Gonzaga Contagion Quarantined?

NSCLC Victory in Kentucky is One of Three Federal Court Decisions to Allow Enforcement of Medicaid Statute

The “Gonzaga Contagion” (see Washington Weekly, March 19, 2004), apparently epidemic in the federal courts, has slowed, or halted, at least temporarily. Three different federal courts, in a mere seven-day span, have ruled for individuals enforcing the Medicaid statute against state Medicaid agency officials. Of course, increasingly disparate readings by the federal courts of Gonzaga v. Doe, 536 U.S. 273 (2002), may stir the high court to speak once again on enforceability of federal statutes against state officials. In the meantime, though, a growing contingent of federal courts is holding that Medicaid beneficiaries may enforce the statute against state Medicaid agencies.

Kerr v. Holsinger , No. 0-68-JMH (E.D. Ky. Mar. 25, 2004)

The U.S. District Court for the Eastern District of Kentucky has granted the motion for preliminary injunction filed by the National Senior Citizens Law Center and the Office of Kentucky Legal Services Programs (OKLSP), on behalf of Kentucky residents whose Medicaid coverage for long-term care was terminated by the state. Concluding that “manipulating eligibility standards in order to make up for budget deficits is unreasonable and inconsistent with Medicaid objectives,” the court ordered that the plaintiffs’ Medicaid coverage be immediately reinstated.

The class action lawsuit, filed against officials in Kentucky’s Medicaid agency in October, challenged the agency’s new regulations, revising long-term care eligibility standards. See Washington Weekly, Oct 10, 2003. The changes were at the center of the state’s effort to cut $50 million from its Medicaid long-term care spending, which officials apparently hoped to accomplish by simply making it unreasonably difficult for individuals to demonstrate a medical need for nursing home or home and community-based care services. In some cases, individuals who had resided in nursing homes for close to five years were being informed by the state that they did not need nursing facility care.

Pointing to Kentucky’s previous findings that they were eligible for long-term care, plaintiffs charged the state with denying mandatory Medicaid services—nursing facility services—to eligible individuals in violation of 42 U.S.C. §§1396a(a)(10)(A) and 1396(d)(a)(4), and with employing an unreasonable eligibility standard in violation of 42 U.S.C. §1396a(a)(17). Plaintiffs also alleged that the state was not providing them notices regarding their eligibility that complied with the requirements of 42 U.S.C. §1396a(a)(3). The state moved to dismiss, alleging that, per Gonzaga, the plaintiffs did not have any rights in these provisions that could be enforced under 42 U.S.C. §1983.

The court held that all four provisions contain enforceable rights. Each, the court said, is clearly intended to benefit the plaintiffs, imposes a binding obligation on the state, and is not so “vague or amorphous” that its enforcement is beyond the scope of the judiciary. The court also held resoundingly that the state could not restrict these rights for the sole purpose of saving money. “Medicaid regulations adopted for the wrong reason; i.e., without a Medicaid-related or health-related purpose, are contrary to the purposes of the Act because they are inherently arbitrary, unreasonable, and invalid.” The court denied the state’s motion to dismiss and granted a preliminary injunction, ordering defendants to reinstate plaintiffs’ benefits.

Rabin v. Wilson-Coker , __F.3d__, 2004 WL 596090

In Rabin, the U.S. Court of Appeals for the Second Circuit found the transitional medical assistance (TMA) provision of the Medicaid Act (42 U.S.C. §1396r-6) enforceable under 42 U.S.C. §1983, after specifically contrasting the provision with the Family Educational Rights and Privacy Act (FERPA) provision at issue in Gonzaga.

42 U.S.C. §1396r-6 provides that individuals whose Medicaid coverage is connected to their eligibility for Temporary Assistance for Needy Families (TANF) may maintain Medicaid eligibility for up to six months after becoming ineligible for TANF because of income from employment. When Connecticut lowered its TANF income eligibility limit last year, it terminated Medicaid coverage of those losing TANF because of the new eligibility limit. Plaintiffs claimed they were entitled to TMA since their income from employment was rendering them ineligible under the new TANF income limit. The state argued that the statute only provides for TMA when an individual loses TANF eligibility because of an increase in employment income, not a decrease in the TANF income limit. The district court agreed with the state’s reading of the statute and granted summary judgment to the state. Rabin v. Wilson-Coker, 266 F.Supp.2d 332 (D. Conn. 2003).

The court of appeals reversed, finding that the statute provides TMA for individuals who lose eligibility for TANF because of a decrease in the income limit if they: (1) have earned income; and (2) would not have been ineligible under the new income limits if they had only unearned income. The court also rejected the state’s argument that 42 U.S.C. §1396r-6 did not confer an enforceable right on the plaintiffs. The provision states that “each state plan...must provide that each family which was receiving [TANF] in at least 3 to 6 months immediately preceding the month in which such family becomes ineligible for such aid, because of…income from employment...remain eligible for assistance under the plan...”

The court distinguished the FERPA provision at issue in Gonzaga from the TMA provision, finding that the latter does not contain “qualifying language akin to FERPA’s ‘policy or practice.’” The court also rejected the state’s argument that the TMA provision is focused not on an individual’s benefits but rather what a “state plan” must require. “Congress has provided that ‘in an action brought to enforce a provision of [Medicaid], such provision is not to be deemed unenforceable because of its inclusion in a section of this chapter requiring a State plan or specifying the required contents of a State plan,’” citing 42 U.S.C. §1320a-2. The court remanded the case to the district court for a summary judgment ruling in favor of the plaintiffs.

Mendez v. Brown, __ F.Supp.2d __, 2004 WL 626550 (D.Mass.)

The plaintiffs in Mendez are clinically obese women with a medical need for breast reduction surgery who were being denied coverage for the service by the state. The state informed the plaintiffs that it would only reconsider if they lost weight, at which point other less costly medical options would be available. The plaintiffs alleged that the state’s denial violated 42 U.S.C. §1396a(a)(8) (requiring that services be provided with “reasonable promptness”), §1396a(a)(10) (requiring that services be provided to individuals in sufficient amount, scope and duration in comparison to other similarly situated individuals), and §1396a(a)(17) (mandating “reasonable” eligibility standards). The state moved to dismiss on grounds that plaintiffs did not have any rights enforceable in these provisions.

The court noted that prior to Gonzaga, all three provisions had been found by federal courts to be enforceable under §1983, and found no merit in the state’s argument that Gonzaga “eviscerated” those prior rulings. It criticized Sabree v. Houston, 245 F.Supp.2d 653 (E.D.Pa.2003), now on appeal before the Third Circuit, as a decision which, “opines, in an unsupported footnote, that certain pre-Gonzaga cases” finding provisions of the Medicaid statute enforceable were “disavowed by Gonzaga.” The court agreed with plaintiffs that, “Sabree’s “disavow[al]” language is untenable.”

The court agreed that the state’s position had “some resonance” in light of the First Circuit’s opinion in Long Term Care Pharmacy Alliance v. Ferguson, __F.3d__, 2004 WL 513790 (finding that, per Gonzaga, providers do not have an enforceable right in the statute’s “equal access provision,” 42 U.S.C. §1396a(a)(30)(A), see Washington Weekly, March 19, 2004). However, the court stated that the three Medicaid provisions at issue “readily survive any heightened analysis which Gonzaga requires…[E]ach subsection—again unlike (30)(A) [the equal access provision]—identifies a ‘discrete class of beneficiaries.’” The court therefore denied the state’s motion for dismissal.