Reed v. Blinzinger, IP 85-1353-C.

• Decision Date: 14 March 1986
• Docket Number: No. IP 85-1353-C.,IP 85-1353-C.
• Citation: 639 F. Supp. 130
• Parties: Brenda REED, for Herself and Her Minor Children Michael Reed and Tony Reed, Linda Evans, for Herself and Her Minor Child Thedell Atwone Polk, and for All Others Similarly Situated v. Donald L. BLINZINGER, in His Official Capacity as Administrator of the Indiana State Department of Public Welfare, and Dr. Otis R. Bowen, Secretary of the Department of Health and Human Services.
• Court: U.S. District Court — Southern District of Indiana

639 F. Supp. 130

Brenda REED, for Herself and Her Minor Children Michael Reed and Tony Reed, Linda Evans, for Herself and Her Minor Child Thedell Atwone Polk, and for All Others Similarly Situated v. Donald L. BLINZINGER, in His Official Capacity as Administrator of the Indiana State Department of Public Welfare, and Dr. Otis R. Bowen, Secretary of the Department of Health and Human Services.

No. IP 85-1353-C.

United States District Court, S.D. Indiana, Indianapolis Division.

March 14, 1986.

East Central Legal Services, Anderson, Ind. by Dennis K. Frick, Montague M. Oliver, Jr., and Daniel J. Smith, for plaintiffs.

Gordon E. White, Jr., Deputy Atty. Gen., Indianapolis, Ind., for defendant.

STECKLER, District Judge.

This matter is before the Court on plaintiffs' motion for preliminary injunction and on the parties' cross motions for summary judgment. The Court consolidated the hearing on plaintiffs' motion for preliminary injunction with a hearing on the summary judgment motions. Having heard evidence and arguments on both motions and having considered the exhibits and briefs, the Court finds that plaintiffs are entitled to judgment as a matter of law. Therefore, plaintiffs' motion for preliminary injunction is moot.

Plaintiffs have been certified as a class under Fed.R.Civ.P. 23(a), (b)(2). The class consists of families who have had or will have their Medicaid eligibility terminated because they are no longer eligible for Aid to Families with Dependent Children (AFDC) benefits based on the new filing requirements under § 2640 of the Deficit Reduction Act of 1984 (DRA), 42 U.S.C. § 602(a)(38). Plaintiffs do not challenge the AFDC requirements and termination. Rather, they argue that their Medicaid eligibility should not be terminated because the income provisions of § 2640 are prohibited by the Medicaid statute and regulations. 42 U.S.C. § 1396a(a)(17)(D); 42 C.F.R. § 435.602.

Under § 2640, all siblings living in a household must now be included in the filing unit for AFDC benefits and have their income counted. 42 U.S.C. § 602(a)(38). The inclusion of siblings in the filing unit has resulted in the termination of the plaintiffs' benefits. Because plaintiffs are no longer eligible for AFDC, the State has terminated their Medicaid eligibility also. However, under the Medicaid statute and regulations, the State is not allowed to consider the financial responsibility of any individual for an applicant, other than the applicant's spouse or parent. 42 U.S.C. § 1396a(a)(17)(D); 42 C.F.R. 435.602. Thus, plaintiffs contend that the termination of their Medicaid eligibility violates the federal Medicaid statute. Plaintiffs seek an injunction enjoining defendant from denying Medicaid assistance to plaintiffs and class members because of the AFDC income provisions and ordering defendants to comply with federal law.

Defendant Donald L. Blinzinger is the Administrator of the Indiana State Department of Public Welfare (State) and as such is generally responsible for the administration of the Medicaid program in Indiana. Defendant Otis R. Bowen, Secretary of the Department of Health and Human Services (Secretary), was joined in the present cause pursuant to this Court's order of January 7, 1986. Defendants contend that there is no inconsistency between the AFDC and Medicaid provisions and that they are complying with federal law.

The State defendant has raised three affirmative defenses. Defendant argues that plaintiffs' action is barred by the Eleventh Amendment because the action is essentially against the State. Because plaintiffs are seeking prospective injunctive relief, however, the action is not barred. See Green v. Mansour, Director, Michigan Department of Social Services, ___ U.S. ___, 106 S.Ct. 423, 88 L.Ed.2d 371 (1985); Quern v. Jordan, 440 U.S. 332, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979); Granados v. Reivitz, 776 F.2d 180 (7th Cir.1985). The State also asserts qualified immunity as an affirmative defense. This defense is usually applicable in an action for damages rather than one for equitable relief. See Gomez v. Toledo, 446 U.S. 635, 639, 100 S.Ct. 1920, 1923, 64 L.Ed.2d 572 (1980). Plaintiffs are not seeking damages.

The State defendant also argues that plaintiffs have failed to state a claim because they did not appeal the administrative decision to a state court. However, exhaustion of state judicial remedies is not required in a § 1983 action. Monroe v. Pape, 365 U.S. 167, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961). Defendant relies on Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981), for the proposition that an available state court remedy must be utilized before a plaintiff may bring a § 1983 action, but plaintiffs' action differs from the complaint in Parratt. Plaintiffs are not claiming a due process violation based on a protected state property right, but are claiming a violation of federal law caused by the defendant's procedures and policies. Therefore, resort to the state court is not necessary. See Logan v. Zimmerman Brush Co., 455 U.S. 422, 435-436, 102 S.Ct. 1148, 1157-58, 71 L.Ed.2d 265 (1982). Plaintiffs have stated a claim under § 1983.

Both defendants rely on the Secretary's interpretation of the new AFDC requirement, which reconciles it with the Medicaid prohibition against deeming income to an applicant from anyone other than the applicant's spouse or parent. Defendants argue that this interpretation is entitled to much deference. Plaintiffs respond that the interpretation is in conflict with the Secretary's own regulations and the clear language of the Medicaid statute. Consequently, plaintiffs argue that the interpretation is clearly erroneous and entitled to no deference by the Court.

Defendants argue that the legislative histories of the 1965 Medicaid statute and DRA show that Congress knew and intended that the new AFDC filing requirements of 42 U.S.C. § 602(a)(38) would affect the Medicaid eligibility of those applicants. Defendants contend that Congress intended to distinguish between deeming of income from outside the family unit and defining available income to the family unit. Defendants argue that the Secretary's interpretation reflects the congressional intent underlying the statutes.

Under the Secretary's interpretation of § 2640, the section does not deem income from financially responsible persons but rather identifies who must be included in a filing unit and then considers all income and resources available to the unit. Because 42 U.S.C. § 1396a(a)(17)(B) requires that all available income must be included in determining a Medicaid applicant's eligibility, defendants contend that 42 U.S.C. § 602(a)(38) is within the meaning of § 1396a(a)(17)(B). Defendants then argue that because § 602(a)(38) identifies available income to the filing unit rather than deeming income from other persons, it is not prohibited under § 1396a(a)(17)(D). Defendants also argue the regulations upon which plaintiffs rely, 42 C.F.R. §§ 435.113 and 435.602, were superseded by § 2640 of DRA and therefore no longer apply.

In response, plaintiffs argue that the Medicaid statute and regulations prohibiting the deeming of income from any persons other than a spouse or parent are unambiguous and therefore reflect the clear intent of Congress and must be enforced. Plaintiffs also argue that the legislative history that defendants rely upon does not clearly indicate that Congress intended that § 1396a(a)(17)(D) not be given effect and that the legislative history does not distinguish between persons inside or outside the family unit. Plaintiffs argue that Congress' silence on § 1396a(a)(17)(D) in § 2640 of DRA cannot modify the unambiguous language of the section.

It is well settled that the Secretary's interpretations are entitled to great deference and that the Secretary has broad discretion to define terms and interpret the Act. Schweicker v. Gray Panthers, 453 U.S. 34, 101 S.Ct. 2633, 69 L.Ed.2d 460 (1981). Moreover, the Secretary's regulations defining terms under the statute have legislative effect, and the Court is limited to determining whether the regulation exceeds the statutory authority and whether it is arbitrary and capricious. See id. at 43-44, 101 S.Ct. at 2639-41. However, this standard of review is inapplicable to the Secretary's letter interpreting § 2640 of DRA, because it is neither a legislative nor substantive regulation. See Batterton v. Francis, 432 U.S. 416, 425 n. 9, 97 S.Ct. 2399, 2405-06 n. 9, 53 L.Ed.2d 448 (1977); Malloy v. Eichler, 628 F.Supp. 582, 593 (Del.1986). Consequently, the Court must decide whether the interpretation is entitled to substantial deference.

An administrative interpretation is given controlling weight only if it is reasonable and reflects the policies underlying the legislation. Morton v. Ruiz, 415 U.S. 199, 237, 94 S.Ct. 1055, 1075, 39 L.Ed.2d 270 (1974). Moreover, an agency is bound by its own regulations. Bahramizadeh v. United States I.N.S., 717 F.2d 1170, 1173 (7th Cir.1983). The interpretation cannot be inconsistent with the plain meaning of a regulation or nullify the intent or wording of a regulation. Id. Therefore, the Court must determine whether the Secretary's interpretation of the new AFDC requirement in 42 U.S.C. § 602(a)(38) is reasonable in light of the Medicaid statutes and regulations.

The Secretary's interpretation of § 602(a)(38) does not comport with the plain language of the Medicaid statute or with the Secretary's own regulations. The language of the statute and regulations is unambiguous. A court "must give effect to the unambiguously expressed intent of Congress." Chevron, U.S.A., Inc. v. Natural Resources Defense, 467 U.S. 837, 104 S.Ct. 2778, 2782-81, 81 L.Ed.2d 694 (1984). When the statute is analyzed as a whole, as defendants argue it should be, the statute provides that the Secretary may set standards for determining the availability of income actually received by an individual and of income...