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April 9, 1980


The opinion of the court was delivered by: Aspen, District Judge:


Plaintiffs Caroline Winter and Marie Kantowicz have brought this class action seeking declaratory and injunctive relief against the Illinois Department of Public Aid ("IDPA") and its director, Arthur Quern, with respect to the eligibility levels and excludable income levels employed in the Medical Assistance Program ("Medicaid") for certain aged, blind, and disabled individuals and couples.*fn1 Medicaid is a public assistance program based on federalstate cooperation. Under the program, the state makes payments to qualified providers of health services on behalf of eligible or medically needy persons. In turn, the federal government reimburses the state for approximately 50% of these payments if the state plan is in compliance with the governing statutory and regulatory requirements.

There are two classes of persons who are beneficiaries of Medicaid payments. The first class includes those persons who are "categorically needy." They receive cash welfare payments from the state and automatically are eligible for Medicaid benefits. The second class consists of persons who are "medically needy." These recipients do not have a sufficiently low income to qualify for cash welfare payments, but nonetheless have medical bills which exceed their income and ability to pay. Under this branch of the Medicaid program, known as Medical Assistance-No Grant (MA-NG), the state will pay the medical expenses of eligible persons who "spend down" so that their income is the same as that of persons who receive cash welfare grants.*fn2 Federal law, however, requires that the level to which MA — NG applicants are required to spend down be no lower than "the most liberal money payment standard used by the state" in determining cash grant assistance to the categorically needy. 42 U.S.C. § 1396a (a)(17); 42 C.F.R. § 448.21(a).*fn3 In this way, federal law seeks to ensure that the medically needy, who have sources of income independent from welfare payments, are at least as well off as those persons who receive cash welfare grants.

Plaintiffs contend, however, that the Illinois program since its inception in 1966 has operated in contravention of this federal policy. Initially, the state set MA-NG eligibility levels at $150 for individuals and $200 for couples. In an earlier opinion in this case, Judge McGarr, who previously presided in this action, held that these eligibility levels were impermissibly low.*fn4 As a result, the defendants thereafter raised the levels to $168 and $205, respectively. Since then, defendants have raised the eligibility levels one more time, to $171 and $216, respectively. Plaintiffs continue to attack these eligibility levels as well as certain other elements of the Illinois MA-NG program. Specifically, the plaintiffs allege in Counts II and III that the present eligibility levels are impermissibly low under both federal and constitutional law and in Count IV that the excludable income provisions of MA-NG violate both federal constitutional and statutory law.

Presently pending before the Court is plaintiffs' motion for summary judgment on the elements of the complaint left unresolved by Judge McGarr's opinion. The Seventh Circuit has observed that "(w)ith the ever increasing burden upon the judiciary, persuasive reasons exist for the utilization of summary judgment procedure whenever appropriate." Kirk v. Home Indemnity Co., 431 F.2d 554, 560 (7th Cir. 1970). Nonetheless, it remains the burden of the moving party to clearly establish the nonexistence of any genuine issue of material fact. Cedillo v. International Association of Bridge & Structural Iron Workers, Local Union No. 1, 603 F.2d 7, 10 (7th Cir. 1979). Any doubts must be resolved against the moving party. Moutoux v. Gulling Auto Electric, Inc., 295 F.2d 573, 576 (7th Cir. 1961).


In Illinois, the eligibility of an aged, blind, or disabled person for cash welfare grants is determined on an individualized basis. Both basic needs — shelter, utilities, food, and clothing — and special needs are incorporated into this eligibility standard. In determining MA-NG eligibility for these persons, however, IDPA has translated this individualized standard into different flat rates for individuals and couples. The $168 and $205 eligibility standards imposed in the aftermath of Judge McGarr's opinion were derived by taking the 90th percentile of total budgeted needs of all cash welfare recipients. The levels presently in effect — $171 and $216 — are derived by computing hypothetical budgets composed of allowances for the basic needs as well as one special need: laundry. Both methods share one important element; they fail to incorporate into the computation all the special needs that are factored into the determination of a categorically needy applicant's eligibility level.

According to 42 C.F.R. § 448.21, MA-NG eligibility levels are to be "as a minimum, at the levels of the most liberal money payment standard used by a state" in determining eligibility for its cash welfare programs. Plaintiffs argue that the most liberal money payment standard consists of the sum of all basic and special needs. Thus, they contend that the present eligibility standards for MA-NG applicants violate federal law in two ways. First, the present level fails to account for all special needs that the state considers when it determines eligibility levels for cash grant payments.*fn5 Second, the prior levels of $168 and $205 suffer the vice of ensuring that 10% of MA-NG recipients will have less disposable income than do categorically needy persons. In each case, plaintiffs contend that the levels violate federal law by placing MA-NG recipients at a disadvantage vis-a-vis cash grant recipients.*fn6

The Court agrees. The federal law accords states wide discretion in administering the Medicaid program. The state may adopt a flat amount eligibility level which includes all special needs; it may conduct case-by-case inquiries into the need of each applicant for MA-NG; or it may utilize a combination of these procedures. Whatever system is used, however, the State must adopt a standard which puts the medically needy on at least an equal footing with cash grant recipients.*fn7 It was for this reason that the court in Aitchison v. Berger, 404 F. Supp. 1137, 1149 (S.D.N.Y. 1975), aff'd, 538 F.2d 307 (2d Cir.), cert. denied, 429 U.S. 890, 97 S.Ct. 246, 50 L.Ed.2d 172 (1976), found an averaging formula utilizing the 50th percentile violative of 42 C.F.R. § 448.3:

  The programs in question are for real people with
  real needs, not statistical averages. Construing the
  legal documents liberally in favor of the needy, it
  makes eminent sense to read the standards in terms of
  every individual or family, not

  to hold that it is sufficient in some average is
    To discriminate against the self-supporting by
  requiring them to live on income below the level
  declared by New York to be necessary for minimal
  maintenance would do violence to the aims of Medicaid
  legislation and common sense. Our concern here is
  with people who have not sought public assistance for
  routine support, but only to meet the catastrophe of
  serious illness.
    Nevertheless, it remains deep and familiar in our
  esteem for individual initiative that we would not
  deem it acceptable without some particular
  justification to treat those outside categorical
  assistance groups less generously than those within.
  The questioned regulation, fairly read, reflects this

IDPA's use of the 90th percentile of cash welfare recipients as the eligibility level for medically needy applicants also results in inequities not different in substance from those arising from the averaging formula employed in Aitchison.*fn8 The Court does not hold that IDPA cannot set a flat medical eligibility standard for MA-NG applicants. That standard, however, cannot be permitted to place medically needy persons in a less advantageous position than categorically needy persons. Therefore, if IDPA chooses to utilize an averaging formula, it must provide some process whereby medically needy applicants will have the opportunity to bring to IDPA's attention any special needs which would allow them to retain more of their income. In this way, all medically needy recipients would be treated at a minimum at least as well as similarly situated categorically needy recipients with special needs.

Thus, to ensure that federal requirements are satisfied and at the same time to avoid costly individual determinations of the eligibility of medically needy applicants, the Court holds that the present eligibility levels may remain in force.*fn9 But if IDPA retains this standard, it must review the status of any MA-NG applicant who makes a prima facie showing that such special needs exist. The special needs to be considered are the same as those incorporated in the categorical assistance computations. Once a special need is shown, IDPA must use the cash assistance standards in determining the individual's eligibility level. Accordingly, IDPA is ordered to prepare a plan on the basis of these ...

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