Whitehouse v. Ives

• Decision Date: 17 April 1990
• Docket Number: Civ. No. 87-0332-B.
• Parties: Robert WHITEHOUSE, et al., Plaintiffs, v. H. Rollin IVES, in his capacity as Commissioner of the Maine Department of Human Services, Defendant and Third-Party Plaintiff, v. Louis W. SULLIVAN, M.D., in his capacity as Secretary of the United States Department of Health and Human Services, Defendant and Third-Party Defendant.
• Court: U.S. District Court — District of Maine

736 F. Supp. 368

Robert WHITEHOUSE, et al., Plaintiffs, v. H. Rollin IVES, in his capacity as Commissioner of the Maine Department of Human Services, Defendant and Third-Party Plaintiff, v. Louis W. SULLIVAN, M.D., in his capacity as Secretary of the United States Department of Health and Human Services, Defendant and Third-Party Defendant.

Civ. No. 87-0332-B.

United States District Court, D. Maine.

April 17, 1990.

Martha A. Grant, Legal Services for the Elderly, Presque Isle, Me., for plaintiffs.

Richard G. Bergeron and Marina E. Thibeau, Asst. Attys. Gen., Dept. of Human Services, Augusta, Me., for defendant and third-party plaintiff.

Michael M. DuBose, Asst. U.S. Atty., Bangor, Me., and George Eng, Asst. Regional Counsel, Dept. of Health and Human Services, Boston, Mass., for defendant and third-party defendant.

MEMORANDUM OF DECISION AND ORDER GRANTING IN PART DEFENDANT IVES' MOTION TO DISMISS

GENE CARTER, Chief Judge.

Plaintiff Robert Whitehouse was admitted to a nursing home in Maine and applied for assistance under the cooperative federal-state Medicaid program. The state found him eligible for Medicaid benefits, but under the program's rules determined that he was required to contribute almost all of his monthly income from his civil service pension to help pay for the costs of his care. That determination worked a particular hardship on his wife, Plaintiff Dorothy Whitehouse, who had been primarily a homemaker during the couple's long marriage and who had, therefore, much smaller retirement earnings than her husband.

Plaintiffs brought suit challenging the rules that precipitated the state's determination of Mr. Whitehouse's assessment for cost of care.¹ Specifically, Plaintiffs claimed that a portion of Mr. Whitehouse's civil service pension should be considered income to his wife, rather than entirely his own income, and that mandatory tax withholdings should not have been considered income available to him at all. Plaintiffs contended that the rules employed by Defendants: (1) were not a reasonable determination of Mr. Whitehouse's income and thus violated the federal Medicaid statute (42 U.S.C. § 1396a(a)(17)); (2) violated Plaintiffs' fundamental rights (including but not limited to privacy, marriage, and spousal support) guaranteed by Article I of the Maine Constitution and Amendments I through X of the United States Constitution; (3) violated the equal protection and due process clauses of the 14th amendment and the Maine Constitution; (4) illegally treated withheld income tax as available income; and (5) violated Maine law by failing to implement an applicable state statute, 22 M.R.S.A. § 3174.

After this action commenced, Congress amended, through enactment of the Medicare Catastrophic Coverage Act of 1988, P.L. 100-360, § 303, the provisions of the Medicaid statute at issue here. The amendments took effect on October 1, 1989. The Commissioner of the Maine Department of Human Services (the Commissioner) moves to dismiss Plaintiffs' claims on the grounds that the 1988 amendments favorably address and moot Plaintiffs' claims. The Commissioner also claims that the prior regulations were valid and did not violate state or federal law. Plaintiffs do not challenge the Act as amended, but seek relief for the period up to the effective date of the amendments.

The Court holds that Plaintiffs' claims for prospective relief are rendered moot by the Medicare Catastrophic Coverage Act of 1988, and thus the Court will dismiss Plaintiffs' claims for injunctive relief. The Court also holds that the income rules employed by Defendants, in the period prior to the effective date of the 1988 amendments, were consistent with the statutory scheme and were reasonable exercises of an explicit, delegated power to define requirements for Medicaid eligibility and the extent of Medicaid benefits. Further, the Court holds that the rules did not violate the federal Constitution. The Court thus will dismiss Plaintiffs' federal constitutional and federal law challenges to the State Defendant's rules. The Court, however, will deny the State Defendant's Motion to Dismiss with respect to Plaintiffs' state law claims.

I. Discussion

To resolve a motion to dismiss, the Court must construe all factual allegations in the complaint in favor of Plaintiffs and decide whether, as a matter of law, Plaintiffs could prove any set of facts which would entitle them to relief. Fed.R.Civ.P. 12(b)(6); Roeder v. Alpha Industries, Inc., 814 F.2d 22, 25 (1st Cir.1987); 5 C. Wright and A. Miller, Federal Practice and Procedure § 1357 (1969).²

The Medicaid program is a cooperative state-federal program, established by Title XIX of the Social Security Act (42 U.S.C. §§ 1396 et seq.), which is intended to provide medical assistance to the indigent and medically needy population. The federal government shares the cost of the program with states that elect to participate, and in return, participating states must comply with requirements imposed by the Medicaid statute and regulations promulgated by the Secretary of the United States Department of Health and Human Services (the Secretary). Atkins v. Rivera, 477 U.S. 154, 156-57, 106 S.Ct. 2456, 2458, 91 L.Ed.2d 131 (1986); 42 U.S.C. § 1396c.

An applicant who is found eligible for Medicaid may be required to contribute a portion of his income to defray the expense of care. Plaintiffs' claims for relief focus on the method used by the state Defendant, in the period prior to the effective date of the Medicare Catastrophic Coverage Act of 1988, to assess the applicant's portion of financial responsibility for care.

Prior to the 1988 amendments, the federal Medicaid statute imposed guidelines on states that chose to participate in the Medicaid program. 42 U.S.C. § 1396a. The state plan had to include reasonable standards for determining eligibility and the extent of medical assistance under the program. 42 U.S.C. § 1396a(a)(17).³ In determining the extent of medical assistance, the state could consider only income and resources that were "available" to a Medicaid applicant. Id. Congress explicitly delegated to the Secretary legislative authority to prescribe standards to determine what income and resources were available to an applicant, and those standards are entitled to substantial deference. Id.; Schweiker v. Gray Panthers, 453 U.S. 34, 43-44, 101 S.Ct. 2633, 2639-40, 69 L.Ed.2d 460 (1981).⁴

Regulations promulgated by the Secretary, in place prior to 1988, furnished financial eligibility guidelines and delineated what income and resources were available to an applicant for the purposes of determining eligibility and the extent of medical assistance. 42 C.F.R. §§ 435.600, et seq.⁵ As a condition of eligibility, applicants were required to take all reasonable steps to obtain any pension, retirement or disability benefits to which they were entitled. 42 C.F.R. § 435.603. The state could "deem" a portion of a non-institutionalized spouse's income to be available to an institutionalized spouse in determining his eligibility for Medicaid. 42 C.F.R. § 435.821. The Supreme Court upheld the deeming regulations as within the Secretary's statutory authority and not arbitrary, capricious or irrational. Schweiker, 453 U.S. at 44, 101 S.Ct. at 2640. The regulations also required a participating state to reduce its payment for the eligible individual's care by an amount equal to the patient's "income," less certain deductions. 42 C.F.R. § 435.832. The amount of the reduction in the state's payment was determined by taking the patient's total income and applying certain deductions, including a potential spousal allowance. Id.⁶ The Maine state plan mirrored these requirements. See Maine Public Assistance Payments Manual, Ch. IV at 6 (Rev. 10/87). The Secretary, as well as the state Defendant, construed the term "total income" to include retirement benefit payments received in the name of the Medicaid applicant/recipient.

a. Effect of the 1988 Medicare Catastrophic Coverage Act of 1988

The Medicare Catastrophic Coverage Act of 1988 clearly was designed to remedy the problems faced by persons in Plaintiffs' situation. The Act clarifies the Medicaid income eligibility guidelines and provides a greater spousal allowance to persons who stay at home when their spouses are institutionalized and receive Medicaid.⁷ Plaintiffs have not amended their complaint to challenge the 1988 amendments; in fact, Plaintiffs concede that the "relief which they have sought through this action has been afforded them by the Medicare Catastrophic Act, effective October 1, 1989." Plaintiffs' Memorandum Objecting to Defendant Ives' Motion to Dismiss at 14. The Court holds that the 1988 amendments render moot Plaintiffs' claims for prospective relief, and thus will dismiss Plaintiffs' claims for injunctive relief.

b. Pension Payments as "Income" to the Pensioner

Plaintiffs contend, however, that the prior income rules were invalid. Plaintiffs thus argue that they are entitled to relief for the period between the determination of Mr. Whitehouse's eligibility for Medicaid and the effective date of the 1988 amendments. Citing the Medicaid statute's requirements that the evaluation of an applicant's income be reasonable and include only income that is "available" to an applicant, Plaintiffs assert that the practice of considering retirement benefit payments as owned by the applicant was arbitrary, capricious, and contrary to the Medicaid statute. Plaintiffs claim that some portion of those retirement benefits should be considered income owned by the recipient's spouse.

The Secretary's determination of what income is available to a Medicaid applicant for purposes of eligibility and assessment for costs of care is "entitled to more than mere deference or weight.... The Secretary's definition is entitled to `legislative effect.'"⁸ Schweiker, 453 U.S. at 44, 101 S.Ct. at 2640; see infra n. 4. In passing on regulations passed...