Petition for Writ of Certiorari — Arkansas, Petitioner v. Charles Gresham, et al.

Supreme Court briefJul 13, 2020

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No. ____

In the Supreme Court of the United States

————

STATE OF ARKANSAS,

Petitioner,

CHARLES GRESHAM, et al.,

Respondents.

————

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

————

OFFICE OF THE ARKANSAS

ATTORNEY GENERAL

323 Center St., Ste. 200

Little Rock, AR 72201

(501) 682-6302

nicholas.bronni@

arkansasag.gov

LESLIE RUTLEDGE

Arkansas Attorney

General

NICHOLAS J. BRONNI

Solicitor General

Counsel of Record

VINCENT M. WAGNER

Deputy Solicitor General

ASHER STEINBERG

DYLAN L. JACOBS

Assistant Solicitors

General

Counsel for Petitioner

July 13, 2020

WILSON-EPES PRINTING CO., INC. – (202) 789-0096 – WASHINGTON, D. C. 20002

QUESTION PRESENTED

The Social Security Act authorizes the Secretary of

Health and Human Services to approve “any experimental, pilot, or demonstration project which, in the

judgment of the Secretary, is likely to assist in promoting the objectives” of a host of state-administered

welfare programs including Medicaid. Here, Arkansas

sought approval to test the hypothesis that conditioning Medicaid expansion benefits on work, education,

or volunteering would lead to healthier outcomes for

its beneficiaries. The Secretary agreed, predicting that

Arkansas’s proposal would likely improve beneficiary

health and promote independence from governmental

support.

On review, the United States Court of Appeals for

the D.C. Circuit held that approval unlawful. It did

not hold that the Secretary’s prediction of health

benefits was unreasonable, or even that the Secretary

failed to weigh those benefits against the project’s

potential costs. Rather, it held the Secretary could not

even consider them because, in its view, the objective

of Medicaid is expanding the ranks of those on Medicaid

and beneficiary health is beyond the Secretary’s remit.

The question presented is:

Whether the Secretary’s approval of the Arkansas

Works Amendment was lawful.

(i)

PARTIES TO THE PROCEEDING BELOW

Petitioner is the State of Arkansas. It was intervenordefendant-appellant in the court of appeals.

The following respondents were plaintiff-appellees

in the court of appeals: Charles Gresham, Cesar

Ardon, Marisol Ardon, Adrian McGonigal, Veronica

Watson, Treda Robinson, Anna Book, Russell Cook,

and Jamie Deyo.

The following respondents were defendant-appellants

in the court of appeals: the United States Department

of Health and Human Services (HHS), the Centers for

Medicare and Medicaid Services (CMS), an agency of

HHS, Alex M. Azar II, in his official capacity as the

Secretary of HHS, and Seema Verma, in her official

capacity as the Administrator of CMS.

iii

RELATED PROCEEDINGS

Gresham v. Azar, No. 18-1900 (D.D.C.) (judgment

entered Apr. 4, 2019).

Gresham v. Azar, No. 19-5094 (D.C. Cir.) (judgment

entered Feb. 14, 2020).

Gresham v. Azar, No. 19-5096 (D.C. Cir.) (judgment

entered Feb. 14, 2020).

TABLE OF CONTENTS

Page

QUESTION PRESENTED ..................................

PARTIES TO THE PROCEEDING BELOW .....

RELATED PROCEEDINGS ...............................

iii

TABLE OF AUTHORITIES ................................

vii

OPINIONS BELOW ............................................

JURISDICTION ..................................................

STATUTORY PROVISIONS INVOLVED ..........

STATEMENT ......................................................

Statutory Background ..............................

1. The Medicaid Program .........................

2. Demonstration Projects .......................

Arkansas Works ........................................

Procedural History....................................

REASONS FOR GRANTING THE WRIT ..........

The court of appeals’ decision is wrong....

A. Health and independence are Medicaid

objectives ..............................................

1. Section 1901 is not a statement of

the Medicaid expansion’s objectives ................................................

a. Section 1901 is not a statement

of programmatic objectives .......

(v)

TABLE OF CONTENTS—Continued

Page

b. Section 1901 does not state

the purposes of the Medicaid

expansion ..................................

2. The Secretary properly considered

health and independence ...............

B. The Secretary’s approval was not

arbitrary and capricious ......................

The question presented warrants review

CONCLUSION ....................................................

II.

APPENDIX

APPENDIX A: OPINION, Court of Appeals

for the District of Columbia Circuit (February

14, 2020) .........................................................

APPENDIX B: MEMORANDUM OPINION,

District Court for the District of Columbia

(March 27, 2019) ............................................

21a

APPENDIX C: Excerpts from administrative

record ..............................................................

61a

APPENDIX D:

42 U.S.C. 1315 ............................................ 193a

42 U.S.C. 1396-1 ......................................... 202a

vii

TABLE OF AUTHORITIES

CASES

Page(s)

Aguayo v. Richardson,

473 F.2d 1090 (2d Cir. 1973) .................... 3, 25

Barber v. Thomas,

560 U.S. 474 (2010) ...................................

Chevron, U.S.A., Inc. v. Nat. Res. Def.

Council, Inc.,

467 U.S. 837 (1984) ...................................

Dep’t of Commerce v. New York,

139 S. Ct. 2551 (2019) ......................... 24, 25, 26

FCC v. Fox Television Stations,

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

Fresno Mobile Radio, Inc. v. FCC,

165 F.3d 965 (D.C. Cir. 1999) ................... 10, 24

Hall v. Florida,

572 U.S. 701 (2014) ................................... 29-30

King v. Burwell,

135 S. Ct. 2480 (2015) ...............................

MCI Telecomms. Corp. v. AT&T Co.,

512 U.S. 218 (1994) ...................................

Me. Cmty. Health Options v. United States,

140 S. Ct. 1308 (2020) ...............................

Melcher v. FCC,

134 F.3d 1143 (D.C. Cir. 1998) .................

MobileTel, Inc. v. FCC,

107 F.3d 888 (D.C. Cir. 1997) ...................

Nat’l Fed’n of Indep. Bus. v. Sebelius,

567 U.S. 519 (2012) ......................... 2, 17, 18, 19

viii

TABLE OF AUTHORITIES—Continued

Page(s)

Nichols v. United States,

136 S. Ct. 1113 (2016) ...............................

Pharm. Rsch. & Mfrs. of Am. v. Walsh,

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

Philbrick v. Azar,

397 F. Supp. 3d 11 (D.D.C. 2019) .............

Philbrick v. Azar,

Nos. 19-5293, 19-5295, 2020 WL

2621222 (D.C. Cir. May 20, 2020) ............ 27-28

Spry v. Thompson,

487 F.3d 1272 (9th Cir. 2007) ...................

Stewart v. Azar,

308 F. Supp. 3d 239 (D.D.C. 2018) ...........

Stewart v. Azar,

313 F. Supp. 3d 237 (D.D.C. 2018) ... 8, 9, 18, 20

U.S. Nat’l Bank of Ore. v. Indep. Ins.

Agents of Am., Inc.,

508 U.S. 439 (1993) ...................................

Young v. Azar,

No. 1:19-cv-3526

(D.D.C. Mar. 4, 2020) ................................

STATUTES

28 U.S.C. 1254(l)...........................................

42 U.S.C. 601(a) ............................................

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

42 U.S.C. 1315(a) .......................................... 3, 21

TABLE OF AUTHORITIES—Continued

Page(s)

42 U.S.C. 1396-1 ..........................................passim

42 U.S.C. 1396a(a)(8) ...................................

42 U.S.C. 1396a(a)(22) .................................

42 U.S.C. 1396a(a)(33)(A) ............................

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

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

42 U.S.C. 1396b ............................................

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

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

42 U.S.C. 1396n(a)(2)(B) ..............................

42 U.S.C. 1396n(b)(1)-(2)..............................

42 U.S.C. 1396n(i)(1)(H)(i) ...........................

42 U.S.C. 1396u-8(a)(2)(A)(ii) ......................

42 U.S.C. 1396u-8(a)(3) ................................

42 U.S.C. 1396u-8(a)(3)(B) ...........................

42 U.S.C. 1397aa(a) ......................................

Further Consolidated Appropriations Act,

2020, Pub. L. No. 116-94, div. A, tit. II,

133 Stat. 2534, 2568 (2019) ...................... 15, 16

Public Welfare Amendments of 1962, Pub.

L. No. 87-543, sec. 122, 76. Stat. 172,

192 (1962) ..................................................

Pub. L. No. 93-233, sec. 13(a)(1), 87 Stat.

947, 960 (1973) ..........................................

TABLE OF AUTHORITIES—Continued

Page(s)

Pub. L. No. 98-369, sec. 2663(j)(3)(C), 98

Stat. 494, 1171 (1984) ...............................

Pub. L. No. 111-148, sec. 4108, 124 Stat.

119, 561-64 (2010) .....................................

RULES

Medicaid Program; Review and Approval

Process for Section 1115 Demonstrations,

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

U.S. House of Rep. R. XXI ............................

OTHER AUTHORITIES

Anthony Albanese, The Past, Present, and

Future of Section 1115: Learning from

History to Improve the Medicaid-Waiver

Regime Today, 128 Yale L.J. Forum 827

(2019) ............................................................

Arkansas 1115 Waiver Extension Application

(June 28, 2016) ..........................................

Arkansas Private Option 1115 Demonstration Waiver: 2014 Annual Report, Ark.

Dep’t of Human Servs. (2015) ..................

4-5

Abbe R. Gluck & Nicole Huberfeld, What Is

Federalism in Healthcare For?, 70 Stan.

L. Rev. 1689 (2018) ...................................

H.R. Rep. No. 111-299 (2009) .......................

Medicaid Waiver Tracker: Approved and

Pending Section 1115 Waivers by State,

Kaiser Fam. Found. (June 26, 2020) ........ 28, 29

TABLE OF AUTHORITIES—Continued

Page(s)

Status of State Action on the Medicaid

Expansion Decision, Kaiser Fam. Found.

(July 1, 2020).............................................

Letter from Mary C. Mayhew, Deputy Adm’r

& Dir., Ctrs. for Medicare & Medicaid

Servs., to Henry D. Lipman, Medicaid

Dir., N.H. Dep’t of Health & Human Servs.

(Nov. 30, 2018) ..........................................

The Use of Healthy Behavior Incentives in

Medicaid, Medicaid & CHIP Payment &

Access Comm’n (August 2016) .................

S. Rep. No. 87-1589 (1962) (Conf. Rep.) ......

James V. Saturno & Brian T. Yeh, Cong.

Res. Serv. R42098, Authorization of

Appropriations: Procedural and Legal

Issues (2016) .............................................. 15, 19

Letter from Andrew M. Slavitt, Acting Adm’r,

Ctrs. for Medicare & Medicaid Servs., to

Cindy Gillespie, Dir., Ark. Dep’t of

Human Servs. (Dec. 8, 2016) ......................

Letter from Jami Snyder, Dir., Ariz. Health

Care Cost Containment Sys., to Calder

Lynch, Deputy Adm’r & Acting Dir., Ctrs.

for Medicare & Medicaid Servs. (Oct. 17,

2019) .......................................................... 28-29

Letter from Marilyn Tavenner, Adm’r, Ctrs.

for Medicare & Medicaid Servs., to Andy

Allison, Dir., Ark. Dep’t of Human Servs.

(Sept. 27, 2013) .........................................

xii

TABLE OF AUTHORITIES—Continued

Page(s)

U.S. Gov’t Accountability Office, GAO-16464SP, Principles of Federal Appropriations Law (4th ed. 2016) ..................... 15, 16, 19

PETITION FOR A WRIT OF CERTIORARI

Petitioner the State of Arkansas respectfully petitions

for a writ of certiorari to review the judgment of the

United States Court of Appeals for the District of

Columbia Circuit in this case.

OPINIONS BELOW

The court of appeals’ opinion (Pet. App. 1a-20a) is

reported at 950 F.3d 93. The district court’s order (Pet.

App. 21a-60a) is reported at 363 F. Supp. 3d 165.

JURISDICTION

The court of appeals entered judgment on February

14, 2020. On March 19, 2020, this Court extended the

deadline to file any petition for a writ of certiorari to

150 days from the date of the lower court judgment.

The jurisdiction of this Court is invoked under 28

U.S.C. 1254(1).

STATUTORY PROVISIONS INVOLVED

Pertinent statutory provisions are set forth in the

appendix to this petition (Pet. App. 193a-202a).

STATEMENT

A. Statutory Background.

1. The Medicaid Program.

In 1965, Congress enacted Medicaid to provide

health care coverage to four categories of low-income

people: the disabled, the blind, the elderly, and needy

families with dependent children. Pet. App. 3a (citing

42 U.S.C. 1396-1). From its inception, Medicaid has

been a cooperative federalism program. States administer the program under plans approved by the Secretary,

42 U.S.C. 1396a(b), and in return, States receive federal

funding. 42 U.S.C. 1396b. Every State participates in

Medicaid. Nat’l Fed’n of Indep. Bus. v. Sebelius (NFIB),

567 U.S. 519, 542 (2012).

In the decades after Medicaid’s enactment, Congress

slowly expanded Medicaid eligibility to include other

particularly needy groups, including pregnant women

and certain children. Id. at 583.

But in 2010, Congress “transformed” Medicaid. Id.

Enacted as part of the Affordable Care Act, what came

to be known as the Medicaid expansion made every

adult with an income up to 133 percent of the poverty

level eligible, and conditioned State participation in

traditional Medicaid on covering the new expansion

population. Id. at 542. In NFIB, this Court, reasoning

the expansion was “a new health care program,” not “a

mere alteration of [the] existing” one, held that condition was unconstitutionally coercive. Id. at 584-85.

As a result, a State’s participation in the Medicaid

expansion is voluntary. Id. at 585. And many States

have opted not to participate. See Status of State

Action on the Medicaid Expansion Decision, Kaiser

Fam. Found. (July 1, 2020).1

2. Demonstration Projects.

In 1962, concerned that the Social Security Act’s

various state plan 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. 87-1589, at 19 (1962)

(Conf. Rep.), Congress enacted Section 1115 of the

Social Security Act. Public Welfare Amendments of

https://www.kff.org/health-reform/state-indicator/state-activ

ity-around-expanding-medicaid-under-the-affordable-care-act.

1962, Pub. L. No. 87-543, sec. 122, 76. Stat. 172, 192

(1962) (codified as amended at 42 U.S.C. 1315). That

section provides that “the Secretary may waive

compliance with any of the requirements” of a host of

state-administered

public-assistance

programs,

including Medicaid, “[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 those programs. 42 U.S.C. 1315(a).

As the Secretary has explained, demonstration

projects “introduc[e] new approaches that can be a

model for other States and lead to programmatic

changes nationwide.” Medicaid Program; Review and

Approval Process for Section 1115 Demonstrations, 77

Fed. Reg. 11,678, 11678 (Feb. 27, 2012). For example,

decades before Congress imposed work requirements

as part of comprehensive welfare reform, States used

Section 1115 demonstration projects to experiment

with similar requirements. See Aguayo v. Richardson,

473 F.2d 1090, 1093-96 (2d Cir. 1973) (Friendly, J.)

(upholding such a project); Anthony Albanese, The

Past, Present, and Future of Section 1115: Learning

from History to Improve the Medicaid-Waiver Regime

Today, 128 Yale L.J. Forum 827, 833-34 (2019) (describing these “precursor[s]” to welfare reform under the

Bush and Clinton administrations).

The Medicaid expansion itself also began as a series

of demonstration projects that expanded Medicaid

coverage to then-ineligible populations. See Spry v.

Thompson, 487 F.3d 1272, 1274-75 (9th Cir. 2007)

(“States may also create ‘experimental, pilot or demonstration’ projects to serve ‘expansion populations’—

individuals who . . . are counted for federal reimbursements only because of the Secretary’s waiver.”). Indeed,

Massachusetts’ “Romney-care,” which inspired the

Affordable Care Act’s mandate and exchanges, was

such a project, “funded and facilitated by a Medicaid

demonstration waiver.” Abbe R. Gluck & Nicole

Huberfeld, What Is Federalism in Healthcare For?, 70

Stan. L. Rev. 1689, 1722 (2018).

Moreover, each of the last three administrations has

approved Section 1115 waivers designed to test healthy

behavior incentives. See The Use of Healthy Behavior

Incentives in Medicaid, Medicaid & CHIP Payment

& Access Comm’n 2, 7 (August 2016).2 And many

of those experiments—like the Arkansas Works

amendment—conditioned some aspect or level of

coverage on healthy behavior. See id.

B. Arkansas Works

In 2013, Arkansas became the first State in the

country to receive a Section 1115 waiver to implement

the Medicaid expansion. Gluck & Huberfeld, supra at

1737. Rather than enrolling beneficiaries in traditional Medicaid, Arkansas’s expansion plan enrolled

beneficiaries in private insurance plans, with the

State paying the premiums. See Letter from Marilyn

Tavenner, Adm’r, Ctrs. for Medicare & Medicaid Servs.,

to Andy Allison, Dir., Ark. Dep’t of Human Servs.

1 (Sept. 27, 2013).3 This first-in-the-nation publicprivate partnership was immediately successful—

cutting the State’s uninsured rate almost in half and

reducing hospitals’ uncompensated care losses by

more than 50 percent. Arkansas Private Option 1115

https://www.macpac.gov/wp-content/uploads/2016/08/The-Useof-Healthy-Behavior-Incentives-in-Medicaid.pdf.

https://www.medicaid.gov/Medicaid-CHIP-Program-Informa

tion/By-Topics/Waivers/1115/downloads/ar/Health-Care-Independ

ence-Program-Private-Option/ar-private-option-app-ltr-09272013.

pdf.

Demonstration Waiver: 2014 Annual Report, Ark.

Dep’t of Human Servs. 3 (2015).4

In 2016, Arkansas received further waiver authority

with the Secretary’s approval of the Arkansas Works

demonstration project. Building on its 2013 demonstration project, Arkansas Works provided premium

support for expansion beneficiaries on employersponsored insurance; required beneficiaries above

poverty level to pay premiums; incentivized annual

checkups with additional benefits; and, critically for

these purposes, referred all enrollees to the Arkansas

Department of Workforce Services for job training and

placement assistance. See Letter from Andrew M.

Slavitt, Acting Adm’r, Ctrs. for Medicare & Medicaid

Servs., to Cindy Gillespie, Dir., Ark. Dep’t of Human

Servs. 1 (Dec. 8, 2016);5 Arkansas 1115 Waiver Extension

Application 10-14 (June 28, 2016).6 The State expected

that “as individuals receiving this referral bec[a]me

employed . . . many [would] transition out of the

Arkansas Works program to [employer-sponsored

insurance] and private, individual market coverage.”

Id. at 14.

https://www.medicaid.gov/Medicaid-CHIP-Program-Informa

tion/By-Topics/Waivers/1115/downloads/ar/Health-Care-Indepen

dence-Program-Private-Option/ar-private-option-annl-rpt2014.pdf.

https://www.medicaid.gov/Medicaid-CHIP-Program-Informa

tion/By-Topics/Waivers/1115/downloads/ar/Health-Care-Indepen

dence-Program-Private-Option/ar-works-amndmnt-appvl12292017.pdf.

https://www.medicaid.gov/Medicaid-CHIP-Program-Informa

tion/By-Topics/Waivers/1115/downloads/ar/Health-Care-Indepen

dence-Program-Private-Option/ar-works-application07072016.pdf.

Like Arkansas’s original demonstration program,

Arkansas Works was successful at reducing the State’s

uninsured population. But the work-referral program

was a disappointment. Though a quarter of beneficiaries who acted on the referrals obtained employment,

only 4.7 percent of beneficiaries acted on the referrals.

Dist. Ct. R. 39-2 at 2. As a result, Arkansas concluded

that a stronger incentive was necessary.

Therefore, in 2017, Arkansas proposed an amendment

to Arkansas Works. Its centerpiece was a communityengagement requirement, designed to “promot[e]

personal responsibility and work,” “encourag[e] movement up the economic ladder, and facilitate[e] transitions

from Arkansas Works to employer-sponsored and

[exchange] coverage.” Pet. App. 192a. To receive

Medicaid expansion coverage, non-exempt, able-bodied

beneficiaries under the age of 50 were required to

report 80 hours of work, work-related activities, education, or volunteering per month. Pet. App. 111a-115a.

To avoid coverage loss, Arkansas carefully designed

a requirement that was attainable and could be complied

with in a variety of ways. Beneficiaries with minor

dependents, full-time students, pregnant women, the

medically frail, and many others were exempted. Pet.

App. 112a-113a. Attendance at educational programs,

including GED classes, counted towards the 80-hour

requirement. Pet. App. 114a. So too did vocational

training and up to 40 hours per month spent looking

for work. Pet. App. 114a. And the hourly minimum

wage was used as a proxy for work hours; thus, 40

hours of work at a wage twice the minimum would

count as 80 hours. Pet. App. 113a n.2. Moreover,

beneficiaries would only be considered non-compliant

and lose their benefits if they failed to meet the

requirement for three consecutive months. Pet. App.

117a. And non-complaint beneficiaries could reapply

for benefits the next calendar year. Pet. App. 118a.

In March of 2018, after notice and comment, the

Secretary, acting through the Administrator of CMS,

approved Arkansas’s proposed amendment. Pet. App.

65a. In contrast to previous Section 1115 approvals,

the Secretary issued a detailed letter responding to

commenters’ concerns and explaining why he concluded the amendment would likely assist in promoting

the objectives of Medicaid. Pet. App. 66a-79a.7

The Secretary predicted that the communityengagement requirement would likely promote two

Medicaid objectives. First, the Secretary explained

that the agency had “an obligation to ensure that

proposed demonstration programs are likely to . . .

improve health and wellness.” Pet. App. 69a. Citing

studies finding that work and other forms of community engagement are correlated with improved health,

the Secretary predicted the community-engagement

requirement would promote beneficiary health by encouraging community engagement. Pet. App. 70a. Second,

looking to Medicaid’s stated objective of “help[ing]

individuals and families attain or retain capability for

independence or self-care,” Pet. App. 69a,8 the Secretary

found “it furthers the purposes of the Medicaid statute

to test and evaluate these requirements as a means . . .

to promote beneficiary independence.” Pet. App. 75a.

Responding to commenters’ concerns that the

community-engagement requirement would result in

For examples of Section 1115 approvals under the prior

administration, see D.C. Cir. J.A., Vol. I, at 118-21, 127-29, 13740, 147-48.

See 42 U.S.C. 1396-1 (listing that as an objective of Medicaid

appropriations).

coverage loss rather than increased community engagement, the Secretary noted that Arkansas exempted

beneficiaries who were unable to work; that his approval

required the State to reach out to beneficiaries and

explain how to comply and report compliance; and that

beneficiaries would only lose coverage after receiving

three notices over three months that their failure to

satisfy the requirement placed their coverage in

jeopardy. Pet. App. 73a-76a.

All things considered, the Secretary concluded that

the requirement “create[d] appropriate incentives for

beneficiaries to gain employment” and predicted that

“the overall health benefits to the effected population

through community engagement outweigh the health

risks to those who fail to [comply] and who fail to seek

exemption.” Pet. App. 75a, 76a. But the Secretary

cautioned that if he was mistaken and the communityengagement requirement did “not adequately incentivize

beneficiary participation,” he could withdraw Arkansas’s

waiver. Pet. App. 75a.

C. Procedural History

Several months after the Secretary approved the

Arkansas Works Amendment, the District Court for

the District of Columbia held the Secretary’s approval

of a similar Section 1115 demonstration project in

Kentucky was arbitrary and capricious. See Stewart

v. Azar, 313 F. Supp. 3d 237 (D.D.C. 2018). In that

case, Kentucky had predicted for budgetary purposes

that under its project, its Medicaid expansion plan

would cover 95,000 fewer people. Id. at 247. Though

it is doubtful that this figure reflected expected coverage losses rather than transitions to commercial and

employer-sponsored coverage, the district court attributed

it entirely to the former and faulted the Secretary for

failing to address Kentucky’s supposed estimate of

coverage loss. See id. at 262-64.

Emboldened by that decision, a group of Arkansas

Works beneficiaries filed suit in the same district court

and designated this case as related to Stewart. Dist.

Ct. R. 2. They claimed that the Arkansas Works Amendment’s approval was arbitrary and capricious under

that court’s reasoning in Stewart—though Arkansas

made no comparable estimate of a reduction in Medicaid

expansion rolls. Pet. App. 31a, 35a. Arkansas

intervened to defend its program. Pet. App. 32a.

As in Stewart, the district court concluded the

Secretary’s approval was arbitrary and capricious.

First, while “express[ing] skepticism that health,

generally construed, was properly considered an objective”

of Medicaid at all, Pet. App. 45a, or that Medicaid had

any objectives beyond maximizing coverage, the

district court ultimately only held that providing

healthcare coverage to eligible beneficiaries was at

least a Medicaid objective. Pet. App. 38a. Second—

while not questioning the Secretary’s predictions that

Arkansas’s project would promote beneficiary health

and independence—the district court held, as in Stewart,

that the Secretary said too little about coverage. In

particular, the district court concluded that although

the Secretary had “acknowledg[ed]” and addressed “at

several points” comments predicting coverage losses,

the Secretary had “fail[ed] to address whether coverage loss would occur.” Pet. App. 40a. That supposed

omission, the district court concluded, rendered his

approval arbitrary and capricious. Pet. App. 50a.

Arkansas and the federal defendants appealed. The

court of appeals affirmed, but on largely different

grounds. It agreed with the defendants that—under

long-established circuit precedent the district court

did not cite—when multiple statutory “objectives could

point to conflicting courses of action,” an “agency could

give precedence to one or several objectives over others

without acting in an arbitrary or capricious manner.”

Pet. App. 18a (citing Fresno Mobile Radio, Inc. v. FCC,

165 F.3d 965, 971 (D.C. Cir. 1999) (Ginsburg, J.);

Melcher v. FCC, 134 F.3d 1143, 1154 (D.C. Cir. 1998)

(Wald, J.)). Thus, the court of appeals suggested, if

Medicaid had “a laundry list” of purposes, one of which

was beneficiary health, prioritizing beneficiaries’

health over maximizing their ranks would have been

permissible. Pet. App. 19a.

But the court of appeals declared that Medicaid was

not a multi-purpose program. Pet. App. 16a. Instead,

it held that Medicaid has just “one primary purpose,

which is providing health care coverage without any

restriction geared to healthy outcomes, financial

independence or transition to commercial coverage.”

Id. And remarkably, the court of appeals concluded

that “the alternative objectives of better health

outcomes and beneficiary independence are not

consistent with Medicaid.” Id.

The court of appeals based its novel interpretation

of the Medicaid statute on an equally novel approach

to statutory interpretation. It acknowledged that “the

Medicaid statute does not have a standalone purpose

section like some social welfare statutes” in the Social

Security Act. Pet. App. 10a. But the court of appeals

found what it deemed a statement of purpose in

Medicaid’s “appropriations provision” at Section 1901

of the Act. Pet. App. 10a-11a (citing 42 U.S.C. 13961). That section, enacted in 1965, states an appropriations purpose of providing “medical assistance on

behalf of [needy] families with dependent children and

of aged, blind, or disabled individuals”—that is, the

original groups of Medicaid beneficiaries. Given that

section, and the statute’s definition of medical assistance as medical services or payment for them, Pet.

App. 11a (citing 42 U.S.C. 1396d(a)), the court of

appeals concluded the entire program’s “primary objective” was “unambiguously” coverage. Pet. App. 12a

(quoting Chevron, U.S.A., Inc. v. Nat. Res. Def.

Council, Inc., 467 U.S. 837, 843 (1984)).

Having discovered an exhaustive statement of

Medicaid’s purposes in its 55-year-old appropriations

section, the court of appeals readily dismissed health

and independence as “non-statutory objectives.” Pet.

App. 19a. As to health, the court of appeals simply

noted that Section 1901 “makes no mention” of it. Pet.

App. 13a. Though granting that health might be “the

ultimate purpose[]” of Medicaid’s provision of health

care coverage, the court of appeals reasoned the

Secretary was bound by “the means [Congress] has

deemed appropriate, and prescribed, for the pursuit”

of that purpose—even when acting under a statute

that authorizes waiving any and all of Medicaid’s

substantive requirements in pursuit of its objectives.

Pet. App. 13a (quoting MCI Telecomms. Corp. v. AT&T

Co., 512 U.S. 218, 231 n.4 (1994)).

As for financial independence, the court of appeals

questioned whether the Secretary had relied on that

objective in approving the Arkansas Works Amendment,

asserting that it was absent from the “specific section”

of the Secretary’s approval addressing Medicaid objectives and appeared only in responses to comments.

Pet. App. 14a. Ultimately, however, the court of

appeals concluded that financial independence too was

non-statutory. Here, the court of appeals encountered

a problem: the appropriations section it deemed an

unambiguously exhaustive statement of Medicaid’s

purposes says a purpose of Medicaid appropriations

was to “help [traditional Medicaid beneficiaries] attain

or retain capability for independence or self-care.”

Pet. App. 11a (quoting 42 U.S.C. 1396-1). Yet the

court of appeals simply sidestepped that problem by

declaring in a single sentence that the independence

Congress had in mind was “functional independence,”

not “financial independence from government welfare

programs.” Pet. App. 15a.

Having determined the Secretary’s approval pursued

“an entirely different set of objectives than the one we

hold is the principal objective of Medicaid,” Pet. App.

18a, the conclusion that his approval was arbitrary

and capricious necessarily followed.

Unlike the district court, the court of appeals did not

claim that the Secretary said nothing about coverage

loss. It acknowledged that the Secretary pointed to

features of Arkansas’s project that would mitigate

coverage loss, said he could rescind his approval if

greater loss occurred than he expected, and predicted

that the health benefits of the project would outweigh

the harms of coverage losses. Pet. App. 17a-18a. But

given its conclusion that coverage was essentially the

program’s sole objective, the court of appeals deemed

these statements an inadequate, “conclusory” treatment

of the problem. Pet. App. 18a.

Ultimately, however, the court of appeals’ problem

with the Secretary’s approval was more fundamental:

in predicting that the risks of coverage loss, no matter

how slight, would be outweighed by the project’s health

benefits, the Secretary “prioritize[d] non-statutory

objectives [over] the statutory purpose.” Pet. App. 19a.

REASONS FOR GRANTING THE WRIT

I. The court of appeals’ decision is wrong.

A. Health and independence are Medicaid

objectives.

1. Section 1901 is not a statement of the

Medicaid expansion’s objectives.

If Medicaid’s sole objective were maximizing eligible

beneficiaries’ coverage, then under the court of appeals’

reasoning no experimental work or community-engagement requirement would ever be permissible. After

all, all such requirements trade some risk of coverage

loss to achieve healthier outcomes and independence.

And under the court of appeals’ logic, that will always

be an impermissible tradeoff since Medicaid’s sole

objective is maximizing coverage.

Simply covering eligible beneficiaries, however, is

not Medicaid’s sole objective. So the Secretary may

balance it against others, as indeed every administration this century, in exercising its Section 1115 waiver

powers, has done.

The court of appeals’ contrary conclusion was based

on the original Medicaid’s appropriations section. It

read that provision as an exhaustive—and unambiguously so—statement of Medicaid’s purposes. There are

two problems with that interpretation. First, that

section is just an authorization of appropriations, not

a purpose section. Second, it says nothing about the

purposes of the ACA’s Medicaid expansion, or for that

matter, any of Medicaid’s other expansions since its

enactment. Rather, at best, it only speaks to the

original Medicaid’s purposes.

a. Section 1901 is not a statement of

programmatic objectives.

Enacted in 1965, and last substantively amended in

1973,9 Section 1901 says:

For the purpose of enabling each State, as far

as practicable under the conditions in such

State, 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 selfcare, there is hereby authorized to be appropriated for each fiscal year a sum sufficient to

carry out the purposes of this subchapter.

The sums made available under this section

shall be used for making payments to States

which have submitted, and had approved by

the Secretary, State plans for medical

assistance.

42 U.S.C. 1396-1.

That section is a surpassingly odd place to find a

statement of programmatic objectives.

Congress

normally states agency objectives—including for social

welfare programs—in a purpose section. See, e.g., 42

U.S.C. 601(a) (TANF’s “Purpose” section, stating “[t]he

That amendment substituted “disabled” for the provision’s

original reference to the “permanently and totally disabled.” Pub.

L. No. 93-233, sec. 13(a)(1), 87 Stat. 947, 960 (1973). A later

technical amendment struck its reference to the former

Department of Health, Education and Welfare. Pub. L. No. 98369, sec. 2663(j)(3)(C), 98 Stat. 494, 1171 (1984).

purpose of this part”); 42 U.S.C. 1397aa(a) (SCHIP’s

“Purpose” section, stating “[t]he purpose of this subchapter”). But as the court of appeals acknowledged,

Section 1901 is not such a section. Pet. App. 10a.

The court of appeals suggested that Section 1901 at

least “articulates the reasons underlying the appropriation of funds,” thus instructing the Secretary on the

objectives to pursue in spending them. Pet. App. 10a11a. But even this overstates matters. For Section

1901 does not appropriate funds; Medicaid funding is

appropriated annually in Congress’s budgets. See,

e.g., Further Consolidated Appropriations Act, 2020,

Pub. L. No. 116-94, div. A, tit. II, 133 Stat. 2534, 2568

(2019). All Section 1901 does is “authorize[] [funds] to

be appropriated,” 42 U.S.C. 1396-1—a crucial nuance

that sharply limits its role.

Often when Congress appropriates funds for a

program, it “passes an Act authorizing” itself to appropriate in between creating the program and appropriating

funding for it. Me. Cmty. Health Options v. United

States, 140 S. Ct. 1308, 1319 (2020) (citing U.S. Gov’t

Accountability Office, GAO-16-464SP, Principles of

Federal Appropriations Law 2-56 (4th ed. 2016) (GAO

Redbook)). These authorizations are parliamentary

formalities, enacted to comply with House rules that

require appropriations in appropriation bills to have

been previously authorized by law. See GAO Redbook

2-55; James V. Saturno & Brian T. Yeh, Cong.

Res. Serv. R42098, Authorization of Appropriations:

Procedural and Legal Issues 4, 6-7 (2016) (“Authorization of Appropriations”).

While authorizations serve a useful parliamentary

role, they do not speak to agencies. Rather, an

authorization like Section 1901 is only a “directive to

Congress itself” that “serves little purpose other than

to comply with House Rule XXI,” the rule requiring

pre-appropriation authorization. GAO Redbook 2-56

(emphasis added). Congress directs agencies on how

to spend appropriated funds through programs’ organic

statutes, or appropriations provisions themselves, not

through appropriation authorizations—and it did so

in Medicaid. See 42 U.S.C. 1396b(a) (directing the

Secretary to fund States’ Medicaid plans); Further

Consolidated Appropriations Act, 2020, Pub. L. No.

116-94, div. A, tit. II, 133 Stat. 2534, 2568 (2019)

(same). So while Section 1901 might state Congress’s

purposes for authorizing itself to make Medicaid

appropriations more than 50 years ago, it doesn’t tell

the Secretary what purposes to pursue.

Besides Section 1901’s function, its text also

indicates it wasn’t intended to fully state Medicaid’s

purposes. Again, Section 1901’s first sentence says

that “For the purpose of enabling each State . . . to

furnish (1) medical assistance on behalf of [Medicaid’s

original beneficiaries], and (2) rehabilitation and other

services to help [them] attain or retain capability for

independence or self-care, there is hereby authorized

to be appropriated for each fiscal year a sum sufficient

to carry out the purposes of this subchapter.” 42 U.S.C.

1396-1 (emphasis added). If “the purpose” stated in

the sentence’s long preamble were the sole “purposes

of this subchapter,” Congress wouldn’t have referred

more broadly to “the purposes of this subchapter,” as

though there were others. It would have simply said

“that purpose” to refer back to the one stated.

That it didn’t makes perfect sense. Had Congress

only authorized appropriations to carry out the purposes it listed in 1965, appropriations for new Medicaid

beneficiaries and objectives to come might have been

seen as unauthorized. By explicitly acknowledging

“purposes of this subchapter” beyond the ones it listed,

Congress wrote an authorization that could last.

b. Section 1901 does not state the purposes

of the Medicaid expansion.

Even if Section 1901 were a statement of purpose,

it would only explain original Medicaid’s purposes.

Section 1901 states a purpose of providing medical

assistance to the four original Medicaid populations—

needy “families with dependent children” and “aged,

blind, or disabled individuals”—and a purpose of helping

“such families and individuals attain or retain capability for independence or self-care.” 42 U.S.C. 1396-1.

But as Section 1901 predates the Medicaid expansion by nearly half a century, it understandably says

nothing about the program’s objectives for expansion

beneficiaries: childless, non-disabled adults up to 133

percent of the poverty level. Indeed, if that section

stated Medicaid’s sole objectives, then even covering

expansion beneficiaries would exceed Medicaid’s objectives since it only discusses assisting “families with

dependent children” and “aged, blind, or disabled individuals.” Id. Thus, looking to the “original program[’s]”

appropriations section to find the objectives of the

expansion’s “new program,” NFIB, 567 U.S. at 582,

583, makes little more sense than searching for the

Medicaid’s expansion’s objectives in the Medicare Act.

The court of appeals did not grapple with this

problem. Instead, it simply applied the section’s

purpose to the Medicaid expansion as if the language

limiting them to original Medicaid beneficiaries

weren’t there. But a court cannot simply “read words

out the statute.” Barber v. Thomas, 560 U.S. 474, 490

(2010). Nor can it unilaterally extend that provision’s

reach to expansion beneficiaries: “To supply omissions

transcends the judicial function.” Nichols v. United

States, 136 S. Ct. 1113, 1118 (2016).

By contrast, the district court, at least, recognized

this problem. In Stewart, it suggested that the omission of expansion beneficiaries from Section 1901 was

another ACA “example[] of inartful drafting,” and that

they should simply be read into that provision alongside their original-Medicaid counterparts. Stewart,

313 F. Supp. 3d at 269 (quoting King v. Burwell, 135

S. Ct. 2480, 2492 (2015)). And once so read in, that

section would state the expansion’s purposes.

The district court’s argument for that conclusion,

however, was simply question-begging. It claimed

that “it [was] inconceivable that Congress intended to

establish separate Medicaid programs, with differing

purposes.” Id. at 270; Pet App. 46a (reaffirming that

conclusion).

But that’s hardly the case. For one thing, contrary

to the district court’s suggestion that original and

expansion Medicaid are the same program, NFIB

explicitly held that the two are different programs. See

567 U.S. at 582 (“We cannot agree that existing

Medicaid and the expansion dictated by the Affordable

Care Act are all one program . . . .”). And for another,

it is hardly “inconceivable” that Congress had somewhat different purposes in mind when it created

programs targeted at very different populations—nondisabled, childless adults vs. the aged, blind and

disabled—nearly half a century apart. Nor is it “inconceivable” that the same Congress that mandated cash

incentives under Medicaid for weight loss, see infra at

21, had a different view on the direct pursuit of health

than the body that enacted original Medicaid.

Because the district court did not consider Section

1901’s limited role as an authorization of appropriations, it did not make what may seem a better

argument for its rewrite of Section 1901: that expansion

beneficiaries must be read into that provision to

authorize expansion funding. That argument, however,

would also fail, because expansion funding has no

shortage of authorization as things stand. And even if

it lacked authorization, that would not cause the

expansion’s appropriations to fail.

First, Section 1901 itself authorizes appropriations

“to carry out the purposes of this subchapter,” which

assuredly include operating the expansion program

codified there. 42 U.S.C. 1396-1. Its lengthy preamble

only states Congress’s original reason for authorizing

funding; it does not limit the authorization. Second,

even under House and Senate rules, an organic statute

authorizing expenditures—as the Medicaid Act does

regarding the expansion—suffices to authorize

appropriations; provisions like Section 1901 are not

required. See Authorization of Appropriations, supra,

at 4, 6-7. Third and last, pre-appropriation authorization is only a parliamentary requirement, not a legal

one, and one that Congress often flouts. See id. at

8-9; GAO Redbook 2-80 n.72 (“Congress appropriates

huge sums each year to fund programs with expired

authorizations.”).

It is little wonder, then, that as Congress expanded

Medicaid “on more than 50 occasions” from the 1980s

to 2010, NFIB, 567 U.S. at 627 (Ginsburg, J.), it never

amended the authorization to name the new beneficiaries: doing so would have been entirely unnecessary.

Thus, it is impossible to conclude “beyond question”—

as courts must before judicially correcting statutes—

that Section 1901’s silence on the Medicaid expansion’s

purposes was a drafting error. U.S. Nat’l Bank of

Ore. v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439,

462 (1993).

In sum, then, Section 1901 is silent on the Medicaid

expansion’s purposes. And there is no basis to

judicially correct its statement of original Medicaid’s

appropriations’ purposes to state the purposes of

expansion funds. So Section 1901 did not, unambiguously or otherwise, preclude the Secretary from deeming

health and independence objectives of the Medicaid

expansion.

2. The Secretary properly considered health

and independence.

Absent the court of appeals’ erroneous conclusion

that Section 1901’s preamble provides an exhaustive

list of Medicaid’s purposes, there isn’t any real dispute

that beneficiary health and independence are Medicaid

objectives. Indeed, even if coverage were Medicaid’s

sole objective, beneficiary health and independence

would further coverage by freeing scarce Medicaid

resources to cover the neediest beneficiaries.

First, as to health, health is undoubtedly an

objective—indeed, the ultimate objective—of a health

care program. After all, health is the purpose of health

care. And if Medicaid were only about lightening

beneficiaries’ health care costs, as the district court

suggested, Stewart, 313 F. Supp. 3d at 267, much of

Medicaid would make no sense: from its provision that

Medicaid plans must provide care with “reasonable

promptness,”10 42 U.S.C. 1396a(a)(8), to its many pro10

Indeed, in 2010 Congress amended the definition of “medical

assistance,” the lynchpin of the D.C. Circuit’s analysis, to make

it clearer that this provision required prompt care, not just prompt

payment for it. See H.R. Rep. No. 111-299, pt. 1, at 649-50 (2009).

visions ensuring the quality of care, not just its coverage. See, e.g., id. 1396a(a)(22), (a)(33)(A) (requirements

for state plans); id. 1396n(a)(2)(B), (b)(1)-(2), (i)(1)(H)(i)

(conditioning federal payment on quality assurance).

In response, the court of appeals concluded that

although health might be “the ultimate purpose[]” of

Medicaid, the program solely pursues that purpose

through “the means” of “health care coverage.” Pet.

App. 12a. But that’s an odd distinction to rest on here

since Section 1115 expressly authorizes the Secretary,

in approving demonstration projects, to waive any and

all of Medicaid’s substantive “requirements”—its

means—to promote its “objectives.” 42 U.S.C. 1315(a).

Moreover, the court of appeals’ distinction ignores

the fact that, as Medicaid has evolved since 1965,

Congress has increasingly used it to pursue improved

health outcomes directly. For example, in 2006, Congress

required the Secretary to approve up to ten States’

demonstration programs that contained “incentives to

patients to seek preventive health care services”—

including conditioning enhanced coverage on using

those services. Id. 1396u-8(a)(3), (a)(3)(B). After an

initial five-year testing period, the Secretary was authorized to approve such programs in any State. Id.

1396u-8(a)(2)(A)(ii). And in the ACA, Congress again

mandated healthy behavior incentives, there through

the Incentives for Protection of Chronic Disease in

Medicaid program, which required the Secretary to

fund experimental cash incentives for such “healthy

behaviors” as weight loss or smoking cessation. Pub.

L. No. 111-148, sec. 4108, 124 Stat. 119, 561-64 (2010)

(codified at 42 U.S.C. 1396a (note)). If Congress thought

so highly of healthy-behavior-incentive experiments

that it mandated the Secretary try some, surely the

Secretary at least has the discretion to try others.

As for independence, the Secretary’s view that one

objective of the Medicaid expansion—a public-assistance program for poor, able-bodied, non-elderly

adults—is helping beneficiaries become independent

from the program is hardly novel.11 Any social welfare

program for those who can work has that objective,

and there is no reason to think the Medicaid expansion

is any different. Indeed, even Section 1901, in which

the court of appeals placed so much stock, said original

Medicaid was intended to provide “services to help

[beneficiaries] attain or retain capability for independence or self-care.” 42 U.S.C. 1396-1. The court of

appeals insisted this language unambiguously referred

to “functional independence,” apparently meaning the

ability to live without nursing or home health care.

Pet. App. 15a. But even original Medicaid wasn’t

limited to the disabled or elderly; it provided assistance to low-income “families with dependent children,”

and “services to help such families [and other beneficiaries] attain or retain capability for independence.”

42 U.S.C. 1396-1 (emphasis added).

Thus, the

reference to independence could not have been limited

in the way the court of appeals thought.

The court of appeals’ suggestion that the Secretary did not

rely on this objective at all was mistaken. While placing greater

emphasis on health, the Secretary said “the agency has an obligation to ensure that proposed demonstration projects are likely

to better enable states to serve their low-income populations,

through measures . . . including [ones] to help individuals and

families attain or retain capability for independence or self-care.”

Pet. App. 69a. He also described the purpose of the project as

“test[ing] whether [the community-engagement requirement]

will lead to improved health outcomes and greater independence,”

and ultimately concluded that “it furthers the objectives of the

Medicaid statute to test and evaluate these requirements as a

means to improve beneficiaries’ health and to promote beneficiary

independence.” Pet. App. 68a, 75a (emphasis added).

This Court has already recognized that conserving

Medicaid costs by helping people avoid becoming eligible

for Medicaid assistance is a Medicaid objective. In

Pharmaceutical Research & Manufacturers of America

v. Walsh, 538 U.S. 644 (2003), drug manufacturers

claimed that Medicaid preempted a state law that

required prior authorization for Medicaid purchases

from manufacturers who declined to provide discounts

for non-Medicaid purchases. A plurality of this Court

upheld the law on the ground that the discounts served

the “Medicaid-related goal[]” of keeping “borderline”

people from suffering illness and “financial hardship”

and “end[ing] up in the Medicaid program.” Id. at 663.

Justice Breyer concurred on the ground that the law

“may further [that and other] Medicaid-related objectives,” agreeing they were Medicaid objectives. Id. at

671 (Breyer, J., concurring in part and concurring in

the judgment). And even the three Justices in dissent

did not dispute that keeping borderline individuals off

Medicaid assistance was a Medicaid objective; they

only disputed whether the “facts in the record” showed

the rebates had that effect. Id. at 689 (O’Connor, J.,

concurring in part and dissenting in part). If keeping

the ineligible from becoming eligible serves a Medicaid

objective, encouraging the eligible to attain employment that can help them become ineligible logically

serves a Medicaid objective.

B. The Secretary’s approval was not arbitrary

and capricious.

Because health and independence are Medicaid

objectives, the Secretary’s approval was not arbitrary

and capricious. The Secretary predicted that the

Arkansas Works Amendment would likely promote

beneficiary health and independence. Neither the

district court nor court of appeals found that prediction

unreasonable. Under the court of appeals’ approach

below, that means the Secretary’s approval was lawful.

For under that approach, where a statute has “several

possible objectives,” it is “enough for the agency to

assess at least one.” Pet. App. 18a (citing Fresno

Mobile Radio, Inc. v. FCC, 165 F.3d 965, 971 (D.C. Cir.

1999) (Ginsburg, J.) (“When an agency must balance a

number of potentially conflicting objectives . . . judicial

review is limited to determining whether the agency’s

decision reasonably advances at least one of those

objectives and its decisionmaking process was regular.”)).

That approach to arbitrary-and-capricious review

under a multi-objective statute is the correct one. As

Judge Wald explained in one of the early decisions

adopting that approach, “only the [agency] may decide

how much precedence particular policies will be granted

when several are implicated in a single decision.”

MobileTel, Inc. v. FCC, 107 F.3d 888, 895 (D.C. Cir.

1997). A court cannot decide how much weight the

Secretary should give coverage relative to health.

That would “substitute [its policy judgment] for that of

the Secretary.” Dep’t of Commerce v. New York, 139 S.

Ct. 2551, 2569 (2019). Indeed, this Court held in

Department of Commerce that where an agency’s

choice “call[s] for value-laden . . . weighing of incommesurables”—there, whether “the value of obtaining

more complete and accurate citizenship data . . . was

worth the risk of a potentially lower response rate”—

that choice is the agency’s to make. Id. at 2571. Here,

similarly, the Secretary concluded that the health

benefits of enhanced community engagement outweighed

the risks of coverage loss. Pet. App. 76a-77a. How

to weigh those incommensurables was likewise his

prerogative.

Further, even if the Secretary were required to

consider potential coverage losses beyond choosing to

place greater weight in his decision on health benefits,

the Secretary did consider coverage. As the court of

appeals acknowledged, the Secretary responded to

comments raising coverage, pointed to multiple features

of Arkansas’s project that would mitigate coverage loss,

indicated he believed that the community-engagement

requirement would “adequately incentivize beneficiary

participation” as to avoid substantial coverage loss,

Pet. App. 75a, and ultimately concluded that the likely

health benefits of the project outweighed the risks of

coverage loss.

What the court of appeals really faulted the

Secretary for, then, was failing to estimate the amount

of coverage loss. But while “[i]t is one thing to set aside

agency action under the Administrative Procedure Act

because of failure to adduce empirical data that can

readily be obtained,” “[i]t is something else to insist

upon obtaining the unobtainable.”

FCC v. Fox

Television Stations, 556 U.S. 502, 519 (2009). The

Secretary could not predict the precise outcome of

Arkansas’s experiment, turning on the vagaries of

human behavior as it did, without conducting the

experiment first. As Judge Friendly wrote of Section

1115 approvals, “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.” Aguayo v.

Richardson, 473 F.2d 1090, 1103 (2d Cir. 1973).

Again, Department of Commerce is helpful. There,

the Secretary of Commerce, advised by his own Census

Bureau that a citizenship question would depress

response rates, concluded that given the “limited empirical evidence” to that effect, he could not “determine

definitively” whether the Bureau was right. 139 S. Ct.

at 2563. He then concluded that the value of citizenship data outweighed the uncertain risks of lower

response. Id. This Court did not require more; it found

his “uncertainty” “justifiabl[e],” and his ultimate

weighing reasonable. Id. at 2571. The Secretary’s

consideration of coverage here was no different. Faced

with comments predicting coverage loss on the basis of

surmise or the history of other programs, the Secretary

found the potential for coverage loss uncertain and

concluded that the benefits of approval outweighed the

uncertain risks. The APA required no more.

II. The question presented warrants review.

In addition to Arkansas and Kentucky, eighteen

other States have approved or pending Section 1115

waiver applications to experiment with communityengagement requirements in Medicaid. Under the

decision below, which would almost certainly govern

any challenges to those requirements, every one of

those States’ requirements would be invalid. Indeed,

two of those eighteen have been struck down by the

courts below already. And those are not the only

States whose Section 1115 waivers are threatened by

the court of appeals’ decision. Rather, under that

decision, any Section 1115 waiver that conditions

coverage on any healthy behavior—not just work or

community-engagement—is suspect. Certiorari is

needed to review and reverse that dramatic curtailment of the Secretary’s waiver powers and the States’

ability to test new approaches to implementing Medicaid.

Under the decision below, no work- or communityengagement requirement approved under Section

1115 can survive, and none can be approved. All workor community-engagement requirements seek to promote

the health or financial independence, or both, of those

subject to them. And all such requirements at least

create some theoretical risk of coverage loss. But

under the decision below, the only thing the Secretary

may consider in evaluating Section 1115 demonstration

projects is coverage. Anything else—and in particular

health and financial independence—is “non-statutory.”

Pet. App. 19a. That means that no Section 1115

approval of a work- or community-engagement requirement, no matter how careful its consideration of

coverage, can survive the court of appeals’ decision.

For any such approval will, under that decision’s logic,

promote “non-statutory objectives” to at least the

potential detriment of “the statutory purpose.” Pet.

App. 19a.

The government agrees. Since the court of appeals’

decision, it has conceded that decision forecloses any

defense of three Section 1115 approvals of communityengagement requirements in the courts below. In

Philbrick v. Azar, 397 F. Supp. 3d 11 (D.D.C. 2019),

the district court set aside the Secretary’s approval of

New Hampshire’s community-engagement requirement.

After the government appealed that decision, the court

of appeals rendered the decision from which certiorari

is sought here.

Even though the government’s

approval and discussion of coverage in Philbrick was

far more detailed than even the approval at issue

here,12 the government conceded its appeal was “controlled” by the decision below in this case. Philbrick v.

See Letter from Mary C. Mayhew, Deputy Adm’r & Dir.,

Ctrs. for Medicare & Medicaid Servs., to Henry D. Lipman,

Medicaid Dir., N.H. Dep’t of Health & Human Servs. 1 (Nov. 30,

2018), https://www.medicaid.gov/Medicaid-CHIP-Program-Infor

mation/By-Topics/Waivers/1115/downloads/nh/nh-granite-advant

age-health-care-program-ca.pdf.

Azar, Nos. 19-5293, 19-5295, 2020 WL 2621222, at *1

(D.C. Cir. May 20, 2020).

In a second case, challenging the Secretary’s

approval of Michigan’s community-engagement requirements, the Secretary conceded that under the decision

below, his “approval of [Michigan’s waiver’s] work and

community engagement component is unlawful.”

Young v. Azar, No. 1:19-cv-3526, D. Ct. Doc. 24, at 3

(D.D.C. Mar. 3, 2020). The district court subsequently

entered judgment as to those requirements. Young,

No. 1:19-cv-3526 (D.D.C. Mar. 4, 2020).

And in a third case, challenging Indiana’s communityengagement requirements, the government conceded

before the court of appeals even rendered judgment

that, were it to rule in favor of Respondents, the

Secretary’s approval of Indiana’s “community engagement requirement would be unlawful under circuit

precedent.” Rose v. Azar, No. 1:19-cv-2848, D. Ct. Doc.

31, at 1 (D.D.C. Jan. 6, 2020). Proceedings in that case

are stayed pending the COVID-19 emergency, but the

district court will inevitably vacate Indiana’s approval

once the stay is lifted.

Those three vacaturs will only be the beginning. The

Secretary has approved community-engagement requirements in five more States: Arizona, Ohio, South

Carolina, Utah, and Wisconsin. Medicaid Waiver

Tracker: Approved and Pending Section 1115 Waivers

by State, Kaiser Fam. Found. (June 26, 2020).13 None

of those approvals could survive a challenge in the

court of appeals, and already some of those States have

suspended implementation in view of the litigation

below. See Letter from Jami Snyder, Dir., Ariz. Health

https://www.kff.org/medicaid/issue-brief/medicaid-waiver-tra

cker-approved-and-pending-section-1115-waivers-by-state.

Care Cost Containment Sys., to Calder Lynch, Deputy

Adm’r & Acting Dir., Ctrs. for Medicare & Medicaid

Servs. (Oct. 17, 2019).14 Ten more States have pending

applications to institute community-engagement requirements under Section 1115: Alabama, Georgia, Idaho,

Mississippi, Montana, Nebraska, Oklahoma, South

Dakota, Tennessee, and Virginia. Medicaid Waiver

Tracker, supra. Unless this Court grants review of the

decision below, the Secretary will be forced to deny all

of those applications.

And even that does not exhaust the ramifications of

the court of appeals’ decision. Many other States have

obtained Section 1115 waivers to condition coverage,

in whole or part, on healthy behaviors. Michigan, for

example, requires beneficiaries above 100 percent of

poverty level to obtain a health risk assessment or

engage in other healthy behaviors, such as getting

vaccinations. The same plaintiffs who have challenged

Michigan’s community-engagement requirement have

challenged that requirement as well. See Young, No.

1:19-cv-3526, D. Ct. Doc. 1, at 23-24, 47-48 (D.D.C.

Nov. 22, 2019). Perhaps that requirement and others

like it could be defended on the ground that the

preventive care and other healthy behaviors they

incentivize conserve Medicaid costs—an objective the

decision below, at least explicitly, did not reject. But

they are, at the least, extremely vulnerable to attack.

The harms of the decision below can scarcely be

overstated. It is often said that the “States are

laboratories for experimentation,” Hall v. Florida, 572

https://www.medicaid.gov/Medicaid-CHIP-Program-Informa

tion/By-Topics/Waivers/1115/downloads/az/Health-Care-Cost-Con

tainment-System/az-hccc-postponement-ltr-ahcccs-works-101720

19.pdf.

U.S. 701, 724 (2014), but that is literally true under

Section 1115. Indeed, much of national healthcare

policy as we know it began its life as a State’s Section

1115 Medicaid experiment. Yet under the court of

appeals’ decision, that flexible waiver authority to test

policies that may enhance the health and welfare of a

State’s citizens—and ultimately the Nation’s—would

become a one-way ratchet, serving no purpose but to

“experiment” with means of increasing coverage. The

Court should grant review to restore Section 1115 to

its central place in healthcare policymaking.

Finally, the absence of a circuit split does not

counsel against certiorari. The D.C. Circuit does not

have exclusive jurisdiction over challenges to Section

1115 approvals, and in theory plaintiffs could sue

in their home States. But the conclusive bar the

D.C. Circuit has erected to Section 1115 communityengagement requirements all but ensures that future

plaintiffs will bring their challenges in the D.C.

Circuit, rather than taking the risk that a different

circuit would reject its erroneous interpretation of the

Medicaid statute. And the district court below has

resisted the government’s requests to transfer venue

to plaintiffs’ home States, reasoning that venue in

the District is preferable because “D.C.-based agency

officials” process Section 1115 applications. Stewart v.

Azar, 308 F. Supp. 3d 239, 247 (D.D.C. 2018). A split,

therefore, is extremely unlikely to emerge. Only this

Court’s review of the decision below can reopen the

door to Section 1115 innovation.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted,

OFFICE OF THE ARKANSAS

ATTORNEY GENERAL

323 Center St., Ste. 200

Little Rock, AR 72201

(501) 682-6302

nicholas.bronni@

arkansasag.gov

LESLIE RUTLEDGE

Arkansas Attorney

General

NICHOLAS J. BRONNI

Solicitor General

Counsel of Record

VINCENT M. WAGNER

Deputy Solicitor General

ASHER STEINBERG

DYLAN L. JACOBS

Assistant Solicitors

General

Counsel for Petitioner

July 13, 2020

APPENDIX

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

————

Appeals from the United States District Court

for the District of Columbia

(No. 1:18-cv-01900)

————

Argued October 11, 2019

Decided February 14, 2020

————

Alisa B. Klein, Attorney, U.S. Department of Justice, argued the cause for federal appellants. With her

on the briefs were Mark B. Stern, Attorney, Robert

P. Charrow, General Counsel, U.S. Department of

Health and Human Services, and Brenna E. Jenny,

Deputy General Counsel.

Leslie Rutledge, Attorney General, Office of the

Attorney General for the State of Arkansas, Nicholas

J. Bronni, Solicitor General, Vincent M. Wagner,

Deputy Solicitor General, and Dylan L. Jacobs,

Assistant Solicitor General, were on the brief for

appellant State of Arkansas.

Ian Heath Gershengorn argued the cause for

plaintiff-appellees. With him on the brief were Jane

Perkins, Thomas J. Perrelli, Devi M. Rao, Natacha Y.

Lam, Zachary S. Blau, and Samuel Brooke.

Kyle Druding was on the brief for amici curiae

American College of Physicians, et al. in support of

plaintiffs-appellees.

Edward T. Waters, Phillip A. Escoriaza, and

Christopher J. Frisina were on the brief for amici

curiae Deans, Chairs, and Scholars in support of

plaintiffs-appellees.

Judith R. Nemsick, Jon M. Greenbaum, and Sunu

Chandy were on the brief for amici curiae Lawyers

Committee for Civil Rights Under Law, et al. in

support of appellees and affirmance.

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 capricious 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 capri-

cious 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.

I. 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 lowincome 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 experi-

mental, 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).

10a

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

A. Objective of Medicaid

The district court is indisputably correct that the

principal objective of Medicaid is providing health care

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

11a

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. 111-148, 124 Stat. 119, 130, 271

(2010)). The text consistently focuses on providing

access to health care coverage.

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 necessary medical services.’” Pharm.

Research & 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

12a

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).

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

13a

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. § 13961. 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 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

14a

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 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 Medicaid-eligible 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

15a

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 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. § 13961. 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. § 1396u1(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

16a

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—demonstrates that Congress did not intend to incorporate work requirements

into Medicaid through § 1396u-1(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.

B. 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

17a

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/uploads/011519AWReport.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, 1294–95, 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

18a

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 (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

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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 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 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.

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.

20a

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 DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

————

Civil Action No. 18-1900 (JEB)

————

CHARLES GRESHAM, et al.,

Plaintiffs,

ALEX M. AZAR II, et al.,

Defendants.

————

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

report his employment in June 2018, but he did not

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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

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 not believe he will be able to comply

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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

and remanded to the Secretary. Here, however, the

Government argues that vacatur is improper both

because, unlike Kentucky, AWA is already active and

24a

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.

I. 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.

A. Legal Background

1. 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. Under the cooperative federal-state arrangement, participating states submit their “plans for

medical assistance” to the Secretary of HHS. Id. To

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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 lowincome 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 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

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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 cost-sharing 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).

2. 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

27a

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, 1961–62. 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 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

28a

period commences, and the agency must wait at least

45 days before rendering a final decision. Id.

§§ 431.416(b), (e)(1).

B. Factual Background

1. 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 536, 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, thenSecretary 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

29a

“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 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

30a

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.

2. 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 corre-

31a

sponded 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

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.

C. 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

32a

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 relatedcase 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

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

33a

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 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, 285-86 (1974) (citation omitted).

34a

III. ANALYSIS

The Court, as it must, first addresses whether there

is subject-matter jurisdiction before proceeding to the

merits of Plaintiffs’ challenges.

A. 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 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

35a

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 decide whether certain Plaintiffs have

standing to challenge this particular part of the

project.

B. 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

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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 “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

37a

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 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.

1. 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 under-

38a

standing 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 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

39a

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 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.

40a

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. 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

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“[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 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

42a

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.

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.

43a

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

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 bene-

44a

ficiaries 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 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.

2. 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.

45a

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 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 Medicaideligible 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

46a

renders his decision arbitrary and capricious; it does

not matter that HHS deemed the project to advance

other objectives of the Act.

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

47a

clear, he did not. Perhaps understanding as much,

HHS largely attempts to 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

48a

private insurance. And the Court “may not 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, the Secretary

49a

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-capricious claim, removing any need

to address their separate statutory-authority, APA

notice-and-comment, and constitutional arguments.

50a

C. 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, 15051 (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 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 pend-

51a

ing 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 approval of a demonstration

project like this one. The Court’s decision does not go

that far. But after at least two attempts for Kentucky,

it has yet to do that analysis. Indeed, HHS may find

it more difficult to offer a sufficient rationale in

its second attempt in this case than in Kentucky.

Arkansas does not appear to face the kind of fiscal

issues asserted in Kentucky; instead, the state’s data

suggest that the Medicaid expansion has reduced the

amount Arkansas will spend on health care for this

population between 2017 and 2021. See ECF No. 53-6,

Exh. 55 (Final Report of Arkansas Health Reform

52a

Legislative Task Force) (explaining that if Arkansas

rejects Medicaid expansion, “the negative impact to

the state budget is approximately $438 [million]”

during this time frame). It stands to reason that the

state will have an uphill climb making the case that

the expansion has pressed its annual budget, such

that eligible persons should be pushed off the rolls.

Such fiscal considerations would, in any event, need to

be balanced against the more than 16,000 persons who

have already lost their coverage because of the new

requirements. See Arkansas Works Reports at 18, 27,

36, 45. The upshot is that the road to cure the

deficiency in this case is, at best, a rocky one, strongly

weighing in favor of vacatur.

2. Seriousness of Disruption

The second factor is a closer call. Arkansas began

implementing its demonstration project in June 2018,

imposing work requirements on adults ages 30–49 and

implementing the changes to retroactive coverage; it

began enforcing work requirements as to adults ages

19–29 in January 2019. HHS and Arkansas assert

that any interruption in the project would be enormously disruptive because it would interfere with the

“State’s data collection efforts,” HHS Reply at 22, and

“undermine” its “extensive efforts to educate Arkansas

Works beneficiaries” on the work requirements. See

Ark. MSJ at 38–39. They emphasize that, because the

Kentucky program had not yet taken effect at the time

of its vacatur, these concerns were not present in

Stewart I. Id. The Court is not insensitive to the

practical concerns Defendants raise about pausing

enforcement of the Amendments, nor does it take

lightly the effect of its ruling upon the state today. For

the reasons that follow, however, it finds that the

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probable disruptions are not so significant as to

require deviation from the ordinary rule of vacatur.

Consider first the nature and extent of the disruptions. If the Court vacates the Secretary’s approval of

AWA, the state would no longer condition certain

Medicaid recipients’ coverage on reporting 80 hours of

qualifying activities each month and would restore the

number of months of retroactive coverage to three. In

other words, vacatur would return matters to the

way they were before the project was approved. Both

changes, HHS asserts, will disrupt the state’s datacollection efforts. See HHS MSJ at 29. If Arkansas —

as the party responsible for collecting and analyzing

data from the project — has concerns about data

collection in the event of vacatur, it does not say as

much. See Ark. MSJ at 38–40 (mentioning only disruptive effects on education and outreach); ECF No. 45

(Ark. Reply) (same). Indeed, one amicus points out

that the Secretary approved this project without “a

proposed evaluation design.” See Amicus Brief of

Deans, Chairs, and Scholars at 19–20.

The Court assumes, however, that vacatur would

interrupt the state’s efforts to collect data on the

effects of the work requirements and changes to

retroactive coverage. While such concerns are not

insignificant, they are tempered in the context of this

case. Experimental projects are intended to help states

like Arkansas “test out new ideas” for providing medical coverage to the needy, thereby influencing the

trajectory of the federal-state Medicaid partnership

down the line. See supra S. Rep. No. 1589 at 1961. If,

after further consideration or after prevailing on

appeal, the Secretary and Arkansas wish to move

ahead with work requirements, they will remain able

to do so in the future. And if they are dissatisfied with

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the data gathered from the initial months of the

project because of the interruption caused by vacatur,

Defendants could extend the project for an additional

period of time to collect more information. This is not

to minimize the importance of data collection in the

context of an experimental project; it is just to say that

vacatur will have little lasting impact on HHS’s or

Arkansas’s interests. That distinguishes this case

from others in which the D.C. Circuit has declined to

vacate on account of irreversible harms that such a

remedy would inflict on the status quo. See AlliedSignal, 988 F.2d at 151.

Defendants also maintain that vacatur will harm

“Arkansas’s education and outreach efforts.” Ark. MSJ

at 39. In that regard, they explain that a decision

invalidating the work requirements will be confusing

to Medicaid recipients who have just recently been

informed that they have to meet those requirements.

Id. at 38–39. The Court grants that vacatur of work

requirements that have already been implemented

may send mixed messages. But any disruption in this

respect is not sufficiently significant to avoid vacatur.

For one thing, Defendants have expressed confidence

throughout this case that they can communicate with

Medicaid recipients regarding the terms of the work

requirements. See HHS MSJ at 8; Ark MSJ at 27, 34–

35. If that is so, they should be able to inform them

that the requirements are paused for now and, if later

reapproved, that they are put back into effect. It bears

mentioning here, however, that the State’s outreach

efforts may well be falling severely short. Notably,

only 12.3% of persons not exempt from the requirements reported any kind of qualifying activity. See

Arkansas Works Reports June–November 2018 at 47,

52. The numbers are even lower for several other

months. Id. Arkansas might use the time while the

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program is paused to consider whether and how to

better educate persons about the requirements and

how to satisfy them. Admittedly, vacatur could make

such outreach complicated. Ultimately, however, the

Court finds that the harms to prior and ongoing

education do not tip the scales against vacatur.

In fact, the structure of the Amendments, considered with the timing of this Opinion, renders vacatur

less disruptive that might be expected. As mentioned

before, Arkansas Works recipients only lose coverage

after three months of non-compliance with the work

requirements. See AR 31. And the three-month clock

starts over at the beginning of the calendar year. Id.

Because fewer than three months have elapsed in

2019, the work requirements have not yet resulted

in anyone’s being disenrolled, as such actions cannot

take place until April 1. As a consequence, vacatur of

the Amendments will not require Arkansas to reenroll persons who have lost their coverage, with the

administrative and communication-related headaches

that might entail. Instead, it just requires them

to communicate to providers that they should not

disenroll persons moving forward on account of the

requirements. The bottom line: “This is not a case in

which the ‘egg has been scrambled,’ and it is too late

to reverse course.” Allina Health, 746 F.3d at 1110–11

(quoting Sugar Cane Growers Co-op of Fla. v.

Veneman, 289 F.3d 89, 97 (D.C. Cir. 2002)).

Finally, the Court emphasizes that the disruptions

to Arkansas’s administration of its Medicaid program

must be balanced against the harms that Plaintiffs

and persons like them will experience if the program

remains in effect. Cf. A.L. Pharma, Inc. v. Shalala, 62

F.3d 1484, 1492 (D.C. Cir. 1995) (explaining that

vacatur inappropriate because “nothing in the record

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suggests that significant harm would result from

allowing the approval to remain in effect pending the

agency’s further explanation”); see also Tr. at 13 (conceding that court should consider harms to Plaintiffs

as part of equitable inquiry into vacatur). Arkansas’s

own numbers confirm that in 2018, more than 16,000

persons have lost their Medicaid. Defendants offer no

reason to think the numbers will be different in 2019;

indeed, once the requirements apply to persons aged

19–29, they seem likely to rise. See Arkansas Works

Reports at 18, 27, 36, 45. Weighing the harms these

persons will suffer from leaving in place a legally

deficient order against the disruptions to the State’s

data-collection and education efforts due to vacatur

renders a clear answer: the Arkansas Works Amendments cannot stand.

IV. CONCLUSION

For the foregoing reasons, the Court will grant

Plaintiffs’ Motion for Summary Judgment and deny

Defendants’ Cross-Motions. A separate Order consistent with this Opinion will issue this day, remanding the matter to HHS.

/s/ James E. Boasberg

JAMES E. BOASBERG

United States District Judge

Date: March 27, 2019

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Appendix A

Arkansas Health

Plan Component

CommunityEngagement

Requirement

Comments

AR 1269 (Arkansas Advocates for

Children & Families) (noting that

the requirement “will increase the

rate of uninsured Arkansans” based

on comparable effect in TANF

program) AR 1277 (American Congress of Obstetricians and Gynecologists, et al.) (“The 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.”); AR 1285 (Families USA)

(“The presence of the requirement

itself will be a barrier to enrollment, causing some eligible working individuals to forego applying

for coverage, and will make it

more difficult for some statutorily

eligible individuals to maintain

coverage.”); AR 1291 (AARP) (expressing concern that requirements wo

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