Rosen v. Goetz

Decision Date27 May 2005
Docket NumberNo. 05-5633.,No. 05-5779.,05-5633.,05-5779.
Citation410 F.3d 919
PartiesMichael ROSEN; Sanford Bloch; Mark Levine, Plaintiffs-Appellees/Cross-Appellants, v. M.D. GOETZ, Jr., Commissioner, Tennessee Department of Finance and Administration, Defendant-Appellant/Cross-Appellee.
CourtU.S. Court of Appeals — Sixth Circuit

Charles J. Cooper, Cooper & Kirk, Washington, D.C., for Appellant.

G. Gordon Bonnyman, Jr., Tennessee Justice Center, Nashville, Tennessee, Edmund L. Carey, Jr., Barrett, Johnston & Parsley, Nashville, Tennessee, for Appellees.

Charles J. Cooper, Michael W. Kirk, Cooper & Kirk, Washington, D.C., Linda A. Ross, Office of the Attorney General, Nashville, Tennessee, Ronald G. Harris, Aubrey B. Harwell, Jr., Neal & Harwell, Nashville, Tennessee, for Appellant.

G. Gordon Bonnyman, Jr., Russell J. Overby, Tennessee Justice Center, Nashville, Tennessee, Edmund L. Carey, Jr., George E. Barrett, Barrett, Johnston & Parsley, Nashville, Tennessee, Andrew Dunlap, Sarah Reynolds, Kirkland & Ellis, New York, New York, Margaret M. Huff, Nashville, Tennessee, Michael Cohan Welfare Law Center, New York, New York, for Appellees.

Mark B. Stern, Dana J. Martin, U.S. Department of Justice, Civil Rights Division, Washington, D.C., for Amicus Curiae.

Before: COLE and SUTTON, Circuit Judges; ZATKOFF, District Judge.*



The State of Tennessee appeals a district court order enjoining it from beginning the process of disenrolling members from its Medicaid program, which is known as TennCare. The district court held that the State's disenrollment procedures, which have been approved by the federal Centers for Medicaid and Medicare Services (CMS), violate (1) a 2001 consent decree requiring compliance with certain federal Medicaid regulations and (2) the Due Process Clause of the United States Constitution. Because the State's procedures comply with the applicable Medicaid regulations and with CMS's own interpretation of those regulations and because the State's procedures otherwise comply with the due process requirements set forth in Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), we reverse.


This case has its genesis in a March 2001 consent decree entered into by the State and the plaintiff class, which represents all beneficiaries of TennCare. The consent decree enjoins the State

from terminating, reducing or suspending the TennCare coverage of members of the plaintiff class who are enrolled in the TennCare program, without affording such individuals notice and an opportunity for a hearing in accordance with 42 C.F.R. Part 431, Subpart E.

JA 129. See generally Rosen v. Tenn. Comm'r of Fin. & Admin., 288 F.3d 918 (6th Cir.2002) (describing the litigation that led to the consent decree).

On January 10, 2005, Tennessee's Governor, Phil Bredesen, informed the public that a severe budgetary shortfall, together with the State of Tennessee's constitutionally mandated balanced budget requirement, would require the State to eliminate three of the seventeen TennCare eligibility categories and to disenroll 323,000 beneficiaries from the TennCare program. TennCare is the State of Tennessee's federally approved Medicaid demonstration project, through which the State extends health care benefits above and beyond federal requirements. See (CMS fact sheet describing the TennCare program). Due to expansions of the program since 1994, Tennessee's Medicaid program is the nation's most generous, providing health care to one-fifth of the State's population. It also has consumed 33.9 and 33.3 percent of the State's total spending over the last two years, the highest of any State in the country and well in excess of the national averages (21.4 and 21.9 percent, respectively) during those years. Current projections, according to the Governor, show that the TennCare program's expenses during fiscal year 2006 would (if left unchanged) increase by $650 million in state funds, a figure exceeding the State's growth in total revenue by approximately $325 million. An increase in TennCare spending of this magnitude, the Governor concluded, would prompt large cuts to the remainder of Tennessee's budget—to education, transportation, public safety and other programs—in view of Tennessee's balanced budget requirement. See Tenn. Const. art. II, § 24.

Within days of this announcement, the district court on its own initiative determined that the consent decree barred the disenrollment proposal and enjoined the State from commencing the disenrollment process, a decision that the State appealed to the Sixth Circuit on January 31, 2005. At this point, a group of individuals successfully moved to intervene in the case on behalf of a class of individuals who would be subject to the disenrollment proposal. While the plaintiffs-intervenors did not favor the TennCare changes, they took the position that the disenrollment process should not be enjoined because immediate implementation of Governor Bredesen's proposal would permit the State to minimize the number of TennCare members that the State proposed to cut from the program this year.

On April 12, 2005, at the urging of the State and the plaintiffs-intervenors, we reversed the injunction. Rosen v. Goetz, 129 Fed.Appx. 167, No. 05-5202, 2005 U.S.App. LEXIS 6444 (6th Cir. Apr. 12, 2005). We held that the district court had mistakenly assumed authority under the 2001 consent decree to limit the State's substantive policy choices in deciding whether to eliminate certain types of "expanded" or "optional" Medicaid coverage, which is to say a State's provision of Medicaid benefits that federal law does not require participating States to provide. See 42 U.S.C. § 1315(a) (2005) (authorizing the waiver of certain federal requirements for "demonstration" projects that "assist in promoting the objectives" of the Medicaid system); see generally Pharm. Research & Mfrs. of Am. v. Thompson, 313 F.3d 600, 602 (D.C.Cir.2002). In reaching this conclusion, we noted that the consent decree gave the district court authority to determine whether the State's procedures for disenrolling TennCare beneficiaries complied with Part 431 of the Medicaid regulations but did not give it authority to question the State's substantive policy decision whether to eliminate certain forms of non-mandatory Medicaid coverage. See Rosen, 129 Fed. Appx. at 171-172, 2005 U.S.App. LEXIS 6444, at *12-13.


Consistent with this decision, the district court on remand examined whether the State's proposed disenrollment process complied with Part 431 of the Medicaid regulations and the Due Process Clause. See 42 C.F.R. § 431.205(d) (2005) (requiring that a State Medicaid agency's hearing system "must meet the due process standards set forth in Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), and any additional standards specified in this subpart"). In making this assessment, the district court held an evidentiary hearing, which among other things allowed the State to outline the process by which it planned to disenroll certain TennCare recipients. As early as June 1, 2005, the State plans to begin mailing three different notices to members of the plaintiff class about the disenrollment process: a Request for Information (RFI), a Verification Request and a Termination Notice. All three of the notices have been written in a way that ensures they are comprehensible to individuals who have a sixth-grade reading level. Each TennCare recipient who has not been identified by the State as eligible to receive benefits under another Medicaid category and who is therefore scheduled for disenrollment will receive a 14-page RFI packet. The RFI informs beneficiaries that their eligibility category for TennCare is ending and that they may continue to receive benefits only if they qualify for an open Medicaid category. The recipient then must complete a 7-page form within 30 days, provide proof of income and resources, provide a statement completed by employers and provide proof of pregnancy or special health conditions. The RFI informs beneficiaries that the State has the discretion to extend the 30-day submission time frame for good cause on a case-by-case basis. The point of this information exchange is to help the State determine whether a given TennCare beneficiary is eligible for benefits under another Medicaid program. JA 586.

If a recipient fails to complete the RFI fully, the State will send the beneficiary a Verification Request, informing the recipient that he or she has ten extra days to respond. JA 648. If the beneficiary does not respond at all or if the response establishes that the beneficiary is not eligible for an open Medicaid category, the State will send a Termination Notice 20 days in advance of the termination date that specifies the reasons why the enrollee is being terminated. The Termination Notice will inform beneficiaries that they have 40 days in which to request a hearing to resolve factual disputes related to termination (and that their coverage will continue until their appeal is resolved if they appeal and request an evidentiary hearing within 20 days).

The State will then route any requests for a hearing to the Tennessee Department of Human Services (DHS), where an employee known as a "Conciliation Specialist" will determine whether the hearing request is timely and whether it raises a "valid factual dispute"—which the State defines as "a dispute, [that] if resolved in favor of the appellant, would prevent the state from taking the adverse action that is the subject of the appeal." D. Ct. Op. at 25. If the Conciliation Specialist determines that there is a legitimate factual dispute about the TennCare member's eligibility to participate in another Medicaid program, the evidentiary hearing will go forward. Otherwise, the appeal will be sent to another...

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