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June 8, 1983

Wayne GADWAY, individually and on behalf of all others similarly situated, Plaintiff,
Barbara BLUM, individually and in her official capacity as Commissioner of the New York State Department of Social Services, and Richard H. Duquette, individually and in his official capacity as Commissioner for Social Services, Clinton County, Defendants.

The opinion of the court was delivered by: MINER


MINER, District Judge.


 This class action concerns the relationship between the medical assistance ("Medicaid") program for the medically needy, 42 U.S.C. §§ 1396a(a)(10)(C) and 1396a(a)(17), New York Social Services Law §§ 366.1(a)(5) and 366.2(b), and the Hill-Burton Act, 42 U.S.C. §§ 291 et seq. The issue here is whether the "spend-down" liability of a medically needy family *fn1" can be met by incurring a hospital bill which the hospital "writes off" as part of its obligation to provide a free or reduced price care to low income people under the Hill-Burton Act. The claim here is predicated upon 42 U.S.C. § 1983, see Maine v. Thiboutot, 448 U.S. 1, 100 S. Ct. 2502, 65 L. Ed. 2d 555 (1980), and jurisdiction is asserted under 28 U.S.C. § 1331. Before this Court are plaintiff's motion for summary judgment *fn2" and defendants' cross-motion for summary judgment. *fn3" Fed.R.Civ.P. 56.


 The facts here are uncontroverted. The Gadways were determined to be Medicaid eligible, subject to a $1,410.00 "spend-down" liability. Mrs. Gadway then became hospitalized, and the Gadways incurred a bill for $1,528.00 from the hospital, plus other medical bills for her care. Medicaid payment for the hospital and related bills was denied because based on the Medicaid rates, which are less than the private billing rates, the $1,410.00 "spend-down" obligation of the Gadways had not been met. Mr. Gadway then applied to the hospital to have the bill "written off" under its Hill-Burton obligation. His request was granted.

 Thereafter, the Gadways used a Medicaid card for other care totalling $2,046.36 during the six-month coverage period. At a subsequent Medicaid re-application, the local social service district discovered that Mr. Gadway's hospital bill had been "written off" under the Hill-Burton Act. Accordingly, the district determined that, since Mr. Gadway was no longer liable on the bill and had not paid it himself, he had never met his $1,410.00 spend-down obligation and that excess Medicaid benefits of $1,410.00 (out of the $2,046.36 total paid) had been provided. The local social services district then had Mr. Gadway sign a written acknowledgment of such $1,410.00 overpayment.

 Mr. Gadway contends that there was no overpayment, as a matter of law, since the hospital bill that was incurred and then "written off" under the Burton-Hill Act should have been counted toward his Medicaid "spend-down" liability.If Mr. Gadway is correct, then the acknowledgment of liability is invalid.

 Plaintiff moves for summary judgment determining that his "spend-down" liability was met and that defendants' policy to the contrary violates the Hill-Burton Act and the Social Security Act. Plaintiff also seeks a declaration that the overpayment agreement is a nullity, New York Social Services Law § 369.1(b) (permitting recovery only of Medicaid not "correctly paid"), and an order requiring that class members be notified and afforded the chance to have their benefits recomputed correctly. *fn4"


 This case requires that the Court construe two unrelated federal health care statutes so as to conform them to their Congressional intent. The first, the Hill-Burton Act, 42 U.S.C. §§ 291 et seq., was enacted in 1944 and predates the Medicaid program, 42 U.S.C. §§ 1396 et seq., by two decades. Among the chief beneficiaries sought to be served by the Act were persons unable to pay for such medical services. Cook v. Ochsner Foundation Hospital, 319 F. Supp. 603, 606 (E.D.La.1970). Indeed, the Act authorizes the Surgeon General to require assurances from hospitals that receive assistance under it that a reasonable volume of services be provided to "persons unable to pay therefor." 42 U.S.C. § 291c(e). See American Hospital Association v. Schweiker, 529 F. Supp. 1283, 1290 (N.D.Ill.1982) ("The real beneficiaries of the entire program [are] those unable to pay for health care themselves").

 The Medicaid program, 42 U.S.C. §§ 1396 et seq., enacted in 1965, P.L. 89-97, provides federal financial assistance to states that choose to reimburse certain costs of medical treatment for needy persons. Schweiker v. Gray Panthers, 453 U.S. 34, 36, 101 S. Ct. 2633, 2636, 69 L. Ed. 2d 460 (1981), citing Harris v. McRae, 448 U.S. 297, 301, 100 S. Ct. 2671, 2680, 65 L. Ed. 2d 784 (1980). Eligibility for Medicaid under the "medically needy" option is determined upon consideration of income and resources available to the applicant in accordance with standards prescribed by the Secretary of Health and Human Services. Id. The purpose of Medicaid is to assist the states in furnishing medical assistance to certain categories of people "whosee income and resources aree insufficient to meet the cost of necessary medical services." 42 U.S.C. § 1396. For the group of people involved, the "medically needy," Congress specified that a state's Medicaid plan must include "reasonable standards" that "(A) are consistent with the objectives of this subchapter" and (B) provide for taking into account only such income and resources as are . . . available to the applicant or recipient." 42 U.S.C. § 1396a(a)(17).

 While both statutes admittedly are similar in purpose, plaintiff argues that the construction applied by defendants completely undercuts the intent of the Hill-Burton Act to provide care for people unable to pay therefor as beneficiaries of the program, since defendants' construction results in every dollar "written off" under the Hill-Burton Act being counted to reduce the amount of "spend-down" Medicaid recipient's countable bills by an equal amount. *fn5" This Court agrees.

 The answer to how these two statutes should properly be construed, in addition to the public policy concern that Hill-Burton funds benefit their intended poor beneficiaries rather than Medicaid programs, is found in the various regulations and policies of the two programs. A Medicaid recipient is eligible to have the rest of his or her medical bills covered once bills in the "spend-down" amount have been "incurred." 42 C.F.R. § 435.2-(b)(3)(i); 42 C.F.R. § 435.851(c). Thus, the issue here is whether a ...

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