Ward v. Wallace, Civ. A. No. 84-T-1612-N.

• Decision Date: 05 January 1987
• Docket Number: Civ. A. No. 84-T-1612-N.
• Citation: 652 F. Supp. 301
• Parties: Monalisa WARD, etc., et al., Plaintiffs, v. George C. WALLACE, etc., et al., Defendants.
• Court: U.S. District Court — Middle District of Alabama

652 F. Supp. 301

Monalisa WARD, etc., et al., Plaintiffs, v. George C. WALLACE, etc., et al., Defendants.

Civ. A. No. 84-T-1612-N.

United States District Court, M.D. Alabama, N.D.

January 5, 1987.

Charles G. Spradling, Jr., Birmingham, Ala., Lawrence F. Gardella and Tamara Young, Montgomery, Ala., for plaintiffs.

John C. Bell, U.S. Atty., Kenneth Vines, Asst. U.S. Atty., Montgomery, Ala., and James N. Stephens, Acting Regional Atty., Edgar M. Swindell, Asst. Regional Atty., Dept. of Health and Human Services, Atlanta, Ga., for defendant Heckler.

Charles A. Graddick, Atty. Gen., Montgomery, Ala., and Herman H. Hamilton, Jr., Sp. Asst. Atty. Gen., Shapard D. Ashley, Counsel, Montgomery, Ala., for defendants Wallace & Baggiano.

Mary Lee Stapp, James E. Long, Asst. Attys. Gen., Alabama Dept. of Pensions & Security, Montgomery, Ala., for defendant Frazier.

MEMORANDUM OPINION

MYRON H. THOMPSON, District Judge.

This class action lawsuit is a challenge to the policy of the Alabama Medicaid program of automatically including the income of an applicant's siblings and grandparents when determining the applicant's financial eligibility to receive Medicaid benefits. The plaintiffs, who have been denied participation in the state Medicaid program because of this policy, ask the court to declare that the policy impermissibly conflicts with federal law and to award the plaintiff class appropriate relief.

For reasons that follow, the court concludes that the challenged policy violates federal law and that the plaintiff class is thus entitled to appropriate relief.

I. BACKGROUND

The Medicaid program was established under Title XIX of the Social Security Act, 42 U.S.C.A. §§ 1396, et seq., as a cooperative program between state and federal governments to pay the costs of medical treatment for needy persons. States are not obligated to participate; however, if a state chooses to take part, the federal government will provide substantial funds to match a specified state contribution and, in turn, the state must comply with federal requirements for the program. Participating states must provide assistance to all individuals specified as "categorically needy." 42 U.S.C.A. § 1396a(a)(10)(A). This group includes persons who receive benefits under the Aid to Families with Dependent Children (AFDC) program, authorized under Title IV-A of the Social Security Act, 42 U.S.C.A. §§ 601, et seq., and persons 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.A. § 1396a(a)(10)(A)(i)(I); 42 C.F.R. § 435.114. Medicaid eligibility is therefore closely linked to eligibility for AFDC assistance, and thus any understanding of Medicaid also requires an understanding of AFDC.

AFDC was enacted to "encourage the care of dependent children in their own homes or in the homes of relatives." 42 U.S.C.A. § 601. AFDC is similar to Medicaid in the sense that it is a cooperative effort between state and federal governments, with the states agreeing to administer the program locally and comply with federal requirements in return for federal financial support. AFDC assistance is available to dependent children in households were one parent is absent or is physically or mentally incapacitated.

Applicants for AFDC are called family "filing units." In order to qualify for the benefits, applicants must meet specified standards of financial need. 42 U.S.C.A. § 606(a). Prior to the 1984 enactment of the Deficit Reduction Act (DEFRA), P. Law No. 98-369, 98 Stat. 1145, an AFDC filing unit did not have to include all family members residing in one household. A family or household applying for AFDC benefits could exclude from the filing unit those household members who had income sufficient to reduce the household's eligibility for benefits. As such, a minor parent living with her children was considered to be a distinct filing unit for AFDC purposes, even if they were residing with a parent of the minor-parent, that is, the grandparent of the children. Similarly, a household could exclude from its application a child who received sufficient independent income to render the child ineligible for AFDC benefits.

Several changes were made in AFDC eligibility requirements by section 2640 of DEFRA; among them were the automatic inclusion of sibling income and, in certain circumstances, grandparent income. 42 U.S.C.A. § 602(a) as amended by paragraphs (38) and (39).¹ The effect of the DEFRA changes was to render ineligible for AFDC benefits a significant number of households that had previously been eligible.

The crux of this lawsuit is whether the AFDC changes in eligibility requirements imposed by DEFRA can properly be applied to Medicaid eligibility determinations as well. The Alabama Medicaid program has, since 1984, been administered as if the AFDC eligibility changes required by DEFRA did in fact also alter the standards for Medicaid eligibility. The plaintiffs filed this lawsuit to challenge this policy.² This court has certified this suit as a class action with the plaintiffs representing all similarly situated persons.

There is no question that the named class representatives have been affected by the challenged policy. During 1984, plaintiff Monalisa Ward, a 17-year-old minor parent, and her infant daughter were denied Medicaid benefits by the Alabama program due to the inclusion of income from Ward's mother, the grandmother of Ward's infant daughter, with whom Ward and her daughter were residing. Plaintiffs Eula Givner and Julia Hails had their Medicaid benefits terminated in 1984 due to the inclusion of income from child support or Social Security benefits received by one child in their respective households as available for the support of that child's siblings in the same home. Givner lost Medicaid coverage for herself and three of her four children due to child support income received by the fourth child. Hails, who acts as caretaker for her deceased sister's three children, lost Medicaid coverage for two of the three children due to inclusion of Social Security benefits the third child receives.

The defendants are Otis R. Bowen, Secretary of the United States Department of Health and Human Services, who is responsible for administration of the federal AFDC and Medicaid programs; George C. Wallace, Governor of the State of Alabama, and Faye S. Baggiano, Commissioner of the Alabama Medicaid Agency, who are responsible for administration of the state Medicaid program; and Gwendolyn H. Williams, Commissioner of the Alabama Department of Pensions and Security, who is responsible for administration of the state AFDC program.

II. THE SECRETARY'S ARGUMENTS

The court will first address the arguments of the Secretary of the Department of the Health and Human Services. The Secretary supports the Alabama Medicaid program's policy only to the extent that it provides for the automatic inclusion of sibling income when making Medicaid eligibility determinations. The Secretary does not support the state program's policy of automatically including grandparent income; for reasons the court need not discuss, the Secretary draws a distinction between the automatic inclusion of sibling income and grandparent income.

A.

The Secretary correctly observes that the Alabama Medicaid program's policy regarding sibling income is based on an official interpretation issued by the Secretary pursuant to Congress's broad delegation of authority to him to determine, in accordance with the law, the amount of income available to a Medicaid applicant. Vance v. Hegstrom, 793 F.2d 1018, 1023 (9th Cir.1986); see also Herweg v. Ray, 455 U.S. 265, 274-75, 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, 2640, 69 L.Ed.2d 460 (1981). The Secretary's interpretation may therefore be rejected and overturned by this court only if the interpretation exceeds statutory authority given the Secretary or is arbitrary and capricious. Herweg, 455 U.S. at 275, 102 S.Ct. at 1066; Gray Panthers, 453 U.S. at 44, 101 S.Ct. at 2640. For reasons that follow, the court agrees with the plaintiffs that the Secretary's interpretation on the automatic inclusion of sibling income, as well as the state policy based on that interpretation, conflicts with the law and that therefore the interpretation exceeds the statutory authority given the Secretary.

B.

The plaintiffs contend that the Alabama Medicaid program's automatic inclusion of sibling income to determine eligibility for Medicaid violates two Medicaid provisions in the Social Security Act, in particular subsections (17)(B) and (D) of 42 U.S.C.A. § 1396a(a). These two subsections provide that a state's Medicaid program must

include 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.A. § 1396a(a)(17)(B) & (D).

Subsection (17)(B) therefore requires Medicaid determinations to be made only on the basis of income "available to the applicant." The term "available" has been interpreted to include not only income actually in the hands of the applicant, but also income which, in the parlance of Social Security laws and regulations, may be "deemed," that is reasonably presumed, available to the applicant, irrespective of whether it is actually available. Herweg, 455 U.S. at 267, 102 S.Ct. at 1063; Gray Panthers, 453 U.S. at 44-48, 101 S.Ct....