783 F.2d 454 (4th Cir. 1986), 85-1098, Morris by Simpson v. Morrow

Docket Nº:85-1098(L), 85-1358.
Citation:783 F.2d 454
Party Name:Mamie B. MORRIS, by her guardian ad litem, Rosa M. SIMPSON; Lucy R. Dellinger, by her guardian ad litem, Arah L. Rozzelle (6-21-84); Pearl S. Cordell, by her guardian ad litem, Bill D. Cordell (6-21-84), Appellees, v. Sarah MORROW, individually & in her official capacity as Secretary of the North Carolina Department of Human Resources; Barbara D. M
Case Date:February 11, 1986
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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Page 454

783 F.2d 454 (4th Cir. 1986)

Mamie B. MORRIS, by her guardian ad litem, Rosa M. SIMPSON;

Lucy R. Dellinger, by her guardian ad litem, Arah L.

Rozzelle (6-21-84); Pearl S. Cordell, by her guardian ad

litem, Bill D. Cordell (6-21-84), Appellees,

v.

Sarah MORROW, individually & in her official capacity as

Secretary of the North Carolina Department of Human

Resources; Barbara D. Matula, individually & in her

official capacity as Director of the Division of Medical

Assistance of the N.C. Department of Human Resources, Appellants,

and

Margaret Heckler, Sec. of H & H; Richard L. Morris,

Associate Regional Adm., H & H; James J. Pirkle,

Acting Regional Adm., H & H Services,

Defendants.

Secretary of Health and Human Services, Amicus Curiae.

Mamie B. MORRIS, by her guardian ad litem, Rosa M. SIMPSON;

Lucy R. Dellinger, by her guardian ad litem, Arah L.

Rozzelle (6-21-84); Pearl S. Cordell, by her guardian ad

litem, Bill D. Cordell (6-21-84), Appellees,

v.

Sarah MORROW, individually & in her official capacity as

Secretary of the North Carolina Department of Human

Resources; Barbara D. Matula, individually & in her

official capacity as Director of the Division of Medical

Assistance of the N.C. Department of Human Resources, Appellants,

and

Margaret Heckler, Sec. of H & H; Richard L. Morris,

Associate Regional Adm., H & H; James J. Pirkle,

Acting Regional Adm., H & H Services,

Defendants.

Secretary of Health and Human Services, Amicus Curiae.

Nos. 85-1098(L), 85-1358.

United States Court of Appeals, Fourth Circuit

February 11, 1986

Argued Oct. 8, 1985.

Rehearing and Rehearing In Banc Denied in No. 85-1098 Feb. 28, 1986.

Page 455

Steven Mansfield Shaber, Asst. Atty. Gen., and Cathy J. Rosenthal, Associate Atty. Gen., Raleigh, N.C. (Lacy H. Thornburg, Atty. Gen. of N.C., Raleigh, N.C., on brief), for appellants.

Charles E. Johnson, Moore, Van Allen, Allen & Thigpen, and Pam Silberman, Charlotte, N.C. (N.C. Legal Services Resource Center, Inc., on brief), for appellees.

Richard K. Willard, Washington, D.C., Charles R. Brewer, U.S. Atty., Asheville, N.C., David R. Smith, on brief, for amici curiae.

Before RUSSELL and SNEEDEN, Circuit Judges, and BOYLE, United States District Judge for the Eastern District of North Carolina, sitting by designation.

TERRENCE WILLIAM BOYLE, District Judge:

This is an appeal from a judgment by the United States District Court for the Western District of North Carolina in a class action brought by Medicaid recipients against the Secretary of the North Carolina Department of Human Resources and the Director of the Division of Medical Assistance of the North Carolina Department of Human Resources challenging the use in the state's Medicaid program of the so-called "$6,000/6% rule" for determining which income producing property should be exempt in the calculation of the recipient's or applicant's reserve of property.

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The district court held: the defendants had violated 42 U.S.C. Sec. 1396a(f), Sec. 209(b) of PUB.L. 92-603, (hereinafter Sec. 209(b) ), through their application of the "$6,000/6% rule"; enjoined them from applying the "$6,000/6% rule"; and, ordered the defendants to notify all class members of their rights under the court's decision. Subsequently, the district court awarded attorneys fees to the plaintiffs' counsel pursuant to 42 U.S.C. Sec. 1988.

We hold that the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), 42 U.S.C. Sec. 1396a(a)(10)(C)(i)(III), mandates that North Carolina use the "$6,000/6% rule" because it is a part of a methodology for determining Supplemental Security Income Eligibility. We therefore reverse the district court's order.

I.

Statutory Background

The Medicaid program, enacted in 1965 as Title XIX of the Social Security Act, 42 U.S.C. Sec. 1396, et seq., "provides federal financial assistance to states that choose to reimburse certain costs of medical treatment for needy persons." Schweiker v. Gray Panthers, 453 U.S. 34, 36, 101 S.Ct. 2633, 2636, 69 L.Ed.2d 460 (1981) quoting Harris v. McCrae, 448 U.S. 297, 301, 100 S.Ct. 2671, 2680, 65 L.Ed.2d 784 (1980). States choosing to participate in the program are required to follow federal guidelines, 42 U.S.C. Sec. 1396, "and must comply with the requirements imposed by the Act itself and the Secretary of Health and Human Services." Schweiker v. Gray Panthers, supra, 453 U.S., at 36-37, 101 S.Ct., at 2636.

Two types of recipients have traditionally received Medicaid Assistance. The first group, commonly called the "categorically needy", received general welfare payments under one of four federal programs. The categorically needy were persons whom Congress considered especially deserving of public assistance because of family circumstances, age or disability. 1 The Medicaid laws required all participating states to provide benefits to the categorically needy. See Randall v. Lukhard, 709 F.2d 257 (4th Cir.1983) mod. and aff'd en banc, 729 F.2d 966 (4th Cir.1984).

In addition, a state could provide benefits to the "medically needy". These are people whose income is too high to qualify for one of the categorical programs but meet all the other categorical criteria. Schweiker v. Hogan, 457 U.S. 569, 573, 102 S.Ct. 2597, 2601, 73 L.Ed.2d 227 (1982). These relatively more affluent aged, blind or disabled persons could become eligible for Medicaid only if their income and assets were insufficient to meet the cost of necessary medical or remedial health care and services. Id. Providing relief for the medically needy was optional even for states electing to participate in the general Medicaid program. However, having elected to supply benefits to both groups, a state had to use the same eligibility standards for each. Winter v. Miller, 676 F.2d 276, 277 (7th Cir.1982). North Carolina has opted to provide coverage to the medically needy. N.C.Gen.Stat. Sec. 108-51 (1978 & Supp.1985).

In 1972 Congress created the Supplemental Security Income Program (SSI) to take effect January 1, 1974. 42 U.S.C. & 1381, et seq. This legislation was aimed at federalizing the three general welfare programs for the aged, blind and disabled, but not for the program which provided aid to families with dependent children. However, the new SSI eligibility criteria were broader than some of the prior state established criteria. Schweiker v. Hogan, supra, 457 U.S., at 581-82, 102 S.Ct. at 2605-06. Thus, in some states, SSI threatened to swell the Medicaid roles and place a large financial burden on those states. Congress, fearing an exodus of participating states, in 1974, added Sec. 209(b) to the Supplemental

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Security Income Act, 42 U.S.C. Sec. 1396a(f) to encourage continued participation by states with stricter criteria. 2

The use of Sec. 209(b) was optional. The states could retain their income limits for eligibility used on January 1, 1972, or adopt the higher federal limit governing general welfare eligibility under SSI. However, Sec. 209(b) required states to operate a program assisting the medically needy. Providing coverage to the medically needy was no longer optional for the states electing the Sec. 209(b) option. Winter v. Miller, supra, at 278. North Carolina has elected to exercise the Sec. 209(b) option. Therefore, North Carolina may utilize its January 1, 1972 eligibility criteria, if these are more restrictive than the SSI criteria. Schweiker v. Gray Panthers, supra, 453 U.S., at 38, 101 S.Ct. at 2637.

The Department of Health and Human Services has long used the so-called "$6,000/6% rule" for calculating what property should be excluded from a person's Medicaid reserve. The "$6,000/6% rule" is a part of the SSI criteria and is used by all non-section 209(b) states. Under the rule, property may be excluded from an applicant's or recipient's reserve of property if it has equity value of less than $6,000 and earns an annual income equal to or greater than 6% of its value. If the property has equity value greater than $6,000 or earns an annual income of less than 6% of its value, it will be included in the recipient's or applicant's reserve. 3 The

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SSI further exempted the home (the principal place of residence) of an applicant or recipient and all of the land appurtenant to it from inclusion as a countable resource. The effect of these rules is to include non-home property as part of a Medicaid applicant's or recipient's reserve if this property does not meet the minimum income producing criteria. Thus, property that is not excluded from reserve becomes part of the total assets of the applicant or recipient and may make them ineligible for Medicaid assistance.

As a matter of practice, prior to September 1, 1983, North Carolina chose to exclude all income producing property from the reserve property calculation. However, effective September 1, 1983, North Carolina adopted the "$6,000/6% rule", at the insistence of the United States Department of Health and Human Services, in order to comply with the congressional mandate of TEFRA. This change in the Medicaid law, enacted by Congress in 1982, provided that a state plan for the medically needy:

... must include a description of ... (III) the single standard to be employed in determining income resources eligibility for all such groups and the methodology to be employed in determining such eligibility, which shall be the same methodology which would be employed under the Supplemental Security Income Program in the case of groups consisting of the aged, blind or disabled individuals in a state in which such program is in effect.... 42 U.S.C. Sec. 1396a(a)(10)(C)(i)(III).

The $6,000/6% rule is a more restrictive eligibility criteria than North Carolina used on January 1, 1972. Since the preexisting North Carolina rule for determining...

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