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February 11, 2013

Approval of Arizona demonstration project with higher copayment requirements than other state medical assistance programs remanded to federal agency for reconsideration

By Geri Szuberla, JD, LLM

The Department of Health and Human Services (HHS) improperly approved an Arizona demonstration project for medical services to low income childless persons who would not otherwise be Medicaid eligible that included mandatory copayments for doctor's visits, non-emergency use of emergency rooms, and prescription drugs (Wood v Betlach, February 6, 2013, Campbell, D). The decision of the agency was remanded for a new review of whether the program meets the requirements of the first two Social Security Act section 1115 requirements, taking into account evidence submitted on behalf of the persons to be served by the program.

Patients in the "expansion population" covered by the demonstration project are subject to copayments, enacted under Arizona Administrative Code Rule R9-22-711(F), are higher than the nominal copayments charged to low income disabled individuals and families with dependent children - the "chronically needy" population that states participating in Medicaid must cover. The court held that the HHS Secretary's decision to approve the project was arbitrary and capricious because she did not address certain evidence submitted in support of the complaint.

Court analysis. The Ninth Circuit has said that approval for a project under sec. 1115 requires the Secretary of HHS, the federal agency that regulates Medicaid programs, to "make some judgment that the project has a research or a demonstration value." A simple benefits cut unconnected to a research or experimental goal does not satisfy this requirement, the district court said. Instead, the Secretary "must make at least some inquiry into the merits of the experiment - she must determine that the project is likely to yield useful information or demonstrate a novel approach to program administration," the Ninth Circuit said.

In this case, the court found that the law requires the Secretary to address the contention that the opinion of an expert witness from a previous case regarding the lack of experimental value of testing copayments also applied in this case.

Other issues. The copayment provisions approved by HHS in this case are not severable from the Secretary's approval of the project as a whole and cannot be vacated separately as the complaint requested, the court said. In addition, the court rejected the claim that the notice to recipients of assistance under the project failed to provide sufficient information for recipients to understand the intended action, including its applicability, the reasons for it, and the law upon which it was based in order to know whether to contest the noticed action.

Attorneys: Logan T. Johnston (Johnston Law Offices, PLC) for Thomas Betlach, Director of the Arizona Health Care Cost Containment System. Joel McElvain, U.S. Department of Justice, for Kathleen Sebelius, Secretary of the HHS.

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