The opinion of the court was delivered by: BRODERICK
VINCENT L. BRODERICK, District Judge.
Plaintiffs Johanne Sasse, Allan Lester, and Charlotte Czako (the "plaintiff-patients") are patients in plaintiff Bruckner Nursing Home ("Bruckner"), and are among 194 of the 196 residents therein who are recipients of medical assistance benefits pursuant to the "Medicaid Program", 42 U.S.C. §§ 1396, et seq. Defendants are the president and trustees of Local 144 Hotel, Hospital, Nursing Home & Allied Health Services Union, SEIU, AFL-CIO ("Local 144"), the union representing employees of Bruckner; the Secretary of the United States Department of Health, Education and Welfare; the Commissioner of the Department of Social Services of the State of New York; the Commissioner of the New York State Department of Health; and the Commissioner of the City of New York Department of Social Services ("City Department").
On or about January 26, 1977, defendant Local 144 obtained judgments in excess of $30,000 against plaintiff Bruckner. After the entry of those judgments, Local 144 served restraining notices under N.Y.C.P.L.R. § 5222 and issued execution to the Sheriff of New York City for service upon the City Department, the local disbursing agent of Medicaid funds. At the time the restraining notices were served, Bruckner had already rendered services to the plaintiff-patients, and had billed the City Department for those services. All parties herein agreed that, for purposes of this action, liens had been established by defendant Local 144 upon funds in the hands of the City Department which were payable, immediately upon audit, to plaintiff Bruckner, on account of medical services already rendered to, inter alia, the plaintiff-patients.
Plaintiffs claim that the restraining notices placed by Local 144 are prohibited by Title XIX of the Social Security Act (42 U.S.C. §§ 1396, et seq.) in that under 42 U.S.C. § 1396a(a)(18) they constitute impermissible liens against the property of the plaintiff-patients. They claim, in this connection, that the service of the allegedly prohibited restraining notices without notice to the plaintiff-patients, and opportunity for them to be heard, violated the Due Process Clauses of the Fifth and Fourteenth Amendments. Plaintiffs seek a preliminary injunction pursuant to Rule 65 of the Federal Rules of Civil Procedure, enjoining defendants from interfering pendente lite with Medicaid payments by the City Department to Bruckner, and enjoining the defendants from enforcing, or otherwise executing with respect to, the restraining notices served upon the City Department.
A temporary restraining order ("TRO") was granted on April 1, 1977,
and after a hearing on April 5 it was modified and extended to April 21, 1977.
A second hearing was held on April 12, 1977. No evidence was adduced at either hearing: all parties stipulated to the substantive facts set forth in this memorandum.
Jurisdiction is properly invoked under 28 U.S.C. § 1331(a) as this case involves the interpretation and application of a federal statute, 42 U.S.C. § 1396a(a)(18), and plaintiffs reasonably allege that the amount in controversy exceeds $10,000 exclusive of interest and costs. Cf., Aitchison v. Berger, 404 F. Supp. 1137, 1143 (S.D.N.Y.1975), aff'd. 538 F.2d 307 (2d Cir. 1976). Plaintiffs also allege violation of the Fifth and Fourteenth Amendments of the Constitution.
The Medicaid Program, 42 U.S.C.§§ 1396 et seq., authorizes the appropriation of monies to be made available "to States which have submitted, and had approved by the Secretary of Health, Education, and Welfare, State plans for medical assistance" to indigents. The program provides that the federal government will participate with state and local governments in providing funds to pay for necessary medical services rendered. For a state government to qualify, the state's plan for medical assistance must meet the criteria set forth in Section 1396a(a).
Sub-paragraph (18) of Section 1396a(a) requires a State plan for medical assistance to "provide that no lien may be imposed against the property of any individual prior to his death on account of medical assistance paid or to be paid on his behalf under the plan (except pursuant to the judgment of a court on account of benefits incorrectly paid on behalf of such individual)..." (emphasis added).
New York State has elected to participate in the Medicaid Program. The New York provision enacted to meet the requirements of § 1396a(a)(18) is set forth in the New York State Social Services Law § 369
, which by its terms comports with the requirements of § 1396a(a)(18):
(a) no lien may be imposed against the property of any individual prior to his death on account of medical assistance paid or to be paid on his behalf under this title, except pursuant to the judgment of a court on account of benefits incorrectly paid on behalf of such individual, and (b) there shall be no adjustment or recovery of any medical assistance correctly paid on behalf of such individual under this title, except from the estate of an individual who was sixty-five years of age or older when he received such assistance, and then only after the death of his surviving spouse, if any, and only at a time when he has no surviving child who is under twenty-one years of age or is blind or permanently and totally disabled, provided, however, that nothing herein contained shall be construed to prohibit any adjustment or recovery for medical assistance furnished pursuant to subdivision three of section three hundred sixty-six of this chapter.
Thus at issue here is the statutory and constitutional applicability of 42 U.S.C. § 1396a(a)(18) (and of New York State Soc. Serv.L. § 369) to the restraining notices served upon the City Department by Local 144. Cf., Aitchison v. Berger, 404 F. Supp. 1137 (S.D.N.Y.1975), aff'd, 538 F.2d 307 (2d Cir. 1976).
I find that the liens placed by Local 144 upon funds payable to Bruckner by the City Department do not violate 42 U.S.C. § 1396a(a)(18) or New York State Soc. Serv.L. § 369, since neither of those provisions applies to such liens
Thus I do not reach the constitutional question suggested by plaintiffs.
The instant restraining notices stem from controversy between a union of nursing home employees and their nursing home employer. The judgments to which they relate are against the nursing home: it is property of the nursing home, not property of the beneficiaries, which the judgment creditors seek to reach. Congress did not intend, in enacting § 1396a(a)(18), to insulate nursing homes from their judgment creditors. The notices served by the Funds upon the City Department are intended to restrain payment to the nursing home of monies owed by the City Department, as agent for the governmental participants in the Medicaid Program, to that nursing home for services already provided under the Program. Ninety-eight percent of the patients of the judgment debtor, Bruckner, are receiving Medicaid assistance. If this Court were to hold that Bruckner's judgment creditors were not permitted to place liens on monies due Bruckner in the hands of the City Department it would severely and unjustly interfere with the rights of the creditors to what is for all practical purposes the judgment debtor's only real source of funds.
Nursing homes, as are other "providers" under Medicaid, are reimbursed for services already furnished. This inevitably presents cash flow problems. The confidence of creditors in nursing homes which participate in the Medicaid Program, and their willingness to deal with such nursing homes on other than a cash-on-the-barrelhead basis, would be severely shaken if this Court were to interpret 42 U.S.C. § 1396a(a)(18) as ...