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April 8, 1969

Dominick CATALANO et al., Plaintiffs,
DEPARTMENT OF HOSPITALS OF the CITY OF NEW YORK, and New York State Department of Social Services, et al., Defendants

Mansfield, District Judge.

The opinion of the court was delivered by: MANSFIELD

MANSFIELD, District Judge.

This class action was commenced against those responsible for the supervision and operation of the Bird S. Coler Hospital, Welfare Island, New York (the "Hospital"), by 18 patients of that Hospital on behalf of themselves and others similarly situated, all of whom receive federally-financed medical assistance pursuant to Title 42 U.S.C. § 1396 et seq. ("Grants to States for Medical Assistance Programs," commonly referred to as "Medicaid") and most of whom receive regular recurring federal benefit checks (primarily Social Security, Civil Service Retirement and Veterans' benefits). The gravamen of the complaint is that defendants, as a condition to rendering medical and hospital assistance, require plaintiffs and members of their class to endorse over to the Hospital their federal and other benefit checks (which range from $75 to $200 per month) in exchange for Fifteen Dollars ($15) cash per month for personal expenditures. Defendants contend that in order to qualify for Medicaid chronically ill patients (such as plaintiffs) of the type treated at the Hospital must, pursuant to 42 U.S.C. § 1396 et seq.1 ("the Medicaid program") and Title 11 of New York's Social Services Law, 52-A Consol. Laws of New York, McKinney's Consol. Laws, c. 55. § 363 et seq.2 and the rules and regulations promulgated thereunder, *fn3" turn over all income, including benefit checks in excess of $15 a month, in order to partially defray the costs of the care provided by the Hospital. The particular regulation pointed to by defendants is found in 18 N.Y.C.R.R. Chapter 1, § 85.3 which reads in part:

"(a) For the purpose of ascertaining need for medical assistance the following income and resources shall be exempt and shall neither be taken into consideration nor required to be applied toward the payment or part payment of the cost of medical assistance:
* * *
"(5) net prospective income in amounts equal to the appropriate amounts allowed in the following schedules: [followed by schedules which, in part, provide a minimum income exemption of $2,300 for a household consisting of one member who is not a wage earner] * * *
"(iii) For the purposes of this section when a person is in chronic care he shall not be deemed to be a member of any household except that:
(a) he shall be allowed a net income exemption of $15 per month for his personal expenses; and
(b) he shall be considered a member of his former family household for the purpose of determining the amount of the savings exemptions for such family household."

 Plaintiffs' complaint is directed toward this regulation and the Hospital's method of enforcing it by requiring patients to endorse over their federal benefit checks in exchange for $15 per month. Plaintiffs contend that the regulation and practice are invalid because: (1) Federal benefit checks are, by federal statute, exempt from any form of legal process designed to make such benefits usable for payment of medical care; (2) The regulation and hospital practices, which limit the chronically ill to an income of $15 per month, are inconsistent with the purposes of the controlling federal statutes, 42 U.S.C. § 1396 et seq. ; (3) The $15 per month income exemption allowed to the chronically ill, as opposed to the substantially higher exemptions permitted for the non-chronically ill, is discriminatory and a denial of equal protection; and (4) The regulation is unauthorized by, and inconsistent with, the law of the State of New York.

 Plaintiffs' 61-page complaint further charges the defendants with opening, obstructing and seizing plaintiffs' mail in violation of both federal statutes and plaintiffs' Fourth, Fifth and Fourteenth Amendment rights; and harassment and intimidation, in violation of their First Amendment rights, of those plaintiffs who sought to institute this litigation and who refused to turn over their federal benefit checks. The complaint requests, among other things, that defendants be enjoined from confiscating plaintiffs' property or opening or otherwise interfering with their mail, and that a declaratory judgment issue declaring the patients' rights to their federal benefit checks under the Federal Medicaid Act. Jurisdiction is rested primarily on federal questions, 28 U.S.C. § 1331, infringement of civil rights, 28 U.S.C. § 1343(3) and (4), and 28 U.S.C. § 1339, which deals with postal matters. *fn4"

 Following plaintiffs' motions for summary judgment, preliminary injunctive relief and a temporary restraining order, on November 29, 1968, after hearing counsel for both sides, we issued a temporary restraining order restraining defendants from interfering with plaintiffs' mail, segregating mail which contained checks and retaining such checks, harassing plaintiffs to endorse these checks, informing plaintiffs that they had a legal obligation to endorse their checks to the hospital, and threatening to deprive plaintiffs of wheel chairs, prosthetic devices or other necessary medical care and services unless they endorsed said checks to defendants. After a lengthy hearing on December 4, 1968 we modified the temporary restraining order by striking those paragraphs enjoining defendants from segregating mail containing checks and from informing plaintiffs that they had a legal obligation to endorse the checks to defendants. The order was so modified for the reason that orderly hospital administration required the segregation of checks and other valuables, not only to safeguard them but to ensure their personal delivery to plaintiffs, some of whom are unable to write and need assistance in endorsing checks and protecting valuables. The paragraph forbidding defendants from informing plaintiffs that they had a legal duty to endorse their checks was stricken on defendants' representation that they would not so inform plaintiffs and because all plaintiffs were aware of this suit and no irreparable injury would occur by the making of such statements.

 On defendants' motion the Court further ordered the joinder of the State of New York as an indispensable party to this action when it appeared that the primary grievance was not the Hospital's activities but the regulation of the State Board of Social Welfare and the State Department of Social Services which, in practice, operated to cut off Medicaid benefits to the patients who refused to endorse their checks to defendants.

 After hearing further argument and testimony on December 10, 1968, the Court gave the parties time to submit post-hearing briefs on plaintiffs' motions for a preliminary injunction and summary judgment and, the proofs having failed to establish a Hospital practice of opening mail and harassing or threatening plaintiffs to endorse the checks, requested that briefs be directed to the legality of the state regulation which, in prescribing eligibility for Medicaid benefits, distinguished between the amount of income exempted from use to offset medical expenses in the case of patients receiving "chronic care" *fn5" ($15 per month, or $180 per year) and other patients ($2,300 per year for an outpatient who is a member of a household and not a wage earner). Before reaching those issues, however, some discussion of the alleged harassment and mail violations is required.

 The essence of the allegations of harassment was that plaintiffs' benefit checks were not delivered to them with their other mail, but were brought separately, the checks often removed from their envelopes, and presented to plaintiffs for endorsement. Upon endorsement plaintiffs would be given $15 and asked to sign a receipt for that amount. If a plaintiff indicated he might refuse to endorse the check, he was told that the law required him to do so and that if he refused his "case would be ...

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