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Camacho v. Perales

January 24, 1986

ENRIQUE CAMACHO, GLADYS CAMACHO, AND LEONARDA TITONE, INDIVIDUALLY AND ON BEHALF OF ALL OTHER PERSONS SIMILARLY SITUATED, PLAINTIFFS, AIDA FIGUEROA, AS ADMINISTRATRIX OF THE ESTATE OF WILLIAM FIGUEROA, INTERVENOR-PLAINTIFF-APPELLANT, WILLIAM BOYD, INDIVIDUALLY AND ON BEHALF OF ALL OTHER PERSONS SIMILARLY SITUATED, INTEVENOR-PLAINTIFF-APPELLANT,
v.
CESAR PERALES, COMMISSIONER OF THE NEW YORK STATE DEPARTMENT OF SOCIAL SERVICES, JAMES KRAUSKOPF, ADMINISTRATOR OF THE NEW YORK CITY HUMAN RESOURCES ADMINISTRATION AND COMMISSIONER OF THE NEW YORK CITY DEPARTMENT OF SOCIAL SERVICES, AND SHIRLEY HARVEY-COOK, COMMISSIONER OF THE ORANGE COUNTY DEPARTMENT OF SOCIAL SERVICES, DEFENDANTS-APPELLEES



Appeal from a judgment of the United States District Court for the Southern District of New York, John E. Sprizzo, Judge, dismissing complaints alleging that State's method of determining Medicaid eligibility of "medically needy" aged, blind, or disabled persons who live with spouses who are not aged, blind, or disabled violates the "same methodology" requirement of 42 U.S.C. § 1396a(a)(10)(C)(i)(III). Affirmed in part, reversed and remanded in part.

Author: Kearse

Before: MESKILL, KEARSE, and WINTER, Circuit Judges.

KEARSE, Circuit Judge:

Intervenors-plaintiffs Aida Figueroa and William Boyd ("intervenors") appeal from a final judgment of the United States District Court for the Southern District of New York, John E. Sprizzo, Judge, dismissing their class action complaints challenging the method by which defendants Commission of the New York State Department of Social Services, et al. (collectively the "State"), calculate the Medicaid eligibility of aged, blind, or disabled persons who are not entitled, because of their financial status, to receive Supplemental SEcurity Income ("SSI") benefits and who live with spouses who are not aged, blind, or disabled within the meaning of the SSI program, 42 U.S.C. §§ 1381-1383c (1982) ("ineligible spouses"). Intervenors contended that the State's method violates 42 U.S.C. § 1396a(a) (1982), which requires that states choosing to provide Medicaid to medically needy aged, blind, or disabled persons must employ the "same methodology" in calculating Medicaid eligibility that the federal government employs in determining SSI eligibility. They sought principally (A) a judgment declaring (1) that the State's inclusion of certain income of the ineligible spouse in the computation of the applicant's financial eligibility violates the same-methodology requirement, and (2) that the State must base all of its income allowance calculations on the number of family members in the household; and (B) an order requiring defendants to reimburse all members of the class for unpaid Medicaid benefits that would have been payable if the requested methodology had been used. We conclude (1) that the State's present methodology fails to conform to the SSI methodology in at least two respects, including the respect challenged by intervenors and the respect that intervenors seek to perpetuate. Since we decline to order the perpetuation of a methodology that in any respect violates the same-methodology requirement of federal law, we affirm in part, reverse in part, and remand for further proceedings.

I. BACKGROUND

Under Medicaid, which is a federal and state cost-sharing program through which participating states provide medical assistance to persons whose income and resources are insufficient to cover the costs of necessary medical care, there are two classes of eligible persons: the "categorically needy" and the "medically needy." The categorically needy, see 42 C.F.R. § 435.1(b)(ii) (1984), are those persons eligible for cash assistance under either the Aid of Families with Dependent Children ("AFDC") program, 42 U.S.C. § 601 et seq. (1982), or the SSI program for persons who have reached the age of 65 or who are blind or disabled, id. § 1381 et seq. The medically needy, see 42 C.F.R. § 435.1(b)(3)(i), are those persons who (a) meet the nonfinancial eligibility requirements for cash assistance under AFDC or SSI, and (b) have income or resources that exceed the financial eligibility standards of the relevant program but that are considered insufficient to pay for necessary medical care. In a state that has elected to provide Medicaid to medically needy persons, such a person becomes eligible for Medicaid if, during a given period, he incurs medical expenses in an amount equal to or greater than the amount by which his income exceeds the "medically needy income standard" set by the state (termed a "spend-down"). See 42 U.S.C. § 1396a(a)(17); 42 C.F.R. §§ 435.831(c) and (d) (1984); N.Y. Admin. Code tit. 18, § 360.5(d) (1985).

Intervenor Boyd is a disabled Medicaid applicant who met all of the requirements for SSI except those as to level of income or resources. Intervenor Figueroa is administratrix of the estate of her late husband, William Figueroa, who was, like Boyd, an SSI-related medically needy Medicaid applicant. New York State provides Medicaid to persons who fall within the definition of medically needy and who "spend down" to the State's medically needy income level. Both intervenors challenge the methodology used by State and local officials to calculate, with respect to the SSI-related medically needy, the level of their income or resources for Medicaid eligibility purposes when they live with spouses who are not eligible for SSI.

A. The Statutory and Regulatory Background of SSI and Medicaid

States that choose to participate in the Medicaid program are required to provide Medicaid to the categorically needy, 42 U.S.C. § 1396a(a)(10)(A)(i), and may, in addition, elect to provide Medicaid to the medically needy, id. § 1396a(a)(10)(C). As a state that has chosen to provide Medicaid to the medically needy, New York is required to include in its Medicaid plan "reasonable standards (which shall be comparable for all groups . . .) for determining eligibility for . . . medical assistance under the plan . . . ." Id. § 1396a(a)(17). A regulation promulgated by the Secretary of the Department of Health and Human Services ("Secretary", "Department") in 1981 provides that the income standard to be used must, in addition, be (a) based on family size; [and] (b) uniform for all individuals in a covered group." 42 C.F.R. § 435.811 (1984). The statutory section principally at issue here, 42 U.S.C. § 1396a(a)(10)(C)(i)(III), requires the State to use, in determining the Medicaid eligibility of the medically needy aged, blind, or disabled, the "same methodology" that is used to determine financial eligibility in the SSI program. That section provides, insofar as is pertinent to this case, as follows:

the [State's] plan must include a description of . . . (III) the single standard to be employed in determining income and resource eligibility [for the SSI-related medically needy] and the methodology to be employed in determining such eligibility, which shall be the same methodology which would be employed under the supplemental security income program in the case of groups consisting of aged, blind, or disabled individuals in a State in which such program is in effect . . . .

1. The SSI Methodology

Under the federal statutory scheme, the maximum benefits payable to an SSI-eligible individual are set at a certain rate; if both husband and wife are SSI-eligible and are living together, the maximum benefits payable to the couple are set at a higher rate. At the time his action was commenced, the Federal benefit rates for eligible individuals and eligible couples were, respectively, $284.30 and $426.40 per month. If the SSI applicant is aged, blind, or disabled and the spouse is not, the following methodology is used to determine the financial eligibility of the applicant.

In the calculation of the applicant's income, the ineligible spouse's income minus certain exclusions and deductions (hereinafter "pertinent income" or "pertinent amount") may be "deemed" available to the applicant and thereby includable in the applicant's "countable income." See 20 C.F.R. §§ 416.1161 and 416.1161a (1985). If the pertinent amount of the spouse's income is "not more than one-half of the Federal benefit rate for an eligible individual," id. § 416.1163(c)(1), no portion of the spouse's income is deemed available to the applicant or included in the applicant's countable income. The applicant's countable income is then subtracted from the Federal benefit rate for an eligible individual to determine whether the applicant is eligible for SSI benefits and, if so, the amount to which he is entitled.

If the pertinent amount of the spouse's income is more than half the Federal benefit rate for an eligible individual, the entire pertinent amount is deemed available to the applicant and is included in the applicant's countable income. Id. § 416.1163(c)(2). The applicant's eligibility for SSI benefits is then determined by subtracting the total amount of his countable income, including the amount deemed available from his spouse, from the Federal benefit rate for an eligible couple. The logic underlying the choice of which Federal benefit rate is to be the minuend of the equation is that an applicant living with an ineligible spouse is treated as a two-person household only if income of the ineligible spouse is deemed available to the applicant. If income of the ineligible spouse is not deemed available to the applicant, the applicant, despite living with an ineligible spouse, is treated as an individual.

Finally, Department regulations provide that the SSI benefits awarded are to be the lesser of (a) the amount computed by subtracting the applicant's countable income including the ineligible spouse's pertinent income if it is deemed available to the applicant under the above "deeming" rules, from the Federal benefit rate for a couple or (b) the amount arrived at by subtracting only the applicant's countable income from the Federal benefit rate for an individual. Id. § 416.1163(c)(3). Thus, if the ineligible spouse's pertinent income is more than one-half the Federal benefit rate for an individual and therefore is deemed available to the applicant, SSI methodology compares (a) the difference between the Federal benefit rate for an eligible couple and the applicant's countable income including the spouse's pertinent amount, to (b) the difference between the Federal benefit rate for an eligible individual and the applicant's countable income with nothing deemed available from the spouse; whichever difference is smaller determines the applicant's eligibility for SSI benefits and the amount of those benefits, if any.

2. The State's Present Methodology

The State has set financial thresholds ("medically needy income standards") for Medicaid eligibility for individuals and for households of more than one. When this action was commenced, the State's medically needy income standards for one- and two-person households were, respectively, $350 and $509 per month. Under the State's present method of determining the Medicaid eligibility of the SSI-related medically needy, the pertinent monthly income of the ineligible spouse is automatically deemed available to the applicant even when that income is not more than half the monthly Federal benefit rate for an eligible individual, and it is automatically included in the countable income of the applicant. The total is then subtracted from the State's per-month medically needy income income standard for a household of two persons. The remainder determines the amount that the applicant must incur in medical expenses in a given period (the spend-down amount) before he becomes eligible for Medicaid; the amount of his Medicaid benefit will be the amount by which his relevant medical expenses under the Medicaid scheme exceed the spend-down amount in the relevant period.

The State's methodology thus differs from the SSI methodology in several respects. First, the State deems the pertinent income of the ineligible spouse available to the applicant regardless of its amount, whereas SSI methodology would deem the spouse's pertinent income available only if that income were more than one-half of the Federal benefit rate for an individual. Second, the State methodology uses as the minuend of its equation the income level for a household of two even where no spousal income is deemed available to the applicant, a situation in which SSI methodology would use the individual level as the minuend. And finally, where even SSI methodology would deem spousal income available to the applicant, the State makes no effort, in accordance with SSI methodology, to compare (a) the difference between the State's medically needy income level for a household of two and the applicant's countable income including the spouse's pertinent amount, to (b) the difference between the medically needy income level for a household of one and the applicant's countable income with nothing deemed available from the spouse, in order to allow the smaller difference to govern the applicant's eligibility for Medicaid benefits.

B. The State's Prior Methodology and the Proceedings Below

Prior to August 1982, the State had calculated the Medicaid eligibility of an SSI-related medically needy applicant living with an ineligible spouse by subtracting only the applicant's own countable income from the State's medically needy income standard for a two-person household. In 1982, the State proposed to change its methodology to conform more strictly to the SSI methodology, in that (1) the State would not deem available to the applicant the pertinent income of an ineligible spouse when that income was not more than one-half of the Federal benefit rate for an eligible individual, and (2) whenever the ineligible spouse's income was not deemed available to the applicant, the State would compute Medicaid eligibility by subtracting the applicant's countable income from the income standard for a one-person household.

The present action was initiated in July 1982 by Enrique Camacho and Leonarda Titone, two SSI-related medically needy Medicaid recipients, and Gladys Camacho, the ineligible spouse of Enrique Camacho, to challenge, inter alia, the State's proposed change in methodology. Plaintiffs obtained a temporary restraining order against implementation of the proposed new methodology, and in or about November 1982, the State agreed not to implement the proposed change, and it adopted instead its present methodology. The claims of the original plaintiffs thereby became moot.

In December 1982 and January 1983, William Figueroa and Boyd, respectively, intervened, challenging one facet of the State's present methodology. Intervenors sued as representatives of a class, eventually certified by the district court as consisting of

all persons who have been since August 1, 1982, are, or may in the future be, applicants for or recipients of Medicaid in New York who are aged, or who are blind or disabled adults, whose spouses are neither aged, blind nor disabled, where the countable income of the non-aged, blind or disabled spouse is too low to be deemed available to the applicant or recipient under Supplemental Security Income regulations.

Intervenors contended that the present methodology's failure to exclude the ineligible spouse's income from the applicant's countable income when the spouse's income would be excluded in calculating SSI eligibility violated the federal statute's same-methodology requirement, and they sought a declaratory judgment to that effect. They sought to retain, however, the facet of the present methodology which uses the income standard for a household of two as the minuend in the Medicaid equation where the SSI methodology would use as its minuend the benefit rate for an individual. Thus, intervenors requested a judgment declaring "that income allowances for SSI-related Medicaid applicants and recipients must be based on the number of family members in a household and family members for whom they are legally responsible." They also requested, inter alia, an order requiring defendants to reimburse members of the class for unpaid Medicaid benefits that would have been payable if the methodology requested by intervenors had been used.

Recognizing that the State's new methodology deemed the ineligible spouse's pertinent income available to the applicant even when that income was so low that it would not be deemed available in determining SSI-eligibility, the district court granted intervenors' motion for a preliminary injunction against use of the "deeming" facet of the present methodology, enjoining the State from

a) Counting the income of a non-SSI-related spouse in determining the Medicaid eligibility of an SSI-related Medicaid applicant or recipient where the non-SSI-related spouse has countable income of $142.10 per month or less; . . . .

The court also granted intervenors' motion to prohibit the State from modifying the household-size facet of its present methodology, enjoining the State from

b) Changing current state policy by reducing income allowances for SSI-related Medicaid applicants and recipients to the one-person household level where a non-SSI-related spouse living with an SSI-related Medicaid applicant or recipient has countable income of $142.10 per month or less unless 60 days notice of such proposed change is given to counsel for plaintiffs herein . . . .

Apparently agreeing that no material facts were in dispute, intervenors and all defendants subsequently moved for summary judgment. The court denied these motions from the bench, indicating that it found ...


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