As noted in part I, a federal district court ruled last month that the Biden administration’s rescission of a Medicaid demonstration waiver in Georgia was unlawful and set it aside. The back story suggests how executive branch agencies can overreach in reversing regulatory decisions too quickly and arbitrarily. At least some Affordable Care Act (ACA) policies remain both easier and harder to rewrite than first imagined, depending on how one does it.

In State of Georgia v. Brooks, Judge Wood cited six critical errors by the Biden administration’s Centers for Medicare and Medicaid Services (CMS). The agency failed to consider or weigh that rescission of the waiver would produce less Medicaid coverage than before. It erroneously measured the waiver against an incorrect baseline: a (hypothetically) full ACA Medicaid expansion in the state. The Biden CMS compared the Georgia work requirements to fundamentally inapt ones in other states. It relied on an impermissible non statutory factor of “health equity” and failed to consider potential reliance interests of Georgia on the originally approved waiver. Moreover, Biden officials fundamentally failed to explain its change of mind since the Trump CMS approved the waiver in October 2020.

This long list of “arbitrary and capricious” administrative actions developed from several basic miscalculations that combined various degrees of arrogance, zealousness, and sloppiness (a full day’s work by Washington standards).

First, Biden officials failed to take enough time for a more thorough review of the Georgia waiver. They relied on loose assertions about how the effects of the COVID-19 pandemic and concerns about health equity for certain disadvantaged groups had changed the key policy considerations. Biden officials yielded to the ideological urgency of outside advocacy groups wanting to end all Medicaid work requirement waivers as quickly and absolutely as possibly in early 2021. Their reliance on seemingly more controllable administrative review mechanisms “took points off the board” and forfeited earlier legal gains in the courts. Whatever the possible legal rationales, this gave Georgia more room to maneuver.

Second, the Biden CMS failed to adjust for the more limited nature of the Georgia waiver, which applied only to “new” Medicaid beneficiaries who would not otherwise be eligible for Medicaid. The state had declined to take up the ACA’s Medicaid expansion offer at enhanced federal matching rates. Hence, Georgia’s work and premium requirements would necessarily produce at least some “net” coverage gains. By trying to do less, Georgia could avoid the legal infirmities of other states’ earlier Medicaid waivers.

Third, using COVID pandemic threats as a limit on economic and employment opportunities for new Medicaid waiver beneficiaries in Georgia fell short. The Georgia waiver had been granted by the Trump administration in October 2020, well after the most serious effects of the pandemic had already taken hold.

In short, Biden officials ignored the different facts and history on the ground in Georgia. A federal court blew the Administrative Procedures Act’s arbitrary and capricious penalty whistle on them.

Any further legal appeal of the court ruling seems unlikely to succeed. The governor’s race in Georgia this November will be far more determinative of future Medicaid policy there.

Positive spillover to another contested ACA waiver in Georgia—involving new “direct access” enrollment private market platforms that would bypass federally approved HealthCare.gov enrollment mechanisms for ACA beneficiaries in individual insurance markets—appears to be rather limited. Biden officials moved more deliberately and carefully before finally rescinding last month part of this other Georgia waiver originally approved by Trump CMS officials in the fall of 2020.

However, this latest federal court ruling does indicate modest room for at least a few states to craft successful Medicaid work-and-premium requirement provisions in a more targeted manner for new populations. Interested non-expansion states still would have to wait for a more receptive White House and walk a narrow line in proposing such modified Medicaid waivers. Weary observers might ask, “Is this really worth it?” But these administrative law manipulations further highlight how pushing the boundaries of a loosely drafted and arrogantly implemented ACA statute usually can find some weak spots, provided that the probes do not overreach. Plugging them up requires more than quick and dirty dismissals that do not engage them seriously. Part III ahead will look at another recent ACA escape route for small employers tunneled through several federal courts.

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