Gorka v. Sullivan

• Decision Date: 14 August 1996
• Docket Number: No. 49A02-9507-CV-385,49A02-9507-CV-385
• Citation: 671 N.E.2d 122
• Parties: Shelley GORKA, a Minor, b/n/f her Mother, Sauncey Gorka, Lois Hensley, a Minor, b/n/f her Mother, Marilyn Hensley, Coletta Clayton, Anna Skaggs, Columbus Transportation, Inc., Ambulatory Renal Services, Inc., Classic Carriage, Inc., Susan Buchanan, d/b/a Medical Transport, CS Medical Transportation Services, Inc., A.S.A.P. Transportation, Ltd., River Cities Yellow Cab Co., Inc., Mainstream Transportation Authority, Inc., Bassemiers Transportation, Inc., and West Central Indiana Ambulance Service, Inc., Appellants-Plaintiffs, v. Cheryl SULLIVAN, in her individual capacity and as Secretary, Indiana Family and Social Services Administration, James M. Verdier, in his individual capacity and as Assistant Secretary, Indiana Office of Medicaid Policy and Planning, Indiana Family and Social Services Administration, and Indiana Office of Medicaid Policy and Planning, Appellees-Defendants.
• Court: Indiana Appellate Court

Page 122

671 N.E.2d 122

Shelley GORKA, a Minor, b/n/f her Mother, Sauncey Gorka Lois Hensley, a Minor, b/n/f her Mother, Marilyn Hensley Coletta Clayton, Anna Skaggs, Columbus Transportation, Inc. Ambulatory Renal Services, Inc., Classic Carriage, Inc. Susan Buchanan, d/b/a Medical Transport, CS Medical Transportation Services, Inc., A.S.A.P. Transportation, Ltd., River Cities Yellow Cab Co., Inc., Mainstream Transportation Authority, Inc., Bassemiers Transportation, Inc., and West Central Indiana Ambulance Service, Inc., Appellants-Plaintiffs, v. Cheryl SULLIVAN, in her individual capacity and as Secretary, Indiana Family and Social Services Administration, James M. Verdier, in his individual capacity and as Assistant Secretary, Indiana Office of Medicaid Policy and Planning, Indiana Family and Social Services Administration, and Indiana Office of Medicaid Policy and Planning, Appellees-Defendants.

No. 49A02-9507-CV-385.

Court of Appeals of Indiana.

Aug. 14, 1996.

Transfer Denied Jan. 22, 1997.

Thomas R. Ruge, Todd A. Richardson, Richard T. Trettin, Lewis & Kappes, P.C., David F. McNamar, Randall R. Fearnow, McNamar, Fearnow & McSharar, P.C., Indianapolis, for Appellants.

Pamela Carter, Attorney General, Beth Henkel, Deputy Attorney General, Indianapolis, for Appellees.

OPINION

KIRSCH, Judge.

The appellants, a plaintiff group consisting of certain Medicaid recipients, a taxi company and a certified class of common carriers who provide transportation for Medicaid recipients appeal from a summary judgment in favor of the Indiana Family and Social Services Administration (the Medicaid agency). The parties present several issues, which we consolidate and restate as:

I. Whether the federal Social Security Act ¹ preempts the Indiana Motor Carrier Act. ²

II. Whether the Medicaid agency must pay the common carriers' filed rates, rather than the lower Medicaid transportation rates.

III. Whether the Medicaid agency violated the Indiana rulemaking statute in adopting certain transportation rates.

IV. Whether the Medicaid agency's transportation rates violate the just compensation provisions of the Indiana Constitution.

We affirm.

FACTS AND PROCEDURAL HISTORY

Indiana provides health care for low-income patients through the Medicaid program. Part of the program funding comes from the federal treasury, and federal officials oversee the program jointly with the Indiana Medicaid agency. To receive the federal funding, Indiana must comply with the federal Medicaid regulations. See Social Security Act, Title XIX, §§ 1901-1917, 42 U.S.C. §§ 1396--1396u (1995). Those regulations require Indiana to assure that Medicaid patients have transportation to and from health care providers' offices. 42 C.F.R. § 431.53 (1995). Indiana fulfills this requirement by contracting with transportation businesses to serve Medicaid patients.

In 1992, the cost of the requisite transportation services rivaled the cost of physician services: $399 per patient for transportation versus $461 per patient for physician services. Record at 683, 685, 762. The cost included wheelchair accessible services, termed "nonambulatory services" and known by the acronym NAS, as well as transportation for patients able to walk, termed "commercial ambulatory services" or CAS. Indiana's transportation costs concerned federal Medicaid officials, and in 1992-93 federal officials audited Indiana's program with the stated objective of determining "methods for controlling future CAS transportation costs." Record at 619. The officials estimated that in 1990, Indiana's CAS cost was nearly sixteen million dollars. In the audit report, the federal officials offered three suggestions for reducing CAS costs: pay lower rates to transportation providers, pursue less expensive transportation alternatives, and eliminate unjustified transportation claims. Record at 621. The federal officials estimated that these cost-saving measures could reduce Indiana's annual CAS expense by about six million dollars. Record at 621.

In March 1993, the Medicaid agency issued bulletins announcing new, lower rates it would pay to transportation providers. Record at 817. Formerly, the maximum rate for CAS providers (other than taxis) was $15, plus $2.00 per mile for out-of-county mileage. Record at 818. The new CAS maximum rate would be $10, plus $1.25 per mile after ten miles, regardless of whether the trip involved out-of-county miles. The NAS rate was formerly $30 plus $2.00 per mile for out-of-county mileage; the new rate would be $20 plus $1.25 per mile. Record at 818.

A group of Medicaid transportation providers (the Providers) and patients filed a complaint against the Medicaid agency in Marion Superior Court, challenging the new rates and seeking an injunction, a writ of mandamus and a declaratory judgment. The Providers alleged the new rates violated Indiana and federal law and sought damages for payments withheld or denied by the Medicaid agency. The agency removed the action to the United States District Court for the Southern District of Indiana. Both sides filed summary judgment motions in federal court. The federal court granted judgment in favor of the Medicaid agency on the federal law claims and remanded the case to state court for resolution of the state law claims. The Providers appealed the summary judgment, and the federal appellate court vacated the district court's decision for lack of jurisdiction. Gorka v. Sullivan, 82 F.3d 772 (7th Cir.1996).

After remand (but before the federal appellate decision), the Providers sought class certification in state court pursuant to Ind. Trial Rule 23. The court certified a class consisting of all CAS and NAS Providers who were certified as common carriers in Indiana. Both sides again sought summary judgment, and the trial court granted judgment in favor of the Medicaid agency. We will add additional facts as necessary.

DISCUSSION AND DECISION

I. Standard of Review

In an appeal from a summary judgment, this court applies the standard prescribed in Ind.Trial Rule 56, as does the trial court. Selleck v. Westfield Ins. Co., 617 N.E.2d 968, 970 (Ind.Ct.App.1993), trans. denied. Summary judgment is appropriate when there are no material factual issues related to the summary judgment motion. Ind.Trial Rule 56(C); Indiana Dep't of Pub. Welfare v. Murphy, 608 N.E.2d 1000, 1002 (Ind.Ct.App.1993). In this appeal, the parties' legal arguments are interspersed with factual allegations, but the allegations are not material to the summary judgment. Rather, each party claims the undisputed facts support summary judgment in their favor. Accordingly, we review only the legal basis for the trial court's decision. State ex rel. Bd. of Dental Examiners v. Judd, 554 N.E.2d 829, 830 (Ind.Ct.App.1990).

II. Preemption

The Providers contend the Indiana Motor Carrier Act gives the Indiana Department of Revenue exclusive jurisdiction over common carrier rates. As such, the Providers argue the Medicaid agency must pay the rates authorized by the Department of Revenue, rather than the new, lower rates established by the Medicaid agency. In response, the Medicaid agency argues that the federal Medicaid Act preempts the Indiana Motor Carrier Act, thereby allowing the Medicaid agency to adopt rates different from the common carrier rates.

The Motor Carrier Act requires that businesses desiring to provide passenger transportation to the general public be certified as common carriers. IC 8-2.1-22-11. To be certified, a transportation business must demonstrate that the proposed transportation operation is required for "public convenience and necessity." IC 8-2.1-22-13. Once the carrier is certified, the Indiana Department of Revenue regulates the transportation operation, including schedules and fares. IC 8-2.1-22-3. The carrier must file its proposed fares with the Department. IC 8-2.1-22-23(a). These fares are known as the "filed rates."

The Department of Revenue must determine whether the filed rates are "just and reasonable." IC 8-2.1-22-21. To make that determination, the Department applies the statutory ratesetting standard, giving consideration to, among other things, the public need for "adequate and efficient transportation ... at the lowest cost consistent with the furnishing of service" and "the need of revenues sufficient to enable such carriers under honest, economical, and efficient management to provide service." IC 8-2.1-22-21(a)(3)-(4). Once the filed rate is in place, the carrier must charge that rate, nothing higher or lower. IC 8-2.1-22-23(c).

The Medicaid agency contends the ratesetting standard in the Indiana Motor Carrier Act conflicts with the standard in the federal Medicaid Act. As such, the agency argues, the federal statute preempts the Indiana Act. The agency also contends that the federal Medicaid statute requires a single state agency to control Medicaid reimbursement rates. The Providers challenge both contentions. The trial court found that the federal Medicaid statute preempts the Indiana Motor Carrier Act. We disagree.

In this case, preemption turns on whether Congress intended that federal regulation supersede state law. Louisiana Pub. Service Comm'n v. F.C.C., 476 U.S. 355, 369, 106 S.Ct. 1890, 1899, 90 L.Ed.2d 369 (1986). State law that conflicts with federal law has no effect, because the conflict is in derogation of Congress' intent that federal law control the subject at issue. U.S. Const. art. VI, cl. 2; Maryland v. Louisiana, 451 U.S. 725, 746, 101 S.Ct. 2114, 2128-29, 68 L.Ed.2d 576 (1981). To determine whether the federal Medicaid Act preempts the Indiana Motor Carrier Act, we examine whether the ratesetting standards in the respective acts impose conflicting requirements.

The federal standard, known as the "equal access" standard, requires states:

"to safeguard against unnecessary utilization of ... care and services and to assure that payments are consistent with efficiency, economy, and quality of...