Eldridge v. D.C. DHS ( 2021 )

Notice: This opinion is subject to formal revision before publication in the
Atlantic and Maryland Reporters. Users are requested to notify the Clerk of the
Court of any formal errors so that corrections may be made before the bound
volumes go to press.
DISTRICT OF COLUMBIA COURT OF APPEALS
No. 18-AA-664
RICHARD ELDRIDGE, ROSA LEE, AND EVA FREEMAN, PETITIONERS,
V.
DISTRICT OF COLUMBIA DEPARTMENT OF HUMAN SERVICES AND DISTRICT OF
COLUMBIA DEPARTMENT OF HEALTH CARE FINANCE, RESPONDENTS.
On Petition for Review of Orders of the
District of Columbia Office of Administrative Hearings
(DHS-681-16)
(Hon. Jeremy Alper, Administrative Law Judge)
(Argued Jan. 21, 2020 Decided April 8, 2021)
Bradley E. Oppenheimer, with whom Jacob E. Hartman and Geoffrey M.
Klineberg were on the brief, for petitioners.
Graham E. Phillips, Assistant Attorney General, with whom Karl A. Racine,
Attorney General for the District of Columbia, Loren L. AliKhan, Solicitor General,
and Caroline S. Van Zile, Deputy Solicitor General, were on the brief, for
respondents.
Before GLICKMAN and EASTERLY, Associate Judges, and FISHER, Senior
Judge. *
*
Judge Fisher was an Associate Judge at the time of oral argument. His status
changed to Senior Judge on August 23, 2020.
2
GLICKMAN, Associate Judge: Petitioners ask us to review an order of the
Office of Administrative Hearings (OAH) affirming the termination of their
Medicaid benefits as participants in the District’s home and community-based
services program for persons who are elderly and individuals with physical
disabilities. The Administrative Law Judge (ALJ) upheld determinations by the
Department of Human Services (DHS) in 2016 and 2017 that petitioners did not
meet applicable income requirements for continuing to receive those benefits
because (1) petitioners’ incomes exceeded the eligibility ceiling for “categorically
needy” beneficiaries, and (2) petitioners did not show they had incurred sufficient
medical costs to bring their remaining income below the considerably lower
eligibility ceiling for “medically needy” beneficiaries (a requirement commonly
referred to as “spending down”). The material facts supporting those determinations
are not at issue; the dispute before us concerns the proper interpretation of federal
and District of Columbia law and regulations governing petitioners’ continuing
Medicaid eligibility.
Petitioners present three claims of legal error. First, they argue that the ALJ
accorded undue deference to respondents’ interpretation of ambiguous provisions of
federal law. Second, petitioners argue that respondents have misapplied federal law
by promulgating different income eligibility levels for categorically and medically
3
needy Medicaid applicants in such a way as to create a “benefit cliff,” whereby
someone whose monthly income does not exceed the eligibility ceiling can receive
full Medicaid coverage of their medical costs, but someone whose monthly income
exceeds that ceiling, by however small an amount, can get no coverage at all until
they have spent a substantial portion of their own modest income on medical costs.
Third, petitioners argue that, instead of rescinding their eligibility for Medicaid when
their incomes rose above the eligibility ceiling, respondents were required by “post-
eligibility treatment of income” regulations to adjust the financial contributions
petitioners were expected to make to the cost of their care in light of their higher
incomes.
We conclude that petitioners are not entitled to relief. The ALJ did not accord
undue deference to respondents’ interpretation of federal law, but even if the ALJ
had done so, a remand would be unnecessary because we construe the law ourselves
de novo. On the merits, we hold that respondents did not misinterpret or misapply
the law. Federal law permits jurisdictions to establish different income eligibility
ceilings for categorically and medically needy Medicaid beneficiaries, and the post-
eligibility treatment of income regulations do not apply to beneficiaries whose
incomes rise above the applicable eligibility ceiling. We therefore affirm the
termination of petitioners’ benefits.
4
I. Medicaid Law and Regulations
The District of Columbia, at its option, participates in the federal Medicaid
program, which provides “financial assistance to States that choose to reimburse
certain costs of medical treatment for needy persons.” 1 In order to receive that
assistance, the District must comply with the Medicaid Act and federal regulations
implementing and interpreting it. 2 The Act prescribes, among other things, the
treatments and services the federal government will subsidize and the eligibility
requirements beneficiaries must meet in order for the District to receive federal
Medicaid funds. 3
1
Harris v. McRae, 448 U.S. 297, 301 (1980). The District is a State for the
purposes of the Medicaid Act, 42 U.S.C. § 1396 et seq. See Hamer v. Dep’t of Hum.
Servs., Gov’t of District of Columbia, 492 A.2d 1253, 1254 n.1 (D.C. 1985) (citing
42 U.S.C. § 1301(a)(1)).
2
Hamer, 492 A.2d at 1255. See also Nat’l Fed’n of Indep. Bus. v. Sebelius,
567 U.S. 519, 541–42 (2012). The federal Medicaid regulations are promulgated
and administered by the Department of Health and Human Services and the Centers
for Medicare and Medicaid Services (CMS). See Wilder v. Va. Hosp. Ass’n, 496
U.S. 498, 502 (1990); Arkansas Dep’t of Health and Hum. Servs. v. Ahlborn, 547
U.S. 268, 275 (2006).
3
42 U.S.C. § 1396 et seq.
5
As pertinent here, the Medicaid program describes three classes of potential
beneficiaries to whom an acceptable State Medicaid program must or may provide
benefits with federal backing: the “mandatory categorically needy,” the “optional
categorically needy,” and the “medically needy.” 4
States (including the District) participating in Medicaid are required to
provide benefits to “mandatory categorically needy” individuals. 5 This category
comprises certain groups of low-income people who “are receiving or deemed to be
receiving cash assistance,” 6 including those who qualify for Supplemental Security
Income for the Aged, Blind, and Disabled (SSI). 7 To qualify for SSI and be
considered mandatory categorically needy, a person’s “countable income” — their
total income minus certain deductions — must be less than the SSI benefit rate. In
4
See Consejo de Salud de la Comunidad de la Playa de Ponce, Inc. v.
Gonzalez-Feliciano, 695 F.3d 83, 90–91 (1st Cir. 2012); Coye v. Dep’t of Health &
Human Servs., 973 F.2d 786, 789 (9th Cir. 1992); 42 C.F.R. § 435.4.
5
42 U.S.C. § 1396a(a)(10)(A)(i); Consejo de Salud, 695 F.3d at 90–91.
6
42 C.F.R. § 435.4; see also Coye, 973 F.2d at 789.
7
42 U.S.C. § 1396a(a)(10)(A)(i)(I) (state Medicaid plans must make medical
assistance available to “all individuals . . . receiving aid or assistance under any plan
of the State approved under subchapter . . . XVI [titled Supplemental Security
Income for Aged, Blind, and Disabled]”).
6
2017, the SSI benefit rate was $735 per month for an individual. 8 None of the
petitioners before us was in the “mandatory categorically needy” category.
States are permitted (but not required) to provide Medicaid benefits to other
groups of low-income persons “who, generally, meet the categorical requirements
or income or resource requirements that are the same as or less restrictive than those
of the cash assistance programs and who are not receiving cash payments.” 9 This is
known as the “optional categorically needy” category. Prior to their terminations,
petitioners qualified for Medicaid benefits under this category in connection with
their participation in a Home and Community-Based Services (HCBS) waiver
program established by the District in accordance with Section 1915(c) of the
Medicaid Act. 10 The District’s program is called the Elderly and Individuals with
Physical Disabilities (EPD) Waiver. 11 Such “waiver” programs permit States to
8
See Cost-of-Living Increase and Other Determinations for 2017, 81 Fed.
Reg. 74,854 (Oct. 27, 2016).
9
42 C.F.R. § 435.4; 42 U.S.C. § 1396a(a)(10)(A)(ii); see also Herweg v. Ray,
455 U.S. 265, 268–69 (1982).
10
See 42 U.S.C. §§ 1396n(c), 1396a(a)(10)(A)(ii)(VI); 42 C.F.R. § 435.217;
see also Olmstead v. L.C. ex rel. Zimring, 527 U.S. 581, 601 & n.12 (1999).
11
See District of Columbia Dep’t of Health Care Fin., Application for a
§ 1915(c) Home and Community-Based Services Waiver (Oct. 20, 2015)
7
provide support services (such as home health aides) enabling eligible Medicaid
beneficiaries who otherwise would be institutionalized to continue residing in their
homes and communities. 12 The Medicaid Act allows States to establish a countable
income ceiling for HCBS waiver beneficiaries at the same elevated level as the States
set for beneficiaries receiving long-term institutional care. That level, referred to as
the Special Income Standard, or “SIS,” may be up to 300% of the SSI benefit rate. 13
The District of Columbia set its Special Income Standard for EPD Waiver
beneficiaries at this maximum allowed level. 14 In 2017, the District’s SIS was
$2,205 per month for individuals. 15
Finally, the Medicaid Act allows States to extend coverage beyond the
categorically needy to persons who qualify as “medically needy” because their
https://dhcf.dc.gov/node/193812 https://perma.cc/S2EX-GNJM (hereinafter EPD
Waiver) https://perma.cc/4BZ4-NMZK; see also 29 D.C.M.R. §§ 9800.2(b), 9899.
12
29 D.C.M.R. § 9899.
13
42 U.S.C. §§ 1396a(a)(10)(A)(ii)(V), 1396b(f)(4)(C).
14
EPD Waiver 43; 29 D.C.M.R. §§ 9801.1, 9899.
15
In 2016, the applicable year in Mr. Eldridge’s case, the District’s SIS was
$2,199 per month.
8
medical expenses are effectively impoverishing. 16 Persons whose countable
incomes exceed the eligibility ceiling for categorical neediness may become eligible
to receive Medicaid benefits as medically needy “if they incur [medical costs] in an
amount that effectively reduces their income” 17 to a “single income standard,”
termed the “medically needy income level” (MNIL). 18 This income ceiling is not
required to be the same as, or comparable to, the income ceiling for the categorically
needy; the MNIL is not linked to the SSI benefit rate. Instead, “Congress explicitly
stated . . . that federal reimbursement for benefits provided to the medically needy
was available only if the income of those persons, after the deduction of incurred
medical expenses, was less than 133⅓% of the state AFDC [Aid to Families with
Dependent Children] payment level.” 19 In setting the parameters for the MNIL,
16
See 42 U.S.C. § 1396a(a)(10)(C); Atkins v. Rivera, 477 U.S. 154, 157–58
(1986).
17
Atkins, 477 U.S. at 158.
18
42 C.F.R. §§ 435.811(a), 435.831(a)(1); see also 29 D.C.M.R. § 9800.2(c)
(“Medically Needy Income Level”). This process is colloquially known as
“spending down.”
19
Schweiker v. Hogan, 457 U.S. 569, 586 (1982); see 42 U.S.C. §
1396b(f)(1)(B). In Hogan, the Supreme Court rejected a constitutional equal
protection challenge to the disparity between the MNIL and the higher income
eligibility ceiling for the categorically needy. 457 U.S. at 587–88, 591–92.
Although Congress subsequently repealed the AFDC program, the MNIL ceiling
remains tied to the value of AFDC benefits as they existed in July 1996, subject to
increases for inflation. See 42 C.F.R. §§ 435.811(e), 435.1007; see also 42 U.S.C.
9
“Congress recognized that this amount could be lower than categorical assistance
eligibility levels.” 20 The MNIL in the District in 2017 was $643 per month for an
individual. 21 Thus, the maximum qualifying countable income for receiving the
District’s EPD Waiver services is significantly lower for the medically needy than
for the categorically needy.
To determine whether an applicant for, or an existing beneficiary of, the
District’s EPD Waiver is within one of the eligibility groups, respondent DHS 22
applies an income test, wherein certain deductions (e.g., Child Nutrition Payments,
§ 1396u-1(b)(2)(B), (f)(3). (The current codification of 42 C.F.R. § 435.1007contains a scrivener’s error: paragraphs (b)(1) and (b)(2) are mistakenly omitted.
The full text of the regulation appears at Medicaid Program; Eligibility and Coverage
Requirements, 58 Fed. Reg. 4908, 4934 (Jan. 19, 1993)).
20
Hogan, 457 U.S. at 586.
21
See 29 D.C.M.R. § 9899 (defining the MNIL as a percentage of federal
poverty levels); Annual Update of the HHS Poverty Guidelines, 82 Fed. Reg. 8831,
8832 (Jan. 31, 2017) (identifying federal poverty levels for 2017). The MNIL is also
subject to a floor. See 42 C.F.R. § 435.811(c). While it is unclear that the District’s
MNIL was the highest it could have been set under the Medicaid Act, petitioners do
not claim the MNIL was below the floor.
22
DHS processes Medicaid applications and determines eligibility, while
respondent DHCF manages the District’s Medicaid Plan and promulgates
implementing regulations. See D.C. Code § 7-771.07 (2018 Repl.).
10
governmental housing assistance, etc. 23) are taken from the applicant or
beneficiary’s gross income to calculate a gross countable income. Applicants and
beneficiaries with countable incomes at or below the SIS qualify for categorically
needy eligibility 24; those “who ha[ve] gross countable income exceeding the SIS”
are required “to spend down the excess income to the MNIL . . . to become
financially eligible” 25 as medically needy.
Federal regulations also require States to calculate an amount each eligible
beneficiary of institutional care or HCBS is expected to contribute to the cost of their
care. 26 In a process referred to as “post-eligibility treatment of income” (PETI),
DHS calculates this financial contribution by applying specified deductions to an
eligible beneficiary’s gross countable income; the amount of countable income that
remains after those deductions is the amount the beneficiary is expected to contribute
for their institutional or community care. 27 Among the required deductions for
23
See 29 D.C.M.R. § 9801.5(a)-(w).
24
Id. § 9801.1.
25
Id. § 9801.6.
26
42 C.F.R. §§ 435.725, 435.726.
27
29 D.C.M.R. §§ 9804.4-9804.6.
11
HCBS beneficiaries is a “Community Maintenance Needs Allowance” (CMNA)
intended to cover their cost of living. 28 A State “may set [the CMNA] at any level,”
provided it is “based on a reasonable assessment of need.” 29 In the District, the
CMNA is equal to the SIS. 30 Consequently, because only persons who have
countable income at or below the SIS (or persons who spend down to the MNIL) are
eligible for the EPD Waiver, their required PETI financial contribution is always
zero. 31
In accordance with federal regulations requiring periodic reassessment of
Medicaid eligibility, DHS must determine the continuing eligibility of EPD Waiver
beneficiaries at least every twelve months, and also whenever it receives new
information that may affect a beneficiary’s eligibility. 32 The reassessment process
for existing beneficiaries mirrors the initial application process, in that the same
countable income eligibility standards and PETI apply.
28
See id. § 9804.4(b); 42 C.F.R. § 435.726(c)(1).
29
42 C.F.R. § 435.726(c)(1)(i).
30
29 D.C.M.R. § 9804.4(b).
31
In contrast, because the needs allowance for institutionalized beneficiaries
is much smaller, see 29 D.C.M.R. § 9804.4(a), they may have substantial financial
contribution requirements.
32
See 29 D.C.M.R. § 9501.14; 42 C.F.R. § 435.916(a), (b), (d).
12
II. The Terminations of Petitioners’ EPD Waiver Benefits
Petitioners are three District of Columbia residents who previously received
HCBS pursuant to the EPD Waiver. In late 2016, DHS notified Mr. Eldridge that
his EPD benefits would not be renewed because his countable income was above the
SIS. At the time his benefits were terminated, Mr. Eldridge’s income was $2,466
per month. Ms. Freeman and Ms. Lee received similar non-renewal notices in early
2017, because their monthly countable incomes were $2,387 and $2,314,
respectively. Each petitioner requested a “fair hearing” before the OAH to contest
DHS’s determination of their ineligibility for benefits 33; their cases were
consolidated and DHCF was permitted to intervene. All parties agreed that an
evidentiary hearing was unnecessary and asked the ALJ to decide the cases as a
matter of law on cross-motions for summary adjudication.
Petitioners argued before the ALJ that they were optional categorically needy
HCBS beneficiaries, and that in reassessing their eligibility to continue receiving the
EPD Waiver services on which they depended, DHS should have applied PETI
33
See 42 U.S.C. § 1396a(a)(3) (State Medicaid plans must provide “an
opportunity for a fair hearing . . . to any individual whose claim for medical
assistance under the plan is denied”).
13
deductions to their gross incomes before applying the countable income test to
determine whether they remained eligible for benefits. If computed in that way,
petitioners’ countable incomes would have been below the SIS level ($2,205 per
month in 2017) and petitioners still would have been considered eligible as
categorically needy. By not applying the PETI deductions in reassessing their
income eligibility, petitioners argued, respondents subjected them to an unfair and
legally unrequired “benefit cliff,” since they would have to “spend down” on their
care so as to reduce their net incomes to the MNIL ($643 per month) in order to be
deemed “medically needy.” No petitioner claimed to have satisfied that
requirement.
In defending the termination of petitioners’ benefits, respondents argued that
the separate (two-stage) financial eligibility and PETI determinations, and the
requirement that an individual whose countable income exceeds the SIS must spend
down to the MNIL to become eligible for HCBS, were required by the Medicaid Act
and applicable regulations.
The ALJ granted summary adjudication to respondents. Stating he had
“independently analyzed the applicable federal and local law,” the ALJ concluded
that “[r]espondents’ interpretation of the statutes and regulations at issue are not
14
inconsistent with the regulatory or statutory language or purpose, or otherwise
unreasonable or improper under applicable law.” The ALJ added that “[t]o the
extent there may be ambiguity in the statutory and regulatory language,
[r]espondents are due substantial deference.” 34 Nowhere in his decision, however,
did the ALJ identify an ambiguity in the law or say he was deferring to respondents
to resolve an issue of interpretation.
The ALJ proceeded to determine whether petitioners qualified for the
District’s EPD Waiver under the applicable income requirements. Because
petitioners were not SSI recipients, they did not qualify as mandatory categorically
needy. Nor did they qualify as optional categorically needy, the ALJ concluded, as
their countable incomes exceeded the SIS, and PETI could not be applied to reduce
their incomes below that ceiling. Finally, the ALJ ruled that petitioners did not
qualify as medically needy in the absence of any showing that they had spent down
their incomes to the MNIL.
34
Citing Chevron U.S.A., Inc. v. N.R.D.C., Inc., 467 U.S. 837, 844 (1984),
and Auer v. Robbins, 519 U.S. 452, 461–63 (1997).
15
III. Standard of Review and the Question of Deference
Petitioners claim that the ALJ erroneously deferred to respondents’
interpretation of ambiguous provisions in the Medicaid Act and the federal
regulations implementing it, and that, based on the uncontested facts and a proper
interpretation of the law, they were eligible to continue in the District’s EPD Waiver
program as categorically needy beneficiaries without having spent down their
income to the MNIL level. These contentions challenge the ALJ’s purely legal
rulings, and our review is de novo. 35
To determine whether the Medicaid Act and its implementing regulations
authorize respondents’ approach to the renewal of HCBS benefits, we look first to
35
See, e.g., E.C. v. RCM of Washington, Inc., 92 A.3d 305, 313 (D.C. 2014)
(“In reviewing an OAH decision, we determine whether: (1) OAH made findings
of fact on each materially contested issue of fact, (2) substantial evidence supports
each finding, and (3) OAH’s conclusions flow rationally from its findings of fact.
However, the construction of a statute raises a question of law which this court
reviews de novo.” (citations and quotation marks omitted)); District of Columbia
Dep’t of Emp’t Servs. v. Smallwood, 26 A.3d 711, 714 (D.C. 2011) (“Our review of
OAH decisions is limited, and we must affirm unless the decision is arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with the law. We
review the OAH’s legal rulings de novo, recognizing that this court is the final
authority on issues of statutory construction.” (citations and quotation marks
omitted)).
16
the language of those statutes and regulations, and construe their words “according
to their ordinary sense and plain meaning.” 36 As a rule, if the language of a statute
or agency regulation is unambiguous, our inquiry ends there; but where the text
allows for more than one reading, we will defer to “an agency’s interpretation of the
statute and regulations it is charged by the legislature to administer, unless its
interpretation is unreasonable or is inconsistent with the statutory language or
purpose.” 37 Respondent DHCF is the single District agency responsible for the
administration of the District’s Medicaid program; accordingly, if we were to find
36
McCormick & Schmick Rest. Corp. v. District of Columbia Alcoholic
Beverage Control Bd., 144 A.3d 1153, 1155 (D.C. 2016) (internal quotation marks
omitted).
37
District of Columbia Dep’t of the Env’t v. E. Capitol Exxon, 64 A.3d 878,
880–81 (D.C. 2013) (quotation marks omitted); id. at 881 (“This deference stems
from the agency’s presumed expertise in construing the statute it administers.”
(quotation marks omitted)). “When, as here, the construction of an administrative
regulation rather than a statute is in issue, deference is even more clearly in order.”
Id. at 881 (citation and quotation marks omitted). We do not grant such deference
to the OAH, however. Id. (“OAH, on the other hand, is vested with the
responsibility for deciding administrative appeals involving a substantial number of
different agencies and thus lacks the subject-matter expertise justifying the deference
to agency interpretations of statutes or regulations. It is also well established, then,
that this court does not accord the same deference to the statutory interpretations of
the Office of Administrative Hearings.” (citations and quotation marks omitted)).
17
the relevant DHCF regulations ambiguous (which in this case we do not), we would
grant appropriate deference to DHCF’s interpretation of the ambiguity. 38
DHS and DHCF are not, however, owed deference with respect to their
interpretations of the federal Medicaid Act and regulations, as there is “no basis for
assuming that Congress delegated any authority to [local agencies] to propound
authoritative interpretations of either the statute or [the U.S. Department of Health
and Human Services (HHS)]’s regulations.” 39 Petitioners argue the ALJ thought
otherwise and that this error entitles them to a remand for further proceedings before
the OAH, in which the ALJ would interpret and apply federal law in their cases
without deference to respondents’ construction of it. 40 They base this argument on
the ALJ’s statement that “[t]o the extent there may be ambiguity in the statutory and
regulatory language, [r]espondents are due substantial deference.” Although that
statement is overbroad if it is read as encompassing deference to respondents’
interpretations of federal law, we are satisfied that the ALJ did not actually accord
such deference. The ALJ explicitly stated he had “independently analyzed the
38
D.C. Code § 7-771.07(1) (2018 Repl.).
39
DeCambre v. Brookline Hous. Auth., 826 F.3d 1, 19 (1st Cir. 2016); see
also Eyecare v. Dep’t of Hum. Servs., 770 N.W.2d 832, 836 (Iowa 2009).
40
See, e.g., E. Capitol Exxon, 64 A.3d at 882.
18
applicable federal and local law,” and his decision bears that out; he found no
ambiguities in federal law and nowhere purported to defer to respondents’
interpretation of an unclear provision in the Medicaid Act or the federal Medicaid
regulations. We therefore are assured that the putative error in the ALJ’s brief
statement regarding deference is innocuous and immaterial. 41
41
See United Dominion Mgmt. Co. v. District of Columbia Rental Hous.
Comm’n, 101 A.3d 426, 430–31 (D.C. 2014). In that case, the Commission had said,
erroneously, that its review of an OAH ALJ’s interpretation of the law was
deferential; we held the error immaterial because the Commission demonstrably
engaged in de novo review of the issues. We explained:
Although the RHC articulated its standard of agency
review incorrectly, we decline to reverse on this ground,
as we find that RHC’s error was ultimately
immaterial. See D.C. Code § 2-510 (b) (“The Court may
invoke the rule of prejudicial error.”); see also LCP, Inc.
v. District of Columbia Alcoholic Beverage Control Bd.,
499 A.2d 897, 903 (D.C. 1985) (“[R]eversal and remand
is required only if substantial doubt exists whether the
agency would have made the same ultimate finding with
the error removed.”). Although the RHC said that it would
defer to reasonable legal interpretations of the OAH ALJ,
its orders demonstrate that it did not do so. The RHC
painstakingly analyzed “the plain language of the [Rental
Housing] Act, the Act’s legislative history, the Act’s
regulations, case law precedent, and the purposes of the
Act” before announcing its conclusion. Indeed, given the
thorough nature of the RHC’s decision and order affirming
the ALJ’s decision, it is apparent that the RHC’s decision
amounted to a de novo review of the legal issues . . . , even
though the RHC did not acknowledge it as such.
19
But a remand to the OAH would not be necessary or appropriate even if it
were otherwise. This court is the final arbiter of the legal issues at hand, and we can
and will determine whether the ALJ’s construction of the Medicaid Act is “in
accordance with [the] law” 42 without according undue deference to respondents’
interpretation of it.
IV. Petitioners’ Eligibility for EPD Waiver Benefits
Petitioners maintain that respondents’ reassessment of their eligibility for
EPD Waiver benefits violated the Medicaid Act and District regulations in two ways.
First, they argue that respondents’ spend-down requirement creates an impermissible
“benefit cliff” by requiring them to spend-down to the MNIL rather than to the
(considerably higher) SIS. Second, they argue that respondents’ refusal to apply
PETI during the financial eligibility determination contravenes federal law and
respondents’ own regulations, because it treats them as new applicants rather than
as existing beneficiaries eligible to have deductions taken from their income to
Id. (internal citation omitted). Essentially the same rationale applies here.
42
D.C. Code § 2-510(a)(3)(A) (2016 Repl.).
20
determine their share of the cost of care. For the following reasons, we disagree with
both contentions.
A. The “Benefit Cliff”
Petitioners premise their first challenge on the notion that respondents have
set two different income qualification levels for HCBS applicants: “SIS ($2,205 per
month) for those qualifying without spend-down, and a much lower Medically
Needy Income level ($643 per month) for those initially above SIS who can spend
down through medical expenses.” 43 The use of two different standards, petitioners
argue, violates the federal requirement that there be a “single income standard” for
medically needy individuals 44 and creates an unfair “benefit cliff” imperiling any
beneficiary whose countable income rises by even a single dollar above the SIS. We
sympathize with petitioners and other Medicaid beneficiaries confronting this
“cliff,” but their legal argument lacks merit, for two reasons.
First, respondents do not use two income standards for medically needy
beneficiaries. The applicable regulation, 29 D.C.M.R. § 9899, unambiguously
43
Br. for Pet’rs at 23–24.
44
See 42 C.F.R. § 435.811(a).
21
provides a single definition of the MNIL: “Fifty percent (50%) of the Federal
Poverty Level (FPL) for a household of two (2) or larger; the MNIL for a household
of one is ninety-five percent (95%) of that for a household of two.” Petitioners cite
no other District regulation that authorizes the use of a different MNIL, and there is
no indication that respondents have ever used, in determining an applicant’s or
beneficiary’s Medicaid eligibility, the SIS as the MNIL as opposed to the figure
defined in § 9899. Respondents have consistently represented that there is one
MNIL for petitioners, which was $643 per month in 2017.45
45
In furtherance of their position, petitioners point to a passage in
respondents’ motion for summary adjudication before the OAH in which
respondents referred to two “medically needy” categories. The two categories
respondents described were “individuals who have an income of no more than 300%
of the SSI federal benefit payment level and individuals who have an income that
exceeds 300% of the SSI federal benefit payment level.” While respondents referred
to both categories as “medically needy,” that was merely infelicitous phrasing,
because (as we have explained above) individuals with incomes at or below 300%
of the SSI benefit level qualify as categorically needy without having to spend down
to the MNIL to (superfluously) meet the income qualification for being deemed
medically needy. Thus, in their motion for summary adjudication, respondents
proceeded to describe one spend-down process and one MNIL. Because a
“medically needy” individual is by definition a person who has met the spend-down
requirements set by a State, see 42 C.F.R. § 435.4 (defining “medically needy” as
persons “not . . . categorically needy but who may be eligible for Medicaid . . .
because . . . their income and resources are within [State-determined] limits . . . after
their incurred expenses for medical or remedial care are deducted”), we are of the
view that the single spend-down process respondents described in their briefing
below establishes that respondents have not implemented more than one medically
needy income standard.
22
Second, requiring petitioners and others with countable incomes above the
SIS to spend down to the much lower MNIL (instead of just to the SIS) in order to
qualify as medically needy does not create a legally improper benefit cliff, for the
simple reason that benefit cliffs are an accepted part of the Medicaid universe that
Congress foresaw and intended.
The Supreme Court explained and sanctioned the reality of Medicaid benefit
cliffs in Schweiker v. Hogan. There, a group of individuals, whose incomes
exceeded the ceiling on qualifying for Medicaid as categorically needy, argued that
the medically needy spend-down requirement was unconstitutional and violated the
Medicaid Act because it mandated that they spend down their incomes to an amount
lower than the categorically needy income limit. 46 The Court held that Congress
specifically intended differing income standards for the categorically needy and the
medically needy by choosing to set the MNIL, but not the categorically needy
income ceiling, at a maximum of 133⅓ percent of the AFDC payment rate. 47 That
choice, the Court explained, was “not inconsistent with constitutional principles of
equal treatment”; rather, it reflected a reasonable decision to prioritize the provision
46
457 U.S. at 571.
47
Id. at 586–87.
23
of medical benefits to categorically needy persons over the provision of benefits to
those persons who were comparatively wealthy by authorizing coverage of the latter
only if they had medical expenses so substantial that their incomes reached a
significantly lower level. 48
There is no distinction between the benefit cliff upheld in Hogan and the one
at issue in this case. The District is not required to include the medically needy in
its EPD Waiver at all, 49 and where it has chosen to include such individuals in its
waiver, it is statutorily prevented from raising the MNIL to the level at which the
48
Id. at 587, 591–93; see also State of Cal., Dep’t of Health Servs. v. Dep’t
of Health & Hum. Servs., 853 F.2d 634, 636 (9th Cir. 1988) (“The medically needy
may qualify for financial assistance if they incur medical expenses in an amount that
effectively reduces their income below that of the categorically needy.”).
49
See Skandalis v. Rowe, 14 F.3d 173, 181–83 (2d Cir. 1994) (holding that
the State of Connecticut may exclude the medically needy from its HCBS Waiver
program); Centers for Medicare & Medicaid Services, Application for a § 1915(c)
Home and Community-Based Waiver: Instructions, Technical Guide and Review
Criteria at 90 (2019) https://www.hhs.gov/guidance/sites/default/files/hhs-
guidance-documents/instructions technicalguide v3.6 10.pdf,
HTTPS://PERMA.CC/W85R-T563 (hereinafter CMS Guidance) (“If a[n eligibility]
group is included in the Medicaid state plan, a state has the option to include the
group in the waiver.” (emphasis added.)).
24
District has set its SIS. 50 In point of fact, CMS guidance to the States and the District
explicitly advises that “a medically needy individual with income over the special
income level cannot spend down to the special income level and be eligible under
the § 435.217 [optional categorically needy] group.” 51 Petitioners have not
identified any applicable provision of the Medicaid Act nor any federal regulation
contrary to that guidance. 52
50
42 U.S.C. § 1396b(f)(1)(B); see also Hogan, 457 U.S. at 586–87; 42 C.F.R.
§§ 435.811(e), 435.1007(b)(1).
51
CMS Guidance, at 91. We consider such guidance persuasive, though it is
not necessarily entitled to the deference owed to formal federal rule-making. See,
e.g., Christensen v. Harris Cty., 529 U.S. 576, 587 (2000); Nunnally v. District of
Columbia Metro. Police Dep’t, 80 A.3d 1004, 1012 & n.17 (D.C. 2013); Wong v.
Doar, 571 F.3d 247, 258–60 (2d Cir. 2009) (according so-called Skidmore
deference, rather than Chevron deference, to CMS interpretive guidance of Medicaid
Act).
52
There are special situations in which Medicaid beneficiaries are not
required to spend down to the MNIL when their countable incomes exceed SIS. For
example, under 42 U.S.C. § 1382h(b), SSI beneficiaries may retain their Medicaid
benefits with a monthly income in excess of the SIS, under certain conditions, if they
return to work. This provision amounts to a work-incentive exception for SSI
beneficiaries who might otherwise choose not to work for fear of their incomes
increasing beyond the SSI benefit rate such that they would lose their Medicaid
coverage. Under 42 U.S.C. § 1396a(a)(10)(A)(i)(I), the District is required to
provide Medicaid benefits for such persons, because they, unlike petitioners, remain
SSI beneficiaries who are mandatory categorically needy.
25
HHS has recognized the precarious position in which this scheme puts
individuals whose incomes exceed categorically needy limits, noting that because
the MNIL is so “very low” it may require individuals who have no other way to
qualify for benefits to spend down large portions of their meager incomes, to a level
lower than that at which they would qualify as SSI beneficiaries in some states. 53
Even so, the Department has concluded that Congress has tied the District’s hands
here — “[u]nder the Medicaid statute, States cannot just increase their medically
needy income levels to deal with this problem.” 54
B. Post-Eligibility Treatment of Income
Petitioners alternatively argue that even if they are not eligible for benefits as
medically needy unless they spend down to the MNIL, they remain optional
categorically needy despite the rise in their countable incomes, because the Medicaid
Act distinguishes between the financial eligibility requirements for “initial”
53
Medicaid Program; Change in Application of Federal Financial
Participation Limits, 66 Fed. Reg. 2316, 2319–20 (Jan. 11, 2001) (authorizing a rule
change regarding the method by which a State may calculate an individual’s
countable income for purposes of determining Medicaid eligibility in order to reduce
the number of beneficiaries subject to spend-down); see also 58 Fed. Reg. at 4923
(calling the MNIL ceiling “fundamentally restrictive”).
54
66 Fed. Reg. at 2320.
26
applicants for Medicaid and existing beneficiaries. Under their view of the Act,
petitioners, having been deemed eligible initially for Medicaid and enrolled in the
EPD Waiver, are “beneficiaries” to whom the District’s income test for HCBS
eligibility no longer applies, and “for whom any excess income simply becomes a
copay determined independently of the spend-down level.” 55 In support of this
“copay” argument, petitioners cite 29 D.C.M.R. § 9804.1, which provides that the
income deductions for PETI are applicable “after an initial eligibility
determination.” (Emphasis added.) Essentially, petitioners contend that existing
beneficiaries, who had their “initial” eligibility determination when they first applied
for Medicaid, may never have their eligibility reassessed; rather, DHS may only
conduct “a simple recalculation of their expected contributions.” 56
As we have explained, respondents do not understand or apply PETI in the
manner petitioners propose. They apply the income eligibility requirements in 29
D.M.C.R. § 9801 for beneficiaries during the renewal process the same way they do
for first-time applicants. Thus, only after a beneficiary meets those requirements
(i.e., has a countable income at or below the categorically needy income ceiling or
55
Br. for Pet’rs at 27.
56
Reply Br. at 17.
27
spends down to the MNIL) do respondents deduct the applicable CMNA (among
other deductions) to determine the beneficiary’s contribution to their cost of care.
But petitioners argue that redetermining eligibility anew before the PETI
contribution determination violates § 9804.1’s language stating PETI must take
place “after an initial eligibility determination.”
It is hard for us to see how petitioners’ argument squares with the federal
requirements, noted above, that eligibility for Medicaid benefits be reassessed
periodically, 57 and that a State must “make two separate determinations: (1) whether
an individual is ‘eligib[le] for’ Medicaid and, if so, (2) the ‘extent of’ benefits to
which he is entitled,” with “[b]oth determinations . . . informed by an individual’s
available ‘income’ and ‘resources.’” 58 And petitioners’ reading of § 9804.1 conflicts
with the plain language of other applicable sections of 29 D.C.M.R.: notably,
§ 9801.1, which states that in order to be eligible for HCBS, “an applicant or
beneficiary shall have gross countable income at or below the . . . [SIS],” and
57
42 C.F.R § 435.916(a) mandates that Medicaid eligibility, including
“financial eligibility,” must be renewed on at least a yearly basis. Consistent with
this requirement, 29 D.C.M.R. § 9501.14 provides that “[t]he Department shall
renew eligibility every twelve (12) months for all beneficiaries, except for
beneficiaries deemed eligible for less than one (1) year.”
58
Wong v. Doar, 571 F.3d 247, 251 (2d Cir. 2009) (citing, inter alia, 42
U.S.C. § 1396a(a)(17)).
28
§ 9801.6, which states that “[a]n applicant or beneficiary who has gross countable
income exceeding the SIS shall be permitted to spend down the excess income to the
MNIL . . . to become financially eligible.” (Emphases added.) It is a “basic”
interpretative principle that “each provision of the [regulation] should be construed
so as to give effect to all of the [regulation’s] provisions, not rendering any provision
superfluous.” 59
In our view, the only reasonable interpretation of the regulations is that the
reference in § 9804.1 to an “initial eligibility determination” simply means that
determination of eligibility comes first, i.e., is the first step of a two-step process for
both applicants and existing beneficiaries when their Medicaid eligibility is subject
to periodic reassessment. The regulation does not create a means of evading
redeterminations of eligibility or enabling beneficiaries to remain eligible
indefinitely regardless of increases in their incomes. Rather, after an “initial”
59
Carlson Constr. Co. v. Dupont W. Condo., Inc., 932 A.2d 1132, 1136 (D.C.
2007) (quoting Thomas v. District of Columbia Dep’t of Emp’t Servs., 547 A.2d
1034, 1037 (D.C. 1988)). See also Rudolph v. United States ex rel Gillott, 37 App.
D.C. 455, 460 (D.C. Cir. 1911) (“In the construction of a statute [or regulation] it is
the duty of the courts to consider the whole, and, if reasonably possible, to reconcile
one part with another, so that due effect may be given to each.”); Rupsha 2007, LLC
v. Kellum, 32 A.3d 402, 410–11 (D.C. 2011) (choosing interpretation that is
“consistent with the regulatory scheme”); Greenbrier Hosp., LLC v. Azar, 974 F.3d
546, 550 (5th Cir. 2020) (“Ordinarily, [courts] try to reconcile potentially conflicting
provisions [in a regulation] by attempting to read the text in harmony.”).
29
renewal of a beneficiary’s eligibility based on whether they continue to meet the
applicable income test, their income is run through the PETI deductions that
determine their required financial contribution, if any, to their cost of care. Thus,
we agree with respondents that District regulations mandate they apply the income
test and then the PETI deductions during each renewal of an existing beneficiary’s
eligibility, and not only upon the first determination of their eligibility.
Petitioners argue that this application of the PETI regulations cannot be
correct. They reason that with the CMNA deduction for EPD Waiver beneficiaries
equal to the SIS, applying PETI after eligibility is determined means those
beneficiaries will never have to defray the District’s payments under the program.
This, petitioners argue, violates the federal requirement that States “must reduce
[their] payment for home and community-based services” by the amount of
countable income remaining after PETI deductions. 60 However, no provision of
federal law prevents a State from setting the maintenance needs allowance at an
amount that reduces a beneficiary’s required copay to zero; the applicable federal
regulation allows the District to set the CMNA “at any level, as long as . . . [t]he
60
42 C.F.R. § 435.726(a).
30
deduction amount is based on a reasonable assessment of need.” 61 There is no claim
that the District’s assessment of need is unreasonable. 62 And petitioners point to
nothing in federal law that would require the District to utilize PETI to do even more
and protect beneficiaries whose incomes rise above the eligibility level from losing
their coverage.
Petitioners have represented to this court that some States have structured
valid Medicaid plans that effectuate a more favorable approach to the renewal of
HCBS benefits for beneficiaries whose incomes rise above the categorically needy
eligibility ceiling. That may be so; the Medicaid Act is designed, to some extent, to
give States “flexibility” in administering their programs, in order to incentivize both
participation in Medicaid and “innovation and experiment[ation]” in approaches to
health care for the needy. 63 But petitioners’ proposed approach is not required by
61
42 C.F.R. § 435.726(c)(1)(i).
62
Further to the point, CMS has acknowledged the District’s approach as
common and not improper, and has even authorized States to “increase the
maintenance needs allowance for waiver participants above [SIS]” in order to protect
income that is excluded from countable income for eligibility purposes. CMS
Guidance at 94 (emphasis added).
63
Skandalis, 14 F.3d at 181.
31
(and, as formulated, appears to be inconsistent with) federal law; we have no
authority to order the District to abandon its own legally valid plan.
V. Conclusion
We conclude that petitioners’ countable incomes rendered them ineligible
under federal and local law and regulations for EPD Waiver benefits as categorically
needy recipients, and that petitioners have not established their eligibility to receive
those benefits as medically needy recipients. We therefore affirm the final order of
OAH upholding the termination of petitioners’ benefits.