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Administration’s Re-Approval of Kentucky’s Medicaid Waiver Again Ignores Harm to Beneficiaries

The Trump Administration has re-approved Kentucky’s Medicaid waiver after a federal district court struck down an almost identical earlier version, but the Administration still didn’t show how a waiver that would take coverage away from beneficiaries who don’t meet a work requirement, pay premiums, or report changes or renew their coverage on time could possibly advance Medicaid’s objectives — setting the stage for further action in court.

The court vacated the Centers for Medicare & Medicaid Services’ (CMS) previous approval because it failed to consider the number of people who would lose coverage — more than 95,000 in a typical month, according to the state’s own estimates. CMS then held a second 30-day public comment period on the waiver and received almost 9,500 unduplicated comments, with 96 percent opposing an approval. Yet the re-approved waiver, which CMS announced in a letter that it released yesterday, is almost identical to the original.

Providing affordable coverage to people who would otherwise be uninsured is a “central objective” of Medicaid, the court noted in vacating the initial waiver. Therefore, CMS’s approval of the waiver was “arbitrary and capricious” because CMS failed to consider Kentucky’s estimate that the waiver would cause a 15 percent drop in adult Medicaid enrollment by its fifth year, equivalent to more than 95,000 people losing coverage in a typical month. (Even more people would likely lose coverage at some point in the year due to lockouts for failing to meet work requirements, pay premiums, or report changes or renew coverage in a timely manner.) CMS’s new letter suggests that this projection may not apply to the version of Kentucky’s waiver it approved and then re-approved. But we conservatively estimate, based on Kaiser Family Foundation and Urban Institute research, that the waiver’s work requirement alone would cause between 45,000 and 103,000 enrollees to lose coverage well before the fifth year, with other waiver provisions causing additional coverage losses.

The early experience in Arkansas, which implemented its work requirement in June, shows the danger ahead in Kentucky. Over 12,000 Arkansas Medicaid beneficiaries have already lost their Medicaid and have likely become uninsured because they didn’t report at least 80 hours of work or work-related activities for three months. The number of Arkansans losing Medicaid coverage exceeds the presumed target population for the work requirement — namely, people who are neither working nor qualify for an exemption. And Kentucky’s work requirement is even more stringent than Arkansas’ and applies to far more beneficiaries.

Many of those who will likely lose coverage due to Kentucky’s waiver will be working people who can’t meet the 80-hour-a-month requirement every month, and others who should be exempt but can’t overcome the red tape to prove it. For example, research shows that families sanctioned due to non-compliance with work requirements under the Temporary Assistance for Needy Families (TANF) program are likelier than other families receiving TANF to have barriers that keep them from working and that should exempt them from the requirements, including having a child with a chronic illness or disability.

CMS’s central justification for approving a waiver that will cause large coverage losses is that Kentucky has threatened to eliminate its Medicaid expansion under the Affordable Care Act in the absence of the waiver, which would cause even greater coverage losses. Not only did the court already consider and reject this argument, but its implications are absurd. CMS’s position appears to be that, because states can choose not to expand Medicaid, they can apply whatever eligibility rules they choose as part of expansion, however harmful to coverage, financial security, and health outcomes. That clearly conflicts with Congress’s goals in giving the Health and Human Services Secretary discretion to approve demonstration projects that promote Medicaid’s objectives, as well as its goals in creating the Medicaid expansion. CMS goes even further by allowing Kentucky to worsen coverage for beneficiaries already covered prior to the Medicaid expansion on the grounds that Kentucky has said it needs to cut costs to maintain expansion coverage.

The new CMS letter also asserts, without evidence, that a significant number of those losing Medicaid coverage under the waiver will transition to commercial coverage. In reality, as we’ve explained, the overwhelming majority of those leaving Medicaid will do so because they can’t meet new eligibility or paperwork requirements, not because they find jobs with affordable health insurance — and so the overwhelming majority will become uninsured.

Finally, CMS insinuates that Kentucky’s current Medicaid program provides low-value coverage, stating that “there is little intrinsic value in paying for [health] services if those services are not advancing the health and wellness of the individual receiving them, or otherwise helping the individual attain independence.” To the contrary, a large and growing body of research finds that Medicaid coverage improves both health and financial security. In Kentucky specifically, Medicaid expansion has resulted in more primary and preventive care, less medical debt, and better self-reported health, studies find.

In vacating CMS’s approval of Kentucky’s original waiver, the federal judge who wrote the opinion noted that an agency’s action is arbitrary and capricious if it “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.” The new approval letter is just as severely flawed.