Chris Traylor, as Executive Commissioner of the Texas Health and Human Services Commission And the Texas Health and Human Services Commission v. Diana D., as Next Friend of KD, a Child Karen G., as Next Friend of TG and ZM, Children Guadalupe P., as Next Friend of LP, a Child Sally L., as Next Friend of CH, a Child Dena D., as Next Friend of BD, a Child OCI Acquisition, LLC
03-15-00657-CV
| Tex. App. | Nov 9, 2015Background
- Appellees are parents of children with significant disabilities and three therapy providers who sued HHSC to enjoin proposed Medicaid rate reductions for pediatric/home-health therapy services scheduled for implementation in 2015. Plaintiffs alleged HHSC failed to follow its own rule (1 TAC § 355.8021(a)(2)(B)) and the APA when promulgating the rates.
- The trial court expedited discovery, held hearings, and found HHSC did not perform the required cost study; it concluded the proposed rates amounted to a rule change subject to the APA and enjoined implementation except where HHSC complies with the rule’s cost-review requirement.
- HHSC had previously abandoned earlier rate proposals and reissued a new proposal; evidence and legislative letters were introduced that Rider 50’s language was permissive (“should”/“may”), not mandatory.
- The trial court denied supersedeas (stay) of the injunction and accepted $500 as security; appellants (HHSC and Commissioner Traylor) appealed and moved this Court to vacate the counter-supersedeas order or, alternatively, increase the bond to $100,000,000 as alleged two‑year budget impact.
- Appellees responded that (1) the injunction rests on state-law procedural defects (failure to follow HHSC rule and the APA), not on federal Medicaid access claims; (2) Armstrong does not preempt state-law review; (3) appellants failed to preserve constitutional or federal arguments in the trial court; and (4) appellants consented to the $500 bond and offered no evidence for the $100M figure.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trial court’s injunction and denial of supersedeas are preempted by federal Medicaid enforcement (Armstrong) | Injunction is based on state-law APA/rule violation; federal preemption is irrelevant. | Only the HHS Secretary can enforce Medicaid access provisions; private/state challenges are preempted under Armstrong. | Court (Appellees’ response): Armstrong is limited to §30(A) private enforcement; does not preempt state-law APA/rule claims—Appellants’ preemption claim is misplaced. |
| Whether trial court action violates the Texas Constitution (separation of powers / legislative mandate via Rider 50) | Rider 50 is permissive (“should/may”), not mandatory; injunction requires HHSC to follow state law and does not stop lawful rate-making. | The injunction interferes with executive/legislative budget implementation and violates separation of powers. | Court (Appellees’ response): No constitutional violation; injunction only bars implementation of rates adopted in violation of HHSC rules/APA; Rider 50 did not compel the specific cuts. |
| Whether appellants preserved federal and constitutional objections and record evidence for appellate review | Appellants failed to timely raise these claims in trial court and supplied no record citations; new affidavit (Oct. 14) was not before the trial court. | Appellants contend trial judge abused discretion; submitted post-judgment affidavit and ask appellate relief. | Court (Appellees’ response): Points waived—appellants did not present these objections at trial, and new evidence post-dates the hearings and cannot show trial-court abuse. |
| Adequacy/amount of bond for supersedeas and claim of $100,000,000 harm | HHSC asks increase to $100,000,000 as two-year budget impact to justify large bond. | Plaintiffs argued $500 was reasonable; appellants previously agreed to $500 at hearing and did not move in trial court to adjust bond; no evidentiary support for $100M. | Court (Appellees’ response): Appellants consented to $500 and waived challenge; no evidentiary basis for $100M; raising bond now is unpreserved and unsupported. |
Key Cases Cited
- El Paso Hosp. Dist. v. Tex. Health & Human Servs. Comm'n, 247 S.W.3d 709 (Tex. 2008) (agency action that ignores its own procedural rules and thus effects a new policy may constitute an invalid rule requiring APA compliance).
- Armstrong v. Exceptional Child Ctr., Inc., 135 S. Ct. 1378 (2015) (private enforcement of certain Medicaid statutory rights under §30(A) is precluded; holding is limited in scope).
- In re State Board for Educator Certification, 452 S.W.3d 802 (Tex. 2014) (discussing limits on state’s ability to supersede adverse non-money judgments and the judiciary’s authority to deny supersedeas when necessary to prevent irreparable harm).
- McCauley v. Consolidated Underwriters, 304 S.W.2d 265 (Tex. 1957) (historical discussion of fundamental error and jurisdiction; appellate courts may address jurisdiction sua sponte).
- Pharm. Research & Mfrs. of Am. v. Walsh, 123 S. Ct. 1855 (2003) (federal Medicaid statute does not broadly preempt state laws absent a showing that the state law impedes a Medicaid purpose or conflicts with federal requirements).