9th Cir. rules against Medicaid expansion populations

The Ninth Circuit held that the Medicaid statute’s requirements and limitations do not apply to Medicaid expansion populations, who do not meet the criteria for being either categorically needy or medically needy. The court therefore agreed with the position advocated by the Secretary of Health and Human Services that no waiver is needed for a state to impose co-payments and premiums in excess of the Medicaid statute’s limits for expansion populations (i.e., those who would be categorically ineligible for Medicaid but for the existence of a demonstration project under 42 U.S.C. § 1315). Spry v. Thompson, No. 04-35746 (May 21, 2007).

The plaintiffs were neither categorically needy nor medically needy as defined by the Medicaid statute.  They obtained Medicaid eligibility through a demonstration program for which the Secretary waived the traditional Medicaid eligibility rules.  The state sought to reduce the costs of paying for Medicaid coverage for the expansion populations by imposing premiums and co-payments, regardless of the individual’s ability to pay.  The plaintiffs were homeless individuals who qualified for participation in the demonstration program but could not pay the premiums required to participate.

 

The state and federal government defendants disputed the private cause of action under 42 U.S.C. § 1983 to enforce the Medicaid provision, 42 U.S.C. § 1396o, which contains limitations on co-payments and premiums.  The court noted that Watson v. Weeks, 436 F.3d 1152, 1155 (9th Cir.), cert. denied, 127 S.Ct. 598 (2006), held that 42 U.S.C. § 1396a(a)(10) (which requires states to make Medical Assistance available to specified groups of individuals) is enforceable under § 1983.  The court concluded that there is no “sound basis for distinguishing Watson.”

 

The court then held, on the merits, that the limitations on co-payments and premiums in 42 U.S.C. § 1396o are applicable only to categorically and medically needy beneficiaries and not to expansion populations.  The court based its holding on the language of the statute, and therefore did not reach the issue of deference to the Secretary’s interpretation of the statute.  The court rejected the plaintiffs’ argument that when the Secretary grants a waiver pursuant to 42 U.S.C. § 1315, the expansion populations become state plan populations, thus subject to § 1396o.  The court held that § 1315 served only to permit states to count costs that would not otherwise be regarded as state plan expenditures for federal Medicaid reimbursement.  The court stated: “Expenditures being ‘regarded as eligible’ for Medicaid for purposes of calculating hospital reimbursement is not the same thing as an individual being ‘eligible’ for Medicaid benefits.”  The court concluded that the state did not need a waiver to exceed the statute’s limits on premiums and co-payments for expansion populations.

 

The concurrence stated that the Medicaid statute was ambiguous regarding whether co-payment and premium limits in § 1396o were applicable to expansion populations.  Nevertheless, the concurrence deferred to the interpretation of the statute by the Secretary, under which “Medicaid regulations do not apply to individuals who are not eligible for Medicaid, such as the expansion populations covered under Oregon’s demonstration project.”