California Welfare Rights Organization v. Richardson, Civ. No. C-72 341.

• Decision Date: 13 September 1972
• Docket Number: Civ. No. C-72 341.
• Parties: CALIFORNIA WELFARE RIGHTS ORGANIZATION et al., Plaintiffs, v. Elliot RICHARDSON, Secretary, United States Department of Health, Education and Welfare, Defendant.
• Court: U.S. District Court — Northern District of California

348 F. Supp. 491

CALIFORNIA WELFARE RIGHTS ORGANIZATION et al., Plaintiffs, v. Elliot RICHARDSON, Secretary, United States Department of Health, Education and Welfare, Defendant.

Civ. No. C-72 341.

United States District Court, N. D. California.

September 13, 1972.

COPYRIGHT MATERIAL OMITTED

Ralph Santiago Abascal, Jay-Allen Eisen, Edmund S. Schaffer, Jerry D. Craig, S. F. Neighborhood Legal Assistance Foundation, Peter Coppelman, Senior Citizens Project, Cal. Rural Legal Assistance, San Francisco, Cal., Stephen R. Elias, Center on Social Welfare Policy and Law, New York City, Patricia Butler, National Legal Program on Health, U.C.L.A. School of Law, Los Angeles, Cal., Michael Trister, Washington Research Project, Washington, D. C., for plaintiffs.

James L. Browning, Jr., U. S. Atty., with John D. Link, Asst. U. S. Atty., San Francisco, Cal., for defendant.

OPINION AND ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS' CROSS MOTION.

WOLLENBERG, District Judge.

Plaintiffs, some of whom are individuals currently receiving benefits under the Medi-Cal program and two of which are unincorporated organizations alleged to be largely composed of Medi-Cal recipients, have brought this action to challenge the decision of the defendant Richardson, Secretary of Health, Education and Welfare, approving what is known as the "California co-payment experiment". The action is brought by plaintiffs on their own behalf and on behalf of all persons who will be forced to pay a part of the cost of Medi-Cal benefits as a result of the Secretary's decision.

JURISDICTION

Plaintiffs claim a wide and somewhat curious array of jurisdictional bases, including 28 U.S.C. § 1337 (Commerce and Anti-Trust Regulations). Among this array is found the judicial review provided by the Administrative Procedure Act, 5 U.S.C. §§ 701 et seq., erroneously cited in the First Amended Complaint at 5 U.S.C. §§ 70 et seq.

The defendant has moved pursuant to Rule 12(b)(6), F.R.Civ.P., to dismiss for failure to state a claim on which relief can be granted, or alternatively, for summary judgment pursuant to Rule 56. Plaintiffs have also moved for summary judgment.

The defendants apparently concede that there is jurisdiction over the subject matter of the action. Both parties apparently agree that the decision in Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L. Ed.2d 136 (1971), determines that judicial review of the Secretary's decision is available. Clearly, the parties cannot by stipulation confer jurisdiction, and whether or not Overton Park controls depends upon the particular statutory language under which the Secretary here acted.

Chapter XIX of the Social Security Act, as amended, establishes a means of partial federal funding of state plans for providing medical services to those who are unable to pay the cost themselves. § 1901 of the Act, 42 U.S.C. § 1396. An extensive list of requirements that must be included in any state plan that is to receive such finding is set out in § 1902, 42 U.S.C. § 1396a. One of the requirements is that the plan must provide that

"any deduction, cost sharing, or similar charge imposed under the plan with respect to inpatient hospital services or any other medical assistance furnished to an individual thereunder, . . . shall be reasonably related . . . to the recipient's income or his income and resources". 42 U.S.C. § 1396a(a)(14)(B).

Section 1115 of the Act, 42 U.S.C. § 1315, entitled "Demonstration Projects", on the other hand, gives broad power to the Secretary to authorize projects which do not fit within the normal guidelines. Specifically, the Secretary is given the authority to "waive compliance with any of the requirements of" § 1902 "to the extent and for the period he finds necessary to enable such State or States to carry out such project . . .". The statute's only restriction on what can be done by way of experimental, pilot or demonstration project is that the project must be one which "in the judgment of the Secretary is likely to assist in promoting the objectives of . . . subchapter among others XIX . . .". The immediate difficulty encountered in applying that language is that the "objectives" of title XIX are nowhere to be found.

Is the decision as to which "experimental" projects are "likely to assist in promoting" the unstated objectives of the title, one which must be considered to be "committed to agency discretion by law" 5 U.S.C. § 701(a)(2) so that no judicial review is possible? In Overton Park, the Secretary of Transportation was barred from prohibiting a highway route which utilized parkland "unless (1) there is no feasible and prudent alternative to the use of such land, and (2) such program includes all possible planning to minimize harm to such park" 401 U.S. at 411, 91 S.Ct. at 821. The Court there found that "there was law to apply" and judicial review was, therefore available. The direction to the Secretary here is considerably less clear. In order to review his decision, it must be determined what the objectives of the title are, or, arguably, whether the Secretary's understanding of the objectives is clearly wrong; secondly, it must be determined whether the experiment is "likely to assist in promoting" those objectives.

The plaintiffs' argument that the "objectives" may be derived from the requirements set forth in § 1902 is most troubling, and must be rejected, in the Court's view for the reasons discussed hereafter. Were § 1902 the only source for deriving the "objectives of the title", the Court would be forced to conclude that there was no jurisdiction to review the Secretary's action because of the exception created by 5 U.S.C. § 701(a)(2); in short, there would simply be no law to apply.

Such a drastic result need not be reached because objectives may be found in the sections of title XIX apart from § 1902, particularly § 1901, 42 U.S.C. § 1396. As will be developed, those provisions do provide a means of testing the Secretary's action challenged here.¹

THE FACTUAL SETTING

Prior to the inauguration of the California co-payment project, and in accordance with the requirements of § 1902(a)(14) and the regulations thereunder, the recipient paid nothing for any of the covered services or prescription drugs under the Medi-Cal program. The project imposes a charge of one dollar upon each "provider" (doctor or other professional) visit and a charge of fifty cents on each prescription filled. The charges apply only to the first two visits or prescriptions each month so that the potential liability cannot exceed three dollars per person per month.²

The co-payment charges are imposed only upon a portion of those who are receiving Medi-Cal benefits. Those who are designated as "Medically Needy Only" are those who are not receiving cash assistance under one of the "categorical aid" programs funded in part by federal funds. All members of that group are required to co-pay. Among those receiving assistance under a categorical aid program, only those who have either income in addition to the welfare check, or those whose resources are in excess of certain prescribed levels are required to co-pay. The fact is, however, that in California none of the recipients of categorical aid have a total income sufficient to meet their most basic needs, according to the State's own figures. It is also clear that in computing the amount needed for such basic needs, the State excludes all expense for medical care.

Applying the rule set out in § 1902(a)(14)(B), quoted above, it becomes quite clear that no recipient of categorical aid is, by the State's own figures able to pay anything for medical care—the amount of payment that could be required as reasonably related to income and resources is precisely zero. In recognition of that fact, California sought, and was granted, a waiver of the requirements of § 1902(a)(14)(B) to conduct the Co-Payment Experiment. The waiver was originally granted for one year, with an option to continue it six additional months upon the Secretary's approval.

The stated purpose of the co-payment project is to test the validity of seven hypotheses. Those are set out in the margin.³ In summary, it would not be inaccurate to state the purpose as an attempt to determine whether the mechanism of co-payments at the stated levels can reduce the costs of the Medi-Cal program without reducing the delivery of needed services. Where the line is to be drawn between "significant" and "insignificant" health care problems, between "over-utilization" and proper utilization of services, how such lines are to be drawn, and by whom, are questions, as plaintiffs note, to which there are, at present, no answers.

PLAINTIFFS' CONTENTIONS

All of plaintiffs' challenges are statutorily based. Initially, they contend that the provisions of § 1115 do not authorize the Secretary to approve any project which results in a lowering of benefits from the level mandated by the requirements of § 1902. Since the plain wording of the statute gives no hint of such a limitation, plaintiffs fall back upon the intent of those in HEW who proposed to Congress the amendment to the Act which became § 1115, and the practice of the agency in interpreting the section. It is maintained, essentially without contradiction, that no project which would have resulted in a lowering of the level of benefits has ever been approved, prior to this California project. Curiously, there is no showing whatsoever, that any state had ever proposed such a project before, much less that such a proposal had been rejected by the Secretary.

There is nothing that would lend the weight of either authority or reason to the remarkable proposition that what the members of the executive bureaucracy may have in mind when they submit proposed legislation to Congress can control the construction of the statute enacted. Particularly must this conclusion be so when the language of...