Md. Medicaid Agency Must Allow Deduction for ‘Old’ Medical Expenses
A Maryland trial court has ruled that federal law requires states to permit institutionalized Medicaid enrollees to use their income to pay for medical expenses incurred prior to eligibility. Smith v. McCann, No. 24-C-05-007421 (Md.Cir.Ct. Jan. 18, 2008).The Issue
The case revolved around the Medicaid law mandating disregard of “payments for certain medical expenses by institutionalized individuals.” 42 U.S.C. § 1396a(r)(1)(A). For purposes of determining how much of a Medicaid enrollee’s monthly income must be paid to the facility for current charges, “there shall be taken into account amounts for incurred medical expenses that are not subject to payment by a third party, including…necessary medical or remedial care…not covered under the State plan” (emphasis added). The plaintiffs asserted that this clause entitled them to use current income to pay medical bills incurred before the plaintiffs became eligible for Medicaid. The state, however, claimed that the clause was limited to charges for services provided while the person was Medicaid-eligible.
The issue is important because past-due bills are a frequent problem for nursing facility residents. Often the bill is incurred due to a delay in obtaining Medicaid eligibility.
Case History
Maryland imposed its reading of the statute at least until 2004, when Maryland attorney Ron Landsman wrote to CMS seeking an advisory opinion on whether Maryland’s position conflicted with federal law (see NSCLC Washington Weekly, September 23, 2004). CMS responded that Maryland’s state plan did not include any prohibition on income deductions for pre-eligibility medical expenses, and that the state therefore could not impose one.
Maryland then submitted a state plan amendment that limited income deductions for pre-eligibility medical expenses to those services received within 90 days of the onset of Medicaid eligibility. CMS approved the amendment. But then in 2005 Maryland submitted another amendment that would have denied a deduction for all medical expenses incurred before eligibility, which CMS rejected. Maryland asked for a reconsideration with CMS, which was denied, and the state is currently seeking review by the Fourth Circuit.
In the meantime, plaintiffs filed suit and, in response to the state’s motion to dismiss, the court ruled that the plaintiffs had a right to proceed under 42 U.S.C. §1983. See NSCLC Washington Weekly, April 4, 2006.
The Court’s Ruling
The parties filed cross-motions for summary judgment. The provision at issue was part of the Medicare Catastrophic Coverage Act of 1988 (MCCA). At the time, the federal government had proposed regulations that would have placed substantial restrictions on income deductions for medical expenses, including on expenses incurred before Medicaid eligibility. In the course of explaining its proposal in the Federal Register, the agency specifically opined that services received “during a period of ineligibility” are services “not covered under the State plan.” Congress responded to the agency’s effort to limit income deductions by mandating in MCCA that states permit institutionalized residents to deduct amounts from their incomes for medical expenses, and used the phrase “not covered under the State plan” to identify those expenses that could be deducted. The phrase “not covered under the State plan” was to interpreted consistently with the definition in the proposed regulation.
Also, CMS’s position was entitled to deference, even though the agency’s position had not been established through formal rulemaking.
Read the opinion (PDF)
Congratulations to the plaintiffs’ counsel: Mr. Landsman; Cyril Smith III and William Meyer of the firm Zuckerman Spaeder LLP; and Rene Reixach of Woods Oviatt Gilman LLP. For more information, please call Eric Carlson in NSCLC’s Los Angeles office, or Gene Coffey in the D.C. office.