An update on the disputes leading CMS and Georgia to court

Two disputes between Georgia and the Centers for Medicare and Medicaid Services (CMS) over the state’s Trump-era waiver plans remain unsettled after eighteen months of legal and political wrangling. Given the wide gaps separating the two sides’ positions, as reflected in a recent exchange of letters, it seems likely that federal courts will be called upon to settle their disagreements.

This federal-state battle, which involves separate state-initiated waiver requests, has its roots in the differing policy priorities of the Trump and Biden administrations (as outlined initially in a column posted in January).

 

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In October 2020, just before the presidential election, CMS approved the first element of Georgia’s two-part plan, covering Medicaid (the waiver was requested under the authority provided in section 1115 of the Social Security Act). Georgia, led by Republican Governor Brian Kemp, sought an increase in Medicaid eligibility to 100 percent of the federal poverty line (FPL), which is below the 138 percent threshold established in the Affordable Care Act (ACA). It also wanted to require some program participants to work or participate in activities that could lead to work — so-called “community engagement” rules.

Then in November, just two days before the election, the Trump administration approved Georgia’s second waiver, covering the state’s private insurance market and enrollment system under the provisions of the ACA. Section 1332 of that law gives states the opportunity to request waivers of otherwise applicable federal requirements. Georgia sought permission to implement a reinsurance program to limit the risk of participating insurers and to substitute a private system of insurance enrollment for the federally-administered healthcare.gov portal.

Within weeks of the Biden administration taking office in January 2021, much of what had just been approved by Trump officials was put on hold. CMS advised Georgia of its concerns surrounding the community engagement requirements and also expressed doubts about the state’s plans for a privately-run insurance enrollment system. CMS has not pulled approval of Georgia’s reinsurance program, which is now in effect and was modeled on programs approved by CMS for implementation in other states.

In April 2022, the Supreme Court chose not to rule on two pending cases contesting the legality of Medicaid work requirements. Because the Biden administration had already pulled back CMS’ previous approvals of those 1115 waivers, the court saw no reason to proceed with making a substantive decision on the merits of the cases.

With no Supreme Court decision to settle the matter, Georgia’s contention that CMS’ reversal on its 1115 program was illegal has been allowed to proceed in court. In a decision from earlier this month, a federal district judge in Georgia ruled in favor of the state’s position and against CMS, based on the view that CMS had acted arbitrarily in terminating Georgia’s previously-approved plan. The Biden administration is very likely to appeal this decision, so it remains unclear if Georgia will be able to proceed with implementation of the program.

The section 1332 waiver also appears headed to court. In April, CMS wrote a lengthy letter to Georgia’s lead official for the waiver’s implementation which outlined numerous concerns with the state’s policies. Among other things, CMS cited an analysis it had commissioned from Acumen LLC which estimated the Georgia plan would reduce the number of persons enrolled in ACA-subsidized insurance by between 23,900 and 45,100 people (it is presumed that losing ACA coverage will increase the percentage of state residents who are uninsured).

CMS gave state officials until the end of July to provide a satisfactory response to the federal government’s concerns.

Georgia responded to CMS in a July 27th letter that did not make concessions or offer amendments to the waiver program. Rather, the state argued that it had proceeded with its planning based on the approval granted by the federal government in November 2020, and that CMS did not have the right to unwind this approval based on newly-discovered concerns. Further, Georgia disputed the findings of the Acumen study and argued its waiver plan is consistent with federal rules prohibiting such programs from increasing the number of persons going without health coverage. Finally, the Georgia letter noted that the state had already expended significant resources to prepare for the implementation of the waiver program.

CMS responded to Georgia’s letter on August 9th with an official suspension of the previous waiver.

While the next steps in this process are not yet clear, it is likely that Georgia will sue in federal court to block CMS from pulling back on its previous approval of the state’s section 1332 waiver program.

At this point, neither side seems inclined to negotiate a compromise. The Biden administration is adamantly opposed to both work requirements in Medicaid and the privatization of the enrollment process under the ACA. Georgia officials are equally convinced that these are exactly the types of policies that should be permitted in state-initiated waiver experiments.

Other states are sure to be watching carefully as lawyers for CMS and Georgia head to court. The resolution of these cases could have lasting implications for federal-state relations under Medicaid, the ACA, and beyond.

James C. Capretta is a columnist for State of Reform and a senior fellow at the American Enterprise Institute.