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Egan v. Davis

June 25, 1997




Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. IP 94-1167-G John Paul Godich, Magistrate Judge.

Before POSNER, Chief Judge, and COFFEY and EASTERBROOK, Circuit Judges.

EASTERBROOK, Circuit Judge.



States that participate in the Medicaid program must provide "a fair hearing before the State agency to any individual whose claim for medical assistance under the plan is denied". 42 U.S.C. sec. 1396a(a)(3). Indiana has a cadre of administrative law judges who take evidence and render decisions at the behest of applicants whose claims are initially denied. If an ALJ denies a claim, the applicant may appeal to a higher administrative level; if the ALJ awards benefits, the state or its fiscal intermediary may appeal to these same officials.

Helen Egan and Donna Belcher, disappointed by decisions concerning medical assistance (the fiscal intermediary declined to authorize the purchase of a wheelchair for Egan, and the state's Medical Review Team determined that Belcher no longer qualified for the program), sought hearings before ALJs, who ruled in their favor. Appeals were taken by local officials in Belcher's case and by the intermediary in Egan's. Fearing the worst, Egan and Belcher filed this suit as a class action under 42 U.S.C. sec. 1983, contending that Indiana's provision for appellate review of ALJs' decisions violates 42 C.F.R. sec. 431.205(b), which reads:

The State's hearing system must provide for --

(1) A hearing before the agency; or

(2) An evidentiary hearing at the local level, with a right of appeal to a State agency hearing.

An ALJ provided by the state is "the agency" for purposes of this regulation. It follows, plaintiffs contend, that there can be no appeal from decisions favorable to applicants -- for appeal is authorized only under sec. 431.205(b)(2), when the hearing occurs at "the local level". If this is so, the regulation has another consequence: applicants cannot appeal unfavorable decisions by ALJs but must instead seek whatever review may be had in court.

Although the suit was filed in 1994, the district court (acting through a magistrate judge, on the parties' consent) did not certify the class until late 1996. By then, the administrative appeals were but vague memories. Both plaintiffs had prevailed: Egan got a wheelchair, and Belcher retained her eligibility. Neither has since been before an ALJ. The parties and the magistrate judge did not discuss whether this made the case moot -- indeed, whether the case had ever been live, given that neither plaintiff lost a penny in benefits. Addressing the merits, the magistrate judge agreed with the plaintiffs' position and issued an injunction forbidding the defendants from "modifying and/or reversing any decisions issued by its [sic] Administrative Law Judges which are favorable to Medicaid applicants and/or recipients". Although the injunction speaks only of decisions favorable to applicants, if the magistrate judge is correct, then the regulation also requires Indiana to stop entertaining applicants' appeals from adverse decisions. Appearing as an amicus curiae, the United States informs us that the regulation's author, the Secretary of Health and Human Services, believes that it does not forbid administrative appeal systems for Medicaid claims -- but the United States noted the potential jurisdictional problem and suggested that the court avoid a decision on the merits.

Egan and Belcher did not suffer monetary injury from the administrative appeals of their claims. They prevailed on the merits and did not incur any expense in opposing the appeals. Injury from pending appeals -- the need to participate in unwelcome procedures, potential delay in the receipt of benefits (though ALJs' decisions are supposed to be implemented while an appeal is pending), and the threat of adverse decision -- gave plaintiffs standing at the time the suit began. Yet the procedures soon ended and the threat of financial loss was dispelled. Plaintiffs did not seek, and could not have received, money damages to compensate for whatever anxiety or delay the administrative appeals may have created. See Arizonans for Official English v. Arizona, 117 S. Ct. 1055, 1069-70 (1997); Green v. Mansour, 474 U.S. 64 (1986). What they sought and received is an injunction forbidding appeals from future decisions -- but this injunction does not appear to affect their own interests.

If a class had been certified while the administrative appeals were pending, then the principle of Sosna v. Iowa, 419 U.S. 393 (1975), and United States Parole Commission v. Geraghty, 445 U.S. 388 (1980) -- that mootness of a plaintiff's personal claim does not prevent him from serving as the representative of a class -- would have been activated. But it was not certified in time, and Indianapolis Board of School Commissioners v. Jacobs, 420 U.S. 128 (1975), holds that a case must be dismissed if the representative's claim becomes moot before certification. No other member of this class has volunteered to become a representative. In the span from August 1993 through October 1994 Indiana reversed 28 decisions in which ALJs had favored claimants. These applicants and others similarly situated (data for months after October 1994 are not in the record) would have live claims, but none has appeared on the scene. So unless either Egan or Belcher is today a proper plaintiff, the case must be dismissed as moot.

Neither Egan nor Belcher has any pending claim for benefits. Both are still eligible, so recurrence of the dispute is more likely than it would be for a member of the public at large -- although, given Weinstein v. Bradford, 423 U.S. 147 (1975), Murphy v. Hunt, 455 U.S. 478 (1982), and Los Angeles v. Lyons, 461 U.S. 95 (1983), which hold that a low probability of recurrence does not create a current case or controversy, we have our doubts that either plaintiff has established that her dispute with the state is capable of repetition. Data in the record do not permit us to estimate how frequently disputes arise and how many of these are resolved by ALJs, though we do know that most decisions by ALJs favorable to claimants are enforced without appeal. What is more, we doubt that a dispute, if one recurs, will again evade review. Anyone whose claim is sustained by an ALJ and rejected on an administrative appeal has an enduring claim for relief. This case, too, would have avoided problems had the magistrate judge followed the command of Fed. R. Civ. P. 23(c)(1): "As soon as practicable after the commencement of an action brought as a class action, the court shall determine ...

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