U.S. Supreme Court agrees to hear case challenging HHS approval of state work requirements for Medicaid beneficiaries

On December 4, the U.S. Supreme Court agreed to hear a case involving agency approval of work requirements for state Medicaid beneficiaries. In Azar v. Gresham, the court will decide whether the Medicaid statute empowers the secretary of the U.S. Department of Health and Human Services (HHS) to approve state plans to use work requirements to encourage Medicaid beneficiaries to find alternative health care coverage.

In 2018, HHS began approving state requests for waivers from Medicaid requirements so those states could test plans that require certain Medicaid beneficiaries to work or pursue job-training to remain enrolled in the program. States argued that such plans would help beneficiaries find employer-sponsored health insurance or get individual plans from a state exchange. With people moving off of Medicaid, states argued that their Medicaid programs would have more resources to help people who cannot afford health care coverage on their own.

The U.S. District Court for the District of Columbia blocked HHS from approving state plans in Arkansas and New Hampshire. The court held that HHS failed to consider the core objective of Medicaid, providing health care coverage to the needy, when it approved the state work requirement plans.

The U.S. Court of Appeals for the District of Columbia Circuit affirmed the decision of the district court. The court held that HHS focused on alternative goals that go beyond what the agency may consider when deciding whether to grant a waiver from Medicaid requirements. The court ruled that HHS failed the Administrative Procedure Act’s arbitrary-or-capricious test, which requires courts to invalidate agency actions that are arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.

In cases where courts find that agencies violate legal requirements, they do not grant judicial deference to those agency actions. Judicial deference is one of the five pillars key to understanding the main areas of debate about the nature and scope of the administrative state. Judicial deference to administrative agencies is a principle of judicial review that applies when a court yields to an agency’s interpretation of either a statute or regulation promulgated by the agency.