State of Tex. v. U.S. Dept. of Health and Human Services, 94-40265

• Decision Date: 22 August 1995
• Docket Number: No. 94-40265,94-40265
• Citation: 61 F.3d 438
• Parties: , 48 Soc.Sec.Rep.Ser. 478, Medicare & Medicaid Guide P 43,547 STATE OF TEXAS, Petitioner, v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Respondent.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 438

61 F.3d 438

64 USLW 2140, 48 Soc.Sec.Rep.Ser. 478,

Medicare & Medicaid Guide P 43,547

STATE OF TEXAS, Petitioner, v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Respondent.

No. 94-40265.

United States Court of Appeals, Fifth Circuit.

Aug. 22, 1995.

Karen Pettigrew, Asst. Atty. Gen., Dan Morales, Atty. Gen., Austin, TX, for petitioner.

Daniel Aibel, Office of Gen. Counsel, Dept. of Health & Human Services, Washington, DC, for respondent.

On Petition for Review from the United States Department of Health and Human Services.

Before REAVLEY, KING and WIENER, Circuit Judges.

KING, Circuit Judge:

The State of Texas appeals an administrative order of the Department of Health and Human Services denying a proposed amendment to its state Medicaid plan. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

In September of 1990, Texas submitted a proposed amendment to its state Medicaid plan to the Health Care Financing Administration ("HCFA") of the United States Department of Health and Human Services ("HHS"). Under this proposed amendment, Texas sought to expand the Medicaid program to cover inpatient residential chemical dependency treatment for children under age twenty-one who qualify for the Medicaid Early Periodic Screening, Diagnostic, and Treatment program. By letter dated May 2, 1991, HCFA rejected the proposed amendment.

The State requested reconsideration. After full briefing by both parties and numerous meetings, the HCFA administrator upheld the initial decision to deny the proposed amendment. The State then requested a formal hearing on the disapproval; after three days of hearings, the hearing officer recommended that the decision to deny the proposed amendment be upheld. Texas appealed to the Secretary of HHS, who, through the HCFA Administrator, accepted the hearing officer's recommendation and issued an administrative order upholding the denial of the proposed amendment. Texas filed a timely appeal of this final administrative order and the matter is now before this court.

II. STANDARD OF REVIEW

The case at hand centers around an issue of statutory construction. While each side argues that the "plain meaning" of a certain portion of the Medicaid statute unambiguously indicates that Congress intended the statute to be interpreted in its favor, we find no such "plain meaning" in the statute. HHS, as the federal agency with expertise in overseeing the Medicaid program, has proffered a construction of the implicit statutory gap. Our task is to determine whether the statutory construction proffered by HHS is valid. Under such circumstances, judicial review is quite limited. See Pauley v. BethEnergy Mines, Inc., 501 U.S. 680, 696, 111 S.Ct. 2524, 2534, 115 L.Ed.2d 604 (1991) ("When Congress, through express delegation or the introduction of an interpretive gap in the statutory structure, has delegated policymaking authority to an administrative agency, the extent of judicial review of the agency's policy determinations is limited."). In the seminal case of Chevron, U.S.A. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), the Supreme Court held that:

[t]he power of an administrative agency to administer a congressionally created ... program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress.... Sometimes the legislative delegation to any agency on a particular question is implicit rather than explicit. In such a case, a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency....

Id. at 843-44, 104 S.Ct. at 2782 (internal quotations, citation and footnotes omitted) (emphasis added). If Congress has not addressed the precise question at issue, "the [c]ourt does not simply impose its own construction on the statute ... [r]ather ... the question for the court is whether the agency's answer is based on a permissible construction of the statute." Id. at 843, 104 S.Ct. at 2782. Thus, we proceed to analyze whether HHS's denial of the proposed amendment to the Texas Medicaid plan was based upon a permissible construction of the relevant Medicaid statute.

III. ANALYSIS

Medicaid is a health care program, primarily for the poor and disabled, which is jointly financed by the federal and state governments and which is administered at the state level, subject to umbrella supervision by HCFA, a division of HHS. The State of Texas asked HCFA for permission to amend its state Medicaid plan to cover residential drug and alcohol treatment for children under age twenty-one who are eligible to receive other health care services under the Early Periodic Screening, Diagnostic and Treatment ("EPSDT") program. ¹ Without HCFA's permission to implement the proposed amendment, the State of Texas cannot receive federal matching funds if it elects to provide these services.

HCFA denied Texas's proposed amendment on the grounds that it would impermissibly result in the flow of federal Medicaid funds to reimburse room and board expenses. ² Specifically, HCFA contends that the portion of the Medicaid statute which provides federal matching funds for the provision of rehabilitative services, 42 U.S.C. Sec. 1396d(a)(13), does not permit matching funds to pay for room and board costs associated with the provision of rehabilitative services in a residential treatment facility. The federal statute at issue provides that federal matching funds may be used, inter alia, for:

(13) other diagnostic, screening, preventive, and rehabilitative services, including any medical or remedial services (provided in a facility, a home, or other setting) recommended by a physician or other licensed practitioner of the healing arts within the scope of their practice under State law, for the maximum reduction of physical or mental disability and restoration of an individual to the best possible functional level.

42 U.S.C. Sec. 1396d(a)(13). ³

The State contends that because the language of Sec. 1396d(a)(13) does not explicitly exclude room and board services, the term "rehabilitative services" should be construed in its broadest sense to include necessary tangential room and board expenses when those rehabilitative services are provided in a residential treatment setting. The State bolsters its argument by contending that because the parenthetical "provided in a facility, a home, or other setting" evinces an explicit intent to provide coverage for services rendered in either an inpatient or an outpatient setting, this necessarily evinces an implicit intent to provide coverage for all necessary corollary expenses in either an inpatient or an outpatient setting--such as room and board in a residential treatment facility.

The State's final argument is that Congress knew how to explicitly exclude coverage for room and board expenses when it wanted to do so, as evidenced by other sections in the Medicaid statute. See 42 U.S.C. Secs. 1396t(a)(9), 1396u(f)(1) (explicitly excluding room and board coverage for frail elderly and developmentally disabled in the provision of home and community care services). Thus, Congress's failure to explicitly exclude room and board expenses in the section authorizing coverage of rehabilitative services indicates that Congress did not wish to exclude coverage for such expenses in this particular context.

HCFA concedes that Sec. 1396d(a)(1...