KERRv. HOLSINGER, (E.D.Ky. 2004)
VADA JEWELL KERR, et al., Plaintiffs, v. JAMES W. HOLSINGER, et. al.,
Defendants
Civil Action No. 03-68-JMH
United States District Court, E.D. Kentucky.
March 25, 2004
MEMORANDUM OPINION
AND ORDER
JOSEPH HOOD, District Judge
This action is before the Court on several motions. Defendants have
filed a motion to dismiss or for summary judgment [Record No. 7].
Plaintiffs have responded [Record No. 25], requesting oral argument on the
motion, and Defendants have replied [Record No. 31].[fn1] Plaintiffs have
filed a motion for preliminary injunction [Record No. 36]. Defendants
have responded [Record No. 42], and Plaintiffs have replied [Record No.
44]. Defendants have also filed a notice of change in administrative
regulation [Record No. 39]. Plaintiffs have filed a response [Record No.
41], and Defendants have replied [Record No. 45]. These matters are now
ripe for decision.
I. FACTUAL BACKGROUND
Plaintiffs are residents of Kentucky and Medicaid recipients
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who have had their necessary level of care determined by the
Department for Medicaid Services (hereinafter, "Department") through a
medical review completed under contract by a Peer Review Organization
(hereinafter, "PRO"). Defendants are the administrators of the Cabinet
for Health Services ("Cabinet") and the Department.[fn2] The Department
is a single state agency designated pursuant to
42 U.S.C. § 1396a(a)(5) and KRS Chapters 194A and 205 for the
administration of the Kentucky Medical Assistance Program (hereinafter,
"Medicaid") in the Commonwealth of Kentucky.[fn3] The Department
is located within the Cabinet pursuant
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to KRS 194A.030(3).
The parties have described how a record number of Kentuckians have
become participants in the Medicaid program just as huge budget
shortfalls have hit the state and while medical and pharmacy costs have
increased. Plaintiffs allege that the Commonwealth responded to the
budget crunch by adopting an "emergency regulation" that redefined
eligibility for Medicaid long-term care and rendered ineligible persons
previously certified as eligible for nursing facility (hereinafter, "NF")
and other long-term care. The emergency regulations described in the
complaint, 907 KAR l:O22E, were replaced by virtually identical permanent
regulations, 907 KAR 1:022 on October 30, 2003 (hereinafter,
collectively, "2003 regulations").[fn4] As a result, there have been
determinations that some Medicaid recipients residing in nursing homes
and others receiving Home and Community Based Services (hereinafter,
"HCBS"), all previously acknowledged by the state as needing these
services, were no longer eligible for long-term care under Kentucky's
Medicaid program.
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On April 4, 2003, Plaintiffs were receiving services under the
Kentucky Medicaid program based on determinations that they were entitled
to receive long-term care. Some resided in nursing homes, and others
participated in the HCBS waiver program. With the adoption of the 2003
regulations and the alteration of the level-of-care criteria for
mandatory federal Medicaid nursing facility services, it was projected
that the Commonwealth would save some $45 million. When Plaintiffs' needs
were reconsidered under the 2003 regulations and information obtained by
the PRO from Plaintiffs' physicians, care givers, and health care
practitioners, none of the plaintiffs remained eligible for NF services
even though they had previously been recognized as having medical need of
those services. The PRO recommended and the Department accepted the PRO's
recommendation that Plaintiffs did not meet the standards for the level
of care in a NF or HCBS as set out in Kentucky administrative
regulations.[fn5] There has been no finding or suggestion that
Plaintiffs' conditions have changed or that they are less in need of
long-term care services than they were before April 4, 2003.
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Plaintiffs allege that they are being deprived of mandatory
services by the implementation of the new regulations. They complain that
the administrative redefinition of the need for NF services and HCBS is
not based upon new medical knowledge "providing a more enlightened
understanding of who actually needs nursing facility services, or indeed
upon any medical or health-related considerations at all . . ." and that
Defendants have not even suggested that the amendments are in the best
interest of Kentucky Medicaid recipients or that the new regulations are
consistent with the objectives of the Medicaid Act or in accord with
federal Medicaid law. [Response at 1.]
Plaintiffs seek relief from the Cabinet's determination of the level of
care under the 2003 regulations by alleging that the level of care
standard is contrary to the provisions of federal law and that subject to
preemption under the Supremacy Clause of the United States Constitution.
Plaintiffs also allege that the level of care standard in the 2003
regulations is unreasonable. Further, Plaintiffs claim that the notices
sent to them are insufficient under the Medicaid Act and the Due Process
Clause of the Fourteenth Amendment. Finally, Plaintiffs allege a
violation of state law because, allegedly, Defendants are not assuring
that PRO complies with state law, that hearings are conducted properly,
or that services are continued pending completion of the appeal process.
II. APPLICABLE STANDARDS OF REVIEW
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Defendant has moved this Court to dismiss Plaintiff's claims
pursuant to Fed.R.Civ.P. 12(b)(1), arguing that the Court does not
have subject matter jurisdiction in this case, and pursuant to
Fed.R.Civ.P. 12(b)(6), arguing that Plaintiff has failed to state a claim
upon which relief may be granted. When considering a 12(b)(1) motion,
the Court may consider matters outside of the record, without converting
the motion to a motion for summary judgment, as the Court must determine
whether or not the Court is even allowed to reach the merits of the case.
Rogers v. StrattonInd., Inc., 798 F.2d 913, 915-917 (6th Cir.
1986). Plaintiff bears the burden of demonstrating that subject matter
jurisdiction exists. Hedgepath v. Kentucky, 215 F.3d 608, 611
(6th Cir. 2000). With regard to the 12(b)(6) motion, this Court must
accept all factual allegations in Plaintiff's complaint as true.
Broyde v. Gotham Tower, Inc., 13 F.3d 994, 996 (6th Cir. 1994).
The complaint may be dismissed only if it is clear that no relief could
be granted on any set of facts that could be proven consistent with the
allegations, and this Court's review amounts to a determination of
whether it is possible for the plaintiff to prove any set of facts in
support of its claims that would entitle it to relief. Sistrvnk v.
City of Strongsville, 99 F.3d 194, 197 (6th Cir. 1996); Miller
v. Currie, 50 F.3d 373, 377 (6th Cir. 1995). This Court must ignore
all outside evidence submitted by the parties in ruling on the motion to
dismiss pursuant to 12(b)(6).
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Defendants have asked, in the alternative, for summary judgment in
this matter. Under Fed.R.Civ.P. 56(c), summary judgment is
appropriate "if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show that
there is no issue as to any material fact, and that the moving party is
entitled to judgment as a matter of law." The moving party may discharge
its burden by showing "that there is an absence of evidence to support
the nonmoving party's case." Celotex Corp. v. Catrett,
477 U.S. 317, 325 (1986). The nonmoving party, which in this case is the
plaintiff, "cannot rest on [her] pleadings," and must show the Court that
"there is a genuine issue for trial." Hall v. Tollett
128 F.3d 418, 422 (6th Cir. 1997). In considering a motion
for summary judgment the court must construe the facts in the light most
favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 255 (1986).
Finally, Plaintiffs have made a motion for preliminary injunction in
this matter. In order to succeed, they must show that (1) there is a
substantially likelihood that they will succeed on the merits of this
litigation, (2) that there is a serious risk of irreparable harm if the
injunction is not issued, (3) that the balance of hardships favors
Plaintiffs, and (4) that an injunction would be in accordance with the
public interest. United States v. Detroit Int'l Bridge Co.,
7 F.3d 497, 503 (6th Cir. 1993). Of
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these factors, no one is determinative to the appropriateness of
the relief sought, rather there is a balancing of the factors. Roth
v. Bank of the Commonwealth, 583 F.2d 527, 536 (6th Cir. 1978).
III. DISCUSSION
A. STANDING AND PRIVATE RIGHT OF ACTION
Parties invoking a court's jurisdiction must establish their standing
in a case or controversy under Article III of the United States
Constitution, a matter turning on the parties' personal stake in the
dispute. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560
(1992); Duke Power Co. v. Carolina Environmental Study Group,
Inc., 438 U.S. 59, 72 (1978). In order to meet the "irreducible
constitutional minimum" of Article III standing, Plaintiffs must
demonstrate three elements: (1) an injury in fact, (2) a causal
connection between the injury and the conduct of which they complain, and
(3) redressability of the injury by the relief sought. In the instant
matter, Defendants argue that Plaintiffs have not been injured because
there is no individual right that may be enforced under
42 U.S.C. § 1983 with regard to the Medicaid Act because that
legislation was enacted pursuant to Congress' spending power and
that Plaintiffs, thus, do not have standing to bring those claims.
42 U.S.C. § 1983 prohibits the deprivation of a person's "rights,
privileges, or immunities" secured by the laws or the
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constitution of the United States under color of state law.
42 U.S.C. § 1983. It is true that, "[i]n legislation enacted pursuant to
the spending power [such as the Medicaid Act], the typical remedy for
State noncompliance with federally imposed conditions is not a private
cause of action for noncompliance but rather action by the Federal
Government to terminate funds to the State." PennhurstStateSchool
& Hosp. v. Halderman, 451 U.S. 1, 28 (1981). Nonetheless, in
some circumstances, federal Medicaid provisions can create a right
privately enforceable against state officers through § 1983. See
Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 511-12 (1990) (holding
that the Boren Amendment to the Medicaid Act created a right enforceable
under § 1983); Westside Mothers v. Haveman, 289 F.3d 852,
862-863 (6th Cir. 2002) (applying test set out in Wilder to
determine of private right of action existed under 42 U.S.C. § 1983
for noncompliance with screening and treatment provisions of Medicaid
Act).
Provisions of the Medicaid Act create an enforceable right under §
1983 if, after a particularized inquiry, the court concludes that:
(1) the statutory section was intended to benefit
the putative plaintiff, (2) it sets a binding
obligation on a government unit, rather than
merely expressing a congressional preference, and
(3) the interests the plaintiff asserts are not so
"`vague and amorphous' that [their] enforcement
would strain judicial competence." Blessing v.
Freestone, 520 U.S. 329, 341 (1997) (quoting
Wright v. Roanoke Redevel. and Housing
Auth.,
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479 U.S. 418, 437. . . . (1987)).
Westside Mothers, 289 F.3d at 862-863. "If these
conditions are met, [the Court] presume[s] the statute creates an
enforceable right unless Congress has explicitly or implicitly foreclosed
this." Id. at 863 (citing Blessing, 520 U.S. at 341;
Wood v. Tompkins, 33 F.3d 600, 605 (6th Cir. 1994)). As Congress
has not foreclosed the possibility of private enforcement of rights under
42 U.S.C. § 1396a(a)(1)(A)(i), 1396d(a)(3) and (4), and
1396a(a)(17), the Court will presume that the Medicaid statute creates
an enforceable right unless Plaintiffs fail to meet the conditions set
out above.
Under the terms of the Act, Kentucky must:
. . . provide (A) for making medical assistance
available, including at least the care and
services listed in paragraphs (1) through (5),
(17) and (21) of section 1396d(a) of this title,
to (i) all individuals [who] meet the age and
financial requirements of a categorical
population.
42 U.S.C. § 1396a(a) (10) (A). 42 U.S.C. § 1396d(a)(4)(A)
specifies "nursing facility services (other than services in an
institution for mental diseases) for individuals 21 years of age or
older" as among the required care or services.
42 U.S.C. § 1396d(a)(4)(A). This is to say that NF services
are a mandatory service under Medicaid. See Westside Mothers,
289 F.3d at 856 ("The Medicaid Act and related regulations set out a
detailed list of services every state program must provide.") Further,
the "nursing facility
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services" of § 1396d(a)(4)(A) are specifically defined as
services required for "an individual who needs or needed on a daily basis
nursing care (provided directly or requiring the supervision of nursing
personnel) or other rehabilitation services which as a practical matter
can only be provided in a nursing facility on an inpatient basis."
42 U.S.C. § 1397d(f). The same may be said of those long-term care
services available under the HCBS waiver program, an alternative to the
services otherwise to be provided under auspices of NF services, to those
who would otherwise require the level of care provided in a hospital,
nursing facility, or intermediate care facility which would be reimbursed
under Medicaid. 42 U.S.C. § 1396a(a)(10)(A)(ii)(VI) and §
1396n(c)(1); 42 C.F.R. § 430.25.
Thus, this Court is persuaded that the NF services and the long-term
care services available under the HCBS waiver program are clearly
intended to benefit Plaintiffs, all within the class of persons eligible
for NF services and HCBS. In fact, there is a binding obligation on the
Commonwealth to provide these services as they "are couched in mandatory
rather than precatory language, stating that Medicaid services
"shall be furnished" to eligible persons and that the NF
services "must be provided." 42 U.S.C. § 1396a(a)(8) and
1396a(a) (10) (A) (emphasis added). These provisions are not so vague or
amorphous as to defeat judicial enforcement because the statute carefully
details the services to be provided.
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See42 U.S.C. § 1396d(a)(4)(A) and 1396r(a). Thus, Plaintiffs
have a private right of action to enforce these provisions.
Similarly, the Court is persuaded that Plaintiffs have a private right
of action for alleged violations of 42 U.S.C. § 1396a(a)(17),
requiring that a "state plan for medical assistance must . . . include
reasonable standards . . . for determining eligibility for and the extent
of medical assistance under the plan . . . which are consistent with the
objectives of [the Act.]" Specifically, this portion of the Act is "by
its terms . . . intended to provide standards upon which individual
applicants can rely in the determination of their benefit eligibility by
state officials. It is intended to benefit the plaintiffs, and it is a
binding obligation on the state agency." Markva v. Haveman,
168 F. Supp.2d 695, 711 (E.D. Mich. 2001), aff'd, 317 F.3d 547 (6th
Cir. 2002). The requirement that these standards be consistent with the
objectives of the Act is not so vague and amorphous as to defeat this
Court's review of the situation. Plaintiffs may bring an action to remedy
this perceived wrong.
Finally, Plaintiffs also have the right to pursue claims for violations
of the requirement for a "fair hearing before the State agency."
42 U.S.C. § 1396a(a)(3). This is a binding obligation on the state to
provide a fair hearing and is clearly "intended to benefit [a] putative
plaintiff." Gean v. Hattaway, 330 F.3d 758, 772-773 (6th Cir.
2003) (quoting Wilder, 496 U.S. at 509). It is
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not "congressional preference" for certain conduct nor an interest
"too vague and amorphous" to be enforced by a competent judiciary,
particularly in light of the judiciary's regular review of matters to
determine whether an individual has been afforded appropriate procedural
due process by a state entity, a claim also raised by Plaintiffs under
the Fourteenth Amendment to the United States Constitution. Id.
Thus, it is proper for those affected by that obligation to bring a suit
for its breach under § 1983.
No doubt, each Plaintiff has a personal stake in the outcome of this
controversy and can claim an injury due to Defendants' decision to
terminate certain Medicaid benefits through their application of the 2003
regulations and their alleged failure to provide Plaintiffs with adequate
procedural due process. Specifically, they have lost NF and HCBS services
under the Medicaid program, a concrete and particularized injury, and
they seek to vindicate interests falling within the "zone of interests"
protected and regulated by the Medicaid Act, as described above.
Defendants allegedly caused their injury by adopting and implementing the
regulations, and that the relief sought, an injunction preventing the use
of the regulations to bar the provision of the services they seek, would
redress or prevent their alleged loss of mandated services under the
Medicaid Act. This is sufficient for standing in this matter, and
Plaintiffs may pursue their claims. Defendants' motion to dismiss this
action for lack
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of standing shall be denied.
B. RIPENESS
Defendants have also suggested that this claim is not yet ripe for
adjudication as Plaintiffs have failed to exhaust their administrative
remedies with the state administrative agency. However, "exhaustion is
not a prerequisite to an action under § 1983," especially where
plaintiffs raise federal constitutional issues and Congress has not
carved out an exception requiring exhaustion as is the case in this
matter. Patsy v. Board of Regents, 457 U.S. 496, 501 and 507
(1982). While Plaintiffs may seek a hearing before state ALJ's on the
application of the new criteria to their case, the state hearing officers
will not address the federal questions raised here. Accordingly, this
matter is ripe for adjudication, and Plaintiffs' claims shall not be
dismissed on these grounds.
C. DUE PROCESS
The Act requires states to provide a fair hearing when a Medicaid
agency takes action to suspend, terminate, or reduce eligibility or
covered services. 42 U.S.C. § 1396a(a)(3); 42 C.F.R. § 431.200,
et seq.; § 431.210. In fact, it is explicitly required that
Kentucky's Medicaid hearing system meet the constitutional due process
standards set forth in Goldberg v. Kelly,
42 C.F.R. § 431.205(d); 907 KAR 1:563; Goldberg v. Kelly, 397 U.S. 254
(1970). At the time of application or any action
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affecting their claims, a state agency must inform applicants or
recipients in writing of their right to a hearing, the method by which
they may obtain a hearing, and that they may be represented by legal
counsel, a relative, a friend, or other spokesperson.
42 C.F.R. § 431.206. A notice of adverse action must contain
a statement of what action is intended, the reasons for the intended
action, the specific regulation supporting or changing the law that
requires the action, an explanation of the right to request hearing,
and an explanation of the circumstances under which Medicaid is continued
if a hearing is requested. 42 C.F.R. § 431.210.
The initial notices to Plaintiffs explaining that they were no longer
eligible for NF or HCBS services under the 2003 criteria failed to give