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BROGAN v. MILLER

United States District Court, Northern District of Illinois, E.D


March 17, 1982

MARIE BROGAN, GLADYS ALLISON, MARGE HAYES, CONLEY FONDA, ELIZABETH HANSEN, PAUL HANSEN, INDIVIDUALLY, AND ON BEHALF OF ALL OTHER PERSONS SIMILARLY SITUATED, PLAINTIFFS,
v.
JEFFREY MILLER, DIRECTOR OF THE ILLINOIS DEPARTMENT OF PUBLIC AID, AND THE ILLINOIS DEPARTMENT OF PUBLIC AID, DEFENDANTS-THIRD PARTY PLAINTIFFS, V. RICHARD S. SCHWEIKER, SECRETARY, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, WAYNE A. STANTON, REGIONAL OFFICIAL, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, CAROLYNE K. DAVIS, ADMINISTRATOR, HEALTH CARE FINANCING ADMINISTRATION, MARTIN D. STANTON, REGIONAL DIRECTOR, MEDICAID, THIRD PARTY DEFENDANTS.

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

MEMORANDUM OPINION AND ORDER

The plaintiff class of MA-NG (Medical Assistance — No Grant) recipients and applicants in Illinois*fn1 has moved for a preliminary injunction to prevent the defendants, Jeffrey Miller*fn2 and the Illinois Department of Public Aid ("IDPA"), from implementing a Medicaid eligibility rule which provides that those individuals whose income and resources exceed the state eligibility standard for cash assistance must actually incur medical expenses sufficient to bring their net income below the cash assistance standard calculated on a six-month basis before receiving a Medicaid card. Plaintiffs seek this Court to require IDPA to determine Medicaid eligibility on a one-month basis or to determine eligibility by allowing applicants to deduct six months' worth of anticipated medical expenses from the income they are currently required to anticipate over the same six-month period. Jurisdiction is alleged in this matter pursuant to 28 U.S.C. § 1331 and 1343. For the reasons stated below, the Court will grant plaintiffs' motion for preliminary injunction and will order IDPA to determine Medicaid eligibility for aged, blind and disabled MA-NG recipients and applicants on a one-month basis.

The Court may in its discretion grant a motion for preliminary injunction relief when the moving party satisfies its burden of persuasion that (1) it will suffer irreparable harm in the absence of an injunction and that legal remedies are inadequate to prevent the harm, (2) the threat of harm to the movant outweighs the harm that would result to the opposing party if an injunction issues, (3) the moving party is at least reasonably likely to prevail on the merits, and (4) the public interest will not be disserved by the granting of injunctive relief. Reinders Bros. v. Rain Bird Eastern Sales Corp., 627 F.2d 44, 48-49 (7th Cir. 1980); Fox Valley Harvestore, Inc. v. A.O. Smith Harvestore Products, Inc., 545 F.2d 1096, 1097 (7th Cir. 1976). Although no one of these factors is determinative, the movant's likelihood of success on the merits is often considered a "threshold requirement for entitlement to preliminary relief." Kolz v. Board of Education of the City of Chicago, 576 F.2d 747, 748-49 (7th Cir. 1978). Defendants in the present case challenge only the likelihood of plaintiffs' success on the merits; defendants do not dispute either the nature or extent of the harm plaintiffs will suffer if an injunction does not issue.

The plaintiff class in this case consists of aged, blind or disabled MA-NG (Medical Assistance — No Grant) recipients and applicants in Illinois. These individuals do not qualify for cash assistance because their income exceeds the income eligibility standard of Illinois law.*fn3 Income in excess of this standard is the amount which an applicant must "spend down" to become eligible for Medicaid. Prior to September 1, 1981, for new MA-NG applicants and November 1, 1981, for current MA-NG recipients,*fn4 an individual could satisfy this spend down requirement and thereby qualify for Medicaid immediately by contributing one-sixth of his or her total six-month spend down amount each month into a "collection account" established by IDPA. Under IDPA's new policy, an individual can satisfy this spend down requirement only by actually incurring medical expenses equaling or exceeding the total six-month spend down amount.*fn5

There is no dispute that such a policy imposes a real and immediate hardship for members of the plaintiff class. The hardship arises from the requirement that a MA-NG applicant must anticipate six months' worth of income to calculate his or her spend down obligation but is not permitted to anticipate six months' worth of medical expenses to offset that income. A MA-NG applicant who has only one month of income, for example, will be required to incur medical expenses to offset six months' worth of "excess" income before qualifying for Medicaid benefits. Under such a policy, individuals in plaintiffs' class will be presented with a "Hobson's choice" of delaying needed medical care in order to pay for other necessities as reflected in the state income eligibility standard or delaying the purchase of those necessities in order to pay for medical care and subsequently qualify for Medicaid.*fn6

In light of these rather stark consequences, we find that, absent granting relief, plaintiff class will suffer irreparable harm, that legal remedies are inadequate, that the threatened harm to the plaintiff class outweighs any harm to defendants should an injunction issue, and that the public interest will not be disserved by the granting of injunctive relief. Thus, the only issue remaining for this Court to decide is whether the plaintiff class is reasonably likely to prevail on the merits of this lawsuit. The substance of plaintiffs' claim in this context is that IDPA's new spend down policy violates the provisions of the Medicaid statute governing state administration of the medical assistance program. Because one of those provisions is tied to the eligibility criteria used by Illinois in 1972, it is necessary to trace the history of the Medicaid program in Illinois in some detail.

The Medicaid program, established in 1965 as Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq., "provid[es] federal financial assistance to States that choose to reimburse certain costs of medical treatment for needy persons." Harris v. McRae, 448 U.S. 297, 301, 100 S.Ct. 2671, 2680, 65 L.Ed.2d 784 (1980). States choosing to participate in the plan must comply with the requirements of Title XIX and regulations promulgated by the Secretary of Health and Human Services ("HHS"). Schweiker v. Gray Panthers, 453 U.S. 34, 101 S.Ct. 2633, 69 L.Ed.2d 460 (1981); 42 U.S.C. § 1396a (1981 Supp.). One of those requirements is that the "categorically needy," recipients of cash payments under state-administered categorical welfare plans, must also be eligible to receive Medicaid benefits under the applicable state medical assistance plan. 42 U.S.C. § 1396a (1976) as amended by Omnibus Budget Reconciliation Act of 1981, Pub.L. No.97-35. Until 1972, this meant that all recipients of Old Age Assistance ("OAA"), Aid to Families with Dependent Children ("AFDC"), Aid to the Blind ("AB") and Aid to the Permanently and Totally Disabled ("APTD") were automatically eligible for Medicaid. In 1972, however, Congress replaced all but AFDC with the federally-administered Supplemental Security Income ("SSI") program for the aged, blind and disabled. 42 U.S.C. § 1381 et seq.*fn7 Under this program, AFDC recipients retain their automatic eligibility for Medicaid as categorical assistance recipients. In states like Illinois, however, aged, blind and disabled recipients of SSI automatically qualify for Medicaid only if they would have qualified for cash assistance under the former state categorical assistance programs in effect on January 1, 1972. 42 U.S.C. § 1396a(f).*fn8

Those aged, blind and disabled individuals whose income is too great to have qualified for categorical assistance under the state standards in effect in 1972 are required by Title XIX to "spend down" their excess income before they can qualify for Medicaid. 42 U.S.C. § 1396a(f). These are the MA-NG applicants and recipients comprising the plaintiff class in this case. Many of these individuals are recipients of SSI whose level of benefits exceed the income eligibility standard for categorical assistance. Other members of the plaintiff class do not receive SSI benefits. Their "excess" income comes from other sources. In either event, however, Title XIX provides that such individuals must be eligible for Medicaid if their income, after deducting incurred medical expenses, "is not in excess of the standard for medical assistance established under the State plan as in effect on January 1, 1972."*fn9 42 U.S.C. § 1396a(f) (1976).

Although no longer receiving state categorical assistance, aged, blind and disabled SSI recipients in Illinois are "categorically needy" within the meaning of Title XIX whether their income falls above or below the cash assistance income eligibility standard. Those MA-NG applicants who have incomes above the income eligibility standard but do not receive SSI benefits (or state supplemental payments) are "medically needy."*fn10 See 42 C.F.R. § 435.4 (1981). In a state like Illinois, therefore, some of the categorically needy as well as all of the medically needy are required to spend down part of their income in order to qualify for Medicaid.

However byzantine this statutory scheme may appear, the fact that some members of the plaintiff class are categorically needy and others medically needy has more than semantic significance. By definition, the state categorical assistance program in effect in 1972 did not provide for a Medicaid spend down or collection account for the categorically needy. Since 1972, however, some categorically needy individuals must spend down in order to qualify for Medicaid. It is not immediately apparent, therefore, how the 1972 Illinois categorical assistance program can provide the standard through which SSI MA-NG applicants can gain Medicaid eligibility as Title XIX requires.

This apparent anomaly does not require, as defendants suggest, that we somehow borrow the spend down eligibility criteria for the categorically needy from the narrower 1972 medical assistance program for the medically needy in Illinois.*fn11 The absence of a spend down provision in the 1972 state categorical assistance program simply requires that IDPA calculate the income of categorically needy applicants under SSI for Medicaid purposes by disregarding the income spent down for medical care. As the language of 42 U.S.C. § 1396a(f) suggests, incurred medical expenses is simply an additional factor to be taken into account by IDPA in the income calculation for categorically needy applicants. Neither the income eligibility level itself nor the period over which income is calculated should change from those standards utilized in 1972.*fn12

From a practical standpoint, eligibility for categorical assistance in Illinois in 1972 appears to have been calculated on a monthly basis.*fn13 Earned income and other resources available to a categorical assistance applicant were calculated on a monthly basis. See IDPA Manual for Aid to the Aged, Blind and Disabled ("AABD") §§ 1065.2, 1250 (Appendices VI and VII) (effective on January 1, 1972). "In determining earned income to be taken into account" when measuring an applicant's need, Illinois law expressly provided for monthly income disregards the size of which depended upon the aged, blind or disabled status of the applicant. Ill.Rev.Stat. 1971, ch. 23, § 3-1.2. The need of an applicant and the size of his or her cash payment was determined with reference to a monthly budget prepared by IDPA. IDPA AABD Manual, § 1002. Under these circumstances, there can be little doubt that "budgeting methodologies actually amount to eligibility rules." Calkins v. Blum, 511 F. Supp. 1073, 1093 (N.D.N.Y. 1981).

Because the income and resources of a categorical assistance applicant were determined on a monthly basis for eligibility purposes in Illinois in 1972, the spend down deduction from that income must also be determined on a monthly basis in order to preserve the integrity of the January 1, 1972, eligibility standards for the categorically needy. Any other result would allow IDPA to treat the SSI categorically needy population differently than the traditional categorically needy population in violation of 42 U.S.C. § 1396a(a)(10)(B)(i) (1976) as amended by P.L. 97-35 (1981). Thus, pursuant to 42 U.S.C. § 1896a(f) (1976), aged, blind and disabled MA-NG applicants and recipients who are categorically needy (because of their eligibility for or receipt of SSI or state supplemental payments) must be permitted to spend down on a one-month rather than six-month basis.

This Court's determination of IDPA's responsibility toward categorically needy MA-NG applicants and recipients has the effect of resolving the issue of IDPA's responsibility toward medically needy MA-NG applicants and recipients. It is true that MA-NG income eligibility for the medically needy in Illinois was calculated on a six-month basis in 1972. IDPA AABD Manual § 5011.1 (effective on January 1, 1972). It is also true, however, that the 1972 "standards for medical assistance" defining the point below which all MA-NG applicants cannot be required to spend down "is considered to be the eligibility standard for cash assistance, or the medical assistance standard for the medically needy program (if the State has established one), whichever is higher." S.Rep.No.92-1230, 92d Cong., 2d Sess. 222 (emphasis added) U.S.Code Cong. & Admin.News 1972, p. 4989. See also Hayes v. Stanton, 512 F.2d 133, 137 n.5 (7th Cir. 1975). Given the restrictive effect on eligibility of a six-month spend down requirement, the "higher standard governing treatment of the medically as well as categorically needy under 42 U.S.C. § 1396a(f) must be derived from the cash assistance program in effect in 1972. Because that program determined eligibility based on monthly income standards, supra, the spend down requirement for the medically needy must also be calculated on a monthly basis.

Calculating the income of medically needy MA-NG applicants in the same way as categorically needy applicants is consistent with the basic purpose of the Medicaid program. Since passage of SSI in 1972, many categorically needy MA-NG applicants have as great a need for Medicaid as medically needy applicants. Distinguishing between these two groups for Medicaid eligibility solely because of the source (as opposed to the amount) of their income would violate the spirit, if not the letter, of Title XIX. Indeed, Title XIX itself provides that the standards for calculating Medicaid eligibility must be comparable between the medically needy population and the categorically needy population.*fn14 42 U.S.C. § 1396a(a)(2), (10)(C) as amended Pub.L. 97-35 (1981). See also Hodecker v. Blum, 525 F. Supp. 867, 873 (N.D.N Y 1981); Winter v. Quern, 490 F. Supp. 788, 794 (N.D.Ill. 1980). As Congress concluded at the inception of the Medicaid program, "[i]n no event . . . may a State require the use of income or resources which would bring the individual's income below the amount established as the test of eligibility under the State plan. Such action would reduce the individual below the level determined by the State as necessary for his maintenance." S.Rep.No.404, U.S.Code Cong. & Admin.News, pp. 1943, 2019 (1965).

Title XIX also requires that a state Medicaid plan

  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, [and] (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. . . .

42 U.S.C. § 1396a(a)(17) (1981). An eligibility policy like the one at issue here which requires the expenditure of income not yet received by the categorically and medically needy cannot be described as reasonable or consistent with the objectives of Medicaid.*fn15

Complicating this dispute between IDPA members of the plaintiff class is IDPA's allegation that HHS mandated implementation of the six-month spend down requirement in Illinois. This allegation, apparently an attempt to shift responsibility for IDPA's new spend down policy onto HHS,*fn16 is not quite accurate. Patricia Richter, Supervisor of the Bureau of Program Operations in the Health Care Finance Administration of HHS, testified that IDPA was not required by HHS to implement a six-month spend down requirement. Deposition of P. Richter at 31-32. Indeed, all of the documents presented by defendants detailing the history of IDPA's dealings with HEW and HHS since 1975 suggest that the federal government has required Illinois to abandon its "collection account" system; HHS has not specifically required IDPA to implement a six-month spend down requirement.*fn17

The Court is cognizant of the fact that HHS has "approved" IDPA's corrective action plan including the six-month spend down requirement. See Letters from Tera Younger, Director of Program Operations, HCFA, HHS, Dated August 20, 1981, and December 11, 1981. This approval, primarily based on HHS' conclusion that the plan eliminates the cause of the abuses under the old collection account system, does not constitute a specific endorsement of the legal sufficiency of a six-month spend down requirement as it compares with Illinois categorical assistance standards in effect in 1972. The general approval by HHS of IDPA's corrective action plan "is not more than slightly persuasive when, as here, the so-called approval does not appear to have followed explicit attention to the question presented." See Aitchison v. Berger, 404 F. Supp. 1137, 1148 (S.D.N.Y. 1975), aff'd 538 F.2d 307, cert. denied, 429 U.S. 890, 97 S.Ct. 246, 50 L.Ed.2d 172 (1976).

Accordingly, this Court will grant plaintiffs' motion for a preliminary injunction and will order IDPA to impose a spend down requirement calculated on a one-month basis for all aged, blind and disabled MA-NG applicants and recipients.*fn18 Defendants are directed to determine MA-NG eligibility for the plaintiff class by utilizing a one-month spend down requirement. It is so ordered.


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