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Court Rejects Kentucky Medicaid Waiver

Kentucky’s overall Section 1115 waiver has been struck down in court, but a portion allowing Medicaid reimbursement for substance use disorder treatment in institutions for mental disease (IMDs) was upheld as a separate waiver.

The United States District Court for the District of Columbia on June 29 issued a ruling in Stewart v. Azar rejecting the Kentucky Helping to Engage and Achieve Long Term Health (HEALTH) waiver. The waiver included several market-based reforms to the state’s Medicaid program, including cost sharing and work and community engagement requirements for beneficiaries who gained coverage through Medicaid expansion.

A group of 16 Medicaid beneficiaries in Kentucky challenged the Department of Health and Human Services’ (HHS’) approval of the waiver. The court found that the beneficiaries had standing and that HHS’ approval was arbitrary and capricious. Specifically, the ruling states that HHS failed to consider the waiver’s impact on furnishing medical assistance or promoting coverage for low-income individuals—key objectives of the Medicaid program.

The ruling stops implementation of Kentucky HEALTH while it is remanded to HHS for correction. HHS has 60 days to file an appeal on the ruling. The ruling only affects the Kentucky HEALTH waiver, though similar waivers have been approved in Arkansas, Indiana, and New Hampshire.

America’s Essential Hospitals released issue briefs on Medicaid waivers containing work requirements and other market-based reforms.

Contact Senior Director of Policy Erin O’Malley at eomalley@essentialhospitals.org or 202.585.0127 with questions.

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About the Author

Rachel Schwartz is a policy associate at America's Essential Hospitals.