Waivers Face Legal Barriers

Waivers and state pilot programs that are approved by the secretary of HHS face one more potential hurdle — judicial review. And the judiciary has recently shown itself willing to overturn the secretary’s Section 1115 waiver decisions.

For example, in Newton-Nations v. Betlach, the Ninth Circuit Court of Appeals held that the secretary acted “arbitrarily and capriciously” when she approved waivers for copayment increases for recipients of Medicaid benefits under Arizona’s Medicaid demonstration project.[34] The court reviewed the secretary’s decision to determine if the project met the definitional requirement of a Section 1115 waiver, promoted the objects of the Social Security Act and was of appropriate extent and length.[35] Despite the secretary’s conclusion (a conclusion that closely mirrors the arguments of states currently contemplating waivers) that Arizona's demonstration project “will continue to ensure wider health benefit coverage to low-income populations,” the court found that “[t]here is no evidence that the Secretary made ‘some judgment that the project has a research or a demonstration value.’”[36] The court found that the secretary had failed to consider whether Arizona’s project would “actually demonstrate something different than the last 35-years’ worth of health policy research” and voided the secretary’s waiver.[37]

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This line of judicial review, of course, is not limited to copayment cases, and virtually any waivers for programs aimed at Medicaid eligibility, duration limitations, personal responsibility or enrollment procedures could face similar judicial scrutiny. Legal challenges of this sort are inherently unpredictable, adding uncertainty and leaving important state reform initiatives in a kind of perpetual limbo.