Roloff v. SullivanRoloff v. Sullivan
38 Soc.Sec.Rep.Ser. 618, Medicare & Medicaid Guide
P 40,777,
Eleanor ROLOFF, individually, and as Personal Representative
of the Estates of Beatrice Beall and Bernice
Beall; and R. Dianne Strickland, as
Guardian of Dorothy Unger,
Plaintiffs-Appellants,
v.
Louis W. SULLIVAN, Secretary of the United States Department
of Health and Human Services; Gail R. Wilensky,
Administrator of the Health Care Financing Administration;
Michelle Harris, Regional Director of the United States
Department of Health and Human Services; Barbara Gagel,
Regional Administrator of the Health Care Financing
Administration; and Suzanne L. Magnant, Administrator of
the Indiana Department of Public Welfare, Defendants-Appellees.
No. 91-3198.
United States Court of Appeals,
Seventh Circuit.
Argued April 15, 1992.
Decided Sept. 11, 1992.
Kent Hull (argued), Legal Services of Northern Indiana, South Bend, Ind., for plaintiffs-appellants.
Clifford D. Johnson, Asst. U.S. Atty., Office of U.S. Atty., South Bend, Ind., Barbara F. Altman (argued), Dept. of Health and Human Services, Region V, Office of Gen. Counsel, Chicago, Ill., for defendants-appellees Louis W. Sullivan, Gail R. Wilensky, Michelle Harris and Barbara Gagel.
Leneigha L. Downs, Office of Atty. Gen., Federal Litigation, Indianapolis, Ind., for defendant-appellee Suzanne Magnant.
Before CUMMINGS and POSNER, Circuit Judges, and WILL, Senior District Judge.*
CUMMINGS, Circuit Judge.
Plaintiffs contend that Indiana's method of calculating the resources of Medicaid applicants, known as the first day of the month rule, is contrary to the Medicaid statute,
I.
Plaintiffs filed their first amended class action complaint on April 19, 1990. The class was alleged in the complaint to consist of all persons who have applied for Medicaid in Indiana but have been denied eligibility because of the first day of the month rule, and all those likely to be denied eligibility because of the rule. The complaint alleged that defendants' actions violated the Medicaid statute (
On July 24, 1991, the district court granted the defendants' motion for summary judgment. The court noted that there was an "apparent factual dispute over what standards were in effect in Indiana as of January 1, 1972," but decided that this apparent dispute was not material to the legal issues in the case. Roloff v. Sullivan,
II.
A. Federal Statutory Background
Medicaid is an intricate program whereby states and the federal government cooperate to give medical assistance to the needy. "Although participation in the Medicaid program is entirely optional, once a state elects to participate, it must comply with the requirements of Title XIX [
A state's obligation to provide Medicaid coverage to the categorically needy is subject to an important limitation found at
It is necessary for the purposes of this appeal to examine
To summarize, after the 1972 amendment to the Medicaid Act, a state could choose what might be called the "SSI option" with regard to the categorically needy, or it could choose the "Section 209(b) option." Under the SSI option, a state must give Medicaid assistance based on the somewhat higher SSI income and resource standards--but it does not have to offset incurred medical expenses from income in determining Medicaid eligibility. Under the Section 209(b) option, a state can employ more stringent income and resource standards for eligibility as long as they are no more stringent than its January 1, 1972, standards, but is required to offset incurred medical expenses from income. See generally
To qualify for Medicaid, an applicant must meet both an income eligibility test and a resource eligibility test; if either the applicant's income or the value of his resources (assets) is too high, then he does not qualify for Medicaid. See Medicare & Medicaid Guide p 14,311 (CCH 1992). Indiana currently calculates resources in accordance with the following rule:
(a) An applicant or recipient is ineligible for medical assistance for any month in which the total equity value of all non-exempt resources exceeds the applicable limitation, set forth below, on the first day of the month:
(1) $1,500 for the applicant or recipient, * * *; or
(2) $2,250 for the applicant or recipient and his spouse.
1. The Beall Sisters
The Beall sisters are now deceased; plaintiff Eleanor Roloff is the legal representative of the estates of Beatrice and Bernice Beall.6 On April 1, 1986, Bernice had a bank account balance of $2,879.90. On April 3, 1986, Robert Roloff, Bernice's nephew, executed an irrevocable funeral trust agreement in the amount of $2,879.90, thereby depleting her bank account. Bernice applied for Medicaid on April 30, 1986, and was denied assistance for the month of April because her bank account balance on April 1, 1986, exceeded $1,500. The creation of the irrevocable funeral trust agreement on April 3 was deemed irrelevant.
2. Robert and Dorothy Unger
Plaintiff R. Dianne Strickland is the legal guardian of her mother Dorothy Unger. Her father Robert Unger is now deceased. During 1989, Dorothy Unger lived at a nursing home, while Robert lived in his home. Medicaid applications for the Ungers were filed in May 1989. Their applications were denied for February 1989 through July 1989 because their countable resources in those months exceeded the statutory maximum for a married couple, $2,250. Their resources for these months included two life insurance policies and several bank accounts, and had a total combined value ranging from $2,336 to $3,707. The Ungers became eligible for Medicaid assistance beginning in September 1989. In 1989, Robert Unger apparently had a "countable" income of $1,290.02 per month and Dorothy Unger had an income of $406 per month.7
C. Definitions
Analysis of the issues raised by plaintiffs is made difficult by the intricacy of the Medicaid Act, plaintiffs' confusing line of argument, and the fact that plaintiffs and defendants seem to ascribe different meaning to the same terms. It is therefore necessary to define some terms with precision in order to wade through the quagmire.
1. Income Spend Down
Income spend down is the process whereby an applicant's income is reduced for the purposes of determining Medicaid eligibility by the amount of incurred but unpaid medical expenses not covered by third-party payers. When income spend down is used, a recipient's Medicaid payments are reduced by the applicant's excess income. See
2. The First Day of the Month Rule
Plaintiffs seem to equate the first day of the month rule with
3. Resource Spend Down
"Resource spend down" is a term with chameleon-like flexibility. Generally speaking, a resource spend down rule allows Medicaid applicants to offset their resources by incurred but unpaid medical bills. Recently, an Indiana Court of Appeals held that Indiana allowed a resource spend down in January 1, 1972. Indiana Dep't of Public Welfare v. Payne,
The state of Illinois uses a "resource spend down" policy that works differently than the system described in Payne. In Hession v. Illinois Dep't of Public Aid,
[B]y allowing an applicant to spend down the assets above the disregard with incurred medical expenses, the applicant is entitled to Medicaid benefits once the medical expenses exceed the excess in assets.
This type of resource spend down is similar to an insurance deductible. Unlike the system described in Payne, Illinois apparently does not require proof of actual spend down before paying the applicant's medical bills.8 From the perspective of the applicant, the only difference is one of timing. The medical provider would presumably prefer Indiana's old system because it gives an incentive to the applicant to pay his "portion" of the medical bills sooner.
Illinois' resource spend down applies only to medical debts. The discussion in Payne does not indicate such a limitation, but the facts of that case only involved medical debts. Unless otherwise specified, we limit our discussion of resource spend down to medical debts. This was the approach of the district court, which stated that "Because Indiana does not allow applicants to spend down their resources, offsetting them against incurred medical expenses, the Ungers' available resources for February-August, 1989 were not decreased by their [nursing home debts]."
4. Conditional Eligibility
In a sense, conditional eligibility is another form of resource spend down (though not limited to medical debts). The basic idea of conditional eligibility is that applicants may receive Medicaid eligibility by expressly agreeing to dispose of their excess resources promptly. In particular, plaintiffs point to the SSI regulations at
III.
The main basis for plaintiffs' challenge to the first day of the month rule is that it is more restrictive than the rule in effect in Indiana on January 1, 1972. As a corollary to this argument, plaintiffs assert that if the rule is permissible because it is part of the SSI program, then Indiana must also adopt other parts of the SSI program, including the so-called conditional eligibility option discussed above. Plaintiffs also argue that the rule fails to meet the requirements of
A. Section 209(b)
Plaintiffs argued in district court that Indiana is violating Section 209(b) because it uses more restrictive criteria than those it used on January 1, 1972. The judge below declined to reach that issue, determining that the fact that the first day of the month rule is an SSI rule makes it proper for Indiana to implement the rule. On appeal, plaintiffs embellish their argument somewhat, contending that Indiana cannot pick and choose SSI rules but rather must take them all (or at least all not blatantly contradictory to the Medicaid scheme). According to plaintiffs, "Indiana may continue under its 1972 policies, pursuant to § 209(b), or it may adopt * * * the SSI scheme. * * * Indiana must choose one of the two alternatives. The State may not retain its § 209(b) status and then impose selected SSI rules which combine to produce a Medicaid system more restrictive than that operated by the State on January 1, 1972." Defendants counter that Section 209(b) is solely an exception to what would otherwise be mandatory coverage under the Medicaid Act, and claim that a state may pick and choose any SSI rules it wishes, even if they are more restrictive than those in effect on January 1, 1972.
At bottom, plaintiffs argue that Section 209(b) is not really an exception to the receipt of benefits by the "categorically needy" but is an alternate basis upon which a Medicaid applicant may become entitled to medical benefits. That is, plaintiffs contend that even if an applicant would not be considered categorically needy, the applicant would be entitled to benefits in a Section 209(b) state if he would have been entitled under that state's January 1, 1972 Medicaid standards. Plaintiffs rely on the presence of the income spend down requirement in Section 209(b) as evidence that Section 209(b) is independent of the strict categorically needy option. This is perhaps a plausible interpretation of the statute. The weight of authority, however, supports the defendants' interpretation of Section 209(b) as an exception to the coverage of the categorically needy. The Supreme Court has consistently characterized Section 209(b) as a means whereby states can restrict Medicaid coverage. Gray Panthers,
Therefore Section 209(b) is properly understood as an exception to the otherwise applicable rule that a state must provide Medicaid assistance to the categorically needy, somewhat imprecisely defined for our purposes as those entitled to receive SSI benefits.12 Section 209(b) does not guarantee any benefits to anyone. Because the SSI regulations include a first day of the month rule, it can be said that the federal government "uses" that rule under Medicaid because of the link between SSI eligibility and Medicaid eligibility under
The exception embodied in Section 209(b) works, we believe, in the following manner:
1) Does the "otherwise applicable law" apply, i.e., is the applicant categorically needy at the time of application? If no, then the applicant is not entitled to Medicaid coverage (unless she is medically needy and lives in a medically needy state). If yes, continue to the next step.
2) Does the exception apply, i.e., even if the applicant is categorically needy, would the applicant have been entitled to benefits under the January 1, 1972 rules? If no, then the applicant is not entitled to Medicaid coverage. If yes, the applicant is entitled to Medicaid coverage.
Under this algorithm, the Section 209(b) exemption is inapplicable only to an applicant who (1) is entitled to receive SSI benefits under current federal standards, and (2) would have been entitled to receive Medicaid benefits under the state's January 1, 1972 regulations. An applicant who meets both requirements above is entitled to receive Medicaid benefits in a Section 209(b) state. Unfortunately for plaintiffs, they have failed to show that they satisfy either requirement.
The major failing of plaintiffs' case is that they have not shown that they were entitled to receive SSI benefits for the months in which they were denied Medicaid benefits. The record does not indicate whether they were receiving SSI benefits during those months, or would otherwise have been classified as categorically needy. Indeed, it appears certain that the Ungers earned too much income to qualify for SSI benefits.
In addition, the status of Indiana's law in 1972 is unclear. The parties treated the issue as a factual matter, although it is really a legal issue. What the state of the law was at a particular date is not a question for a fact-finder--qualified immunity cases are analogous, and we do not ask the jury to decide whether a particular constitutional right was clearly established at some prior time. Maust v. Headley,
We have reservations about accepting defendants' assertion that a Section 209(b) state can "pick and choose" selected SSI rules.14 As noted above, a Medicaid applicant in Indiana who 1) is eligible for SSI benefits under current federal regulations, and 2) would have been eligible for Medicaid benefits under Indiana's rules in effect on January 1, 1972, is entitled to receive Medicaid benefits. Picking and choosing SSI rules would be unlawful if it caused Indiana to deny Medicaid eligibility to individuals who meet both requirements above.15
Our resolution of the Section 209(b) issue therefore prevents us from giving blanket approval to Indiana's first day of the month regulation. Since the district court certified a class challenge to the first day of the month rule, the prudent course is to narrow the class definition to include only those similar to the named plaintiffs--namely, those persons denied Medicaid benefits because of the first day of the month rule who also did not qualify for SSI benefits. We leave for another day the claims of persons (if any) who would be eligible both for SSI benefits under current federal standards and for Medicaid benefits under the rules in force in Indiana at the beginning of 1972, but to whom Indiana has denied Medicaid eligibility.
B.
The plaintiffs also argue that Indiana's use of a first day of the month rule violates
It is appropriate to discuss specifically the reasonableness of Indiana's failure to allow a resource spend down, a topic not reached in Glaser. Although it presents a closer case, we also conclude that Indiana's failure to adopt a resource spend down rule does not violate
IV.
For the foregoing reasons, the judgment of the district court is affirmed, with the reservation that the class represented by the named plaintiffs is narrowed to include only those persons not entitled to be classified as categorically needy.
Notes
The Honorable Hubert L. Will, Senior District Judge of the United States District Court for the Northern District of Illinois, is sitting by designation
The district court rejected plaintiffs' claims based on the Administrative Procedure Act and under the Fifth and Fourteenth Amendments. Plaintiffs do not appeal these rulings
Notwithstanding any other provision of this subchapter, * * * no State not eligible to participate in the State plan program established under subchapter XVI of this chapter shall be required to provide medical assistance to any aged, blind, or disabled individual (within the meaning of subchapter XVI of this chapter) for any month unless such State would be (or would have been) required to provide medical assistance to such individual for such month had its plan for medical assistance approved under this subchapter and in effect on January 1, 1972, been in effect in such month, except that for this purpose any such individual shall be deemed eligible for medical assistance under such State plan if (in addition to meeting such other requirements as are or may be imposed under the State plan) the income of any such individual as determined in accordance with section 1396b(f) of this title (after deducting any supplemental security income payment and State supplementary payment made with respect to such individual, and incurred expenses for medical care as recognized under State law regardless of whether such expenses are reimbursed under another public program of the State or political subdivision thereof) is not in excess of the standard for medical assistance established under the State plan as in effect on January 1, 1972. * * * In States which do not provide medical assistance to individuals pursuant to paragraph (10)(C) of [subsection (a) of this section], an individual who is eligible for medical assistance by reason of the requirements of this section concerning the deduction of incurred medical expenses from income shall be considered an individual eligible for medical assistance under paragraph (10)(A) of that subsection.
This similarity between the medically needy and
Federal regulations governing the SSI program incorporate a similar rule whereby income and resources are calculated on the first day of the month. See
The facts for Bernice Beall and her sister Beatrice are exactly the same
This information is contained in a March 23, 1990, decision by the Indiana Department of Public Welfare, but was not mentioned by either party before this Court
The Illinois Administrative Code describes Illinois' resource spend down policy in some detail. 89 Ill.Admin.Code Ch. I, § 120.60
Although plaintiff does not discuss them, Indiana's Medicaid regulations in 1979 seemed to implement a similar system, allowing eligibility for applicants with excess personal property if
(a) Such property cannot be reduced or adjusted to the amount allowable within the established time standards for processing applications;
(b) The applicant agrees that repayment of medical payments made on his/her behalf will be made to the County Department when the excess resources are actually available following the adjustment; and
(c) It is anticipated that such individual will remain eligible for assistance after such expenditure of the excess resources.
Ind.Admin.Code 9-3-2(22.2) (1979)
This provision provides that a state plan must
include reasonable standards * * * for determining eligibility for and the extent of medical assistance under the plan which (A) are consistent with the objectives of this subchapter, (B) provide for taking into account only such income and resources as are, as determined in accordance with standards prescribed by the Secretary, available to the applicant or recipient * * *, [and] (C) provide for reasonable evaluation of any such income or resources * * *.
Plaintiffs argue that Morris and Savage were effectively overruled by Section 303(e)(5) of the 1988 Medicare Catastrophic Coverage Act ("MCCA"), Pub.L. No. 100-360,
(2)(A) The methodology to be employed in determining income and resource eligibility under subsection * * * (f) of this section * * * may be less restrictive, and shall be no more restrictive, than the methodology--
(i) in the case of groups consisting of aged, blind, or disabled individuals, under the supplemental security income program * * *,
(B) For purposes of this subsection * * *, methodology is considered to be "no more restrictive" if, using the methodology, additional individuals may be eligible for medical assistance and not individuals who are otherwise eligible are made ineligible for such assistance.
There is an obvious tension between this provision and Section 209(b). Mowbray v. Kozlowski,
We do not presume to parse the "labyrinthian" Medicaid statute to decide exactly how one qualifies as categorically needy
We do note that there have been a number of cases that have held that Indiana used a resource spend down rule on January 1, 1972. Most recently, as indicated above, the Indiana Court of Appeals concluded "that the State's plan in effect on January 1, 1972, allowed applicants to spend down excess resources to become eligible for Medicaid benefits." Payne,
We reject outright defendants' apparent argument that the first day of the month rule is not subject to Section 209(b) analysis because it is a "neutral administrative rule." There is nothing neutral about Indiana's decision whether or not to use a resource spend down policy. Defendants offer no authority for their argument that the "neutrality" of a rule is relevant, and nothing in Section 209(b) or elsewhere in the Medicaid Act supports the argument. The fact that some applicants may be better off under the first day of the month rule is irrelevant, since Section 209(b) focuses on whether an individual would have qualified on January 1, 1972, not on the cumulative effects on all applicants of any change in the state's regulatory scheme
This does not mean that Indiana must incorporate into its Medicaid program the SSI conditional eligibility regulations at
It is true that a person can avoid the effects of a Medicaid system that does not have a resource spend down rule by promptly paying medical bills as they become due. For some persons this might be possible, but for many applicants the physical, psychological, and economic realities of the situation make prompt payment of medical bills very difficult. See Haley v. Commissioner of Public Welfare,