Waskul v. Washtenaw Cnty. Cmty. Mental Health

• Decision Date: 29 October 2020
• Docket Number: No. 19-1400,19-1400
• Citation: 979 F.3d 426
• Court: U.S. Court of Appeals — Sixth Circuit
• Parties: Derek WASKUL, by his guardian, Cynthia Waskul; Cory Schneider, by his guardians, Martha and Wendy Schneider; Kevin Wiesner, by his guardian, Kerry Kafafian; Washtenaw Association for Community Advocacy ; Lindsay Trabue, by her guardian, Kristin Kill; Hannah Ernst, by her guardians, Susan and Robert Ernst, Plaintiffs-Appellants, v. WASHTENAW COUNTY COMMUNITY MENTAL HEALTH; Trish Cortes, in her official capacity as Director of Washtenaw County Community Mental Health; Community Mental Health Partnership of Southeast Michigan; Jane Terwilliger, in her official capacity as director of Community Mental Health Partnership of Southeast Michigan; Michigan Department of Health and Human Services; Robert Gordon, in his official capacity as Director of Michigan Department of Health and Human Services, Defendants-Appellees.

979 F.3d 426

Derek WASKUL, by his guardian, Cynthia Waskul; Cory Schneider, by his guardians, Martha and Wendy Schneider; Kevin Wiesner, by his guardian, Kerry Kafafian; Washtenaw Association for Community Advocacy ; Lindsay Trabue, by her guardian, Kristin Kill; Hannah Ernst, by her guardians, Susan and Robert Ernst, Plaintiffs-Appellants,

v.WASHTENAW COUNTY COMMUNITY MENTAL HEALTH; Trish Cortes, in her official capacity as Director of Washtenaw County Community Mental Health; Community Mental Health Partnership of Southeast Michigan; Jane Terwilliger, in her official capacity as director of Community Mental Health Partnership of Southeast Michigan; Michigan Department of Health and Human Services; Robert Gordon, in his official capacity as Director of Michigan Department of Health and Human Services, Defendants-Appellees.

No. 19-1400

United States Court of Appeals, Sixth Circuit.

Argued: June 11, 2020

Decided and Filed: October 29, 2020

CLAY, Circuit Judge.

In 2015, a predecessor to Defendant Washtenaw County Community Mental Health modified the methodology through which it allocated funding to individuals with disabilities receiving community living support services pursuant to a Medicaid waiver received by the State of Michigan. Plaintiffs, five individuals receiving those services, together with the Washtenaw Association for Community Advocacy, challenge that methodology in this case against Defendants the Michigan Department of Health and Human Services, Community Mental Health Partnership of Southeast Michigan, Washtenaw County Community Mental Health, and the directors of these organizations. In particular, Plaintiffs assert that by implementing or allowing implementation of this new methodology, Defendants violated provisions of the Medicaid Act, 42 U.S.C. §§ 1396a(a)(8), (a)(10)(A), (a)(10)(B), 1396n(c)(2)(A) and (C) ; Title II of the Americans with Disabilities Act ("ADA"), 42 U.S.C. § 12132 ; § 504 of the Rehabilitation Act, 29 U.S.C. § 794 ; the Michigan Mental Health Code, Mich. Comp. Laws § 330.1722 ; and the terms of Michigan's Medicaid Habilitation Supports Waiver and the contracts implementing it. The district court dismissed Plaintiffs’ claims in full.

For the reasons set forth in this opinion, we REVERSE the district court's decision and REMAND for further proceedings consistent with this opinion.

BACKGROUND

Factual Background

The State of Michigan offers funding and support to qualifying individuals with disabilities to aid them in living independently in their own home communities, rather than in institutionalized care facilities, pursuant to a Medicaid waiver (the "Habilitation Supports Waiver" or the "Waiver") obtained from the federal government.

This Community Living Support ("CLS") program furthers those individuals’ self-determination by allowing them to structure their own support services based on their medical needs.

Plaintiffs in this case are five individuals who participate in Michigan's CLS program and the Washtenaw Association for Community Advocacy ("WACA"), a non-profit organization of which the individual Plaintiffs are members that advocates for support services for individuals with developmental disabilities. Plaintiff Derek Waskul has severe cognitive impairment and autism

and requires 24/7 supervision. Plaintiff Cory Schneider has autism, a developmental disability, and an undiagnosed behavior disorder that also require 24/7 care. Plaintiff Kevin Wiesner has severe developmental disabilities and suffers from seizures. Plaintiff Lindsay Trabue has Down syndrome and is non-verbal. She has only very basic functional skills and also requires 24/7 care. Finally, Plaintiff Hannah Ernst has been diagnosed with Angelman syndrome, a seizure disorder, and cognitive impairment.

At bottom, Plaintiffs allege that a change in the method through which their CLS budgets are calculated has prevented them from receiving required services and support, in violation of federal and state law and Defendants’ contracts with one another. Plaintiffs’ claims hinge on Medicaid requirements and funding mechanisms, and so we must begin by surveying Michigan's Medicaid framework.

A. Michigan's Medicaid Framework

The joint federal-state Medicaid program provides medical assistance to qualifying individuals who are unable to pay or do not have private insurance, pursuant to Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. (the "Medicaid Act"). In order to receive federal Medicaid funds, states must develop a plan to administer their program in compliance with federal statutory and regulatory requirements. 42 U.S.C. § 1396a(a) ; 42 C.F.R. § 430.10. Once their plan is approved by the Centers for Medicare and Medicaid Services ("CMS"), states receive federal funds to supplement state spending on Medicaid-covered services. See 42 U.S.C. § 1396b(a).

Michigan's Medicaid program is administered by Defendant Michigan Department of Health and Human Services ("the Department"), which is led by Defendant Robert Gordon, its director (collectively, "State Defendants"). 42 U.S.C. § 1396a(a)(5) (requiring that each state "provide for the establishment or designation of a single State agency to administer or to supervise the administration of" their plan); 42 C.F.R. § 431.10(b)(1). The Department then contracts with regional prepaid inpatient health plans ("PIHPs"), which are public managed care organizations that receive funding and arrange and pay for Medicaid services. 42 U.S.C. § 1396u-2(a)(1)(B) ; Mich. Comp. Laws § 400.109f. Defendant Community Mental Health Partnership of Southeast Michigan ("CMHPSM") is the PIHP responsible for Washtenaw County, and is led by Defendant Jane Terwilliger, its executive officer (collectively, "PIHP Defendants").¹ The Department has supervisory and policymaking authority over the PIHPs and must ensure that PIHPs retain oversight and accountability over any subcontractors. PIHPs subcontract with community organizations that provide or arrange for mental health services for recipients, including Defendant Washtenaw County Community Mental Health ("WCCMH"). WCCMH is the public community mental health authority for Washtenaw County and is led by Defendant Trish Cortes, its director (collectively, "County Defendants"). The relationships between the Department, CMHPSM, and WCCMH are governed by federal and state law, in addition to specific contracts. See, e.g. , 42 U.S.C. § 1396u-2(a)(1)(B) ; Mich. Comp. Laws §§ 330.1100a(18), 400.109f.

B. The Community Living Support Program Framework

Under this framework, Defendants work together to ensure CLS services are provided to qualifying recipients, including the individual Plaintiffs, pursuant to the terms of Michigan's Habilitation Supports Waiver. That waiver is financed through so-called "capitation procedures." This means that the federal government provides the relevant entity—here the PIHP, Defendant CMHPSM—with a fixed amount of funding for each person participating in the CLS program, regardless of how many services the entity ultimately provides to the recipient. The PIHP then determines how to allocate these funds to recipients. (Am. Compl., R. 146 at PageID #3718; Application for Habilitation Supports Waiver, MI.0167.R04.00, at 5–6 (Oct. 1, 2010) (hereinafter, "Waiver"), available at https://www.michigan.gov/documents/mdch/Habilation_Supports_Waiver_340749_7.pdf.) PIHPs can make or lose money depending on how the amount they receive in capitation funds compares to the amount of funding they provide recipients, but they must ensure that the services they provide comply with the terms of their contract with the State, which itself must ensure that it complies with the terms of the Medicaid Act, federal regulations, and the Waiver.

Once an individual has elected to receive CLS services, they go through what is known as a person-centered planning ("PCP") process, during which an individual plan of service ("IPOS") and corresponding budget for CLS services is developed. Mich. Dep't of Health & Human Servs., Medicaid Provider Manual at 328 (hereinafter "Mich. Medicaid Provider Manual"), available at (http://www.mdch.state.mi.us/dch-medicaid/manuals/MedicaidProviderManual.pdf), see 42 C.F.R. § 441.301(b)(1)(i). The IPOS describes the services that have been deemed "medically necessary" for each recipient based on criteria defined in Michigan's Medicaid Provider Manual. (Am. Compl., R. 146 at PageID #3713; Mich. Medicaid Provider Manual at 337 ("The determination of a medically necessary support, service or treatment must be ... [d]ocumented in the individual plan of service.").) Michigan's Waiver application, later approved by CMS, explained:

An individual budget includes the expected or estimated costs of ... obtaining the mental health services and supports included in the IPOS.... Once the IPOS is developed, the amount of funding needed to obtain the identified services and supports is determined collectively by the participant, the mental health agency (PIHP or designee), and others participating in the PCP process. This process involves costing out the services and supports using the rates for providers chosen by the participant and the number of hours authorized in the IPOS.... The individual budget is authorized in the amount of that total cost of all services and supports in the IPOS.

(Waiver at 134.) The individual then enters a "self-determination arrangement" with their local community mental health service program. (Id. at 135.) Under that arrangement, the individual determines how to use the funds in their budget to execute their IPOS. This includes hiring, scheduling, and paying staff, as well as selecting, arranging, and paying for services, supports, and treatments listed in the IPOS. A fiscal intermediary actually holds the funds and pays bills directed to them.

C. WCCMH's Budget Methodology

This brings us to the change in budget methodology that prompted this case. Budgets for CLS services are calculated by...