Kai v. Ross, 03-1721NE.

• Decision Date: 10 July 2003
• Docket Number: No. 03-1721NE.,03-1721NE.
• Citation: 336 F.3d 650
• Parties: Teresa KAI, on behalf of herself and all others similarly situated; and Stacy Noller, on behalf of herself and all others similarly situated, Appellants, v. Ron ROSS, as the Director of the Nebraska Department of Health and Human Services, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 650

336 F.3d 650

Teresa KAI, on behalf of herself and all others similarly situated; and Stacy Noller, on behalf of herself and all others similarly situated, Appellants, v. Ron ROSS, as the Director of the Nebraska Department of Health and Human Services, Appellee.

No. 03-1721NE.

United States Court of Appeals, Eighth Circuit.

Submitted: June 19, 2003.

Filed: July 10, 2003.

Rehearing and Rehearing En Banc Denied August 7, 2003.

Steven A. Hitov, argued, Washington, DC (Rebecca L. Gould, D. Milo Mumgaard, Allen L. Overcash, Michelle Paxton, Lincoln, NE, on the brief), for appellant.

Michael J. Rumbaugh, argued, Special Asst. Atty. General, Lincoln, NE (Royce N. Harper, Sr. Asst. Atty. Gen., on the brief), for appellee.

Before LOKEN, Chief Judge, RICHARD S. ARNOLD and BYE, Circuit Judges.

RICHARD S. ARNOLD, Circuit Judge.

This case is about Temporary Medical Assistance, a federally funded state program of medical care for the needy and others which the parties refer to as "TMA." We shall adopt the same usage. The named plaintiffs, Teresa Kai and Stacy Noller, are members of a class, certified by the District Court, of medically needy caretaker relatives. The class contains about 10,000 single working mothers and other caretaker relatives. Under a provision of what was popularly known as the Welfare Reform Bill, passed in 1996, plaintiffs are ineligible for Medicaid benefits unless they qualify under transitional provisions now found in Sections 1925 and 1931 of the Social Security Act, as amended, 42 U.S.C. §§ 1396r-6, 1396u-1(a), (b). Plaintiffs filed a motion for a preliminary injunction to require the defendant, Ron Ross, Director of the Nebraska Department of Health and Human Services, to continue their benefits. The District Court denied the motion, and this appeal followed on an expedited basis.

In our view, plaintiffs' claim is likely to succeed under the plain meaning of the relevant statutes. We therefore reverse and remand this case to the District Court with the following direction: that the preliminary injunction prayed for by the plaintiffs be granted, that the case proceed to final disposition with reasonable dispatch, and that the Court, after such proceedings as are necessary to put the case in a position for final decision, enter whatever final judgment the law and the facts at that time indicate.

I.

For many years, the principal federally funded public-assistance program in this country was called Aid to Families with Dependent Children (AFDC). This program worked in tandem with Medicaid, a federally funded program of medical assistance for the needy and others created by Title XIX of the Social Security Act, 42 U.S.C. §§ 1396 et seq. States do not have to participate in Medicaid, but if they choose to do so, as Nebraska has, they must conform to certain requirements set out in federal statutes, one of which, for many years, was that persons receiving AFDC would also be eligible for Medicaid. States were permitted, in addition, to designate other classes of persons eligible for Medicaid, and, as we shall see, Nebraska, at least at one time, did so.

This regime was fundamentally changed in 1996 by the enactment of welfare-reform legislation that ended the AFDC program and made other important changes in federal assistance to the needy. This enactment was called the Personal Responsibility and Work Opportunity Reconciliation Act, and is codified in various sections of the Social Security Act. The AFDC program was replaced with a new program called Temporary Assistance to Needy Families (TANF). Recipients of TANF are not included in the mandatory groups to whom participating states must afford Medicaid benefits.

Under the 1996 statute's transitional provisions, however, states desiring to participate in Medicaid had to continue paying Medicaid benefits to those persons who had been on AFDC. In addition, certain other persons who had also, in the past, been receiving Medicaid benefits were entitled, under these transitional provisions, to a continuation of those benefits. The issue in this case, broadly stated, is whether the plaintiff class is one of the groups among these other persons (who had not been on AFDC) entitled to the benefits of the transitional provision.

The transitional provision is found in Section 1925 of the Social Security Act, 42 U.S.C. § 1396r-6, which provides up to one year of transitional medical coverage to certain groups. The parties to this case agree that the governing definition is found in Section 1931 of the Act, 42 U.S.C. § 1396u-1(a), (b).

Section 1931 persons are entitled to TMA. We are required to determine what the statute means, and, therefore, as a necessary first step, we set out the language of the relevant parts of Section 1931 in full:

(a) REFERENCES TO TITLE IV-A ARE REFERENCES TO PRE-WELFARE-REFORM PROVISIONS. — Subject to the succeeding provisions of this section, ... any reference in this title ... to a provision of part A of title IV, or a State plan under such part or plan, shall be considered a reference to such a provision or plan as in effect as of July 16, 1996, with respect to the State.

(b) APPLICATION OF PRE-WELFARE-REFORM ELIGIBILITY CRITERIA. —

(1) IN GENERAL. — For purposes of this title, subject to paragraphs (2) and (3), in determining eligibility for medical assistance —

(A) an individual shall be treated as receiving aid or assistance under a State plan approved under part A of title IV [AFDC] only if the individual meets —

(i) the income and resource standards for determining eligibility under such plan, and

(ii) the eligibility requirements of such plan under subsections (a) through (c) of section 406 and section 407(a),

as in effect as of July 16, 1996; and

(B) the income and resource methodologies under such plan as of such date shall be used in the determination of whether any individual meets income and resource standards under such plan.

(2) STATE OPTION. — For purposes of applying this section, a State —

(A) may lower its income standards applicable with respect to part A of title IV, but not below the income standards applicable ... on May 1, 1988;

(B) may increase income and resource standards under the State plan referred to in paragraph (1)... by a percentage that does not exceed the percentage increase in the Consumer Price Index ...; and

(C) may use income and resource methodologies that are less restrictive than the methodologies used under the State plan under such part as of July 16, 1996.

42 U.S.C. § 1396u-1.

More specifically, plaintiffs contend that they are individuals who "shall be treated as receiving" AFDC, 42 U.S.C. § 1396u-1(b)(1)(A) because they had been receiving Medicaid in Nebraska under "income and resource methodologies that [were] less restrictive than the methodologies used under" AFDC, 42 U.S.C. § 1396u-1(b)(2)(C).

The case came before the District Court on motion for preliminary injunction. The standard for determining such motions is familiar. The Court shall weigh the following four factors: (1) the plaintiffs' likelihood of success on their claim; (2) the injury to the plaintiffs that will be irreparable if preliminary relief is erroneously denied; (3) the injury to the defendants that will be irreparable if preliminary relief is erroneously granted; and (4) the public interest. As is often the case, the District Court considered the first factor, likelihood of success on the merits after completion of the case, to be the most important one. After analyzing the relevant statutes, the Court concluded that plaintiffs' likelihood of success was small. It did discuss the other three factors, as was proper, but took the view (with which we agree) that, in the circumstances of this case, the first factor was the most important one. The motion for preliminary injunction was therefore denied. We likewise concentrate our consideration of the case on the first factor. As to that point, we respectfully disagree with the District Court and reverse, for reasons that will shortly be given.

II.

We have set out the statutory background. Now let us examine how the plaintiffs and their class fit into it. As the District Court found, Teresa Kai takes prescription medications for type II diabetes and high blood pressure. She also suffers from asthma and depression. Ms. Noller has schizophrenia and bipolar disorder, and takes four prescription drugs that have allowed her to perform successfully her daily activities and to maintain employment. They were within the class of people eligible for Medicaid benefits when the Welfare Reform Bill passed in 1996, and remained within that class until the State of Nebraska amended the relevant statute in 2002. Plaintiffs were not receiving, and were not eligible for, AFDC (called in Nebraska ADC, or Aid to Dependent Children). They were, however, eligible for, and receiving, Medicaid benefits under a state-determined method of counting income called "stacking." (No one seems to know exactly what this term means or why it is used in the present context, so we assume the word itself is not important.) Under Neb.Rev.Stat. § 68-1020(2)(d) (2001), in effect until last year, plaintiffs were eligible for Medicaid as medically needy caretaker relatives. A net countable income of $392.00 per month was attributed to them.

This all changed with the enactment of LB 8, Laws 2002, Second Special Session, § 2. The new law amended the relevant portion of Neb.Rev.Stat. § 68-1020 by ending the so-called "stacking" method of determining income level for Medicaid eligibility. This change had the effect of making plaintiffs and the members of their class ineligible for Medicaid.

For clarity of analysis, and so that readers may have before them the pertinent portion of the relevant federal statute, we now again quote Section 1931 of the Social Security Act, 42 U.S.C. § 1396u-1(a), (b), leaving out certain superfluous parts. (Recall that by virtue of Section...