— In recent years, amid the skyrocketing cost of healthcare, the Secretary of the Department of Health and Human Services (“HHS”) approved several Section 1115 demonstration projects from states seeking to implement Medicaid work requirements in an effort to decrease healthcare spending.Footnote 1 The Secretary has stated that these projects promote the objectives of the Medicaid program because they improve beneficiary health-outcomes, address behavioral and social factors that influence health outcomes, and incentivize beneficiaries to engage in their own health care to achieve better health outcomes.Footnote 2 In response to these approvals, Native American tribes and members of Congress petitioned the Centers for Medicare and Medicaid Services (“CMS”) to exempt tribal members from the Medicaid work requirements.Footnote 3 On January 17, 2018, in response to these concerns, CMS issued a letter to tribal leaders stating that it could not grant exemptions for tribal members because of civil rights concerns.Footnote 4 CMS’s Administrator has been quoted as stating that such exemptions would be “race-based” and may therefore lead to civil rights issues.Footnote 5 The Native American tribes and members of Congress have maintained that tribal members should be granted exemptions due to the unique legal status of tribes and the well-established protections given to tribes.Footnote 6 This recent development article addresses the status of current case law surrounding Medicaid work requirements, the application of general legal requirements to tribes, and the implications of COVID-19 on tribal members subject to work requirements. As the current case law framework suggests, (1) CMS’s argument that it cannot approve the exemption because it is race-based is misled because federal jurisprudence has established that tribes are classified as political entities and not racial groups; (2) if CMS fails to approve the exemption, it may be subject to litigation asserting that the failure to approve the exemption frustrates the purpose of the Medicaid statute; and (3) failure to provide the exemption would further exacerbate health disparities and worsen health outcomes in tribal communities.
I. MEDICAID WORK REQUIREMENTS
Section 1115 of the Social Security Act gives the Secretary of Health and Human Services authority to approve experimental, pilot, or demonstration projects that promote the objectives of Medicaid.Footnote 7 The purpose of these projects, which give states additional flexibility to design and improve their programs, is to demonstrate and evaluate state-specific policy approaches to better serve Medicaid populations. On March 14, 2017, HHS and CMS issued a letter to the nation’s governors affirming the federal government’s partnership with states to improve the integrity and effectiveness of the Medicaid program for low-income beneficiaries.Footnote 8 This letter encourages states to bring forward Section 1115 demonstration proposals designed to accomplish this, grounded in ideas that reflect the dynamics and culture of a state. Shortly after, on January 11, 2018, CMS sent a letter to State Medicaid Directors advising them that CMS would support state efforts to improve Medicaid enrollee health outcomes by incentivizing community engagement among able-bodied, working-age Medicaid beneficiaries.”Footnote 9 Following this letter, many states, including Arkansas and Kentucky, had Section 1115 demonstration projects implementing Medicaid work requirements approved by the Secretary.Footnote 10
For instance, the Secretary approved Arkansas’s Section 1115 demonstration project, which required Medicaid beneficiaries to work or engage in specified educational, job training, or job search activities for at least 80 hours per month and to document said activities. Footnote 11 Per the terms of Arkansas’s project, certain categories of beneficiaries were exempted from completing the hours, including beneficiaries who show they are medically frail or pregnant, caring for a dependent child under age six, participating in a substance treatment program, or are full-time students.Footnote 12 Nonexempt “beneficiaries who fail to meet the work requirements for any three months during a plan year will be disenrolled … and will not be permitted to re-enroll until the following plan year.”Footnote 13 In its approval, the Secretary of HHS stated that he believed the project would improve health outcomes, address behavioral and social factors that influence health outcomes, and incentivize beneficiaries to engage in their own health care to achieve better health outcomes.Footnote 14 The Secretary of HHS received a substantial number of comments on its approval of the project. The concerns raised by commenters include concerns that the community engagement requirement would “cause disruptions in care” or “create barriers to coverage” for beneficiaries who are not exempt.Footnote 15 In response, the Secretary noted that Arkansas had several exemptions and would “implement an outreach strategy to inform beneficiaries about how to report compliance.”Footnote 16
Similarly, the Secretary approved Kentucky’s proposed Section 1115 demonstration project which requires adult Medicaid beneficiaries who are not disabled to spend 80 hours per month on community engagement activities (including employment, job-skills training, education, community training, and participation in substance abuse disorder treatment) or risk losing Medicaid coverage. Footnote 17 Similarly to Arkansas, there are a number of exemptions from program requirements as well as several guardrails. The Secretary stated that the project would achieve Medicaid’s aim by increasing the health and well-being of beneficiaries, reducing cost, and increasing beneficiary self-sufficiency.Footnote 18
II. TRIBAL CASE LAW
As a result of Section 1115 demonstration projects, tribal leaders have sought exclusion, arguing they should be exempt from work requirements due to their unique quasi-sovereign tribal status.Footnote 19 In order to analyze whether CMS may exempt tribal members from approved State Medicaid 1115 demonstration projects implementing Medicaid work requirements, it is useful to review litigation involving tribal issues. The issue of whether general acts of congress need to express a manifest intent in order for legislation to apply to Indian tribes has been a prevalent discussion in tribal law.Footnote 20 In Federal Power Commission v. Tuscarora Indian Nation, New York’s Power Authority, acting under a license issued to it by the Federal Power Commission, sought to take land, upon the payment of just compensation, owned by the Tuscarora Indian Nation.Footnote 21 The land was critically needed to develop a power plant to supply power to those in the surrounding areas.Footnote 22 The Tuscarora Indian Nation objected to the taking, stating that the lands were part of a reservation and federal law prevented the taking of a reservation if the taking would interfere with the purpose for which the reservation was required.Footnote 23 The Tuscarora Indian Nation heavily relied upon Elk v. Wilkins to support its position that general acts of congress did not apply to Indians, unless so expressed as to clearly manifest an intention to include them.Footnote 24 The court in Federal Power Commission rejected this proposition in favor of the Court’s modern view that a general statute in terms applying to all persons also includes Indians and their property interests, unless there is an intent to exclude Indians definitely expressed in the statute.Footnote 25 This general rule of federal applicability is still operative law today.
There are, however, established exceptions to the general rule of federal applicability to Indian tribes. A federal statute of general applicability will not apply to Indian tribes if, (1) the law touches “exclusive rights of self-governance in purely intramural matters,” (2) the application of the law to the tribe would abrogate rights guaranteed by Indian treaties,” or (3) there is proof “by legislative history or some other means that Congress intended the law not to apply to Indians on their reservations.”Footnote 26 In any of these three situations, “Congress must expressly apply a statute to Indians before we will hold that it reaches them.”Footnote 27
Outside of analyzing whether legislation applies to tribal members, courts have also considered whether laws establishing an Indian preference should be classified as unconstitutional racial preferences.Footnote 28 Morton v. Mancari discussed this issue in the context of whether legislation granting Indians a preference was repealed by the Equal Employment Opportunity Act of 1972.Footnote 29 The court in Morton held that employment preference for qualified Indians in the Bureau of Indian Affairs provided by the Indian Reorganization Act did not constitute invidious racial discrimination in violation of due process and that preference was reasonable and rationally designed to further Indian self-government.Footnote 30 The court went further in saying that not only does this preference not constitute racial discrimination but it is also not even a ‘racial’ preference.Footnote 31 The preference, as applied, is granted to Indians not as a discrete racial group, but, rather, as members of quasi-sovereign tribal entities whose lives and activities are governed by the Bureau of Indian Affairs in a unique fashion.Footnote 32 The court seemed to be using a rational basis approach to this determination since it went further in stating that “as long as the special treatment can be tied rationally to the fulfillment of Congress’ unique obligation toward the Indians, such legislative judgments will not be disturbed.”Footnote 33
III. LEGAL CHALLENGES TO MEDICAID WORK EXEMPTION
As noted above, in the past several years, the Secretary of HHS has approved several Section 1115 demonstration projects from states seeking to implement Medicaid work requirements.Footnote 34 In response to these approvals, Native American tribes and members of Congress have petitioned CMS and the Secretary of HHS to exempt tribal members from the Medicaid work requirements.Footnote 35 In response to these concerns, CMS stated that it could not grant such exemptions because the exemptions would be “race-based” and may therefore lead to civil rights issues.Footnote 36 Native American tribes and members of Congress have maintained that tribal members should be exempt from these requirements and a legal challenge may be forthcoming.Footnote 37 As a result, in this section, case law cited above may impact a legal challenge to CMS’s position. Importantly: (1) CMS’s argument that it cannot approve the exemption because it is race-based is misled because federal jurisprudence has established that tribes are classified as political entities and not racial groups and (2) if CMS fails to approve the exemption, it may be subject to litigation asserting that the failure to approve the exemption frustrates the purpose of the Medicaid statute; and (3) failure to provide the exemption would further exacerbate health disparities and worsen health outcomes in tribal communities.
A. Exempting Tribal Entities Does Not Constitute a Racial Preference
The tribes insist that any claim of “racial preference” is moot because their status as a tribe is political and not racial.Footnote 38 The tribes note that they have been constitutionally protected as separate governments, dating back to treaties hammered out by President George Washington and reaffirmed in recent decades under Republican and Democratic presidents alike, including the Clinton, George W. Bush and Obama administrations.Footnote 39 CMS’s conclusion that it may not approve the exemption because it is race-based is misled, and CMS may likely approve such an exemption if it concludes that the exemption is related to an intramural matter, would abrogate the rights guaranteed to tribal members by treaties, or if it expresses an intent to exempt tribal members in its regulations or guidance.
The Supreme Court has held that the federal government can lawfully treat Indians and Indian tribes differently from other groups in carrying out the trust responsibility without running afoul of United States Constitution’s equal protection clause because such treatment is not directed at a suspect racial classification but rather a unique non-suspect class based on political relationship with tribal entities recognized as separate sovereigns in the Constitution.Footnote 40 Although the Supreme Court’s civil rights jurisprudence generally applies strict scrutiny when reviewing classifications based on race, color, or national origin, the Court in Morton rejected the strict scrutiny test in favor of a rational basis approach when reviewing the Indian employment preference law at issue in that case.Footnote 41 The Supreme Court has later explained that the treatment of tribal members as a political group rather than a racial classification is “rooted in the unique status of Indians as a separate people with their own political institutions” and in Indian tribes’ status as “quasi-sovereign tribal entities.”Footnote 42
Based on the framework established by the Supreme Court, CMS has ample legal authority to treat Medicaid beneficiaries who are tribal members differently than other Medicaid beneficiaries if doing so is rationally related to its unique trust responsibility to Indians. Under familiar principles of Indian law, such actions are political in nature, and as a result do not constitute prohibited race-based classifications. This principle has been recognized and repeatedly reaffirmed by the Supreme Court and every Circuit Court of Appeals that has considered it.Footnote 43 This principle has been extended to the actions of Administrative Agencies like HHS even in the absence of a specific statute. In fact, HHS regulations implementing Title VI of the Civil Rights Act recognize and implement this principle with respect to the Indian Health Services.Footnote 44 Thus, if CMS did grant an exemption to tribal members, any legal challenge to it would be reviewed under rational basis review, and not strict scrutiny, and CMS would likely be able to succeed in proving that it had a rational basis for treating tribal members different than other Medicaid beneficiaries.
B. The General Applicability Rule Should Not Apply
To the extent that CMS is concerned that its approval of the Section 1115 demonstration projects regarding Medicaid work requirements is tantamount to its approval of a law of general applicability, and thus must be applied with equal force to tribal members, CMS may still move forward with approving the exemption, if it believes that the work requirements relate to an intramural matter or abrogate the rights guaranteed by Indian treaties, or if CMS has otherwise evidenced an intent that the work requirements should not apply to tribal members.Footnote 45
The Medicaid work requirements probably do not constitute purely intramural matters because the demonstration projects likely have an effect on the open marketsFootnote 46 and may result in conduct that is not limited in scope to tribal affairs alone.Footnote 47 Regardless of whether any of these exceptions apply, tribal members should be exempt from work requirements because the imposition of these requirements in any form frustrates the purpose that Medicaid was intended to serve.Footnote 48
IV. IMPLICATIONS TO CMS AND PUBLIC HEALTH POLICY
If CMS does not approve the work requirement exemption, it may face legal challenges that its failure to do so frustrates the purpose of the Medicaid statute. Recent circuit court and district court decisions have found that the Secretary’s approval of Section 1115 Medicaid work demonstration projects violate the Administrative Procedure Act because they frustrate the aim of the Medicaid program and are thus arbitrary and capricious.Footnote 49 If CMS continues to deny approval of a tribal exemption, it may open itself up to litigation risk that a district court or circuit court will similarly conclude that the failure to approve the exemption is arbitrary and capricious because it frustrates the purpose of the Medicaid Act.
Tribes receive Medicaid funding through Section 1911 of the Social Security Act.Footnote 50 Section 1911 was enacted to provide supplemental federal funding to the Indian Health Services (“IHS") and designed to ensure that Medicaid funds would “flow into IHS institutions.”Footnote 51 Mandatory work and community engagement requirements will create a barrier to access to Medicaid that is unique to IHS beneficiaries. Indians are already exempted from the Affordable Care Act due to the specialized nature of tribes, their disproportionately high rates of unemployment and uninsured, and their significant physical and mental health needs.Footnote 52 Unlike other Medicaid enrollees, IHS beneficiaries have access to the IHS system at no cost to them.Footnote 53 If faced with mandatory work and community engagement requirements that do not accommodate or account for Tribal programs, Medicaid enrollees from Indian tribes can and will choose to no longer participate in the Medicaid program, relying solely on IHS for their medical needs. IHS will consequently lose much of its supplemental Medicaid funding which will deprive IHS of Medicaid resources in a manner that is contrary to Congressional intent in Section 1911 of the Social Security Act.Footnote 54 This will frustrate, rather than advance, the objectives of the Medicaid statute for Indian health.
V. FURTHER IMPLICATIONS IN LIGHT OF THE COVID-19 CRISIS
The Secretary may only approve Section 1115 demonstration projects related to Medicaid work requirements if doing so is “likely to assist in promoting the objectives” of the Medicaid statute.Footnote 55 If CMS does not exempt Indians from Section 1115 demonstration projects instituting mandatory community engagement and work requirements, it opens itself up to arguments that it is putting Indians at-risk of losing valuable healthcare funds. Requiring work or work-related activities as a condition of Medicaid eligibility would also make it harder for Indians to stay covered and it would make it harder for IHS to provide needed services to Indians, especially in light of the pandemic.Footnote 56
The rise of COVID-19 has only further exacerbated these health needs. The Navajo Nation, which occupies the largest reservation in the country, has more per capita cases and deaths than any U.S. state.Footnote 57 Although Indians only make up 9% of the population of New Mexico and 4% of the population of Arizona, they account for 75% of COVID-19 deaths in New Mexico and 12% in Arizona.Footnote 58 This disproportionate death rate is likely amplified in this community due to understaffed hospitals, increased likelihood of comorbidities and inability to social distance due to crowded housing conditions.Footnote 59 COVID-19 also led to an increase in unemployment across the country and those who were not working before the pandemic are unlikely to have moved into employment during the downturn.Footnote 60 Additionally, tribal reservations have faced difficulties receiving adequate supplies from the federal government.Footnote 61
In response to the current public health emergency, the Families First Coronavirus Response Act (“FFRCA”) includes “maintenance of eligibility” protections to ensure continued coverage for Medicaid enrollees and no states are currently implementing work requirements.Footnote 62 This is only a temporary measure and does not address the long-term solution of a permanent exemption for tribes or even going as far as ultimately eliminating the Medicaid work requirements entirely. Additionally, many individuals who currently have private job-based coverage may become newly eligible for Medicaid if they lost their jobs during the economic downturn.Footnote 63 Unfortunately, for some individuals, Medicaid coverage options will be more limited for those in states that have not adopted the ACA Medicaid expansion.Footnote 64
In a January 28, 2021 executive order, President Biden directed relevant agencies to review waivers and waiver policies that may reduce coverage or otherwise undermine Medicaid, including work requirements.Footnote 65 If it is determined that work requirements are an impediment to health care access, this could be critical not only in providing exemptions but possibly in abolishing work requirements entirely. If agencies decide to maintain work requirements or further limit exemptions, it is likely that this action will reinvigorate a new wave of litigation contesting the decision. Either way, these pending actions under the Biden Administration will have lasting implications not only for tribal members but also for Medicaid enrollees at large.
