Appeal by defendants, the Commissioner of the New York State Department of Social Services and the Director of the Monroe County Department of Social Services, from a judgment of the District Court for the Western District of New York, Michael A. Telesca, Judge, holding that New York's practice of requiring AFCD-related medically needy applicants for and recipients of Medicaid to compute the "spend-down" required for coverage of inpatient hospital expenses on the basis of their projected income over six months, in contrast to the one-month income period used in testing eligibility for AFDC, violates 42 U.S.C. § 1396a(a)(10)(C)(i)(III) and § 1396a(a)(17). Reversed, with instructions to grant defendants' motion for summary judgment.
Before: FRIENDLY, OAKES and WINTER, Circuit Judges.
This appeal from a judgment of the District Court for the Western District of New York relating to the Medicaid program raises close questions, described below, which are of great concern to the "medically needy" on the one hand, and the State of New York*fn1 and the United States on the other.
The Proceedings Below and in this Court
This action was brought by Gloria DeJesus, a citizen of the United States and a resident of Monroe County, New York, against Cesar Perales, Commissioner of the New York State Department of Social Services, and W. Burton Richardson, Director of the Monroe County Department of Social Services.
The statutory background is as follows: Medicaid, enacted in 1965 as Title XIX of the Social Security Act (the Act), 42 U.S.C. § 1396 et seq. (1982),*fn2 is a cooperative federal/state cost-sharing program designed to enable participating states to furnish medical assistance to persons whose income and resources are insufficient to meet the costs of necessary medical care and services. There are two sets of eligible persons. The "categorically needy" are persons eligible for cash assistance under two federal programs: Aid to Families with Dependent Children (AFDC), § 601 et seq., and Supplemental Security Income (SSI), § 1381 et seq.*fn3 Participating states must provide Medicaid coverage to the categorically needy, § 1396a(a)(10)(A). The "medically needy" are persons who meet the non-financial eligibility requirements for cash assistance under AFDC or SSI, but whose income or resources exceed the financial eligibility standards of the relevant program. This appeal concerns persons who, but for income or resources, would qualify for AFDC; they are known as "AFDC-related medically needy." Participating states may, at their option, provide Medicaid coverage to the medically needy, § 1396a(a)(10)(C). States that do so must establish "reasonable" Medicaid income standards*fn4 for testing financial eligibility and must use "flexibility" in the application of these standards by allowing medically needy persons whose income exceeds the standard to "spend down" their excess income by incurring medical expenses*fn5 equal to or greater than the excess, § 1396a(a)(17). Persons who meet their spend-down for a given period are eligible to receive Medicaid for the remainder of that period without any further spend-down.
New York joined the Medicaid program in 1966, authorizing the New York State Department of Social Services (NYSDSS) to establish a Medicaid plan covering both the categorically and the medically needy, 1966 N.Y. Laws, ch. 256, as amended N.Y. Soc. Serv. Law § 363 et seq. Defendants submitted below an affidavit of Richard T. Cody, Assistant Commissioner in the Division of Medical Assistance of NYSDSS, which supplied information, much of it uncontested, about the operation of Medicaid in New York. To determine the amount that an AFDC-related medically needy person is required to spend down before becoming entitled to Medicaid coverage of inpatient hospital expenses, NYSDSS computes the person's monthly excess income prospectively for a period of six months. 18 New York Code Rules & Regulations § 360.5(d)(1) (1985) [hereafter N.Y.C.R.R.]. If the person's prospective income changes during the spend-down period, the spend-down is adjusted to reflect the actual amount of income available to him. After the person has incurred medical expenses equal to his spend-down, he will be eligible to receive Medicaid for the remainder of the spend-down period. In contrast, NYSDSS determines financial eligibility for AFDC by measuring a person's income for a single month, § 602(a)(13)(A)(i). If the person qualifies for AFDC in a given month, he is categorically needy and is entitled to full Medicaid coverage of all medical expenses, including inpatient hospital expenses, incurred in that month.
The complaint alleges that Mrs. DeJesus' family consists of her husband and his three minor children. Their gross income, consisting of her husband's workman's compensation and social security disability benefits, amounted to $729.77 per month, as compared with New York's income standards for Medicaid and for cash assistance in 1984 of $575 and $578.93 per month, respectively. Since NYSDSS must use the higher of the two standards in determining eligibility for Medicaid, 18 N.Y.C.R.R. § 360.5(c)(7), it calculated the family's excess income to be $151 per month and their spend-down for inpatient hospital care to be six times this, or $906. The complaint further alleges that in October 1984 Mrs. DeJesus and one of the children were found to require surgery, apparently of non-emergency character, but that the operations had to be canceled because the family was unable to pay a preadmission deposit equal to their entire spend-down of $906. Later, after being informed that New York's six-month spend-down requirement would be challenged in the courts, another hospital agreed to perform the operation on plaintiff upon payment of a preadmission deposit equal to her spend-down for one month, or $151.
This action was brought as a class action on behalf of Mrs. DeJesus and "a class consisting of all AFDC-related medically needy applicants for or recipients of Medicaid who have been, are being or will be subjected to defendants' six-month spend-down requirements in order to qualify or requalify for Medicaid benefits" for inpatient hospital care. Plaintiff alleges that New York's six-month spend-down requirement violates § 1396a(a)(10)(C)(i)(III), which provides that a state's plan to furnish Medicaid to the medically needy must set forth
the single standard to be employed in determining income and resource eligibility . . . and the methodology to be employed in determining such eligibility, . . . which shall be the same methodology which would be employed under . . . the appropriate State [cash assistance] plan . . . to which such group is most closely categorically related . . .,
and § 1396a(a)(17), which provides that the plan must
include reasonable standards (which shall be comparable for all groups . . .) for determining eligibility for and the extent of medical assistance under the plan which (A) are consistent with the objectives of this subchapter, (B) provide for taking into account only such income and resources as are, as determined in accordance with standards prescribed by the Secretary, available to the applicant or recipient . . . [and] (C) provide for reasonable evaluation of any such income or resources . . . .
After answer the parties stipulated to class certification. Both sides then moved for summary judgment. Plaintiff's motion was supported by affidavits of her attorney and herself, which added nothing to the complaint except that Mrs. DeJesus had agreed to pay the hospital performing the surgery the balance of $755 on her six-month spend-down if the court did not order payment by Medicaid.
Defendants' motion was supported by the Cody affidavit mentioned above. Cody averred that his colleagues in the Division of Medical Assistance had not received complaints from the medically needy that they were unable to receive necessary hospital care because of the computation of the spend-down, and that in 1984 approximately $175,000,000 had been spent in providing hospital care to the AFDC-related medically needy. He referred to § 2805-b of New York's Public Health Law, which requires every general hospital to admit any person in need of immediate hospitalization with all convenient speed and not to question such person or any member of his or her family concerning insurance, credit or payment of charges before admission. He ...