Himes v. Sullivan, Civ. No. 91-6172L.

• Citation: 779 F. Supp. 258
• Decision Date: 04 September 1991
• Docket Number: Civ. No. 91-6172L.
• Parties: Craig HIMES, et al., Plaintiffs, v. Louis W. SULLIVAN, M.D., et al., Defendants.
• Court: U.S. District Court — Western District of New York

779 F. Supp. 258

Craig HIMES, et al., Plaintiffs, v. Louis W. SULLIVAN, M.D., et al., Defendants.

Civ. No. 91-6172L.

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

September 4, 1991.

Ellen M. Yacknin, Greater Upstate Law Project, Rochester, N.Y., David B. Pels, Southern Tier Legal Services, Bath, N.Y., for plaintiffs.

Brian M. McCarthy, Asst. U.S. Atty., U.S. Atty., Rochester, N.Y., for defendant Louis W. Sullivan, M.D.

Charles D. Steinman, Office of New York State Atty. Gen., Dept. of Law, Rochester, N.Y., for defendant Cesar Perales.

James A. Robinson, Rochester, N.Y., for defendant W. Burton Richardson.

Thomas S. Pera, Buffalo, N.Y., for defendant Karen Schimke.

Gary Lee Bennett, Wayne County Dept. of Social Services, Lyons, N.Y., for defendant Rita B. Otterbein.

H. Bartlett McGee, Jr., Warren County Dept. of Social Services, Lake George, N.Y., for defendant Joseph P. Menaldino.

Martha A. Rogers, County of Suffolk, Dept. of Law, Hauppauge, N.Y., for defendant Ruth A. Brandwein, Ph.D.

DECISION AND ORDER

LARIMER, District Judge.

Plaintiffs, suing on behalf of themselves and all similarly situated Medicaid applicants and recipients throughout New York State, ask this Court to enjoin the defendants from counting as "available income" court-ordered support payments and mandatory payroll deductions in determining Medicaid eligibility. This matter is before the Court on plaintiffs' motion for a preliminary injunction and for class certification.¹

For the reasons that follow, I must deny plaintiffs' motion for a preliminary injunction.

BACKGROUND

The named plaintiffs in this action are Medicaid applicants or recipients who have been informed that their benefits will be reduced or discontinued because their available income, including taxes and court ordered support payments, exceeds allowable limits. Prior to January 1, 1991, amounts that a plaintiff was ordered to pay in child support were deducted automatically by the State in the calculation of the payor's monthly income. Likewise, amounts that a plaintiff had deducted from his or her salary for the payment of income and FICA taxes were not included as income.

A. Statutory Framework.

Medicaid, enacted in 1965 as Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq., is a jointly financed federal-state program designed to provide medical assistance to those who lack sufficient income and resources to pay for health care. A state is not required to participate in the Medicaid program. Once a state chooses to participate in the program, however, it must create a state plan that complies with the requirements imposed by the Medicaid Act and the federal Medicaid regulations.

States participating in the program must provide Medicaid coverage to the "categorically needy." 42 U.S.C. § 1396a(a)(10)(A); Atkins v. Rivera, 477 U.S. 154, 106 S.Ct. 2456, 91 L.Ed.2d 131 (1986). The "categorically needy" are persons eligible for cash assistance under either the SSI program, 42 U.S.C. § 1381 et seq., or the AFDC Program, 42 U.S.C. § 601 et seq. Notably, SSI and AFDC are intended to provide financial assistance for basic necessities, but are not designed to cover medical expenses. Consequently, Congress directed participating states to provide medical assistance, through the Medicaid program, to these individuals who would otherwise be unable to meet their medical expenses. Schweiker v. Gray Panthers, 453 U.S. 34, 37, 101 S.Ct. 2633, 2636, 69 L.Ed.2d 460 (1981).

A participating state also may elect to provide medical benefits to the "medically needy." The "medically needy" 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. Atkins, 477 U.S. at 157, 106 S.Ct. at 2458. These individuals qualify for benefits under Medicaid only after they incur expenses that reduce their income to the eligibility level of a "categorically needy" person. In other words, the medically needy must "spend down" the amount by which their income exceeds the eligibility level, so that their income matches the income of persons eligible for AFDC or SSI. Atkins, 477 U.S. at 158, 106 S.Ct. at 2459.

Most states promptly elected to participate in the Medicaid program, and many chose to provide coverage to the "medically needy." By 1967, however, 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 section 1396b(f)(1)(B), which limits federal financial participation in the Medicaid program. This section provides that 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 of the same size without any income or resources."

In 1982, Congress amended § 1396a of the Medicaid statute to require states to use "the same methodology" for the medically needy as would be employed for the categorically needy. See Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA"), Pub.L. No. 97-248 (1982). The Secretary interpreted TEFRA to require states to use the same disregards and deductions in determining financial eligibility for the medically needy as those utilized in the AFDC and SSI cash assistance programs. In response, Congress in 1984 enacted a moratorium that prohibited the Secretary from imposing penalties and disapproving state plans that used less restrictive eligibility criteria than the AFDC and SSI methodologies. See Deficit Reduction Act of 1984 ("DEFRA"), Pub.L. No. 98-369, § 2373(c)(1), 98 Stat. 494, 1112 (1984).

In reply to the Secretary's narrow interpretation of the 1984 moratorium, Congress passed additional legislation in 1987 to clarify its intent. See Medicare and Medicaid Patient and Program Protection Act of 1987 ("MMPPPA"), Pub.L. No. 100-93, § 9, 101 Stat. 680, 695 (1987). The Medicare Catastrophic Coverage Act of 1988 made this moratorium permanent by allowing states to be less restrictive, but not more restrictive, than the AFDC and SSI methodologies. 42 U.S.C. § 1396a(r)(2).

Section 1396a(r)(2) provides, in relevant part:

The methodology to be employed in determining income and resource eligibility for medically needy individuals ... may be less restrictive, and shall be no more restrictive, than the methodology employed in determining eligibility under the State plan most closely categorically related.

To determine whether a person is entitled to Medicaid benefits, a state may consider only the income and resources that are "available" to the applicant or recipient. 42 U.S.C. § 1396a(a)(17)(B). It is this statute, and the interpretation of "available" income, that is at the heart of the dispute in the instant case.

B. The New York State Plan.

New York State participates in the Medicaid program and has elected to provide Medicaid benefits to the "medically needy." Prior to January 1, 1991, New York used an income methodology for the medically needy that expressly disregarded court-ordered support payments and mandatory payroll deductions in the calculation of countable income. In other words, New York automatically excluded court-ordered support payments and mandatory payroll deductions for income taxes in determining Medicaid eligibility. See former N.Y. Social Service Law, §§ 366.2(a)(5) and 366.2(a)(7).

In September 1985, the New York State Department of Social Services ("NYSDSS") submitted State Plan Amendment ("SPA") 85-25 to the federal Health Care Financing Administration ("HCFA") for approval. The SPA contained a proposed list of income disregards, including those at issue in this case. Thereafter, in March 1989, and prior to a final determination on SPA 85-25, the HCFA issued and sent to the State Medicaid Manual ("SMM"), Transmittal No. 33.² According to the Secretary, this transmittal describes HCFA's policy on the use of the so-called "more liberal disregards," and provides in relevant part:

Section 303(e) of the Medicare Catastrophic Coverage Act (MCCA) of 1988 adds § 1902(r)(2) § 1396a(r)(2) to the Medicaid statute. Under this new section, you may employ, for all Medicaid only eligibility groups ... income and resource methods that are more liberal than those of the most closely related cash assistance program.... Exempted from the definition of more liberal policies are those which result in rendering current eligibles ineligible. Because Federal Financial Participation (FFP) limits under § 1903(f) § 1396b(f) remain unchanged, application of more liberal income methods under color of § 1902(r)(2) to those eligibility groups which are subject to § 1903(f) limits might result impermissibly in these limits being exceeded.

Then, on April 3, 1989, the Administrator of the HCFA notified NYSDSS that SPA 85-25 had been partially disapproved. In particular, the Administrator informed the State that New York's income exemptions for payroll withholdings and court-ordered support payments were disallowed. The April 3, 1989 letter from HCFA to NYSDSS explained:

We also noted in our review of SPA 85-25 that more liberal deductions for income taxes, FICA, and court ordered support payments were previously incorrectly approved as part of SPA 82-9. We also noted that listed as an approved more liberal disregard under SPA 82-9 is a disregard of health insurance premiums in addition to federally mandated deductions (ie., under regulations at 42 C.F.R. § 435.831). To the extent that these are not deductions required under this regulation, application of the disregards can result in Federal financial participation (FFP) limits being exceeded. Approval of these additional disregards, however, does not allow the State to claim FFP

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