State of Ill., Dept. of Public Aid v. Schweiker

• Decision Date: 06 May 1983
• Docket Number: 82-1752,Nos. 82-1175,s. 82-1175
• Citation: 707 F.2d 273
• Parties: STATE OF ILLINOIS, DEPARTMENT OF PUBLIC AID, Petitioner, v. Richard S. SCHWEIKER, Secretary, and the United States Department of Health and Human Services, Washington, D.C., Respondents.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 273

707 F.2d 273

2 Soc.Sec.Rep.Ser. 84

STATE OF ILLINOIS, DEPARTMENT OF PUBLIC AID, Petitioner, v. Richard S. SCHWEIKER, Secretary, and the United States Department of Health and Human Services Washington, D.C., Respondents.

Nos. 82-1175, 82-1752.

United States Court of Appeals Seventh Circuit.

Submitted March 17, 1983.

Decided May 6, 1983.

Ellen P. Brewin, Asst. Atty. Gen., Chicago, Ill., for petitioner.

Susanne M. Lee, U.S. Dept. of Health & Human Services, Washington, D.C., for respondents.

Before BAUER, CUDAHY and POSNER, Circuit Judges.

POSNER, Circuit Judge.

The Secretary of Health and Human Services has moved to dismiss these two petitions, filed by the State of Illinois and seeking judicial review of orders disallowing federal reimbursement for certain Medicaid expenditures made by the state. The ground for the Secretary's motion is that judicial review of such orders may be obtained, if at all, only in federal district court (with a right of appeal to this court of course), and not in this court directly. We originally set the motion for oral argument, but when Illinois filed a brief in which it stated that it agreed with the Secretary that we did not have jurisdiction we decided oral argument would not be helpful. Nevertheless, since the question is jurisdictional the agreement of the parties does not bind us, and since it has been answered in different ways in different circuits it merits discussion.

If a state wants to participate in the Medicaid program--wants, that is, to obtain federal money to provide medical services to poor people--it must submit to the Secretary of Health and Human Services a plan that conforms to the requirements of 42 U.S.C. Sec. 1396a. Within 90 days the Secretary must decide whether the plan does conform. 42 U.S.C. Sec. 1316(a)(1). If he decides it does not, he must on the state's demand hold a hearing to reconsider his decision. Sec. 1316(a)(2). The decision on reconsideration is the Secretary's "final determination," and a state that does not like it may file a petition for review in a federal court of appeals. Sec. 1316(a)(3). Also reviewable under this subsection is a final determination under 42 U.S.C. Sec. 1396c to shut off all Medicaid funds to a state either because "the plan has been so changed that it no longer complies" with the provisions of section 1396a or because "in the administration of the plan there is a failure to comply substantially with any such provision."

Section 1316(d) entitles the state to seek reconsideration whenever the Secretary "determines that any item or class of items on account of which Federal financial participation is claimed ... shall be disallowed for such participation." Nowhere does the statute make provision for judicial review of disallowances, so if the orders that Illinois has petitioned us to review are disallowance rather than plan-nonconformity orders we do not have jurisdiction under section 1316(a)(3). If there is any jurisdiction to review these orders it would be in federal district court under one of the general district court jurisdictional statutes, such as 28 U.S.C. Sec. 1331 (federal-question jurisdiction); Illinois has filed a district court suit under 28 U.S.C. Sec. 1331 in case we lack jurisdiction.

The first petition for review, No. 82-1175, challenges the disallowance of reimbursement for expenditures on services provided at nine nursing homes that HHS decided were "institutions for mental diseases" and hence excluded by federal law from the Medicaid program. See 42 U.S.C. Sec. 1905(a)(15)(B). The second, No. 82-1752, challenges the disallowance, based on the Hyde Amendment, see Harris v. McRae, 448 U.S. 297, 304, 100 S.Ct. 2671, 2681, 65 L.Ed.2d 784 (1980), of reimbursement of the costs of certain abortions. HHS's Departmental Grant Appeals Board upheld both disallowances after full hearings in which appeals from several states were consolidated because the same legal issues were involved. Unless the decisions are vacated on judicial review the amount of the disallowed reimbursement will be deducted pursuant to 45 C.F.R. Sec. 201.14(e) from future requests by Illinois (and the other states) for federal Medicaid reimbursement.

If section 1316 is read literally, we lack jurisdiction. The Secretary made no determination of nonconformity within 90 days of the submission of Illinois' plan or of any amendment to the plan, which for purposes of section 1316(a) would count as a plan submission, see 1316(b); nor did he shut off Medicaid funds upon a determination that Illinois' plan had been changed or was being administered in such a manner that it was no longer conforming; and these are the only types of determination that section 1316(a)(3) makes reviewable directly in the court of appeals. The Secretary made a different kind of determination: he disallowed specific items of expenditure--the procedure described in 1316(d).

The main objection to reading section 1316 literally is that it seems to give the Secretary the power unilaterally to decide whether a state can get judicial review of his determinations directly in the court of appeals or must first go to district court. If he wanted to make the state go the latter route, all he would have to do, it might appear, is pronounce the state's plan conforming--thereby barring the state from going to the court of appeals under section 1316(a)(3)--and then later disallow the reimbursements sought by the state in accordance with the plan. Such a power would take on a sinister hue if the district court turned out not to have jurisdiction to review disallowances. This position has some support in remarks of--more accurately, quoted by--Senator Javits, 111 Cong.Rec. 3068 (1965); in the absence from the committee reports' otherwise detailed discussion of judicial review of any suggestion that disallowance orders are reviewable in any court, S.Rep. No. 404, 89th Cong., 1st Sess. 150-51 (1965); H.Rep. No. 213, 89th Cong., 1st Sess. 131-32 (1965), U.S.Code Cong. & Admin.News 1965, p. 1943; and in a dictum in State Dept. of Public Welfare of Texas v. Califano, 556 F.2d 326, 329 and n. 4 (5th Cir.1977)--although County of Alameda v. Weinberger, 520 F.2d 344 (9th Cir.1975), holds, and at present the Secretary of HHS concedes (though the concession cannot bind us), that review may be had in the district court.

Another objection to the literal reading of section 1316 is that while routing judicial review through the district court makes good sense when a disallowance takes the form of an auditor's exception made without a hearing or written record--which may have been what Congress thought would be the typical case under section 1316(d), see S.Rep. No. 404, supra, at 151; H.Rep. No. 213, supra, at 132--the procedure that has actually been adopted by the Secretary, see 45 C.F.R. Sec. 201.14(d) and Appendix to Sec. 201.14, and followed in this case, has the effect of requiring that any decision to disallow a reimbursement be made by the Departmental Grant Appeals Board on the basis of a full written record. There is no need for a district court to reconstruct the administrative record and hence no reason for another tier of judicial review between the Departmental Grant Appeals Board and us. Cf. Denberg v. United States Railroad Retirement Bd., 696 F.2d 1193, 1196 (7th Cir.1983).

Although it therefore might be a good idea to make disallowances judicially reviewable in the same manner as determinations of plan nonconformity--that is, directly in the courts of appeals--this result cannot be brought about without ignoring section 1316(d) entirely, though we acknowledge that Congress might have wanted that result if it had known that every disallowance would be based on a formal record. Even the Third Circuit, which has gone the furthest toward merging disallowance determinations into determinations of plan nonconformity, see State of New Jersey v. Department of Health & Human Services, 670 F.2d 1262, 1275-78 (3d Cir.1981); State of New Jersey v. Department of Health & Human Services, 670 F.2d 1284, 1290-94 (3d Cir.1982), has drawn the line where the Secretary denied reimbursement for services provided by a single improperly certified nursing home, and has held that review of that denial could not be obtained in the court of appeals directly. State of New Jersey v. Department of Health & Human Services, 670 F.2d 1300, 1302-04 (3d Cir.1982); see also State of Georgia, Dept. of Human Resources v. Califano, 446 F.Supp. 404, 413 (N.D.Ga.1977); Solomon v. Califano, 464 F.Supp. 1203 (D.Md.1979); Wingate v. Harris, 501 F.Supp. 58, 63 (S.D.N.Y.1980). We are stuck with having to distinguish disallowances from determinations of plan nonconformity--just as we are stuck with having to distinguish ICC orders "for the payment of money or the collection of fines, penalties, and forfeitures," which may be challenged only in district court, 28 U.S.C. Sec. 1336(a), from other ICC orders, which may be challenged only in the court of appeals, 28 U.S.C. Secs. 2321(a), 2342(5). See Pullman-Standard v. ICC, 705 F.2d 875 (7th Cir.1983). The challenge is to come up with a workable distinction between nonconformity and disallowance determinations.

A preliminary issue is whether the district courts have jurisdiction to review disallowances. If they do, it becomes less critical whether we define determination of plan nonconformity, the only determination we can review directly under 42 U.S.C. Sec. 1316(a)(3), broadly or narrowly--but not inconsequential. The more broadly we construe section 1316(a)(3), the more we simplify judicial review of Medicaid determinations by eliminating an extra tier of review and thereby reducing the burdens on our harried district judges in a class of cases where there is no need to involve the district courts, since a full record will already have been made before the Departmental Grant Appeals Board. Routing judicial review through the district court...