Addis v. Whitburn

• Decision Date: 05 October 1998
• Docket Number: No. 96-3748,96-3748
• Citation: 153 F.3d 836
• Parties: Patrick ADDIS, et al., Plaintiffs-Appellants, v. Gerald WHITBURN, individually and in his official capacity as Secretary of the Wisconsin Department of Health and Social Services, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 836

153 F.3d 836

58 Soc.Sec.Rep.Ser. 1

Patrick ADDIS, et al., Plaintiffs-Appellants, v. Gerald WHITBURN, individually and in his official capacity

as Secretary of the Wisconsin Department of Health

and Social Services, et al., Defendants-Appellees.

No. 96-3748.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 15, 1997.

Decided Sept. 4, 1998.

Rehearing and Suggestion for Rehearing En Banc Denied Oct. 5, 1998.

Amy Shapiro, Calvey, Lara & Shapiro, Milwaukee, WI, Patricia DeLessio (argued), Milwaukee, WI, for Plaintiffs-Appellants.

Donald P. Johns, Susan K. Ullman (argued), Office of Attorney General, Wisconsin Department of Justice, Madison, WI, for Defendants-Appellees.

Before POSNER, Chief Judge, and CUMMINGS and ROVNER, Circuit Judges.

ILANA DIAMOND ROVNER, Circuit Judge.

At issue in this complex case is the validity of various aspects of the State of Wisconsin's Medical Assistance plan. Plaintiffs contend that portions of the state program violate the federal Social Security Act and thus should be enjoined, and that one aspect of the program also violates the Americans with Disabilities Act and the Rehabilitation Act. Rather than granting the requested injunction, the district court dismissed plaintiffs' complaint in its entirety, finding that plaintiffs could not succeed in showing that any of the challenged portions of Wisconsin's program violates federal law. Because we believe that two aspects of the state plan are inconsistent with a provision in the Social Security Act, we reverse the district court's judgment in part and affirm in part.

I.

At this stage of the proceedings, we assume the truth of the facts alleged in plaintiffs' complaint and draw all reasonable inferences from those facts in plaintiffs' favor. Ashafa v. City of Chicago, 146 F.3d 459, 461 (7th Cir.1998). Defendants--the Secretary of Wisconsin's Department of Health and Social Services and others working under his direction--do not dispute that plaintiffs' complaint, as well as their opening brief to this court, accurately describe the operation of Wisconsin's Medical Assistance plan. Their response to the complaint is that the plan does not violate federal law. We therefore base the following summary of Wisconsin's Medical Assistance plan on the allegations in plaintiffs' complaint and on the description provided in plaintiffs' opening brief.

The Medical Assistance program, more commonly known as "Medicaid," is a federal program administered by the states. The federal government provides partial reimbursement to participating states for the cost of medical services provided under the program, as well as for the cost of the program's administration. Yet in order to receive those federal funds, a state must operate its medical assistance program in compliance with the Social Security Act ("SSA") and its implementing regulations (see 42 U.S.C § 1396a(a)), not always an easy task given the maze of statutory provisions and federal regulations involved. E.g. Schweiker v. Gray Panthers, 453 U.S. 34, 43, 101 S.Ct. 2633, 69 L.Ed.2d 460 (1981) ("The Social Security Act is among the most intricate ever drafted by Congress. Its Byzantine construction, as Judge Friendly has observed, makes the Act 'almost unintelligible to the uninitiated.' "). We provide a brief overview below of the provisions relevant here.

Under the SSA, states are required to provide medical assistance to certain categories of individuals, whereas coverage to others is optional. See 42 U.S.C. § 1396a(a)(10)(A)(i). In all, we shall refer to three categories of potential recipients--the "categorically needy," the "medically needy," and those whose need is determined in relation to the poverty level. Individuals included in the following groups are considered "categorically needy" and thus are automatically entitled to medical assistance coverage: (1) those who receive Aid to Families with Dependent Children ("AFDC") benefits and Supplemental Security Income ("SSI") benefits; (2) pregnant women, children under eighteen and their caretakers, and disabled persons with income and assets at or below AFDC limits; (3) those who lose their eligibility for AFDC benefits due to increased earnings or child support income; and (4) infants under the age of one who are born to women who are eligible for medical assistance at the time of the infant's birth. Id.

In addition to the "categorically needy" groups, states are permitted at their option to provide coverage to those who are considered "medically needy," a group generally including pregnant women, children, and disabled and elderly persons who otherwise would qualify for AFDC and SSI benefits except that their income and asset levels exceed the levels permitted under those programs. Wisconsin has chosen to provide medical assistance to those in the "medically needy" category, and it has established standards for obtaining that assistance which are based on the size of the recipient's family. The SSA requires that a state's need standards be "equivalent to 133 1/3 percent of the highest amount which would ordinarily be paid to a family of the same size" under the state's AFDC program. 42 U.S.C. § 1396b(f)(1)(B)(i). Moreover, if an applicant's income exceeds the state's need standards, he still may qualify for medical assistance after satisfying a deductible calculated on the basis of his excess income. See 42 C.F.R. § 435.831(e).

The final group of medical assistance recipients includes pregnant women and children who do not qualify as either categorically or medically needy but whose family income is at or below a designated percentage of the poverty level. See 42 U.S.C. § 1396a(a)(10)(A)(IV-VII). States are required, for instance, to provide medical assistance to pregnant women and infants less than one year of age whose family income is at or below 133 percent of the poverty level; to children under the age of six whose family income is at or below 133 percent of the poverty level; and to children born after September 30, 1993 who are between the ages of six and nineteen and whose family income is at or below 100 percent of the poverty level. Id. At their option, states may also provide medical assistance to pregnant women and infants less than one year of age whose family income is at or below 185 percent of the poverty level. Id. In Wisconsin, the medical assistance program covering this "poverty level" group is referred to as the "Healthy Start" program. See Wis. Stats. §§ 49.46 & 49.47.

In addition to these specific categorical guidelines, the SSA also requires that state medical assistance plans comply with certain more general principles. First, states must develop and utilize standards for determining income and resource eligibility that are no more restrictive than those employed in determining eligibility for the SSI program for SSI-related persons and the AFDC program for AFDC-related persons. 42 U.S.C. § 1396a(a)(10)(C)(i). Second, states are directed in establishing eligibility standards to provide a reasonable evaluation of the income and resources available to the applicant or recipient and to take account only of income and resources that are actually so available. 42 U.S.C. § 1396a(a)(17)(B) & (C). At the same time, states are prohibited from taking into account "the financial responsibility of any individual for any applicant or recipient" unless the individual is the applicant's spouse or parent. 42 U.S.C. § 1396a(a)(17)(D). Finally, in determining whether pregnant women and children are eligible for participation in a poverty level program such as Wisconsin's "Healthy Start," states are required to determine family income in accordance with the methodology employed under that state's AFDC program, except to the extent that the methodology is inconsistent with 42 U.S.C. § 1396a(a)(17)(D)'s financial responsibility rule. 42 U.S.C. § 1396a(l )(3)(E).

Having elected to participate in the Medicaid program, Wisconsin must attempt to successfully navigate these federal requirements, the most troublesome of which seems to be the financial responsibility rule of 42 U.S.C. § 1396a(a) (17)(D) ("subsection (17)(D)"). Prior to June 1, 1993, Wisconsin determined eligibility for medical assistance by treating all related persons in a single household as one group, except in limited circumstances. The income and assets of that household group were then compared to the state's need standard for a group of that size to determine eligibility for medical assistance. In a series of administrative hearing decisions, however, the Wisconsin Department of Health and Social Services determined that this practice violates subsection (17)(D) when an individual other than the applicant's spouse or parent has his or her own income that is included in the total income of the household group.

In response to those decisions, Wisconsin adopted the Family Fiscal Unit policy ("FFU") for determining eligibility for medical assistance. Under that policy, Wisconsin no longer considers the income and assets of the entire family group in assessing an applicant's eligibility, but sets up individual fiscal test groups that are designed to avoid assigning income to the applicant that was earned by a non-legally responsible person--i.e., by someone other than the applicant's spouse or parent. As the district court explained it, eligibility is now determined "one individual at a time rather than family by family." R. 19, at 5. Thus, under the FFU policy, eligibility is determined first by calculating the applicant's own income and assets and adding to them a prorated share of the income and assets of the applicant's spouse or parent. ¹ Once the applicant's income is so calculated, it is compared to a pro rata share of the state's need standard for the size of the entire family under consideration. In other words, Wisconsin does not compare the income of a family fiscal unit to the need standard for a unit of that size or...