Dexter v. Kirschner, s. 91-15062
| Decision Date | 18 August 1992 |
| Docket Number | Nos. 91-15062,91-15409,91-15422,s. 91-15062 |
| Parties | , 38 Soc.Sec.Rep.Ser. 391, Medicare & Medicaid Guide P 40,710 Sheri H. DEXTER, Plaintiff-Appellee, Leukemia Society of America, Arizona Chapter, Intervenor-Appellee, v. Leonard J. KIRSCHNER, Director of the Arizona Health Care Cost Containment System, Defendant-Appellant, and Arizona Physicians, IPA, Inc., Defendant. Sheri H. DEXTER, Plaintiff-Appellee, Leukemia Society of America, Arizona Chapter, Intervenor-Appellee, v. Leonard J. KIRSCHNER, Director of the Arizona Health Care Cost Containment System, Defendant-Appellant. Sheri H. DEXTER, Plaintiff-Appellee, v. Leonard J. KIRSCHNER, Director of the Arizona Health Care Cost Containment System, Defendant, and Arizona Physicians, IPA, Inc., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Michael D. Curran and Logan T. Johnston, Johnston, Maynard, Grant & Parker, Phoenix, Ariz., for defendant-appellant.
David K. Duncan, Meyer, Hendricks, Victor, Osborn & Maledon, P.A., Phoenix, Ariz., for defendant-appellant Arizona Physicians, IPA, Inc.
Heidi L. McNeil and Melinda A. Rigby, Snell & Wilmer, Phoenix, Ariz., for intervenor-appellee.
Appeal from the United States District Court for the District of Arizona.
Before: SCHROEDER, LEAVY, and RYMER, Circuit Judges.
FACTS AND PROCEEDINGS BELOW
We must decide whether the State of Arizona may, under Medicaid regulations and the Equal Protection Clause of the Fourteenth Amendment, choose to fund one type of bone marrow transplant but not another.
The facts are undisputed. Sheri Dexter, now deceased, suffered from leukemia. She qualified for benefits under Arizona's Medicaid program, 1 administered by the Arizona Health Care Cost Containment System (AHCCCS). One of the appellants, Dr. Leonard J. Kirschner, is the director of AHCCCS. The other appellant, Arizona Physicians, IPA, Inc., is the health plan governed by AHCCCS in which Ms. Dexter was enrolled as a member. After Sheri Dexter's death, we granted the unopposed motion of the Leukemia Society of America, Arizona Chapter, to intervene as appellee.
The disease Sheri Dexter had is known as chronic myelogenous leukemia. The death rate is approximately 100% for individuals who are untreated. The required treatment is chemotherapy so extensive that it kills not only the cancer but also the patient's bone marrow. Therefore, a bone marrow transplant is a necessary part of the cure.
The only effective and proven transplant for chronic myelogenous leukemia is an allogeneic bone marrow transplant in which a matched donor's marrow is infused into the patient. An allogeneic bone marrow transplant is the standard of care for the treatment and cure of chronic myelogenous leukemia; it is not experimental. Dexter's physicians estimated that with an allogeneic bone marrow transplant, she had a 60% to 90% chance of long-term, disease-free survival.
The average cost of an allogeneic bone marrow transplant at the University Medical Center in Tucson, Arizona, is $170,000. Dexter was denied Medicaid coverage because Arizona's Medicaid statute does not cover allogeneic bone marrow transplants.
The statute does, however, cover autologous bone marrow transplants. In an autologous bone marrow transplant, the patient's own bone marrow is removed and later readministered after chemotherapy. Patients with chronic myelogenous leukemia cannot be treated effectively with an autologous bone marrow transplant because their disease never goes into complete remission so that healthy bone marrow may be withdrawn. Thus, if reinjected with their own diseased marrow, the cancer would simply spread again.
Ms. Dexter filed this action seeking declaratory and injunctive relief. She alleged that the appellants' failure to approve Medicaid payment for an allogeneic bone marrow transplant violated various provisions of Title XIX and its implementing regulations, 42 C.F.R. § 430.00 et seq. The district court granted preliminary injunctive relief. The parties stipulated that the preliminary injunction be permanent and the district court entered a Final Judgment and Decree of Permanent Injunction.
Among other things, the court decreed that A.R.S. § 36-2907.F, the Arizona statute providing that autologous bone marrow transplants be covered by Medicaid, violates 42 U.S.C. § 1396 et seq. and is unconstitutional as applied to Ms. Dexter and others similarly situated. 2 In a separate order, the court awarded attorneys' fees of $25,000 and costs of $139.55 to Ms. Dexter.
On appeal, the appellants argue that the district court erred in finding A.R.S. § 36-2907.F unconstitutional and that the award of attorney fees should be reversed.
A district court's grant of permanent injunctive relief is reviewed for an abuse of discretion or application of erroneous legal principles. Guadamuz v. Bowen, 859 F.2d 762, 766 (9th Cir.1988); Tollis Inc. v. San Bernardino County, 827 F.2d 1329, 1331 (9th Cir.1987).
Fireman's Fund Ins. Co. v. Ignacio, 860 F.2d 353, 354 (9th Cir.1988) (citations omitted).
Two Arizona statutes, A.R.S. §§ 36-2907.A.12 and 36-2907.F, make it clear that Arizona covers autologous but not allogeneic bone marrow transplants. A.R.S. § 36-2907.A.12 provides in relevant part:
[T]he following health and medical services shall be provided pursuant to provider contracts awarded under this article:
....
Medically necessary kidney, cornea and bone transplants 3 and immunosuppressant medications for these transplants ... and, beginning October 1, 1988, medically necessary liver transplants and immunosuppressant medications for these transplants.... No other organ transplants may be covered by the system unless specifically required by federal law[.]
(Emphasis added).
A.R.S. § 36-2907.F, which the district court found unconstitutional, provides that:
Notwithstanding subsection A of this section [of which A.R.S. § 36-2907.A.12 is a part], beginning October 1, 1989, the director shall provide medically necessary autologous bone marrow transplants to a person defined as eligible[.]
The appellants argue the district court clearly erred in finding A.R.S. § 36-2907.F unconstitutional as applied and in violation of federal law since (1) Dr. Kirschner had no discretion at all in this case and (2) federal law does not require coverage of the allogeneic bone marrow transplant. They claim that Dr. Kirschner did not act arbitrarily or unreasonably in denying Medicaid to Sheri Dexter; rather, he simply obeyed a valid state law.
"Medically Necessary" and A State's Discretion
Once a state elects to participate in the Medicaid program, it must comply with federal requirements. See 42 U.S.C. § 1396a(a). Arizona participates in the Medicaid program through the AHCCCS. Pursuant to Medicaid, AHCCCS must provide assistance to pay for medically necessary inpatient hospital and physician's services for eligible persons. See 42 U.S.C. §§ 1396a(a)(10), 1396d(a)(1)-(5).
Sheri Dexter argued before the district court that her allogeneic bone marrow transplant was medically necessary and therefore, the denial of Medicaid coverage was in violation of federal Medicaid laws. The appellants argued that the "medically necessary" standard does not apply to organ transplants because under certain 1987 Congressional amendments the states were given discretion whether to cover those transplants.
The appellants are correct. The statute applicable to payments for organ transplants, 42 U.S.C. § 1396b(i) (1992), does not make payments mandatory. Section 1396b(i) states only what must occur in the event a state should decide, in its discretion, to pay for organ transplants:
Payment under the preceding provisions of this section shall not be made--
(1) for organ transplant procedures unless the State plan provides written standards respecting the coverage of such procedures and unless such standards provide that--
(A) similarly situated individuals are treated alike[.]
We agree with the Eighth Circuit's explanation of section 1396b(i):
[O]rgan transplants are a special situation. In 1985 and again in 1987 Congress amended the Medicaid statute to add a section governing payments for organ transplants. 42 U.S.C. § 1396b(i). The statute itself can be read as merely laying out additional standards the states must meet to receive federal funds for organ transplants, but the legislative history of the provision reveals that Congress intended the states to have discretion whether to include organ transplants in the Medicaid plans.
Ellis v. Patterson, 859 F.2d 52, 54-55 (8th Cir.1988) (footnote omitted).
The Eighth Circuit decided later that organ transplants need not be covered by Medicaid because organ transplants are not among the services that must be provided under Medicaid:
States have some discretion in determining which medical services to cover under their Medicaid program. Other medical services, such as inpatient and outpatient hospital services, laboratory and X-ray services, skilled nursing facility services, and physician services must be provided. 42 U.S.C. § 1396d(a)(1)-(5). These required medical services must be provided whenever they are 'medically necessary.'
Meusberger v. Palmer, 900 F.2d 1280, 1282 (8th Cir.1990). The Eighth Circuit specifically held that organ transplants are excepted from Medicaid funding...
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