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