United States District Court, N.D. Illinois, Eastern Division
MARY NASELLO, KATHERINE STEPHENS, VIRGINIA AYDELOTTE, KAREN S. STANFORD, RALPH HERMAN LAKE, BERT LOUIS MESTEL, BECKY A. LONG, JULIA A. BAKER, LUCY M. EMERICK, and DELORES E. O'DEAR, individually and as the representatives of a class of similarly situated persons, Plaintiffs,
THERESA A. EAGLESON, in her official capacity as Director of the Illinois Department of Healthcare and Family Services, and GRACE B. HOU, in her official capacity as Director of the Illinois Department of Human Services, Defendants.
MEMORANDUM OPINION AND ORDER
W. GETTLEMAN, UNITED STATES DISTRICT JUDGE.
Mary Nasello, Katherine Stephens, Virginia Aydelotte, Karen
S. Stanford, Ralph Herman Lake, Bert Louis Mestel, Becky A.
Long, Julia A. Baker, Lucy M. Emerick, and Dolores E.
O'Dear have brought a four count amended putative class
action complaint against defendants Theresa A. Eagleson,
Director of the Illinois Department of Healthcare and Family
Services and Grace B. Hou, Director of the Illinois
Department of Human Services, alleging that defendants have
violated the Medicaid Act, 42 U.S.C. § 1396a(a)(17)(B),
the Due Process Clause of the Fourteenth Amendment, the
Americans with Disabilities Act, 42 U.S.C. § 12131 et
seq. and the Rehabilitation Act, 29 U.S.C. § 701 et
seq., and the Supremacy Clause by failing to deduct
plaintiffs' pre-eligibility medical expenses when
calculating their income for purposes of determining their
patient pay amount for long term care. Count I seeks a
declaration that defendants' practice of refusing to
allow what plaintiffs interchangeably call “deviated
liability” or “deviated income” of
non-covered medical expenses incurred prior to eligibility
for Medicaid benefits for Illinois nursing home residents
violates the Medicaid Act, and an order that defendants adopt
a process by which they will bring the calculation of patient
liability into compliance with federal law. Count II alleges
that defendants are violating Medicaid's
“reasonable promptness” requirement, 42 U.S.C.
§ 1396a(a)(8). Count III alleges that defendants'
actions violate the ADA and Rehabilitation Acts. In Count IV,
plaintiffs seek a temporary and permanent injunction.
Defendants have moved under Fed.R.Civ.P. 12(b)(6) to dismiss
for failure to state a claim. For the reasons discussed
below, defendants' motion is granted.
are all nursing home residents with serious medical
conditions that require 24hour medical care. Although not
providing any specifics, the complaint alleges that each
plaintiff has one or more medical conditions that
substantially limits one or more major life activities.
Plaintiffs are all financially needy, falling within the
requirements for Medicaid assistance. Each has been approved
for Medicaid Long Term Care Benefits. Each had incurred
medical expenses prior to becoming eligible for Medicaid and
for which they remain financially liable. They claim that
under Medicaid regulations these “prior” expenses
should be offset from the calculation of their income for
purposes of determining the amount they must contribute to
the cost of their nursing home care.
have moved to dismiss the complaint for failure to state a
claim. Such a motion challenges the sufficiency of the
complaint, not its merits. Gibson v. City of
Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). The court
accepts as true all well-pleaded factual allegations and
draws all reasonable inferences in plaintiffs' favor.
Sprint Spectrum, L.P. v. City of Carmel, Indiana,
361 F.3d 998, 1001 (7th Cir. 2004). A complaint must allege
sufficient facts, that if true, would raise a right to relief
above the speculative level, showing that the claim is
plausible on its face. Bell Atlantic Corp. v.
Twombly, 550 U.S. 549, 555 (2007). To be plausible on
its face, the complaint must plead facts sufficient for the
court to draw the reasonable inference that defendant is
liable for the alleged misconduct. Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009).
Medicaid program was established in 1965 as Title XIX of the
Social Security Act. See Social Security Amendments
of 1965, Title XIX, Pub. L. No. 89-97, 79 Stat. 286, 343-53
(codified as amended at 42 U.S.C. § 1396a). It was
designed to provide financial assistance to persons whose
income is insufficient to meet the costs of medical care. It
functions as a partnership between the federal government and
the states. Miller v. Olszewski, 2009 WL 5201792
(E.D. MI Dec. 21, 2009); 42 U.S.C. § 1396a(a)(10). As
part of the program, states provide payment for certain
medical and nursing home expenditures using a mix of both
federal and state funds. In return for the use of federal
funds, the state agrees to comply with the Medicaid statute
and any administrative regulations promulgated by the Centers
for Medicare and Medicaid Services (“CMS”), the
federal agency charged with providing program oversight.
Maryland Dept. of Health and Mental Hygiene v. Centers
for Medicare and Medicaid Services, 542 F.3d, 424, 426
(4th Cir. 2008); 42 U.S.C. § 1396a(a)(1).
permits two basic categories of applicants to receive medical
assistance. 42 U.S.C. § 1396a(a)(10). The first,
“categorically needy, ” are applicants whose low
income alone qualifies them to receive Medicaid benefits. The
second, “medically needy, ” are applicants
“who have become impoverished through medical
expenditures; while they have sufficient income to afford
basic living expenses, they cannot afford expensive medical
care.” Maryland Dept. of Health and Mental
Hygiene, 542 F.3d at 429; 42 U.S.C. § 1396a(a)(10).
has delegated to CMS “exceptionally broad authority to
promulgate regulations determining the extent of income and
resources available to medically needy applicants and
recipients. Id.; 42 U.S.C. § 1396a(a)(17).
“If a medically needy applicant's pre-eligibility
income exceeds the Medicaid limit, CMS regulations direct
states to deduct incurred medical expenses in order to reduce
that income to the Medicaid eligibility level.”
Id. (citing 42 C.F.R. § 435.831(d)).
The regulations term this the “spenddown” process
and require states to calculate the amount of
“countable income” medically needy applicants
must “spenddown” before Medicaid will cover their
medical expenses. Id.
determine an applicant's countable income, states first
subtract certain standard deductions from gross income.
Id. If that amount equals or is less than the state
income standard, the applicant is deemed eligible for
Medicaid benefits. Id.; 42 C.F.R. § 435.831(c).
If the amount exceeds the state income standard, the
applicant may become eligible for benefits by “spending
down” incurred medical expenses to meet the state
eligibility standard. Id. Incurred medical expenses
are defined as any medically necessary expenses for which an
applicant would otherwise be liable. 42 C.F.R. §
435.831. States are required by CMS to deduct expenses that
the applicant is repaying either at the time of application
or that were incurred within three months prior to the filing
of the application. Maryland Dept. of Health and Mental
Hygiene, 542 F.3d at 429. If this adjusted income,
determined after completion of the spenddown process, is
reduced to below the threshold level, the applicant is deemed
eligible for Medicaid benefits, such as nursing home care.
home residents receiving Medicaid benefits who have income
remaining after the spenddown process, such as the instant
plaintiffs, are required by CMS to contribute that income to
the nursing home to defray the cost of their care.
Id.; 42 U.S.C. § 1396a(a)(17). To determine the
amount of income a nursing home resident has after becoming
Medicaid eligible, states must calculate what CMS terms the
“post-eligibility contribution to care.”
post-eligibility contribution to care amount is calculated by
a process similar to the spenddown process. First, the state
determines the resident's total income including income
disregarded during spenddown. From that is subtracted any
“incurred medical expenses” deducted during
spenddown. If there is available income remaining, CMS
assumes the resident will use it to defray room and board
costs and directs states to subtract that amount from
Medicaid's payment to the nursing home. Id.; 42
C.F.R. 435.725(a). “Thus, during the post-eligibility
process, CMS's regulations require states to deduct
incurred medical expenses in the same manner as they deducted
those expenses during the spenddown process.”
Id. at 430.
providing these deductions from total income to reach
post-eligibility contribution to care, Medicaid permits
recipients receiving long term care to have sufficient income
to pay for medical services that are necessary to their
health, but are not paid by Medicaid under the state's
plan. Miller, 2009 WL 5201792 at *3. As a result, if
a recipient nursing home resident requires podiatry,
chiropractic or dental care that are not covered items under
the state's plan, the actual costs of those items will be
deducted from the recipients' otherwise required
contribution to the cost of care amount, so the recipient
would retain this part of the income to pay for those
medically necessary non-covered items. Id.
the deductions allowed when determining post-eligibility
contribution to care are those for the recipients'
“incurred expenses for medical or remedial care that
are not subject to payment by a third party, including -
necessary or remedial care recognized under State law but not
covered under the State plan under the subchapter, subject to
reasonable limits the State may establish on the amount of
these expenses.” 42 U.S.C. § 1396a(r)(1)(A)(ii).
In the instant complaint, plaintiffs claim that defendants
have not properly deducted their incurred medical expenses
when calculating their ...