adjustment for the required surplus contribution. Id. at PP 95-100.
On April 27, 1987, HRA reimbursed Bogsted in the amount of $ 558.69 in out-of-pocket expenses for home care provided to Henderson between December 19, 1985 and January 3, 1986. The amount represented a rate of $ 3.35 per hour, for twelve hours a day for a total of $ 40.20 per day. HRA subtracted Henderson's monthly surplus contribution for this period amounting to $ 84.51. Id. at P 101. Bogsted then requested a second fair hearing, and DSS issued a decision on December 18, 1987 holding that HRA was correct in limiting Bogsted's reimbursement to twelve hours per day of home care. However, DSS directed HRA to: (1) reevaluate the rate of payment and (2) recalculate the surplus income deduction. In a corrected fair hearing decision of May 9, 1988, DSS corrected an error in computation with respect to the surplus deduction but left the rest of the earlier fair hearing decision intact. Id. at P 102. Based on these determinations, Bogsted alleges that she has been reimbursed for only $ 574.79 of the $ 1874 in payments she paid from her own funds for home care erroneously denied her mother by Medicaid. Id. at PP 103-05.
3. Sheldon and Hazel Greenberg
Sheldon and Hazel Greenberg allege that they should be reimbursed in full for home care services they provided to Lillian Cohen, Mrs. Greenberg's mother, for the period from September 15, 1986 through February 3, 1987. After being discharged from the hospital on September 15, 1986, Cohen required home care assistance. She had applied for Medicaid and was approved on October 3, 1986 for twenty-four hour per day home care service on a sleep-in basis. Although Cohen was financially eligible to receive Medicaid as of November 1, 1986, HRA never provided the services to her. Instead, her daughter and son-in-law paid a provider $ 360 per week for the sleep-in home care services. On March 6, 1987 Cohen died from colon cancer. Id. at PP 106-13.
The Greenbergs allege that they spent $ 4834.26 for home care services for Cohen between November 1, 1986 and February 2, 1987. After a fair hearing held on March 4, 1987, DSS issued a decision dated July 9, 1987 in which it determined that HRA should provide reimbursement for home care services on a twenty-four hour per day, seven days per week, sleep-in basis for the period in question at the Medicaid rate. Therefore, HRA agreed to reimburse the Greenbergs for $ 3,310.80 for the home care services they provided Cohen from November 1, 1986 through February 2, 1987. This amount represented reimbursement at a rate of $ 3.35 per hour for twelve hours per day for a total daily rate of $ 40.20. HRA deducted $ 468 representing Cohen's monthly surplus income for the period in question. Id. at PP 114-16.
At the Greenberg's request, a second fair hearing was held on January 14, 1988 and resulted in a decision issued on February 22, 1988 directing HRA to explain its method of computation of the reimbursement amount and specifically the number of hours paid daily for sleep-in personnel care services and the dollar per hour. Id. at P 118. On May 19, 1988, HRA explained in a letter to DSS that agencies under contract with HRA to provide home care to Medicaid recipients only receive payment for twelve hours of services per day in sleep-in cases. When a recipient contracts with an independent contractor, the letter continues, HRA reimburses the recipient at a $ 3.35 per hour rate. Based on this information, DSS concluded that HRA's reimbursement to the Greenbergs complied with the fair hearing decision. Id. at PP 120-21.
Summary Judgment may be granted when the moving party establishes "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Rule 56(c), Fed. R. Civ. P.; Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); Rosen v. Thornburgh, 928 F.2d 528, 532 (2d Cir. 1991). In this action, there is no dispute as to the material facts.
At issue in this case is the proper construction of the corrective action regulation. Plaintiffs derive two inferences regarding the method and scope of corrective payments based on this regulation. First, according to plaintiffs, the corrective action regulation embodies an exception to the vendor payment principle. In other words, the regulation permits corrective payments, unlike most Medicaid payments, to be made directly to Medicaid recipients. Second, plaintiffs interpret the phrase "corrective payments," based on the structure and purpose of the Medicaid Act, to mean payments sufficient to correct agency errors. Therefore, plaintiffs assert that, in order to make the recipients whole, corrective payments should not be limited to the Medicaid rate but should entail full reimbursement.
Defendants contend that both of plaintiffs' inferences are unfounded. They argue that, insofar as the corrective action regulation fails to specify the recipient of corrective payments, the regulation must comply with Medicaid's general statutory requirement that payments be made to providers rather than recipients. In support of their interpretation, defendants point out that Congress expressly enumerated its only exception to the vendor payment principle in 42 U.S.C. § 1396d(a).
To interpret "corrective payments" in a way that construes the corrective action regulation as another statutory exception to the vendor payment principle would be violative of sovereign immunity.
Likewise, defendants argue that the regulation's silence concerning the amount of payments confirms that it adheres to Medicaid's statutory fee schedule authorizing payments only at the Medicaid rate. In the alternative, defendants maintain that even if the corrective action regulation constitutes a waiver of the vendor payment principle and authorizes direct payment to Medicaid recipients, there is still no basis for concluding that payments should exceed the Medicaid rate.
Claims under 42 U.S.C. § 1983
Before addressing the meaning and scope of the corrective action regulation, the Court considers HRA's allegation that plaintiffs are barred from bringing their claims under 42 U.S.C. § 1983. Section 1983 establishes a cause of action for "the deprivation of any rights, privileges, or immunities secured by the Constitution and laws" of the United States. Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 508, 110 L. Ed. 2d 455, 110 S. Ct. 2510 (1990) (quoting 42 U.S.C. § 1983).
It serves to remedy violations of federal statutes as well as the Constitution. Id. (citing Maine v. Thiboutot, 448 U.S. 1, 4, 65 L. Ed. 2d 555, 100 S. Ct. 2502 (1980)). There is a presumption in favor of the right to bring suit under § 1983. Chan v. City of New York, 1 F.3d 96; 1993 U.S. App. LEXIS 19196 at *19 (2d Cir. 1993).
However, a violation of a federal statute does not always give rise to a cause of action under § 1983. Id. When alleging a violation of a federal statute, a plaintiff is not allowed to sue under § 1983 if: (1) "the statute did not create enforceable rights, privileges, or immunities within the meaning of § 1983;" or (2) "Congress has foreclosed such enforcement of the statute in the enactment itself." Wright v. Roanoke Redevelopment and Housing Authority, 479 U.S. 418, 423, 93 L. Ed. 2d 781, 107 S. Ct. 766 (1987).
A. Enforceable Rights
1. The Existing Framework
In determining whether a statute creates a right, privilege or immunity enforceable under § 1983, the Court applies the three-part Wilder test. First, the Court ascertains whether "'the provision in question was intended to benefit the putative plaintiff."' Wilder v. Virginia Hosp. Ass'n, 496 U.S. at 509 (quoting Golden State Transit Corp. v. City of Los Angeles, 493 U.S. 103, 106, 107 L. Ed. 2d 420, 110 S. Ct. 444 (1989)). Second, even if the provision benefits the plaintiff, the Court can still hold that it does not create an enforceable right if "it reflects merely a 'congressional preference' for a certain kind of conduct rather than a binding obligation on the governmental unit." Id. (citing Pennhurst State School and Hospital v. Halderman, 451 U.S. 1, 19, 67 L. Ed. 2d 694, 101 S. Ct. 1531 (1981)). Third, the Court will also not enforce plaintiff's asserted interest, if it "is 'too vague and amorphous' such that it is 'beyond the competence of the judiciary to enforce."' Id. (quoting Golden State Transit Corp. v. City of Los Angeles, 493 U.S. at 108; Wright v. Roanoke Redevelopment and Housing Auth., 479 U.S. at 431-32).
In Wilder, the Supreme Court held that the Boren Amendment to the Medicaid Act created a right enforceable by health care providers under § 1983 to obtain "reasonable" reimbursement rates. 496 U.S. at 509-10. The Court reasoned that "there can be little doubt that the health care providers are the intended beneficiaries of the Boren Amendment. The provision establishes a system of reimbursement of providers and is phrased in terms benefitting health care providers . . . ." Id. at 510. The Boren Amendment, Wilder explained, "imposes a binding obligation on States participating in the Medicaid program to adopt reasonable and adequate rates" because it "is cast in mandatory rather than precatory terms: The State plan 'must ' 'provide for payment . . . of hospitals.'" Id. at 512 (emphasis in original) (quoting 42 U.S.C. § 1396a(a)(13)(A)). "'The Boren Amendment's language succinctly sets forth a congressional command, which is wholly uncharacteristic of a mere suggestion or nudge."' Id. (quoting West Virginia University Hospitals, Inc. v. Casey, 885 F.2d 11, 20 (3d Cir. 1989)). Finally, Wilder found that the obligation was not "too 'vague and amorphous'" inasmuch as "the statute and regulation set out factors which a state must consider in adopting its rates." 496 U.S. at 519.
More recently, in Suter v. Artist M., 118 L. Ed. 2d 1, 112 S. Ct. 1360 (1992), the Supreme Court did not explicitly apply the three-part Wilder test, but established certain guidelines to determine whether a § 1983 right of action exists.
Suter found that children who were state wards had no right to maintain a § 1983 action to enforce a federal statute that conditioned federal reimbursement for state foster care programs on HHS acceptance of a state plan containing a provision that "'reasonable efforts will be made (A) prior to the placement of a child in foster care, to prevent or eliminate the need for removal of the child from his home, and (B) to make it possible for the child to return to his home . . . .'" 112 S. Ct. at 1364 (quoting 42 U.S.C. § 671(a)(15)). There was no statutory right to maintain a § 1983 action because: (1) "no further statutory guidance is found as to how 'reasonable efforts' are to be measured," Id. at 1368; (2) the method of compliance was, "within broad limits, left up to the state," Id.; and (3) the statute provides other enforcement mechanisms and, therefore, the absence of a private remedy under § 1983 did not render the "reasonable efforts" clause ineffectual. Id. at 1368-69. In conclusion, Suter stated:
Careful examination of the language relied upon by respondents, in the context of the entire Act, leads us to conclude that the "reasonable efforts" language does not unambiguously confer an enforceable right upon the Act's beneficiaries. The term "reasonable efforts" in this context is at least as plausibly read to impose only a rather generalized duty on the State, to be enforced not by private individuals, but by the Secretary . . . .
Id. at 1370.
2. The Existing Framework as Applied to the Corrective Action Regulation
Applying the three-part Wilder test, and following the guidelines set out in Suter, this Court finds that plaintiffs have an enforceable right under § 1983. First, Medicaid recipients are the intended beneficiaries of the corrective action regulation. Medicaid, in general, aims to benefit its recipients whose income and resources are insufficient to meet the costs of necessary medical services. More specifically, the corrective action regulation provides a remedy to those recipients who have been declared eligible for corrective payments pursuant to the fair hearing provision. Defendants' argument that the corrective action regulation does not unambiguously confer a binding obligation to make direct payments to recipients who incurred costs as a result of agency error is beside the point. Whether or not payments are to be made directly to the recipients, it is they who benefit from the corrective action regulation.
Second, participating states are bound by the regulation to make corrective payments promptly. "Once a State voluntarily chooses to participate in Medicaid, the State must comply with the requirements of Title XIX and applicable regulations." Alexander v. Choate, 469 U.S. 287, 289 n.1, 83 L. Ed. 2d 661, 105 S. Ct. 712 (1985). Indeed, the regulation itself is not phrased in precatory but in mandatory terms -- "the agency must promptly make corrective payments." Moreover, the statutory provisions upon which plaintiffs rely are similarly phrased in mandatory language. For example, plaintiffs bring this action under a provision of the Medicaid statute requiring that "medical assistance made available to any individual . . . shall not be less in amount duration or scope than . . . to any other such individual." 42 U.S.C. § 1396a(a)(10)(B) (emphasis added). Although states have discretion in the design of their plans, they are not granted "broad limits" in complying with the corrective action regulation; corrective payments must be made "promptly."
Third, plaintiffs asserted interest is not too vague and amorphous that it is beyond the competence of the judiciary to enforce. Unlike in Suter, the right plaintiffs seek to claim under is not limited to "reasonable efforts." Plaintiffs seek their out-of-pocket expenditures, a definite and precise mathematical amount in the form of "corrective payments[ made] retroactive to the date an incorrect action was taken." Thus, plaintiffs have met the three-part Wilder test and have an enforceable right within the meaning of 42 U.S.C. § 1983 to bring a claim under the Medicaid statute.
B. Congressional Foreclosure
1. The Existing Framework
Even where there is a clearly conferred federal right, a § 1983 suit is not available where Congress has expressed its intention to foreclose such a remedy. Yet, courts should not "'lightly conclude that Congress intended to preclude reliance on § 1983 as a remedy for the deprivation of a federally secured right."' Wilder v. Virginia Hosp. Ass'n, 496 U.S. at 520 (quoting Wright v. Roanoke Redevelopment & Housing Auth., 479 U.S. at 423-24 (quoting Smith v. Robinson, 468 U.S. 992, 1012, 82 L. Ed. 2d 746, 104 S. Ct. 3457 (1984))).
Indeed, defendants have a heavy burden to demonstrate "'by express provision or other specific evidence from the statute itself'" that Congress intended to foreclose private enforcement. 496 U.S. at 520-21 (quoting Wright v. Roanoke, 479 U.S. at 423). "Other specific evidence" may include the provision of a scheme of remedial devices that is "'sufficiently comprehensive . . . to demonstrate congressional intent to preclude the remedy of suits under § 1983."' Id. (quoting Middlesex County Sewage Auth. v. National Sea Clammers Ass'n, 453 U.S. 1, 20, 69 L. Ed. 2d 435, 101 S. Ct. 2615 (1981)). However, "the availability of administrative mechanisms to protect plaintiff's interests is not necessarily sufficient to demonstrate that Congress intended to foreclose a § 1983 remedy. Rather the statutory framework must be such that 'allowing a plaintiff' to bring a § 1983 action 'would be inconsistent with Congress' carefully tailored scheme."' Golden State Transit Corp. v. City of Los Angeles, 493 U.S. at 106-07 (citations omitted). As this Court recently noted, the "sufficiently comprehensive" test has rarely been met. Chan v. City of New York, 803 F. Supp. 710, 726 (S.D.N.Y. 1992), aff'd, 1 F.3d 96 (2d Cir. 1993).
2. The Existing Framework as Applied to the Corrective Action Regulation
Defendants argue that plaintiffs are foreclosed from suing under § 1983, because they may challenge reimbursement decisions at an administrative "fair hearing" that provides a remedy amounting to a "comprehensive enforcement mechanism." This Court disagrees. In Wilder, the Court explicitly found that the administrative scheme established pursuant to the Boren Amendment to the Medicaid Act could not be considered sufficiently comprehensive to demonstrate a congressional intent to preclude § 1983 relief. Likewise, in this action, the right to a fair hearing does not furnish plaintiffs with an elaborate and comprehensive enforcement mechanism. The fair hearing does not provide for class-wide relief. In addition, the fair hearing cannot reimburse recipients for actual costs incurred as a result of agency error because New York's reimbursement regulation is directly to the contrary.
Defendants' argument that New York allows its fair hearing decisions to be challenged through an Article 78 proceeding is similarly misplaced. "The availability of state administrative procedures . . . does not foreclose resort to § 1983." Wilder v. Virginia Hosp. Ass'n, 496 U.S. at 523. Moreover, § 1983 relief is not foreclosed by the failure to exhaust state administrative and judicial remedies. See Monroe v. Pape, 365 U.S. 167, 183, 5 L. Ed. 2d 492, 81 S. Ct. 473 (1961) ("The federal remedy is supplementary to the state remedy, and the latter need not be first sought and refused before the federal one is invoked."). Therefore, defendants have failed to meet their burden of demonstrating that Congress has foreclosed plaintiffs from bringing a § 1983 action.
Corrective Payments: To Whom?
The Court must now determine whether the corrective action regulation is an exception to the vendor payment principle. Although the federal regulation does not specify to whom payments should be made, New York's reimbursement regulation codifies defendants' policy of offering direct reimbursement to recipients who have incurred expenses as a result of agency error. This policy originated in an October 15, 1980 memorandum, issued by HCFA's Director of Bureau Program Policy, Robert D. O'Connor, outlining when Medicaid payments can be made directly to recipients as an exception to the vendor payment principle (the "O'Connor memo"). Plaintiff's 3(g) Statement Ex H. The O'Connor memo was written during the pendency of a federal class action, Chenet v. Department of Public Welfare et al., Civ. No. 78-848-F (D. Mass.), in which the issue arose whether retroactive payments may be made directly to recipients, who were improperly denied Medicaid benefits. It announced that:
Upon review of this issue, we have determined that States may make direct reimbursement to individuals who paid for services after an erroneous determination of ineligibility. which is reversed on appeal. The purpose of this exception to the vendor payment principle is to correct the inequitable situation that results from the erroneous determination made by the agency. The intent is to put individuals who acquire eligibility on appeal on the same basis as those whose eligibility was correctly determined in the first place.