864 F.3d 469 (6th Cir. 2017), 16-3550, Ohio Department of Medicaid v. Price

Docket Nº:16-3550
Citation:864 F.3d 469
Opinion Judge:GRIFFIN, Circuit Judge.
Party Name:OHIO DEPARTMENT OF MEDICAID, Petitioner, v. THOMAS E. PRICE, Secretary of Health and Human Services, Respondent
Attorney:Ara Mekhjian, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Petitioner. Lucy C. Lisiecki, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Chicago, Illinois, for Respondent. Ara Mekhjian, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Petitioner. Lucy C. Lisiecki, UNITE...
Judge Panel:Before: GUY, CLAY, and GRIFFIN, Circuit Judges. GRIFFIN, J., delivered the opinion of the court in which GUY, J., joined. CLAY, J., delivered a separate dissenting opinion. CLAY, Circuit Judge, dissenting.
Case Date:July 24, 2017
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 469

864 F.3d 469 (6th Cir. 2017)

OHIO DEPARTMENT OF MEDICAID, Petitioner,

v.

THOMAS E. PRICE, Secretary of Health and Human Services, Respondent

No. 16-3550

United States Court of Appeals, Sixth Circuit

July 24, 2017

Argued, January 26, 2017

Page 470

[Copyrighted Material Omitted]

Page 471

On Petition for Review of a Final Determination of the Secretary of Health and Human Services. No. 15-01.

ARGUED:

Ara Mekhjian, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Petitioner.

Lucy C. Lisiecki, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Chicago, Illinois, for Respondent.

ON BRIEF:

Ara Mekhjian, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Petitioner.

Lucy C. Lisiecki, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Chicago, Illinois, for Respondent.

Before: GUY, CLAY, and GRIFFIN, Circuit Judges. GRIFFIN, J., delivered the opinion of the court in which GUY, J., joined. CLAY, J., delivered a separate dissenting opinion.

OPINION

Page 472

GRIFFIN, Circuit Judge.

The Ohio Department of Medicaid petitions this court for review of an order entered by the Centers for Medicare and Medicaid Services (CMS) denying a proposed amendment to the State's Medicaid plan. At issue is whether Ohio's juvenile pretrial detainees are " inmate[s] of a public institution" --a population ineligible for federal Medicaid reimbursement under 42 U.S.C. § 1396d(a)(29)(A). CMS has determined they are. Because the agency's interpretation is not arbitrary, capricious, or an abuse of its discretion, we deny the petition for review.

I.

A.

Medicaid is a cooperative federal-state program that provides funds to participating states for the medical care of needy individuals. Harris v. Olszewski, 442 F.3d 456, 460 (6th Cir. 2006). To qualify for federal funds, states must submit to CMS " a state Medicaid plan that details the nature and scope of the State's Medicaid program. It must also submit any amendments to the plan that it may make from time to time." Douglas v. Indep. Living Ctr. of S. Cal., Inc., 565 U.S. 606, 610, 132 S.Ct. 1204, 182 L.Ed.2d 101 (2012). Before approving a state's plan or an amendment to it, CMS reviews the plan for compliance with all statutory and regulatory requirements. See Rosen v. Goetz, 410 F.3d 919, 927 (6th Cir. 2005); see also 42 U.S.C. § § 1316(a)(1), (b) & 1396a(b). " And . . . the agency will not provide federal funds for any state plan amendment until the agency approves the amendment." Douglas, 565 U.S. at 611.

One constraint on state plans is Medicaid's inmate exclusion, which prohibits federal financial participation (FFP) for state medical expenditures made on behalf of " any individual who is an inmate of a public institution (except as a patient in a medical institution)." 42 U.S.C. § 1396d(a)(29)(A).1 State governments are traditionally responsible for the medical care of those they punish by incarceration. See Estelle v. Gamble, 429 U.S. 97, 103, 97 S.Ct. 285, 50 L.Ed.2d 251 (1976); see also Brown v. Plata, 563 U.S. 493, 510-11, 131 S.Ct. 1910, 179 L.Ed.2d 969 (2011). And " [t]he intent of [this] prohibition is to ensure that federal Medicaid funds are not used to finance care that is the responsibility of state and local authorities." Carolyn L. Yocom, U.S. Gov't Accountability Off.,

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GAO-14-752R Medicaid: Information on Inmate Eligibility and Federal Costs for Allowable Services (2014) (footnote omitted).

CMS defines who is, and who is not, an " inmate of a public institution" in 42 C.F.R. § 435.1010. The regulation provides in pertinent part: Inmate of a public institution means a person who is living in a public institution. An individual is not considered an inmate if--

* * *

(b) He is in a public institution for a temporary period pending other arrangements appropriate to his needs.

Id. (emphasis added). An individual is an " inmate of a public institution" barred from coverage if he " is living in a public institution." Id. However, an individual living in a public institution is not an " inmate of a public institution" --and therefore not barred from coverage--if he resides in the public institution " for a temporary period pending other arrangements appropriate to his needs." Id.

B.

In early 2014, Ohio submitted a proposed plan amendment to CMS aimed at exploiting this distinction. Specifically, it sought to classify pretrial detainees under age 19 as non-inmates--i.e., those who live in a public institution for only " a temporary period pending other arrangements appropriate to [their] needs," and for whom the State can claim federal Medicaid reimbursement. In so doing, petitioner acknowledged it was " requesting . . . Medicaid coverage for a specific population that is currently ineligible for Medicaid benefits."

After requesting and receiving further information from Ohio, CMS denied the amendment. Respondent explained that the inmate exclusion recognizes " no difference" between adults and juveniles, or convicted detainees and those awaiting trial. " For purposes of excluding FFP, for example, a juvenile awaiting trial in a detention center is no different than an adult in a maximum security prison," " both are considered inmates of a public institution." It also rejected Ohio's argument that juvenile pretrial detainees fit the regulatory exception for individuals living in a public institution for a " temporary period," and instead emphasized that the involuntary nature of the stay is the determinative factor: " This exception . . . does not apply when the individual is involuntarily residing in a public institution awaiting adjudication of a criminal matter."

Ohio challenged the decision through a CMS hearing officer and an administrator, and both affirmed the denial. It now petitions for review of the administrator's ruling as the Secretary's final decision.

II.

The Administrative Procedure Act governs our review of the Secretary's decision. Battle Creek Health Sys. v. Leavitt, 498 F.3d 401, 408-09 (6th Cir. 2007). " The APA, which is incorporated by the Social Security Act, see 42 U.S.C. § 1395 oo (f)(1), commands reviewing courts to 'hold unlawful and set aside' agency action that is 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.'" Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994) (quoting 5 U.S.C. § 706(2)(A)). CMS falls short of this standard if its decision " relie[s] on factors which Congress has not intended it to consider, entirely fail[s] to consider an important aspect of the problem, offer[s] an explanation that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a

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difference in view or the product of agency expertise." Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983).

A.

" The Medicaid Act commits to the federal agency the power to administer a federal program." Douglas, 565 U.S. at 614. " And here," in denying Ohio's proposed amendment, " the agency has acted under this grant of authority." Id. Section 1396a(b) of the Act directs the Secretary to approve state plans that " fulfill[] the conditions specified" in the statute, and reject those that do not. 42 U.S.C. § 1396a(b). Through this " express delegation of specific interpretive authority," United States v. Mead Corp., 533 U.S. 218, 229, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001), " Congress manifested its intent that the Secretary's determinations, based on interpretation of the relevant statutory provisions, have the force of law." Pharm. Research & Mfrs. of Am. v. Thompson, 362 F.3d 817, 822, 360 U.S.App.D.C. 375 (D.C. Cir. 2004). Accordingly, we give the agency's decision to disapprove the amendment the benefit of Chevron deference. See Harris, 442 F.3d at 467, 470; see also Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 843-44, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).

" When a court reviews an agency's construction of the statute which it administers" under Chevron, " it is confronted with two questions." 467 U.S. at 842. " First, always," is whether " Congress has directly spoken to the precise question at issue." Id. (emphasis added). " If it has, 'that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.'" Harris, 442 F.3d at 466 (quoting Chevron, 467 U.S. at 842-43). Second, if Congress has not spoken to the precise question at issue, and the statute is silent or ambiguous, we ask " whether the agency's answer is based on a permissible construction of the statute." Chevron, 467 U.S. at 843. " Permissible" does not mean the agency's construction was " the only one" CMS could have adopted, or " even the reading we would have reached if the question initially had arisen in a judicial proceeding." Battle Creek, 498 F.3d at 408-09 (quoting Jewish Hosp., Inc. v. Sec'y of Health & Human Servs., 19 F.3d 270, 273-74 (6th Cir. 1994)). It means we defer to the agency's reading unless it is " arbitrary, capricious, or manifestly contrary to the statute." Chevron, 467 U.S. at 844 (footnote omitted). Because the Medicaid Act is silent regarding the precise question at issue here--whether the term " inmate" encompasses juvenile pretrial detainees--we proceed to the second step of the inquiry.

The administrator found § 1396d(a)(29)(A) " unambiguous[ly]" prohibits federal funding " for medical care of an 'inmate' . . . unless the inmate is in a medical institution." " In set[ting] forth this prohibition," he noted, " the statute does not differentiate between types of inmates, for example by age (juvenile or adult) or by status...

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