Turner v. Heckler, 84-3108

• Decision Date: 14 February 1986
• Docket Number: No. 84-3108,84-3108
• Citation: 783 F.2d 657
• Parties: , Medicare&Medicaid Gu 35,139 Lucinda TURNER; Asberry Turner; Dorothy Willoweit; Herbert Willoweit; Fanny Finke; Matthew Finke; Inez Shupert; John Shupert; Zelma Brooks; Roy Brooks; Gladys Tharp; and Harlan Tharp, individually and on behalf of all others similarly situated, Plaintiffs-Appellees, v. Margaret HECKLER; United States Department of Health and Human Services; John Cuddy; Ohio Department of Public Welfare; Montgomery County Welfare Department; Mary Harris; Clarke County Welfare Department; and Ronald Rockwell, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 657

783 F.2d 657

12 Soc.Sec.Rep.Ser. 269, Medicare&Medicaid Gu 35,139

Lucinda TURNER; Asberry Turner; Dorothy Willoweit Herbert Willoweit; Fanny Finke; Matthew Finke; Inez Shupert; John Shupert; Zelma Brooks; Roy Brooks; Gladys Tharp; and Harlan Tharp, individually and on behalf of all others similarly situated, Plaintiffs-Appellees, v. Margaret HECKLER; United States Department of Health and Human Services; John Cuddy; Ohio Department of Public Welfare; Montgomery County Welfare Department; Mary Harris; Clarke County Welfare Department; and Ronald Rockwell, Defendants-Appellants.

No. 84-3108.

United States Court of Appeals Sixth Circuit.

Argued Dec. 5, 1985.

Decided Feb. 14, 1986.

Gerald F. Kaminski, Asst. U.S. Atty., Dayton, Ohio, David Ruvane Smith argued, Washington, D.C., for defendants-appellants.

Michael Shuey, Dayton, Ohio, Sheila P. Cooley, Columbus, Ohio, Jeri J. Simmons argued, Dayton, Ohio, Janet Pecquet, Gregory S. French, Pro Seniors, Inc., Cincinnati, Ohio, for plaintiffs-appellees.

Before KRUPANSKY and MILBURN, Circuit Judges; and BROWN, Senior Circuit Judge.

BAILEY BROWN, Senior Circuit Judge.

The Defendant Secretary of Health and Human Services (Secretary) appeals from a judgment of the district court granting Plaintiffs' request for a preliminary injunction and ordering the Secretary to financially participate in all medicaid benefit payments made to eligible nursing home residents by the Defendant Ohio Department of Public Welfare (ODPW) under an interim settlement agreement executed by the Plaintiffs and the ODPW and adopted as an order of the district court, 573 F.Supp. 867. The only basis for the issuance of injunctive relief against the Secretary was the district court's finding that the Secretary, in violation of 42 U.S.C. Sec. 1316(a)(1), failed to compare the provisions of the state medicaid plan which were in effect on January 1, 1972 (1972 Medicaid Plan) with the amendments to the Plan enacted in Ohio Admin.Code Sec. 5101:1-39-22. Because we find that the district court failed to consider an offer of proof made by the Secretary prior to the issuance of the injunctive order demonstrating that a comparison of the 1972 Medicaid Plan with such amendments to the Plan had been conducted by the Secretary in accordance with the district court's interpretation of the requirements of Sec. 1316(a)(1), we conclude that the district court abused its discretion in issuing the preliminary injunction.

I. Introduction

The federal medicaid program, Title XIX of the Social Security Act, 42 U.S.C. Sec. 1396 et seq., was enacted in 1965 to extend financial assistance to states that chose to subsidize certain costs of medical treatment for particular groups of low-income individuals. Harris v. McRae, 448 U.S. 297, 301, 100 S.Ct. 2671, 2680, 65 L.Ed.2d 784 (1980). States that participated in the federal program were required to extend coverage to persons described as the "categorically needy," i.e., those who received financial assistance under any one of the four federal programs established in the Social Security Act. ¹ Schweiker v. Hogan, 457 U.S. 569, 572, 102 S.Ct. 2597, 2600, 73 L.Ed.2d 227 (1982). In addition, states that chose to offer assistance to the "medically needy--persons lacking the ability to pay for medical treatment, but with incomes too high to qualify for categorical assistance"--received partial federal reimbursement. Schweiker v. Gray Panthers, 453 U.S. 34, 37, 101 S.Ct. 2633, 2636, 69 L.Ed.2d 460 (1981).

In 1972, Congress consolidated three of the four categorical assistance programs ² into one assistance program, the Supplemental Security Income for the Aged, Blind and Disabled (SSI), 42 U.S.C. Sec. 1381 et seq., and assumed sole responsibility for the program funding and eligibility. Id. at 38, 101 S.Ct. at 2637. Under SSI, the number of persons eligible for financial assistance represented, in some cases, an increase in those numbers previously eligible under the categorical assistance programs. Id. This prompted a concern in Congress. As recounted by the Supreme Court in Gray Panthers:

Congress feared that [the participating] States would withdraw from the cooperative Medicaid program rather than expand their Medicaid coverage in a manner commensurate with the expansion of categorical assistance. '[I]n order not to impose a substantial fiscal burden on these States' or to discourage them from participating ... Congress offered what has become known as the Sec. 209(b) option. Under it, States could elect to provide Medicaid assistance only to those individuals who would have been eligible under the state Medicaid plan in effect on January 1, 1972. States thus became either 'SSI States' or '209(b) States' depending on the coverage that they offered.

Gray Panthers, 453 U.S. at 38-39, 101 S.Ct. at 2637-2638 (footnote omitted).

Ohio chose the "Sec. 209(b)" option. Ohio Rev.Code Ann. Sec. 5111.02. In May of 1982, Ohio promulgated Ohio Admin.Code Sec. 5101:1-39-22 (Plan Amendments), amending its existing medicaid plan, and filed for approval with the United States Department of Health and Human Services (Department) pursuant to 42 U.S.C. Sec. 1316(a)(1). The Plan Amendments were approved by the Secretary without the benefit of a copy of the 1972 Medicaid Plan for comparison. ³ Ohio began implementing its amended medicaid plan sometime in early 1983.

Under the pertinent terms of Ohio's medicaid plan as amended by Sec. 5101:1-39-22 the nursing home applicant's eligibility for financial assistance was determined by comparing the applicant's net income ⁴ with the cost of care in the nursing institution. Recognizing that in many instances the income of the applicant was used to support a non-institutionalized spouse, often referred to as a "community spouse," the amended plan permitted a maintenance needs allowance (MNA) for that spouse in the amount of $222 a month. This permitted the applicant to set aside up to $222 of his income per month and not have that amount counted by the state as income for purposes of calculating eligibility. ⁵ The applicant's contribution for nursing care was calculated by reducing dollar for dollar the amount of the MNA authorized for support of the community spouse by the net income of the community spouse received from outside sources and then deducting the resulting figure from the net income of the medicaid applicant.

II. Facts

A class action suit was filed in United States District Court for the Southern District of Ohio on March 4, 1983, against the Secretary and the Department as well as against various state and local welfare agencies in Ohio. ⁶ The Plaintiffs were four married couples, each couple consisting of a spouse receiving nursing care financial assistance under the amended Ohio medicaid plan and a non-institutionalized spouse who was dependent upon the income of the institutionalized spouse for support and maintenance.

Plaintiffs alleged that Ohio's administration of their medicaid plan, as amended by Ohio Admin.Code Sec. 5101:1-39-22, resulted in an impermissible reduction in the amount of income the institutionalized spouse could set aside for the maintenance of the community spouse and thereby unlawfully increased the contribution of the medicaid recipient for the cost of nursing care. Plaintiffs sought to have the district court declare invalid and enjoin enforcement of the Plan Amendments and a federal medicaid regulation, 42 C.F.R. Sec. 435.733(c) (Federal Regulation) ⁷ on the grounds that both were unconstitutional ⁸ and violated 42 U.S.C. Sec. 1396a(a)(17)(c) by failing to provide a "reasonable evaluation" of the medicaid recipient's support obligations. Additionally, the complaint charged that the Plan Amendments established a more restrictive medicaid eligibility standard than that permitted by 42 C.F.R. Sec. 435.733(c) and 42 U.S.C. Sec. 1396a(a)(17) and was defective for failure to comply with statutory procedural requirements in its promulgation and administration by the state. ⁹ In particular, at issue in the instant appeal, Plaintiffs alleged that the failure of the Secretary to compare provisions of the Plan Amendments with the 1972 Medicaid Plan at the time the Department approved the amendments violated 42 U.S.C. Sec. 1316(a)(1). ¹⁰

On March 7, 1983, Plaintiffs moved for a temporary restraining order preventing the Defendants from continuing to implement the Plan Amendments and directing the Defendants to make future medicaid payments based on the method of income calculation used prior to the implementation of the amended medicaid plan. ¹¹ The district court granted Plaintiffs' motion on March 10th and, later, at Plaintiffs' request, extended the order until March 31, 1983. Upon the expiration of the district court's order, the Secretary filed a motion to dismiss or in the alternative for summary judgment.

On April 8, 1983, the district court held a hearing on Plaintiffs' motion for a preliminary injunction seeking to enjoin continued implementation of the Plan Amendments and the Federal Regulation, as interpreted by the Secretary, and, in an order issued August 25, 1983, overruled in part the Secretary's motion for summary judgment and indicated that it would grant the preliminary injunction.

The district court found that Plaintiffs had demonstrated a probability of success on the merits in each of their three claims that the ODPW failed to follow statutory prerequisites in the promulgation and implementation of the Plan Amendments. In particular, the court found that the Plan Amendments had not been reviewed by the MCAC prior to their promulgation in violation of 42 C.F.R. Sec. 431.12(e) and 42 U.S.C. Sec. 1396a(a)(1) and had not been implemented by the ODPW in a uniform manner throughout the state in violation of 42 C.F.R. Sec. 431.50. The district court also determined that the failure of the Secretary to compare provisions of the Plan Amendments with a copy of the provisions of the 1...