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In re County of St Lawrence

Supreme Court of New York, Third Department

May 17, 2012

In the Matter of COUNTY OF ST LAWRENCE, Respondent,
v.
NIRAV R. SHAH, as Commissioner of Health, et al., Appellants.

Calendar Date: March 23, 2012

Eric T. Schneiderman, Attorney General, Albany (Victor Paladino of counsel), for appellants.

Whiteman, Osterman & Hanna, L.L.P., Albany (Christopher E. Buckey of counsel), for respondent.

Before: Rose, J.P., Spain, Malone Jr., Kavanagh and McCarthy, JJ.

MEMORANDUM AND ORDER

Kavanagh, J.

Appeal from a judgment of the Supreme Court (Demarest, J.), entered August 22, 2011 in St. Lawrence County, which granted petitioner's application, in a proceeding pursuant to CPLR article 78, to annul a determination of respondent Commissioner of Health disallowing petitioner's claims for Medicaid reimbursements.

As of December 2010, petitioner had submitted three claims to respondent Department of Health (hereinafter DOH) seeking reimbursement for certain payments, known as overburden expenditures, that it made to the state for Medicaid services provided to certain mentally disabled recipients (see Social Services Law § 368-a [1] [h]; Matter of Spano v Novello, 13 A.D.3d 1006, 1007-1008 [2004], lv denied 4 N.Y.3d 819 [2005]). DOH rejected each of these claims because it interpreted a 2010 amendment to the Medicaid Cap Statute (see L 2005, ch 58, part C, as amended by L 2006, ch 57, part A, § 60) as repealing Social Services Law § 368-a (1) (h) and thereby relieving it of the obligation to reimburse petitioner for these overburden expenditures (see L 2010, ch 109, part B, § 24). In response to this determination, petitioner commenced this CPLR article 78 proceeding seeking payment of these claims, all of which accrued prior to January 1, 2006 and totaled $28, 716. Supreme Court granted the petition and ordered respondents to reimburse petitioner for these expenditures, and this appeal by respondents ensued.

Medicaid is a government-funded health program that provides medical services to individuals with low incomes and limited resources (see Matter of Nazareth Home of the Franciscan Sisters v Novello, 7 N.Y.3d 538, 542 [2006]). In New York, it is administered by DOH and is funded by subsidies received from federal, state and local governments (see Social Services Law § 368-a [1] [d]). By 1982, the expense born by counties in New York for their share of the cost of Medicaid had significantly increased due, in part, to the deinstitutionalization of certain mentally disabled persons and the medical services they required upon being relocated in the community (see Matter of Krauskopf v Perales, 139 A.D.2d 147, 148 [1988], affd 74 N.Y.2d 730 [1989]). Recognizing that counties needed financial assistance to meet this obligation, the Legislature enacted the Human Service Overburden Law in 1982, thus spawning the term overburden expenditures. This statute made the state fully responsible for each county's share of Medicaid expenditures incurred in providing medical services to these mentally disabled recipients and required the state to reimburse the county for any payments it made for these overburden expenditures (see Social Services Law § 368-a [1] [h]). It is this obligation imposed on the state by this statute — the full payment of the nonfederal share of medical services provided to certain mentally disabled individuals — and how it has been affected by a 2010 amendment to the Medicaid Cap Statute that is at issue in this proceeding (see L 2010, ch 109, part B, § 24).

In 2006, the Medicaid Cap Statute was enacted for the singular purpose of providing counties with relief from the financial burdens imposed upon them by Medicaid. Before the Medicaid Cap Statute was enacted, the federal government paid 50% of the medical costs incurred under Medicaid, while the state and counties, as a general rule, each paid a 25% share of these expenses. The Medicaid Cap Statute altered this funding formula by, in effect, limiting each county's liability to the net Medicaid expenditures it made in 2005 with adjustments for inflation and other so-called trend factors (see L 2005, ch 58, part C, § 1) [1]. After the cap went into effect, the state took the position that it was no longer obligated to reimburse counties for overburden expenditures incurred prior to January 1, 2006. Petitioner, and others, challenged the denial of these claims in CPLR article 78 proceedings, and numerous courts declared that the state was still obligated to reimburse the counties for these expenditures that occurred prior to January 1, 2006, or before the effective date of the Medicaid Cap Statute [2] (see Matter of County of St. Lawrence v Daines, 81 A.D.3d 212');">81 A.D.3d 212, 214-215 [2011], lv denied 17 N.Y.3d 703 [2011]; Matter of County of Herkimer v Daines, 60 A.D.3d 1456, 1457 [2009], lv denied 13 N.Y.3d 707 [2009]; Matter of County of Niagara v Daines, 60 A.D.3d 1460, 1461 [2009], lv denied 13 N.Y.3d 708 [2009]).

While litigation was pending, the Legislature, in 2010, amended the Medicaid Cap Statute to provide that "the state-local [s]ocial [s]ervice district relative percentages of the non- federal share of medical assistance expenditures incurred prior to January 1, 2006 shall not be subject to adjustment on or after July 1, 2006" (L 2010, ch 109, part B, § 40) [3]. In effect, this amendment locked in a county's percentage share for the cost of Medicaid services at the figure calculated under the cap and prohibited any adjustment in that percentage after July 1, 2006 [4]. After this amendment took effect, respondents once again claimed that the state was no longer required to reimburse counties for these overburden expenditures because such a refund would result in an alteration of each county's "percentage of the non-federal share" for Medicaid expenditures made prior to January 1, 2006 in violation of this statute. Distilled to its essence, respondents' claim is that if a county was given a refund for these expenditures, it would, in effect, have paid less for Medicaid prior to January 1, 2006 and its Medicaid liability as calculated under the cap would thereby be reduced. For reasons that follow, we do not agree, and affirm the judgment of Supreme Court requiring respondents to reimburse petitioner for overburden expenditures that it incurred prior to January 1, 2006.

We begin by noting, as respondents concede, that the 2010 amendment — and its legislative history — make no reference to the state's obligation to reimburse counties for overburden expenditures that accrued prior to January 1, 2006 or the court decisions declaring that this obligation was not altered or affected by the Medicaid Cap Statute. Moreover, the amendment, by its terms, does not explicitly repeal Social Services Law § 368-a (1) (h) or the regulations promulgated by DOH to implement it (see 18 NYCRR 601 et seq.). In the absence of such a clear and unequivocal indication by the Legislature that it intended to repeal Social Services Law § 368-a (1) (h), respondents argue that the 2010 amendment, by implication, effectively invalidated that statute and relieved the state of the obligation to pay overburden expenditures because it prohibits, after July 1, 2006, any adjustment of the percentage share of what a county pays for Medicaid under the cap.

Initially, we note that "[r]epeal by implication is distinctly not favored in the law[, ]" and a court "should not lightly infer that the Legislature has repealed one if its own enactments when it has failed to do so expressly" (Alweis v Evans, 69 N.Y.2d 199');">69 N.Y.2d 199, 204 [1987]). Here, respondents have presented no rationale for why the Legislature, if it intended to repeal Social Services Law § 368-a (1) (h) and relieve the state of the underlying obligation, did not do so explicitly either in the 2010 amendment or in the legislative history that preceded its enactment. The fact that the Legislature did not speak to this issue is, in our view, made even more telling given the financial implications that would necessarily result from such a finding. All agree that much more is at stake in this proceeding than the $28, 716 sought by petitioner in its petition. As respondents' expert acknowledged, if all the counties and social service districts in this state submitted "such reimbursement claims, the total amount of reimbursement would dwarf the amount... claimed to date." In our view, it makes no sense that the Legislature would enact such an amendment intending to repeal an existing statute knowing that to do so would have profound financial consequences for all involved and not announce that intention at some point in the legislative process.

We also reject respondents' position that the 2010 amendment and Social Services Law § 368-a (1) (h) as they relate to overburden expenditures are inherently inconsistent and cannot coexist with each other. In that regard, "a statute is not deemed impliedly modified by a later enactment 'unless the two are in such conflict that both cannot be given effect. If by any fair construction, a reasonable field of operation can be found for [both] statutes, that construction should be adopted'" (Matter of Consolidated Edison Co. of N.Y. v Department of Envtl. Conservation, 71 N.Y.2d 186, 195 [1988], quoting People v Newman, 32 N.Y.2d 379, 390 [1973], cert denied 414 U.S. 1163 [1974]; accord Matter of Independence Party State Comm. v New York State Bd. of Elections, 297 A.D.2d 459');">297 A.D.2d 459, 461 [2002]). This is especially true in cases involving statutes relating to the same subject matter, as these must be "'read together and applied harmoniously and consistently'" (Matter of Independence Party State Comm. v New York State Bd. of Elections, 297 A.D.2d at 461, quoting Alweis v Evans, 69 N.Y.2d at 204; see Matter of M.B., 6 N.Y.3d 437, 447 [2006]). Here, as petitioner argues, and Supreme Court agreed, the two provisions — Social Services Law § 368-a and the 2010 amendment — as they relate to the state's obligation to reimburse counties for these expenditures are compatible and can be interpreted to achieve legislative objectives that are not inherently inconsistent with each other. Specifically, the 2010 amendment can be read to bar reimbursement for overburden expenditures that accrued after January 1, 2006 — or the first date that counties operated under the cap — while Social Services Law § 368-a can be interpreted as requiring the state to reimburse petitioner for any such expenditures that accrued prior to that date (see Matter of St. Lawrence County v Daines, 81 A.D.3d at 215).

As for respondents' contention that their interpretation of this amendment is entitled to deference, we note that the phrase "relative percentages of the non-federal share of medical assistance expenditures incurred prior to January 1, 2006" is not a highly technical term or a concept that implicates respondents' operating practices or procedures. Instead, it refers to what petitioner and the state paid for Medicaid expenditures prior to January 1, 2006 and, as applied to the issues raised in this proceeding, involves a question of "pure statutory reading and analysis" for which deference is not required (Matter of Belmonte v Snashall, 2 N.Y.3d 560, 566 [2004]). Moreover, the affidavit submitted by respondents interpreting the 2010 amendment and its impact on the state's obligation to pay these overburden expenditures was prepared long after the amendment ...


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