Opinion
CV-03-121-ST
October 17, 2003
FINDINGS AND RECOMMENDATION
INTRODUCTION
On January 28, 2003, plaintiffs, Elizabeth A. Spry, Gary Spry, Demon Harvey, Michael McCarthy, and Mary Gaye Reyes, filed this action against defendants, Tommy Thompson, Secretary of the United States Department of Health and Human Services ("HHS"), Thomas Scully, Administrator of Centers for Medicare and Medicaid Services, and Jean Thorne ("Thorne"), Director of the Oregon Department of Human Services ("ODHS").
The Centers for Medicare and Medicaid Services ("CMS") is a federal agency within the HHS.
On June 13, 2003, plaintiffs filed a Second Amended Complaint, alleging that they and approximately 80,000 other similarly situated persons constitute a class of current participants in the low-income Oregon Health Plan ("OHP") who will be denied access to healthcare because of premium and co-payment charges as part of a "human research experiment," known as the Oregon Health Plan 2 ("OHP2"). Plaintiffs allege that Tommy Thompson and Thomas Scully (the "federal defendants") have violated: 42 U.S.C. § 3515b (First Claim); 42 U.S.C. § 1315 (Second, Third, Fourth and Fifth Claims); and 42 U.S.C. § 1396o(f) and 5 U.S.C. § 552(a)(1)(D) and (E) (Sixth Claim). Plaintiffs also allege that Thorne has violated: 42 U.S.C. § 1396o(b)(1) (Seventh Claim); 42 U.S.C. § 1396o(b)(3) (Eighth Claim); the Due Process Clause of the Fourteenth Amendment (Ninth Claim); the Equal Protection Clause of the Fourteenth Amendment (Tenth Claim); and 42 U.S.C. § 1983 (Eleventh Claim).
Plaintiffs filed the Second Amended Complaints after oral argument on Thorne's Motion to Dismiss. This court permitted additional briefing in light of plaintiffs' two new claims against Thorne and to brief the Supreme Court's recent decision in Pharmaceutical Research Mfr. v. Walsh, 583 US ___, 123 S Ct 1855 (2003). In addition, the parties agreed that Thorne's Motion to Dismiss should be deemed as filed against the Second Amended Complaint.
Thorne moves to dismiss all claims against her (Seventh through Tenth Claims) (docket #11) for failure to state a claim upon which relief may be granted. For the reasons that follow, Thorne's Motion to Dismiss should be granted as to the Ninth Claim and otherwise denied.
LEGAL STANDARD
In evaluating a motion to dismiss for failure to state a claim pursuant to FRCP 12(b)(6), the court must accept the allegations of material fact as true, and must construe those allegations in the light most favorable to the non-moving party. Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir 1995). "The issue is not whether [the] plaintiff will ultimately prevail but whether the [plaintiff] is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). Thus, a claim should be dismissed only if it appears beyond doubt that the plaintiff can establish no set of facts under which relief could be granted. Jacobsen v. Hughes Aircraft Co., 105 F.3d 1288, 1292 (1997), overruled on other grounds by Hughes Aircraft Co. v. Jacobson, 119 S Ct 755 (1999), citing Conley v. Gibson, 355 U.S. 41, 45-46 (1957).CONVERSION TO SUMMARY JUDGMENT
As a preliminary matter, both parties submitted materials outside the pleadings. Because Thorne seeks dismissal for failure to state a claim for relief, the court may either exclude those materials or may consider them and, if so, treat the motion as one for summary judgment, provided that the parties are given a reasonable opportunity to present all relevant material. FRCP 12(b)(6). Alternatively, on a motion to dismiss, the court may consider documents "whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to [plaintiffs] pleading." Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir), cert denied, 525 U.S. 1001 (1998) (citations omitted).
A conversion to summary judgment is premature, since the parties have filed cross-motions for summary judgment (dockets # 34 (plaintiffs), # 57 (Thorne) # 61 (federal defendants)). The Second Amended Complaint refers to the OHP2 waivers whose authenticity is not questioned. Therefore, this court will consider the six exhibits attached to the Affidavit of Jim Edge which pertain to the OHP2 waivers.
BACKGROUND
I. Medicaid Act and the Waiver Program
This action arises from Oregon's participation in the Medicaid program, a cooperative federal-state Medical Assistance Program authorized by Title XIX of the Social Security Act, 42 U.S.C. § 1396-1396v ("Medicaid Act"). Medicaid is administered by each state that enrolls and while participation is voluntary, a participating state is bound by the Medicaid Act's statutory and regulatory requirements.
States participating in Medicaid must submit a "State Plan" for approval by the Secretary of HHS. 42 U.S.C. § 1396a(a); 42 C.F.R. § 430.10. A state generally must offer coverage to certain eligible groups and may opt to offer coverage to certain other eligible groups. See 42 U.S.C. § 1396a(a)(10); 42 C.F.R. § 435.4. The "categorically eligible" (or "mandatory") group includes individuals who receive or are eligible for cash assistance from either the welfare program (Temporary Assistance to Needy Families) or the Supplemental Security Income program ("SSI"), a federal program for individuals with disabilities. 42 U.S.C. § 1396a(a)(10)(A) (E). Other eligible groups, referred to as the "medically needy" (or "optional"), are persons who satisfy the eligibility requirements of welfare or SSI, but whose income or resources exceed the financial eligibility standards of those programs. See 42 U.S.C. § 1396a(a)(10)(C). The Medicaid Act also mandates that specified types of health services be covered (for example, physician services), but allows states the option of covering other types of services (for example, pharmaceuticals).
Temporary Assistance to Needy Families ("TANF") replaced the Aid to Families with Dependant Children program ("AFDC") with the passage of the Personal Responsibility and Work Opportunity Act of 1996. Federal funds are provided to states in the form of a block grant to serve needy families with children.
However, HHS may waive compliance with at least some of the requirements of the Medicaid Act, including eligibility limitations, for programs that will further the purposes of the Social Security Act. 42 U.S.C. § 1315(a).
II. Oregon's Health Plan
In 1994, under Medicaid waivers granted by HHS, Oregon launched OHP, a medical assistance program designed to expand healthcare coverage to low-income Oregonians with incomes above the federal poverty line. 1115 Waiver Amendment Application, p. 1. To offset the cost of expanding coverage to these individuals, Oregon developed the concept of the prioritized list of medical conditions, paired with their most effective treatments. Based upon the availability of state and federal funds, the state legislature then drew a line and the services above the funding line were covered instead of the services mandated by the Medicaid Act.
In recent years, the sustainability of the program has declined based on Oregon's budgetary crisis and rising healthcare costs. Id; Or Laws 2001, Ch 898. Thus, the 2001 Oregon legislature directed the creation of OHP2, a restructuring program designed to "sustain the current program, expand coverage to higher income levels to stabilize insurance coverage and reach more uninsured Oregonians, and leverage private insurance, particularly employer-sponsored coverage." 1115 Waiver Amendment Application, p. 1. OHP2 expanded coverage in the OHP (Title XIX of the Social Security Act) and the State Children's Health Insurance Program ("SCHIP") (Title XXI of the Social Security Act). It also increased enrollment in the Family Health Insurance Assistance Program ("FHIAP"), which subsidizes premiums for employer-sponsored and private market health insurance for individuals with incomes up to 170% of the federal poverty line.
On October 15, 2002, HHS approved OHP2 as a demonstration project under 42 U.S.C. § 1315 ("§ 1315"), effective February 1, 2003. Approval Letter, p. 1. What was formerly known as OHP became known as "Oregon Health Plan Plus"("OHP Plus") and continued to provide the same benefit package (based upon the prioritized list) to the "categorically eligible" as before, without cost-sharing other than nominal co-payments on prescription drugs. The income limit for eligibility was increased from 100% to 110% of the poverty line in a program now called "Oregon Health Plan Standard" ("OHP Standard"). The cost of this expansion was offset by reducing the benefit package for all non-categorical groups (including the expansion group) and imposing monthly premiums and co-payments beginning February 1, 2003, regardless of the individual's ability to pay these costs. Those who fail to pay the required premiums for OHP Standard are disqualified from the OHP for a minimum of six months regardless of the reason for nonpayment.
The legislation authorized ODHS to expand OHP Standard to those with incomes up to 185% of the federal poverty line. ODHS chose to implement the expansion incrementally, beginning with an increase to 110%.
III. Plaintiffs' Class
Plaintiffs are not eligible for Medicaid coverage under OHP Plus because they are either single or married childless adults who are neither disabled nor blind. See 42 U.S.C. § 1396a(a)(10). Although they qualify for coverage under OHP Standard, they are homeless and destitute and lack the ability to pay the premiums and co-payments required. As a result, some have lost their OHP Standard coverage and cannot reapply for any OHP Standard coverage until six months after their termination date. They need prescription medications for serious health concerns, including cardiac arrhythmia, traumatic arthritis, depression, grand mal seizures, emphysema, and other respiratory problems.
Plaintiffs challenge the HHS waivers that establish OHP2 as a demonstration project and authorize premiums and co-payments for certain OHP2 eligibility groups that include plaintiffs.
DISCUSSION
I. Private Right of Action under § 1983 for Alleged Violations of §§ 1396o(b)(1) (3) (Seventh, Eighth and Eleventh Claims)
The Seventh Claim alleges that Thorne "is violating 42 U.S.C. § 1396o(b)(1) by imposing premiums that are not related to the recipient's income as defined under 42 C.F.R. § 447.52." Second Amended Complaint, ¶ 111. The Eighth Claim alleges that Thorne "is violating 42 U.S.C. § 1396o(b)(3) by imposing more than nominal copayments." Id at ¶ 113. The Eleventh Claim alleges a § 1983 claim because Thorne violated the rights conferred under §§ 1396o(b)(1) and (3). Id at ¶ 121. Thorne seeks to dismiss these claims as a matter of law because the Medicaid statutes at issue do not confer any individual right on plaintiffs to enforce through § 1983. For the reasons set forth below, this court concludes that plaintiffs do have a private right of action.
A. Legal Standard
Liability exists under § 1983 against persons who act under color of law to deprive individuals of "any rights, privileges, or immunities secured by the Constitution and laws" of the United States. Section 1983 is a remedy not only for constitutional violations, but also for violations of federal statutes. Maine v. Thiboutot, 448 U.S. 1, 6-8 (1980). However, actions based upon an alleged violation of a federal statute may not proceed under § 1983 if: (1) "the statute did not create enforceable rights, privileges, or immunities within the meaning of § 1983;" or (2) "Congress has foreclosed such enforcement of the statute in the enactment itself." Wright v. Roanoke Redev. and Hous. Auth., 479 U.S. 418, 423 (1987). Whether the particular statute creates a federal right enforceable under § 1983:
turns on whether the provision in question was intend[ed] to benefit the putative plaintiffs . . . If so, the provision creates an enforceable right unless it reflects merely a congressional preference for a certain kind of conduct rather than a binding obligation on the governmental unit,. . . or unless the interest the plaintiff asserts is too vague and amorphous such that it is beyond the competence of the judiciary to enforce.Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 509 (1990) (citations and internal quotations omitted).
Plaintiffs bear the burden of showing that a violation of the federal law also amounts to the violation of a federal right possessed by them. Blessing v. Freestone, 520 U.S. 329, 340 (1997). The analysis must be focused on a specific statutory provision. Id at 342.
The following three-part test serves as guidance for determining whether a statute confers an individual enforceable right:
1. Congress must have intended that the provision in question benefit the plaintiff.
2. The plaintiff must demonstrate that the right assertedly protected by the statute is not so `Vague and amorphous" that its enforcement would strain judicial competence.
3. The statute must unambiguously impose a binding obligation on the states.Id at 340-41.
Also see Cort v. Ash, 422 U.S. 66, 78 (1975), applying a similar three-part test: (1) legislative intent; (2) consistent with legislative purpose; and (3) an action traditionally relegated to state law.
Just last year, the Court fleshed out the first part of the Blessing test. In Gonzaga Univ. v. Doe, 536 U.S. 273 (2002), the Court considered the relationship between the statutory creation of a private right of action and of a right enforceable under § 1983 in an effort to resolve any ambiguity stemming from its prior opinions. Id at 278. Concerned that some courts had interpreted Blessing "as allowing plaintiffs to enforce a statute under § 1983, so long as the plaintiff fell within the general zone of interest that the statute is intended to protect," Gonzaga "reject[ed] the notion that our cases permit anything short of an unambiguously conferred right to support a cause of action brought under § 1983." Id at 283. It emphasized that the first inquiry is "whether Congress intended to create a federal right." Id at 283 (emphasis in original). "Accordingly, where the text and structure of a statute provide no indication that Congress intends to create new individual rights, there is no basis for a private suit, whether under § 1983 or under an implied right of action." Id at 286.
While Gonzaga requires clear and unambiguous proof that Congress intended to establish an individual right on behalf of a plaintiff, it did not displace or supercede Blessing or any other precedent. This is confirmed by the Ninth Circuit in Save Our Valley v. Sound Transit, 335 F.3d 932, 939 (9th Cir 2003), which analyzed Supreme Court precedent, including Blessing and Gonzaga, to conclude that an agency regulation cannot create individual rights enforceable through § 1983. It acknowledged that the three-prong Blessing test remains the appropriate criteria for determining whether a § 1983 right is present, but did not have to apply the test "because the Supreme Court already has told us that Title VI does not create the claimed right." Id at 944 n10.
B. Intent to Benefit Plaintiffs
Applying the Blessing test, as clarified by Gonzaga, this court must first determine whether Congress unambiguously intended to provide individuals such as plaintiffs a private right of action under §§ 1396o(b)(1) or (3). Gonzaga considered several factors in that regard. First, it examined whether the provision contained any "`rights-creating'" language critical to showing the requisite congressional intent to create new rights." 536 US at 287. Second, it examined whether the statute had an "aggregate focus" unconcerned with "whether the needs of any particular person have been satisfied." Id at 288, citing Blessing. Third, it examined the statute's enforcement mechanism for individual complaints. Id at 289. This court will examine those same factors.
1. Rights-Creating Language
"Rights-creating" language focuses on conferring a benefit or entitlement for an individual or class of individuals, rather than the entity or person that the statute intends to regulate. Gonzaga, 536 US at 287. "Statutes that focus on the person regulated rather than the individuals protected create no implication of an intent to confer rights on a particular class of persons." Alexander v. Sandoval, 532 U.S. 275, 289 (2001) (quotations omitted). Instead, "[f]or a statute to create such private rights, its text must be "phrased in terms of the persons benefitted." Gonzaga, 536 US at 284, citing Cannon v. University of Chicago, 441 U.S. 677, 690 n 13 (1979); see also Suter v. Artist M., 503 U.S. 347, 363 (1992) (refusing private enforcement through § 1983 of the Adoption Assistance and Child Welfare Act of 1980 because the "term `reasonable efforts' in [the statute's] context is at least as plausibly read to impose a rather generalized duty on the State, to be enforced not by private individuals, but by the Secretary in the manner [of reducing payments]"). An obvious example of rights-creating language is found in Titles VI and IX ("`no person shall be subjected to discrimination'"). Gonzaga, 536 US at 287.
The Medicaid Act was enacted by Congress pursuant to its spending power. The Supreme Court has made clear that "[i]n legislation enacted pursuant to the spending power, the typical remedy for State noncompliance with federally imposed conditions is not a private cause of action for noncompliance but rather action by the Federal Government to terminate funds to the State." Pennhurst State School and Hospital v. Halderman, 451 U.S. 1, 28 (1981).
Article I, § 8, cl. 1, of the Constitution provides, "Congress shall have Power to . . . provide for the . . . general Welfare of the United States."
Since Pennhurst, the Supreme Court has only twice found spending legislation to confer individual rights. In Wright, 479 US at 423-432, tenants were allowed to sue under § 1983 to recover past overcharges under a rent-ceiling provision of the Public Housing Act. Three years later in Wilder, 496 US at 509-10, a hospital association was permitted to sue state officials under § 1983 for violating the hospitals' rights under a payment provision of the Medicaid Act.
Two other spending legislation cases are particularly relevant here. Blessing found that a mother did not have a private right of action to require the state to operate its child support program in "substantial compliance" with Title IV-D with the Social Security Act. However, it did not "foreclose the possibility that some provisions of Title IV-D give rise to individual rights," such as 42 U.S.C. § 657(b)(1) which was not explicitly alleged in the Complaint. Blessing, 520 US at 345-46.
More recently Gonzaga held that a student may not sue a private university for damages under § 1983 to enforce provisions of the Family Educational Rights Privacy Act ("FERPA") "which prohibit the federal funding of educational institutions that have a policy or practice of releasing education records to unauthorized persons." Gonzaga, 536 US at 276. Barring funds to an educational institution was "two steps removed from the interests of individual students and parents and clearly does not confer the sort of " individual entitlement" that is enforceable under § 1983. Id at 274, citing Cannon, 441 US at 690-93 (emphasis in original).
The statutory language in §§ 1396o(b)(1) and (3) falls between the two extremes of the clear rights-creating language of Titles VI and IX and the lack of such language in FERPA. Both §§ 1396o(b)(1) and (3) specify the minimum and maximum rates and charges that each recipient state can impose on individuals and entitle individuals to the nominal rates set by Congress. Section § 1396o(b)(1) states in relevant part that "[t]he State plan shall provide that in the case of [medically needy or optional] individuals . . . there may be imposed an enrollment fee, premium, or similar charge, which (as determined in accordance with standards prescribed by the Secretary) is related to the individual's income[.]" Additionally, the implementing regulation states in relevant part:
For the purpose of relating the amount of an enrollment fee, premium, or similar charge to total gross family income, as required under § 447.51(d), the following rules apply: (a) Minimum charge. A charge of at least $1.00 per month is imposed on each — (1) One- or two-person family with monthly gross income of $150 or less; (2) Three- or four-person family with monthly gross income of $300 or less; and (3) Five- or more-person family with monthly gross income of $350 or less.42 C.F.R. § 447.52.
42 C.F.R. § 447.52(b) also provides a table of maximum charges related to gross family income.
Similarly, § 1396o(b)(3) provides that:
The State plan shall provide that in the case of [medically needy or optional] individuals . . . any deductions, cost sharing, or similar charge imposed under the plan with respect to other such individuals . . . will be nominal in amount (as determined by the Secretary in regulations which shall . . . take into account the level of cash assistance provided in such State and such other criteria as the Secretary determines to be appropriate).
Although the Medicaid Act originates from Congress' authority to enact spending legislation, it departs in one significant respect from other spending legislation such as FERPA. The Medicaid Act expressly directs the participating state to spend the federal funding on low-income individuals in need of medical assistance. The state combines its monies with federal funds to jointly assist providing the medically needy with medical care. As a result, the Medicaid Act contains a laundry list of rights to be afforded to recipients.
Both 1396o(b)(1) and (3) confer a direct, rather than an indirect, benefit or entitlement to an individual or class of individuals, such as plaintiffs. Unlike the statutes at issue in Blessing and Gonzaga, these statutes are not "designed only to guide the State in structuring its systemwide efforts." Blessing, 520 US at 344. Rather than being two steps removed from the interests of recipients of Medicaid funds, they focus on the individuals to be protected.
This is not the first case addressing whether 1396o creates an individually enforceable right. One district court pre- Gonzaga found this same provision to be enforceable by Medicaid recipients under § 1983. Greenstein v. Bane, 833 F. Supp. 1054, 1067, 1074-75 (SDNY 1993) (applying the three-part Wilder test). Other courts both pre- Gonzaga and post-Gonzaga have permitted recipients of Medicaid to sue under § 1983 to enforce other provisions of the Medicaid Act. Twice since Gonzaga, the First Circuit found in Medicaid statutes a congressional intent to benefit Medicaid-eligible individuals. In Rolland v. Romney, 318 F.3d 42, 53-56 (1st Cir 2003), the First Circuit held that § 1396r of the Medicaid law was intended to benefit the plaintiff class of developmentally disabled adults residing in nursing homes regarding the "specialized services" that must be provided. In Bryson v. Shumway, 308 F.3d 79, 88 (1st Cir 2002), the court found that the "reasonable promptness" requirement of § 1396a(a)(8) of the Medicaid Act was intended to benefit the plaintiffs who were Medicaid-eligible individuals seeking services under a Medicaid Home and Community-based waiver. Last year before Gonzaga, the Sixth Circuit found a clear Congressional intent to benefit the minor plaintiffs claiming a right to services under Medicaid's Early and Periodic Screening, Diagnosis, and Treatment Program in 1396d. Westside Mothers v. Haveman, 289 F.3d 852, 863 (6th Cir 2002). See also Wood v. Tomkins, 33 F.3d 600, 611 (6th Cir 1999) (allowing home care Medicaid recipients to sue for violations of 1396n(c)(2)).
Three district court cases found that Medicaid Act provisions do not create an enforceable right: Wilson-Coker v. Community Visiting Nurse and Home Care Agency, 222 F. Supp.2d 190 (D Conn 2002); Belen Consolidated Sch. et al v. Otten, 259 F. Supp.2d 1203 (D NM 2003); and Burlington United Methodist Family Serv. Inc. v. Atkins, 227 F. Supp.2d 593 (SD WVa 2002). Each of these cases, however, addressed the right of medical providers, not Medicaid recipients, to enforce provisions of the Medicaid Act. Belen and Burlington actually note this distinction and suggest that beneficiaries do have private rights. While Wilson-Coker does not discuss the right of beneficiaries to enforce, a later case from the same district does find that beneficiaries have a private right. See Rabin v. Wilson-Coker, 266 F. Supp.2d 332, 342 (D Conn 2003).
District courts in the First Circuit reaching the same conclusion are: Rabin, 266 F. Supp.2d at 342; American Society of Consultant Pharmacists v. Concannon, 214 F. Supp.2d 23, 29 (D Me 2002); Long Term Care Pharmacy Alliance v. Ferguson, 206 F. Supp.2d 282, 290 (D Mass 2003).
One district court case relied upon by Thorne, Sabree v. Houston, 245 F. Supp.2d 653 (ED Pa. 2003), takes the radical position that after Gonzaga, a federal Medicaid law never can be enforced under § 1983. This court is not persuaded by its analysis. It extends Gonzaga well beyond its intended reach by ignoring the precedent of Wilder which Gonzaga cited with approval: "Congress [had] left no doubt of its intent for private enforcement" in its enactment of the Medicaid Act's Boren Amendment. Gonzaga, 536 US at 280, citing Wilder, 496 US at 522-23. Sabree overlooks the fact that Gonzaga had the opportunity to overrule either Wilder or Blessing, but did not do so. Instead, it simply clarified how to apply the first element of the Blessing test for determining whether statutes create rights privately enforceable through § 1983 actions. Sabree improperly interprets the scope of Gonzaga.
Accordingly, this court concludes that the text of § 1396o(b) reflects an intent by Congress to create a federal right enforceable by Medicaid recipients. The other factors considered by Gonzaga support that conclusion, as discussed below.
2. Aggregate Focus
Statutes with an "aggregate focus" on the persons regulated (such as educational institutions), rather than on individuals protected (such as persons suffering discrimination), create no implication of an intent to confer rights on a particular class of persons. As discussed above, the particular provisions of the Medicaid Act at issue here confer monetary benefits on particular classes of persons. Each person who fails to receive that benefit suffers the type of "individualized, concrete monetary entitlement found enforceable in Maine . . . and Wilder." Gonzaga, 536 US at 289 n6. This is a far cry from the statutes at issue in Blessing and Gonzaga where recipient institutions could avoid termination of funding by "substantially complying" with the federal requirements. Sections 1396o(b)(1) and (3) do not concern a "policy" or "practice" that triggers a funding prohibition, but an individual monetary entitlement. Given the individual focus, rather than an aggregate focus, this factor favors a finding of a private right of action.
3. Enforcement Mechanism
A statute may contain "a remedial scheme that is `sufficiently comprehensive . . . to demonstrate congressional intent to preclude the remedy of suits under § 1983.'" Blessing, 520 US at 346 (citations omitted). However, "a plaintiff's ability to invoke § 1983 cannot be defeated simply by `[t]he availability of administrative mechanisms to protect the plaintiff's interest." Id at 329 [citation omitted]. Hence, § 1983 was still available in both Wright and Wilder even though administrative "oversight powers were accompanied by limited state grievance procedures for individuals." Id.
The Medicaid Act has several main enforcement mechanisms. First, pursuant to § 1396c, the Secretary may curtail federal funds to states whose plans are no longer in compliance with the Act. Second, § 1396a(a)(3) requires that the State Plan "provide for granting an opportunity for a fair hearing before the State agency to any individual whose claims for medial assistance under the plan is denied or is not acted upon with reasonable promptness." Oregon has instituted an administrative hearings process. See OAR 461-025-0310. Under this rule, OHP Standard members are entitled to a contested case hearing when the state "acts to deny, reduce, close, or suspend a grant of . . . medical assistance." Id. Nevertheless, it is well-settled that administrative hearings are not granted to challenges of a rule of general applicability. United States v. Florida E. Coast Ry. Co., 410 U.S. 224, 244-45 (1973) (holding that administrative policies applied uniformly to a large group of people are not subject to individual hearings under the Due Process Clause); see also Logan v. Zimmerman Brush Co., 410 U.S. 224, 244-45; Bi-Metallic Inv. Co. v. State Bd. of Equalization, 239 U.S. 441, 445 (1915). Thus, the contested case hearing will not allow plaintiffs to raise the same issues that they are raising in this case.
Unlike FERPA at issue in Gonzaga, the Medicaid Act contains no federal review mechanism that reveals an intent by Congress to bar individual suits under § 1983. Instead, as in Wilder with respect to the Boren Amendment, this "administrative scheme cannot be considered sufficiently comprehensive to demonstrate a congressional intent to bar the private remedy of § 1983." Wilder, 496 US at 522. It consists only of the Secretary's administrative oversight and limited state administrative procedures. Accordingly, the enforcement scheme does not foreclose a private judicial remedy under § 1983.
4. Other indications of congressional intent
Further evidence of congressional intent can be found in the legislative history when attempts have been made to amend the Social Security Act to preclude § 1983 suits. For example, in 1981, 1985, 1987, and 1996, Congress rejected bills that would have limited § 1983 as Thorne suggests should be done here. In 1995, Congress implicitly recognized that § 1983 provided a right to sue to enforce the Medicaid Act by passing a provision that would have repealed that right. This attempt was unsuccessful because President Clinton vetoed the legislation. Notably, in 1980 the Court invited Congress to change the law if it thought the Court's interpretation of Congressional intent was in error. Maine, 448 US at 8. The lack of success of legislators to enact provisions precluding enforcement of the Medicaid Act through § 1983 despite many attempts, is a clear indication that the provisions of the Social Security Act are presumptively enforceable in a § 1983 action.
The House Budget Committee stated "the Bill would remove the existing right to sue a State official under 42 U.S.C. § 1983 to require prospective enforcement of the Medicaid statute." HR 2491, 104th Cong., §§ 2611, 2117.
5. Conclusion
Because all three Blessing prongs are satisfied and the factors considered by Gonzaga tilt favorably towards a finding of a private right of action, this court finds that eligible individuals have a federal right to enforce §§ 1396o(b)(1) and (3).
C. Right not "vague or amorphous"
The second part of the three-part Blessing test also is met, because the right asserted by plaintiffs is not so "vague and amorphous" that its enforcement would strain judicial competence. Blessing, 520 US at 340-41. The rights asserted by plaintiffs are well within the range of rights that have been adjudicated in this respect. The Supreme Court found that judicial competence was not strained by enforcement of a provision requiring that Medicaid rates be:
reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities in order to provide care and service in conformity with applicable state and federal laws, regulations, and quality and safety standards and to assure that individuals eligible for medical assistance have reasonable access . . . to inpatient hospital services of adequate quality.Wilder, 496 US at 519-20.
In two recent decisions, the First Circuit found judicial competence was not strained by enforcement of Medicaid provisions requiring that nursing facility residents be provided with "specialized services," or that Medicaid-eligible individuals be provided housing and community-based waiver services "with reasonable promptness." Rolland, 318 F.3d at 53-54; Bryson, 308 F.3d at 89. Finally, the Sixth Circuit has also found that the Early Periodic, Screening, Diagnosis and Treatment requirements of the Medicaid Act were not so vague and amorphous as to defeat judicial enforcement because "the statute and regulations carefully detail the specific services to be provided." Westside Mothers, 289 F.3d at 863.
The statute at issue here is even more detailed than those at issue in the foregoing cases. Section § 1396o(b) requires that any premiums imposed pursuant to a state plan be "related to the individual's income" as defined "in accordance with standards prescribed by the Secretary." The Secretary has prescribed those standards in 42 C.F.R. § 447.52. That regulation sets forth detailed limits on the amount of premiums that may be charged, based on the number of family members and their gross monthly income. It is an easy task for this court to compare to the federal regulation the premiums promulgated by rule by the state defendant.
D. Binding Obligation on the State
Plaintiffs' claims also satisfy the third part of the Blessing test because § 1396o(b) speaks in mandatory terms. Use of the word "shall" in the federal Medicaid Act has been recognized as establishing the "binding obligation" of the three-part test. See, e.g., Westside Mothers, 289 F.3d at 863 ("Medicaid services `shall be furnished' to eligible children"). Here, § 1396o(b)(1) provides that the "State plan shall provide that . . . there may be imposed an enrollment fee, premium, or similar charge, which (as determined in accordance with standards prescribed by the Secretary) is related to the individual's income." Section § 1396o(b)(3) states that "any . . . cost sharing or similar charge imposed under the plan . . . will be nominal in amount." Section § 1396o(f) proscribes the Secretary's waiver authority for cost sharing. It states that "no deduction, cost sharing, or similar charge may be imposed under any waiver authority of the Secretary . . . unless such waiver is for a demonstration project" for which the Secretary has made explicit findings, including that the project will
test a unique and previously untested use of co-payments; will be limited to a period of not more than two years; will provide benefits to recipients of medical assistance which can reasonably be expected to be equivalent to the risks to the recipients; will be based on a reasonable hypothesis which the demonstration is designed to test in a methodologically sound manner, including the use of control groups of similar recipients of medical assistance in the area; and that it is voluntary, or makes provision for assumption of liability for preventable damage to the health of recipients of medical assistance resulting from involuntary participation.
Thus, the language throughout § 1396o(b) is mandatory and unambiguously imposes binding obligations on the state and the Secretary.
E. Regulations
Thorne also argues, citing Save Our Valley, 335 F.3d 932, that plaintiffs cannot seek to enforce regulations under § 1983. That case involved a challenge to a proposed light rail line in Seattle which the plaintiff asserted would have a disproportionate adverse impact on minority residents of the area, in violation of Title VI regulations of the United States Department of Transportation. Relying heavily on the Supreme Court decisions in Gonzaga and Alexander v. Sandoval, 532 U.S. 275 (2001), it concluded that if only Congress can create a private cause of action, then only Congress, and not agencies, can create a federal right. It also held that regulations can play a role in identifying private rights. "[S]o long as the statute itself confers a specific right upon the plaintiff, and a valid regulation merely further defines or fleshes out the content of that right, then the statute — `in conjunction with the regulation' — may create a federal right as further defined by the regulation." Save Our Valley, 335 F.3d at 941, citing Harris v. James, 127 F.3d 993, 1009 (11th Cir 1997). See also Wright, 479 US at 431 ("The regulations, however, defining the statutory concept of `rent' as including utilities, have the force of law"), citing Chrysler Corp. v. Brown, 441 U.S. 281, 294-295 (1979).
Section § 1396o(b) directs the Secretary to prescribe standards for co-payments and premiums. The standards prescribed by the Secretary in regulations were thus incorporated by reference into the statute. As long as plaintiffs have enforceable rights under § 1396o(b), they have a right to enforce the Secretary's regulations which define the content of that right.
F. Conclusion
The fact that the Medicaid Act is spending legislation does not necessarily bar enforcement of certain of its provisions by a private right of action under § 1983. When the provisions of spending clause enactments confer entitlements on individuals, are not vague, and bind state recipients, those will be regarded as "rights secured by the . . . laws of the United States." Wilder, 496 US at 498.
In enacting §§ 1396o(b)(1) and (3), Congress clearly and unambiguously intended to confer individual rights upon Medicaid beneficiaries. Those rights are not vague and are binding on participating states. Thus, plaintiffs, who purport to be Medicaid beneficiaries, have a basis for a private suit under § 1983, and Thorne's motion to dismiss the Seventh, Eighth and Eleventh Claims on that basis is denied.
II. Failure to State a Claim for Violation of the Medicaid Act (Seventh, Eighth Eleventh Claims )
Even if plaintiffs have a private cause of action under § 1983, Thorne argues that plaintiffs fail to state a claim against Thorne because the federal defendants authorized and approved OHP2. If the federal defendants should not have approved OHP2 in the first instance, then Thorne asserts that plaintiffs may have a claim against the federal defendants, but not against her. However, plaintiffs' claims against Thorne are premised on OHP2 lacking a valid waiver under § 1315. If OHP2 lacks a valid waiver and therefore violates the Medicaid Act by improperly charging co-payments or premiums, then plaintiffs clearly can sue Thorne for that violation.
Thorne also contends that OHP2 does not violate any provision of the Medicaid Act. Section 1396o(b)(1) authorizes states to impose "an enrollment fee, premium, or similar charge which (as determined in accordance with standards prescribed by the Secretary) is related to the individual's income." The Secretary has prescribed premium guidelines in 42 C.F.R. § 447.52. The premium schedule for the OHP Standard, as reflected in OAR 461-155-0235, does not match those premium guidelines.
However, Thorne contends that those premium guidelines are not the only "standards" which may be "prescribed by the Secretary" and that the Secretary may prescribe other standards through the process of revising and approving a state's waiver application. Here the Secretary reviewed and approved OHP2 pursuant to the general waiver authority under § 1315. By doing so, Thorne asserts that the Secretary has waived the general Medicaid standards, including 42 C.F.R. § 447.52, and instead prescribed specific standards for Oregon. The Approval Letter specifically waives several Medicaid cost-sharing limitations.
Plaintiffs respond that the "standards" referenced in § 1396o(b)(1) are the premium guidelines in 42 C.F.R. § 447.52 and that the Secretary does not have authority to prescribe any other standards through the waiver authority in § 1315. Section 1315 grants the Secretary general waiver authority regarding Social Security Act provisions, including the Medicaid Act requirements set forth in § 1396a:
In the case of any experimental, pilot, or demonstration project which, in the judgment of the Secretary, is likely to assist in promoting the objectives of title . . . XIX, in a State or States — (1) the Secretary may waive compliance with any of the requirements of section . . . 1902 [ 42 U.S.C. § 1396a] . . .
One of the provisions which may be waived under § 1315 is § 1396a(a)(14) which requires a state's plan for medical assistance to: "provide that enrollment fees, premiums, or similar charges, and deductions, cost sharing, or similar charges may be imposed only as provided in § 1396o of this title." No mention is made in § 1315 of the Secretary's authority to waive § 1396o. In fact, § 1396o(f) allows some cost-sharing under a demonstration project, but only in specified circumstances. Plaintiffs assert that the Secretary does not have the authority under § 1315 to waive cost-sharing requirements under any circumstances other than as specified in § 1396o(f). Because OHP2 does not comply with those specified circumstances, plaintiffs contends that OHP2 violates § 1396o.
In essence, Thorne argues that OHP2 is a demonstration project under § 1315 which is not restricted by any Medicaid Act requirements because it would not exist without a waiver. Plaintiffs contest that OHP2 is a legitimate demonstration project for a number of reasons, including the serious risk imposed on the subjects. See Second Amended Complaint, ¶¶ 23, 81, 87-89. This dispute requires factual determinations inappropriate in the context of a motion to dismiss.
But even if OHP2 is a legitimate demonstration project under § 1315, resolution of plaintiffs' claims requires the court to engage in statutory interpretation which necessarily involves some analysis of Congressional intent. This same issue is presented by the pending summary judgment motions filed by both Thorne and the federal defendants. Rather than resolve this issue on a motion to dismiss with a very limited record, this court recommends denying this part of Thorne's motion to dismiss in favor of resolving it through summary judgment.
III. Fourteenth Amendment — Due Process (Ninth Claim)
Plaintiffs' Ninth Claim alleges that Thorne is violating the Fourteenth Amendment "by irrebuttably presuming class members have the ability to pay the premiums imposed by [Thorne] and denying the class members a due process hearing on the issue of their ability to pay." Second Amended Complaint, ¶ 117. For the reasons set forth below, this claims fails as a matter of law and should be dismissed.
A. Legal Standards
Due process protects citizens from arbitrary treatment by their government. Wolff v. McDonnell, 418 U.S. 539 (1974). It ensures that citizens possess an opportunity to be heard in a meaningful time and meaningful manner. Goldberg v. Kelly, 397 U.S. 254, 268 (1970). "The right to prior notice and a hearing is central to the Constitution's command of due process." United States v. James Daniel Good Real Prop., 510 U.S. 43, 53 (1999) (forfeiture proceeding). To maintain a procedural due process claim, plaintiffs must establish that a state actor has deprived them of a constitutionally protected liberty or property interest without due process. See Zinermon v. Burch, 494 U.S. 113, 125(1990).
A property interest exists in Medicaid benefits if plaintiffs can individually demonstrate that they are entitled to those benefits. Board of Regents v. Roth, 408 U.S. 564, 577 (1972). An entitlement exists where the statutes or regulations in question establish a framework of factual conditions delimiting entitlements which are capable of being explored at a due process hearing. Cornelius v. La Croix, 838 F.2d 207, 210 (7th Cir 1988).
B. Analysis
Plaintiffs have clarified that their due process claim is not premised on their right to individualized hearings on the application of the generally applicable rule that all OHP Standard members must pay a sliding scale premium. Nor do plaintiffs assert that the state failed to grant them a hearing upon the termination of their benefits. Instead, they claim that the state has created an irrebuttable presumption that all OHP Standard participants have the ability to pay and that their failure to do so is willful. Anyone who fails to pay his or her premium is disqualified from OHP2 for a mandatory minimum six-month period without any opportunity to demonstrate an inability to pay. Even after six months, an individual cannot re-qualify until the past due premium is paid. OAR 461-135-1130. Plaintiffs claim that the irrebuttable presumption that they have the ability to pay premiums violates their rights to due process.
However, this claim is substantively the same as a claim that plaintiffs are entitled to a hearing for the purpose of challenging the assessment of OHP Standard premiums to those who are unable to pay them. Payment of the premiums is the threshold standard applicable to everyone. The issue is not an individual plaintiffs inability to pay the premiums. The state makes no presumption about any person's means and does not dispute the plaintiffs' inability to pay. Instead, the issue is the generally applicable threshold requirement for an OHP Standard participant to pay a premium regardless of ability to pay.
As discussed above, administrative hearings are not granted to challenge a rule of general applicability. Florida E. Coast Ry. Co., 410 US at 244-45 (holding that administrative policies applied uniformly to a large group of people are not subject to individual hearings under the due process clause); 42 C.F.R. § 431.220(b) (a state agency administering Medicaid need not provide a hearing if the "sole issue is a Federal or State law requiring an automatic change adversely affecting some or all recipients"). Plaintiffs' argument is akin to arguing that although the OHP2 is open to Oregon residents, California residents who are denied access to OHP2 are constitutionally guaranteed a hearing on whether non-Oregon residency should preclude their inclusion. This is precisely the sort of generally applicable standard that does not give rise to an individualized hearing requirement.
Thus, plaintiffs' due process claim fails as a matter of law and the Ninth Claim should be dismissed.
IV. Fourteenth Amendment — Equal Protection (Tenth Claim)
Plaintiffs' Tenth Claim alleges that Thorne is violating the Fourteenth Amendment "by treating equally situated classes of Medicaid recipients differently with no rational basis for doing so." Second Amended Complaint, ¶ 119. For the reasons set forth below, dismissal of this claim is premature.
A. Legal Standards
A denial of equal protection is premised on a classification which denies similar treatment to all persons similarly situated. Absent a suspect classification or fundamental interest, the equal protection analysis turns on the rational basis test. Gregory v. Ashcroft, 501 U.S. 452, 470-71 (1991). The law regarding the rational basis test is well-settled:
We many times have said, and but weeks ago repeated, that rational-basis review in equal protection analysis "is not a license for courts to judge the wisdom, fairness, or logic of legislative choices." Nor does it authorize "the judiciary [to] sit as a superlegislature to judge the wisdom or desirability of legislative policy determinations made in areas that neither affect fundamental rights nor proceed along suspect lines." For these reasons, a classification neither involving fundamental rights nor proceeding along suspect lines is accorded a strong presumption of validity. Such a classification cannot run afoul of the Equal Protection Clause if there is a rational relationship between the disparity of treatment and some legitimate governmental purpose. Further, a legislature that creates these categories need not "actually articulate at any time the purpose or rationale supporting its classification." Instead, a classification "must be upheld against equal protection challenge if there is any reasonably conceivable state of facts that could provide a rational basis for the classification."
A State, moreover, has no obligation to produce evidence to sustain the rationality of a statutory classification. "[A] legislative choice is not subject to courtroom factfinding and may be based on rational speculation unsupported by evidence or empirical data." A statute is presumed constitutional, and "[t]he burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it," whether or not the basis has a foundation in the record. Finally, courts are compelled under rational-basis review to accept a legislature's generalizations even when there is an imperfect fit between means and ends. A classification does not fail rational-basis review because it "`is not made with mathematical nicety or because in practice it results in some inequality.'" "The problems of government are practical ones and may justify, if they do not require, rough accommodations — illogical, it may be, and unscientific."Heller v. Doe by Doe, 509 U.S. 312, 320-21 (1993) (citations omitted).
B. Analysis
Plaintiffs are neither members of a suspect class nor individuals asserting a recognized fundamental right. See Harris v. McRae, 448 U.S. 297, 323 (1980) ("this Court has repeatedly held that poverty, standing alone, is not a suspect classification"). Therefore, to avoid dismissal, plaintiffs must satisfy their burden of being able to "negative every possible conceivable basis" which might support the differing treatment in OHP2 of equally situated classes of Medicaid recipients. Heller, 509 US at 321. The difficulty in analyzing this claim is determining who are the "equally situated classes of Medicaid recipients" treated differently by OHP2.
Thorne assumes that these classes are the OHP Plus participants, who are "categorically eligible" and pay no premiums, and the OHP Standard participants, who are "medically needy" (those with incomes too high to qualify as "categorically eligible") and must pay monthly premiums. The distinction between OHP Plus participants and OHP Standard participants mirrors Congress' own distinction within the Medicaid Act which courts are loath to second guess. The Supreme Court has rejected an equal protection challenge to less generous treatment of the "medically needy" as opposed to the "categorically eligible." Schweiker v. Hogan, 457 U.S. 569, 591 (1982) ("Although some `medically needy' persons have less income available for nonmedical expenses that those who receive categorical assistance, the broad legislative classification does not involve the type of arbitrariness that is constitutionally offensive"). Thorne also explains that imposing premiums onto the OHP Standard participants and not onto the OHP Plus participants is rational in light of Oregon's budgetary crisis.
As Thorne concedes, the symmetry is not exact. OHP Plus coverage is available to a limited class of persons who are not "categorically eligible." But no one who is "categorically needy" is in OHP Standard.
However, Thorne misconstrues the basis for plaintiffs' equal protection claim. Plaintiffs' claim is not premised on differing treatment of the "categorically eligible" and "medically needy" by OHP Plus and OHP Standard. Contrary to Thorne's assumption, plaintiffs do not fall into the "medically needy" class of persons under § 1396a. Instead, they fall into an "expansion class" of low income adults outside the "categorically eligible" and "medically needy" classifications set forth in the Medicaid Act; members of this "expansion class" would be covered by OHP Standard if they could afford to pay the required premiums. Plaintiffs complain that OHP Standard unfairly excludes them by imposing cost-sharing regardless of their inability to pay. "This deprivation of coverage subjects them to increased health risks and forces them to seek care at expensive hospital emergency rooms." Second Amended Complaint, ¶ 4.
Plaintiffs equal protection argument is based on the differing treatment under OHP Standard of needy non-cash aid recipients, such a plaintiffs, and needy cash aid recipients. Plaintiffs contend that charging premiums regardless of an individual's ability to pay is contrary to the express legislative purpose for both the Medicaid Act and OHP2. The purpose of the Medicaid Act is "to enable each state, as far as practicable, to furnish medical assistance to individuals whose income and resources are insufficient to meet the costs of necessary medical services." 42 U.S.C. § 1396. The purpose of OHP2 is "to increase access by Oregon's low income, uninsured children and families to affordable health care coverage." HB 2519, Section 1. Premiums and co-payments were to be considered only as a means of encouraging the use of preventative services and avoiding the "costs incurred by the health care delivery system by providing health care services through emergency departments. Id, Sections 2(3) (4). Cost-sharing also was to be based upon an ability to pay. Id, Section 7(4). However, plaintiffs argue that imposing premiums and co-payments, regardless of an individual's ability to pay, contravenes these legislative policies and fails the rational basis test.
The classification drawn by OHP2 distinguishes not on the basis of income, nor even on the basis of medical needs, but on the basis of receipt of cash assistance. Many disabled individuals, including the named plaintiffs, do not receive cash aid, yet have dire medical needs. By imposing cost-sharing on all OHP Standard participants, regardless of ability to pay and regardless of whether the cost-sharing impedes access completely, plaintiffs contend that OHP2 has gone beyond the legislative classification and express legislative purpose.
Determining whether plaintiffs satisfy their burden under the rational basis test does not require fact-finding and may be decided on a motion to dismiss. Gregory, 501 US at 473 (finding a rational basis on a motion to dismiss for the disparity in treatment between judges who are required to retire at age 70 and other state officials with no mandatory retirement age); Aleman v. Glickman, 217 F.3d 1191, 1201 (9th Cir 2000) (finding a rational basis on a motion to dismiss for the disparity between marriages ending in divorce and death for food stamp eligibility). However, at this point, the parties are not on the same track with respect to this claim. Thorne's analysis is inapplicable to plaintiffs' equal protection claim. In addition, Thorne has filed a motion for summary judgment against this same claim. Given that plaintiffs have submitted materials outside the record on this motion to dismiss which this court is not considering, Thorne's motion to dismiss this claim should be denied in favor of more thoroughly addressing this issue on the pending summary judgment motion.
RECOMMENDATION
For the reasons stated above, Thorne's Motion to Dismiss (docket #5) should be GRANTED as to the Ninth Claim and otherwise DENIED.
SCHEDULING ORDER
Objections to the Findings and Recommendation, if any, are due November 7, 2003. If no objections are filed, then the Findings and Recommendation will be referred to a district court judge and go under advisement on that date.
If objections are filed, the response is due no later than November 28, 2003. When the response is due or filed, whichever date is earlier, the Findings and Recommendation will be referred to a district court judge and go under advisement.