Commonwealth Of Mass. v. Sebelius

• Decision Date: 24 March 2010
• Docket Number: Civil Action No. 09-10274-WGY.
• Citation: 701 F.Supp.2d 182
• Parties: Commonwealth of MASSACHUSETTS, by its EXECUTIVE OFFICE OF HEALTH AND HUMAN SERVICES, Plaintiff,v.Kathleen SEBELIUS, in her official capacity as Secretary of Health and Human Services of the United States; Charlene Frizzera, in her official capacity as Acting Administrator of the Centers for Medicare and Medicaid Services; Centers for Medicare and Medicaid Services; and Departmental Appeals Board of the United States Department of Health and Human Services, Defendants.
• Court: U.S. District Court — District of Massachusetts

701 F.Supp.2d 182

Commonwealth of MASSACHUSETTS, by its EXECUTIVE OFFICE OF HEALTH AND HUMAN SERVICES, Plaintiff,v.Kathleen SEBELIUS, in her official capacity as Secretary of Health and Human Services of the United States; ¹ Charlene Frizzera, in her official capacity as Acting Administrator of the Centers for Medicare and Medicaid Services; Centers for Medicare and Medicaid Services; and Departmental Appeals Board of the United States Department of Health and Human Services, Defendants.

Civil Action No. 09-10274-WGY.

United States District Court,

D. Massachusetts.

March 24, 2010.

COPYRIGHT MATERIAL OMITTED

Thomas A. Barnico, Attorney General's Office, Boston, MA, for Plaintiff.

Sonya A. Rao, United States Attorney's Office, Boston, MA, for Defendants.

MEMORANDUM AND ORDER

YOUNG, District Judge.

I. INTRODUCTION

The Massachusetts Executive Office of Health and Human Services (“Mass. Services”) brings this action against Kathleen Sebelius, as Secretary of Health and Human Services of the United States (the “Secretary”); Charlene Frizzera, as Acting Administrator of the Centers for Medicare and Medicaid Services (the “Center”); and the Departmental Appeals Board of the United States Department of Health and Human Services (the “Board”) (collectively the “Defendants”). Mass. Services seeks judicial review of a decision of the Board Massachusetts Executive Office of Health and Human Services, No. A-08-83, 2008 WL 5501237, Decision No. 2218 (Department of Health and Human Services, Departmental Appeals Board, December 31, 2008) (the “Board's Decision”), which affirmed the disallowance of $86,645,247 in federal financial participation funds (the “Funds” or “FFP”) that were authorized under the Medicaid Act (the “Act”), 42 U.S.C. §§ 1396 et seq. In the alternative, Mass. Services seeks a declaration that section 1915(g) of the Act, 42 U.S.C. § 1396n(g)(2), is an unconstitutional exercise of the Spending Power of Congress. The parties filed cross motions for summary judgment and agreed to resolve the litigation as a “case stated.” ²

A. Background

The Medicaid Program (“Medicaid”), administered by the Department of Health and Human Services (the “Department”) through the Center, is designed to assist states in providing health care services to certain eligible persons. 42 U.S.C. §§ 1396 et seq.; Harris v. McRae, 448 U.S. 297, 308, 100 S.Ct. 2671, 65 L.Ed.2d 784 (1980). The Act's broad purpose is to provide medical assistance ³ to under-privileged families and individuals and to help families or individuals attain independence or self care. 42 U.S.C. § 1396. The Act specifies numerous broad categories of medical assistance that are reimbursable under Medicaid, including hospital services, physician services, nursing facility services, and case management services. 42 U.S.C. § 1396d(a). Section 1396d(a)(19) of the Act authorizes reimbursement for case management services, as defined by section 1396n(g)(2) of the Act. 42 U.S.C. § 1396d(a)(19). Under Section 1396n(g), a state may elect to provide targeted case management services, meaning that it limits its case management services to certain groups of eligible individuals. 42 U.S.C. § 1396n(g)(1). The Act defines “case management services” as “services which will assist individuals eligible under the plan in gaining access to needed medical, social, educational, and other services.” 42 U.S.C. § 1396n (g)(2)(A)(i).

Each state is required to develop a comprehensive plan describing the nature and scope of its Medicaid program. 42 C.F.R. § 430.10. State plans must be approved by the Center. 42 C.F.R. §§ 430.14-430.16. If states are in compliance with the Act, the Department automatically distributes funds to them in furtherance of these goals. Massachusetts v. Sec'y of Health and Human Servs., 816 F.2d 796, 801 (1st Cir.1987) aff'd in part and rev'd on other grounds sub nom. Bowen v. Mass., 487 U.S. 879, 108 S.Ct. 2722, 101 L.Ed.2d 749 (1988). The plans are financed both by federal and state funds. Federal financial assistance funds, called “reimbursement[s] ... [are] actually a series of huge quarterly advance payments that are based on the State's estimate of its anticipated future expenditures.” Bowen, 487 U.S. at 883-84, 108 S.Ct. 2722 (citing 42 U.S.C. § 1396b(d)). “If something is ‘medical assistance’ the Secretary must pay a percentage of its costs.” Id.

The estimated expenditures are “adjusted to reflect actual expenditures,” and “[o]verpayments may be withheld from future advances.” Id. at 884, 108 S.Ct. 2722 (citing 42 U.S.C. § 1396b(d)(5)). If the State's expenditures do not comply with the requirements of federal law, the federal agency may disallow reimbursement for any item or class of items. 42 U.S.C. § 1316(d). The Supreme Court has recognized that “a disallowance represents an isolated and highly focused inquiry into a State's operation of the assistance program.” Bowen, 487 U.S. at 885, 108 S.Ct. 2722 (internal quotation omitted). In actuality, as will be seen, the federal government manages the state plans in mind numbing detail.

II. FINDINGS OF FACT

In Massachusetts, Mass. Services administers the Medicaid plan. Mass. Gen. Laws ch. 6A, § 16. In 1994, Mass. Services sought approval of State Plan Amendment TN 94-017 (the “1994 Plan”), requesting Funds for various targeted case management services performed by the employees of the Massachusetts Department of Social Services (“MDSS”). A.R. 167-69.⁴ The 1994 Plan defined the “targeted group” as Medicaid-eligible children who may potentially be abused or neglected, or Medicaid-eligible children who are currently receiving services from MDSS after a determination that they were either abused or neglected or posed a risk of being abused or neglected. A.R. 168. The 1994 Plan identified the services to be provided to the targeted group as the: “1) collection of assessment data; 2) development of an individualized plan of care; 3) coordination of needed services and providers; 4) home visits and collateral contracts as needed; 5) maintenance of case records; and 6) monitoring and evaluation of client progress and service effectiveness.” A.R. 168.

After the 1994 Plan was approved, Mass. Services and the Center engaged in continuous discussions as to what ought be considered reimbursable under the terms of that Plan. See Bothamley Aff. at A.R. 186-87; Letter from Susan Maciolek, Revenue Contract Manager, to Jack Briggs, Health Care Financing Administration (Jan. 25, 1996) at A.R. 190-92 (questioning what Mass. Services identified as protective intake); Letter from Susan Maciolek, Revenue Contract Manager, to Harold Finn, Health Care Financing Administration, (Feb. 15, 1996) at A.R. 196-97 (discussing how claims would be “tracked and identified”).

In May 2006, the Office of the Inspector General of the Department (the “Inspector”) issued a Review of Targeted Case Management Services Rendered by the Massachusetts Department of Health and Human Services (2006) (the “Review”). A.R. 112. The Review detailed expenditures for fiscal years 2002 and 2003 under the Medicaid program and concluded that Mass. Services had overstated its allowable targeted case management expenditures for these years. A.R. 126. It noted that the Funds were used not only for allowable case management services, but also for direct social services, which were not reimbursable when claimed as case management services. Id. The Review refrained from expressing an opinion on whether case management services that were inherent in, and inseparable from, direct services, were reimbursable or not. Id. The Review recommended that Mass. Services return $86,645,347 to the federal government, which had been claimed for services that, in fact, were direct services, and that it work with the Center to determine the status of the funds used for services of a dual nature. Id.

On March 20, 2008, the Center officially disallowed $86,645,347. Letter from Richard McGreal, Associate Regional Administrator Department of Health and Human Services, to Thomas Dehner, Director, Executive Office of Health and Human Services, (March 20, 2008) at A.R. 40-42. Mass. Services appealed this decision to the Board on April 22, 2008. Acknowledgment of Notice of Appeal at A.R. 43. The Board's Decision affirmed the disallowance of the Funds. Board's Decision, 2008 WL 5501237, at *HHS 35.

1. The Board's Decision

The Board's Decision affirmed the Report's finding that eight types of services (“cost categories”, or “cost centers”) as defined in Massachusetts' Random Moment Time Study ⁵ (“RMTS”) and provided for under the 1994 Plan did not meet the definition of case management services. These services included: (1) Protective intake; (2) Case management; ⁶ (3) Preparation for and participation in legal proceedings; (4) Referrals to the district attorney; (5) Child placement; (6) Investigative efforts; (7) Services for children with special needs; and (8) All other permanency planning activities. Board's Decision, 2008 WL 5501237, at *HHS 14.

a. Protective intake

Although Mass. Services argued to the Board that the “protective intake” cost center was the “first step in the process of developing a child's service plan,” the Board agreed with the Center that it was more appropriate to look at the definition of “protective intake” according to the RMTS. Board's Decision, 2008 WL 5501237, at *HHS 15-16. With regard to “protective intake,” the RMTS describes it, in relevant part, as the following:

This activity code is for investigative efforts to prevent or eliminate the need for removal of children from their homes for all cases where a removal of a child from his or her home has not occurred (but such a removal is, to the caseworker, a reasonable possibility in the absence of preventive services).... The conduct of the following activities are among those investigative efforts to prevent or eliminate the need for removal of a child from his or her home:

(1) Receipt and screening to determine,

...