Mazza v. Secretary of Dept. of Health and Human Services

• Citation: 903 F.2d 953
• Decision Date: 25 July 1990
• Docket Number: No. 89-5601,89-5601
• Parties: , Unempl.Ins.Rep. CCH 15458A Sam MAZZA, Appellant, v. SECRETARY OF DEPARTMENT OF HEALTH AND HUMAN SERVICES of the United States, Appellee.
• Court: U.S. Court of Appeals — Third Circuit

Page 953

903 F.2d 953

30 Soc.Sec.Rep.Ser. 3, Unempl.Ins.Rep. CCH 15458A

Sam MAZZA, Appellant, v. SECRETARY OF DEPARTMENT OF HEALTH AND HUMAN SERVICES of the United States, Appellee.

No. 89-5601.

United States Court of Appeals Third Circuit.

Argued Dec. 13, 1989.

Decided May 17, 1990.

Rehearing and Rehearing In Banc Denied July 25, 1990.

Terence Farrell, (argued), Community Health Law Project, East Orange, N.J., for appellant.

Samuel A. Alito, Jr., U.S. Atty., Susan J. Steele, (argued), Asst. U.S. Atty., Newark, N.J., for appellee.

Before HUTCHINSON, COWEN and WEIS, Circuit Judges.

OPINION OF THE COURT

WEIS, Circuit Judge.

The claimant here filed concurrent claims for Social Security Disability and Supplemental Security Income payments. Asserting that a statutory amendment granted an option, the Social Security Administration calculated the disability benefits first and offset them against potential SSI payments, despite a long-standing practice to the contrary. As a result, the claimant was denied entitlement to SSI benefits and the accompanying entitlement to Medicaid. We conclude that the agency's unguided, random processing of the concurrent claims here was arbitrary and not in accordance with statutory intent. Accordingly, we will reverse the district court judgment against the claimant and remand with directions that he be found eligible for SSI, thereby protecting his eligibility for Medicaid.

Claimant Sam Mazza began a period of hospitalization for a disabling condition on June 8, 1984. He applied for Supplemental Security Income benefits under Title XVI (SSI) as well as for payments under the Old-Age, Survivors, and Disability Insurance program found in Title II. On June 19, 1984 the Social Security Administration advised him that the cash surrender value of his life insurance policy made him financially ineligible for SSI benefits. Mazza then took out a loan of $1,500 on the policy, which he used to pay part of a long overdue debt. This action reduced the cash value of the policy to $1,050 and diminished his assets so that he met the standards for inclusion in the SSI program.

At the Social Security Administration's suggestion, Mazza also applied for a veterans pension, which he received in February 1985. At that point, his income exceeded the limits set for SSI eligibility. Mazza's claim, therefore, is for the time between June 1984 and February 1985. During that period his sole income was a union pension of $269.91 per month. His hospitalization lasted until September 5, 1984, and it is not disputed that his disability has continued to the present.

Approximately a year after his application for benefits, Mazza received a letter from the Social Security Administration dated June 5, 1985 stating that he had met the medical requirements for Title II disability benefits and that a decision on the non-medical requirements would be forthcoming. In a July 15, 1985 letter, the Social Security Administration informed Mazza that his SSI claim was denied because of his income, which was said to include Title II benefits for the period beginning June 1984. In fact, the Title II payments had not been made, nor was Mazza notified until some three weeks later that he had been found eligible for those benefits retroactively. ¹

On August 6, 1985, the Social Security Administration notified Mazza that he would receive a check for Title II benefits covering the months from June 1984 to July 1985. The letter included the following statement: "In an earlier notice we told you that we would reduce your social security benefits [Title II] for 06/84 THROUGH 05/85 if you had received supplemental security income payments for this period. Because you did not receive supplemental security income payments, your social security benefits will not be reduced."

In response to his request for reconsideration of the SSI denial, Mazza received a letter dated September 20, 1985 explaining that because he had received retroactive Title II payments covering the period after June 1984, he was not entitled to SSI benefits for the same time.

Mazza appealed this ruling and at a hearing before an ALJ pointed out that the refusal to allocate SSI benefits also resulted in a denial of Medicaid coverage for medical expenses incurred during his illness. The ALJ rejected Mazza's position on the ground that the retroactive Title II payments raised his income above the SSI eligibility ceiling for the months in question.

Because of a transcription difficulty, Mazza was required to present his case to a second ALJ who also rejected the claim. In the course of his recommended decision, the second ALJ nevertheless wrote: "In the instant case, the supplemental security income benefits should have been calculated first and the SSDI [Title II] benefits should have been reduced to account for those payments. This was admittedly not done."

After the Appeals Council accepted the second ALJ's recommendation to deny benefits, Mazza appealed to the district court. The district judge observed that "[b]ecause of the timing of the Secretary's disability determination, Mazza's eligibility for SSI and SSDI [Title II] benefits for an earlier period was essentially determined concurrently." The court read the amended "windfall" statute, 42 U.S.C. Sec. 1320a-6, to mean that "either SSI or SSDI [Title II] benefits awarded retroactively may be offset against the other to prevent a windfall payment to the applicant."

Focusing on the calculation of benefits chronology, the district court concluded that "[t]o the extent it is argued the Act is silent regarding whether SSI or SSDI [Title II] be calculated first, courts should defer to the Secretary's construction if it is reasonable, even if that construction is not the only one reasonable." Based on that rationale, the court granted summary judgment to the Secretary.

On appeal Mazza concedes that he is not entitled to duplicative payments for the June 1984 to February 1985 period, and disclaims any attempt to evade the windfall statute or to collect any additional sums. Instead, he seeks reallocation of the amounts already received so as to establish eligibility for SSI in addition to Title II. He contends that the Secretary should have first calculated the SSI benefits and then deducted them from the amount due from the Title II payments. Had that procedure been followed, Mazza would have received the Medicaid assistance that has been denied him.

The Secretary maintains that the windfall statute gives an option to calculate and reduce retroactive benefits in either order. The Secretary insists that this policy reflects a reasonable interpretation of the windfall statute, and that we should defer to that construction.

Although the windfall provision presents the crucial issue in this case, a brief preliminary review of the related benefits statutes will be helpful.

Title II of the Social Security Act, 42 U.S.C. Secs. 401-433, provides that individuals who have worked and contributed to the Social Security Trust Fund are entitled to disability benefits upon showing physical or a mental disability. This disability coverage is available without demonstrating financial need.

Title XVI of the Act, 42 U.S.C. Secs. 1381-1383c, addresses SSI benefits. Eligibility for this program depends on claimants' incomes and financial assets rather than contributions to the Social Security Funds. Claimants may receive SSI payments for certain specified physical disabilities or when their incomes fall below a certain level. Disability payments received under Title II count as unearned income in evaluating claimants' financial need for SSI benefits.

The windfall statute, 42 U.S.C. Sec. 1320a-6, governs retroactive awards of Title II and SSI benefits and is designed to prevent duplication of payments under both programs. In describing the need to prevent windfalls, the Conference Committee explained, "an individual eligible under both [the Title II] and SSI programs, whose determination of eligibility for [Title II] is delayed, can in some cases receive full payment under both programs for the same months." H.R. Conf.Rep. No. 944, 96th Cong., 2d Sess. 69, reprinted in 1980 U.S.Code Cong. & Admin. News 1392, 1416. The Senate also was aware of the problem and proposed that "an individual's entitlement under the two titles shall be considered as a totality." S.Rep. No. 408, 96th Cong., 2d Sess. 78 reprinted in 1980 U.S.Code Cong. & Admin. News 1277, 1356.

The Congressional discussion led to the 1980 legislation providing that "[Title II] benefits ... retroactively payable ... shall be reduced by an amount equal to ... supplemental security income benefits ... for such ... months as would not have been paid ... if the individual had received the [Title II] benefits ... at the times they were regularly due during such period rather than retroactively." Pub.L. No. 96-265, Sec. 501(a), 94 Stat. 441, 469-70 (1980) (codified as amended at 42 U.S.C. Sec. 1320a-6).

A program complementary to SSI is interim state assistance given without delay to the critically needy. Claimants will often file concurrently for benefits under both Title II and SSI. Because of the protracted nature of the administrative process, the waiting periods for determination of eligibility may be lengthy. In order to provide financial aid during the interim, states grant immediate assistance through their welfare agencies. In addition to preventing double payments, Congress intended the 1980 windfall statute to facilitate reimbursement to those states. See H.R. Conf.Rep. No. 944, 96th Cong., 2d Sess. 69, reprinted in 1980 U.S.Code Cong. & Admin. News 1392, 1416 ("From the amount of social security benefits offset under the provision, States would be reimbursed for any amounts of State supplementary payments that would not have been paid"). See 42 U.S.C. Sec. 1383(g). See also Moore v. Colautti, 483 F.Supp. 357 (E.D.Pa.1979), (discussing legislative...