Caldwell v. Blum

• Decision Date: 16 April 1980
• Docket Number: No. 718,D,718
• Parties: Ethel CALDWELL, Individually and on behalf of all other persons similarly situated, Plaintiff-Appellee, and Ella McCullough, Janet Richmond, Agnes Grant and Muriel Rothstein, as next friend of Belle Barnett, Individually and on behalf of all other persons similarly situated, Plaintiffs-Intervenors-Appellees, v. Barbara BLUM, as Commissioner of the New York State Department of Social Services, Defendant-Appellant, and James L. Covert, as Commissioner of the Madison County Department of Social Services, Madison County, New York, John L. Lascaris, as Commissioner of the Onondaga County Department of Social Services, Onondaga County, New York, Joseph P. Menaldino, as Commissioner of the Warren County Department of Social Services, Warren County, New York, Robert E. Laundree, as Commissioner of the Essex County Department of Social Services, Essex County, New York, Gabriel T. Russo, as Commissioner of the Monroe County Department of Social Services, Monroe County, New York, Defendants-Appellees. Anita PERITO and James Perito, Individually and on behalf of all others similarly situated, Plaintiffs-Appellees, and Louis Friedman, Plaintiff-Intervenor-Appellee, v. Barbara BLUM, Individually and as Commissioner of the New York State Department of Social Services, Defendant-Appellant, and Blanche Bernstein, Individually and as Commissioner of the New York City Department of Social Services, Defendant-Appellee. Jennie LANDERS, Plaintiff-Appellee, and Josephine Maniccia, Plaintiff-Intervenor-Appellee, v. Barbara BLUM, Individually and as Commissioner of the New York State Department of Social Services, Defendant-Appellant, and David R. Adinolfi, as Commissioner of the Cortland County Department of Social Services, Cortland County, New York, Defendant-Appellee. Julia WHITLOCK, Plaintiff-Appellee, v. Barbara BLUM, as Commissioner of the New York State Department of Social Services, Defendant-Appellant, and Robert Wagner, as Commissioner of the Tompkins County Department of Social
• Court: U.S. Court of Appeals — Second Circuit

Page 491

621 F.2d 491

Ethel CALDWELL, Individually and on behalf of all other

persons similarly situated, Plaintiff-Appellee,

and

Ella McCullough, Janet Richmond, Agnes Grant and Muriel

Rothstein, as next friend of Belle Barnett, Individually and on behalf of all other persons similarly situated, Plaintiffs-Intervenors-Appellees, v. Barbara BLUM, as Commissioner of the New York State

Department of Social Services, Defendant-Appellant,

and

James L. Covert, as Commissioner of the Madison County

Department of Social Services, Madison County, New York,

John L. Lascaris, as Commissioner of the Onondaga County

Department of Social Services, Onondaga County, New York,

Joseph P. Menaldino, as Commissioner of the Warren County

Department of Social Services, Warren County, New York,

Robert E. Laundree, as Commissioner of the Essex County

Department of Social Services, Essex County, New York,

Gabriel T. Russo, as Commissioner of the Monroe County

Department of Social Services, Monroe County, New York,

Defendants-Appellees.

Anita PERITO and James Perito, Individually and on behalf of all others similarly situated, Plaintiffs-Appellees, and Louis Friedman, Plaintiff-Intervenor-Appellee, v. Barbara BLUM, Individually and as Commissioner of the New

York State Department of Social Services,

Defendant-Appellant,

and

Blanche Bernstein, Individually and as Commissioner of the

New York City Department of Social Services,

Defendant-Appellee.

Jennie LANDERS, Plaintiff-Appellee, and Josephine Maniccia, Plaintiff-Intervenor-Appellee, v. Barbara BLUM, Individually and as Commissioner of the New

York State Department of Social Services,

Defendant-Appellant,

and

David R. Adinolfi, as Commissioner of the Cortland County

Department of Social Services, Cortland County,

New York, Defendant-Appellee.

Julia WHITLOCK, Plaintiff-Appellee, v. Barbara BLUM, as Commissioner of the New York State

Department of Social Services, Defendant-Appellant,

and

Robert Wagner, as Commissioner of the Tompkins County

Department of Social Services, Tompkins County,

New York, Defendant-Appellee.

No. 718, Docket 79-7864.

United States Court of Appeals Second Circuit.

Argued Jan. 18, 1980.

Decided April 16, 1980.

Clifford A. Royael, Albany, N. Y. (Robert Abrams, Atty. Gen. of the State of New York, Jeremiah Jochnowitz, Asst. Sol. Gen., Alan W. Rubenstein, Albany, N. Y., of counsel), for appellant State Commissioner of Social Services.

Rene H. Reixach, Jr., Greater Upstate Law Project, Rochester, N. Y., for plaintiffs-appellees and plaintiffs-intervenors-appellees.

Before FRIENDLY, MANSFIELD and KEARSE, Circuit Judges.

MANSFIELD, Circuit Judge:

The Commissioner of the New York State Department of Social Services appeals from a decision and order of the District Court for the Northern District of New York entered by Judge Howard G. Munson on December 3, 1979, which granted the application of plaintiffs (aged, blind or disabled New York residents who had been denied medical assistance benefits because of their transfers of their property to others) for class certification and a preliminary injunction restraining the enforcement of N.Y. Social Services Law § 366(1)(e), ¹ and Regulation 18 N.Y.C.R.R. 360.8, ² and denied the Commissioner's motion to dismiss the action. The statute and regulation deny Medicaid benefits to persons who have made property transfers for the purpose of receiving medical assistance benefits.

Federal jurisdiction was invoked on the ground that the state statute and regulation denied plaintiffs due process and equal protection of the laws. Injunctive relief was granted on the ground that the New York transfer-of-assets restriction violates the Social Security Act, 42 U.S.C. § 1396a(a)(10)(C) (i). ³ We affirm the grant of preliminary relief, substantially for the reasons stated by Judge Munson, and dismiss as interlocutory and nonappealable defendant's cross-appeal from the orders granting class action status and denying dismissal of the action.

Title XIX of the Social Security Act, 42 U.S.C. §§ 1396-1396k, authorizes each state to participate in a cooperative federal-state program for medical assistance to the needy, known as Medicaid, and to operate a medical assistance plan, subject to federal statutory and regulatory guidelines. If a state chooses to participate, it must adopt a statutory plan setting forth the coverage to be extended to recipients, including the terms upon which individuals will be eligible and it must extend benefits to those who are eligible for federally-funded financial assistance, such as recipients of Supplementary Security Income (SSI) for the aged, blind and disabled, known as the "categorically needy." In addition, a participating state may elect to provide for payment for medical services to those aged, blind or disabled individuals, known as the "medically needy," whose incomes or resources, while exceeding the financial eligibility requirements for the categorically needy (such as an SSI recipient) are insufficient to pay for necessary medical care.

New York elected to participate in the Medicaid program and to pay benefits to the "medically needy" upon their meeting eligibility requirements specified in N.Y. Social Services Law, § 366. The issue now before us is whether New York's statutory eligibility requirements for the medically needy are compatible with applicable federal law.

It is undisputed that New York imposes more restrictive eligibility requirements on the medically needy than on the categorically needy. Under the Social Security Act and regulations thereunder, a "categorically needy" applicant for SSI benefits, whose assets exceed the program's eligibility limits, may by disposing of his excess assets become eligible for Medicaid benefits, 42 U.S.C. § 1382b(b), ⁴ 42 C.F.R. § 435.120(b), ⁵ Social Security Manual at § 12507. However, under the N.Y. Social Services Law, § 366(1)(e) and regulations thereunder, 18 N.Y.C.R.R. 360.8, a voluntary transfer of assets in order to qualify for or maintain eligibility for medicaid benefits (or to defeat recovery of medical assistance already paid, see N.Y. Social Services Law, § 369(1)(b)) renders a medically needy person ineligible for Medicaid benefits. ⁶

The issue here turns on whether, as plaintiffs contend, the language of the Social Security Act, 42 U.S.C. § 1396a prohibits the State from thus imposing more restrictive eligibility requirements upon the medically needy than upon the categorically needy. Plaintiffs rely principally on § 1396a(a)(10)(C)(i), which obligates states that have chosen to include the medically needy in their Medicaid Plans to use "comparable standards" in determining Medicaid eligibility. It directs a state to make Medicaid benefits available to

"all individuals who would, except for income and resources, be eligible . . . to have paid with respect to them supplemental security income benefits . . ., and who have insufficient (as determined in accordance with comparable standards ) income and resources to meet the costs of necessary medical and remedial care and services." (Emphasis added).

Although the foregoing quoted provision is not unambiguous, HEW has in its regulations adopted the view that it does require comparable eligibility requirements for the medically needy and the categorically needy. Title 42 C.F.R. § 435.401(c), provides that a state medicaid agency

"must not use requirements for determining eligibility for optional coverage groups (such as the medically needy) that are . . . (2) For aged, blind and disabled individuals, more restrictive than those used under SSI. . . ."

Indeed, HEW has written to the states of New York, California and Michigan, which have transfer-of-assets prohibitions with respect to medicaid eligibility for the medically needy but not for the categorically needy, advising them that their policy is not in compliance with the Social Security Act.

Moreover, the courts have repeatedly recognized § 1396a(a)(10)(C)(i) as obligating states to adopt no more restrictive standards for medicaid eligibility than those governing the eligibility of other groups. In Greklek v. Toia, 565 F.2d 1259 (2d Cir. 1977), cert. denied sub nom. Blum v. Toomey, 436 U.S. 962, 98 S.Ct. 3081, 57 L.Ed.2d 1128 (1978), we invalidated a more restrictive state standard for deduction of work expenses for medically needy than for categorically needy and in Fabula v. Buck, 598 F.2d 869 (4th Cir. 1979), the Fourth Circuit held that a Maryland transfer-of-assets prohibition similar to that of New York, which applied to the medically needy, violates § 1396a(a)(10)(C)(i). But see contra, Dawson v. Beach, (C.D.Cal., May 10, 1979, Civ. 78-2350-MML). Since the argument of this appeal the Appellate Division of the Supreme Court of the State of New York, Second Judicial Department, has held § 366(1)(e) of N.Y. Social Services Law to be violative of the Supremacy Clause by reason of its conflict with the foregoing provisions of the Social Security Act and regulations thereunder, Scarpuzza v. Blum, App.Div., 426 N.Y.S.2d 505 (2d Dept. 1980).

Plaintiffs' position is further buttressed by § 1396a(a)(17) which requires a state plan for assistance to

"(17) include reasonable standards (which shall be comparable for all groups . . .) for determining eligibility for and the extent of medical assistance under the plan which . . . (B) provide for taking into account only such income and resources as are, as determined in accordance with standards prescribed by the Secretary, available to the applicant or recipient and (in the case of an applicant who would, except for income and resources, be eligible (to receive . . . SSI benefits i. e. the categorically needy)) as would not be disregarded . . . in determining his eligibility for such aid, assistance or benefits."

In other words, as we noted in Friedman v. Berger, 547 F.2d 724, 728 (2d Cir. 1976), cert. denied, 430 U.S. 984, 97 S.Ct. 1681, 52 L.Ed.2d 378 (1977), "for...