Rabin v. Wilson-Coker

Decision Date26 March 2004
Docket NumberNo. 03-7572.,03-7572.
Citation362 F.3d 190
PartiesRonni RABIN, individually and as a representative of all persons similarly situated, Maritza Avila, individually and as a representative of all persons similarly situated, Jane Doe, Ronald Green, individually and as representatives of all persons similarly situated, Wende Qallab, individually and as a representative of all persons similarly situated, Plaintiffs-Appellants, v. Patricia WILSON-COKER, in her official capacity as Commissioner of the Connecticut Department of Social Services, Defendant-Appellee.
CourtU.S. Court of Appeals — Second Circuit

Shelley A. White, New Haven Legal Assistance Assoc., Inc., New Haven, CT (Joanne G. Gibau, New Haven Legal Assistance Assoc., Inc., New Haven, CT; Sharon Langer, Connecticut Legal Services, New Britain, CT; Lucy Potter, Greg Bass, Greater Hartford Legal, Hartford, CT, on the brief), for Plaintiffs-Appellants.

Hugh Barber, Assistant Attorney General (Richard Blumenthal, Attorney General, Richard J. Lynch and Tanya Feliciano, Assistant Attorneys General, on the brief), Hartford, CT., for Defendant-Appellee.

Before: POOLER, SACK, and WESLEY, Circuit Judges.

POOLER, Circuit Judge.

Congress has determined that parents who receive Medicaid should enjoy a temporary grace period before having their benefits terminated when their earned income would otherwise make them ineligible. The question we face is whether the grace period only applies when the parent is fortunate enough to get a job or receive a salary increase that triggers ineligibility, or if the grace period also applies when a state lowers its income eligibility limits, making a working parent who has not received an increase in her salary ineligible.

The statute central to this appeal, 42 U.S.C. § 1396r-6, provides that families who were eligible for Aid to Families With Dependent Children ("AFDC"), a former welfare program, "in at least 3 of the 6 months immediately preceding the month in which such family becomes ineligible for such aid, because of hours of, or income from, employment of the caretaker relative," will remain eligible for Medicaid for a period of up to a year. See 42 U.S.C. § 1396r-6(a)(1), (b)(1). Each of the individual plaintiffs has earned income and was terminated from Medicaid when Connecticut enacted a statute reducing its Medicaid eligibility limits. See 2003 Conn. Acts § 03-02 § 10(g) (Reg.Sess.). Connecticut contends that the transitional medical assistance ("TMA") benefit is unavailable to plaintiffs because they lost their eligibility due to the new income limits and not due to income from employment. After reviewing the statutory scheme, the legislative history of the TMA provision and its purposes, and the relevant cases, we conclude that plaintiffs lost their eligibility for Medicaid because of "income from employment" within the meaning of the federal statute and therefore remain eligible for TMA.

The Statutory Framework

Prior to April 1, 2003, Connecticut allowed families with income levels up to 150% of the federal poverty level to participate in HUSKY A, a state Medicaid program. Connecticut achieved this result by not counting income between its AFDC eligibility levels and 150% of the federal poverty level. In 2003, the Connecticut legislature enacted P.A. 03-02, which provided that parents and other needy caretaker relatives would not be eligible for TMA if their incomes exceeded 100% of the federal poverty level. 2003 Conn. Acts § 03-02 (Reg.Sess.). The legislature further directed that the Medicaid assistance for newly ineligible caretaker relatives would end on April 1, 2003.1 Id. Defendant Patricia Wilson-Coker, Commissioner of the Connecticut Department of Social Services, issued termination notices to approximately 23,000 adult Medicaid recipients informing them that their Medicaid benefits would end on April 1, 2003, because their household incomes exceeded 100% of the federal poverty level.

Connecticut's actions took place against the background of a Byzantine tangle of federal statutes, any one of which is difficult to decipher if read either independently of the history of the program or in isolation from other provisions of the Medicaid Act. We therefore undertake a brief description and history of the Medicaid program, created in 1965.

Medicaid is a joint federal-state program under which the federal government pays a portion of a state's expenses for providing medical assistance to persons who are unable to afford insurance provided that the state's plan for granting assistance has been approved by the Centers for Medicare and Medicaid Services ("CMS"), a federal agency within the United States Department of Health and Human Services ("HHS"). Rodriguez v. City of N.Y., 197 F.3d 611, 613 (2d Cir.1999). In order to win approval from CMS, the state plan must comply with the requirements of the Medicaid Act, 42 U.S.C. § 1396 et seq., and its implementing regulations. Wisconsin Dep't of Health and Family Servs. v. Blumer, 534 U.S. 473, 479, 122 S.Ct. 962, 151 L.Ed.2d 935 (2002).

Medicaid eligibility is categorical. To receive benefits, applicants must show both that they are needy and that they fall into one of the many categories set forth in 42 U.S.C. § 1396a(a)(10)(A). Until Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ("PRWORA"), two of the most significant eligibility categories were families who received AFDC, a cash assistance program for families with dependent children, and families with dependent children who would be eligible for AFDC if it were not for income and resources and who meet state income eligibility standards for Medicaid. See 42 U.S.C. §§ 1396a(a)(10)(A)(i)(I), 1396a(a)(10)(C), 1396d(a)(i),(ii).

PRWORA abolished the AFDC program and established a new cash assistance program for families, Temporary Assistance to Needy Families ("TANF"). See 42 U.S.C. § 601 et. seq. Nevertheless, Congress continued to define eligibility by reference to the former AFDC program. See 42 U.S.C. § 1396(a)(10)(A), (C). Congress resolved the apparent inconsistency of defining categorical eligibility by reference to the repealed AFDC program by enacting 42 U.S.C. § 1396u-1, which provides that for purposes of PRWORA's TMA provision, a person will "be treated as receiving aid or assistance" under AFDC, the repealed program, if she meets income and resource standards and other eligibility requirements in effect in 1996. 42 U.S.C. § 1396u-1(b)(1)(A). Congress also gave the states the option of creating either higher or lower income limits within the following parameters: (1) the income level could be no lower than the level in effect under the 1988 state plan; (2) income and resource levels could be increased "by a percentage that does not exceed the percentage increase in the Consumer Price Index for all urban consumers"; and (3) the states could change their methods for counting income and resources to make those methods "less restrictive" than the 1996 methods. 42 U.S.C. § 1396u-1(b)(2). As we have seen, Connecticut originally chose the third option and thereby created a generous program for its needy families.

The TMA program also has a long history. In 1972, Congress provided that families who became ineligible for AFDC due to "increased income from employment" would remain eligible for Medicaid for four months. Pub.L No. 92-603 § 209, 86 Stat. 1329 (1972) (codified as amended at 42 U.S.C. § 1396a(e)(1)(A)). In 1984, the Eighth Circuit considered the meaning of Section 209's reference to "increased income from employment." Phillips v. Noot, 728 F.2d 1175, 1177 (8th Cir.1984). The Phillips plaintiffs had been terminated from AFDC — and Medicaid — because they were no longer eligible for an income disregard that allowed AFDC recipients to keep the first thirty dollars and an additional one-third of their earned income. Id. at 1176-77. Their incomes had not increased. Id.

The Eighth Circuit found Section 209's TMA language ambiguous because "increased income from employment" could refer either to actual income from employment or to income that was countable under the applicable eligibility standards. Id. at 1177. Thus, the court turned to the legislative history of the TMA statute and found that "[t]he clear primary purpose of the provision was to remove a work disincentive: loss of Medicaid benefits" and that a secondary purpose was preventing "sudden loss of medical care." Id. Although the court also acknowledged that the purpose of limiting the earned income disregard "was undoubtedly to cut federal spending," it found this purpose irrelevant to construing the language of the separate statutory provision authorizing TMA, explaining that "[t]he fact that in 1981 Congress sought to cut the budget in no way imposes a general rule that all statutes involving expenditures must be construed in favor of spending less." Id. at 1178.

The Phillips court also rejected HHS's interpretation of the TMA provision, which supported the state, because it was "not based on long-standing policy," had not "been the subject of administrative adjudication or rulemaking," and was not "supportive of the congressional purpose" of the TMA provision. Id.

The court held: "Even though ... Congress may not have envisioned the precise situation which exists here and now, we find the legislative history to tip the balance in favor of plaintiffs' position. We therefore conclude that the term `income' in [the TMA provision] means `countable' income." Id.

In probable reaction to Phillips, Congress added a new section to the AFDC statute which granted families who lost AFDC as a result of the expiration of the thirty and one-third disregard a minimum of nine months of transitional Medicaid. Pub.L. 98-369 § 2624, formerly codified at 42 U.S.C. § 602(a)(37)(1985). This section effectively adopted the specific holding of Phillips and extended its duration.


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