Greenstein By Horowitz v. Bane

• Decision Date: 05 October 1993
• Docket Number: No. 89 Civ. 1038 (RJW).,89 Civ. 1038 (RJW).
• Parties: Benjamin and Anna GREENSTEIN, by their next friend, Rose HOROWITZ, Barbara Bogsted, Sheldon and Hazel Greenberg, individually and on behalf of all others similarly situated, Plaintiffs, v. Mary Jo BANE, Commissioner of the New York State Department of Social Services and Barbara Sabol, Administrator of the New York City Human Resources Administration, Donna E. Shalala, Secretary of Health and Human Services, Defendants.
• Court: U.S. District Court — Southern District of New York

833 F. Supp. 1054

Benjamin and Anna GREENSTEIN, by their next friend, Rose HOROWITZ, Barbara Bogsted, Sheldon and Hazel Greenberg, individually and on behalf of all others similarly situated, Plaintiffs, v. Mary Jo BANE, Commissioner of the New York State Department of Social Services and Barbara Sabol, Administrator of the New York City Human Resources Administration, Donna E. Shalala, Secretary of Health and Human Services, Defendants.

No. 89 Civ. 1038 (RJW).

United States District Court, S.D. New York.

October 5, 1993.

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Toby Golick, Cardozo Bet Tzedek Legal Services, New York City (Francis N. Pantaleo, of counsel), Jeffrey Watnick, Legal Services for the Elderly in Queens, Rego Park (Donna Dougherty, of counsel), for plaintiffs.

Robert Abrams, Atty. Gen. of the State of NY, Robert F. Bacigalupi, Asst. Atty. Gen., New York City, for defendant Mary Jo Bane.

O. Peter Sherwood, Corp. Counsel, Georgia Pestana, Asst. Corp. Counsel, New York City, for defendant Barbara Sabol.

Mary Jo White, U.S. Atty., S.D.N.Y., Lorraine S. Novinski, Sp. Asst. U.S. Atty., New York City, for defendant Donna E. Shalala.

OPINION

ROBERT J. WARD, District Judge.

Plaintiffs are members of a certified class of "all New York City Medicaid recipients or their representatives who, as a result of agency error or delay, have incurred out-of-pocket expenses for authorized Medicaid services and have not been provided full reimbursement for those expenses." Greenstein v. Perales, No. 89 Civ. 1038 (RJW), 1989 WL 434395 at *14, 1989 U.S.Dist. LEXIS 6872 at **15-16 (S.D.N.Y. June 20, 1989). In this action brought pursuant to 42 U.S.C. § 1983, plaintiffs challenge the policies and practices of defendants Mary Jo Bane, Commissioner of the New York State Department of Social Services ("DSS"), Barbara Sabol, Administrator of the New York City Human Resources Administration ("HRA"), and Donna E. Shalala, Secretary of the United States Department of Health and Human Services ("HHS") (collectively the "defendants").¹

In particular, plaintiffs allege that defendants misinterpret 42 C.F.R. § 431.246 (the "corrective action regulation") by adopting a policy of not providing full reimbursement for expenses incurred on account of erroneous denials and delays in Medicaid payments and by limiting corrective payments to a state's predetermined Medicaid rate. As a result, plaintiffs also question the validity and constitutionality of N.Y.Comp.Codes R. & Regs. tit. xviii § 360-7.5(a)(1) (the "reimbursement regulation") which codifies defendants' reimbursement policy. Alternatively, plaintiffs argue that, even if the corrective action regulation does not provide for full reimbursement, the Court should invalidate the DSS and HRA practice of limiting reimbursement for personal home care services at the Medicaid rate, and should direct DSS and HRA to make additional reimbursements to plaintiffs.

Plaintiffs now move for an order granting summary judgment, pursuant to Rule 56, Fed.R.Civ.P. Both DSS and HRA cross-move for an order granting summary judgment in their favor. In addition, HRA argues that the action should be dismissed, because plaintiffs' claims are not enforceable under 42 U.S.C. § 1983. For the reasons that follow, plaintiffs' motion is granted and DSS and HRA's cross-motions are denied.

BACKGROUND

A. Medicaid's Statutory Scheme

1. The Medicaid Program

Medicaid, enacted in 1965 as Title XIX of the Social Security Act, 79 Stat. 343 (codified as amended at 42 U.S.C. §§ 1396, 1396a-u (1988)), is a joint federal-state program providing medical assistance to eligible low-income individuals. States are not required to establish a Medicaid plan, but any plan they create must comply with the Medicaid statute and HHS regulations. 42 U.S.C. § 1396a; see Himes v. Shalala, 999 F.2d 684, 686 (2d Cir.1993). If the Health Care Financing Administration ("HCFA") of HHS approves the state's plan, the state is eligible to receive federal matching funds. Sweeney v. Bane, 996 F.2d 1384, 1385 (2d Cir.1993) (citing 42 U.S.C. § 1396).

States that institute Medicaid plans must furnish medical assistance to the "categorically needy." 42 U.S.C. § 1396a(a)(10)(A). The "categorically needy" are persons eligible for cash assistance through either of two programs: (1) Supplemental Security Income for the Aged, Blind and Disabled ("SSI"), 42 U.S.C. § 1381 et seq. or (2) Aid to Families with Dependent Children ("AFDC"), 42 U.S.C. § 601 et seq. Atkins v. Rivera, 477 U.S. 154, 157, 106 S.Ct. 2456, 2458, 91 L.Ed.2d 131 (1986). Because SSI and AFDC cover only assistance for basic necessities, Congress determined that recipients of those programs were especially deserving of medical assistance through Medicaid. Id. (citing Schweiker v. Gray Panthers, 453 U.S. 34, 37, 101 S.Ct. 2633, 2636, 69 L.Ed.2d 460 (1981)).

In addition to the "categorically needy," a participating state may elect to provide medical benefits to the "medically needy." Atkins v. Rivera, 477 U.S. at 157, 106 S.Ct. at 2459. "Medically needy" persons are those who satisfy the eligibility requirements of SSI or AFDC but whose income or resources exceed the financial eligibility standards of those programs. Id. "Medically needy" persons only qualify for Medicaid benefits after they have engaged in "spend down" by incurring expenses that reduce their income to the eligibility level of a "categorically needy" person. Id. at 158, 106 S.Ct. at 2459 (citing 42 U.S.C. § 1396a(a)(17)).

While states must comply with all applicable federal requirements in implementing Medicaid, they have considerable discretion in the design and operation of their plans. "Within broad federal rules, each State decides eligible groups, types and range of services, and administrative and operating procedures." 42 C.F.R. § 430.0. In New York, DSS supervises the State's Medicaid plan while HRA administers the program in New York City. See N.Y. Social Services Law § 363-a(1). New York State has opted to provide medical benefits to the "medically needy" through a form of "step down" known as the "surplus income program." N.Y.Comp.Codes R. & Regs. tit. xviii §§ 360-4.8(b) and (c). Individuals in this program receive Medicaid coverage in any month in which they incur medical expenses exceeding an income allowance known as the "monthly surplus."

When a recipient becomes eligible for Medicaid, the program pays for approved medical supplies and services rendered as of the first day of the month in which eligibility was established. Id. § 360-2.4(c). The recipient is also deemed retroactively eligible for Medicaid on "expenses incurred during the three months prior to the month of application for Medicaid, provided the applicant was eligible in the month in which the medical care and services were received." Id. Retroactive payments for medical bills are made directly to the recipient, but reimbursement is limited to a fee established by the state known as the Medicaid rate. Id.

Generally, however, payments for Medicaid are made directly to the individual or entity providing the services rather than to the recipient of the services (the "vendor payment principle"). 42 C.F.R. § 447.10(d); N.Y.Comp.Codes R. & Regs. tit. xviii § 360-7.5(a). The purpose of the vendor payment principle is to ensure that providers will be reimbursed for services they furnish recipients, thereby eliminating disincentives in providing such services based on the fear of nonpayment. Here too, the provider obtains reimbursement at the state's predetermined "Medicaid rate." See, 42 U.S.C. § 1396a(a)(30)(A); 42 C.F.R. § 447.200 et seq. The Medicaid rate is not a single fee but a range of fees which varies depending on the type of services and supplies being provided. Once the provider has been paid by the state, the state is entitled to reimbursement from HCFA for a specified portion of payments referred to as the "federal financial participation" rate ("FFP").

2. Personal Care Providers and Services

New York State offers Medicaid to recipients who require medical attention in their own homes ("personal care services" or "home care"). These services are "rendered by an individual, not a member of the family, who is qualified to provide such services, where the services are prescribed by a physician. ..." N.Y. Social Services Law § 365-a(2)(e); N.Y.Comp.Codes R. & Regs. tit. xviii § 505.14(a)(1) (personal care services refer to "some or total assistance ... essential to the maintenance of the patient's health and safety in his or her own home"). The local social services districts determine whether an applicant is eligible to receive personal care services, and the level and amount of services eligible recipients should receive. N.Y.Comp.Codes R. & Regs. tit. xviii § 505.24(a), (b). In New York City, HRA makes these determinations.

The number of hours provided through personal care services varies based on factors including the recipient's medical condition and whether he or she has family members or friends who can serve as informal caregivers. Id. § 505.14. Some recipients require "continuous twenty-four-hour personal" service in which they are provided with uninterrupted care by two personal care aides who serve consecutive twelve-hour shifts ("continuous care"). Id. § 505.14(a)(3). Other recipients may need "live-in" care in which there is only one personal care aide, who lives in the recipient's home. Finally, there are Medicaid recipients who need personal home care but for fewer hours than is provided by either continuous care or live-in care.

As with other Medicaid payments, personal care providers are paid for their services at the Medicaid rate. However, whereas the Medicaid rates for most supplies and services are explicitly established by local social services districts, the Medicaid rates for personal care services are negotiated by contract with...