State of Ill. by Illinois Dept. of Public Aid v. U.S. Dept. of Health and Human Services, 84-2535

• Decision Date: 30 August 1985
• Docket Number: No. 84-2535,84-2535
• Citation: 772 F.2d 329
• Parties: , 11 Soc.Sec.Rep.Ser. 88, Medicare&Medicaid Gu 34,885 STATE OF ILLINOIS, by the ILLINOIS DEPARTMENT OF PUBLIC AID, Plaintiff- Appellant, v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES and Margaret Heckler, Secretary of Health and Human Services, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 329

772 F.2d 329

3 Fed.R.Serv.3d 474, 11 Soc.Sec.Rep.Ser. 88,

Medicare&Medicaid Gu 34,885

STATE OF ILLINOIS, by the ILLINOIS DEPARTMENT OF PUBLIC AID Plaintiff- Appellant, v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES and Margaret Heckler, Secretary of Health and Human Services, Defendants-Appellees.

No. 84-2535.

United States Court of Appeals Seventh Circuit.

Argued April 23, 1985.

Decided Aug. 30, 1985.

Karen Konieczny, Asst. Atty. Gen., Chicago, Ill., for plaintiff-appellant.

Robert S. Lavet, Civil Div., Dept. of Justice, Washington, D.C., for defendants-appellees.

Before CUMMINGS, Chief Judge, CUDAHY, Circuit Judge, and TIMBERS, Senior Circuit Judge. ^*

CUMMINGS, Chief Judge.

The State of Illinois, by the Department of Public Aid (the "DPA" or the "State"), seeks to overturn the United States Department of Health and Human Services' disallowance of federal reimbursement funds claimed by the DPA under the Medicaid program, Title XIX of the Social Security Act, 42 U.S.C. Sec. 1396 et seq. (commonly referred to as the "Medicaid" Act), for monies expended in providing certain abortion services pursuant to federal court orders. The district court granted summary judgment for the defendant Department of Health and Human Services (HHS). The DPA argues that the disbursement of federal funds is required by 1) the federal injunctions levied against the DPA in light of FED.R.CIV.P. 65(d), 2) the principle of "cooperative federalism" underlying the Medicaid program, and 3) certain HHS regulations. For the reasons set forth below, we affirm the decision of the district court.

I

This controversy arises out of payment of funds by a state agency mandated by several federal court orders while the validity of the Hyde Amendment (infra note 1) and a similar Illinois statute, Public Act 80-1091, effective December 17, 1977, ILL.REV.STAT. ch. 23, Sec. 5-5 (1983), was litigated in federal court. Ultimately the legal bases for the injunctions were rejected by the Supreme Court and this Circuit and the injunctions subsequently were lifted. Its legal position vindicated, the DPA unsuccessfully sought federal reimbursement from the HHS pursuant to Title XIX of the Social Security Act for the funds unwillingly expended.

The Medicaid Act established a program whereby federal financial assistance would be available to participating states that provided medical services to needy recipients in accordance with certain federal statutory and regulatory requirements. Participating states are entitled to federal reimbursement or so-called "Federal Financial Participation" (FFP) for a percentage of the Medicaid expenditures. The availability of FFP to reimburse state Medicaid expenditures for abortion services has been sharply restricted since 1976 by the so-called "Hyde Amendment." ¹ Enacted annually as an amendment to the relevant appropriations bill, the provision, though varying from year to year, generally has restricted abortion funding to instances where the life of the mother is endangered by the pregnancy, where the pregnancy is the result of rape or incest, and where the pregnancy would cause severe and long-lasting physical health damage to the mother.

In late 1977 the Illinois legislature enacted P.A. 80-1091, supra, which prohibited use of state funds to pay for abortion services except where such services "are necessary for the preservation of the life of the [pregnant] woman." The Illinois law subsequently was challenged on the ground that it violated substantive rights created by Title XIX of the Social Security Act and the Ninth and Fourteenth Amendments to the United States Constitution. Since the Medicaid Act provisions and its implementing regulations, which facially required funding of "medically necessary" or "therapeutic" abortions, ² were not altered by the Hyde Amendment, a valid question existed as to whether the Amendment's funding restrictions substantively amended the Medicaid Act and thereby relieved the participating states of their obligation to provide for medically necessary abortions under the Act.

The first injunction prohibiting the DPA from enforcing P.A. 80-1091 was issued by this Court on January 11, 1978 (Zbaraz v. Quern, 572 F.2d 782 (7th Cir.1978)), and remained in force until March 15, 1978, while we considered the district court's decision to stay proceedings below challenging the Illinois statute pending an interpretation by an Illinois court. After we remanded for further proceedings, the district court concluded that the Hyde Amendment had not substantively amended Title XIX nor relieved Illinois of its Title XIX obligation to fund medically necessary abortions. Zbaraz v. Quern, 469 F.Supp. 1212 (N.D.Ill.1978) (R. Item 1, Exhibit B at 8-12). The court consequently permanently enjoined Illinois from enforcing P.A. 80-1091. On appeal this Court again reversed, disagreeing with the lower court's statutory interpretation and remanding for a ruling on the constitutionality of both P.A. 80-1091 and the Hyde Amendment. Zbaraz v. Quern, 596 F.2d 196 (7th Cir.1979), certiorari denied, 448 U.S. 907, 100 S.Ct. 3048, 65 L.Ed.2d 1136 (1980). On remand the district court modified its injunction (on February 15, 1978) to require Illinois to fund only those abortion services for which FFP was available under the Hyde Amendment. After transfer to another district judge, the United States intervened to defend the constitutionality of the Hyde Amendment and on April 30, 1979, District Judge Grady declared P.A. 80-1091 unconstitutional and again enjoined the DPA from enforcing that statute as to deny payments for medically necessary abortions. Zbaraz v. Quern, 469 F.Supp. 1212 (N.D.Ill.1979). This injunction was dissolved on June 30, 1980, when the Supreme Court vacated Judge Grady's decision on direct appeal. Williams v. Zbaraz, 448 U.S. 358, 100 S.Ct. 2694, 65 L.Ed.2d 831 (1980). Consequently, the DPA was required to pay for abortion services under court order between the dates of January 11, 1978, to March 15, 1978; May 15, 1978, to February 15, 1979; and April 30, 1979, to June 30, 1980.

In July and August of 1980 the Health Care Financing Administration of HHS disallowed the DPA's claim for $965,399.00 in FFP for the costs of medically necessary abortions funded by plaintiff that were performed between August 5, 1977, and September 30, 1979. The Departmental Grant Appeals Board (DGAB) of HHS upheld the denial on February 26, 1982, on the ground that the Hyde Amendment prohibited any federal reimbursement and that the federal court orders directed at the DPA in no way required HHS to provide such reimbursement (R. Item 24, Exhibit A). Plaintiff appealed the HHS decision to the United States District Court for the Northern District of Illinois in an action for judicial review of a disallowance of FFP upheld by the DGAB. See State of Illinois, Department of Public Aid v. Schweiker, 707 F.2d 273, 277 (7th Cir.1983). The district court refused to order federal reimbursement and granted defendant summary judgment on the grounds that HHS was not prohibited from enforcing the Hyde Amendment by the Zbaraz court orders, that Judge Grady's April 1979 order was void and that any HHS regulations requiring reimbursement could not displace the valid statutory constraints of the Hyde Amendment.

II

Since plaintiff solely challenges the legal basis of HHS' decision, this Court's task is to "decide all relevant questions of law * * * [and] interpret constitutional and statutory provisions" and "set aside agency action, findings, and conclusions found to be * * * not in accordance with law." 5 U.S.C. Secs. 706, 706(2)(A); see St. Francis Hospital Center v. Heckler, 714 F.2d 872, 873 (7th Cir.1983), certiorari denied, --- U.S. ----, 104 S.Ct. 1274, 79 L.Ed.2d 679 (1984); Illinois v. Schweiker, 707 F.2d at 275, 277. Defendant does not assert that any deference should be accorded its legal determinations and under the circumstances of this case, none would be appropriate. See St. John's Hickey Memorial Hospital, Inc. v. Califano, 599 F.2d 803, 812-815 (7th Cir.1979).

Contrary to the assertions of the plaintiff, the Hyde Amendment's prohibition on funding used to perform certain abortions is clear and unambiguous. See supra note 1. The DPA argues, however, that despite this prohibition, the special facts of this case require HHS to provide the requested FFP. ³

The state first argues that the injunctions issued pursuant to the Zbaraz litigation requiring state funding of therapeutic Medicaid abortions also directly bound HHS to provide FFP. To support this proposition the DPA relies solely on FED.R.CIV.P. 65(d) which makes an injunction binding on "the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them." Although HHS only became a party to the third round of the Zbaraz litigation by intervening to defend the constitutionality of the Hyde Amendment, see supra p. 331, and the injunctions were solely directed at the State of Illinois (see Williams v. Zbaraz, 448 U.S. 358, 366, 100 S.Ct. 2694, 2699, 65 L.Ed.2d 831; 442 U.S. 1309, 1311, 99 S.Ct. 2095, 2097, 60 L.Ed.2d 1033 (1979) (Stevens, J., opinion in chambers); R. Item 1, Exhibits A, B) the plaintiff asserts that the concept of "cooperative federalism" underlying the Medicaid program placed the defendants HHS and Secretary of Health and Human Services "in active concert or participation" with the State and bound them to the requirements of the Zbaraz orders.

Regardless of the implications of the concept of "cooperative federalism," see infra p. 331, in this context, the district court was correct in pointing out that Rule 65(d) has no application to these circumstances. The purpose of the rule is to ensure "that defendants may not nullify a decree by carrying out prohibited acts through aiders and abettors, although they were not parties to the...