Spry v. Thompson

• Decision Date: 21 May 2007
• Docket Number: No. 04-35746.,No. 04-35750.,04-35746.,04-35750.
• Citation: 487 F.3d 1272
• Parties: Elizabeth A. SPRY; Gary Spry; Demon Harvey; Michael McCarthy; Mary Gaye Reyes, Plaintiffs-Appellees, v. Tommy THOMPSON, Secretary of Health & Human Services; Mark B. McClellan, Administrator, Centers for Medicare and Medicaid Services, Defendants-Appellants, and Gary Weeks, Director, Oregon Department of Human Services, Defendant. Elizabeth A. Spry; Gary Spry; Demon Harvey; Michael McCarthy; Mary Gaye Reyes, Plaintiffs-Appellants, v. Tommy Thompson, Secretary of Health & Human Services; Thomas A. Scully, Administrator; Jean Thorne, Gary Weeks, Director, Oregon Department of Human Services, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

487 F.3d 1272

Elizabeth A. SPRY; Gary Spry; Demon Harvey; Michael McCarthy; Mary Gaye Reyes, Plaintiffs-Appellees, v. Tommy THOMPSON, Secretary of Health & Human Services; Mark B. McClellan, Administrator, Centers for Medicare and Medicaid Services, Defendants-Appellants, and Gary Weeks, Director, Oregon Department of Human Services, Defendant.

Elizabeth A. Spry; Gary Spry; Demon Harvey; Michael McCarthy; Mary Gaye Reyes, Plaintiffs-Appellants, v. Tommy Thompson, Secretary of Health & Human Services; Thomas A. Scully, Administrator; Jean Thorne, Gary Weeks, Director, Oregon Department of Human Services, Defendants-Appellees.

No. 04-35746.

No. 04-35750.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 17, 2005.

Filed May 21, 2007.

Alisa B. Klein, U.S. Department of Justice, Washington, DC, for appellants-cross-appellees Secretary of Health & Human Services and Administrator, Centers for Medicare and Medicaid Services.

Charles E. Fletcher, Assistant Attorney General, Salem, OR, for cross-appellee Director, Oregon Department of Human Services.

Jane Perkins, National Health Law Program, Chapel Hill, NC, and Lorey H. Freeman (briefed), Oregon Law Center, Portland, OR, for appellees-cross-appellants.

Rochelle Bobroff (briefed), AARP Foundation Litigation, Washington, DC, for amicus curiae AARP.

Appeals from the United States District Court for the District of Oregon; Garr M. King, District Judge, Presiding. D.C. Nos. CV-03-00121-KI, CV-03-00121-GMK.

Before: ANDREW J. KLEINFELD and SUSAN P. GRABER, Circuit Judges, and BARRY T. MOSKOWITZ,^* District Judge.

Opinion by Judge KLEINFELD; Concurrence by Judge MOSKOWITZ.

KLEINFELD, Circuit Judge.

We deal with what federal Medicaid restrictions apply to a state program providing medical benefits to persons who are not eligible for Medicaid.

States do not have to participate in the federal Medicaid program, but if they do, the state plans must generally conform to federal Medicaid regulations. In return for their participation and conformity with federal requirements, participating state governments get partial reimbursement from the federal government. States also may experiment with new types of plans. If they do, the plans must generally conform to Medicaid regulations for Medicaid-eligible people, but the Secretary of Health and Human Services may waive some requirements. If a state chooses to expand coverage to needy people who are not eligible for Medicaid, and the Secretary exercises his discretion to approve the plan, then the needy people who are not eligible for Medicaid are nevertheless regarded as though they were, for purposes of calculating reimbursements to the state.¹

This case involves a question not previously decided. Suppose the state expands its coverage in an experimental plan, called a "demonstration project," to needy people who are not eligible for Medicaid, and the Secretary waives any objection to the different provisions for those eligible for Medicaid, but does not waive or otherwise speak to the terms of coverage for needy people who are not eligible. These individuals are now regarded as eligible for the limited purposes of federal reimbursement to hospitals. But is the state bound by Medicaid premium and co-payment requirements (in the absence of a Secretary's waiver) even though these individuals remain statutorily ineligible for Medicaid under federal law? Our conclusion is that it is not.

Facts.

The five plaintiffs in this case are not eligible for Medicaid, although their income is low. They would have to be blind or disabled, or would have to have children (they do not), to be eligible.² Oregon has developed a health plan to cover them despite their ineligibility. They have to pay higher premiums and higher co-payments on doctor visits, medications, etc. than they would if eligible under Medicaid. Medicaid is not totally free to recipients; they are required to pay nominal amounts as co-payments for their government provided insurance coverage, medications, doctor and hospital visits, etc. Under the Oregon plan, the premiums for these needy but Medicaid-ineligible people range from $5.00 to $20 per month, depending on income, compared to Medicaid limits of $1.00 to $6.00 per month. Likewise, their co-payments for medical care, prescriptions, and hospitalization are between $5.00 and $250, compared to Medicaid limits of $0.50 to $3.00.

Oregon created the predecessor to this plan in 1992, covering both people that had to be covered for the state to get Medicaid reimbursements, and people not as badly off as those that had to be covered. The plan cost the state government too much money, even after the partial federal reimbursements, so it developed in 1994 the new somewhat less ample demonstration project, which is the subject of this litigation. This lawsuit tests the permissibility of the reductions in benefits for those not eligible for Medicaid compared to the previous Oregon plan.

The federal legislation providing grants to states for medical assistance programs separates people into classes: (1) the "categorically needy,"³ generally those eligible for welfare; aged, blind, or disabled individuals who are qualified for social security disability benefits; and low-income pregnant women and children, and (2) the "medically needy,"⁴ individuals who are above the poverty line but would not be if they were not assisted with medical expenses. In order to receive federal Medicare funds, the state must provide for the categorically needy population and may provide for the medically needy population.⁵

States may also create "experimental, pilot, or demonstration" projects to serve "expansion populations"—individuals who are not as badly off as the categorically needy and the medically needy.⁶ If they do, the Secretary of Health and Human Services may waive compliance with some of the federal Medicaid requirements⁷ for the expansion populations and entitle the states to put the expenses for them into the formula for federal reimbursements.⁸ A demonstration project may cover people who would not be eligible for Medicaid without a waiver from the Secretary. The agencies call these people "expansion populations" because the state demonstration project has expanded its coverage to include them and they are counted for federal reimbursements only because of the Secretary's waiver. These "expansion populations" are covered in addition to the categorically needy and the medically needy.

The Oregon application for waiver described the people in this lawsuit as "not otherwise eligible for Medicaid (including parents, singles and couples) with incomes up to 185 percent FPL [federal poverty line]." What is critical is that they are not eligible for Medicaid, either as a "mandatory" population (the "categorically needy") or as an "optional" population (the "medically needy"). They are childless, nondisabled adults. Oregon's plan expands public medical benefits beyond those eligible for Medicaid, even though the state could, if it chose, leave them with no benefits whatsoever under its Medicaid program.

The Secretary approved the Oregon demonstration project and gave the state its requested waiver for the "optional," "medically needy" population. For the "expansion population," though (those people not eligible for Medicaid), the Secretary took the position that no waiver was needed and neither gave nor denied a waiver for the expansion population. If the law requires compliance with Medicaid standards for people in the expansion population in the absence of a waiver, then the plan fails, because their monthly medical insurance premiums of $6 to $20 (depending on income) and co-payments of $2 to $250 would be too high.

The plaintiffs sought class certification and injunctive and other relief under 42 U.S.C. § 1983 to prevent Oregon from requiring them to pay the premiums and co-payments. They sought summary judgment. The federal and state governments moved for summary judgment on the theory that no waiver was necessary for the expansion population. The state argued as well for dismissal on the ground that the federal statute does not create a private right of action.

The district court denied class certification, but granted summary judgment in favor of plaintiffs on the co-payments, and enjoined collection of them. This victory for plaintiffs was based on the absence of a waiver. The court granted summary judgment in favor of defendants on the premiums, and did not preclude subsequent waiver, which would eliminate the reason for the injunction on co-payments, if the Secretary went through the procedure for granting waivers.

Both sides appeal the final judgment.

Analysis.

I. Private Cause of Action.

The State of Oregon argued, relying on Blessing v. Freestone⁹ and its progeny, that the plaintiffs did not have any federal right enforceable under 42 U.S.C. § 1983. Although the question was arguable when the briefs were filed, it was settled after argument by a panel with priority over ours.¹⁰ Watson v. Weeks¹¹ holds that 42 U.S.C. § 1396a(a)(10) "creates a private right of action enforceable under section 1983." We do not see a sound basis for distinguishing Watson, and conclude that if there is a violation in this case of the statutory standards, then the plaintiffs in this case have a private right of action enforceable under section 1983.

II. Is Waiver Necessary?

The question whether the Secretary's waiver is necessary to allowing Oregon to collect the premiums and co-payments is one of law, decided by summary judgment, so we review de novo.¹² The statute speaks unambiguously, so we do not reach Chevron¹³ deference (the Secretary has taken the position that waivers are not necessary for coverage of expansion populations not eligible for Medicaid).

The waiver statute¹⁴ enables the Secretary to "waive compliance" with certain Medicaid provisions for demonstration projects, and it provides that costs...