Pennsylvania, Department of Public Welfare v. U.S. Department of Health & Human Services
647 F.3d 506
3rd Cir.2011Background
- Pennsylvania obtained a HCBS waiver in 2001, renewed in 2006, to reimburse habilitation services in home- and community-based settings.
- Pennsylvania claimed occupancy costs (rent, utilities, etc.) in community facilities could be reimbursed as habilitation, not as room and board.
- CMS denied the claim in 2006, classifying occupancy costs as room and board excluded from federal reimbursement.
- CMS issued a July 5, 2006 and August 17, 2006 letter sustaining the exclusion, then disallowed occupancy cost claims on June 21, 2007.
- Pennsylvania appealed to the DAB, which upheld the denial, concluding occupancy costs were essentially room costs.
- Pennsylvania sued in district court seeking APA relief; the district court granted summary judgment for HHS, deferring to the agency’s interpretation under Chevron.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does 'room and board' exclude occupancy costs? | Pennsylvania: occupancy costs are not room costs; are habilitation expenses. | HHS: occupancy costs are part of room and board and thus non-reimbursable. | Yes; plain meaning excludes occupancy costs as room and board. |
| If ambiguous, is the agency's Chevron interpretation permissible? | Pennsylvania argues Chevron doesn't apply to state grant terms. | HHS's interpretation is a permissible reading under Chevron Step Two. | Yes; agency interpretation permissible under Chevron. |
| Does Bennett retroactivity argument apply to grant-terms interpretation? | Bennett retroactivity concerns apply to contract-like grant terms. | Bennett does not govern here; longstanding waiver interpretation applies. | No retroactivity issue; Chevron analysis controls. |
Key Cases Cited
- Klein v. Califano, 586 F.2d 250 (3d Cir. 1978) (describes Medicaid cooperative federal-state framework)
- Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (Sup. Ct. 1984) (establishes two-step framework for agency deference)
- Pareja v. Attorney General, 615 F.3d 180 (3d Cir. 2010) (permissible agency interpretations under Chevron Step Two)
- Secretary of Labor v. Beverly Healthcare-Hillview, 541 F.3d 193 (3d Cir. 2008) (dictionary-based statutory interpretation permissible under Chevron)
- Bennett v. New Jersey, 470 U.S. 632 (1985) (retroactivity concerns regarding grant conditions)
- Bennett v. Ky. Dep't of Educ., 470 U.S. 656 (1985) (federal funds conditions require clear expression)
- United States v. Geiser, 527 F.3d 288 (3d Cir. 2008) (determines plain meaning of statutory terms)