Vaughn v. Sullivan, IP 93-1600 C B/S.

• Decision Date: 19 October 1995
• Docket Number: No. IP 93-1600 C B/S.,IP 93-1600 C B/S.
• Citation: 906 F. Supp. 466
• Parties: Karen VAUGHN, et al., Plaintiff, v. Cheryl SULLIVAN, et al., Defendant.
• Court: U.S. District Court — Southern District of Indiana

906 F. Supp. 466

Karen VAUGHN, et al., Plaintiff, v. Cheryl SULLIVAN, et al., Defendant.

No. IP 93-1600 C B/S.

United States District Court, S.D. Indiana, Indianapolis Division.

October 19, 1995.

COPYRIGHT MATERIAL OMITTED

Kenneth J. Falk, Legal Services Organization of Indiana, Indianapolis, Indiana, for plaintiff.

Brian D. Scott, Deputy Attorney General, Indianapolis, IN, for defendant.

ENTRY

BARKER, Chief Judge.

This case involves a challenge to the way the State of Indiana administers plans to achieve self support ("PASS" or "PASS plans") and the Medicaid Act. As will be discussed in more detail below, participation in a PASS allows a disabled individual to earn "extra" income without necessarily disqualifying him or her from receiving other government-provided benefits. The State of Indiana excludes PASS income from consideration in determining Medicaid eligibility only if the disabled person is blind. Plaintiffs bring this class action because the State does not extend this benefit to sighted disabled persons.

I. FACTUAL BACKGROUND.

A. Statutory Framework

The Medicaid program was established in 1965 as a way for the states and the federal government to provide medical assistance to the needy. Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. As originally enacted, Medicaid required participating states to provide medical assistance to individuals who received cash payments under four joint federal/state welfare programs administered by the states. In 1972 Congress replaced three of the four programs with a new federal program, Supplemental Security Income for the Aged, Blind, and Disabled ("SSI"), 42 U.S.C. § 1381 et seq.; see generally, Herweg v. Ray, 455 U.S. 265, 102 S.Ct. 1059, 71 L.Ed.2d 137 (1982); Schweiker v. Gray Panthers, 453 U.S. 34, 101 S.Ct. 2633, 69 L.Ed.2d 460 (1981).

The establishment of SSI increased the number of individuals previously ineligible for assistance under the state programs. Fearing that many states would leave the Medicaid program rather than expand their Medicaid coverage, Congress enacted 42 U.S.C. § 1396a(f), which has become known as the section 209(b) option.¹ Herweg, 455 U.S. at 268, 102 S.Ct. at 1063. The section 209(b) option permits states to use Medicaid eligibility requirements for the blind, aged and disabled that are more restrictive than the eligibility requirements used by the federal government to determine SSI eligibility. However, section 209(b) prohibits states from imposing stricter eligibility standards than those in place on January 1, 1972. Mattingly v. Heckler, 784 F.2d 258, 262 n. 3 (7th Cir. 1986) (section 209(b) state can elect to provide Medicaid assistance only to "those individuals who met the eligibility requirements for the state administered programs on January 1, 1972, rather than determining Medicaid eligibility according to the standards of the new SSI program"). The State of Indiana has elected to be a section 209(b) state.

One of the objectives of the SSI program is to supply "incentives and opportunities for those able to work or to be rehabilitated that will enable them to escape from their dependent situations." Panzarino v. Heckler, 624 F.Supp. 350, 353 (S.D.N.Y.1985) (quoting H.Rep. 92-231, 1972 U.S.C.C.A.N. 4989, 5133). The PASS program was conceived as one method of doing so. As its name implies, PASS exclusions are intended to expand opportunities for recipients of SSI to "become self-supporting by permitting them to set aside income or resources for a specific occupational goal, such as education, training or purchase of work-related equipment, without losing eligibility for or entitlement to SSI benefits." Waterflow v. Gallant, 767 F.Supp. 393, 394 (D.Mass.1991). As a result, SSI recipients who are approved to participate in a PASS are permitted to take jobs and earn income without losing their SSI benefits. 42 U.S.C. §§ 1382a(b)(4) and 1382b(a)(4).²

Indiana's Medicaid program treats blind and sighted PASS participants differently. Blind recipients, for example, can have income earned under an approved PASS plan disregarded for a period of up to twelve months.³ Blind PASS participants are also exempted from Indiana's Medicaid resource limitations. 405 IAC 2-3-15(c)(9). There are no similar exemptions for sighted disabled PASS participants. As a result, a sighted PASS participant must incur a "spend down" in order to maintain eligibility under the Indiana Medicaid plan, thus requiring the recipient to pay her medical bills until the excess income above the resource limit is spent. 405 IAC 2-3-10.

B. The Named Plaintiffs

Plaintiff Matt Ravin suffers from chronic multiple sclerosis ("MS"). Because he has no control over his legs and cannot use his hands, he has been confined to a wheelchair. He cannot feed himself and needs an aide to assist him in getting up in the morning and into bed at night. Although he is totally disabled, he is not blind or visually impaired.

Mr. Ravin has been earning Social Security Disability benefits totaling $626 per month. This amount is greater than the maximum monthly income limit for Medicaid. Thus, Mr. Ravin has a monthly spend down of $164 per month, which is to say he must spend that much per month on medical expenses before he is eligible for Medicaid benefits. He has never had difficulty meeting this spend down requirement, however, because his medical expenses are so high.

Effective April 1, 1994, the Social Security Administration approved Mr. Ravin's proposed PASS, thus allowing him to set aside income for an occupational objective. Pursuant to his PASS, income of up to $1294.98 was excludable for purposes of determining his SSI eligibility. As a result, Mr. Ravin became eligible for $446 in monthly SSI benefits retroactive to April. He keeps these monies in a separate savings account where they are accumulating so that he can purchase a handicapped-accessible van.

On November 21, 1994, Mr. Ravin began working part time as a community relations officer for a company doing work for Metro Bus of Indianapolis. He places all of his wages of $250 per week (gross) into his PASS account. His PASS plan has been adjusted by the SSA to exclude from consideration for purposes of determining his SSI eligibility all income he anticipates receiving from this employment.

Prior to his participation in the PASS program, Mr. Ravin was required to spend down $164 per month to remain eligible for state Medicaid benefits. Despite the approval of his PASS, this spend down requirement has not changed. Moreover, as a result of his three sources of income—SSI, disability and wages—Mr. Ravin is now ineligible for Medicaid benefits because his monthly resources exceed that program's $1500 monthly resource limit. 405 IAC 2-3-15.⁴ If he were blind, however, these resources would not be counted for purposes of determining Medicaid eligibility.

Karen Vaughn is also a disabled Indiana Medicaid recipient with a PASS. She is a quadriplegic who became totally paralyzed from the neck down due to an August, 1976, shooting accident. Her PASS, which is to become a consultant on issues under the Americans with Disabilities Act, was approved in June of 1992. Once her PASS was approved, Ms. Vaughn became eligible for an extra $236 per month in SSI benefits. Currently, she receives monthly SSI benefits of $428 and Social Security Disability benefits of $278.

Like Mr. Ravin, Ms. Vaughn is dependent on Medicaid for her medical care. She worries that any additional income earned pursuant to her SSI PASS would jeopardize her continued eligibility for Medicaid benefits. Although Ms. Vaughn has been offered a consulting contract with an organization called Accessing Technology Through Awareness in Indiana, "she has not entered into the ... contract" for fear that she will become ineligible for Medicaid. (Second Amended Complaint, at ¶ 23).

On October 27, 1994, Plaintiffs filed their Second Amended Class Action Complaint, seeking to enjoin defendants from enforcing policies "which would count PASS monies or income generated from PASS plans in ways different than those provided in federal law." (Second Amended Complaint, p. 7). Plaintiffs' challenge is three-fold: (1) that the disparate treatment afforded blind PASS participants vis-à-vis sighted PASS participants violates section 1396a(a)(17) of the Medicaid Act; (2) that such treatment violates the Rehabilitation and Americans with Disabilities Acts; and (3) that such behavior violates the Equal Protection Clause of the United States Constitution. Each of these contentions will be addressed in turn.⁵

II. DISCUSSION.

A party is entitled to summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A genuine issue of material fact exists where "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). The court must view all inferences in the light most favorable to the nonmoving party. Anderson, 477 U.S. at 255, 106 S.Ct. at 2513; Estate of Starks v. Enyart, 5 F.3d 230, 232 (7th Cir.1993).

A. Indiana's Disparate Treatment of PASS-generated Income and Resources Does Not Violate the Medicaid Act.

In determining eligibility for SSI, 42 U.S.C. § 1382a(b) excludes specific items from a recipient's "countable income," and § 1382b(a) excludes additional items from "countable resources." Included within these exemptions is income earned pursuant to a PASS plan, which is excluded under § 1382a(b)(4)(A) and (B), and resources necessary to fulfill the PASS under § 1382b(a)(4). See Randall v. Broome County Social Services, 1995 WL 236254, * 3 (N.D.N.Y. April 10, 1995).

Indiana's...