Himes v. Shalala
| Decision Date | 28 July 1993 |
| Docket Number | D,No. 1384,1384 |
| Parties | , Medicare & Medicaid Guide P 41,564 Craig HIMES; Kenneth Holz, by his Power of Attorney, Bernice Holz; Bernice Holz; Delores Scott; Willie Brown, Jr., by his parent and next friend Mollie Brown; Mollie Brown; Ryan Trudsoe, by his parent and next friend, Deanna Bennett; Deanna Bennett; Dolores Bragg, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. Donna E. SHALALA, Secretary of the United States Department of Health and Human Services, in her official capacity; Mary Jo Bane, individually and in her official capacity as Commissioner of the New York State Department of Social Services; W. Burton Richardson, Director of the Monroe County Department of Social Services; Karen Schimke, Commissioner of the Erie County Department of Social Services; Rita B. Otterbein, Commissioner of the Wayne County Department of Social Services; Joseph P. Menaldino, Commissioner of the Warren County Department of Social Services; Ruth A. Brandwein, Ph.D., Director of the Suffolk County Department of Social Services, in their individual and official capacities, Defendants-Appellees. ocket 92-6295. |
| Court | U.S. Court of Appeals — Second Circuit |
David Pels, Southern Tier Legal Services, Bath, NY (Ellen M. Yacknin, Greater Upstate Law Project, Rochester, NY, of counsel) for plaintiff-appellant.
Judith L. Pearlstein, Asst. Regional Counsel, U.S. Dept. of Health and Human Services, New York City (Beverly Dennis III, Acting Gen. Counsel, Annette H. Blum, Chief Counsel, of counsel) for defendant-appellee Donna E. Shalala.
Denise A. Hartman, Asst. Atty. Gen., Albany, NY for defendant-appellee Mary Jo Bane.
Before KEARSE and ALTIMARI, Circuit Judges, and ROBERT W. SWEET, Senior District Judge of the United States District Court for the Southern District of New York, sitting by designation.
Plaintiffs-appellants, Medicaid applicants or recipients suing on behalf of themselves and all similarly situated persons, appeal from a judgment entered in the United States District Court for the Western District of New York (Larimer, Judge) granting defendants-appellees' motion for summary judgment and denying plaintiffs-appellants' cross-motion for summary judgment. Plaintiffs-appellants brought a class action challenging the recent modification of N.Y.Soc.Serv.Law § 366(2)(a)(7) (McKinney 1992). See Act of Dec. 21, 1990, ch. 938, § 38, 1990 N.Y.Laws 2034, 2065. The new statute and the regulations promulgated thereunder treat certain categories of payments as available income for purposes of determining Medicaid eligibility that had not been included in the past. Plaintiffs-appellants argue that these new rules violate their rights under the Federal Medicaid Act and that the processes used to implement the new rules violate certain New York State regulations.
For the reasons set forth below, we affirm the judgment of the district court.
Plaintiffs-appellants ("plaintiffs") brought a class action on behalf of Medicaid applicants or recipients who have been informed that their benefits will be reduced or discontinued because their "available income," as calculated under the newly amended N.Y.Soc.Serv.Law, § 366(2)(a)(7) (McKinney 1992), exceeds allowable limits. The new regulations include the following four categories of payments as "available income" for purposes of determining Medicaid eligibility or benefits under 42 U.S.C. § 1396a(a)(17)(B) (1988): (1) court-ordered support payments; (2) income taxes; (3) Social Security contributions; and (4) state disability insurance contributions. Previously, those categories of payments were disregarded in calculating a recipient's available income. Plaintiffs challenged the recent inclusion of these categories in the calculation of "available income" for eligibility purposes. They brought their claim against the Secretary of the United States Department of Health and Human Services 1 (the "Secretary"), the Commissioner of the New York State Department of Social Services, and various other commissioners of local departments of Social Services (collectively herein the "Defendants").
The Medicaid program was enacted in 1965 as Title XIX of the Social Security Act, 42 U.S.C. §§ 1396, 1396a-u (1988) ("Medicaid Act" or "the Act"), as a cooperative federal-state program designed to provide health care to needy individuals. Although a state is not required to participate in the Medicaid program, once it chooses to do so it must develop a plan that complies with the Medicaid statute and the Secretary's regulations. See New York v. Sullivan, 894 F.2d 20, 21-22 (2d Cir.1990).
A state, in administering its Medicaid program, must set reasonable standards for assessing an individual's income and resources in determining eligibility for, and the extent of, medical assistance under the program. See 42 U.S.C. § 1396a(a)(17). Those standards must take into account "only such income and resources as are, as determined in accordance with standards prescribed by the Secretary, available to the applicant or recipient." 42 U.S.C. § 1396a(a)(17)(B) (emphasis added).
States that accept Medicaid funds are obligated to provide coverage to the "categorically needy." See 42 U.S.C. § 1396a(a)(10)(A)(i). These are persons whose income levels allow them to qualify for cash assistance under either the Supplemental Security Income for the Aged, Blind, and Disabled ("SSI") program or the Aid to Families with Dependent Children ("AFDC") program. States also have the option of providing medical benefits to the "medically needy." See 42 U.S.C. § 1396a(a)(10)(A)(ii). These are individuals who satisfy the eligibility requirements of AFDC or SSI but whose income exceeds the maximum income levels permitted under the various cash assistance programs. "Medically needy" persons qualify for Medicaid only after they have incurred medical expenses reducing their income to the eligibility level of "categorically needy" persons. In Medicaid parlance this is referred to as "spending down."
After many states chose to provide coverage to the "medically needy," Congress realized that it was "fiscally improvident to rely exclusively on the States to set income limits for both aspects of the Medicaid program." Schweiker v. Hogan, 457 U.S. 569, 575-76, 102 S.Ct. 2597, 2602, 73 L.Ed.2d 227 (1982). Consequently, in 1968 Congress enacted § 1396b(f) (), which limits federal financial participation in Medicaid by providing:
the applicable income limitation with respect to any family is the amount determined, in accordance with standards prescribed by the Secretary, to be equivalent to 133 1/3 percent of the highest amount which would ordinarily be paid to a family 42 U.S.C. § 1396b(f)(1)(B)(i).
of the same size without any income or resources.
New York has chosen to participate in the Medicaid program and has elected to provide benefits to the "medically needy." Prior to January 1, 1991, New York calculated eligibility by using an income methodology that expressly disregarded court-ordered support payments and mandatory payroll deductions in the calculation of countable income. New York has recently changed that policy and no longer disregards those payments in calculating available income for eligibility purposes. See Act of Dec. 21, 1990, ch. 938, § 38, 1990 N.Y.Laws 2034, 2065. The following series of events is relevant to understanding why New York reversed its policy.
In September 1985, the New York State Department of Social Services ("NYSDSS"), the agency that runs the state's Medicaid program, submitted amendments to its State Plan ("SPA 85-25") to the Federal Health Care Financing Administration ("HCFA") for approval. SPA 85-25 contained a proposed list of "income disregards," including the court-ordered support payments and mandatory payroll withholdings at issue in this case.
In March 1989 the HCFA issued State Medicaid Manual ("SMM") Transmittal No. 33 addressing states' use of more liberal income and resource methods for determining Medicaid eligibility. HCFA stated that in order for it to assure compliance with FFP limits, it "has elected to disapprove plan policies which will result in FFP limits being exceeded." Health Care Financing Administration, State Medicaid Transmittal No. 33, at 2 (March 1989). HCFA subsequently notified NYSDSS that SPA 85-25 had been partially disapproved. HCFA explained that while the exclusion of certain payments from countable income was permitted under § 1396a(r)(2), the application of such liberal methods remained subject to the FFP limits of § 1396b(f). Because it was possible that the use of the State's more liberal policies could have resulted in the FFP limits being exceeded, HCFA determined that the State's more liberal policies were not acceptable as originally proposed.
In order to bring New York's plan into compliance with the Secretary's directives, the New York State Legislature amended New York's Medicaid statute. Specifically, the legislature deleted income taxes and court-ordered support payments as specific income exemptions when assessing the eligibility of the medically needy. See Act of Dec. 21, 1990, ch. 938, Sec. 38, 1990 N.Y.Laws 2034, 2065. HCFA had not specifically mandated that the State of New York make the above changes. Rather, New York, in deciding how to proceed in the joint federal-state program, opted to eliminate the income disregards from its methodology for calculating available income for Medicaid eligibility in order to ensure that the FFP cap provision of § 1396b(f) was not exceeded. New York State could have chosen to use a screening method to ensure that the budget cap was not exceeded, but it claimed that...
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