Connecticut St. Dept. of Pub. W. v. DEPARTMENT OF H., E. & W.

• Decision Date: 03 September 1971
• Docket Number: No. 1097,Docket 71-1574.,1097
• Citation: 448 F.2d 209
• Parties: CONNECTICUT STATE DEPARTMENT OF PUBLIC WELFARE, Petitioner, v. DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, SOCIAL AND REHABILITATION SERVICE, et al., Respondents.
• Court: U.S. Court of Appeals — Second Circuit

448 F.2d 209 (1971)

CONNECTICUT STATE DEPARTMENT OF PUBLIC WELFARE, Petitioner, v. DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, SOCIAL AND REHABILITATION SERVICE, et al., Respondents.

No. 1097, Docket 71-1574.

United States Court of Appeals, Second Circuit.

Argued August 13, 1971.

Decided September 3, 1971.

Francis J. MacGregor, Asst. Atty. Gen., East Hartford, Conn. (Robert K. Killian, Atty. Gen., Hartford, Conn., on the brief), for petitioner.

Leonard Schaitman, Atty., Dept. of Justice, Washington, D. C. (L. Patrick Gray, III, Asst. Atty. Gen., Morton Hollander, Atty., Dept. of Justice, Washington, D. C., on the brief), for respondents.

John Q. Tilson, Jr., New Haven, Conn. (Jeremy G. Zimmerman, New Haven, Conn., on the brief), for intervenor Connecticut Hospital Assn.

William H. Clendenen, Jr., New Haven, Conn. (David M. Lesser, New Haven, Conn., Nancy Duff Levy and Steven Cole, New York City, Richard Cramer, Hartford, Conn., Roger Rice, Washington, D. C., on the brief), for intervenors The New Haven Moms, Quinnipiac Welfare Rights Mothers, The Willimantic Welfare Rights Organization, Welfare Recipients are People, The National Welfare Rights Organization and its Connecticut affiliates.

Before FEINBERG, MULLIGAN and TIMBERS, Circuit Judges.

FEINBERG, Circuit Judge:

The Connecticut State Department of Welfare petitions under 42 U.S.C. § 1316 for review of the decision of the Secretary of the Department of Health, Education, and Welfare (HEW) acting through the Administrator of the Social and Rehabilitation Service (SRS), 45 C. F.R. § 213.32(d), that certain Connecticut public assistance plans are not in conformity with federal law. As a sanction, the Secretary ordered that, effective July 1, 1971, federal financial support for the Connecticut programs be terminated until the state placed its plans in conformity. On June 28, 1971, this court stayed the Secretary's order pending disposition of the petition for review but ordered Connecticut, pending further order of this court, to comply with certain aspects of the Secretary's decision. For reasons explained below, we affirm the order of the Secretary.¹

I.

Before discussing Connecticut's objections to the Secretary's order, it would be helpful to outline both the federalstate cooperative public assistance programs under the Social Security Act and the prior administrative proceedings in this case. Pursuant to the Act, the federal government provides grants-in-aid to states that administer programs for supplying assistance to specified categories of needy individuals and families. The five programs involved in this case are: (1) Old Age Assistance (OAA) under Title I of the Act, 42 U.S.C. § 301 et seq.; (2) Aid to Families with Dependent Children (AFDC) under Title IV, 42 U.S.C. § 601 et seq.; (3) Aid to the Blind (AB) under Title X, 42 U.S.C. § 1201 et seq.; (4) Aid to the Permanently and Totally Disabled (APTD) under Title XIV, 42 U.S.C. § 1351 et seq.; and (5) Medical Assistance (MA) under Title XIX, 42 U.S.C. § 1396 et seq.

The state programs are financed by the federal government on a matching fund basis. State participation is not required by the Social Security Act. States may choose not to apply for federal assistance or may join some, but not all, of the programs. Further, the establishment of criteria for need and other factors of eligibility, and the level of payments, are left largely to the states. At the same time, the Act prescribes specified requirements with which all state programs must comply. And so the states are required to submit to the Secretary of HEW, and have approved by him, a plan that describes the programs adopted by the state in conformity with federal law requirements. Once approved, the plan continues to be subject to the Secretary's scrutiny to determine conformity to federal law. 42 U.S.C. §§ 302, 602, 1202, 1316, 1352, 1396a.

If the Secretary determines that an approved state plan no longer so conforms, the Act requires that federal payments be terminated, in whole or in part, until the plan meets federal criteria. Moreover, while the approved plan may conform to federal law, the Act requires that federal payments be terminated, in whole or in part, if the Secretary finds that the state's administration of the plan does not comply substantially with federal law. The Act also establishes a procedure for determining whether a state plan conforms to, or state administration substantially complies with, the requirements of federal law. Under the statutory procedure, the Secretary must give reasonable notice and opportunity for a hearing to the state agency administering the plan. 42 U.S.C. §§ 304, 604, 1204, 1316, 1354, 1396c. The Act also provides that a state that is aggrieved by the Secretary's determination after such a hearing may petition a United States court of appeals for judicial review of the Secretary's order. 42 U.S.C. § 1316.

In 1970, the Secretary, acting through the Administrator of SRS, notified the Commissioner of the Connecticut State Welfare Department that a hearing would be held to determine whether five of Connecticut's public assistance plans (OAA, AFDC, AB, APTD, and MA) were in conformity with federal law, and, if not, whether federal grants-in-aid to those programs should be terminated. The notices described the specific issues to be considered and stated that HEW and Connecticut officials had been unable to reach agreement on those issues after negotiations.

Subsequently, the Administrator decided to remove certain issues from the hearing. The hearing, preceded by a pre-hearing conference and a stipulation of facts, was held on December 1, 2 and 3, 1970. On March 30, 1971, the hearing examiner issued his recommended findings and proposed decision. He found that, with respect to all eight issues considered at the hearing, the Connecticut plans did not comply with federal law. After the parties submitted written comments on the recommended report of the examiner, the Administrator adopted the conclusion of the examiner on May 28, 1971. As stated above, the Administrator ordered that federal financial support to Connecticut's public assistance programs be terminated as of July 1, 1971, until the state placed its plans in conformity.

Although the May 28, 1971 decision found Connecticut out of conformity with respect to eight issues, the parties are in agreement or are approaching agreement on five of those issues. Thus, in this court, Connecticut contests the Secretary's determination on only the following three issues: (1) the computation of inpatient hospital costs under MA; (2) the computation of the "earned income" disregard under a work incentive program; and (3) the computation of deductible work related expenses under the same program. In addition, Connecticut argues that the HEW hearing was procedurally unfair.

II.

Examining the last objection first, Connecticut claims that the conformity hearing procedures, 45 C.F.R. § 213, were unfair because the hearing officer lacked the power to subpoena witnesses, papers and other evidence, 45 C.F.R. § 213.22(b), and because there is no provision for discovery by deposition or interrogatories. Connecticut contends that it was thus unable to examine the Secretary or his subordinates about the rationale and basis for the regulations it was allegedly violating. Connecticut candidly admits that it cannot find support for its argument in the fifth amendment, see South Carolina v. Katzenbach, 383 U.S. 301, 323, 86 S.Ct. 803, 15 L.Ed.2d 769 (1966), but rests its right to fair procedure on the tenth amendment.

Without considering whether Connecticut's reading of the tenth amendment is correct, we think it clear that the conformity hearing was procedurally fair. Due process is not an unvarying standard; what process is due always depends upon the interests affected. Goldberg v. Kelly, 397 U.S. 254, 263, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970). The only issues at the hearing were ones of law — whether Connecticut's various public assistance plans conformed with the federal regulations and whether those regulations were reasonable and in accord with the Social Security Act. There was no dispute regarding adjudicatory facts. In such circumstances due process does not require a full evidentiary hearing but only adequate opportunity for argument. See 1 K. Davis, Administrative Law § 7.01 (1958 ed. and 1970 Supp.). Clearly the state was provided with that opportunity. Moreover, Connecticut was allowed to cross-examine all witnesses and to submit all relevant evidence. 45 C.F.R. § 213.23. Indeed, the state presented an expert witness who testified why the medical assistance regulations were unreasonable. We conclude that Connecticut has not shown how its rights were prejudiced by the hearing procedures.

III.

On the three substantive issues raised by Connecticut, we must affirm the Secretary's determination if, with proper deference to HEW as "the agency charged with the administration" of the Social Security Act, Lewis v. Martin, 397 U.S. 552, 559, 90 S.Ct. 1282, 1286, 25 L.Ed.2d 561 (1970), we conclude that (1) the regulations, promulgated under 42 U.S.C. § 1302, are within the Secretary's "broad rule-making powers," Thorpe v. Housing Authority, 393 U.S. 268, 277 n. 28, 89 S.Ct. 518, 21 L.Ed.2d 474 (1969), and (2) the Secretary's determination that Connecticut's plans do not conform with those regulations is "supported by substantial evidence." 42 U.S.C. § 1316(a) (4). While the issues are technically complicated, we believe that both tests are met and affirm the Secretary's order.

(a) Inpatient hospital care

As to the issue of reimbursement for inpatient hospital care under MA, Connecticut argues that the Secretary's regulations are unreasonable and, in any event, that the state is in compliance with those regulations. The Social Security Act provides "for payment of the reasonable cost (as determined in accordance with standards approved by the...