Cowan v. Myers

• Decision Date: 09 December 1986
• Citation: 187 Cal.App.3d 968,232 Cal.Rptr. 299
• Court: California Court of Appeals Court of Appeals
• Parties: , 16 Soc.Sec.Rep.Ser. 734, Medicare & Medicaid Guide P 36,378 Stephen COWAN, et al., Plaintiffs and Appellants, v. Beverlee A. MYERS, as Director, etc., et al., Defendants and Appellants. Civ. 22987.

Page 299

232 Cal.Rptr. 299

187 Cal.App.3d 968, 16 Soc.Sec.Rep.Ser. 734,

Medicare & Medicaid Guide P 36,378

Stephen COWAN, et al., Plaintiffs and Appellants, v. Beverlee A. MYERS, as Director, etc., et al., Defendants and Appellants.

Civ. 22987.

Court of Appeal, Third District, California.

Dec. 9, 1986.

Rehearing Denied Jan. 7, 1987.

Review Denied April 2, 1987.

John K. Van de Kamp, Atty. Gen., Thomas E. Warriner, Asst. Atty. Gen., John W. Spittler, Deputy Atty. Gen., for defendants and appellants

Juan A. Del Real, Samuel D. Turner and John Daniel Kiser, Washington, D.C., as amici curiae, on behalf of defendants and appellants.

Lynn S. Carman, San Francisco, for plaintiffs and appellants.

W. Edward Barnes, Sacramento, Clifford C. Sweet, Oakland, Melinda Bird, Los Angeles, Kate Meiss, Santa Ana, and Georgia Bacile, amici curiae, for plaintiffs and appellants.

CARR, Associate Justice.

At issue in this appeal are certain provisions of the Medi-Cal Benefits Program (Welf. & Inst.Code, § 14000 et seq.), which limit health services to those "medically necessary to protect life or prevent significant disability" and whether such provisions are fatally inconsistent with the Federal Medicaid Act (the Act). (42 U.S.C. § 1396 et seq.) The trial court found this limitation would unduly curtail medical assistance to the poor, contrary to the objectives of the Act and further found the system of prior authorization for health services, designed to implement the definition of medical necessity, was inconsistent with the Act. (Welf. & Inst.Code, § 14133.3, prior to 1985 amendment ch. 1411, § 2.) A writ of mandate issued from the trial court ordering the defendant state agencies and officials to refrain from enforcing either These state agencies and officials (hereafter collectively the State) appeal, contending: (1) the plaintiffs failed to exhaust their administrative remedies; (2) the definition of medical necessity in the Medi-Cal Benefits Program is consistent with federal law; and (3) the prior authorization program is likewise consistent with federal law. The plaintiffs have cross-appealed, contending the judgment erroneously failed to restrain a postservice system of authorization of Medi-Cal services.

the limitation on medically necessary services or the prior authorization system. ¹

During the pendency of this appeal the Legislature amended several Medi-Cal provisions and expanded the definition of medically necessary services. (§ 14059.5.) ² The version of Medi-Cal provisions presently in force is the relevant legislation for this appeal as "on appeals from judgments granting or denying injunctions, the law to be applied is that which is current at the time of judgment in the appellate court." (City of Whittier v. Walnut Properties, Inc. (1983) 149 Cal.App.3d 633, 640, 197 Cal.Rptr. 127, citing Kash Enterprises, Inc. v. City of Los Angeles (1977) 19 Cal.3d 294, 306, fn. 6, 138 Cal.Rptr. 53, 562 P.2d 1302.) The principal question on this appeal now is whether the amended provisions, which currently limit health services to those "medically necessary to prevent significant illness, to alleviate severe pain, to protect life, or to prevent significant disability," are fatally inconsistent with the Act. (42 U.S.C. § 1396 et seq.)

We conclude the Medi-Cal statutes are in compliance with federal law, but that current regulations governing medical coverage do not conform to those Medi-Cal statutes. This conclusion renders the cross-appeal moot and requires partial reversal of the judgment.

FACTS

The Medi-Cal Benefits Program as originally enacted provided for benefits covering outpatient services, hospital services, nursing services, certain drugs, medical transportation, and home health care services among others. (See former Welf. & Inst.Code, § 14132.) In 1975, section 14132 was amended, and the provision of most health services was made "subject to utilization controls." (Stats.1975, ch. 1005, § 3, subd. (b), p. 2360.) These controls on the utilization of Medi-Cal services were set out in section 14133. ³ The controls allowed the State to withhold coverage or payment for services which were determined to be medically unnecessary. The 1975 provisions did not define a "medical necessity."

In 1982, the Legislature enacted section 14133.3. This section defined the term "medical necessity" as used in relation to the established utilization controls. Section 14133.3 at that time provided in relevant part: "(a) The director shall require fully documented medical justification from providers that the requested services are On or about September 1, 1982, the State sent a letter to all Medi-Cal recipients detailing the changes in Medi-Cal benefits. The letter stated in part: "Coverage of medical, surgical, and other services will be limited to only those services which are considered medically necessary to protect life or prevent significant disability. Those elective services which can be eliminated without seriously endangering your life or causing you a significant disability will no longer be approved.... If you are denied a service and your condition worsens to the point where further denial would endanger your life or cause significant disability, the service can be reconsidered for approval." The letter detailed certain drug program reductions and listed a number of drugs which would be covered only after prior authorization.

                medically necessary to protect life or prevent significant disability, on all requests for prior authorization.  [p] (b) For services not subject to prior authorization, the director shall additionally determine utilization controls which shall be applied to assure that the health care services provided and the conditions treated, are medically necessary to protect life or prevent significant disability.   Such utilization controls shall take into account those diseases, illnesses, or injuries which require preventive health services or treatment to prevent serious deterioration of health."  (Italics added.)   The Legislature also determined to remove certain drugs from the "Medi-Cal Drug Formulary," a list of drugs for which no prior authorization is needed and to eliminate coverage for various "common medicine chest medical supply items, over-the-counter drug products, prescription drug products which afford minor symptomatic relief, and codeine and other narcotic analgesics."  (Stats.1982, ch. 328, § 53, subd.  (2), p. 1606.)   These statutory changes led to revisions in the Medi-Cal regulations, which limited health care services to those "which are reasonable and necessary to protect life or prevent significant disability, ..." (Cal.Admin.Code, tit. 22, § 51303, subd.  (a).) 4
                

The plaintiffs are three Medi-Cal recipients and one resident taxpayer of California. They alleged that because of the Medi-Cal changes they were not receiving health services which were medically necessary, but were not necessary to protect life or prevent significant disability. They sought mandate to restrain the State from enforcing the new restriction on Medi-Cal services and to require the State to pay for all drugs, procedures, and services prescribed by physicians without the necessity of prior authorization. The trial court granted the relief requested. The State sought reconsideration on two grounds. First, the State informed the trial court that the Medi-Cal amendments had been approved by the federal Department of Health and Human Services as being in compliance with the Act. Second, the State proffered new evidence that one of the plaintiffs, Lorna Purkey, had successfully completed an administrative appeal, resulting in a granting of the treatment the petition alleged had been denied her. The State contended this rendered significant portions of the case moot. The motion for reconsideration was denied, and judgment granting a peremptory writ of mandate was entered. This appeal followed.

Thereafter, the Legislature enacted section 14059.5, which provides: "A service is 'medically necessary' or a 'medical necessity' when it is reasonable and necessary to protect life, to prevent significant illness or

significant disability, or to alleviate severe pain."

DISCUSSION

I

The State first contends the trial court lacked jurisdiction to entertain the instant petition because the plaintiffs failed to allege exhaustion of the appropriate administrative remedies. This contention would have some merit if plaintiffs were simply challenging the denial of Medi-Cal benefits. In such circumstances, the right to an administrative appeal hearing is clear. (§ 10950; Cal.Admin.Code, tit. 22, § 50951 et seq.) In fact, the record discloses that subsequent to trial the treatment requested by plaintiff Purkey was granted through just such an administrative appeal. ⁵ The denial of benefits, however, was not the only grievance raised by the petition. The plaintiffs also alleged the relevant Medi-Cal statutes and regulations were violative of federal law. "An administrative agency ... has no power: [p] To declare a statute unenforceable, or to refuse to enforce a statute on the basis that federal law or federal regulations prohibit the enforcement of such statute unless an appellate court has made a determination that the enforcement of such statute is prohibited by federal law or federal regulations." (Cal. Const., art. III, § 3.5, subd. (c).) Moreover, the same code section which granted plaintiffs an administrative appeal to contest the denial of Medi-Cal benefits provides: "there is no right to a state hearing when ... the sole issue is a federal or state law requiring an automatic change in services or medical assistance which adversely affects some or all recipients." (§ 10950.) As the eventual granting of benefits to two of the plaintiffs renders their denial of benefits claim moot, the sole issue remaining as to them is the validity of the relevant statutes and regulations. Plaintiffs correctly...