cir. 1998). For example, in both

Fresno Mobile Radio and Melcher, the statute at issue

included five separate objectives for FCC to consider

when creating auctions for licenses, including “the development and rapid deployment of new technologies,”

“promoting economic opportunity and competition,” and

the “efficient and intensive use of the electromagnetic

spectrum.” 47 U.S.C. § 309( j)(3). In Fresno Mobile

Radio, we recognized that these objectives could point

to conflicting courses of action, so the agency could give

precedence to one or several objectives over others without acting in an arbitrary or capricious manner. Fresno

Mobile Radio, 165 F.3d at 971; see also Melcher, 134

F.3d at 1154; Rural Cellular Ass’n v. FCC, 588 F.3d

1095, 1101-03 (D.C. Cir. 2009) (explaining that an agency

may not “depart from” statutory principles “altogether

to achieve some other goal”). The crucial difference in

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this case is that the Medicaid statute identifies its primary purpose rather than a laundry list. The primary

purpose is

to furnish (1) medical assistance on behalf of families

such families and individuals attain or retain capability for independence or self-care.

42 U.S.C. § 1396-1. Importantly, the Secretary disregarded this statutory purpose in his analysis. While we

have held that it is not arbitrary or capricious to prioritize one statutorily identified objective over another, it is

an entirely different matter to prioritize non-statutory objectives to the exclusion of the statutory purpose.

III.

CONCLUSION

Because the Secretary’s approval of Arkansas Works

was arbitrary and capricious, we affirm the district court’s

judgment vacating the Secretary’s approval.

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APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 19-5293

Consolidated with 19-5295

September Term, 2019

1:19-cv-00773-JEB

SAMUEL PHILBRICK, ON BEHALF OF THEMSELVES

AND ALL OTHERS SIMILARLY SITUATED, ET AL.,

APPELLEES

ALEX M. AZAR, II, SECRETARY, UNITED STATES

DEPARTMENT OF HEALTH AND HUMAN SERVICES,

ET AL., APPELLANTS

NEW HAMPSHIRE DEPARTMENT OF HEALTH AND

HUMAN SERVICES, APPELLEE

Filed:

May 20, 2020

ORDER

BEFORE: HENDERSON and RAO, Circuit Judges,

and SENTELLE, Senior Circuit Judge

Upon consideration of the unopposed motion for summary affirmance, it is

ORDERED that the motion for summary affirmance

be granted and the district court’s order filed July 29,

2019, be affirmed. The federal appellants acknowledge

that the disposition of this case is controlled by Gresham

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v. Azar, 950 F.3d 93 (D.C. Cir. 2020), and, accordingly,

the merits of the parties’ positions are so clear as to warrant summary action, see Taxpayers Watchdog, Inc. v.

Stanley, 819 F.2d 294, 297 (D.C. Cir. 1987) (per curiam).

Pursuant to D.C. Circuit Rule 36, this disposition will

not be published. The Clerk is directed to withhold issuance of the mandate herein until seven days after resolution of any timely petition for rehearing or petition

for rehearing en banc. See Fed. R. App. P. 41(b); D.C.

Cir. Rule 41.

Per Curiam

FOR THE COURT:

Mark J. Langer, Clerk

BY:

/s/

Manuel J. Castro

Deputy Clerk

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APPENDIX C

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Civil Action No. 18-1900 (JEB)

CHARLES GRESHAM, ET AL., PLAINTIFFS

ALEX MICHAEL AZAR II, ET AL., DEFENDANTS

Filed:

Mar. 27, 2019

MEMORANDUM OPINION

Adrian McGonigal is 40 years old and lives with his

brother in Pea Ridge, Arkansas. He used to have a job

working in the shipping department of Southwest Poultry, a food-service company located nearby, although he

received no medical insurance through his employer.

Like many Americans, he has several serious medical

conditions. Beginning in 2014, McGonigal was able to

receive medical care—including regular doctor visits

and numerous prescription drugs—through the state’s

expanded Medicaid program. In mid-2018, however,

McGonigal learned that he would be subject to new work

requirements, which he would have to report online, as

a condition of receiving health benefits. These were

imposed by the Arkansas Works Amendments (AWA),

approved by the U.S. Secretary of Health and Human

Services in March 2018. Despite his lack of access to,

and difficulty working with, computers, he was able to

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report his employment in June 2018, but he did not know

he needed to continue to do so each month. As a result,

when he went to pick up his prescriptions in October, the

pharmacist told him that he was no longer covered, and

his medicines would cost him $800. In the absence of

Medicaid, he could not afford the cost of the prescriptions and so did not pick them up. His health conditions then flared up, causing him to miss several days of

work, and Southwest Poultry fired him for his absences.

He thus lost his Medicaid coverage and his job.

Anna Book is 38 years old and lives in Little Rock.

She currently rents a room in an apartment but was

homeless for most of the last eight years. In July 2018,

she got a job as a dishwasher in a restaurant, for which

she works about 24 hours each week. Before that, she

was unemployed for two years. She nevertheless also

had health care provided through Arkansas’s Medicaid

program, which a local pastor helped her sign up for in

2014. Book learned last August that, pursuant to

AWA, she would have to report 80 hours each month of

employment or other activities to keep that coverage.

While she reported her compliance in August and September with the pastor’s help—she does not have reliable internet access—Book has several health conditions

and worries that she will not maintain sufficient hours

at her job to keep her coverage.

Russell Cook is 26 and also lives in Little Rock. He

is currently homeless. While he has spent time working as a landscaper, he is not presently employed and

has minimal job prospects. The state’s Medicaid program has previously given him access to health care for

various health conditions, including a torn Achilles tendon and serious dental problems. Cook, however, does

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not believe he will be able to comply with the new AWA

work requirements, which began applying to him in January 2019. Lacking access to the internet or a phone,

he also worries that he will be unable to report compliance with those requirements. He thus expects to lose

his Medicaid coverage.

These are three of the ten Arkansans who come to

this Court seeking to undo the work requirements the

state added in 2018 to its Medicaid program. They

sued the Secretary of Health and Human Services in August 2018, arguing that the federal government’s approval of the state’s new requirements violated the Administrative Procedure Act and the Constitution.

Plaintiffs’ suit does not offer an issue of first impression. Indeed, this Court just last summer considered a

challenge to the Secretary’s approval of very similar

changes to Kentucky’s Medicaid program—including

work or “community engagement” requirements—in

Stewart v. Azar, 313 F. Supp. 3d 237 (D.D.C. 2018)

(Stewart I). There, it vacated the agency’s decision because it had not adequately considered whether the program “would in fact help the state furnish medical assistance to its citizens, a central objective of Medicaid.”

Id. at 243. Plaintiffs point to the identical deficiency in

the record in this case. Despite the protestations in its

(and intervenor Arkansas’s) briefing, HHS conceded at

oral argument that the administrative decision in this

case shares the same problem as the one in Stewart I.

See Oral Argument Transcript at 6-7. The Court’s job

is thus easy in one respect: the Secretary’s approval

cannot stand.

Yet a separate question remains: what is the proper

remedy? In Stewart I, the Court vacated the approval

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and remanded to the Secretary. Here, however, the

Government argues that vacatur is improper both because, unlike Kentucky, AWA is already active and halting it would be quite disruptive, and because any error

is easily fixed, just as it has been for Kentucky. The

challengers disagree, positing that the deficiency in the

approval is substantial and that any resulting disruption

is outweighed by the ongoing harms suffered by the

more than 16,000 Arkansans who have lost their Medicaid coverage. Given the seriousness of the deficiencies

—which, as this Court explains in a separate Opinion issued today, the remand in Kentucky did not cure—and

the absence of lasting harms to the Government relative

to the significant ones suffered by Arkansans like Plaintiffs, the Court will vacate the Secretary’s approval and

remand for further proceedings.

BACKGROUND

As it did in Stewart I, the Court begins with an overview of the relevant history and provisions of the Medicaid Act. See 313 F. Supp 3d. at 243-44. It then turns

to Arkansas’s challenged plan before concluding with

the procedural history of this case.

Legal Background

The Medicaid Act

Since 1965, the federal government and the states

have worked together to provide medical assistance to

certain vulnerable populations under Title XIX of the

Social Security Act, commonly known as Medicaid.

See 42 U.S.C. § 1396-1. The Centers for Medicare and

Medicaid Services (CMS), a federal agency within the

Department of Health and Human Services, has primary responsibility for overseeing Medicaid programs.

26a

Under the cooperative federal-state arrangement, participating states submit their “plans for medical assistance” to the Secretary of HHS. Id. To receive federal funding, those plans—along with any material

changes to them—must be “approved by the Secretary.”

Id.; see also 42 C.F.R. § 430.12(c). Currently, all states

have chosen to participate in the program.

To be approved, state plans must comply with certain

minimum parameters set out in the Medicaid Act. See

42 U.S.C. § 1396a (listing 83 separate requirements).

One such provision requires state plans to “mak[e] medical assistance available” to certain low-income individuals. Id. § 1396a(a)(10)(A). Until recently, that group

included pregnant women, children, and their families;

some foster children; the elderly; and people with certain disabilities. Id. In 2010, however, Congress enacted the Patient Protection and Affordable Care Act

(ACA), colloquially known as Obamacare, “to increase

the number of Americans covered by health insurance.”

Nat’l Fed. of Indep. Business v. Sebelius, 567 U.S. 519,

538 (2012). Under that statute, states can expand

their Medicaid coverage to include additional low-income

adults under 65 who would not otherwise qualify. See

42 U.S.C. § 1396a(a)(10)(A)(i)(VIII).

Generally, a state must cover all qualified individuals or

forfeit its federal Medicaid funding. Id. § 1396a(a)(10)(B).

That was originally so for the ACA expansion population

as well. See 42 U.S.C. § 1396c. In NFIB, however,

the Supreme Court held that Congress could not, consistent with the Spending Clause of the Constitution,

condition previously appropriated Medicaid funds on

the state’s agreeing to the expansion. See 567 U.S. at

584-85. The result was that states could choose not to

27a

cover the new population and lose no more than the

funds that would have been appropriated for that group.

Id. at 587. If, however, the state decided to provide

coverage, those individuals would become part of its

mandatory population. Id. at 585-87 (explaining that

Congress may “offer[] funds under the Affordable Care

Act to expand the availability of health care, and requir[e] that States accepting such funds comply with the

conditions on their use”). In that instance, the state

must afford the expansion group “full benefits”—i.e., it

must provide “medical assistance for all services covered under the State plan” that are substantially equivalent “in amount, duration, or scope . . . to the medical assistance available for [other] individual[s]” covered under the Act. See 42 U.S.C. § 1396d(y)(2)(B);

42 C.F.R. § 433.204(a)(2).

The Medicaid Act, in addition to defining who is entitled to coverage, also ensures what coverage those enrolled individuals receive. Under § 1396a, states must

cover certain basic medical services, see 42 U.S.C.

§§ 1396a(a)(10)(A), 1396d(a), and the statute limits the

amount and type of premiums, deductions, or other costsharing charges that a state can impose on such care.

Id. § 1396a(a)(14); see also id. § 1396o. Other provisions

require states to provide three months of retroactive coverage once a beneficiary enrolls, see id. § 1396a(a)(34), and

to ensure that recipients receive all “necessary transportation . . . to and from providers.” 42 C.F.R. § 431.53.

Finally, states must “provide such safeguards as may be

necessary to assure” that eligibility and services “will be

provided, in a manner consistent with simplicity of administration and the best interests of the recipients.”

42 U.S.C. § 1396a(a)(19).

28a

Section 1115 of Social Security Act

Both before and after the passage of the ACA, a state

is not entirely locked in; instead, if it wishes to deviate

from the Medicaid Act’s requirements, it can seek a

waiver from the Secretary of HHS. See 42 U.S.C.

§ 1315. In enacting the Social Security Act (and, later,

the Medicaid program within the same title), Congress

recognized that statutory requirements “often stand in

the way of experimental projects designed to test out

new ideas and ways of dealing with the problems of public welfare recipients.” S. Rep. No. 1589, 87th Cong.,

2d Sess. 19, reprinted in 1962 U.S.C.C.A.N. 1943, 196162. To that end, § 1115 of the Social Security Act allows the Secretary to approve “experimental, pilot, or

demonstration project[s]” in state medical plans that

would otherwise fall outside Medicaid’s parameters.

The Secretary can approve only those projects that “in

[his] judgment . . . [are] likely to assist in promoting

the [Act’s] objectives.” 42 U.S.C. § 1315(a). As conceived, demonstration projects were “expected to be selectively approved by the Department and to be those

which are designed to improve the techniques of administering assistance.” Supra S. Rep. No. 1589 at 1962.

Once the Secretary has greenlighted such a project, he can

then waive compliance with the requirements of § 1396a

“to the extent and for the period . . . necessary to

enable [the] State . . . to carry out such project.” Id.

§ 1315(a)(1).

While the ultimate decision whether to grant § 1115

approval rests with the Secretary, his discretion is

not boundless. Before HHS can act on a waiver application, the state “must provide at least a 30-day public

notice[-]and[-]comment period” regarding the proposed

29a

program and hold at least two hearings at least 20 days

before submitting the application.

See 42 C.F.R.

§§ 431.408(a)(1), (3). Once a state completes those prerequisites, it then sends an application to CMS. Id.

§ 431.412 (listing application requirements). After the

agency notifies the state that it has received the waiver

application, a federal 30-day public-notice period commences, and the agency must wait at least 45 days before

rendering a final decision. Id. §§ 431.416(b), (e)(1).

Factual Background

Arkansas Works Amendments

Arkansas’s Medicaid program dates back to 1970.

For most of the program’s history, the state maintained

among the most stringent eligibility thresholds in the

nation for adults, covering only the aged, disabled, and

parents with very low incomes. See ECF 53-6, Exh. 54

(Ark. Health Care Independence Program Interim Report) at 16. That changed with the passage of the ACA.

While states had a choice after NFIB not to expand

Medicaid, Arkansas was one of those that opted to do so.

Under its expansion program, which began January 1,

2014, Medicaid-eligible persons were given the opportunity to enroll in private insurance plans financed by

the state. See AR 71. In its first two years, the program provided health coverage to more than 278,000

newly eligible individuals, helping to lower the uninsured rate from 19% to 11%. See AR 1274. The program became known as Arkansas Works in January

2017.

That month featured another significant change in

the political landscape, as the Trump administration

took over from President Obama. In March 2017, then-

30a

Secretary Thomas Price and CMS Director Seema

Verma sent a letter to all 50 governors announcing the

administration’s view that the ACA’s expansion of Medicaid was “a clear departure from the core, historical

mission of the program.” See AR 85. They thus

alerted states of the agency’s “intent to use existing Section 1115 demonstration authority” to help revamp Medicaid. See AR 86. Together they promised to find “a

solution that best uses taxpayer dollars to serve” those

individuals they deemed “truly vulnerable.” Id. Heeding HHS’s call, Governor Asa Hutchinson proposed

three substantial amendments to Arkansas Works under Section 1115. See AR 2057. First, he proposed to

shift income eligibility for the expansion population

from 133% to 100% of the Federal Poverty Line. Id.

Second, he proposed to “institute work requirements

as a condition” of continued Medicaid coverage. Id.

Third, he proposed to eliminate retroactive health

coverage. Id. The state did not estimate the effects

these amendments would have on Medicaid coverage.

CMS held a public-comment period from July 11 to August 10, 2017, and numerous organizations offered their

views and analysis of the changes.

On March 5, 2018, the Secretary approved the work

requirements and limits to retroactive coverage, concluding that they were “likely to assist in improving

health outcomes” and “incentivize beneficiaries to engage in their own health care.” AR 2-4. Under the

new work requirements, most able-bodied adults in the

Medicaid expansion population ages 19 to 49 must complete each month 80 hours of employment or other qualifying activities—or earn income equivalent to 80 hours

of work. Id. Compliance was required to be reported

31a

monthly through an online portal. See AR 29. Various groups of persons are exempt, including the medically frail, pregnant women, full-time students, and persons in drug- or alcohol-treatment programs. See AR

28. Nonexempt individuals who do not report sufficient qualifying hours for any three months in a plan

year are disenrolled from Medicaid for the remainder of

that year and not permitted to re-enroll until the following plan year. See AR 14, 30-31. The work requirements took effect for persons age 30 to 49 on June 1,

2018, and for persons age 20 to 29 on January 1, 2019.

See ECF No. 26-3 (Arkansas Works Eligibility and Enrollment Monitoring Plan) at 7-8. As to retroactive

coverage, the Secretary approved a reduction from the

three months required by the Act to one month; the

more drastic proposal of eliminating such coverage entirely was abandoned, as was the Governor’s request to

reduce eligibility down to 100% of the FPL. See AR

12, 22.

According to Arkansas’s Department of Human Services, only a small percentage of the persons required to

report compliance with the work requirements actually

did so during the first six months of the program. In

October, for example, only 12.3% (1687 out of 13653) of

persons not exempt from the requirements reported any

kind of qualifying activity. See ECF No. 42-1 (Arkansas Works Reports June-November 2018) at 47, 52.

Since the program began, more than 16,900 individuals

have lost Medicaid coverage for some period of time for

not reporting their compliance. Id. at 18, 27, 36, 45.

It is not known what percentage of these individuals

completed the work requirements but did not report

versus those who did not engage in the work itself.

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Kentucky HEALTH

Arkansas was not the only state interested in the new

administration’s proposal to rethink the Medicaid Expansion. The Commonwealth of Kentucky proposed a

demonstration project—called Kentucky HEALTH—

with similar community-engagement requirements and

cutbacks to retroactive coverage. (It also contained

other elements not relevant here.) Kentucky, unlike

Arkansas, did estimate the coverage effects of its project, explaining that thousands of persons would lose

their Medicaid benefits over the course of the project;

indeed, their estimate corresponded to about 95,000 persons losing Medicaid for one full year. As it did in Arkansas, the Secretary approved that project on the ground

that it was likely to “improv[e] health outcomes” and “increas[e] individual engagement in health care decisions.”

Stewart I, 313 F. Supp. 3d at 258 (quoting AR 7).

Before the project took effect, several Medicaid recipients challenged the Secretary’s approval in this Court.

They argued, among other things, that the agency had

failed to adequately explain why Kentucky HEALTH

promoted the objectives of Medicaid and that approval

of the project exceeded HHS’s statutory authority.

The Court concluded that the plaintiffs were right in one

central and dispositive respect: “[T]he Secretary never

adequately considered whether Kentucky HEALTH

would in fact help the state furnish medical assistance to

its citizens, a central objective of Medicaid.” Id. at 243.

It therefore vacated the Secretary’s approval and remanded the matter to the agency for further consideration. Id. at 273.

HHS has since reopened the comment period and

subsequently reapproved Kentucky’s project, offering

33a

additional explanation for why the project advances the

objectives of the Medicaid Act. The parties have now

come back to the Court and filed cross-motions for summary judgment in that case. The Court issues a separate Opinion today resolving those motions, which it will

refer to as Stewart II.

Procedural History

Several Arkansas residents filed this lawsuit in August 2018. They assert that the Secretary’s approval

of the Arkansas Works Amendments was arbitrary and

capricious, in excess of his statutory authority, and in

violation of the Take Care Clause of the Constitution.

Because it was designated as related to Stewart I, see

ECF No. 2, the case was directed to this Court. While

Defendants objected to the related-case designation, see

ECF No. 17, the Court determined that the cases’ common legal and factual issues militated in favor of its retaining the matter. See Minute Order of Sept. 12, 2018.

The State of Arkansas has since intervened as a Defendant, and numerous amici have also joined the fray. Dueling Cross-Motions for Summary Judgment are now

ripe.

II.

LEGAL STANDARD

The parties have cross-moved for summary judgment on the administrative record. The summaryjudgment standard set forth in Federal Rule of Civil

Procedure 56(c), therefore, “does not apply because of

the limited role of a court in reviewing the administrative record.” Sierra Club v. Mainella, 459 F. Supp. 2d

76, 89 (D.D.C. 2006); see also Bloch v. Powell, 227

F. Supp. 2d 25, 30 (D.D.C. 2002), aff ’d, 348 F.3d 1060

(D.C. Cir. 2003). “[T]he function of the district court is

34a

to determine whether or not as a matter of law the evidence in the administrative record permitted the agency

to make the decision it did.” Sierra Club, 459 F. Supp.

2d. at 90 (quotation marks and citation omitted).

“Summary judgment is the proper mechanism for deciding, as a matter of law, whether an agency action is supported by the administrative record and consistent with

the [Administrative Procedure Act] standard of review.”

Loma Linda Univ. Med. Ctr. v. Sebelius, 684 F. Supp. 2d

42, 52 (D.D.C. 2010) (citation omitted).

The Administrative Procedure Act “sets forth the full

extent of judicial authority to review executive agency

action for procedural correctness.” FCC v. Fox Television Stations, Inc., 556 U.S. 502, 513 (2009). It requires courts to “hold unlawful and set aside agency action, findings, and conclusions” that are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2). Agency action

is arbitrary and capricious if, for example, the agency

“entirely failed to consider an important aspect of the

problem, offered an explanation for its decision that

runs counter to the evidence before the agency, or is so

implausible that it could not be ascribed to a difference

in view or the product of agency expertise.” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto.

Ins. Co., 463 U.S. 29, 43 (1983).

In other words, an agency is required to “examine the

relevant data and articulate a satisfactory explanation

for its action including a rational connection between the

facts found and the choice made.” Id. at 43 (quoting

Burlington Truck Lines v. United States, 371 U.S. 156,

168 (1962)) (internal quotation marks omitted). Courts,

accordingly, “do not defer to the agency’s conclusory or

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unsupported suppositions,” United Techs. Corp. v.

Dep’t of Def., 601 F.3d 557, 562 (D.C. Cir. 2010) (quoting

McDonnell Douglas Corp. v. Dep’t of the Air Force, 375

F.3d 1182, 1187 (D.C. Cir. 2004)), and “agency ‘litigating

positions’ are not entitled to deference when they are

merely [agency] counsel’s ‘post hoc rationalizations’ for

agency action, advanced for the first time in the reviewing court.” Martin v. Occupational Safety & Health

Review Comm’n, 499 U.S. 144, 156 (1991) (citation omitted). Although a reviewing court “may not supply a

reasoned basis for the agency’s action that the agency

itself has not given,” a decision that is not fully explained

may, nevertheless, be upheld “if the agency’s path may

reasonably be discerned.” Bowman Transp., Inc. v.

Arkansas-Best Freight System, Inc., 419 U.S. 281, 28586 (1974) (citation omitted).

III. ANALYSIS

The Court, as it must, first addresses whether there

is subject-matter jurisdiction before proceeding to the

merits of Plaintiffs’ challenges.

Jurisdiction

Unlike in Stewart I, Defendants do not contest Plaintiffs’ standing to challenge the Secretary’s approval of

the Arkansas Works Amendments as a whole. The

Court, nevertheless, has an independent duty to assure

that it has subject-matter jurisdiction in this case. See

Kaplan v. Cent. Bank of Islamic Repub. of Iran, 896 F.3d

501, 509 (D.C. Cir. 2018). To establish standing under

Article III, Plaintiffs must show that they have suffered

a concrete injury that is fairly traceable to the challenged conduct and that is likely to be redressed by a

36a

favorable judicial decision. See Lujan v. Defs. of Wildlife, 504 U.S. 555, 590 (1992). On review, the Court easily concludes that at least one Plaintiff has established

all three elements. Consider, for example, Adrian

McGonigal, whom we encountered in this Opinion’s

opening paragraph. He attests that he has lost his Medicaid coverage as a result of the community-engagement

requirement and has thus been unable to pay for certain

medical bills and prescription drugs. See ECF No.

27-3 (McGonigal Declaration).

Or look to Russell

Cook, also mentioned in the introduction, who avers that

he will be unable to meet the community-engagement

requirement once it applies to him and thus believes that

loss of his health-care coverage is imminent. See ECF

No. 27-7 (Cook Declaration). From these declarations

and others submitted with Plaintiffs’ Motion, there is little doubt that at least one Plaintiff has suffered an injury (or will suffer an injury in the future)—the loss of

Medicaid coverage—that is attributable to the Secretary’s approval of AWA, and that a favorable decision

from the Court would redress it. See NB ex rel. Peacock v. District of Columbia, 682 F.3d 77, 82-83 (D.C.

Cir. 2012).

While standing is thus easily established for their

claim challenging the project as a whole, the state of Arkansas attacks Plaintiffs’ standing to make one of their

arguments. It specifically says that no Plaintiff may

challenge Arkansas Works’ online-only reporting requirements because the state changed its policy before

this suit so as to allow reporting by phone or in person.

See ECF No. 39 (Arkansas MSJ) at 34. There is no

need for the Court to weigh in here. Because it resolves this case based on the challenge to the Arkansas

Works Amendments writ large, the Court declines to

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decide whether certain Plaintiffs have standing to challenge this particular part of the project.

Merits

With that threshold issue easily dispatched, the Court

turns to the merits. Plaintiffs’ central position is identical to that of the challengers in Stewart I: the Arkansas Works Amendments “fundamentally alter the design and purpose of Medicaid.” ECF No. 27 (MSJ) at

13. They thus assail the Secretary’s approval of the

Amendments on similar fronts. First, with regard to

the project as a whole, Plaintiffs assert that HHS did not

sufficiently consider whether it would promote the objectives of Medicaid, including how it would affect the

provision of medical assistance to the needy. Second,

they maintain that the Secretary lacked statutory authority to approve numerous aspects of AWA. Finally,

Plaintiffs posit that a letter CMS issued in January 2018

violates the APA because it did not go through notice

and comment. As in Stewart I, the Court only needs to

consider the first of these contentions: “whether the

Secretary acted arbitrarily or capriciously in concluding

that [Arkansas Works] was ‘likely to assist in promoting

the objectives’ of the Medicaid Act.” Stewart I, 313

F. Supp. 3d at 259 (quoting 42 U.S.C. § 1315(a)).

Under that deferential standard, the Court “is not

empowered to substitute its judgment for that of the

agency.” Citizens to Preserve Overton Park, Inc. v.

Volpe, 401 U.S. 402, 416 (1971). Nor can it “presume

even to comment upon the wisdom of [Arkansas’s] effort

at [Medicaid] reform.” C.K. v. N.J. Dep’t of Health &

Human Servs., 92 F.3d 171, 181 (3d Cir. 1996). Still, it

is a fundamental principle of administrative law that

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“agencies are required to engage in reasoned decisionmaking.” Michigan v. EPA, 135 S. Ct. 2699, 2706 (2015)

(internal quotation marks omitted). This means that

an agency must “examine all relevant factors and record

evidence.” Am. Wild Horse Pres. Campaign v. Perdue,

873 F.3d 914, 923 (D.C. Cir. 2017). At minimum, the

Secretary cannot “entirely fail[] to consider an important aspect of the problem.” Motor Vehicle Mfrs.

Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43

(1983). Rather, he must “adequately analyze . . .

the consequences” of his actions. See Am. Wild Horse,

873 F.3d at 932. In doing so, “[s]tating that a factor

was considered . . . is not a substitute for considering it.” Getty v. Fed. Savs. & Loan Ins. Corp., 805 F.2d

1050, 1055 (D.C. Cir. 1986). The agency must instead

provide more than “conclusory statements” to prove it

“consider[ed] [the relevant] priorities.” Id. at 1057.

With that framework in mind, Plaintiffs’ position is

simple: “The purpose of [] Medicaid” is to enable states

“to furnish health care coverage to people who cannot

otherwise afford it.” MSJ at 1, 15. Yet the Secretary,

just as in Stewart I, “failed to consider adequately” the

impact of the proposed project on Medicaid coverage.

See Am. Wild Horse, 873 F.3d at 923. Indeed, he neither offered his own estimates of coverage loss nor grappled with comments in the administrative record projecting that the Amendments would lead a substantial

number of Arkansas residents to be disenrolled from

Medicaid. Those omissions, they urge, make his decision arbitrary and capricious.

Plaintiffs are correct. As Opening Day arrives, the

Court finds its guiding principle in Yogi Berra’s aphorism, “It’s déjà vu all over again.” In other words, as

39a

the Secretary’s failures here are nearly identical to

those in Stewart I, the Court’s analysis proceeds in the

same fashion. It begins with the basic deficiencies in

the Secretary’s approval in this case and then examines

Defendants’ counterarguments.

The Secretary’s Consideration of Medicaid’s

Objectives

Before approving a demonstration or pilot project,

the Secretary must identify the objectives of Medicaid

and explain why the project is likely to promote them.

As it did in Stewart I, the Court assumes that the Secretary’s identification of those objectives is entitled to

Chevron deference. That is, in reviewing his interpretation, the Court must first ask whether “Congress has

directly spoken to the precise question at issue,” and, if

not, whether “the agency’s answer is based on a permissible construction of the statute.” Chevron U.S.A., Inc.

v. Nat’l Res. Def. Council, Inc., 467 U.S. 837, 842-43

(1984). According such deference is not of much practical significance here, however, because the Secretary

agrees with the Court’s understanding of a “core objective” of the Medicaid Act. See ECF No. 52 (HHS Reply) at 5.

In Stewart I, the Court explained that “one of Medicaid’s central objectives” is to “furnish medical assistance” to persons who cannot afford it. See 313 F. Supp.

3d at 243, 261, 266, 273. That conclusion followed ineluctably from § 1396-1 of the Act, which provides that

Congress appropriated Medicaid funds “[f]or the purpose

of enabling each State, as far as practicable under the

conditions in such State, to furnish (1) medical assistance . . . [to] individuals[] whose income and resources are insufficient to meet the costs of necessary

40a

medical services, and (2) rehabilitation and other services to help such families and individuals attain or retain capability for independence or self-care.” Case

law discussing the program’s objectives confirms as

much. See, e.g., Schweiker v. Hogan, 453 U.S. 569, 571

(1982) (explaining that Congress established Medicaid

“for the purpose of providing federal financial assistance to States that choose to reimburse certain costs of

medical treatment for needy persons”); W. Va. Univ.

Hosps. Inc. v. Casey, 885 F.2d 11, 20 (3d Cir. 1989)

(“[T]he primary purpose of [M]edicaid is to achieve the

praiseworthy social objective of granting health care

coverage to those who cannot afford it.”).

Defendants, as mentioned, agree that providing

health coverage to the needy is a purpose of the Act.

See ECF No. 37 (HHS MSJ) at 12; Ark. MSJ at 13. In

Arkansas’s words, “[T]hat Medicaid coverage is a Medicaid objective is readily apparent from the substantive

provisions of the statute.” Ark. MSJ at 13. The Secretary, in fact, refers to the provision of medical care to

eligible persons as “Medicaid’s core objective.” HHS

Reply at 5 (emphasis added). HHS nevertheless did

not consider whether AWA would advance or impede

that objective.

In his approval letter, the Secretary explained that

he considered the following objectives of the Medicaid

Act:

(1) “whether the demonstration as amended

was likely to assist in improving health outcomes”; (2)

“whether it would address behavioral and social factors

that influence health outcomes”; and (3) “whether it

would incentivize beneficiaries to engage in their own

health care and achieve better health outcomes.” AR

4. Those are substantially the same objectives HHS

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considered when it first approved the Kentucky program. See Stewart I, 313 F. Supp. 3d at 261-62.

What the Court said in that case thus holds true here:

“While those may be worthy goals, there [i]s a notable

omission from the list”—namely, whether the project

would “help or hurt [Arkansas] in ‘funding . . . medical services for the needy.’ ” Id. (quoting Alexander v.

Choate, 469 U.S. 287, 289 n.1 (1985)). By his own description, the Secretary “entirely failed to consider” this

question. See State Farm, 463 U.S. at 43.

The Government conceded as much at oral argument,

stating that HHS’s Arkansas approval letter no more

addresses the program’s effects on Medicaid coverage

than the Kentucky approval letter before the Court in

Stewart I. See Tr. at 6-7. Because this is a separate

administrative decision on review in a separate case,

however, a brief assessment of the deficiency is instructive. To “adequately analyze” the issue of coverage,

Am. Wild Horse, 873 F.3d at 932, the Secretary needed

to consider whether the demonstration project would be

likely to cause recipients to lose coverage and whether

it would cause others to gain coverage. He did neither.

a. Risk to Coverage

The Secretary’s approval letter did not consider

whether AWA would reduce Medicaid coverage. Despite acknowledging at several points that commenters

had predicted coverage loss, the agency did not engage

with that possibility. For example, after mentioning

that commenters had “expressed concerns that these requirements would . . . create barriers to coverage,”

the Secretary responded that “[t]he state has pledged to

do beneficiary outreach and education on how to comply” and has created an “easy” online reporting system.

42a

See AR 6. He also pointed to exemptions built into the

project and to Arkansas’s assurances that it will allow

for “reasonable modifications” for beneficiaries unable

to meet the requirements. Id. But those statements

did not grapple with the coverage issue. Not only did

they fail to address whether coverage loss would occur

as predicted, but they also ignored that commenters had

projected that such loss would happen regardless of the

exemptions and the education and reporting processes;

indeed, some comments pinpointed online-only reporting as a source of coverage loss. See, e.g., AR 1272,

1287.

Later, HHS noted again many commenters’ view that

community-engagement requirements would “create

barriers to coverage for non-exempt people who might

have trouble accessing care.” AR 6. Instead of addressing that issue, however, it merely said: “We believe that the community engagement requirements create appropriate incentives for beneficiaries to gain employment.” Id. That position says nothing about the

risk of coverage loss those requirements create. The

bottom line: the Secretary did no more than acknowledge

—in a conclusory manner, no less—that commenters

forecast a loss in Medicaid coverage. But “[s]tating

that a factor was considered . . . is not a substitute

for considering it.” Getty, 805 F.2d at 1055. His decision thus falls short of the kind of “reasoned decisionmaking” the APA requires. See Michigan, 135

S. Ct. at 2706.

Defendants argue that the Secretary did not need to

—and perhaps was not even able to—provide a numeric

estimate of coverage loss. See HHS MSJ at 21; Ark.

MSJ at 24. While producing an empirical prediction of

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coverage loss does not seem like too much to ask of the

expert agency tasked with supervising Medicaid programs in all 50 states, the Court does not need to decide

whether such an estimate is required. Here, numerous

commenters predicted that substantial coverage loss

would occur; a table cataloguing the relevant comments

is included at the end of this Opinion in an Appendix.

See, e.g., AR 1269 (Arkansas Advocates noting that requirement “will increase the rate of uninsured Arkansans”); AR 1277 (American Congress Obstetricians and

Gynecologists explaining that “[t]he experience of the

TANF program . . . demonstrates that imposing

work requirements on Medicaid beneficiaries would

. . . lead to the loss of health care coverage for substantial numbers of people who are unable to work or

face major barriers to finding and retaining employment.”); see also ECF No. 33 (Amicus Brief of Deans,

Chairs, and Scholars) at 14. Under these circumstances, the agency must grapple with the risk of coverage loss. See Nat’l Lifeline Assoc. v. FCC, 915 F.3d 19,

30-31 (D.C. Cir. 2019).

The Secretary should explain, for example, whether

it agrees with the commenters’ coverage predictions.

If so, it might elucidate whether it expects the loss to be

minor or substantial, and how that weighs against the

advancement of other Medicaid objectives. Nothing close

to this appears in the Secretary’s approval letter. That

does not mean that the Government must “recit[e] and

refut[e] every objection submitted in opposition to the

proposed demonstration.” HHS MSJ at 22. It just

means that, at a minimum, the agency cannot “entirely

fail[] to consider an important aspect of the problem,”

repeatedly raised in the comment period. See State

Farm, 463 U.S. at 43.

44a

Arkansas maintains that the Secretary did not need

to consider any reduction in coverage because it—unlike

Kentucky—did not predict that the project would even

cause coverage loss. See Ark. MSJ at 24. But the

state’s failure in that respect does not alter HHS’s inquiry. Under the Medicaid Act, the Secretary may approve only those demonstration projects that are “likely

to assist in promoting the objectives of [Medicaid],” and

the parties agree that the provision of health coverage

is a “central” objective of the Act. See 42 U.S.C.

§ 1315(a); HHS MSJ at 12-13; Ark. MSJ at 13. Whether a state gives the Secretary excellent data or no data

at all about coverage, his duty remains the same: to

determine whether the proposed project will promote

the objectives of the Act, including whether it advances

or hinders the provision of health coverage to the needy.

If it were otherwise, HHS could approve a project that

would decimate Medicaid coverage without so much as

addressing the issue where the state did not submit its

own estimate of coverage loss. Even putting to one

side the agency’s affirmative obligation to address coverage loss, however, the Secretary unquestionably has a

duty to consider that issue where multiple commenters

provide credible forecasts that it will occur. See, e.g.,

AR 1269, 1277, 1285, 1294-95. Here, as has been said,

the agency had and neglected that duty.

In a last attempt to resist this conclusion, the Secretary says that he did not need to consider coverage because he had no obligation to offer any explanation of his

decision to approve a demonstration project. See HHS

MSJ at 22-23; see also Tr. at 9. For support, HHS

points to the regulations governing its approval of

demonstration projects, which do not explicitly require

the Secretary to respond to comments or articulate the

45a

basis for his decision. See HHS MSJ at 22 (discussing

42 C.F.R. § 431.416). The APA, however, requires

more. Where an agency decision is judicially reviewable, as the Court has already held this one is, see Stewart I, 313 F. Supp. 3d at 254-56, the Government “must

give a reason that a court can measure . . . against

the ‘arbitrary or capricious’ standard of the APA.”

Kreis v. Sec’y of Air Force, 866 F.2d 1508, 1514-15 (D.C.

Cir. 1989); see also Coburn v. McHugh, 679 F.3d 924, 934

(D.C. Cir. 2012) (“At the very least, the Board must ‘provide an explanation that will enable the court to evaluate

the agency’s rationale at the time of decision.’ ”) (quoting

Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633,

654 (1990)). HHS’s regulations—which require CMS

to maintain and publish an administrative record of public comments, any CMS responses, and a written approval or disapproval letter—are fully consonant with

this axiomatic administrative-law requirement. See

42 C.F.R. § 431.416(f ). The argument that no explanation for the Secretary’s decision is required thus does

not save it.

b. Promote Coverage

At the same time that he failed to consider the risk to

coverage, the Secretary identified only one element of

the Amendments that might promote health coverage.

In a single sentence, he noted that “a more limited period of retroactive eligibility will encourage beneficiaries to obtain and maintain health coverage, even when

they are healthy.” AR 8. Little needs to be said on

this score. It is well established that “conclusory or

unsupported suppositions” do not satisfy the agency’s

obligation to engage in reasoned decisionmaking. See

McDonnell Douglas Corp. v. U.S. Dep’t of Air Force, 375

46a

F.3d 1182, 1187 (D.C. Cir. 2004). That is particularly

so in the face of numerous comments taking the opposite

position. As the American Congress of Obstetricians

and Gynecologists, among others, explained, limiting

retroactive coverage may lead “Medicaid-eligible persons [to] wait even longer to have their conditions

treated to avoid incurring medical bills they cannot

pay.” AR 1279. And when they do eventually arrive

for treatment, they will be covered for less time than

they would have been before AWA took effect, by definition reducing their Medicaid coverage. See AR 1338

(National Health Law Program describing this risk).

HHS’s brief reference to the potential coverage-promoting

effects of the changes to retroactive eligibility thus does

not get it across the line.

Counterarguments

Defendants offer two separate reasons for the Court

to overlook the Secretary’s failure to consider coverage,

neither of which is persuasive. They say first that the

Arkansas Works Amendments promote several other

important objectives of Medicaid, including the health of

Medicaid-eligible persons. Second, Defendants maintain that any deficiency in the administrative record in

this case is cured by the agency’s subsequent approval

of Kentucky’s similar project on remand from the

Court’s decision in Stewart I.

a. Other Objectives

Defendants justify the proposed demonstration project on the ground that, regardless of its effect on Medicaid coverage, it advances other objectives of the Act.

HHS specifically insists, as it did in Stewart I, that the

Secretary was on solid ground in finding that the project

47a

would improve health outcomes, thereby advancing the

goals of Medicaid. See HHS MSJ at 17-18. Faced with

this argument previously, this Court expressed skepticism that health, generally construed, was properly

considered an objective of the Act. See Stewart I, 313

F. Supp. 3d at 266. It ultimately held that the agency’s

“focus on health is no substitute for considering Medicaid’s central concern: covering health costs” through

the provision of free or low-cost health coverage. Id.

The Court reached the same conclusion in response to

assertions that Kentucky HEALTH promoted independence and self-sufficiency. Id. at 271-72. HHS

has offered no argument here that calls those conclusions into question.

Arkansas presses the point in a somewhat different

way, asserting that the provision of Medicaid coverage

is (1) the purpose only of Medicaid appropriations, not

Medicaid, (2) in “irreconcilable tension” with other purposes of the Act, and (3) not applicable to the Medicaid

expansion population. See Ark. MSJ at 10-22. At the

same time, it concedes, seemingly in conflict with its

other contentions, that it is “readily apparent” that

providing “Medicaid coverage for Medicaid-eligible people” is “an objective of Medicaid.” Id. at 13. The

Court has said this before and will say it again: if, as

Arkansas and HHS admit (and this Court has found),

ensuring Medicaid coverage for the needy is a key objective of the Act, the Secretary’s failure to consider the

effects of the project on coverage alone renders his decision arbitrary and capricious; it does not matter that

HHS deemed the project to advance other objectives of

the Act.

48a

While the Court might stop there, a brief foray into

Arkansas’s arguments is nevertheless worthwhile. As

to the first, Medicaid is an appropriations statute enacted pursuant to “Congress’s power under the Spending Clause.” NFIB, 567 U.S. at 542. What better

place could the purpose of a spending program be found

than in the provision that sets up the “purpose” of its

appropriations? Arkansas’s second objection is even

more puzzling. The Court does not understand how

the objectives of a statute all agree was designed to provide free or low-cost medical care to the needy could

nevertheless stand in “irreconcilable tension” with the

goal of providing free or low-cost medical care to that

population. The third sits on more comprehensible

ground, though it yields Arkansas no more success.

Addressing the purpose of the Medicaid expansion in

Stewart I, the Court explained that “the Medicaid statute

—taken as a whole—confirms that Congress intended to

provide medical assistance to the expansion population.”

313 F. Supp. 3d at 269. HHS conceded as much in that

case. Id. Neither party has offered any reason to retreat from that determination.

Defendants’ attempts to find refuge in other purposes of the Act and the propriety of Chevron deference

as to those purposes are thus all hat, no cattle. Because they agree that the provision of low-cost medical

care to Medicaid-eligible persons is a “core” purpose of

the Act, see HHS Reply at 5, there is no legally significant dispute over the meaning of the Medicaid Act.

What matters, instead, is the question addressed above:

whether the Secretary adequately considered this issue.

As has been made abundantly clear, he did not. Perhaps understanding as much, HHS largely attempts to

49a

justify its approval of the project in this case not on the

Arkansas record but on another record entirely.

b. Kentucky Remand

This brings the Court to the argument that leads off

the Secretary’s Reply Brief: that his approval of AWA

“is amply justified by the reasoning in his November 20,

2018, approval of Kentucky’s materially similar project.” HHS Reply at 1. In particular, HHS argues

that the project on review here will, like the one approved on remand in Kentucky, help adults “transition

from Medicaid to financial independence,” thereby enhancing “the fiscal sustainability of Arkansas’s Medicaid

program”—an objective of the Act. Id. at 6. The

Government clarified at oral argument that this is not

merely a contention against vacatur—although it was

principally offered as such—but also an argument in favor of sustaining the Secretary’s approval entirely.

See Tr. at 8-10. The Court addresses the latter position here, leaving the remedy question for the end. In

short, three weighty and independent rationales require

rejecting HHS’s assertion that the Amendments should

be approved based on the record in the Kentucky remand proceeding.

First, it runs headlong into the “fundamental rule of

administrative law” that a reviewing court “must judge

the propriety of such action solely by the grounds invoked by the agency.” SEC v. Chenery Corp., 332 U.S.

194, 196 (1947). Nowhere in the Secretary’s approval letter does he justify his decision based on concerns about

the sustainability of Arkansas’s Medicaid program, or

on a belief that the project will help Medicaid-eligible

persons to gain sufficient financial resources to be able

to purchase private insurance. And the Court “may not

50a

accept [] counsel’s post hoc rationalizations for agency action.” State Farm, 463 U.S. at 50; see also Burlington

Truck Lines, 371 U.S. at 168-69 (“Chenery requires that

an agency’s discretionary order be upheld, if at all, on

the same basis articulated in the order by the agency

itself.”). The Government responded at oral argument

that the Secretary did not need to provide any basis for

his decision approving Arkansas’s proposed project, so

it does not matter on what justification his decision is

judicially upheld. See Tr. at 9-10. The Court has already explained why that assertion is inconsistent with

the APA, see supra at 20-21, and it will not spill more

ink on the matter here.

HHS’s argument suffers from a second and equally

significant flaw. The demonstration project under consideration in Kentucky involves different considerations

from the Arkansas project, and the rationales in favor of

approving one may well not apply to approving the

other. The Secretary said as much in opposing this

case’s designation as related to the Kentucky one. See

ECF No. 17 (“The two cases involve two separate approvals of two distinct projects in two different States.”).

Consider the principal arguments the Secretary relies

upon on remand in Kentucky. First, he says that the

project promotes coverage because in its absence, the

expansion population would have no Medicaid coverage.

See Stewart v. Azar, No. 18-152, ECF No. 108 (HHS

MSJ) at 18-20. A necessary ingredient of this argument appears to be that the Kentucky Governor has conditioned the Commonwealth’s continued expansion of

Medicaid on the Secretary’s approval of the proposed

project. Id. at 19. There is no suggestion that Arkansas’s Governor has made any similar kind of threat with

regard to the Arkansas Works Amendments. Second,

51a

the Secretary justifies the Kentucky program on the

ground that it advances the fiscal sustainability of the

state’s Medicaid program, which is at risk due to Kentucky’s dire budgetary situation. Id. at 15-18. Yet

there is no assertion that Arkansas is suffering from

similar fiscal problems. The Government’s argument

that the Kentucky approval justifies the decision on review in this case is particularly unpersuasive considering these significant differences.

The final reason to reject this argument is the simplest: the justification the Secretary has given for sustaining Kentucky’s program on remand is insufficient

and the Court today rejects it in its latest Opinion in

Stewart. See Stewart v. Azar, No. 18-152, Slip Opinion

at 3 (Mar. 27, 2019) (Stewart II). If the explanation

does not even justify affirmance of Kentucky’s project,

it cannot support upholding a different administrative

decision approving a different state’s project.

* * *

In sum, the Secretary’s approval of the Arkansas

Works Amendments is arbitrary and capricious because

it did not address—despite receiving substantial comments on the matter—whether and how the project

would implicate the “core” objective of Medicaid: the

provision of medical coverage to the needy. Neither

his consideration of other Medicaid Act objectives nor

his subsequent approval of Kentucky’s separate demonstration project cure that deficiency. This failure infected the Secretary’s approval of AWA as a whole, such

that those Amendments are invalid. The Court will

thus grant Plaintiffs full relief on their arbitrary-and-

52a

capricious claim, removing any need to address their separate statutory-authority, APA notice-and-comment, and

constitutional arguments.

Remedy

That leaves only the question of the proper remedy,

which in these circumstances is not small beer. When

a court concludes that agency action is unlawful, “the

practice of the court is ordinarily to vacate the rule.”

Ill. Pub. Telecomms. Ass’n v. FCC, 123 F.3d 693, 693

(D.C. Cir. 1997); Reed v. Salazar, 744 F. Supp. 2d 98, 119

(D.D.C. 2010) (“[T]he default remedy is to set aside

Defendants’ action.”); Sierra Club v. Van Antwerp, 719

F. Supp. 2d 77, 78 (D.D.C. 2010) (“[B]oth the Supreme

Court and the D.C. Circuit Court have held that remand,

along with vacatur, is the presumptively appropriate

remedy for a violation of the APA.”). “[A]lthough vacatur is the normal remedy, [courts] sometimes decline

to vacate an agency’s action.” Allina Health Servs. v.

Sebelius, 746 F.3d 1102, 1110 (D.C. Cir. 2014). That

decision depends on the “seriousness of the order’s deficiencies (and thus the extent of doubt whether the agency

chose correctly) and the disruptive consequences of an interim change.” Allied-Signal, Inc. v. U.S. Nuclear Reg.

Comm’n, 988 F.2d 146, 150-51 (D.C. Cir. 1993) (citation

omitted); see also Standing Rock Sioux Tribe v. U.S.

Army Corps of Engineers, 282 F. Supp. 3d 91, 103

(D.D.C. 2017) (declining to vacate when agency “largely

complied” with statute and could likely substantiate

prior conclusions on remand).

In Stewart I, the Court concluded that both factors

supported vacatur. The Government’s failure to consider an objective of Medicaid was a “major shortcoming” going “to the heart” of his decision. See 313

53a

F. Supp. 3d at 273. And vacatur was not overly disruptive because the project had “yet to take effect” and the

plaintiffs could suffer “serious harm[s]” were Kentucky

HEALTH allowed to be implemented pending further

proceedings. Id. While the journey is somewhat different in this case, the Court arrives at the same destination.

1. Seriousness of Deficiencies

The first factor does not favor the Government. For

starters, in Stewart I, the Court concluded that the same

legal error was a “major shortcoming” going “to the

heart of the Secretary’s decision.” 313 F. Supp. 3d at

273. It explained that the D.C. Circuit has “repeatedly

vacated agency actions with that flaw.” Id. Defendants respond that the Secretary has cured the error

identified in Stewart I on remand, so it will assuredly be

able to cure this one upon remand, too. See HHS MSJ

at 28-29; see also Ark. MSJ at 37-38. Not so. As explained at length in Stewart II, the Court finds that the

remand has not cured this “major shortcoming.” See

Slip Op. at 3, 14-45. Because the agency failed to provide a legally sufficient rationale upon remand from

Stewart I, the Court is even less sanguine that it will be

able to do so in this case than when it vacated the Secretary’s Kentucky approval the first time.

This does not mean it will be impossible for the

agency to justify its appro

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