Shagalow v. State, Dept. of Human Services, No. A06-246.

• Decision Date: 19 December 2006
• Docket Number: No. A06-246.
• Citation: 725 N.W.2d 380
• Parties: Shaina SHAGALOW, Appellant, v. STATE of Minnesota, DEPARTMENT OF HUMAN SERVICES, Respondent.
• Court: Minnesota Court of Appeals

725 N.W.2d 380

Shaina SHAGALOW, Appellant, v. STATE of Minnesota, DEPARTMENT OF HUMAN SERVICES, Respondent.

No. A06-246.

Court of Appeals of Minnesota.

December 19, 2006.

COPYRIGHT MATERIAL OMITTED

Corey L. Gordon, Shapiro Gordon, LLC, Minneapolis, MN, for appellant.

Mike Hatch, Attorney General, Robin Christopher Vue-Benson, Erika Schneller Sullivan, Assistant Attorneys General, St. Paul, MN, for respondent.

Considered and decided by MINGE, Presiding Judge; LANSING, Judge; and KLAPHAKE, Judge.

OPINION

MINGE, Judge.

Appellant challenges the decision of respondent Minnesota Department of Human Services (DHS) denying Medical Assistance coverage for habilitation services in Jerusalem, Israel. Appellant claims that there is no habilitation services program appropriate for her condition and compatible with her religious beliefs in Minnesota; that the only residential habilitation program providing suitable services consistent with her beliefs is in Jerusalem, Israel; that rules governing the Medical Assistance program do not preclude payment for these services in Israel; and that denial of payment to the Israeli provider is improper, violates her right to religious freedom under the federal and state constitutions, and violates the Americans with Disabilities Act (ADA). Because we conclude that the state's decision not to pay for these services is not arbitrary and capricious, is not erroneous, was based on religiously neutral reasons, and does not directly affect appellant's religious beliefs or practices, and that granting appellant's request would place an unreasonable burden on the state's administration of its Medical Assistance program, we affirm.

FACTS

Appellant Shaina Shagalow is a young Jewish Orthodox woman who has been diagnosed with mild mental retardation. She also has a developmental cognitive disorder and attention deficit hyperactivity disorder. Appellant reads at a sixth-grade level and requires assistance with grooming and similar everyday tasks. Appellant is dependent on others to make legal and medical decisions, and her parents are her court-appointed legal guardians.

Appellant attended a private Jewish Orthodox school for girls from the fourth grade through high school. She lived at home while she attended school. As high school graduation approached, her family began searching for habilitation programs for young adults that were also compatible with her Jewish Orthodox faith. Habilitation services assist persons to develop skills to live in society. Minn. R. 9525.1800, subp. 13a (2006). Appellant's family knew that no day program consistent with appellant's Orthodox faith is available in Minnesota. The only residential habilitation program which appellant's parents could identify that adheres to Jewish Orthodox practices including gender segregation, strict observance of the Sabbath, and food preparation and consumption, is one conducted by Midreshet Darkaynu (Darkaynu), located in Jerusalem, Israel. There are no such residential Jewish Orthodox programs in the United States.

Appellant requested that the Hennepin County Children, Family, and Adult Services Department (county) provide financial support for habilitation services at Darkaynu as a part of Minnesota's Medical Assistance program. Medical Assistance is this state's part of the federal Medicaid program. Appellant does not request assistance for the room and board or travel portions of the program, only habilitation services. The county denied appellant's request, and appellant requested review. The denial was upheld by a referee at DHS, and the commissioner of DHS adopted the referee's decision. Appellant sought review of that decision by the Hennepin County District Court. The district court upheld the decision. This appeal follows.

ISSUES

I. Did DHS err in refusing to pay for habilitation services at Darkaynu for appellant?

II. Does DHS's refusal to pay for habilitation services for appellant at Darkaynu violate her right to religious freedom secured by the United States Constitution and the Minnesota Constitution?

III. Does DHS's refusal to pay for habilitation services for appellant at Darkaynu violate the Americans with Disabilities Act?

ANALYSIS

"On appeal from the district court's appellate review of an administrative agency's decision, this court does not defer to the district court's review, but instead independently examines the agency's record and determines the propriety of the agency's decision." Johnson v. Minn. Dep't of Human Servs., 565 N.W.2d 453, 457 (Minn.App.1997). In accordance with the Minnesota Administrative Procedure Act (APA), the reviewing court may "reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the administrative . . . decision" was:

(a) in violation of constitutional provisions; or

(b) in excess of the statutory authority or jurisdiction of the agency; or

(c) made upon unlawful procedure; or

(d) affected by other error of law; or

(e) unsupported by substantial evidence in view of the entire record as submitted; or

(f) arbitrary or capricious.

Minn.Stat. § 14.69 (2004). "Agency decisions are presumed to be correct by reviewing courts . . . ." In re Hutchinson, 440 N.W.2d 171, 176 (Minn.App.1989), review denied (Minn. Aug. 9, 1989). Moreover, appellate courts generally defer to an agency's expertise. Reserve Mining Co. v. Herbst, 256 N.W.2d 808, 824 (Minn.1977). The party challenging the agency decision has the burden of proving grounds for reversal. Markwardt v. State Water Res. Bd., 254 N.W.2d 371, 374 (Minn.1977); Johnson, 565 N.W.2d at 457.

I. MEDICAL ASSISTANCE COVERAGE

The first issue is whether DHS's decision was improper. Appellant challenges the conclusion of law that Medical Assistance funds may not be used to pay for services provided outside of the United States and claims that DHS and the county had discretion to pay for such services. Although it is not clear whether appellant claims that DHS erred as a matter of law and appellant does not expressly allege that the refusal was arbitrary and capricious, we will initially construe the appeal from that perspective because those are relevant standards for judicial review.

Both parties concede from the outset that there is no federal or state statute or regulation that explicitly prohibits Medical Assistance from paying for services provided outside of the country. Likewise, while Minnesota law permits payment of Medical Assistance to licensed Canadian institutions under some circumstances, Minn.Stat. § 256B.25, subd. 1 (2004), appellant cannot point to any explicit legal provisions requiring DHS to pay for habilitation or other services being delivered outside of the United States. Moreover, there is no evidence that other states have authorized their Medicaid programs to pay out-of-country service providers. The federal and state legal framework, largely, does not speak to the question here. However, that framework and its administration are relevant to our decision.

A. Medical Assistance Habilitation Services and the Waiver

Appellant requests benefits through the Consumer-Directed Community Support (CDCS) portion of Minnesota's Medical Assistance program. Minnesota participates in the federal program by contracting with the Centers for Medicare & Medicaid Services (CMS), the federal agency that administers Medicaid. See 42 U.S.C. § 1396a (2000 & Supp.2003).

Appellant points out that Minnesota's CDCS program is operated pursuant to a waiver granted by CMS and argues that the flexibility afforded in the waiver allows for payment of services provided by Darkaynu. CMS is authorized to grant such waivers from the standard Medicaid requirements. 42 U.S.C. § 1396n(b) (2000 & Supp.2003); 42 C.F.R. § 430.25 (2005). Minnesota requested, and was granted a waiver to pay for home and community-based services, including habilitation services, to mentally disabled persons. Minnesota's CDCS program waiver permits beneficiaries to work with a case manager to design a service plan for their unique needs as follows:

Recipients or their representative hire, fire, manage and direct their support workers. . . .

Recipients or their representatives have control over the goods and services to be provided through developing the community support plan, selecting vendors, verifying that the service was provided, evaluating the provision of the service, and managing the CDCS budget. . . .

. . . .

The recipient or their representative will direct the development and revision of their community support plan and delivery of the CDCS services.

. . . .

The support plan will also specify provider qualification and training requirements, who is responsible to assure that the qualification and training requirements are met, and whether or not a criminal background study will be required for each service.

State of Minnesota, Renewal of the Home and Community-Based Service Waiver for People With Mental Retardation or Related Conditions (MR/RC), Appendix B-1, 37-39 (Jan. 1, 2003) [hereinafter MR/RC Waiver].

Appellant asserts that the control granted to recipients under the waiver gives the recipient broad discretion to select service providers and that the primary monitor of quality assurance, as well as the health and safety of the services provided, is the recipient, not DHS or the county. We acknowledge that the flexibility of the waiver supports appellant's claim that the county has the discretion to design a program to accommodate her legitimate religious claims. Appellant in effect asserts that in her situation, failure to accommodate her claims is an abuse of discretion or arbitrary and capricious.

Although flexible, the CDCS waiver program includes several safeguards to ensure service providers meet health and safety requirements and comply with applicable licensing statutes. In its administration of the Medical Assistance waiver, the state must demonstrate that it will...