(Bloomberg) – The Trump administration's ongoing effort to undermine Obamacare triggered a lawsuit accusing the government of trying to financially starve two state-run health care programs that serve almost 1 million low-income Americans.
The U.S. Health and Human Service Department waited until a day before Affordable Care Act payments were due to notify New York and Minnesota by email that more than $1 billion in annual funding was being cut off, according to a complaint filed Friday in federal court in Manhattan.
New York Attorney General Eric Schneiderman called the state's health plan a "lifeline" for 700,000 residents. "The abrupt decision to cut these vital funds is a cruel and reckless assault on New York's families," he said in a statement.
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The agency's decision represents a 25 percent cut in funding to the programs, which New York described as "extremely successful" due to their low cost for participants and generous benefits, according to the suit. In New York, about 40 percent of participants are legal immigrants who would otherwise qualify for Medicaid except for their immigration status, state data show.
'A disaster'
While Trump failed to overturn the Affordable Care Act, his administration has sought to undermine it in a variety of other ways, including cutting funding to various programs and ending the individual mandate through the recent tax overhaul. Trump has said Obamacare is "a disaster."
HHS spokesman Ryan Murphy declined to comment on the lawsuit.
New York and Minnesota allege the agency made its decision without proper justification, offering no legal analysis or reasoning.
Instead, the states say, the agency offered an opinion letter from the Justice Department, which in turn relied on a ruling in federal court, even though they only addressed so-called cost-sharing reduction subsidy payments for qualified health plans purchased through private companies — not the Basic Health Plans.
According to the states, the cut in funding constitutes "arbitrary and capricious" decision-making that violates the Administrative Procedure Act.
New York and Minnesota have state-based insurance exchanges under the ACA and don't use the federal government's healthcare.gov site. They're the only two states that participate in the Basic Health Program at the center of the dispute, offering plans with very low out-of-pocket costs and monthly premiums from $0 to $80.
The plans, which merged with New York's and Minnesota's earlier state-run insurance programs, were created with millions of dollars in state funds with the expectation that they'd be kept afloat almost entirely with federal funds.
The Trump administration had been complying with funding requirements until Dec. 21, when Health and Human Services said it wouldn't be paying $266 million due to New York and $32 million due to Minnesota for their Basic Health Program expenses in the first quarter of 2018, according to the suit. Over a full year, that would amount to about $1.2 billion.
"HHS's termination of this critical funding inflicts direct and potentially devastating injury on the States, which passed legislation and collectively invested millions of dollars to create and operate" the state-run plans, according to the complaint.
The case is State of New York v. Department of Health and Human Services, 1:18-cv-00683, U.S. District Court, Southern District of New York (Manhattan).
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