The Arc of California v. Toby Douglas
2014 U.S. App. LEXIS 12260
| 9th Cir. | 2014Background
- California funds home- and community-based services for developmentally disabled under the Lanterman Act, partially through Medicaid HCBS waivers.
- Three funding policies enacted from 2009—a 3% rate reduction, a uniform holiday schedule, and a half-day billing rule—were challenged as inconsistent with the Medicaid Act and related federal statutes; CMS granted a waiver renewal for 2011–2016 but did not discuss these policies.
- Arc of California and United Cerebral Palsy Association of San Diego allege the policies reduce access, quality, and cost-efficiency of care and violate Section 30(A) of the Medicaid Act and related ADA, Rehabilitation Act, and Lanterman Act provisions.
- The district court stayed discovery, dismissed Medicaid Act claims, and denied preliminary injunctive relief; Arc moved for injunctive relief, arguing ongoing irreparable harm.
- The majority holds the percentage reduction moot but that the uniform holiday schedule and half-day billing rule remain live challenges; court remands for record augmentation and reconsideration of injunctive relief.
- The court ultimately dismisses the mootness as to the expired statute and remands for further proceedings on the remaining claims and remedies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Section 30(A) requires studying effects before HCBS changes | Arc argues 30(A) requires cost/effect studies. | California contends CMS waiver approval suffices. | Section 30(A) applies; failure to study likely violates 30(A). |
| Whether CMS approval of the HCBS waiver forecloses Section 30(A) claims | ARC contends CMS approval does not resolve 30(A) issues. | State argues waiver approval signals compliance. | CMS approval does not bar independent 30(A) challenges; district court erred in deferring. |
| Mootness of the percentage payment reductions on appeal | Reduction expired; challenge should be live under exception for repetition. | Mootness rules apply; need not decide repetition. | Percentage reductions moot; other live challenges remain. |
| Irreparable harm and balance of equities for uniform holiday schedule/half-day rule | Injury to providers’ viability and access to care is ongoing and irreparable. | Evidence insufficient or not properly weighed. | District court abused its discretion; remand for reevaluation of harms and equities. |
| Whether district court properly dismissed Medicaid Act claims and related ADA/Rehabilitation Act/Lanterman Act claims | Medicaid Act claims should proceed; district court erred in dismissal. | CMS approval foreclosed these claims. | Dismissal reversed for Medicaid Act claims; pendent appeal resolves intertwined issues. |
Key Cases Cited
- Orthopaedic Hospital v. Belshe, 103 F.3d 1491 (9th Cir. 1997) (Section 30(A) requires cost studies to support rates and avoid costs of care.)
- Managed Pharmacy Care v. Sebelius, 716 F.3d 1235 (9th Cir. 2013) (CMS approval does not automatically prove 30(A) compliance; requires data and monitoring.)
- Indep. Living Ctr. of S. Cal., Inc. v. Shewry (ILC II), 543 F.3d 1050 (9th Cir. 2008) (Affirms that Supremacy Clause challenges may proceed despite CMS actions; changed circumstances matter.)
- Sanchez v. Johnson, 416 F.3d 1051 (9th Cir. 2005) (Lanterman Act framework and community-based goals.)
- Winter v. NRDC, 555 U.S. 7 (Supreme Court 2008) (Injunction standard and irreparable harm considerations.)