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DOE BY DOE v. PERALES

March 1, 1991

MARY DOE, BY HER POWER OF ATTORNEY JANE DOE; LUCY G.; AND CLARA S., BY HER POWER OF ATTORNEY RICHARD S., ON BEHALF OF THEMSELVES AND ALL PERSONS SIMILARLY SITUATED, PLAINTIFFS,
v.
CESAR PERALES, INDIVIDUALLY AND IN HIS CAPACITY AS COMMISSIONER OF THE NEW YORK STATE DEPARTMENT OF SOCIAL SERVICES; W. BURTON RICHARDSON, AS DIRECTOR OF THE MONROE COUNTY DEPARTMENT OF SOCIAL SERVICES; AND RITA B. OTTERBEIN, AS DIRECTOR OF THE WAYNE COUNTY DEPARTMENT OF SOCIAL SERVICES, DEFENDANTS.



The opinion of the court was delivered by: Larimer, District Judge.

DECISION AND ORDER

FACTS

Unlike most applications for temporary restraining orders under Federal Rule of Civil Procedure 65, the proceedings to date in this case have been on full notice to all parties. On February 26, 1991, the Court met at length with counsel in chambers, heard brief statements from all parties and set down a briefing schedule for argument on the preliminary injunction, which is scheduled for March 13, 1991. In addition, the Court has received written submissions from plaintiffs and defendant Perales, and has heard further oral argument from all parties in open court on March 1, 1991.

Plaintiffs urge that they will suffer irreparable harm from defendants' actions before the Court hears argument on the preliminary injunction. Thus, they have asked the Court to issue temporary relief, enjoining the state from implementing its decision until that time.

FACTS

The three named plaintiffs are all elderly residents of nursing homes in Rochester who are dependent on Medicaid for their care. The plaintiffs allege that in January, 1991 the New York State Department of Social Services ("NYSDSS") determined that Chapter 938, § 38 of the laws of 1990, enacted by the New York legislature on December 21, 1990, required a reduction of permissible exempt resource levels allowed to Medicaid recipients. Whereas, previously, individual recipients could maintain exempt resources of $3,350 in a given month, the new limit became $3,000.

Plaintiffs further contend that on January 28, 1991, NYSDSS first notified nursing home care providers of this change in a form letter. The letter briefly announced the change in the resource limit and directed the provider to distribute an enclosed form "notice" to residents of the facility to whom the new changes applied. The letter delegates to the provider the function of determining which residents should receive the notice on the basis of the provider's calculation of the residents' change in net available monthly income (NAMI) from January to February 1991.

Finally, both the form letter and enclosed notice for distribution to residents state that the reduction in resource limit was effective as of February 1, 1991. The notice for distribution informs the recipient that "excess resources," i.e., those exceeding the $3,000 limit would be applied toward the cost of the recipient's medical care.

DISCUSSION

A party is entitled to preliminary injunctive relief if it can show irreparable harm and a likelihood of success on the merits or sufficiently serious questions going to the merits to make them a fair ground for litigation with the balance of hardships tipping decidedly in its favor. See Plaza Health v. Perales, 878 F.2d 577 (2d Cir. 1989); Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70 (2d Cir. 1979).

Plaintiffs challenge defendants' actions on essentially four grounds. First, plaintiffs maintain that defendants have reduced Medicaid benefits without giving recipients prior notice and the opportunity for a fair hearing as mandated by federal regulations and federal caselaw. Second, it is alleged that defendants failed to give public notice, also required by federal regulation, of the proposed changes in the method for determining benefits. Third, plaintiffs assert that defendants have violated the Medicaid statute itself by failing to base the determination of plaintiffs' eligibility for benefits on the resources actually available to the recipient. Finally, plaintiffs allege that defendants have improperly delegated to the nursing facilities the responsibility for the administration and supervision of the Medicaid program.

A.  Notice

Because the regulations relied upon by the plaintiffs mandate the giving of notice to Medicaid recipients before benefits are suspended or reduced, it is necessary in the first instance to determine whether defendants' actions constitute a reduction in benefits. For purposes of this application, it seems clear that the state's proposed action constitutes a sufficient "reduction" of benefits to implicate the applicable federal regulations. To put it simply, Medicaid recipients whose resources in February exceeded the new limit must pay up to $350 more for that month's care than they would have had to pay under the previous limit. To give an example, a recipient owning $3500 in available resources in February would have paid $150 to the provider under the old limit, but now owes $500 to the facility under the new one.

The care provided costs more to the recipients under the new plan. The recipients' resources must be used to pay for care that was previously covered by Medicaid. The creation of a new resource limit has a direct and immediate impact on many recipients, forcing them to spend more of their meager assets on medical care and, therefore, in effect reducing the amount of care covered by Medicaid.

Assuming then that the state's action has caused a reduction in benefits, the question becomes whether plaintiffs are likely to succeed on their claims that defendants have violated federal law or federal regulations.

Plaintiffs cite three separate regulations in support of their claims that defendants have failed to give proper ...


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