Edwards v. Myers

• Decision Date: 07 May 1985
• Citation: 213 Cal.Rptr. 737,167 Cal.App.3d 1070
• Parties: , 9 Soc.Sec.Rep.Ser. 928, Medicare & Medicaid Guide P 34,673 Katherine EDWARDS, Plaintiff and Respondent, v. Beverlee MYERS, etc., et al., Defendants and Appellants; Eddy Tanaka, etc., Defendant and Respondent. Civ. B001083.
• Court: California Court of Appeals Court of Appeals

Page 737

213 Cal.Rptr. 737

167 Cal.App.3d 1070, 9 Soc.Sec.Rep.Ser. 928,

Medicare & Medicaid Guide P 34,673

Katherine EDWARDS, Plaintiff and Respondent, v. Beverlee MYERS, etc., et al., Defendants and Appellants;

Eddy Tanaka, etc., Defendant and Respondent.

Civ. B001083.

Court of Appeal, Second District, Division 3, California.

May 7, 1985.

John K. Van de Kamp, Atty. Gen., Thomas E. Warriner, Asst. Atty. Gen., Anne S. Pressman and Richard J. Magasin, Deputy Attys. Gen., for defendants and appellants.

Marilyn Kaplan, Byron J. Gross, Los Angeles, and Bruce Iwasaki, Pacoima, for plaintiff and respondent.

DANIELSON, Associate Justice.

Defendants Department of Health Services, Department of Finance, and the Director of each ("State"), as well as the Director of the Los Angeles County Department of Public Social Services ("County"), appeal from an order granting a preliminary injunction restraining them from terminating payment of Medi-Cal benefits to certain recipients. In a previous opinion, we held the terminations proper. 161 Cal.App.3d 129, 207 Cal.Rptr. 336. Pursuant to the direction of our Supreme Court, 212 Cal.Rptr. 143, 696 P.2d 637, we have reconsidered the matter in light of Crippen v. Kheder (6th Cir.1974) 741 F.2d 102, and hold, in conformance therewith, that Medi-Cal recipients who are no longer automatically eligible for such benefits are nonetheless entitled to continue receiving them until redetermination of their eligibility under other, non-automatic, Medi-Cal categories.

Subchapter XIX of the Social Security Act established the Medicaid Program to provide federal financial assistance to states choosing to reimburse needy persons for certain medical treatment costs. (42 U.S.C. § 1396 et seq.) States electing to participate in the program must comply with all requirements of the Act and with regulations promulgated by the Secretary of the Department of Health and Human Services. (42 U.S.C. § 1396; Massachusetts Ass'n of Older Americans v. Sharp (1st Cir.1983) 700 F.2d 749, 750.) California has chosen to participate in the program, terming its medical benefits program "Medi-Cal". (Welf. & Inst.Code, § 14000 et seq.)

Participating states are required to provide assistance to the "categorically needy" and may elect to provide assistance to the "medically needy." (42 U.S.C. § 1396a(a)(10); 42 C.F.R. §§ 435.100-435.340.) The "categorically needy" are those individuals or families receiving federal aid through other programs, i.e., Aid to Families with Dependent Children ("AFDC") or Supplemental Security Income ("SSI") (42 U.S.C. § 1396a(a)(10)(A); 42 C.F.R. §§ 435.110, 435.120.) Also included within this class are individuals excluded from AFDC because of an eligibility requirement that does not apply to the Medicaid Program. (42 C.F.R. § 435.122.) The "medically needy" are persons not receiving AFDC or SSI, but who meet certain eligibility guidelines for medical assistance. (42 C.F.R. § 435.301.) California has opted to provide coverage for "medically needy" persons under its Medi-Cal program.

Plaintiff Katherine Edwards is one of a number of California residents who, because they were recipients of Aid to Families with Dependent Children ("AFDC") Prior to 1981, $30.00 plus one-third of an AFDC recipient's earnings were excluded from income for the purpose of determining eligibility for benefits under that program. This "30 and 1/3 disregard" was designed to encourage AFDC recipients to work by removing the disincentive of termination of benefits upon employment. In 1981, as part of the Omnibus Budget Reconciliation Act ("OBRA"), Congress limited application of the "30 and 1/3 disregard" to a period of only four months. (42 U.S.C. § 602(a)(8)(B)(ii)(II).)

were termed "categorically needy" for Medi-Cal purposes and thus automatically eligible for such benefits.

In California, OBRA resulted in the elimination of the "30 and 1/3 disregard" on April 1, 1982, to persons who had been receiving AFDC benefits on its effective date. Elimination of the disregard rendered Edwards and others ineligible for AFDC benefits. These persons were also no longer considered "categorically needy," and therefore no longer automatically eligible for Medi-Cal benefits.

In March 1982, Edwards received a Notice of Action stating that her AFDC and Medi-Cal benefits would be discontinued effective April 1, 1982, due to expiration of her entitlement to the "30 and 1/3 disregard." The notice also advised Edwards of her right to request a state hearing on the matter, and that her benefits might continue pending such a hearing.

Edwards did not seek a state hearing; instead, she filed this action for injunctive relief, contending the state was obligated pursuant to 42 U.S.C. section 1396a(e)(1) to continue payment of Medi-Cal benefits for a period of four months following termination of AFDC benefits, and that in any event payment of benefits must continue until eligibility therefor is redetermined under the guidelines applying to the "medically needy" recipient category.

Under 42 U.S.C. section 1396a(e)(1), when AFDC benefits are terminated because of "increased hours of, or increased income from, employment," recipients are entitled to receive Medicaid benefits for four additional months without a determination that they are "medically needy." (See also 42 C.F.R. § 435.112.) The trial court determined that the term "income", as used in section 1396a(e)(1), referred to "countable income", i.e., net income after deduction of all disregards permitted in calculating AFDC eligibility; therefore, the increase in a recipient's countable income resulting from elimination of the "30 and 1/3 disregard" constituted "increased income from employment." The court issued a preliminary injunction restraining the State from failing to continue payment of Medi-Cal benefits for an additional four months to recipients discontinued from the AFDC program due to the elimination of the "30 and 1/3 disregard." The State was also enjoined from failing to continue disbursement of Medi-Cal benefits to such recipients pending redetermination of their eligibility under Medi-Cal criteria other than AFDC eligibility.

The State appealed, contending the trial court erred in ordering payment of Medi-Cal benefits for both the four-month period attributed to section 1396a(e)(1), and until redetermination of eligibility. In our original decision, we held in favor of the State on both issues.

Plaintiff now concedes the first of these issues has been rendered moot by the enactment of section 2624 of the Deficit Reduction Act of 1984 (P.L. 98-369), providing that families who lose AFDC eligibility upon expiration of their four-month entitlement to the "30 and 1/3 disregard" remain eligible for Medicaid benefits for a period of nine additional months. (See also Welf. & Inst.Code, § 14005.8.)

With respect to the second issue, our Supreme Court has directed our attention to the decision in Crippen v. Kheder, supra, 741 F.2d 102. Crippen's eligibility for SSI benefits terminated when the Michigan Department of Social Services revoked the Adult Foster Care license for the home in which she resided. The Department notified Crippen that her Medicaid benefits would be terminated because her SSI benefits had been terminated, and that she Crippen pointed out, as does Edwards, that the regulations require the state to "promptly redetermine eligibility" when a recipient's circumstances have changed (42 C.F.R. § 435.916(c)), and to continue to furnish Medicaid "to all eligible persons until they are found to be ineligible" (42 C.F.R. § 435.930(b)). ¹

could seek a hearing, whereupon her benefits would continue until the hearing was held. She did not request a hearing, but filed a class action "seeking declaratory and injunctive relief against the Department's policy of automatically terminating individuals from Medicaid solely upon receipt of information that SSI benefits have been terminated without making a prior determination of the individual's eligibility as a medically needy person." (Crippen v. Kheder, supra, 741 F.2d at p. 104.)

Crippen relied, as does Edwards, on the decisions in Stenson v. Blum, 476 F.Supp. 1331 (S.D.N.Y.1979) (aff'd without opinion, 628 F.2d 1345 (2d Cir.) cert. den. 449 U.S. 885 (1980)), and Massachusetts Ass'n. of Older Americans v. Sharp (1st Cir.1983) 700 F.2d 749. In Stenson, the state terminated payment of Medicaid benefits to recently terminated SSI recipients without notice and without an opportunity for a hearing. These former recipients were granted an injunction requiring the state to restore their Medicaid benefits, and to continue furnishing the same, until the agency made an ex parte determination of eligibility for such benefits on a ground other than categorical eligibility, until the recipients were given timely and adequate notice of the proposed termination of their Medicaid benefits, and until they were accorded an opportunity for a hearing. (Stenson v. Blum, supra, 476 F.Supp. 1331, 1339-1340, 1343.) In Massachusetts Ass'n. of Older Americans v. Sharp, supra, 700 F.2d 749, the court held that the state was obligated to continue payment of Medicaid benefits to families with stepchildren whose AFDC benefits had been terminated as a result of a recent stepparent liability provision, until the state determined that the recipients were not eligible for medically needy Medicaid. The court noted, at page 753, that "the regulations suggest that the applicants are still 'categorically needy', since the reason for their disqualification (stepparent income deeming) is expressly made irrelevant to Medicaid eligibility. See 42 U.S.C. § 1396(a)(17)(D); 42 C.F.R. § 435.113."

The...