Wood et al v. Betlach et al

Filing 117

ORDER that Plaintiffs' 106 Cross-Motion for Summary Judgment is denied. The Secretary's 113 Motion for Summary Judgment is granted. The Clerk is directed to enter Judgment and terminate this action. Signed by Judge David G Campbell on 7/26/2013.(LFIG)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 No. CV-12-08098-PCT-DGC Flint Wood, et al., Plaintiffs, 10 11 v. 12 ORDER Thomas Betlach, Director of the Arizona Health Care Cost Containment System, and Kathleen Sebelius, Secretary of the United States Department of Health and Human Services, in their official capacities, 13 14 Defendants. 15 16 17 The parties have filed motions for summary judgment. Docs. 106, 113. The 18 motions are fully briefed. For reasons that follow, the Court will deny Plaintiffs’ motion 19 and grant Defendants’ motion.1 20 I. Background. 21 Defendant Kathleen Sebelius (“the Secretary”) is Secretary of the United States 22 Department of Health and Human Services (“DHHS”), which approves state Medicaid 23 plans. Plaintiffs are low income residents of Arizona who qualify for medical assistance 24 under a statewide, Medicaid-approved demonstration project administered by the Arizona 25 Health Care Cost Containment System (“AHCCCS”). 26 27 28 1 The requests for oral argument are denied because the Court is very familiar with this case, the issues are fully briefed, and oral argument will not aid the Court’s decision. See Fed. R. Civ. P. 78(b); Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998). 1 The demonstration project provides coverage to low income childless adults who 2 would not otherwise be Medicaid eligible. Patients in this “expansion population” are 3 subject to mandatory copayments for doctor’s visits, non-emergency use of emergency 4 rooms, and prescription drugs. These copayments, enacted under Arizona Administrative 5 Code Rule R9-22-711(F), are higher than the nominal copayments charged to low income 6 disabled individuals and families with dependent children – the “chronically needy” 7 population that states participating in Medicaid must cover. Plaintiffs represent a class of 8 persons defined as “All Arizona Health Care Cost Containment System eligible persons 9 in Arizona who have been or will be charged copayments pursuant to Arizona 10 11 Administrative Code Amended Rule R9-22-711(F).” Doc. 87. Plaintiffs filed a complaint seeking declaratory and injunctive relief from these 12 copayment requirements. Doc. 1. Plaintiffs allege that the requirements violate 13 Medicaid’s nominality limits and its prohibition on denial of services for inability to 14 make copayments (id., ¶¶ 2, 36, 37); that the Secretary exceeded her authority under 42 15 U.S.C. § 1315 when she granted approval to the heightened and mandatory copayments 16 in the demonstration project and thereby violated the federal Medicaid Act and the 17 Administrative Procedure Act (“APA”) (id., ¶¶ 60, 95-96); and that AHCCCS Director 18 Thomas Betlach violated the due process requirements of the U.S. Constitution and the 19 Medicaid Act when he sent legally insufficient notices to those subjected to the higher 20 copayments. Id., ¶¶ 44, 99. 21 Plaintiffs filed a motion for class certification (Doc. 13) which the Court granted 22 (Doc. 87), and a motion for preliminary injunction (Docs. 5) which the Court denied 23 (Doc. 88). The Secretary filed a motion for summary judgment (Doc. 29), Plaintiffs filed 24 a cross-motion for summary judgment (Doc. 67), and Director Betlach filed a cross- 25 motion for summary judgment on Plaintiffs’ second claim for relief (Doc. 85). The Court 26 denied the Secretary’s motion for summary judgment, granted Plaintiffs’ cross-motion 27 for summary judgment on their first claim for relief, remanded the Secretary’s approval 28 of Arizona’s demonstration project, denied Plaintiffs’ motion for summary judgment on -2- 1 their second claim for relief, and granted Director Betlach’s motion for summary 2 judgment on Plaintiffs’ second claim for relief. Doc. 102. The Secretary reconsidered 3 Arizona’s demonstration project and affirmed her prior decision in an approval letter 4 dated April 8, 2013. Doc. 103-1. The parties have filed summary judgment motions in 5 light of this decision. 6 A. Overview of the Medicaid Program. 7 Congress created Medicaid in 1965 by adding Title XIX to the Social Security 8 Act, 42 U.S.C. §§ 1396-1396w-5. Medicaid was enacted, in part, to enable states “to 9 furnish . . . medical assistance on behalf of families with dependent children and of aged, 10 blind, or disabled individuals, whose income and resources are insufficient to meet the 11 costs of necessary medical services.” 42 U.S.C. § 1396-1. States that wish to receive 12 federal funds through Medicaid must submit a state plan for approval by the Secretary of 13 DHHS. 14 “categorically needy” (those with dependent children who qualify for welfare, the 15 disabled, children, and pregnant women who qualify). 42 U.S.C. § 1396a(a)(10)(A)(i). 16 Pharm. Research & Mfrs. of Am. (“PhRMA”) v. Walsh, 583 U.S. 644, 650-651, 651 n. 4 17 (2003). States may additionally opt to cover the “medically needy” (those who meet the 18 non-financial eligibility requirements of Medicaid, but whose incomes exceed the 19 eligibility limits). 20 specifically waived, state plans must comply with all provisions of the Medicaid Act. 21 Spry v. Thompson, 487 F.3d 1272, 1273 (9th Cir. 2007); see also Beno v. Shalala, 30 F. 22 3d 1057, 1068 (9th Cir. 1994) (“While states are not required to participate in these 23 federal programs, if they elect to participate, compliance . . . is mandatory.”) Id. at § 1396a(a)-(b). State Medicaid plans must cover those who are 42 U.S.C. § 1396a(a)(10)(C); see PhRMA at 651 n. 5. Unless 24 Under Section 1115 of the Social Security Act, the Secretary of DHHS may waive 25 certain Medicaid Act requirements for an approved “experimental, pilot, or 26 demonstration project” that the Secretary finds “is likely to assist in promoting the 27 objectives of” the Medicaid Act. 42 U.S.C. § 1315. Section 1115 demonstration projects 28 may cover Medicaid ineligible populations – known as “expansion populations” – who -3- 1 are not covered under the state Medicaid plan. Id.; Spry, 487 F.3d at 1274-5. The waiver 2 allows state expenditures for these projects to be counted as expenditures under the state 3 plan for federal reimbursement purposes. 42 U.S.C. § 1315(a)(2)(A); Spry, 487 F.3d at 4 1277. 5 States are permitted, with some exceptions, to impose cost-sharing provisions for 6 both the mandatory (“categorically needy”) and optional (“medically needy”) populations 7 covered by Medicaid state plans. 42 U.S.C. § 1396o(a) & (b). These charges must be 8 nominal in amount. Id. at § 1396o(a)(3) & (b)(3). See Spry, 487 F.3d at 1276. The 9 nominality requirements do not apply to expansion populations. Id., Newton-Nations v. 10 Betlach, 660 F.3d 370, 379-80 (9th Cir. 2011). 11 B. Arizona’s Medicaid-Funded Plans. 12 Arizona participates in Medicaid through AHCCCS. Docs. 16 at 11, 39 at 7; 13 A.R.S. §§ 36-2901-2972. AHCCCS administers Arizona’s state Medicaid plan, its 14 demonstration projects, and certain state-only initiatives. Doc. 39 at 6-7. 15 In November 2000, Arizona citizens passed Proposition 204, which required the 16 state to expand AHCCCS coverage to all persons with incomes below the federal poverty 17 level (“FPL”). Doc. 16 at 13; A.R.S. § 36-2901.01. In 2001, the state received approval 18 from DHHS for a demonstration project under Section 1115. Doc. 16 at 13. The 19 Secretary’s approval allowed the state to provide federally-reimbursed AHCCCS 20 coverage to individuals below the FPL who did not have dependent children living with 21 them – the expansion population referred to as “childless adults” – who would not 22 otherwise be Medicaid eligible under a state plan. Id.; Doc. 39 at 7. 23 AHCCCS beneficiaries covered as part of this “expansion population” were 24 charged the same nominal copayments as regular Medicaid recipients – $1.00 per 25 doctor’s visit, $5.00 for nonemergency use of emergency rooms, and $5.00 for 26 nonemergency surgery. Doc. 16 at 13; Ariz. Admin. Code R9-22-711(A). The plan 27 prohibited health care providers from refusing services to those who could not make the 28 copayments. Ariz. Admin. Code R9-22-711(B). -4- 1 In 2003, Arizona implemented the Copayment Rule and increased copayments for 2 those in the expansion population. Doc. 16 at 14; Ariz. Admin. Code R9-22-711(E). The 3 Copayment Rule gave medical providers discretion to refuse services to members of the 4 expansion population who failed to pay the increased copayments. Id. Arizona applied 5 for and received approval from the Secretary of DHHS for this modification to its 6 demonstration project. Doc. 39 at 7. The Copayment Rule, which was then found at 7 Arizona Administrative Code R9-22-711(E), required members of the expansion 8 population to pay $4.00 for every generic prescription or brand name prescription where 9 no generic drug is available, $10.00 for every brand name prescription when a generic 10 drug is available, $5.00 for every physician office visit, and $30.00 for non-emergency 11 use of an emergency room. Doc. 16 at 14. The Secretary’s approval for the 2001 12 demonstration project expired in 2006, but the Secretary approved an additional five-year 13 demonstration project that included the Copayment Rule (renumbered to Rule R9-22- 14 711(F)). Docs. 16 at 14; 39 at 7. 15 The demonstration project was scheduled to expire on September 30, 2011. As a 16 result, the State wrote to the Secretary on March 31, 2011, and asked her to approve “a 17 new Section 1115 Research and Demonstration Project Waiver . . . for the period of 18 October 1, 2011, through September 30, 2016.” AR 004219. The proposed new project 19 covered the childless adult population covered by the previous demonstration project, but 20 with enrollment frozen at lower levels. Id. at 004220. It also included the Copayment 21 Rule, renumbered to R9-22-711(F), as well as other modifications to the program. Id.; 22 Id. at 000018. The Secretary approved the new demonstration project on October 21, 23 2011. Id. at 000001-5. The project was approved until 2016, with the Copayment Rule 24 effective until December 31, 2013.2 Id.; Id. at 000033. 25 26 27 28 Plaintiffs brought this lawsuit on the basis of the Secretary’s October 21, 2011 2 The federal Affordable Care Act is set to go into effect on January 1, 2014. As of that date, all those with incomes below the FPL will become a mandatory Medicaid population. 42 U.S.C. § 1396a(a)(10)(A)(i)(VIII). AR 000036-37. (Section 36(b)). -5- 1 decision, but they purport to challenge only the Copayment Rule portion of that decision. 2 In other words, Plaintiffs ask the Court to vacate the Copayment Rule and leave the rest 3 of the Secretary’s decision and the demonstration project in place. 4 C. Newton-Nations Litigation. 5 Following the Secretary’s 2003 approval of the Copayment Rule, which modified 6 the 2001 demonstration project by increasing copayments for the childless adult 7 population, several plaintiffs who were part of this expansion population brought suit 8 challenging the Secretary’s approval of the increased copayments as arbitrary and 9 capricious and in violation of the Medicaid Act. See Newton-Nations v. Rogers, 221 10 F.R.D. 509, 510 (D. Ariz. 2004). Judge Earl H. Carroll granted the plaintiffs’ motion for 11 class certification, with the class defined as “all Arizona Health Care Cost Containment 12 eligible persons in Arizona who have been or will be charged copayments pursuant to 13 Arizona Administrative Code Amended Rule R9-22-711(E).” Id. at 512. Judge Carroll 14 granted the plaintiffs’ request for a preliminary injunction and enjoined the state from 15 imposing the higher copayments or allowing medical providers to refuse services for 16 inability to pay. Newton-Nations v. Rogers, 316 F. Supp. 2d 883, 891 (D. Ariz. 2004). 17 The injunction was lifted on March 29, 2010, when Judge Carroll granted summary 18 judgment in favor of the defendants. Newton-Nations v. Rogers, No. CV 03-2506-PHX- 19 EHC, 2010 WL 1266827 at *21 (D. Ariz. March 29, 2010). 20 The Ninth Circuit affirmed Judge Carroll’s decision in part and reversed it in part. 21 Newton-Nations v. Betlach, 660 F.3d 370, 383-84 (9th Cir. 2011). The Court of Appeals 22 found that Judge Carroll had properly granted summary judgment in favor of the 23 defendants and against the plaintiffs on the claim that the then-Secretary violated the 24 Medicaid Act and the APA when he determined that a waiver of the copayment 25 requirement was not required for Arizona’s expansion populations. Id. at 379-80. The 26 Court of Appeals found that the Secretary had reasonably interpreted the Medicaid Act to 27 mean that persons not covered by the state Medicaid plan “are expansion populations not 28 protected by the § 1396o cost-sharing limits.” Id. at 379. The Ninth Circuit reversed the -6- 1 grant of summary judgment in favor of defendants on the claim that the Secretary’s 2 approval of the increased copayments was arbitrary and capricious, finding that “[t]he 3 administrative record does not demonstrate that the Secretary made the requisite findings 4 required by Beno.” Id. at 381. The Ninth Circuit found “no evidence that the Secretary 5 made ‘some judgment that the project ha[d] a research or a demonstration value.’” Id. 6 (quoting Beno, 30 F.3d at 1069). The Ninth Circuit remanded to the district court with 7 instructions to vacate the Secretary’s decision and remand to the Secretary for further 8 consideration. Id. at 382. 9 On remand, Judge Roslyn O. Silver found the case moot because the Secretary’s 10 2003 approval of the Copayment Rule had expired and “the copayments currently in 11 effect are due to a new program based on a new administrative record.” Newton-Nations 12 v. Betlach, 03-02506-PHX-ROS, Doc. 261 at 4 (emphasis in original). Judge Silver 13 stated that the plaintiffs could file a new suit on the new record. Id. Plaintiffs promptly 14 filed this action. Doc. 1. 15 II. Legal Standards. 16 Under the APA, a reviewing court must hold unlawful and set aside agency action 17 found to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance 18 with law[.]” 5 U.S.C. § 706(2)(A). A decision is arbitrary and capricious if the agency 19 “has relied on factors which Congress has not intended it to consider, entirely failed to 20 consider an important aspect of the problem, offered an explanation for its decision that 21 runs counter to the evidence before the agency, or is so implausible that it could not be 22 ascribed to a difference in view or the product of agency expertise.” O’Keeffe’s, Inc. v. 23 U.S. Consumer Prod. Safety Comm’n, 92 F.3d 940, 942 (9th Cir.1996) (quoting Motor 24 Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)). The 25 standard is deferential. The Court may not substitute its judgment for that of the agency. 26 27 28 -7- 1 River Runners for Wilderness v. Martin, 593 F.3d 1064, 1070 (9th Cir.2010).3 2 A party seeking summary judgment “bears the initial responsibility of informing 3 the district court of the basis for its motion, and identifying those portions of [the record] 4 which it believes demonstrate the absence of a genuine issue of material fact.” Celotex 5 Corp. v. Catrett, 477 U.S. 317, 323 (1986). Summary judgment is appropriate if the 6 evidence, viewed in the light most favorable to the nonmoving party, shows “that there is 7 no genuine dispute as to any material fact and the movant is entitled to judgment as a 8 matter of law.” Fed. R. Civ. P. 56(a). Summary judgment is also appropriate against a 9 party who “fails to make a showing sufficient to establish the existence of an element 10 essential to that party’s case, and on which that party will bear the burden of proof at 11 trial.” Celotex, 477 U.S. at 322. Only disputes over facts that might affect the outcome 12 of the suit will preclude the entry of summary judgment – the disputed evidence must be 13 “such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. 14 Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 15 III. The Secretary’s Motion for Summary Judgment. 16 Approval of a demonstration project under Section 1115 requires that the 17 Secretary examine three issues: “first, whether the project is an ‘experimental, pilot or 18 demonstration project.’ Second, whether the project is ‘likely to assist in promoting the 19 objectives of the act.’ Third, ‘the extent and period’ for which she finds the project is 20 necessary.” 21 (internal citations and initial capitals omitted). The Secretary seeks summary judgment 22 on Plaintiffs’ first claim for relief, arguing that she considered each of these factors and 23 reasonably determined that the demonstration project as a whole could yield useful 24 information for demonstration purposes, serves the objectives of the Medicaid Act by 25 26 27 28 Newton-Nations, 660 F.3d at 380 (quoting Beno, 30 F.3d at 1068-71) 3 Plaintiffs argue that the Court should “accord a greater degree of scrutiny to a decision ‘that arrives at substantially the same conclusion as an order previously remanded by the same court.’” Doc. 110-1 at 3 (quoting Greyhound Corp. v. I.C.C., 668 F.2d 1354, 1358 (D.C. Cir. 1981)). The Court disagrees. See City of Los Angeles v. U.S. Dep’t of Transp., 165 F.3d 972, 977-78 (D.C. Cir. 1999). -8- 1 providing coverage to those who would not otherwise be entitled to federally-funded 2 medical assistance, and is limited in extent and duration. Doc. 114 at 2-3. The Secretary 3 argues that Section 1315 requires no more (id. at 3), and that “[a]lthough she was not 4 obligated to do so, the Secretary also reasonably determined that this copayment 5 provision satisfied the requirements of Section 1115” (id.). 6 The parties continue to disagree on whether the Secretary’s approval can only be 7 upheld if the copayments, viewed in isolation, satisfy each of the three prongs under the 8 Medicaid Act, or whether it is permissible for the Secretary to base her consideration of 9 these factors upon the demonstration project as a whole. See, e.g., Doc. 114 at 3, 9-12; 10 Doc. 115-1 at 3-4, 7 n.3. The Court’s prior order squarely addressed this issue: “The 11 imposition of copayments on the expansion population may be relevant or even central to 12 the Secretary’s consideration of the experimental purpose of the demonstration project 13 and of its overall effectiveness in furthering the objectives of the Medicaid Act, but 14 nothing in Newton-Nations, Beno, or the language of Section 1115 persuades the Court 15 that compliance with Section 1115 must be found in the copayments alone rather than the 16 demonstration project as a whole.” Doc. 102 at 11. The Court stands by that view. 17 Additionally, Plaintiffs argue that “[t]he April 8, 2013, approval letter does not 18 review the demonstration as a whole but rather selectively reapproves five parts of the 19 demonstration.” Doc. 110-1 at 5 n.2. Because Plaintiffs challenge only the Secretary’s 20 re-approval of the copayment provision, Plaintiffs ask the Court to review the Secretary’s 21 consideration of the copayment provision only. Doc. 110-1 at 5-15. The Secretary 22 responds by arguing that “the Secretary was entitled to consider the demonstration project 23 in its entirety” (Doc. 114 at 9), and that “the Secretary expressly recited that she reviewed 24 the ‘demonstration as a whole,’ rather than viewing the ‘copayments for childless adults 25 in isolation.’” Doc. 114 at 10 (quoting Doc. 103-1 at 3). The Secretary submits that she 26 “listed a series of demonstration purposes that the project as a whole would serve, 27 including testing the ‘use of managed care entities to provide cost effective care 28 coordination’ and she found that the project as a whole would further the objective of the -9- 1 Medicaid program to provide coverage for the expansion population.” Id. (quoting and 2 citing Doc. 103-1 at 2-3). The Secretary’s summary judgment motion primarily argues, 3 however, that the copayment provision satisfies Section 1115. See Doc. 114 at 12-16; 4 Doc. 116 at 8-12. The Court accordingly will focus its discussion of the project’s 5 demonstration purposes and its promotion of the objectives of the Medicaid Act on the 6 copayment provision. 7 A. Is the Project an Experimental, Demonstration, or Pilot Project? 8 Congress enacted Section 1115 to ensure that certain of the Act’s otherwise 9 mandatory requirements did not “stand in the way of experimental projects designed to 10 test out new ideas and ways of dealing with the problems of public welfare recipients.” 11 S. Rep. No. 1589, 87th Cong., 2d Sess. 20, reprinted in 1962 U.S.C.C.A.N. 1943, 1961, 12 cited in Beno, 30 F.3d at 1069. Thus, approval for a project under this provision requires 13 the Secretary to “make some judgment that the project has a research or a demonstration 14 value.” Beno, 30 F.3d at 1069. The Ninth Circuit has explained that a simple benefits 15 cut unconnected to a research or experimental goal does not satisfy this requirement. Id. 16 Instead, the Secretary “must make at least some inquiry into the merits of the experiment 17 – she must determine that the project is likely to yield useful information or demonstrate 18 a novel approach to program administration.” Id. 19 The Secretary argues that she easily met this burden when granting approval to 20 Arizona’s demonstration project because “she found that the copayment provision would 21 likely yield useful information ‘related to the impact of the childless adult copayments on 22 access, outcomes and costs of care.’” Doc. 114 at 12 (quoting Doc. 103-1 at 3). Like the 23 prior approval letter, the April 2013 approval letter identifies four elements of the project 24 that will be tested with respect to the effects of copayments on the state’s childless adult 25 population (Doc. 103-1 at 3) and incorporates by reference the Special Terms and 26 Conditions (“STCs”) (id. at 1). This portion of the Secretary’s approval letter makes 27 clear that the Secretary made at least “some judgment that the project has a research or a 28 demonstration value.” Beno, 30 F.3d at 1069. - 10 - 1 Additionally, the April 2013 approval letter finds that “this demonstration – based 2 in part on the hypotheses set forth in the STCs – will address existing gaps in the research 3 or otherwise strengthen the research literature on cost sharing with respect to low-income 4 adults by testing the impact of the childless adults’ copayments on access, outcomes, and 5 costs of care.” Doc. 103-1 at 4. The approval letter identifies the following specific 6 research areas: 7 emergency department (ED) among Medicaid beneficiaries” (id.); (2) “the long-term 8 effects of imposing copayments on the non-emergency use of the ED on Medicaid 9 beneficiary health outcomes” (id.); and (3) “several areas that have not been extensively 10 researched in the past, including the impact of copayments on provider participation, 11 prescription drug utilization, and transportation” (id.). (1) “the effect of cost sharing on the non-emergency use of the 12 Plaintiffs argue that the Secretary failed to consider substantial evidence showing 13 that none of the project’s identified hypotheses tests anything new for demonstration 14 purposes. 15 Dr. Leighton Ku: (1) the July 2012 Supplemental Declaration of Dr. Ku (Doc. 51), in 16 which Dr. Ku opined that a massive multi-year, multi-state study of the use of emergency 17 rooms by Medicaid patients in states that assessed a copayment for non-emergency use of 18 the emergency room showed that there was no reduction in emergency room use (id., 19 ¶ 18); and (2) the September 2012 Second Supplemental Declaration of Dr. Ku (Doc. 72), 20 in which he opined that the imposition of copayments on the use of the emergency room 21 conflicted with the imposition of copayments on doctor visits because the “policies would 22 counteract one another and it would be impossible to discern which policy is leading to 23 which result” (id., ¶ 7). Doc. 115-1 at 10-14. Plaintiffs rely principally on two declarations of 24 The April 2013 approval letter notes that the Centers for Medicare & Medicaid 25 Services (“CMS”) “is aware of the research conclusions regarding the negative effects of 26 cost sharing on low-income populations that objecting stakeholders advance as a basis for 27 disapproving the mandatory copayments.” Doc. 103-1 at 4. Accordingly, the Court does 28 not agree that the Secretary ignored Dr. Ku’s opinions or other evidence in the - 11 - 1 administrative record indicating that the copayments have no experimental value. The 2 Secretary explained her rationale for disagreeing with the substance of this evidence. 3 Doc. 103-1 at 4. The Secretary was not required to do more. See Earth Island Inst. v. 4 U.S. Forest Serv., 697 F.3d 1010, 1020 (9th Cir. 2012) (“courts should not impose new 5 requirements on agencies not imposed by the APA or a substantive statute.”). 6 In rejecting Dr. Ku’s opinions, the Secretary favorably cites the Declaration of 7 Victoria Wachino, Director of the Children and Adults Health Programs Group at the 8 CMS within DHHS. Doc. 103-1 at 4 n.3 (citing Doc. 66-1). Director Wachino is 9 responsible for overseeing and supervising the Division of State Demonstrations and 10 Waivers, which analyzes and processes state Section 1115 applications, and she was 11 involved in approving Arizona’s demonstration project. 12 Director Wachino affirms Dr. Ku’s opinion that cost-sharing has been extensively 13 researched, but states that “[c]ontrary to Dr. Ku’s belief, CMS believes that the 14 hypotheses outlined in the New Demonstration with respect to cost sharing may address 15 existing gaps in or otherwise strengthen the research literature and will render 16 information useful in crafting future public policy.” Doc. 66-1, ¶¶ 12, 14. Director 17 Wachino’s Declaration, dated August 15, 2012 (Doc. 66-1), is not part of the 18 administrative record on which the Secretary reconsidered and re-analyzed the 19 demonstration project (Doc. 103-1 at 1) (“In light of this ordered remand, CMS has 20 reconsidered the state’s requests and re-analyzed the administrative record as of 21 October 21, 2011”). Although the Court “may not consider reasons for agency action 22 which were not before the agency,” Beno, 30 F.3d at 1073 (citing Bowen v. Am. Hosp. 23 Ass’n, 476 U.S. 610, 627 (1986)), the Wachino Declaration does show that the 24 Secretary’s conclusion is not “so implausible that it could not be ascribed to a difference 25 in view or the product of agency expertise.” O’Keefe’s, Inc., 92 F.3d at 942 (quoting 26 Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)). Doc. 66-1, ¶¶ 1-2, 5. 27 The April 2013 approval letter shows that the Secretary considered and responded 28 to Plaintiffs’ substantive objections and that “the decision was based on a consideration - 12 - 1 of the relevant factors[.]” Beno, 30 F.3d at 1073 (quoting Overton Park, 401 U.S. at 2 416). Plaintiffs may disagree with the Secretary’s conclusion, but the Secretary has 3 demonstrated that her consideration of the project’s experimental purpose was not 4 arbitrary and capricious. 5 B. Will the Project Likely Assist in Promoting the Objectives of the Act? 6 The purpose of the Medicaid Act is to enable states “to furnish . . . medical 7 assistance on behalf of families with dependent children and of aged, blind, or disabled 8 individuals, whose income and resources are insufficient to meet the costs of necessary 9 medical services.” 42 U.S.C. § 1396-1. In furtherance of this purpose, Section 1115 10 waivers allow states to extend medical assistance to expansion populations. 42 U.S.C. § 11 1315(a)(2). This includes the childless adult population at issue in this case. 12 The Secretary argues that she “‘considered the impact of the state’s project on the 13 persons’ the Medicaid Act ‘was enacted to protect.’” Doc. 114 at 14 (quoting Newton- 14 Nations, 660 F.3d at 381). As evidence that she met this requirement, the Secretary 15 points to this portion of the approval letter: 16 17 18 19 20 21 22 23 24 In administering the joint federal-state Medicaid program, CMS is reasonably relying on the state’s assertions about what alternative choices the state may make in the absence of CMS’s approval. While we recognize the objection of some stakeholders that copayments will not result in cost savings, and even if we entirely agreed with this position, when weighed against the alternatives the state proposes as described above, we conclude that the childless adult expansion population is better served by being covered under this demonstration project – including having to make copayments for services – than it would be without any, or more limited, coverage by the state. We note that the state is under no obligation, prior to January 1, 2014, to provide coverage for this population at all. Doc. 103-1 at 3. 25 Plaintiffs argue that the Secretary ignored evidence in the administrative record 26 showing that the copayments are not an effective cost savings measure and are harmful to 27 the objectives of the Medicaid Act. Doc. 110-1 at 5-9. But the approval letter references 28 these objections and concludes otherwise based on the finding that the cost-saving - 13 - 1 measures are a means to continue providing medical benefits that the state would 2 otherwise have to cut due to budgetary concerns. See Doc. 103-1 at 2-3. 3 Plaintiffs also argue that the Secretary “blindly accept[ed] the State’s request for 4 the copayments.” Doc. 115-1 at 6. This is not the case. The approval letter notes that 5 the state was considering “alternatives, such as covering fewer people in this population 6 by lowering the qualifying federal poverty level (FPL) percentage limit, reducing benefits 7 for the currently-covered population, or eliminating coverage of this expansion 8 population entirely.” 9 proposed alternatives credible because of “the state’s decision to freeze enrollment for the 10 childless adult eligibility group in the state’s previous section 1115 demonstration . . . on 11 July 8, 2011.” Id. The Secretary did not make this judgment “blindly.” Instead, the 12 Secretary explained her decision based on both her expertise and the evidence before her. 13 See O’Keeffe’s, Inc., 92 F.3d at 942. Doc. 103-1 at 2. The Secretary explicitly found the state’s 14 In reaching her conclusion that the demonstration project as a whole furthers the 15 objectives of the Medicaid Act, the Secretary considered the corresponding tradeoffs on 16 17 18 19 20 21 22 23 24 25 26 27 28 those covered by the project and addressed Plaintiffs’ objections that the copayments are not an effective cost saving measure. Doc. 103-1 at 3. The Secretary’s “path may be reasonably discerned,” River Runners for Wilderness, 593 F.3d at 1078, and, accordingly, the Secretary’s consideration of the project’s furtherance of the objectives of the Medicaid program was not arbitrary and capricious. See Beno, 30 F.3d at 1074 (“the record must be sufficient to support the agency action, show that the agency has considered the relevant factors, and enable the court to review the agency’s decision.” (citing Fla. Power & Light Co. v. Lorion, 470 U.S. 729, 744 (1985))). C. Was the Project Approved for the Extent and Period Necessary? The Secretary argues that she only approved the copayments for a limited time, ending on December 31, 2013, thus fulfilling her obligation under Section 1115(a)(2)(A) to consider the extent and duration of the project. Doc. 114 at 17. Plaintiffs do not argue - 14 - 1 that the Secretary failed to meet this obligation. See Docs. 110-1, 115-1. The Court finds 2 that the Secretary’s consideration of the extent and duration of the project was not 3 arbitrary and capricious. 4 D. 5 The Court will grant the Secretary’s motion for summary judgment on Plaintiffs’ 6 first claim for relief on the ground that the Secretary’s review of the three Section 1115 7 requirements was not arbitrary and capricious. 8 IV. Summary. Plaintiffs’ Cross Motion for Summary Judgment. 9 For the reasons discussed above, the Court will deny Plaintiffs’ motion on the 10 ground that Plaintiffs have not raised an issue of fact as to whether the Secretary’s review 11 of the three Section 1115 requirements was arbitrary and capricious. 12 IT IS ORDERED: 13 1. Plaintiffs’ cross-motion for summary judgment (Doc. 106) is denied. 14 2. The Secretary’s motion for summary judgment (Doc. 113) is granted. 15 3. The Clerk is directed to enter Judgment and terminate this action. 16 Dated this 26th day of July, 2013. 17 18 19 20 21 22 23 24 25 26 27 28 - 15 -

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