Maryland Medicaid Beneficiaries Win Round One on Prior Expenses

A Maryland trial court has given Medicaid beneficiaries the go-ahead to pursue an action against the state for its refusal to offset certain prior health care expenses against a beneficiary’s monthly patient-pay amount. The case is Smith v. McCann, Case No. 24-C-05-007421, Order on Motion to Dismiss (Md. Cir. Ct. Baltimore March 14, 2006).

The case is Smith v. McCann, Case No. 24-C-05-007421, Order on Motion to Dismiss (Md. Cir. Ct. Baltimore March 14, 2006).

Maryland has submitted a Medicaid state plan amendment that would allow use of a deductible only for payment of health care expenses that were incurred in a month for which a beneficiary was Medicaid-eligible. The amendment conflicts with previous CMS rulings requiring that previously-incurred health care expenses be allowed to be used to meet the Medicaid monthly deductible even if those expenses were incurred in a month in which the beneficiary was not Medicaid eligible.  The CMS position has proven very helpful for nursing facility residents particularly, who, if a Medicaid application is filed tardily and/or incompetently, often incur thousands of dollars of debt to the nursing facility in the months before an application snafu is resolved.

The state’s motion to dismiss was based upon two arguments:  that the plaintiffs had failed to exhaust administrative remedies, and that the relevant federal Medicaid provisions could not be enforced through 42 U.S.C. § 1983.  The court had little trouble disposing of the arguments relating to exhaustion of remedies, concluding that exhaustion of remedies was not required for the two causes of action based on Section 1983, or on the remaining cause of action for declaratory relief challenging a regulation’s validity.

The court issued a split decision relating to enforceability through Section 1983.  The court upheld the cause of action based on an alleged violation of 42 U.S.C. § 1396a(r)(1)(a), which requires a state Medicaid program to take into account “amounts for incurred expenses for medical or remedial care that are not subject to payment by a third party.”  The court considered this language to be as unambiguously rights-creating as other Medicaid provisions at issue in recent federal appellate decisions applying Section 1983.

However, the court concluded that adequate rights-creating language was not set forth in 42 U.S.C. § 1396c, which requires the federal government to terminate federal financial participation if a state Medicaid plan, or the administration of such plan, is noncompliant with federal Medicaid law.  Accordingly, the court dismissed the cause of action based upon section 1396c.