Proposals have been introduced in the 115th Congress to reform the Medicaid program, which provides medical assistance to low-income and needy individuals. At least one of these legislative proposals would allow states to impose work requirements on certain categories of individuals as a condition of coverage under the Medicaid program. While such proposals have been included as legislative amendments to the Medicaid statute (such as the American Health Care Act, H.R. 1628), work requirements have also been discussed in the context of waivers granted to states under the existing demonstration authority provided in Section 1115 of the Social Security Act (SSA). Section 1115 authorizes the Secretary of Health and Human Services (HHS) to waive a number of Medicaid requirements to the extent necessary to allow a state to undertake an “experimental, pilot, or demonstration project” that is likely to assist in promoting the objectives of Medicaid. This report examines the scope of authority to grant such waivers under Section 1115, including the degree to which such waivers may be judicially reviewable and the level of scrutiny courts would apply in such cases.
Numerous federal courts have held that the Secretary’s decision to grant a waiver under Section 1115 is reviewable under the Administrative Procedure Act (APA). Such review uses the deferential “arbitrary and capricious” standard to evaluate the permissibility of agency action. In cases where Section 1115 waivers have been challenged, courts have held that the APA does not empower judges to substitute their judgment for that of the agency, but only to consider whether the Secretary’s decision was based on consideration of relevant factors and whether there has been a clear error of judgment. Therefore, a court’s evaluation of a particular Section 1115 waiver will likely turn upon the sufficiency of the actual administrative record relied upon by the HHS Secretary when deciding to grant a waiver.