Reames v. Oklahoma ex rel. Ok Health Care

• Decision Date: 14 June 2005
• Docket Number: No. 04-6002.,04-6002.
• Parties: Patti L. REAMES, Plaintiff-Appellant, v. State of OKLAHOMA, ex rel. OKLAHOMA HEALTH CARE AUTHORITY; Oklahoma Department of Human Services; Michael Fogarty; Howard Hendrick, Defendants-Appellees. The Association for Community Living, Inc., Amicus Curiae.
• Court: U.S. Court of Appeals — Tenth Circuit

411 F.3d 1164

Patti L. REAMES, Plaintiff-Appellant, v. State of OKLAHOMA, ex rel. OKLAHOMA HEALTH CARE AUTHORITY; Oklahoma Department of Human Services; Michael Fogarty; Howard Hendrick, Defendants-Appellees.

The Association for Community Living, Inc., Amicus Curiae.

No. 04-6002.

United States Court of Appeals, Tenth Circuit.

June 14, 2005.

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Lee M. Holmes, Holmes, Holmes & Neisent, P.L.L.C., Oklahoma City, OK, (Tracy Speck Neisent, Holmes, Holmes & Neisent, P.L.L.C., Oklahoma City, OK with him on the briefs), for the Appellant.

Andrew Tevington, Assistant Attorney General, State of Oklahoma, Oklahoma City, OK, (Travis Smith, Assistant General Counsel, Oklahoma Department of Human Services, Oklahoma City, OK, with him on the briefs), for the Appellees.

Before LUCERO and McCONNELL, Circuit Judges, and ANDERSON, Senior Circuit Judge.

LUCERO, Circuit Judge.

Patti Reames, a Social Security recipient, appeals the lower court ruling that the Oklahoma Department of Human Services did not violate federal law when it determined that she cannot use a federal statutory "special needs trust" to prevent Oklahoma from taking her Social Security income as Medicaid co-pay. Because we conclude that Oklahoma is not acting contrary to Congressional intent, we AFFIRM.

I

Reames is a 51-year-old disabled inhabitant of an Oklahoma nursing home whose only income is from monthly Social Security Disability ("SSD") benefits payments she has received since her disability more than five years ago. Almost all of the monthly benefit is paid as co-pay to her nursing home under Oklahoma Medicaid rules. In an attempt to keep Oklahoma from using her check as co-pay, on February 26, 2002, Reames' mother created a Special Needs Trust as authorized by 42 U.S.C. § 1396p(d)(4)(A). Enacted in 1993 as part of Congress's revision of how trusts were treated under Medicaid, this section enables the "assets" of a disabled individual under the age of 65 to be contributed to a Special Needs Trust for her benefit without having such assets treated as countable assets for Medicaid purposes.¹ The day after the creation of the § (d)(4)(A) trust, Reames assigned her monthly SSD check to the trust through direct deposit.

In April, 2002, Reames applied to the Oklahoma Department of Human Services ("OKDHS"), the state agency that determines Medicaid eligibility and disbursement, requesting that Medicaid pay for her nursing-home care. In June, her application was approved, effective retroactively to when her assets had been placed in the trust, but OKDHS took account of Reames' SSD in its determination of her co-pay, and the notice of approval thus required her to pay $796 of her $846 check to the nursing home every month. This determination is in accordance with Medicaid regulations that require states to take Social Security income into account for purposes of establishing the amount of beneficiaries' co-pay. Reames filed an administrative appeal, an administrative hearing was held, and a Fair Hearing Decision was issued affirming the co-pay calculation. Another administrative appeal was filed to the Director of OKDHS, who also upheld the co-pay determination.

Her administrative remedies thus having been exhausted, Reames filed suit in district court against OKDHS, the Oklahoma Health Care Authority ("OCHA"), OKDHS Director Headrick and OHCA Chief Executive Officer Fogarty, arguing that the § (d)(4)(A) trust statute on its face both protects the SSD benefits she assigned to the trust from being taken into account by Oklahoma in its co-pay determination, and supercedes any state or federal Social Security or Medicaid regulations. Reames sought three kinds of relief: 1) a declaration that defendants' method of computing her Medicaid benefits is illegal, 2) injunctive relief enjoining defendants from considering the disability income placed in the trust in determining her Medicaid benefits, and 3) an order requiring defendants to restore to plaintiff the amounts she asserts have been wrongfully applied toward the cost of her nursing-home care (despite her assertion that she "does not seek a money judgment against the state"). Based in part on sovereign immunity determinations and in part on the perceived compatibility of Oklahoma's Medicaid scheme with the federal legal and regulatory framework, the district court affirmed Oklahoma's administrative determinations and dismissed the suit. Reames now appeals the district court decision.

II

In its Eleventh Amendment analysis, the district court let Reames' suit for declaratory and injunctive relief against all defendants move forward, and dismissed any claims she made for retroactive compensatory relief. This court reviews de novo a district court's Eleventh Amendment immunity determination. Lewis v. N.M. Dep't of Health, 261 F.3d 970, 975 (10th Cir.2001).

The Eleventh Amendment provides that "the Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State...." U.S. Const. amend. XI. This Amendment precludes not only actions in which the state is directly named as a party, but also actions brought against a state agency or state officer where the action is essentially one for recovery of money from the state treasury. Edelman v. Jordan, 415 U.S. 651, 677, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974) (barring any "retroactive award which requires the payment of funds from the state treasury" and limiting the federal courts to providing only "prospective injunctive relief" against state officials sued in their official capacity).² However, the possibility — indeed, even the "inexorability" — that a court's ruling may ultimately lead to the payment of state funds does not necessarily transmute the relief at issue into an impermissible award of damages. See Quern v. Jordan, 440 U.S. 332, 347, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979).

Nevertheless, if the relief sought only requires state expenditures pursuant to a court order requiring a change in state conduct, the Eleventh Amendment will not ordinarily preclude actions brought against the state. For example, in Milliken v. Bradley, 433 U.S. 267, 97 S.Ct. 2749, 53 L.Ed.2d 745 (1977), the Supreme Court held that a Sixth Circuit order requiring defendants to implement remedial education programs as an adjunct to desegregating the Detroit public school system did not violate the Eleventh Amendment. Because the expenditure was ancillary to the defendants' compliance in the future with the court's order to "conform their conduct to requirements of federal law," ordering the necessary expenditure of funds for the programs was within the federal courts' remedial powers. Id. at 289, 97 S.Ct. 2749.

Reames' case is more analogous to Edelman than to Milliken because it is easy to distinguish the remedy for past misinterpretations of federal law (reimbursement for co-pays already paid) from the remedy for future ones (ordering Oklahoma prospectively to cease taking a co-pay). Retroactive benefits cannot therefore be seen as an adjunct of a court-ordered prospective relief, but could only constitute redress for past violations of federal law. As such, and because the funds not disbursed to Reames are intermingled in the state fisc, retroactive benefits paid to Reames would be indistinguishable from damages. Edelman squarely holds that such relief is outside the remedial power of the federal courts, as contrasted with "prospective declaratory and injunctive relief," which may be subject to exception from the sovereign immunity doctrine. Edelman, 415 U.S. at 666 n. 11, 94 S.Ct. 1347 (1974). Therefore, OKDHS and OCHA are entitled to immunity from suit insofar as Reames seeks retroactive benefits.

The Eleventh Amendment does not prevent plaintiffs from bringing suits against state officials like Hendrick and Fogarty in their individual and personal capacities. Scheuer v. Rhodes, 416 U.S. 232, 237-38, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). However, it is unclear whether Reames sues Hendrick and Fogarty in their individual or in their official capacity. In Kentucky v. Graham, 473 U.S. 159, 167 n. 7, 105 S.Ct. 3099, 87 L.Ed.2d 114 (1985), the Supreme Court recognized that while a complaint may not always clearly specify whether state officials are sued personally or officially, the "course of proceedings" will usually indicate the nature of the suit. Reames has consistently directed all of her arguments to the actions of OKDHS and OCHA, taken through its agents Hendrick and Fogarty. At no time did she seek to impose liability on Hendrick or Fogarty independent of the actions of their agencies. Reames has treated this lawsuit from its inception as a suit against the state, premised upon the actions of its agents, and therefore money damages are barred under the Eleventh Amendment.

On this basis, the district court properly granted defendants' motion to dismiss on grounds of immunity insofar as it addressed the defendants' potential liability for restoring to Reames the amounts she asserts have been wrongfully applied toward the cost of her nursing-home care. The trial court also correctly denied the motion insofar as she sought prospective declaratory and injunctive relief.

III

A district court's review of agency action is a question of law that we review de novo. Public Lands Council v. Babbitt, 167 F.3d 1287, 1293 (10th Cir.1999).

The dispute between Reames and the state of Oklahoma stems from the fact that the Special Needs trust generally authorizes protection of assets, including income, from Medicaid determinations, whereas state and federal Medicaid regulations mandate that states take income into account in determining co-pay. Section § (d)(4)(A) enables disabled individuals under age 65 to contribute "assets" to a Special Needs Trust for their benefit without having such assets treated as countable assets for Medicaid purposes....