Opinion
File No. 5:99-CV-70.
Date: November 8, 1999.
ORDER AND JUDGMENT
In accordance with the opinion entered this date,
IT IS HEREBY ORDERED that Plaintiffs' motion for summary judgment (Docket # 8) is DENIED.
IT IS FURTHER ORDERED that Plaintiffs' motion for class certification (Docket # 9) is DENIED as moot.
IT IS FURTHER ORDERED that Defendants' motion to dismiss for lack of subject matter jurisdiction or for summary judgment (Docket # 18) is GRANTED.
IT IS FURTHER ORDERED that JUDGMENT is entered in favor of Defendants and this case is DISMISSED in its entirety.
OPINION
Plaintiffs Sharon and Veronica Bunker are minor children who applied for and were denied health care coverage under Michigan's Medicaid program. Through this action they are challenging Defendants' methodology for determining Medicaid eligibility, which they contend violates federal law. They seek declaratory and injunctive relief on behalf of themselves and others similarly situated.
Plaintiffs filed this action against James K. Haveman, Jr., in his capacity as Director of the Michigan Department of Community Health ("DCH"), and Douglas E. Howard, in his capacity as Director of the Michigan Family Independence Agency ("FIA"). For purposes of this motion, the Court will refer to Defendants in the singular, or as the "State".
Deborah Bunker lives with her three minor daughters, Lisa, Shannon and Veronica. Each of the three daughters receives $106 per month in social security benefits on their father's record. Lisa is pregnant. On April 6, 1999, Defendant denied Plaintiffs Shannon and Veronica's application for Medicaid benefits under the MIChild program. In making their determination that Shannon and Veronica were not eligible, the State applied its then existing policy of requiring each daughter's Medicaid eligibility to be considered separately from her sisters because each daughter receives income. The State also applied its policy of counting the parent's income as being fully available for the support of each applicant child, without consideration of the parent's financial responsibility for all the siblings who were excluded from the applicant child's Medicaid group. Lisa's application for Medicaid benefits was granted under the Healthy Kids program because she is pregnant and is counted as 2 persons for purposes of determining her Medicaid group size. If the State had considered the three daughters' eligibility as a single group, all three of the Bunker sisters (Lisa, Sharon and Veronica) would have been eligible to receive Medicaid.
On May 21, 1999, Plaintiffs filed this class action lawsuit seeking declaratory and injunctive relief under 42 U.S.C. § 1983. Plaintiffs raise two challenges to the policy in their complaint, a grouping challenge and an availability challenge. In Count I Plaintiffs allege that Defendant's policy fails to comply with 42 U.S.C. § 1396u-1's preservation of Title IV-A family grouping methodology. In Count II Plaintiffs allege that Defendant's policy fails to use reasonable standards for recognizing when a responsible relative's income is unavailable to one dependent relative because it is being used for the financial support of other dependent relatives and thereby violates the requirement in 42 U.S.C. § 1396a(a)(17)(B) to take into account "only such income and resources as are . . . available to the applicant or recipient." 42 U.S.C. § 1396a(a)(17)(B).
Plaintiffs seek relief on their own behalf and on behalf of a class consisting of "all past, present and future Michigan Medicaid applicants who are denied Medicaid based on Defendant's policy of excluding a Medicaid applicant's sibling, child, or step-parent from the applicant's Medicaid group when the income of the excluded sibling, child, or step-parent of the applicant does not exceed the difference between the Medicaid income limit for the applicant's group size with the person excluded and the income limit for the applicant's group size if the person were not excluded." Complaint ¶ 12.
On July 1, 1999, Plaintiffs filed an administrative action with the DCH seeking, among other things, retroactive Medicaid coverage.
In late July Defendant drafted a new policy that supersedes the policy challenged by Plaintiffs. The new policy, which went into effect September 1, 1999, amends the methodology by which a child can be found eligible for the Healthy Kids program. Under the new policy, the income of the child who is being considered for Healthy Kids is added to a pro-rated portion of the income of his or her parent(s). This pro-ration recognizes that the parent(s) may need to use some of that income for one another or for other children. (Affidavit of Robert Stampfly, Director, Managed Care Support Division, DCH, Medical Services Administration). Plaintiffs have been found eligible for Medicaid under the new policy, with an eligibility date retroactive to June 1, 1999.
On September 10, 1999, this Court held a hearing on Plaintiffs' motions for summary judgment, and on Defendant's motion for dismissal or summary judgment based on lack of subject matter jurisdiction due to mootness.
At the hearing Defendant announced its intention to withdraw the motion to dismiss on abstention grounds. An order dismissing Defendant's motion to dismiss on abstention grounds was entered on September 16, 1999.
The first motion to be addressed by this Court is Defendant's motion for dismissal and/or summary judgment for lack of subject matter jurisdiction. There is no dispute that in this suit against the State Plaintiffs are limited to prospective injunctive and/or declaratory relief. See Pennhurst State School Hospital v. Halderman, 465 U.S. 89 (1984). Because Plaintiffs have now been found to be eligible for Medicaid under the State's new policy, and because there is no additional prospective relief that this Court could order in this matter, Defendant contends that Plaintiffs' complaint is now moot.
Plaintiffs do not deny that they have been found to be eligible for Medicaid benefits under the new policy.
Neither do they deny that they are limited in this suit to prospective injunctive relief. Nevertheless, they contend that this action is not moot. Although there is no question that the new policy complies with the requirement under 42 U.S.C. § 1396a(1)(17)(B) that the State consider only actually available income.
Plaintiffs contend that because Defendant has not admitted the illegality of its previous policy, it is capable of repetition.
In evaluating the mootness issue, the Court is guided by the Supreme Court's opinion in Green v. Mansour, 474 U.S. 64 (1985). In Green, the petitioners challenged Michigan's policies regarding the AFDC program. While the action was pending Congress amended the federal statute to coincide with Michigan's policies. The Supreme Court held that the issuance of a declaratory judgment in the absence of a continuing violation of federal law would be improper:
This is an abbreviation for Aid to Families with Dependent Children, which is the former aid program that was governed by Title IV-A."
There is no claimed continuing violation of federal law, and therefore no occasion to issue an injunction. Nor can there be any threat of state officials violating the repealed law in the future. Cf. Steffel v. Thompson, supra, 415 U.S. at 454, 94 S.Ct., at 1213. There is a dispute about the lawfulness of respondent's past actions, but the Eleventh Amendment would prohibit the award of money damages or restitution if that dispute were resolved in favor of petitioners. We think that the award of a declaratory judgment in this situation would be useful in resolving the dispute over the past lawfulness of respondent's action only if it might be offered in state-court proceedings as res judicata on the issue of liability, leaving to the state courts only a form of accounting proceeding whereby damages or restitution would be computed. But the issuance of a declaratory judgment in these circumstances would have much the same effect as a full-fledged award of damages or restitution by the federal court, the latter kinds of relief being of course prohibited by the Eleventh Amendment. The teachings of Huffman, Samuels, and Wycoff are that a declaratory judgment is not available when the result would be a partial "end run" around our decision in Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974).
Green, 474 U.S. at 73.
The Court is cognizant that in contrast to Green, in this case there has been a voluntary cessation of the allegedly illegal action by the State, rather than a change in federal law that authorizes the challenged State policy. The Supreme Court has observed that "voluntary cessation of the alleged illegal conduct does not deprive the tribunal of the power to hear and determine the case, i.e., does not make the case moot. United States v. W.T. Grant Co., 345 U.S. 629, 632 (1953). "Defendants face a heavy burden to establish mootness in such a case because otherwise they would simply be free to `return to [their] old ways' after the threat of a lawsuit had passed . . . Thus they must establish that `there is no reasonable likelihood that the wrong will be repeated.'" Iron Arrow Honor Society v. Heckler, 464 U.S. 67, 72 (1983) (quoting W.T. Grant).
In Mosely v. Hairston, 920 F.2d 409, 415 (6th Cir. 1990), the Sixth Circuit acknowledged that a party who voluntarily ceases the challenged activity and claims mootness has a heavy burden. The court noted, however, that there is a difference in the way voluntary cessation of illegal activities is treated when the offending parties are government officials rather than private parties.
"[T]he cessation of allegedly illegal conduct by government officials has been treated with more solicitude by the courts than similar action by private parties. According to one commentator, such self-correction provides a secure foundation for a dismissal based on mootness so long as it appears genuine. Id. (citations omitted). Because the court found no reasonable basis for assuming that the state would fail to comply with the requirements of the federal law or to follow the regulations now proposed and adopted, the court concluded that the claims for declaratory and injunctive relief were moot, and must be dismissed. Id.
Plaintiffs contend that Defendant cannot show that there is no reasonable likelihood that the wrong will be repeated. Defendant has not acknowledged the illegality of the previous policy, it has not represented that it will not violate the Medicaid statute in the future, and it did not issue its proposed new policy until late July 1999, after this action was filed, despite having been on notice of the illegality of the policy since March 1999. Plaintiffs also contend that the complexity of the proposed policy, Defendant's professed inability to re-program their computers to perform the calculations under the new policy until sometime in 2000, and Defendant's failure as yet to issue the actual instructions for the FIA caseworkers who must apply the new policy, makes it reasonably likely that Defendant will not comply with federal law in the future.
The Court finds no evidence to indicate that Defendant's change in policy in this case was not in fact bona fide. The State has amended the DCH Beneficiary Eligibility Bulletin, it has made amendments to the FIA's Program Eligibility Manual, and it has prepared a videotape that FIA is using to train its staff in the application of the new policy. The changes in both DCH and FIA's policies have been transmitted to all of the affected parties, including FIA, local public health departments and Maximus, a contractor. Stampfly Affidavit. ¶¶ 7-8. According to Mr. Stampfly, the changes to the Healthy Kids eligibility methodology are intended to be permanent, so long as the federal law and its interpretations remain unchanged. Id. at ¶ 9. It would be costly to the State and disruptive and confusing to both the State and affected Medicaid recipients if the policy were altered again in the near future. Id.
Based upon the evidence of record, the court is satisfied that the new policy was not adopted in bad faith. The State has shown a good faith commitment to the new policy, and there is no evidence to indicate that Defendant is likely to reverse its policy when this suit ends. There is no reasonable likelihood that the wrong will be repeated.
Accordingly, because the State has amended its policy to cure the availability issue raised in Count II of Plaintiffs' complaint, and because Plaintiffs are now eligible for Medicaid, Count II of Plaintiffs' challenge to the State's Medicaid policy is moot.
II.
Although the new policy addresses the issue raised in Count II of Plaintiffs' complaint, and although Plaintiffs have been found eligible for benefits under the new policy, Plaintiffs contend that the new policy does not moot their entire claim because it does not address the Title IV-A grouping issue raised in Count I.
Defendant questions whether Plaintiffs have standing to raise this claim. The individual Plaintiffs are now eligible for Medicaid, and they have not shown that they are or will be affected by the State's failure to use Title IV-A methodology. Neither have Plaintiffs identified any other individuals who are today ineligible as a result of the State's failure to use Title IV-A methodology. Defendant argues that Plaintiffs' hypothetical examples do not create a case or controversy.
The new policy, like the old policy, does not incorporate the Title IV-A methodology of considering all members of the family as a single group. Under the new policy, if a child has any income, the child's eligibility is determined as a separate family group with the parent(s). The new policy is accordingly subject to the same legal challenge Plaintiffs raised to the old policy. Plaintiffs' legal challenge to the State's policy has not been rendered moot by the adoption of the new policy.
Although the individual Plaintiffs have qualified for Medicaid benefits without resort to application of the Title IV-A methodology, there are undoubtedly other class members who would not be eligible for benefits under the State's new policy, but who would be eligible if the State amended their policy to incorporate Title IV-A methodology. In light of the fact that Plaintiffs brought this case as a class action, the Court does not consider this issue to be so hypothetical as to be moot. The Court will accordingly consider the parties' cross-motions for summary judgment on the Title IV-A issue.
The new Michigan Medicaid policy, like the former policy, excludes the sibling, child, or step-parent of an applicant from the applicant's Medicaid group if the sibling, child, or stepparent has any income. According to Plaintiffs, Title IV-A methodology would require that a child who applies for Medicaid be permitted to include in the child's Medicaid group his/her step-parent or siblings, when their inclusion would result in Medicaid eligibility. Thus, if a child is not eligible under the child-by-child methodology of the new policy, Plaintiffs contend that the State must make a second determination of eligibility in which the siblings and parents are considered as a single group whose income is measured against the larger needs standard for such a group's size.
The State denies that it is required to undertake this second determination of eligibility based on family grouping. The State contends that the Title IV-A grouping methodology is not applicable to children who have income because such grouping is specifically prohibited by the Medicaid statute's anti-deeming provision, 42 U.S.C. § 1396a(1)(17)(D). The State contends that subsection (D) prohibits the State from grouping a child with his or her siblings when the child has any income, regardless of amount.
Plaintiffs acknowledge and agree that the inclusion in the applicant's group of a sibling or step-parent with income greater than the incremental increase would result in unlawful deeming and be prohibited by 42 U.S.C. § 1396a(a)(17)(D). Plaintiffs contend, however, that the inclusion of siblings, children or step-parents in a Medicaid group does not assume or impose any financial contribution or responsibility when the individual being included does not have income greater than the incremental increase in the Medicaid limit that results from his inclusion in the group — i.e., when her income does not exceed her own needs. Plaintiffs contend that "deeming" is only an issue when a child's income is greater than the incremental increase. Plaintiffs contend that a sibling's income can be included so long as that income is less than the "incremental increase," because in such cases the income cannot be considered "available" to the applicant.
The question for this Court is one of first impression — whether the anti-deeming provision, 42 U.S.C. § 1396a(a)(17)(D), applies when the child's income is less than the incremental increase.
"[T]he starting point in any case involving the meaning of a statute, is the language of the statute itself." Group Life Health Ins, Co. v. Royal Drug Co., Inc., 440 U.S. 205, 210 (1979). The Court must "begin with the language of the statute itself, and interpret it according to its plain language absent evidence of a contrary legislative intent." Parker-Hannifin v. Commissioner of Internal Revenue, 139 F.3d 1090, 1095 (6th Cir. 1998) (citation omitted). The meaning of a statute's words can also be "enlightened by their context and the contemporaneous legislative history," as well as the "historical context of the statute." Walton v. Hammons, No. 98-1765, ___ F.3d ___, 1999 WL 731729, *4, (6th Cir. Sep 21, 1999).
42 U.S.C. § 1396u-1(b)(2) provides that in determining eligibility for medical assistance, the income and resource methodologies under Title IV-A in effect as of July 16, 1996, shall be used in the determination of whether any individual meets income and resource standards under such plan.
The Title IV-A standards in effect as of July 16, 1996, provide that in making a determination with respect to a dependent child's eligibility for AFDC, a State agency should include any parent, brother or sister living in the same home, and any income available for such parent, brother or sister. 42 U.S.C. § 602(a)(38).
Congress has, however, provided that a State plan for medical assistance shall not take into account "the financial responsibility of any individual for any applicant or recipient of assistance under the plan unless such applicant or recipient is such individual's spouse or such individual's child who is under age 21." 42 U.S.C. § 1396a(1)(17)(D). It is the meaning of this section, known as the "anti-deeming" provision, that is at the heart of the Title IV-A methodology issue in this case.
In Snede v. Kizer, 728 F. Supp. 607 (N.D.Cal. 1990), the court noted that this provision "unambiguously limits financial responsibility for medical care to parents and spouses, for purposes of computing Medicaid eligibility." Id. at 609. "[I]ncome from any other individual can not be considered." Id. This Court has similarly noted that "Congress' intent as expressed in section 1396a(a)(17)(D) was that a state should not consider a person's income and resources as being available to a Medicaid applicant or recipient, and thus include such in determining Medicaid eligibility, unless that person is the applicant or recipient's spouse or parent." Sundberg v. Mansour, 627 F. Supp. 616, 620 (W.D.Mich. 1986) (Enslen, J.). "[S]ection 1396a(a)(17)(D) prohibits the Secretary from requiring states to consider sibling income and resources in making Medicaid eligibility determinations." Id. See also Reed v. Blinzinger, 639 F. Supp. 130 (S.D.Ind. 1986) ("An examination of the legislative history of the Medicaid Act reveals that Congress designed § 1396a(a)(17)(D) to prevent states from assuming the availability of income from relatives other than the applicant's spouse or child.").
Plaintiffs caution that despite the seeming clarity of the broad statements found in these cases, the cases cited do not address the particular facts of this case. Each of these cases involved children who were found ineligible for Medicaid based upon the agency's inclusion of siblings who had income greater than the incremental increase. Plaintiffs contend that these cases should be limited to their facts. None of these cases considered the situation where the child's income was less than the incremental amount. According to Plaintiffs, where the child's income is less than the incremental amount, inclusion of the child in the family grouping will not result in deeming that child's income to be available for the medical needs of that child's siblings.
There are no published opinions addressing the precise issue presented by this case, i.e., whether the Title IV-A methodology requirement gives Medicaid applicants the right to include siblings and step-parents in their group if the income of the sibling or step-parent is less than the incremental increase.
To the extent the statute is ambiguous, the Court looks to the agency regulations for guidance. "Under Chevron [Chevron U.S.A., Inc. v. Natural Resources Defense Council. Inc., 467 U.S. 837, 842 (1984)], if the agency's statutory interpretation clarifies an ambiguity in a way that is reasonable in light of the legislature's revealed design, the Court gives that judgment controlling weight." United States v. Haggar Apparel Co., 526 U.S. 380, 119 S.Ct. 1392, 1394 (1999) (citing NationsBank of N.C., N.A. v. Variable Annuity Life Ins. Co., 513 U.S. 251, 257 (1995)).
"If Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation. Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute." Chevron U.S.A., Inc. v. Natural Resources Defense Council. Inc., 467 U.S. 837, 843 (1984).
The regulation adopted by the Department of Health and Human Services to address financial responsibility of relatives and other individuals in medical assistance programs provides:
Except for a spouse of an individual or a parent for a child who is under age 21 or blind or disabled, the agency must not, consider income and resources of any relative as available to an individual.42 C.F.R. § 435.602(a)(1) (emphasis added) The regulation is clear. The agency must not consider income and resources of one child as available to a sibling. The regulation does not distinguish between income that is greater or lesser than the incremental increase. The regulation does not tell the agency to consider the income if it results in eligibility, but to disregard it if it results in a loss of eligibility. Only a spouse or parent's income is to be considered. No other relative's income is to be considered as available.
The agency's regulation clarifies the alleged ambiguity in the anti-deeming provision. The agency's interpretation of the anti-deeming provision is not arbitrary, capricious, or manifestly contrary to the statute. It is a reasonable interpretation, and accordingly, under Chevron, this Court is bound by that interpretation.
Moreover, the regulation that addresses the AFDC grouping requirement, 45 C.F.R. § 26.10, provides that it applies to AFDC only:
For AFDC only, in order for the family to be eligible, an application with respect to a dependent child must also include, if living in the same household and otherwise eligible for assistance:
(A) Any natural or adoptive parent, or stepparent . . .; and
(B) Any blood-related or adoptive brother or sister. . . .
45 C.F.R. § 206.10(a)(1)(vii) (emphasis added).
Although Plaintiffs' interpretation of the anti-deeming provision may also be reasonable, and although it may be consistent with Congressional efforts to make Medicaid more accessible to children, Plaintiffs have not shown that the statute requires such a reading. Plaintiffs are essentially requesting the Court to rewrite the statute and regulation to include additional terms based upon Plaintiffs' understanding of the rationale behind the deeming provision. Neither the anti-deeming provision nor its associated regulation limit the application of the anti-deeming provision to the grouping of siblings when the child's income exceeds the incremental amount. The Court will not rewrite the statute or regulation to insert this additional limitation. Plaintiffs have not convinced this Court that the State's new Medicaid policy violates federal law. Based upon the applicable statutes and regulations, this Court concludes that the State is not required to use Title IV-A grouping methodology when a child's income is below the incremental increase. Accordingly, the Court will grant Defendant's motion for summary judgment as to Count I.
Plaintiffs' framing of the issue in this case is illuminating. Plaintiffs argue that "the use of Title IV-A methodology in the limited circumstances of this case does not violate the plain, unambiguous language of 42 U.S.C. § 1396a(1)(17)(D)." (Plaintiffs' Supplemental Brief on Count I, p. 2) (emphasis added). Whether Plaintiffs' plan for using Title IV-A grouping for children whose income is below the incremental increase violates the anti-deeming provision, however, is not the issue in this case. The issue for this Court is whether the State's plan violates federal law, or, stated differently, whether the State is required to use Title IV-A methodology where a child's income is below the incremental increase.
Because the Court finds that Defendant is entitled to summary judgment on Count I of Plaintiffs' complaint, and because Count II has been mooted by the State's adoption of the new policy, judgment will be entered for Defendant, this case will be dismissed, and Plaintiffs' motion for class certification will be denied as moot.
An order and judgment consistent with this opinion will be entered.