Lynch v. Rank

• Decision Date: 09 March 1984
• Docket Number: No. C-83-2340 WHO.,C-83-2340 WHO.
• Citation: 604 F. Supp. 30
• Parties: Raymon and Joann LYNCH, et al., Plaintiffs, v. Peter RANK, Director of the Department of Health Services of the State of California, et al., Defendants. Peter RANK, Director of the State Department of Health Services, et al., Defendants and Third Party Plaintiffs, v. Margaret HECKLER, Secretary of Health and Human Services, et al., Third Party Defendants.
• Court: U.S. District Court — Northern District of California

604 F. Supp. 30

Raymon and Joann LYNCH, et al., Plaintiffs, v. Peter RANK, Director of the Department of Health Services of the State of California, et al., Defendants.

Peter RANK, Director of the State Department of Health Services, et al., Defendants and Third Party Plaintiffs, v. Margaret HECKLER, Secretary of Health and Human Services, et al., Third Party Defendants.

No. C-83-2340 WHO.

United States District Court, N.D. California.

March 9, 1984.

Daniel Brzovic, Bet Tzedek Legal Services, Los Angeles, Cal., Evelyn R. Frank, Legal Aid Society of Alameda County, Oakland, Cal., for plaintiffs.

John K. Van De Kamp, Atty. Gen., Charlton G. Holland, Catherine M. Van Aken, Deputy Attys. Gen., San Francisco, Cal., for defendant Rank.

Joseph Russoniello, U.S. Atty., John F. Barg, Asst. U.S. Atty., Northern Dist. of Cal., San Francisco, Cal., for third party defendant Heckler.

OPINION AND ORDER

ORRICK, District Judge.

The Pickle Amendment to the Social Security Act, 42 U.S.C. § 1396a(note), was designed "to insure that an increase intended to benefit the aged and disabled would not have inadvertent harmful effects." S.Rep. No. 94-1265, 94th Cong., 2d Sess. 28 (1976), reprinted in 1976 U.S.Code Cong. & Ad.News 5997, 6022. Congress intended the Amendment to nullify the detrimental effect of social security cost-of-living increases on certain recipients' eligibility for Medicaid benefits; such increases raised the recipient's countable income level beyond the qualifying limit for Supplemental Security Income ("SSI") payments. Loss of SSI eligibility, in turn, caused such an individual to lose his or her qualification for Medicaid. This loss of Medicaid eligibility is a far greater financial burden than the small cost-of-living increase can offset.

Plaintiffs, a class of California residents, charge that the Director of the Department of Health Services of the State of California (the "State") and the Secretary of Health and Human Services (the "Secretary") have incorrectly applied the Amendment by invoking it only when it appears that a recipient lost his or her right to SSI "solely" because of a social security cost-of-living increase. Plaintiffs take the position that the Pickle Amendment applies a "but for" test, that is, if one would still be entitled to SSI benefits but for the Social Security cost-of-living increase, then one would qualify under the Amendment for continued Medicaid benefits. Plaintiffs thus seek a judgment compelling the State and the Secretary to adopt the "but for" test. Plaintiffs also seek certification of a nationwide class of plaintiffs and a mandatory injunction against the Secretary. For the reasons set forth below, the Court finds for the plaintiffs.

I

A

This case involves the interaction of three federal programs, the SSI program, 42 U.S.C. § 1381 et seq., the Old Age Survivors and Disability Income Program ("OASDI" or "Social Security"), 42 U.S.C. § 401 et seq., and Medicaid, 42 U.S.C. § 1396 et seq. SSI aids the aged, blind, and disabled poor by paying each covered person enough money to bring his or her income up to a federally-established minimum level. That minimum income may be set at a higher level if an individual state is willing to pay additional cost. See 42 U.S.C. § 1382e.¹

OASDI payments, commonly known as "social security," are primarily an insurance program. The size of payments to retired workers or their survivors depends in part on how much the worker and his or her employer have contributed to the system. Annual cost-of-living increases are made to recipients. See 42 U.S.C. § 415(i).

Finally, Medicaid is a federal program that reimburses states for providing medical care to those who cannot afford it.² If a person is qualified for and receives SSI, he or she is denominated a "categorically needy" person and is, in a majority of states,³ automatically entitled to Medicaid, with no cost to the recipient. 42 U.S.C. § 1396a(a)(10). Those poor who do not receive SSI still receive Medicaid payments in some states, including California, but only after they have paid out each month enough of their own funds for medical expenses to bring their remaining income below the SSI qualification limit. This group of persons who must pay a share of their medical costs before receiving Medicaid are denominated "medically needy" recipients; the requirement that they spend a certain amount of their own income for medical needs is called a "spend down" or a "share of cost" provision.

Some SSI recipients also receive OASDI, or social security benefits, albeit in amounts low enough that they continue to meet the income eligibility criteria for the SSI program. As OASDI recipients, they receive an annual social security cost-of-living increase. The annual increase may raise the recipient's income above the SSI limit, disqualifying him or her from further SSI benefits.

Before enactment of the Pickle Amendment, an SSI recipient who became ineligible for SSI benefits also lost his or her categorically needy Medicaid benefits. In states that do not provide Medicaid to the medically needy, the consequence was total ineligibility for medical assistance. In states participating in the medically needy program, the recipient could continue to obtain medical assistance, but only after meeting a monthly "spend down" or "share of cost" requirement.

The social security cost-of-living increases were, therefore, producing drastic consequences. The slight advantage of higher social security benefits was far outweighed by the loss of Medicaid coverage. In response, Congress enacted the Pickle Amendment to

"protect individuals * * * by providing that no recipient of Federal benefits or State supplementary payments under the SSI program would lose eligibility for medicaid as the result of the operation of the cost-of-living benefit increase provision in Title II OASDI. The purpose of the Amendment is to insure that an increase intended to benefit the aged and disabled would not have inadvertent harmful effects."

S.Rep. No. 94-1265, 94th Cong., 2d Sess. 28 (1976), reprinted in 1976 U.S.Code Cong. & Ad.News 6022.

The Pickle Amendment achieves this goal by excluding social security cost-of-living increases from countable income in the determination of Medicaid eligibility. For example, if the federally-established monthly income level for SSI were $500, an individual with a monthly OASDI income of $490 and no other income would receive $10 in SSI and would be automatically entitled to Medicaid because he or she was categorically needy. If that individual then received a $20 cost-of-living increase in OASDI benefits,⁴ he or she would no longer qualify for SSI because his or her income would now be over the $500 limit. The Pickle Amendment, however, would require that the cost-of-living increase not be included in the determination of Medicaid eligibility; thus, a qualified individual would continue to receive Medicaid as if he or she were still an SSI recipient.

The Secretary, however, has interpreted the Pickle Amendment in a restrictive manner. Using what is referred to as the "solely" test, the Secretary decreed that OASDI cost-of-living increases would be excluded in calculating Medicaid eligibility only when such increases were the sole cause of the loss of SSI eligibility. The "solely" test is codified at 42 C.F.R. § 435.135 (1981). Those persons whose loss of SSI eligibility was triggered by some other increase in income, but who would, nevertheless, remain eligible for SSI but for the OASDI cost-of-living increase, do not receive Medicaid assistance as categorically needy persons under the Secretary's interpretation of the Pickle Amendment.⁵

Intended beneficiaries of the Amendment challenged this restrictive interpretation in Massachusetts, naming the Secretary and the Massachusetts Commissioner of Public Welfare as defendants. The district court certified a statewide class of plaintiffs and agreed that the "solely" test did not reflect the intent of Congress or the language of the statute. Ciampa v. Schweiker, 511 F.Supp. 670 (D.Mass.1981). On appeal, the First Circuit affirmed, sub nom. Ciampa v. Secretary of Health and Human Services, 687 F.2d 518 (1st Cir.1982). Relying on the unambiguous language of the statute itself, the court unanimously concluded: "The relevant words * * * are `except for.' These words suggest a mechanical `but for' test; they do not suggest the type of `causal' requirement that the government has imported into its regulations." Id. at 524.

The Secretary followed the Ciampa court's directive in Massachusetts, but continued to enforce its regulation requiring the "solely" test in all other states. Plaintiffs then filed this action in San Francisco Superior Court, challenging California's use of the "solely" test, as well as other aspects of the Pickle Amendment not at issue in this motion. The State removed the case to this Court and named the Secretary as a third-party defendant. Plaintiffs⁶ filed an amended complaint, naming the Secretary as a defendant and seeking relief on behalf of a nationwide class of those persons to whom the "solely" test denies Medicaid eligibility.

B

The problem caused by OASDI cost-of-living increases is best illustrated by surveying the plight of several members of the plaintiff class. Raymon Lynch, 52 years old, is disabled due to two ruptured disks, high blood pressure, and a nervous condition. He receives social security benefits of $563 per month. His wife, plaintiff Joann Lynch, is also disabled and receives OASDI monthly benefits of $239. Their combined benefits support a family of four, which includes their sixteen year old daughter, and their eleven year old granddaughter. Until July 1977, Raymon Lynch also received SSI and, accordingly, received Medicaid without a share of cost. In October 1982, the Lynches were notified by the State (which was applying the solely test for Pickle eligibility) that they would in...