Texas Health and Human Services Commission v. Linda Puglisi, 03-15-00226-CV

Background

Appellee Linda Puglisi sought a group 4 custom power wheelchair with an integrated standing feature (mobile stander) and a power seat system; HHSC/Molina approved the wheelchair and power seat system but denied the integrated standing feature as not covered DME under Texas Medicaid policy.
HHSC and Molina relied on Texas Medicaid policy (TMPPM/TMHP) that categorically excludes certain mobile standing features and permits coverage of less costly, effective alternatives; HHSC affirmed Molina's denial after administrative review.
Puglisi is dually eligible (Medicare/Medicaid, MQMB), and HHSC argues Medicare primary-payor rules and prior-authorization procedures (including requirements that providers seek Medicare determinations first) were not satisfied before she sought Medicaid authorization.
Administrative record shows independent reviewers found Puglisi requires maximum caregiver assistance for MRADLs and cannot independently transfer to a stander, undermining medical-necessity support for an integrated mobile stander.
Puglisi challenged the denial in state district court; HHSC appealed the trial court's ruling to the Third Court of Appeals. HHSC files this reply brief defending its denial on statutory, regulatory, evidentiary, and due-process grounds.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether an item defined as DME is automatically "covered DME" under Medicaid	Puglisi: integrated standing feature meets DME definition so it must be covered	HHSC: coverage is determined by statutory/rule processes; DME definition alone does not create coverage	Court accepts agency position that coverage requires compliance with state plan, rules, and CMS guidance, not definition alone
Medical necessity for integrated standing feature given Puglisi's functional status	Puglisi: her providers support standing feature as medically necessary	HHSC: record shows she needs maximum assistance for MRADLs and cannot independently transfer, so integrated stander does not correct/ameliorate disability	Agency findings that alternative (stand-alone dynamic stander or other options) are sufficient were supported by record evidence
Effect of Medicare primary-payor rules and MQMB status on Medicaid prior-authorization	Puglisi: Medicare primary status does not dictate order for prior authorization	HHSC: provider must seek Medicare prior authorization and present Medicare denial reasons to Medicaid per TMPPM and statute; MQMB status makes Medicare determinations a prerequisite	Agency properly relied on Medicare-first rules; HHSC argued remand to permit Medicare prior auth or exceptional-review was appropriate
Appropriate standard of judicial review and burden of proof on administrative record review	Puglisi: agency's denial lacked credible evidence contradicting treating providers	HHSC: administrative findings are presumed supported by substantial evidence; burden rests on challenger to rebut	Court applies substantial-evidence standard; agency decisions upheld if supported by record evidence
Validity of categorical exclusion of mobile standers from Medicaid coverage	Puglisi: TMHP exclusion is an unpromulgated rule and invalid	HHSC: States may adopt pre-approved lists and categorical exclusions based on reasonableness and cost-effective alternatives; Detgen (5th Cir.) supports such exclusions when CMS guidance permits	Fifth Circuit authority and CMS guidance support state's reasonable categorical exclusions and the availability of an exceptions process; agency policy sustained
Whether Puglisi was denied due process in administrative and judicial proceedings	Puglisi: alleges inadequate process	HHSC: she had multi-level administrative hearings and judicial review; remedy for any process defect is remand for further proceedings	Agency argues process was adequate; if court finds otherwise remand would be proper remedy

Key Cases Cited

DeSario v. Thomas, 139 F.3d 80 (2d Cir. 1998) (medical necessity and coverage are distinct; CMS guidance on state lists does not mandate coverage of every DME item)
Detgen ex rel. Detgen v. Janek, 752 F.3d 627 (5th Cir. 2014) (state may categorically exclude certain devices if reasonable and alternative, and such exclusions can be consistent with federal Medicaid law)
City of El Paso v. Pub. Util. Comm'n, 883 S.W.2d 179 (Tex. 1994) (administrative findings are presumed supported by substantial evidence and burden rests on challenger)
Tex. Health Facilities Comm'n v. Charter Med.-Dall., 665 S.W.2d 446 (Tex. 1984) (administrative law principles regarding evidentiary presumptions and judicial review)
Univ. of Tex. Med. Sch. at Houston v. Than, 901 S.W.2d 926 (Tex. 1995) (remedy for due-process defects is typically to provide the missing process, i.e., remand)