Markva v. Haveman

• Decision Date: 27 January 2003
• Docket Number: No. 01-2509.,01-2509.
• Citation: 317 F.3d 547
• Parties: Richard MARKVA, Deanna Markva, Beverly Langsdon, and Peggy Otler, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees, v. James K. HAVEMAN, Jr., in his official capacity as Director, Michigan Department of Community Health, and Douglas E. Howard, in his official capacity as Director, Michigan Family Independence Agency, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 547

317 F.3d 547

Richard MARKVA, Deanna Markva, Beverly Langsdon, and Peggy Otler, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees, v. James K. HAVEMAN, Jr., in his official capacity as Director, Michigan Department of Community Health, and Douglas E. Howard, in his official capacity as Director, Michigan Family Independence Agency, Defendants-Appellants.

No. 01-2509.

United States Court of Appeals, Sixth Circuit.

Argued: April 25, 2002.

Decided and Filed: January 27, 2003.

COPYRIGHT MATERIAL OMITTED

William R. Morris (argued and briefed), Office of the Attorney General, Social Services Division, Lansing, MI, for Appellants.

Jacqueline Doig (argued and briefed), Terri L. Stangl (briefed), Center for Civil Justice, Saginaw, MI, for Appellees.

Rochelle Bobroff (briefed), AARP Foundation Litigation, Washington, D.C., for Amicus Curiae.

Before DAUGHTREY and MOORE, Circuit Judges; ECONOMUS, District Judge.^*

OPINION

DAUGHTREY, Circuit Judge.

This appeal arises from a class-action challenge to that portion of the Michigan Medicaid plan's methodology for calculating eligibility and benefits for relatives caring for dependent children that treats non-parents differently from parents. Under Michigan's plan, "medically needy" caretakers of dependent children must incur a specific amount of monthly out-of-pocket expenses for medical care before they are eligible to receive Medicaid benefits: the higher an applicant's "countable" household income, the more money the applicant must "spend down" before benefits are available. When a parent caretaker applies for Medicaid, Michigan allows the parent to exclude from countable income an amount allocated for the care of the dependent children. However, those non-parent relatives acting as caretakers who apply for Medicaid are not entitled to deduct a similar portion from their income to reflect the financial needs of the children under their care. As a result, non-parent caretakers pay a higher deductible in order to receive Medicaid benefits than do parent caretakers.

This suit was brought by a class of "medically needy" grandparents who are raising their grandchildren because the children's parents have died or are otherwise absent. On behalf of themselves and similarly-situated non-parent relative caretakers, the plaintiffs sued the directors of the Michigan Department of Community Health and the Michigan Family Independence Agency under 42 U.S.C. § 1983, arguing that Michigan's policy of calculating Medicaid eligibility and benefit levels differently for non-parent and parent caretakers violates the federal Medicaid law and its implementing regulations. The defendants maintain that the distinction between parent and non-parent caretakers is justified because parents, unlike non-parent relatives, are legally responsible for the children's financial needs.

Although the district court agreed with the defendants that Michigan's interpretation of the Medicaid statutes was not altogether unreasonable from a policy standpoint, the court held nonetheless that the policy, as implemented, violates several specific provisions of those statutes and the regulations promulgated pursuant to them. The district court therefore awarded summary judgment to the plaintiffs and permanently enjoined the defendants from using a methodology for non-parent relative caretakers that differs from the methodology used for parent caretakers. See Markva v. Haveman, 168 F.Supp.2d 695, 717 (E.D.Mich.2001).

On appeal, the Michigan agencies argue that the district court erred in failing to interpret these statutory and regulatory provisions in the context of the entire web of benefits provided to children and their caretakers. The defendants also argue that the plaintiffs have failed to demonstrate the injury necessary for standing because other welfare benefits that their grandchildren receive — benefits these children would not be entitled to receive if they were living with their parents — offset the increases in the plaintiffs' spend down obligations.

For the reasons set out below, we conclude that the district court properly interpreted and analyzed the relevant law. Accordingly, we affirm the district court's judgment.

BACKGROUND

The federal Medicaid program, established by Title XIX of the Social Security Act, provides financial assistance to low-income individuals seeking medical care, pursuant to 42 U.S.C. § 1396. States receive federal assistance to administer their own individual Medicaid plans; however, in order for a state to receive federal assistance, its plan must meet the requirements of the Social Security Act and the regulations promulgated by the Secretary of Health and Human Services.

At issue here is the "caretaker relative eligibility" category for Medicaid benefits established by 42 U.S.C. § 1396d(a)(ii). See Markva, 168 F.Supp.2d at 714. "Caretaker relatives" are adults — parents or other close relatives — with whom a "dependent child"¹ is living. See id. at 702. The named plaintiffs in this case are grandparents who are raising one or more of their grandchildren because their grandchildren's parents have died or are otherwise unable to care for them. See id. at 699-702. They are all "medically needy," meaning that although their incomes are too high to entitle them to cash assistance under general welfare programs, they nonetheless qualify for Medicaid because their incomes do not cover the costs of the medical care they need. See id. at 702-03. "Medically needy" individuals qualify for Medicaid by showing that their "countable income" minus their medical expenses falls below the applicable income limit, called the "protected income level." If an applicant's income exceeds the protected income level, then Medicaid benefits are not triggered until the applicant incurs a specific amount of monthly out-of-pocket expenses for medical care. See id. at 699. This deductible, referred to throughout this litigation as the "spend down," is calculated as the difference between the applicant's countable income and the protected income level. See 42 C.F.R. § 435.831.

Michigan's Family Independence Agency's Program Eligibility Manual sets forth the policies that govern the "caretaker relative" Medicaid category for recipients in that state. In calculating eligibility and benefit levels for those within this category, Michigan does not include dependent children living in the home within the caretaker's family group for Medicaid Accordingly, the protected income level of each caretaker does not rise with the number of children living in the household. However, when a parent caretaker applies for "caretaker relative" Medicaid, the Michigan agencies reduce the amount of the parent caretaker's countable (or "budgeted") income by a pro rata amount to account for the needs of each of his or her children. See Markva, 168 F.Supp.2d at 699, 701-03. Because parent caretakers whose budgeted income exceeds their protected income are required themselves to pay medical expenses equal to the difference between the two (the so-called "spend down"), a lower budgeted income means a lower spend-down obligation.

The Michigan agencies do not apply this proration methodology to caretakers who are not the biological or adoptive parents of the children under their care. In calculating the spend-down amount that a non-parent relative caretaker is required to incur before she can receive Medicaid benefits, the defendants do not deduct from the caretaker's budgeted income an amount attributable to the financial needs of the dependent children under his or her care. See id. at 699, 701-03. As a result, "caretaker relative" Medicaid applicants who are the parents of the children under their care are entitled to greater benefits than otherwise similarly-situated "caretaker relative" Medicaid applicants who are not the biological or adoptive parents of the children in their household. The plaintiffs argue that Michigan's policy of treating parent and non-parent caretaker relatives differently violates the federal Medicaid statute and its implementing regulations.

In granting summary judgment to the plaintiffs, the district court held that the defendants' policy of using different methodologies violated federal Medicaid law in three respects. First, the district court held that the defendants' policy violated 42 U.S.C. § 1396a(a)(10)(C)(i)(III) and 42 C.F.R. § 435.601(d)(4), which require states to use a "comparable" methodology to determine the benefits for "all persons within each category of assistance ... within an eligibility group" — in this case, all medically-needy relative caretakers, whether parent or non-parent. See Markva, 168 F.Supp.2d at 714-716. Second, the district court found that the policy violated 42 U.S.C. § 1396(a)(10)(C)(i)(II) and 42 C.F.R. § 440.240(b)(2), which require states to provide services that are "equal in amount, duration, and scope for all recipients within the group" of medically needy relative caretakers. See Markva, 168 F.Supp.2d at 716. Third, the district court held that the policy violated 42 U.S.C. § 1396a(a)(10)(C)(i)(III) and 42 C.F.R. § 435.601(d)(2), as modified by 42 U.S.C. § 1396u-1(a), which require states to use a methodology for determining Medicaid eligibility of non-parent relative caretakers that is no more restrictive than the methodology in effect on July 16, 1996, to determine cash assistance eligibility for the most closely-related categorically needy group. See Markva, 168 F.Supp.2d at 717-18. However, the district court rejected the plaintiffs' claim that the defendants' policy violated the requirement in 42 U.S.C. § 1396a(a)(17) that the state "reasonably evaluate" an applicant's resources, finding that the defendants' policy was "not unreasonable per se." See Markva, 168 F.Supp.2d at 716-17.

As a result, the district court permanently enjoined the defendants from "using a methodology to determine the...