Dominguez v. Schwarzenegger

• Decision Date: 03 March 2010
• Docket Number: No. 09-16359.,09-16359.
• Citation: 596 F.3d 1087
• Parties: Lydia DOMINGUEZ, on behalf of herself and a class of those similarly situated; Patsy Miller, on behalf of herself and a class of those similarly siguated; Alex Brown, by and through his mother and next friend Lisa Brown, on behalf of himself and a class of those similarly situated; Donna Brown, on behalf of herself and a class of those similarly situated; Chloe Lipton, by and through her conservator and next friend Julie Weissman-Steinbaugh, on behalf of herself and a class of those similarly situated; Herbert M. Meyer, on behalf of himself and a class of those similarly situated; Leslie Gordon, on behalf of himself and a class of those similarly situated; Charlene Ayers, on behalf of herself and a class of those similarly situated; Willie Beatrice Sheppard, on behalf of herself and a class of those similarly situated; and Andy Martinez, on behalf of himself and a class of those similarly situated; Service Employees International Union United Healthcare Workers West; Service Employees International Union United Long-Term Care Workers; Service Employees International Union Local 521; Service Employees International Union California State Council, Plaintiffs-Appellees, v. Arnold SCHWARZENEGGER, Governor of the State of California; John A. Wagner, Director of the California Department of Social Services; David Maxwell-Jolly, Director of the California Department of Health Care Services; John Chiang California State Controller, Defendants-Appellants, and Fresno County; Fresno County In-Home Supportive Services Public Authority, Defendants.
• Court: U.S. Court of Appeals — Ninth Circuit

596 F.3d 1087

Lydia DOMINGUEZ, on behalf of herself and a class of those similarly situated; Patsy Miller, on behalf of herself and a class of those similarly siguated; Alex Brown, by and through his mother and next friend Lisa Brown, on behalf of himself and a class of those similarly situated; Donna Brown, on behalf of herself and a class of those similarly situated; Chloe Lipton, by and through her conservator and next friend Julie Weissman-Steinbaugh, on behalf of herself and a class of those similarly situated; Herbert M. Meyer, on behalf of himself and a class of those similarly situated; Leslie Gordon, on behalf of himself and a class of those similarly situated; Charlene Ayers, on behalf of herself and a class of those similarly situated; Willie Beatrice Sheppard, on behalf of herself and a class of those similarly situated; and Andy Martinez, on behalf of himself and a class of those similarly situated; Service Employees International Union United Healthcare Workers West; Service Employees International Union United Long-Term Care Workers; Service Employees International Union Local 521; Service Employees International Union California State Council, Plaintiffs-Appellees, v. Arnold SCHWARZENEGGER, Governor of the State of California; John A. Wagner, Director of the California Department of Social Services; David Maxwell-Jolly, Director of the California Department of Health Care Services; John Chiang California State Controller, Defendants-Appellants, and Fresno County; Fresno County In-Home Supportive Services Public Authority, Defendants.

No. 09-16359.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted January 19, 2010.

Decided March 3, 2010.

Stephen P. Berzon, Scott A. Kronland, Stacey M. Leyton, Peder J. Thoreen, and Anne N. Arkush of Altshuler Berzon LLP, San Francisco, CA, for the plaintiffs-appellees.

Edmund G. Brown, Jr., Attorney General of California, Douglas N. Press, Senior Assistant Attorney General, Susan M. Carson, Supervising Deputy Attorney General, and Gregory D. Brown and Michael A. Zwibelman, Deputy Attorneys General, San Francisco, CA, for the State defendants-appellants.

Appeal from the United States District Court for the Northern District of California, Claudia Wilken, District Judge, Presiding. D.C. No. 4:09-cv-02306-CW.

Before: STEPHEN REINHARDT, W. FLETCHER and MILAN D. SMITH, JR., Circuit Judges.

MILAN D. SMITH, JR., Circuit Judge:

In 1973, the State of California established the In-Home Supportive Services (IHSS) program to provide in-home assistance and care to low-income elderly and disabled persons who otherwise would be unable to remain safely in their homes. See Cal. Welf. & Inst.Code § 12300. Plaintiffs-Appellees, a putative class comprised of recipients of the State's IHSS program and the unions who represent IHSS providers, seek to enjoin state legislation that reduces the state contribution to wages paid to IHSS providers because it is preempted by Section 30(A) of the Medicaid Act. The district court issued a preliminary injunction. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Under Title XIX of the Social Security Act (the Medicaid Act), 42 U.S.C. § 1396 et seq., the federal government grants states funds to use towards state-administered programs that provide medical assistance to low income individuals.¹ To receive federal funds, states must administer their programs in compliance with individual "State plans for medical assistance," which require approval by the federal Secretary of Health and Human Services. 42 U.S.C. § 1396-1. The California Department of Health Care Services (Department) is designated the "single State agency established or designated to administer or supervise the administration of the[State] plan." 42 C.F.R. § 431.10(b).

IHSS is one of the programs for which California receives federal funding under its version of Medicaid, known as Medi-Cal. Medi-Cal operates via a prospective reimbursement system, whereby the State "sets reimbursement rates for specific services, regardless of where those services are performed." Orthopaedic, 103 F.3d at 1493. IHSS recipients receive a host of "supportive services ...[,] which make it possible for the recipient to establish and maintain an independent living arrangement." Cal. Welf. & Inst.Code § 12300(b). These services, which are provided in the beneficiary's home, include assistance with ambulation, bathing, oral hygiene, grooming, dressing, bowel and bladder care, feeding, and self-administration of medications. Id. § 12300(b)-(d). There are over 360,000 IHSS providers serving 440,000 individuals in California; sixty-two percent of IHSS recipients receive care from an IHSS provider who is also a relative. In many cases, supportive services are provided by a parent, who is eligible to receive payment for caring for his or her child only upon leaving full-time employment or if the parent is unable to obtain full-time employment because no other suitable provider is available and the child would be left with inadequate care. See Cal. Welf. & Inst.Code § 12300(e).

The IHSS program is paid for and administered through a combination of federal, state, and county funds. The State has authorized counties to provide for the delivery of IHSS services by one of two methods: first, a county may hire IHSS providers directly; or second, a county may contract with a nonprofit consortium (NPC) or establish a public authority (PA)—an entity separate from the county that performs public and essential governmental functions necessary to deliver IHSS services. See Cal. Welf. & Inst. Code §§ 12302, 12301.6(a)-(b). Fifty-six of the State's fifty-eight counties have established a NPC or PA. NPCs and PAs are considered employers of IHSS providers for purposes of collective bargaining over wages, hours, and other terms and conditions of employment, although IHSS recipients retain the right to hire, fire, and supervise the work of their individual IHSS provider. Id. § 12301.6(c).

In counties that have established a NPC or PA, wages and benefits are established through collective bargaining between the NPC or PA and the providers' union. Cal. Welf. & Inst.Code § 12301.6(c). Before any increase in wages or benefits may take effect, it must be approved by the Department, which determines whether the increase is consistent with federal law and ensures that federal financial participation is available. Id. § 12306.1(a).

For the IHSS program, the California legislature has directed the Department to establish a provider reimbursement rate methodology that: (1) is consistent with the functions and duties of NPCs and PAs; (2) "[m]akes any additional expenditure of state general funds subject to appropriation in the annual Budget Act"; and (3) "[p]ermits county-only funds to draw down federal financial participation consistent with federal law." Id. § 14132.95(j)(2)(A)(i)-(iii). In establishing its rate-setting methodology, the Department is also authorized to "[d]eem the market rate for like work in each county ... to be the cap for increases in payment rates for individual practitioner services," and "[p]rovide for consideration of county input concerning the rate necessary to ensure access to services in that county." Id. § 14132.95(j)(2)(C).

Following the passage of the American Recovery and Reinvestment Act of 2009 (ARRA), the federal government contributes approximately sixty-two percent of the overall cost of the IHSS program.² Of the remaining "non-federal share," the State contributes sixty-five percent while the county contributes thirty-five percent. Cal. Welf. & Inst.Code § 12306(b). However, the State's contribution is subject to a statutory cap. Prior to implementation of the statute at issue in this case, California Welfare & Institutions Code § 12306.1(d)(6) (effective July 1, 2009), the State contributed sixty-five percent of the non-federal share up to $12.10 per hour. Id. § 12306.1(c)-(d). That statutory cap has increased over time, beginning at $8.10 per hour in 2000 and reaching $12.10 by way of four statutory increases. See id. § 12306.1(d)(1)-(5).

However, on February 20, 2009, the Governor signed § 12306.1(d)(6) into law. Scheduled to take effect July 1, 2009, § 12306.1(d)(6) reduces the statutory maximum for which the State would contribute its proportionate share for IHSS wages and benefits from $12.10 per hour to $10.10 per hour. In other words, the State's maximum contribution to wages and benefits would be reduced from sixty-five percent of the non-federal share of an hourly rate up to $12.10 to sixty-five percent of the non-federal share of an hourly rate up to $10.10.

The new law does not require counties to reduce wages and benefits paid to IHSS service providers. Counties are permitted to make up the difference between the State's current contribution and any reduction that may result from the State's decreased contribution. Currently, thirty-four of the fifty-six NPCs and PAs pay IHSS providers $10.10 per hour or less in wages and benefits, so there would be no reduction in the State's contribution in any of those counties, including Los Angeles County in which forty-two percent of all IHSS services are provided. Twenty-two counties are, however, directly affected by the rate change. According to Plaintiffs, in response to § 12306.1(d)(6), fourteen of those counties that were paying wages and benefits of more than $10.10 per hour have thus far submitted Rate Change Requests to the Department of Social Services (DSS), seeking to reduce wages effective July 1, 2009.³ All of these Rate Change Requests were approved by DSS and the Department.

On May 26, 2009, Plaintiffs brought this action challenging § 12306.1(d)(6) under the Supremacy Clause, claiming that in enacting and implementing § 12306.1(d)(6), the State failed to comply with the procedural and substantive requirements of 42 U.S.C. § 1396a(a)(30)(A) (hereafter § 30(A)).⁴ After noting that the State...