Massachusetts Ass'n for Retarded Citizens, Inc. v. King

• Decision Date: 18 December 1981
• Docket Number: 81-1692,Nos. 81-1292,s. 81-1292
• Parties: MASSACHUSETTS ASSOCIATION FOR RETARDED CITIZENS, INC., et al., Plaintiffs-Appellees, v. Edward J. KING, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — First Circuit

Page 602

668 F.2d 602

MASSACHUSETTS ASSOCIATION FOR RETARDED CITIZENS, INC., et

al., Plaintiffs-Appellees, v. Edward J. KING, et al., Defendants-Appellants.

Nos. 81-1292, 81-1692.

United States Court of Appeals, First Circuit.

Argued Sept. 18, 1981.

Decided Dec. 18, 1981.

Bruce Mohl, Asst. Atty. Gen., Boston, Mass., with whom Francis X. Bellotti, Atty. Gen., and Thomas Miller, Asst. Atty. Gen., Boston, Mass., were on brief, for defendants-appellants.

Nonnie S. Burnes, Boston, Mass., with whom Richard W. Renehan, and Hill & Barlow, Boston, Mass., were on brief, for plaintiffs-appellees.

Before BOWNES and BREYER, Circuit Judges, and MURRAY, ^* Senior District Judge.

BOWNES, Circuit Judge.

This case is a late offshoot of five consolidated class actions that challenged on constitutional and statutory grounds the conditions at five schools for the retarded in Massachusetts. The basic actions were settled by consent decrees, but subject to the continuing supervision of the district court. The preliminary injunction that is the focus of this case was precipitated by the passage by the Massachusetts Legislature of a charge-for-care statute, St.1980, c. 329, §§ 44-51, that was intended to increase federal Medicaid reimbursement for services provided to residents at the state schools. The statute accomplishes this by requiring that state school residents who are ineligible for Medicaid because of the amount of their assets become eligible by reducing their assets or putting them beyond their control or paying for their own care. Hitherto, most of plaintiffs, regardless of the amount of their assets, were not charged for care. Because the Commonwealth would receive directly from Medicaid an increase in revenue of approximately 18% for fiscal 1981 and 31% for fiscal 1982, its interest in implementing the charge-for-care statute is obvious.

The district court, on plaintiffs' petition, issued a preliminary injunction prohibiting The underlying issue is whether the consent decrees entered in these cases prior to the enactment of the charge-for-care statute overrides the statute and requires defendants to provide care without charge to plaintiffs regardless of the amount of their assets. ¹

defendants from implementing the charge-for-care statute pending a final resolution of plaintiffs' claims on the merits. Defendants have appealed.

A short history of the entire litigation and the charge-of-care statute is necessary for an understanding of the case before us. We borrow heavily from the district court's unpublished opinion in reciting the factual background.

HISTORY OF THE LITIGATION

The first of this five actions was filed in 1972 on behalf of the mentally retarded clients ^** at the Belchertown State school. A similar suit was brought two years later on behalf of clients at the Walter E. Fernald State School. In 1975, plaintiffs filed separate class action suits on behalf of clients at the Monson Development Center, the Wrentham State School and the Paul A. Dever School. Defendants in each of these suits are officials of the Commonwealth of Massachusetts responsible for the operation of the institutions for the retarded. ² The five cases were consolidated by order of the district court.

The complaints alleged that conditions at the institutions were constitutionally and statutorily inadequate. The cases were settled prior to trial because the Governor and the Attorney General of the Commonwealth "made a judgment that the level of care did not reach (a) constitutional level of care," and, as a result, concluded that "the case would be indefensible." ³

Rather than engage in protracted litigation, the parties agreed to devote their resources and energy to the task of examining each institution in order to identify deficiencies and design practical and effective remedial programs. After hundreds of hours of difficult negotiations, the parties agreed to consent decrees that embodied the parties' collective assessment of the needs of the clients at the five state schools and the appropriate means of meeting those needs. The consent decrees were approved and appropriately entered by the district court.

The parties also negotiated and agreed to a "Final Decree on Personnel at the Five State Schools for the Mentally Retarded" (Personnel Decree) under which defendants agreed to comply with the personnel standards for care and treatment set forth in Title XIX of the Social Security Act. The district court approved the Personnel Decree on August 2, 1978.

THE CHARGE-FOR-CARE STATUTE

Between 1970 and 1980, the Department of Mental Health (DMH) was statutorily prohibited from charging for the residential care of a person in a mental retardation facility who had reached the age of majority and had been in the care of the DMH for at least five years. Mass.Gen.Laws Ann. ch. 123, § 37 (prior to amendment). ⁴ Virtually Most clients at the state schools are categorically eligible to receive Medicaid benefits by reason of their mental retardation. There are, however, financial eligibility requirements that preclude federal Medicaid assistance for clients with assets in excess of the allowable maximum. In most cases, this amount is $1,500. ⁵ According to defendants, a significant number of clients at the state schools are currently ineligible for Medicaid benefits because they hold assets in excess of this amount.

every member of the plaintiff class meets these criteria.

Under the joint federal/state Medicaid program, the Commonwealth receives federal reimbursement for approximately one-half the cost of services provided by the state schools. ⁶ Federal funds have become an important source of revenue for the state schools. In fiscal year 1981, over 95% of the state schools' revenue (not including state appropriations) was derived from federal reimbursement for Medicaid expenses incurred by the 67% of the state school population then eligible for Medicaid. ⁷

In early 1980, the Executive Office of Human Services (EOHS) began exploring ways to increase the Commonwealth's ability to obtain federal reimbursement for the cost of providing care to the mentally retarded clients at the state schools. As a means of achieving this goal, the EOHS participated in the drafting of the "charge-of-care statute," which was enacted into law as St.1980, c. 329, §§ 44-51 (see Appendix for text of statute). These sections amend portions of Mass.Gen.Laws Ann. chs. 123 and 118E that pertain to charges for care for persons in state institutions for the mentally retarded. The amendments impose full charges for care on all clients of state institutions for the mentally retarded who, because they hold assets in excess of the maximum amount allowable under federal law, are ineligible for federal benefits under Title XVI or Title XIX of the Social Security Act (Medicaid).

Defendants estimate that there are 1603 clients who are potentially subject to charges for care under the statute. ⁸ The charge to be levied at each institution is to be determined by the state Rate Setting Commission. The rate will reflect both operating and capital costs. ⁹ According to defendants, the full cost of a client's care in fiscal year 1981 was between $115.87 and $268.47 per day, or $41,134 to $95,307 per year. ¹⁰

The Commonwealth does not expect to gain significant revenue from charges imposed directly on clients. Even if the DMH charged all clients potentially affected by the statute, the amount of revenue produced would be limited. The figures provided by defendants indicate that the average client potentially subject to charge would totally consume his assets in less than one month if he were charged for the full cost of his care. ¹¹

Under the statute, clients with assets in excess of $1,500 can become Medicaid eligible and avoid charges for care by "sheltering" their assets. This can be done by either setting up a joint bank account or by placing the assets in an irrevocable trust.

The charge-for-care statute specifically provides for a "program of legal assistance to facilitate the establishment of trusts." St.1980, c. 329, § 50. This program became known as the Client Trust Fund Project (Project). The purpose of the Project was to help clients and their families select an appropriate method of alienating their assets in excess of $1,500 by providing them with legal and financial advice. The Project staff conducted informational meetings and provided the appropriate family member or guardian with an information guide which, in addition to explaining the objectives and mechanics of the Project, included a selection-of-option form that was to be completed and returned to the Project staff within seven days of receipt. The form contained three options: (1) establish an irrevocable trust; (2) create a joint, consignatory bank account; or (3) spend down any assets over the prescribed maximum level. The Project also offered clients a model trust instrument as an aid for drawing up an irrevocable trust.

Plaintiffs soon became dissatisfied with the operation of the Project. Of particular concern was the fact that approximately 900 of the mentally retarded clients potentially subject to charge do not have guardians or legal representatives to help them assess the various alternatives available to them. ¹² About sixty of these clients have no family member, guardian, conservator, or any other general representative to assist them. Plaintiffs allege that the Project failed to give individualized attention to the financial needs of each of these clients, and that the information provided by the Project was inaccurate, incomplete and confusing. ¹³

THE PRELIMINARY INJUNCTION

On December 15, 1980, plaintiffs filed a motion seeking an injunction prohibiting defendants from charging plaintiffs for their care, which plaintiffs alleged violated defendants' obligations under the consent decrees. Plaintiffs also requested that the district court enjoin defendants from...