A federal judge has blocked a controversial Medicaid waiver in Kentucky that was set to go into effect Sunday and would have imposed work requirements on beneficiaries.

U.S. District Judge James Boasberg ruled that the administration never adequately considered whether the work requirements and other restrictions would violate the program's central purpose of providing medical assistance to vulnerable citizens.

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“The Secretary never adequately considered whether Kentucky HEALTH would in fact help the state furnish medical assistance to its citizens, a central objective of Medicaid,” Boasberg said in his decision. “This signal omission renders his determination arbitrary and capricious.”

The 60-page ruling in the U.S. District Court for the District of Columbia vacated the Trump administration’s approval of Kentucky’s waiver and sent it back to the Centers for Medicare and Medicaid Services (CMS) for further review.

The decision by Boasberg, who was appointed by former President Obama, is a blow to Republican governors and the Trump administration who have sought to turn Medicaid into a much more conservative program.

In a statement, CMS Administrator Seema Verma called the decision “disappointing.”

“States are the laboratories of democracy and numerous administrations have looked to them to develop and test reforms that have advanced the objectives of the Medicaid program. The Trump Administration is no different,” Verma said.

Verma said the agency is “conferring with the Department of Justice to chart a path forward. In the meantime, we will continue to support innovative, state-driven policies that are designed to advance the objectives of the Medicaid program by improving health outcomes for thousands of low-income Americans.”

The decision is a victory for the group of Kentucky residents and activists who sued the administration for approving the waiver.

“There is a reason why no previous administration has approved the severe provisions Kentucky is so bent on pressing – they do not furnish health care services. Instead they punish the very populations Medicaid is intended to protect,” said Catherine McKee, senior attorney at the National Health Law Program, one of the groups representing the plaintiffs.

The state had estimated that the work requirements and other restrictions would cut up to 95,000 people from Medicaid.

Boasberg said the administration never took Kentucky’s own estimates into consideration.

“At bottom, the record shows that 95,000 people would lose Medicaid coverage, and yet the Secretary paid no attention to that deprivation. Nor did he address how Kentucky HEALTH would otherwise help ‘furnish . . . medical assistance’,” Boasberg wrote.

Kentucky Gov. Matt Bevin (R) has repeatedly said the state’s Medicaid expansion under ObamaCare is not fiscally sustainable, and that the waiver is needed to bring down the costs of covering so many new individuals.

Bevin had threatened to discontinue Medicaid expansion in the state, which covers more than 500,000 people, if the requirements were struck down.

Kentucky was the first of four states to win approval for work requirements in a Medicaid waiver, and the decision could have nationwide implications.

Close to a dozen other states are looking to adopt their own work requirements.

Jeff Myers, president and CEO of Medicaid Health Plans of America, said the ruling puts states on notice.

“All the states currently considering expanding Medicaid with work requirements and co-pay cost sharing .. it probably brings that to a halt,” Myers said.

Friday's decision is likely not the end of the matter as Kentucky and the administration are likely to appeal.

Kentucky’s waiver would allow the state to deny coverage to any nondisabled adult who cannot prove they are working, volunteering or in school for at least 20 hours per week.

It would also have charged premiums to low-income Medicaid recipients, eliminated full coverage of dental care, vision services, and over-the-counter medications for many adults.

The waiver also would have implemented a six-month lockout period for people who failed to re-enroll in time or report a change in income.

Requiring work for benefits is a GOP policy staple, but until this year, no state has ever been able to get federal approval to impose work requirements on Medicaid beneficiaries.

Boasberg dismissed the arguments made by lawyers for Bevin and the administration that the positive gains treating substance abuse disorder will be wiped out if the waiver is invalidated.

If the work requirements are invalidated and Bevin ends the state’s expansion, the state argued that coverage would also end.

Activists cheered the ruling, and said it should send a strong signal to the administration.

“Today’s win means that at least 100,000 Kentucky residents will continue to be able to see their doctors, stay healthy, and take care of their families,” Frederick Isasi, executive director of Families USA, said in a statement. "Today’s court decision emphasizes Medicaid’s mission: Medicaid is about health insurance. Period."

- Updated 5:44 p.m.