Szlosek v. Secretary of Health & Human Services

• Decision Date: 19 November 1987
• Docket Number: Civ. A. No. 85-0318-F.
• Citation: 674 F. Supp. 944
• Parties: Rose SZLOSEK and Kathleen Starkey, Plaintiffs, v. SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant.
• Court: U.S. District Court — District of Massachusetts

674 F. Supp. 944

Rose SZLOSEK and Kathleen Starkey, Plaintiffs, v. SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant.

Civ. A. No. 85-0318-F.

United States District Court, D. Massachusetts.

November 19, 1987.

Peter Benjamin, Western Mass. Legal Services, Springfield, for plaintiffs.

Mary E. Carmody, Asst. U.S. Atty., for defendant.

MEMORANDUM AND ORDER

FREEDMAN, Chief Judge.

Rose Szlosek and Kathleen Starkey, recipients of Social Security Title II benefits, challenge the validity of 20 C.F.R. § 416.1123(b) (1986), which deems money withheld to recoup overpayments under Title II of the Social Security Act ("Title II"), 42 U.S.C. §§ 401-433, as income for the purposes of calculating Supplemental Security Income ("SSI") benefits under Title XVI of the Act, 42 U.S.C. §§ 1381-1383c.

This action is before the Court on plaintiffs' motion for summary judgment and class certification. Defendant counters with a cross motion for summary judgment. Plaintiffs have exhausted their administrative remedies and are properly in this Court pursuant to 42 U.S.C. § 405(g). There are no material factual disputes. Plaintiffs claim that 20 C.F.R. § 416.1123(b) implementing 42 U.S.C. § 1382(a)(2)(B) of the Act is not a reasonable interpretation of that statutory provision. Plaintiffs argue that 1) the Secretary misinterprets the plain language of the statute, 2) the regulation contravenes congressional intent, 3) it constitutes impermissible cross program recovery, and 4) it violates the Equal Protection Clause.

I. FACTS

Plaintiffs are both elderly widows. Each is in the process of repaying overpayments under Title II of the Social Security Act. Both have been adjudged to be "not without fault" in receiving the overpayments pursuant to 42 U.S.C. § 404(b). Therefore, the Social Security Administration ("SSA") is in the process of recovering these overpayments from their Title II benefits.

Rose Szlosek is 69 years old. As a widow, she is entitled to gross Title II benefits of $501 per month. Of that amount, $100 is withheld per month to recoup a prior Title II overpayment. Thus, her net Title II benefit is $401 per month. Kathleen Starkey is 79 years old. She is entitled to $405 under Title II. The sum of $92 per month is withheld to recoup an overpayment. Thus, her net Title II benefit is $313. Both plaintiffs claim they would be eligible for more SSI benefits if their net Title II benefits were considered as their income. For example, Rose Szlosek receives no SSI benefits. However, were her income of $401 considered for the purposes of determining SSI needs, then she would be eligible for $83.82 per month in SSI benefits. Kathleen Starkey already receives $82 per month in SSI benefits but, if her net income of $313 were considered, she would be entitled to $171.82 in SSI benefits per month.

II. STATUTORY AND REGULATORY SETTING

This action involves two federal entitlement programs: Supplemental Security Income, Pub.L. 92-603, 42 U.S.C. §§ 1381-1383c, and Title II of the Social Security Act, 42 U.S.C. § 401-433. SSI and Title II are separate programs, each operating pursuant to different statutory authority and receiving funding from separate sources. Title II is funded by employee and employer Federal Insurance Contributions Act ("FICA") contributions. SSI is funded by general revenues collected through personal, corporate and other taxes. The regulation in dispute concerns the calculation of income for the purposes of assessing SSI needs. Specifically, 20 C.F.R. § 416.1123(b) includes money withheld from Title II benefits to recoup a prior Title II overpayment in determining whether an individual qualifies for SSI benefits.

A. The SSI Program

Congress established the SSI program as "a national program to provide supplemental security income to individuals who have attained age 65 or are blind or disabled." 42 U.S.C. § 1381. The legislation was "designed to provide a positive assurance that the Nation's aged, blind and disabled people would no longer have to subsist on below-poverty level incomes ... by providing an assured total monthly income." Robinson v. Bowen, 828 F.2d 71, 73 (2d Cir.1987) (Oakes, J., dissenting) (citing S.Rep. No. 1230 at 384).¹ It is a program of last resort for people with no other source of income. Because SSI is a supplemental program, SSI beneficiaries must apply for every other source of income to which they are entitled. 42 U.S.C. § 1382(e)(2). Income received from other sources is then deducted from the amount received in SSI benefits. The SSI program determines the amount of assistance granted by comparing the beneficiary's earned and unearned income against a standard. 42 U.S.C. § 1382(b). The standard for determining unearned income is statutorily defined as:

Any payments received as an annuity, pension, retirement, or disability benefit, including veterans' compensation and pensions, workmen's compensation payments, old age, survivors, and disability insurance benefits, railroad retirement annuities and pensions, and unemployment insurance benefits.

42 U.S.C. § 1382(a)(2)(B). SSI thus provides subsistence level income for the recipients of many different benefit programs.

B. Overpayments

The Social Security Act and the regulations promulgated pursuant to it provide that "whenever the Secretary finds that more or less than the correct amount of payment has been made to any person under this title, proper adjustment or recovery shall be made, under regulation prescribed by the Secretary." 42 U.S.C. § 404(a)(1). The Social Security Administration often waives overpayments when they are received through no fault of the beneficiary. When, however, an overpayment is made because the beneficiary has not provided the Secretary with current information, that beneficiary is found to be "not without fault" and is required to return the amount overpayed. 20 C.F.R. § 410.561(g). Plaintiffs do not dispute the Secretary's decision that they were "not without fault" and are obligated to refund their overpayment. The facts surrounding their incurrence of an overpayment are not relevant.

The issue in this case is a change in the regulations governing the categorization of unearned income deducted for overpayments. When SSI was enacted, the Secretary's predecessor promulgated a regulation stating that eligibility for SSI could only be calculated according to the income actually possessed by an applicant. 20 C.F. R. § 416.1120 (1977). This regulation was explained further in 1979 by an amendment defining income as "anything an individual receives in cash or in kind that can be used to meet his or her needs for food, clothing, and shelter." 44 Fed.Reg. 6430 (Feb. 1, 1979). The result of these regulations was that Title II benefits withheld to recoup a Title II overpayment were not counted as income when calculating an SSI recipient's income.

In 1982, however, a different Secretary decided, essentially, to make a policy reversal by including as income benefits withheld to recoup a Title II overpayment. In promulgating 20 C.F.R. § 416.1123(b)(1), the Secretary provided SSI applicants with the following notice:

Amount considered as income. We may include more or less of your unearned income than you actually received. (1) We include more than you actually receive where another benefit payment (such as a social security incurrence benefit) ... has been reduced to recover a previous overpayment....

20 C.F.R. § 416.1123(b)(1). By replacing 20 C.F.R. § 416.1120 with 20 C.F.R. § 416.1123(b)(1), the Secretary announced her intention to consider the amount of money to which beneficiaries were entitled rather than the amount they received as income. Therefore, under the new regulation, a Title II beneficiary's income for the purpose of determining SSI eligibility includes the amount being withheld to recoup the prior Title II overpayments. This is a major policy reversal unaccompanied by any change in the underlying SSI statute. The current Secretary, in his arguments before this Court, justifies the change with two arguments: 1) recipients are benefitted by the withheld funds in that they are repaying a legal debt; and 2) the regulation is necessary to stem the flow of funds from one benefit program to another.

III. ANALYSIS

The question before this Court, then, is whether the new regulation, 20 C.F.R. § 416.1123(b)(1), is valid and consistent with recent amendments to the Social Security Act and does not violate the Equal Protection Clause of the United States. Although similar cases have been decided by other district and circuit courts, the issue is one of first impression in this circuit; thus, this Court is not bound by precedent. When presented with both statutory and constitutional grounds for review, a court should consider the statutory claim before the constitutional one. Califano v. Yamasaki, 442 U.S. 682, 692, 99 S.Ct. 2545, 2553, 61 L.Ed.2d 176 (1979); United States v. C.I.O., 335 U.S. 106, 110, 68 S.Ct. 1349, 1351, 92 L.Ed. 1849 (1948); Ashwander v. TVA, 297 U.S. 288, 347, 56 S.Ct. 466, 483, 80 L.Ed. 688 (1936) (concurring opinion). Therefore, this Court will consider the statutory claims before considering plaintiffs' equal protection argument.

A. Statutory Language: The Word "Received"

Plaintiffs and defendant argue differing interpretations of the word "received" in 42 U.S.C. § 1382a(a)(2)(B). The statute defines unearned income as

Any payments received as an annuity, pension, retirement, or disability benefit, including veterans' compensation and pensions, workmen's compensation payments, old age, survivors, and disability insurance benefits, railroad retirement annuities and pensions, and unemployment insurance benefits.

Plaintiffs argue that the legislature intended "received" to mean the actual receipt of money in hand rather than constructive receipt. The interpretation of individual words in a statute is a difficult task. This Court is guided by the Supreme Court's rule of...