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Two Lawsuits with Implications for the Coverage of Millions of Americans

Significant legal challenges have marked the history of the Affordable Care Act (ACA) since its passage in 2010, and have largely determined the outlines of the law’s current structure. Similarly, as Sara Rosenbaum argues in a brief published this week, the courts have substantially shaped the Medicaid program over its 53-year history. Two recent legal challenges have potentially far-reaching implications for both the Affordable Care Act and the Medicaid program, and the millions of Americans who depend on them for their health insurance. While the plaintiffs take different positions regarding the ACA and Medicaid, the cases and the Trump Administration’s responses to them reveal an executive branch that is consistent in its efforts to reduce the federal government’s role in guaranteeing health insurance coverage for Americans.

Stewart v. Azar

Oral arguments in U.S. District Court for the District of Columbia begin today in a class action lawsuit brought by 15 Kentucky Medicaid enrollees. The case challenges the legality of several aspects of Kentucky’s 1115 Medicaid demonstration waiver, which allows the U.S. Department of Health and Human Services (HHS) and states to test time-limited innovations in Medicaid and other public welfare programs without congressional action. Set to go into effect on July 1, the Kentucky waiver’s most controversial provision is the requirement that Medicaid beneficiaries work or perform community service for at least 80 hours per month to retain coverage. The suit also challenges the authority of HHS, now led by Secretary Alex Azar, to both encourage and approve Medicaid work demonstrations generally and the approval of Kentucky’s demonstration in particular.   The suit also challenges the legality of other aspects of the waiver, including the imposition of premiums, the use of six-month lock-out periods for beneficiaries who don’t comply with work requirements or pay their premiums on time, and the elimination of Medicaid’s requirement that new beneficiaries receive three months of retroactive coverage. Three other states have received approval for similar waivers, seven states have applications under review at the Centers for Medicare and Medicaid Services, and several others are developing them. Because the case challenges both the Kentucky waiver and HHS policy, it has implications for these states, as well as the future of the Medicaid program.  

A critical issue highlighted by the case goes to the heart of the entitlement nature of the Medicaid program. Under the Medicaid Act and subsequent amendments, Congress has determined certain groups of people to be eligible for Medicaid coverage by virtue of their age, income, or health needs. These mandatory coverage groups include children, pregnant women, and the elderly, blind and disabled. Because working-age adults with low incomes were the least likely to work in a job that comes with health benefits, the ACA created a new mandatory eligibility category for adults with income less than 138 percent of the federal poverty level. The Supreme Court decision in 2012 effectively made this optional for states. But once a state elects to cover people who fall into this group, individuals at this income level become a mandatory coverage group. Kentucky expanded eligibility for this group in 2014, and most, but not all, of its waiver provisions apply only to this group. The lawsuit argues that suspending a beneficiary’s coverage for failure to comply with the new waiver requirements would be in violation of their entitlement to coverage under the Medicaid Act. In public speeches, Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma, also named as a defendant in the suit, has maintained that Congress’s decision to expand eligibility for Medicaid to “able-bodied” adults was a departure from the historical mission of the program and that states should have the opportunity to alter that through work and other requirements. While the vast majority of adults who have coverage through the ACA’s Medicaid expansion have jobs, work requirements will likely impose significant administrative barriers that could trigger eligibility losses even among those working full time. Estimates of coverage losses range from 95,000 to nearly 300,000 people in Kentucky. Because low-income workers remain the least likely group in the U.S. workforce to have coverage through their jobs, many will likely become uninsured.

Texas v. Azar

Secretary Azar is also the defendant in this case, brought by Texas and 19 other Republican-led states. So-called amici, or friend of the court briefs, are due today and several groups have filed briefs. The suit claims that Congress’s repeal of the individual mandate penalty renders the individual mandate — still part of the ACA — unconstitutional. Because the mandate is essential to the operation of the law, the case argues that the entire law is invalid. In an extraordinary departure from executive branch precedent — and as noted by Tim Jost — Attorney General Jeff Sessions notified Congress last Thursday that the administration agreed with the plaintiffs that the individual mandate was unconstitutional. Because of this, the administration argues that insurers selling policies in the individual market can no longer be banned from denying people coverage or charging higher premiums because of their health, gender, or age. However, the administration maintains that other parts of the law, including the Medicaid expansion, are not affected.  

Looking forward

Taken together, these cases underscore the Trump Administration’s ongoing interest in reducing the number of people covered under the Affordable Care Act by withdrawing federal support for the law. Today’s oral arguments in the Stewart case will provide early indications as to how the courts will view the administration’s actions. The insurance coverage of millions of Americans and the future of the Medicaid program are at stake.

The author thanks Sara Rosenbaum for helpful comments and Munira Gunja for research assistance. 

Publication Details

Publication Date: June 14, 2018
Citation:

Sara R. Collins, "Two Lawsuits with Implications for the Coverage of Millions of Americans," To the Point (blog), Commonwealth Fund, June 14, 2018.