Vance v. Hegstrom, s. 85-4050

• Citation: 793 F.2d 1018
• Decision Date: 02 July 1986
• Docket Number: 85-4065,Nos. 85-4050,s. 85-4050
• Parties: , 14 Soc.Sec.Rep.Ser. 97, Medicare&Medicaid Gu 35,478 Marjorie VANCE, on her own behalf and as Next Friend of Linda Barteau, her minor child, and Susan Turner, on her own behalf and as Next Friend of Shane Turner, her minor child, and All Others Similarly Situated; Appellees, v. Leo HEGSTROM, Individually and in his Official Capacity as Director of the Department of Human Resources of the State of Oregon; and Keith Putman, Individually and in his Official Capacity as Director of the Adult and Family Services Division of Department of Human Resources of the State of Oregon; and Otis R. Bowen, * Individually and in his Official Capacity as Secretary of the Department of Health and Human Services of the United States of America; Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1018

793 F.2d 1018

55 USLW 2047, 14 Soc.Sec.Rep.Ser. 97,

Medicare&Medicaid Gu 35,478

Marjorie VANCE, on her own behalf and as Next Friend of

Linda Barteau, her minor child, and Susan Turner, on her own

behalf and as Next Friend of Shane Turner, her minor child, and All Others Similarly Situated; Appellees, v. Leo HEGSTROM, Individually and in his Official Capacity as

Director of the Department of Human Resources of the State

of Oregon; and Keith Putman, Individually and in his

Official Capacity as Director of the Adult and Family

Services Division of Department of Human Resources of the

State of Oregon; and Otis R. Bowen, ^*

Individually and in his Official Capacity as Secretary of

the Department of Health and Human Services of the United

States of America; Appellants.

Nos. 85-4050, 85-4065.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted May 8, 1986.

Decided July 1, 1986.

As corrected July 2, 1986.

Roger A. Schwartz, National Health Law Review, Washington, D.C., for appellees.

Philip Schradle, Salem, Or., for Hegstrom.

William J. McIntyre, Seattle, Wash., for Heckler.

Appeal from the United States District Court for the District of Oregon.

Before ALARCON, REINHARDT and THOMPSON, Circuit Judges.

THOMPSON, Circuit Judge:

State appellants Hegstrom and Putnam (No. 85-4050) and federal appellant Secretary of Health and Human Services Bowen (No. 85-4065) appeal the district court's order granting summary judgment in favor of appellees. 629 F.Supp. 747. The sole issue on appeal is whether sibling income, which a state must include in computing income available to a family to determine AFDC eligibility under 42 U.S.C. Sec. 602(a)(38), may be included in computing that family's available income to deny Medicaid benefits. We hold that it cannot and we affirm the judgment of the trial court.

I FACTS

This case involves an interpretation of Title XIX of the Social Security Act, as amended, 42 U.S.C. Sec. 1396 et seq. (Medicaid) and its relation to Title IV-A of the Social Security Act, as amended, 42 U.S.C. Sec. 601 et seq. Title IV-A is more commonly known as Aid to Families with Dependent Children (AFDC). Both programs are cooperative federal-state efforts that enable states to provide assistance to needy families and individuals. See Lynch v. Rank, 747 F.2d 528, 530 (9th Cir.1984), modified and granting reh'g, 763 F.2d 1098 (9th Cir.1985); 42 U.S.C. Secs. 601, 1396. Although states are not required to participate in the AFDC or Medicaid programs, participating states must have their programs approved by the Secretary of Health and Human Services. Cubanski v. Heckler, 781 F.2d 1421, 1423 (9th Cir.1986); 42

U.S.C. Secs. 602(b), 1396a(a). Oregon has elected to participate in both programs.

1. Medicaid

States electing to provide Medicaid benefits must cover "categorically needy" individuals. Cubanski, 781 F.2d at 1423; Lynch, 747 F.2d at 530 n. 1; 42 U.S.C. Sec. 1396a(a)(10)(A); 42 C.F.R. Sec. 435.100. "Categorically needy" individuals are those persons receiving AFDC or those "who would be eligible for AFDC except for an eligibility requirement used in that program that is specifically prohibited under [Medicaid]." 42 U.S.C. Sec. 1396a(a)(10)(A)(i)(I); 42 C.F.R. Secs. 435.4, 435.100 et seq.

Standards for determining Medicaid eligibility are set forth in 42 U.S.C. Sec. 1396a(a)(17). Schweiker v. Hogan, 457 U.S. 569, 574, 102 S.Ct. 2597, 2601, 73 L.Ed.2d 227 (1982). That section provides, in part, that a state's Medicaid plan must:

[I]nclude reasonable standards ... for determining eligibility for and the extent of medical assistance under the plan which ...

(B) provide for taking into account only such income and resources as are, as determined in accordance with standards prescribed by the Secretary, available to the applicant or recipient and ...

(D) do not take into account the financial responsibility of any individual for any applicant or recipient of assistance under the plan unless such applicant or recipient is such individual's spouse or such individual's child who is under age 21 or ..., is blind or permanently and totally disabled, ...

42 U.S.C. Sec. 1396a(a)(17).

Subsection (17)(B) grants the Secretary broad powers to set standards to determine what income is available to a Medicaid recipient. Herweg v. Ray, 455 U.S. 265, 274, 102 S.Ct. 1059, 1066, 71 L.Ed.2d 137 (1982); Schweiker v. Gray Panthers, 453 U.S. 34, 43-44, 101 S.Ct. 2633, 2639-40, 69 L.Ed.2d 460 (1981). However, subsection (17)(D) precludes a state from "deeming," ¹ as income available to a Medicaid applicant, income from persons other than the applicant's spouse, or parent if the applicant is under twenty-one, blind, or disabled. 42 U.S.C. Sec. 1396a(a)(17)(D). Herweg, 455 U.S. at 275 & n. 13, 102 S.Ct. at 1067 n. 13.

2. AFDC

Aid to Families with Dependent Children was enacted to "encourag[e] the care of dependent children in their own homes or in the homes of relatives...." 42 U.S.C. Sec. 601. Medberry v. Hegstrom, 786 F.2d 1389, 1389-90 (9th Cir.1986). The goal of the program is "to help maintain and strengthen family life and to help [parents or relatives of dependent children] to attain or retain capability for the maximum self-support and personal independence consistent with the maintenance of continuing parental care and protection, ..." 42 U.S.C. Sec. 601. To achieve this goal, federal funds are made available to the states to "enabl[e] each State to furnish financial assistance and rehabilitation and other services, ..." Id.

The Secretary's regulations require that states provide Medicaid to individuals receiving AFDC. 42 C.F.R. Sec. 435.110(a). For purposes of section 435.110, "an individual is receiving AFDC if his needs are included in determining the amount of the AFDC payment" to be received by a family with dependent children. 42 C.F.R. Sec. 435.110(b). To qualify for AFDC benefits, individuals must meet certain standards of financial need, as defined by their income and resources. 42 U.S.C. Sec. 602(a).

Applicants for AFDC are called family filing units. Prior to 1984, a family applying for AFDC benefits could exclude from the filing unit those family members whose This procedure changed in 1984 when Congress passed the Deficit Reduction Act of 1984, P.Law No. 98-369, 98 Stat. 1145 (DEFRA). Section 2640(a) of the Act, codified at 42 U.S.C. Sec. 602(a)(38), no longer allows an applicant for AFDC to exclude children from the filing unit. Specifically, in determining the eligibility of a dependent child for AFDC benefits a state must include:

income and/or resources, if counted in the overall family income and resources, would make the family ineligible for AFDC benefits. For example, prior to 1984, if one child in a family received $300 per month in social security benefits, that child and his income could have been excluded from the family filing unit, thus enabling the remainder of the family to qualify for and receive AFDC benefits.

(A) any parent of such child, and

(B) any brother or sister of such child, ... if such parent, brother, or sister is living in the same home as the dependent child, and any income of or available for such parent, brother, or sister shall be included in making such determination and applying such paragraph with respect to the family ...;

42 U.S.C. Sec. 602(a)(38).

Thus, siblings who were previously excluded from the family filing unit are now members of the unit and their income is considered available to all members of the filing unit.

Appellees Marjorie Vance and Susan Turner are two mothers who, with their children, received AFDC and Medicaid benefits prior to 1984. ² Each had one child who was excluded from the AFDC and Medicaid filing units prior to 1984 because they received social security benefits. Following the enactment of DEFRA, those children were made members of the family filing unit. The social security benefits received by those children made their families ineligible for AFDC benefits and consequently those benefits were terminated by Oregon. In addition to the termination of these AFDC benefits, which is not at issue in this case, Oregon also terminated appellees' Medicaid benefits. It was Oregon's position that because Medicaid eligibility of families and children not receiving AFDC is determined by the financial eligibility requirements of the states' AFDC plan, 42 C.F.R. Sec. 435.711, when a family became ineligible for AFDC because of the sibling income provisions of DEFRA, ³ the family was also ineligible for Medicaid.

In response to an inquiry from the state, the Health Care Financing Administration (HCFA) of the Department of Health and Human Services informed Oregon that this position fully complied with the Medicaid statutes and regulations. HCFA administers the Medicaid program at the federal level and is responsible for assuring that states operate their programs in accordance with their approved plans and in compliance with all applicable requirements. HCFA also assured Oregon that its position did not conflict with 42 C.F.R. Sec. 435.602(a) ⁴ because each sibling was now a When Oregon terminated the appellees' Medicaid benefits appellees filed the present action. They claimed that the termination of their Medicaid benefits violated Medicaid statutes prohibiting deeming of sibling income. The district court granted appellees' motion for summary judgment and enjoined Oregon "from enforcing any rule or policy that includes as income for purposes of determining Medicaid eligibility, income of an individual, other than applicants or recipients, who is not the parent of a child that is under twenty-one, blind or disabled, or a spouse." The district court expressly adopted the reasoning of Olson v. Reagen, No. 85-101-A (S.D.Iowa Apr. 11, 1985) and Gibson v. Puett, No. 83-84-1232 (M.D.Tenn. Dec. 5, 1984) both of which held that subsection (17)(D) and the Secretary's regulations precluded inclusion of sibling income for...