Arkansas Medicaid Home and Community Based Services Hours Cuts

Problem Statement

In 2016, nearly half of beneficiaries in Arkansas’s Medicaid home and community based services (HCBS) program experienced unexpected and dramatic cuts to their care. After hearing directly from beneficiaries, Legal Aid of Arkansas filed a federal lawsuit, which revealed that the state was using an algorithm called Resource Utilization Groups (RUGs) to determine people’s care needs. RUGs assigned insufficient hours of care to people at all levels of medical need. After the federal court determined the state had violated due process requirements, the state suspended care reductions for several months and revised its notices of adverse action. Further advocacy efforts revealed that, apart from providing insufficient levels of care, the algorithm did not account for certain medical conditions and other factors—a mistake that caused incorrect calculations for hundreds of people. A later state lawsuit invalidated the algorithm entirely on rulemaking grounds, and affected communities persuaded elected officials to abandon the algorithm.

Advocates learned about the RUGs algorithm directly from people who lost hours of care, but only after the system had already been implemented. Because of this, the strategy involved litigation on their behalf—including an analysis of the algorithm obtained during discovery—and a media strategy centering self-advocates and beneficiaries.

Issue Status

The RUGs algorithm was invalidated by a state court and later rejected by elected officials. Litigation and representation in administrative hearings enabled some beneficiaries to retain previous care levels through the time RUGs was in effect.

Starting in 2019, the state replaced the RUGs with a different system for assessments, eligibility, and care allocation. A healthcare-focused consulting firm, Optum, developed an assessment tool called ARIA (Arkansas Independent Assessment). The state uses that assessment to determine eligibility and to set an individual budget cap that limits the cost of services someone can receive—regardless of actual care needs. The state determines a person’s care needs by using a time-task tool that outlines a set number of minutes for each care task. The new system has been designed for a different set of people, leaving over a quarter of those in Arkansas’s program determined wholly ineligible for care. Many of the people still eligible for services have their care limited by the budget caps and time-task tool.

With so many people terminated or facing reductions in hours, the state again failed to protect people’s rights to due process to fight the cuts. People lost benefits immediately even though the law requires the state to continue them while an appeal is ongoing. As a result, some people had to go without enough care or any care at all for several months. This led to people lying in their waste, missing medical appointments, skipping meals and baths, and suffering in other ways. Also, the state failed to explain the reason for the cuts so that people would know what they needed to prove to keep the care at the previous level.

Several people sued the state again in federal court and, this time, they also sued the individual state Medicaid officials responsible for implementing the new system. They won the initial stage of the lawsuit and won the state’s appeal to the Eighth Circuit Court of Appeal. Afterwards, they reached a settlement that forced the state to pay out nearly $500,000 and to make changes to the entire system. This way, the plaintiffs received money for their suffering and ensured that all program participants facing any cuts in the future will keep their benefits while they appeal and receive a detailed explanation of the reasons for the cuts so that they have a better chance to fight them.

Links to More Information

Federal lawsuit (available via PACER): Jacobs v. Gillespie, 3:16-CV-119 (E.D. Ark.)

State lawsuit (available via Arkansas Court Connect): Ledgerwood et al. v. Arkansas Department of Human Services, 60CV-17-442 (Pulaski County Circuit Court)

Appeal at Ark. Dep’t of Hum. Servs. v. Ledgerwood, 530 S.W.3d 336 (Ark. 2017)

Elder v. Gillespie, Case No. 3:19-cv-155 (E.D. Ark.) Complaint

Elder v. Gillespie, 54 F.4th 1055 (8th Cir. 2022) Opinion

For trial documents (deposition transcripts, trial transcripts, verbal decisions by judges, etc.), please check with Kevin De Liban

Formula For Care: Four-Part Series by Arkansas TV News Station KARK (2017)

• Part 1: Computer Program Determines Critical Care
• Part 2: Explaining the Formula for Care
• Part 3: Finding A Solution
• Part 4: Lawmakers Concerned About Changes

What Happens When An Algorithm Cuts Your Healthcare - The Verge (2018)

What Happened When A “Wildly Irrational” Algorithm Made Crucial Healthcare Decisions - The Guardian (2021)

The Automated Administrative State: A Crisis of Legitimacy - Danielle Keats Citron and Ryan Calo (2021)

Disabled Arkansans obtain settlement and program improvements in lawsuit against DHS officials - Arkansas Times (2023)