Williams v. St. Clair

• Decision Date: 28 January 1980
• Docket Number: No. 78-1625,78-1625
• Citation: 610 F.2d 1244
• Parties: Nellie WILLIAMS et al., Plaintiffs, Minnie Merli, Plaintiff-Appellant, v. Fred ST. CLAIR et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1244

610 F.2d 1244

Nellie WILLIAMS et al., Plaintiffs Minnie Merli, Plaintiff-Appellant, v. Fred ST. CLAIR et al., Defendants-Appellees.

No. 78-1625.

United States Court of Appeals Fifth Circuit.

Jan. 28, 1980.

Dennis L. Horn, Hazlehurst, Miss., Gill Deford, Nat'l Senior Citizens Law Center, Los Angeles, Cal., for plaintiff-appellant.

Thomas E. Childs, Jr., Jackson, Miss., for state defendants.

Robert E. Hauberg, U.S. Atty., L. A. Smith, III, Asst. U.S. Atty., Jackson, Miss., Alvin N. Jaffe, Carl H. Harper, Eva H. Goldstein, Asst. Reg. Attys., Dept. of HEW, Atlanta, Ga., for federal defendants.

Appeal from the United States District Court for the Southern District of Mississippi.

Before COLEMAN, Chief Judge, RONEY and FAY, Circuit Judges.

COLEMAN, Chief Judge.

In the companion case of Norman v. St. Clair, 610 F.2d 1228, decided today, we addressed the propriety of Mississippi's deeming practices in determining Medicaid eligibility. ¹ Here we must examine the state's spend-down procedures. ² We find no statutory or constitutional impediment to their operation.

The general operation of the federal-state Medicaid scheme is outlined in Norman. States which employ more restrictive eligibility guidelines than those existing under the current Supplemental Security Income Program (SSI), the so-called "209(b) exception", 42 U.S.C. § 1396a(f), must allow Medicaid applicants to "spend-down," by incurring medical expenses, the amount by which their incomes exceed the eligibility levels. Under the Medicaid statute and regulations, states have discretion in selecting the spend-down period. Mississippi has selected a period of six months. For non-institutionalized persons, then, the state multiplies by six (the length of the spend-down period) the amount by which the applicant's income exceeds $150 (surplus monthly income) to determine the applicant's spend-down amount. If during the six-month period the applicant incurs medical expenses at least equal to the spend-down amount, the applicant becomes eligible for Medicaid. See Mississippi Department of Welfare Manual, Vol. III, § M, pp. 9649b-9661b (hereinafter cited as Welfare Manual). When this case was filed, Mississippi required that the applicant present proof of incurred expenses. An applicant could not anticipate or project expenses, even though those might be readily ascertained and verified.

Plaintiff Wharey Wilson, a nursing home resident, became ineligible for Medicaid when the joint incomes of Wilson and his wife exceeded the eligibility cut-off by $48.65 as a result of Social Security and Veterans Administration cost of living increases. Thus, although Mr. Wilson was institutionalized, he was required to incur medical expenses in excess of $2500 before becoming eligible for Medicaid.

Plaintiff Juanita Lee, also a nursing home resident, had income exceeding the eligibility limits by $2.29 as a result of a general cost of living increase for Social Security recipients. Because of this excess, the state required her to spend-down approximately $2,500 over a 6-month period before she became eligible for Medicaid.

Subsequent to the bringing of this suit, the Mississippi Medicaid Commission altered its spend-down requirements to allow both institutionalized and non-institutionalized applicants to use anticipated or projected, rather than actually accrued, medical expenses in meeting the spend-down requirement, where those expenses were predictable and recurring. HEW's regional office in Atlanta informed state officials that the new procedure would not comply with HEW regulations, 45 C.F.R. 248.1. ³ According to HEW, an applicant may not include expenses that he anticipates incurring. The only exception exists in an institutional setting where the beneficiary is in residence and is expected to remain, and the billing rate is fixed. Not desiring to lose federal funding, ⁴ Mississippi once again changed its spend-down policy, allowing institutionalized applicants to anticipate expenses but requiring non-institutionalized persons to accrue actual expenses.

Plaintiffs amended their complaint to include as a plaintiff Minnie Merli, a non-institutionalized Medicaid applicant suffering from rheumatoid arthritis. ⁵ At the time she brought suit, she had a spend-down amount of $203.40. Her physician testified that she required one visit per month to a physician, at $15 per visit, and medication costing $49.91 per month. He indicated that Mrs. Merli's condition would slowly and progressively worsen. Plaintiffs allege that low income persons such as Ms. Merli find difficulty in obtaining credit in such large amounts from providers of medical services and drugs. Yet such credit must be received in order for the person to incur the required spend-down amount.

Under Mississippi's current spend-down policy, then, institutionalized individuals are permitted to anticipate predictable medical expenses in order to meet Medicaid eligibility income levels. Non-institutionalized persons are not so permitted and must in fact accrue medical expenses in order to spend-down their excess income. Plaintiffs challenge this policy, arguing first that denying non-institutionalized applicants with necessary and recurring future medical expenses the opportunity to anticipate those expenses violates the Medicaid statute, particularly 42 U.S.C. § 1396a(f), and HEW's own internal regulations. Second, they contend that the practice of allowing institutionalized persons to anticipate expenses while not allowing non-institutionalized persons to do so produces an irrational distinction and violates the Equal Protection Clause. We reject both arguments.

A. Statutory Analysis

Under § 209(b), states using Medicaid plans more restrictive than the standards under SSI must allow potential Medicaid applicants to spend-down through medical expenses the amount by which their income exceeds the eligibility level. See Hayes v. Stanton, 7 Cir. 1975, 512 F.2d 133. Section 209(b) of Pub.L.No.92-603 added § 1902(f) to the Social Security Act, which provides in relevant part:

. . . no State shall be required to provide medical assistance to any aged, blind, or disabled individual . . . for any month unless such State would be (or would have been) required to provide medical assistance to such individual for such month had its plan for medical assistance approved under this title and in effect on January 1, 1972, been in effect in such month, except that for this purpose any such individual shall be deemed eligible for medical assistance . . . if . . . the income of any such individual as determined in accordance with section 1903(f) (after deducting such individual's payment after title XVI, And incurred expenses for medical care as defined in section 213 of the Internal Revenue Code of 1954) is not in excess of the standard for medical assistance established under the state plan as in effect on January 1, 1972.

Pub.L.No.92-603, 92d Cong., 2d Sess. (1972) (emphasis added). ⁶ The implementing regulations are found at 42 C.F.R. § 435.732(c), (d) which requires states to "deduct from income expenses incurred by the individual or financially responsible relatives for necessary medical and remedial services that are recognized under State law. . . ." ⁷

Although the legislative history on this section is sparse, the Report of the House Ways and Means Committee on the bill touches briefly upon it:

Cash assistance families with incomes above the eligibility level would receive medicaid coverage only after incurring medical expenses equal to the amount by which their total income (including cash assistance payments) exceeded the medicaid standard; they would be required to "spend-down" by this amount to establish their eligibility for medicaid. In effect, this amount would be a deductible, increasing in amount as earnings rise and, therefore, avoiding the situation where one dollar of earnings can result in the loss of protection worth several hundred dollars. Medical expenses for this purpose would be defined as those in section 213 of the Internal Revenue Code.

H.Rep.No.92-231, 92d Cong., 1st Sess. (1971), reprinted in (1972) U.S.Code, Cong. & Admin.News, pp. 4989, 5061.

In enacting this provision, Congress built upon the rationale underlying the initial Medicaid act. Under the 1965 program, Congress had stressed that states should employ flexible income standards to take account of the applicant's medical expenses. To prevent situations in which an individual is ineligible because his income exceeds the limit even though the excess may be small when compared with the cost of medical care, Congress required states to "be flexible in the consideration of an individual's income," and stated that "the State's standards for determining eligibility . . . shall take into account, except to the extent prescribed by the Secretary, the cost whether in the form of insurance premiums or otherwise incurred for medical care or any other type of remedial care recognized under State law." Accordingly, States were to make sure that "the income of the individual has been measured in terms of both the State's allowance for basic maintenance needs and the cost of the medical care he requires." S.Rep.No.404, 89th Cong., 1st Sess. (1965), reprinted in (1965) U.S.Code, Cong. & Admin.News, pp. 1943, 2019. See also 111 Cong.Rec. 18349 (July 27, 1965) (statement of Sen. Long presenting summary of Conference Report) (states must provide a flexible income test which takes into account medical expenses). ⁸

But while Congress has indicated states must consider medical expenses before denying eligibility, Congress has not explicitly addressed the manner in which states may do so. Congress has not, for example, required that states take into account anticipated expenses. It has said only that they must consider incurred expenses. We see no reason to require the state and HEW to give "incurred" a definition beyond its...