Jackson v. Millstone

• Decision Date: 21 June 2002
• Docket Number: No. 48,48
• Citation: 801 A.2d 1034,369 Md. 575
• Parties: Taurus JACKSON, et al., v. Joseph MILLSTONE.
• Court: Maryland Court of Appeals

801 A.2d 1034

369 Md. 575

Taurus JACKSON, et al., v. Joseph MILLSTONE.

No. 48, September Term, 2000.

Court of Appeals of Maryland.

June 21, 2002.

Marta D. Harting (Kurt J. Fischer and Michelle J. Dickinson of Piper, Marbury, Rudnick & Wolfe LLP, on brief), Baltimore, for Petitioners.

Andrew H. Baida, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen. of Maryland, on brief), Baltimore, for Respondent.

Argued Before ELDRIDGE, RAKER, WILNER, CATHELL, HARRELL, LAWRENCE F. RODOWSKY (Retired, Specially Assigned), and THEODORE G. BLOOM (Retired, Specially Assigned), JJ.

ELDRIDGE, Judge.

In this action for declaratory and injunctive relief, Taurus Jackson and the estate of Jessica Nettles, by their next friend, Johns Hopkins Hospital, claim that the Director of the Medical Care Financing and Compliance Division of the State's Medical Assistance Program, Maryland Department of Health and Mental Hygiene, deprived the plaintiffs of rights to which they were entitled under the federal Medicaid Act, 42 U.S.C. § 1396 et seq.¹ The plaintiffs sought a declaratory judgment and an injunction concerning the validity and enforceability of a Maryland medical assistance regulation, set forth in Code of Maryland Regulations (COMAR) 10.09.06.06C, which requires, for preauthorization of medical services for an individual, that the medical provider submit to the Department adequate documentation establishing that the medical service to be rendered is both "necessary" and "appropriate."²

The challenge to the regulation arises out of the Department's application of COMAR 10.09.06.06C to two requests for preauthorization for liver transplant surgeries. The plaintiffs argue that the Department violated the federal Medicaid Act when it denied, based on the regulation, preauthorization for their respective "life-saving" liver transplant operations. They contend that for eligible persons under the age of 21, federal law requires only that the medical service be "necessary," and that the state regulation, by requiring that the service also be "appropriate," adds an element not allowed by federal law. The plaintiffs maintain that, with regard to persons under the age of 21, the Department is prohibited from making determinations based, in part, on the "appropriateness" of the procedure in question.

I.

Before setting forth the facts of the case, we shall briefly review the medicaid program.³ Congress enacted the Medicaid Act in 1965 as Title XIX of the Social Security Act. See 42 U.S.C. § 1396 et seq.; 42 C.F.R. §§ 430-456. The Act was designed to enable states, as far as practicable, to furnish medical assistance to individuals whose income and resources are insufficient to meet the costs of necessary medical services. To that end, the Act established a medical assistance program, which is a jointly funded collaboration between the states and the federal government. It is a voluntary program, in which a state may elect, but is not compelled, to participate. When a state elects to participate in the medicaid program, it prepares and submits for approval by the federal Health Care Financing Administration, the federal agency that administers the Federal Medical Assistance Program, a state medicaid plan for the provision of medical assistance that complies with the federal Medicaid Act and with the regulations promulgated by the Secretary of the Department of Health and Human Services. See 42 U.S.C. § 1396(a); 42 C.F.R. §§ 430-456. If the federal agency approves the state plan, then the state qualifies for federal funding, whereby the federal government will reimburse the state up to 50% of the cost of the medicaid program. See 42 U.S.C. § 1396b(a); 42 U.S.C. § 1396d(b). The federal Office of Inspector General periodically audits state operations to determine whether the operations are "cost-efficient" and whether "[f]unds are being properly expended." 42 C.F.R. § 430.33(a).

While the federal government establishes broad policy, secures state compliance with the statute, and dispenses federal funds to supplement state spending on medicaid, there exists some latitude for each state to determine which of its citizens qualify for this form of medical insurance and which services its program will provide. The state agency charged with dispensing the state medicaid program is responsible for interpreting, administering, and complying with federal medicaid statutes and regulations. Within broad federal rules, each state decides eligibility groups, types and range of services, payment levels for services, and administrative and operating procedures.

Maryland has chosen to participate in the medicaid program. It does so through the Maryland Medical Assistance Program, operated by the Department of Health and Mental Hygiene. See Maryland Code (1982, 2000 Repl.Vol., 2001 Supp.) § 15-103 of the Health General Article. The program's director, or a designee, is responsible for the approval or denial of applications for preauthorization for payment. Preauthorization, or approval from the Department, is required before one can receive medical assistance benefits. See COMAR 10.09.06.01B(30).

Although the federal Medicaid Act only mandates that states provide medical assistance for those classified as "categorically needy,"⁴ Maryland's state plan is designed to provide comprehensive health care services for "categorically needy" and "medically needy" persons. See §§ 15-201.1, 15-103 of the Health-General Article; COMAR 10.09.06.01B(21). See also 42 U.S.C. § 1396a(a)(10)(A), (C) (listing those who qualify as "categorically" and "medically" needy, respectively). Under the Maryland Medicaid Plan, "categorically needy" includes "aged, blind, or disabled persons, or families and children,⁵ who are otherwise eligible for Medical Assistance and who meet the financial eligibility requirements for FIP, SSI, or Optional State Supplement." COMAR 10.09.24.02B(11). Essentially, "categorically needy" persons are those whose income levels are so low that they qualify to receive cash assistance from an approved state program, and they cannot afford to pay for basic needs or medical assistance. The "medically needy," on the other hand, are "persons who are otherwise eligible for Medical Assistance, who are not categorically needy, and whose income and resources are within the limits set under the [s]tate [p]lan." COMAR 10.09.24.02B(38). See Jaffe v. Sharp, 463 F.Supp. 222 (D.Mass.1978) (defining the "medically needy" as individuals and families whose income exceeds that of categorically needy but is nevertheless insufficient to cover medical care). Included among the "medically needy" under the Maryland Medical Assistance Plan are persons under the age of 21. COMAR 10.09.24.03D(2). Taurus Jackson currently qualifies for medical assistance in Maryland as either categorically or medically needy, and he "may select any ... category for which technical eligibility may be established." COMAR 10.09.24.04M(3)(a).

II.

Taurus Jackson is under the age of 21 and, as pointed out above, is qualified for medicaid benefits. When Taurus was ten years old, he developed end stage liver disease. In July 1992, Taurus received preauthorization by the Department for a liver transplantation and underwent surgery, but the new liver failed a month later. Consequently, in September 1992, Taurus was preauthorized by the Department for a second liver transplantation and again underwent surgery. During this period, Taurus had been placed in foster care facilities, and he was not always given his prescribed medication.

About two and a half years later, in March 1995, Taurus was treated for chronic rejection but with minimal results. His liver function continued to deteriorate, and his primary health care provider, Johns Hopkins Hospital, determined that Taurus was going to die without another liver transplant. The Hospital requested preauthorization for Taurus's third liver transplantation. In ruling on this request, the Department considered Taurus's complicated past post-operative recovery, whereby his own behavioral problems and the failure to adhere to medication requirements contributed to his previous liver failures. The Department denied the preauthorization request, stating that "a third transplant was not necessary or appropriate for preapproval for reimbursement" because Taurus "remains at great risk for future transplant failure." The Hospital and Taurus requested that the Department reconsider, and the Department asked for supplemental information to be submitted regarding Taurus's psychiatric condition and related behavioral problems. Johns Hopkins Hospital submitted supplemental information that Taurus's psycho-social problems had improved, but the Department found that this information was insufficient. The Department again denied the preauthorization request, stating that Taurus's liver transplantation "procedure does not meet criteria for approval."

On June 27, 1996, a matching liver was found for Taurus. Johns Hopkins Hospital, believing that the liver transplantation procedure was necessary in order to keep Taurus alive, performed at its own expense a successful transplant operation. Taurus remains alive today.

Jessica Nettles was 14 years old when she was diagnosed with liver failure, chronic hepatitis, and an immune deficiency disease. She was qualified for medicaid benefits. In January 1995, Johns Hopkins Hospital, which was Jessica's primary health care provider, requested and received preauthorization from the Department for a liver transplantation for Jessica. No liver became available during the 60 day authorization period, and, as a result, the preauthorization expired. Consequently, in June 1995, the Hospital sought recertification for a liver transplantation for Jessica. This time, the Department requested supplemental information regarding Jessica's other diagnosed medical problems and how they would affect her liver transplantation surgery and chances...