G.S. VS. DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES (DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES) ( 2020 )


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  •                                 NOT FOR PUBLICATION WITHOUT THE
    APPROVAL OF THE APPELLATE DIVISION
    This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
    internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
    SUPERIOR COURT OF NEW JERSEY
    APPELLATE DIVISION
    DOCKET NO. A-4675-18T1
    G.S.,
    Appellant,
    v.
    DIVISION OF MEDICAL
    ASSISTANCE AND HEALTH
    SERVICES, and HUNTERDON
    COUNTY DIVISION OF
    SOCIAL SERVICES,
    Respondents.
    __________________________
    Submitted September 14, 2020 – Decided November 16, 2020
    Before Judges Messano and Smith.
    On appeal from the New Jersey Division of Medical
    Assistance and Health Services, Department of Human
    Services.
    Legal Services of Northwest Jersey, attorneys for
    appellant (Shefali Saxena, on the briefs).
    Gurbir S. Grewal, Attorney General, attorney for
    respondent Division of Medical Assistance and Health
    Services (Melissa H. Raksa, Assistant Attorney
    General, of counsel; Jacqueline R. D'Alessandro,
    Deputy Attorney General, on the brief).
    PER CURIAM
    On August 30, 2018, respondent, the Hunterdon County Welfare Agency
    (the agency), issued appellant, G.S., a notice of overpayment of ACA1 Medicaid
    benefits. The agency sought $25,692.35. G.S. requested a hearing, which
    occurred February 19, 2019. On March 11, 2019, the administrative law judge
    (ALJ) issued an initial decision waiving the overpayment. In her decision, the
    ALJ made witness credibility findings as well as detailed findings of fact.
    I.
    G.S. is a twenty-four-year-old woman diagnosed with bipolar disorder,
    post-traumatic stress disorder, and depression. G.S. took medication for her
    1
    Affordable Care Act (ACA) Medicaid differs from traditional Medicaid and
    uses different qualifying criteria than traditional Medicaid. Persons not eligible
    to enroll in a state's traditional Medicaid plan may qualify for the ACA Medicaid
    plan if they fall within a certain income range, are not eligible for minimum
    essential health coverage or cannot afford employer-sponsored health coverage,
    and have not attained the age of sixty-five at the beginning of the plan year.
    
    42 U.S.C. § 18051
    (e)(1).
    A-4675-18T1
    2
    mental health issues, attended therapy, and lived in a group home for people
    diagnosed with mental illness. In 2015, G.S. applied for and was granted ACA
    Medicaid. G.S. did not include in her application that she suffered from mental
    health disabilities.   In March 2016, G.S. obtained a part-time job at the
    Hunterdon Medical Center. She was promoted to full-time status later in 2016.
    In July 2016, the agency sent G.S. its eligibility redetermination 2 form by
    mail. G.S. testified that she did not recall receiving the form. The purpose of
    the form was to ascertain any change in the recipient's "income base" under
    which the recipient first qualified for benefits, and to confirm that the recipient
    remained eligible for ACA Medicaid benefits. In 2017, the agency admitted that
    it failed to send G.S. the annual redetermination form, nor did it take any other
    steps to determine G.S.'s eligibility on its own. While working at the medical
    center in 2017, G.S. took a leave of absence from work due to mental and
    physical health issues. In April 2018, the agency performed an "administrative
    2
    Eligibility of ACA Medicaid beneficiaries must be renewed "once every
    [twelve] months[.]" A renewing agency must consider a beneficiary's income,
    amongst other factors, in the eligibility renewal process. See 
    42 U.S.C. § 18051
    (e)(1)(B). The renewing agency making this eligibility determination
    "must do so without requiring information from the beneficiary if able to do so."
    
    42 C.F.R. § 435.916
    (a) (1)-(2).
    A-4675-18T1
    3
    renewal" of G.S.'s ACA Medicaid eligibility and discovered G.S.’s medical
    center job. As a result, the agency determined that G.S. no longer qualified for
    ACA Medicaid. Due to unreported employment income, G.S. did not qualify for
    ACA Medicaid benefits for calendar year 2017 and part of 2018. 3
    The agency terminated G.S. from the program and sought the recovery of
    $25,692.35 in benefits it paid to her during the time she had unreported income.
    When the agency terminated G.S.'s ACA Medicaid eligibility in April 2018, it
    did not undertake a determination to see if G.S. was eligible for another
    Medicaid program.4 After terminating G.S. from ACA Medicaid, the agency
    3
    See 
    42 U.S.C.S. § 18051
    (e)(1)(B).
    4
    42 C.F.R. 453.916 (f) (1) - (2) addresses the obligation of a county board of
    social services to search for other Medicaid programs for an ACA Medicaid
    beneficiary prior to determining that beneficiary ineligible. The section reads
    as follows:
    (1) Prior to making a determination of ineligibility, the
    agency must consider all bases of eligibility, consistent
    with § 435.911 of this part.
    (2) For individuals determined ineligible for Medicaid,
    the agency must determine potential eligibility for other
    insurance affordability programs and comply with the
    procedures set forth in § 435.1200(e) of this part.
    [Ibid.]
    A-4675-18T1
    4
    eventually determined G.S. eligible for another Medicaid program, called
    Medicaid Workability 5, in June 2018.
    After the hearing, the ALJ's initial decision recommended waiving
    collection of the overpayment, finding that G.S.'s mental health disability, her
    lack of intent to commit fraud,      the agency's failure to perform a timely
    redetermination of eligibility, and her eligibility for Medicaid Workability,
    taken together, supported an exercise of the Commissioner's discretion under
    N.J.S.A. 30:4D-7(l).6 The Director rejected the ALJ's initial decision. The
    Director gave two reasons: (1) she found it "implausible" that G.S. would not
    know to report her income; and (2) she found that since G.S. was not determined
    disabled until July 2018, there could be no finding by the ALJ that G.S. would
    have received Workability benefits before that. The Director did not conclude
    5
    "The purpose of the New Jersey Workability program is to provide an
    opportunity for disabled individuals who are employed to purchase Medicaid
    coverage when their earnings would otherwise disqualify them for Medicaid."
    N.J.A.C. 10:72-9.1. This program applies "to employed, permanently-disabled
    individuals residing in New Jersey who are between the ages of 16 and 64 whose
    countable earned incomes are below 250%, and countable unearned incomes
    below 100% of the Federal poverty level for an individual or a couple." Ibid.
    6
    N.J.S.A. 30:4D-7(l) reads in pertinent part, "the commissioner is further
    authorized and empowered, at such times as he [or she] may determine feasible,
    . . . [t]o compromise, waive, or settle and execute a release of any claim arising
    under this act . . . . "
    A-4675-18T1
    5
    that the ALJ's findings were arbitrary, capricious, or unreasonable or that the
    ALJ's findings were unsupported by sufficient, competent or credible evidence
    in the record.
    G.S. raises the following issues on appeal:
    I.    DMAHS' DECISION TO DENY A WAIVER OF
    THE MEDICAID OVERPAYMENT WAS
    ARBITRARY,     CAPRICIOUS,       AND
    UNREASONABLE BECAUSE IT FAILED TO
    PROVIDE A CLEAR REASON FOR
    REJECTING THE ALJ’S INITIAL DECISION,
    AND    WAS   NOT     SUPPORTED    BY
    SUBSTANTIAL, CREDIBLE EVIDENCE IN
    THE RECORD.
    A. DMAHS Failed to Consider HCDSS'
    Affirmative Obligations in the Medicaid
    Renewal Process Pursuant to the Federal ACA
    Medicaid Regulations, 42 § C.F.R.
    435.916(a).
    B. By Failing to Comply with 
    42 CFR § 435.916
    ,
    HCDSS Retroactively Terminated Medicaid
    Benefits Without Evaluating G.S.’ Eligibility
    for Another Medicaid Program in Violation of
    
    42 C.F.R. § 435.916
    (f)(1).
    i.     HCDSS has a duty to evaluate a
    beneficiary’s eligibility for all other
    Medicaid     programs       prior    to
    termination of Medicaid benefits.
    ii.    DMAHS acted unreasonably in
    failing    to  acknowledge   the
    substantial,  credible  evidence
    A-4675-18T1
    6
    supporting       G.S.'    retroactive
    eligibility for Medicaid Workability
    in 2017.
    C. DMAHS Improperly Rejected the ALJ's
    Credibility Determinations of Lay Witnesses
    in Violation of the New Jersey Administrative
    Procedure Act, N.J.S.A. 52:14B-10(C).
    II.
    Our role in reviewing an agency decision is limited. R.S. v. Div. of Med.
    Assistance & Health Servs., 
    434 N.J. Super. 250
    , 260-61 (App. Div. 2014) (citing
    Karins v. City of Atl. City, 
    152 N.J. 532
    , 540 (1998)). We "defer to the specialized
    or technical expertise of the agency charged with administration of a regulatory
    system." In re Virtua-W. Jersey Hosp. Voorhees for Certificate of Need, 
    194 N.J. 413
    , 422 (2008) (citing In re Freshwater Wetlands Prot. Act Rules, 
    180 N.J. 478
    ,
    488-89 (2004)).      "[A]n appellate court ordinarily should not disturb an
    administrative agency's determinations or findings unless there is a clear showing
    that (1) the agency did not follow the law; (2) the decision was arbitrary, capricious,
    or unreasonable; or (3) the decision was not supported by substantial evidence."
    
    Ibid.
     (citing In re Herrmann, 
    192 N.J. 19
    , 28 (2007)).
    A presumption of validity attaches to the agency's decision. Brady v. Bd. of
    Review, 
    152 N.J. 197
    , 210 (1997); In re Tax Credit in re Pennrose Props., Inc., 
    346 N.J. Super. 479
    , 486 (App. Div. 2002). The party challenging the validity of the
    A-4675-18T1
    7
    agency's decision has the burden of showing that it was arbitrary, capricious, or
    unreasonable. J.B. v. N.J. State Parole Bd., 
    444 N.J. Super. 115
    , 149, (App. Div.
    2016) (quoting In re Arenas, 
    385 N.J. Super. 440
    , 443-44 (App. Div. 2006)).
    Nevertheless, "an appellate court is 'in no way bound by the agency's
    interpretation of a statute or its determination of a strictly legal issue.'" R.S. v. Div.
    of Med. Assistance & Health Servs., 
    434 N.J. Super. 250
    , 261 (App. Div. 2014)
    (quoting Mayflower Sec. Co. v. Bureau of Sec. in Div. of Consumer Affairs of Dep't
    of Law & Pub. Safety, 
    64 N.J. 85
    , 93 (1973)).
    The New Jersey Administrative Procedure Act, N.J.S.A. 52:14B-1 to
    52:14B-31, establishes an agency head's standard of review when considering
    an ALJ's initial decision.
    N.J.S.A. 52:14B-10(c) reads in pertinent part:
    In reviewing the decision of an administrative law
    judge, the agency head may reject or modify findings
    of fact, conclusions of law or interpretations of agency
    policy in the decision, but shall state clearly the reasons
    for doing so. The agency head may not reject or modify
    any findings of fact as to issues of credibility of lay
    witness testimony unless it is first determined from a
    review of the record that the findings are arbitrary,
    capricious or unreasonable or are not supported by
    sufficient, competent, and credible evidence in the
    record. In rejecting or modifying any findings of fact,
    the agency head shall state with particularity the
    reasons for rejecting the findings and shall make new
    A-4675-18T1
    8
    or modified findings supported by sufficient,
    competent, and credible evidence in the record.
    [Ibid.]
    When an agency head rejects or modifies an ALJ's "findings of facts,
    conclusions of law[,] or interpretations of agency policy in the decision . . ." the
    agency head "shall state clearly the reasons for doing so." N.J.S.A. 52:14B-10(c).
    Nevertheless, when rejecting or modifying an ALJ's findings of fact, "the agency
    head must explain why the ALJ's decision was not supported by sufficient credible
    evidence or was otherwise arbitrary." Cavalieri v. Bd. of Trs. of Pub. Emps. Ret.
    Sys., 
    368 N.J. Super. 527
    , 534 (App. Div. 2004) (first citing N.J.S.A. 52:14B-10(c);
    then citing S.D. v. Div. of Med. Assistance & Health Servs., 
    349 N.J. Super. 480
    ,
    485 (App. Div. 2002)).
    Medicaid is a federally created, state-implemented program that provides
    "medical assistance to the poor at the expense of the public." Estate of DeMartino
    v. Div. of Med. Assistance & Health Servs., 
    373 N.J. Super. 210
    , 217 (App. Div.
    2004) (quoting Mistrick v. Div. of Med. Assistance & Health Servs., 
    154 N.J. 158
    ,
    165 (1998)); see also 
    42 U.S.C. § 1396-1
    . Once a state elects to participate and has
    been accepted into the Medicaid program, it must comply with the Medicaid statutes
    and federal regulations. Harris v. McRae, 
    448 U.S. 297
    , 301 (1980); United Hosps.
    A-4675-18T1
    9
    Med. Ctr. v. State, 
    349 N.J. Super. 1
    , 4 (App. Div. 2002); see also 42 U.S.C. §§
    1396a, 1396b (2019).
    New Jersey participates in the federal Medicaid program pursuant to the
    New Jersey Medical Assistance and Health Services Act, N.J.S.A. 30:4D-1 to
    4D-19.5. Eligibility for Medicaid in New Jersey is governed by regulations
    adopted in accordance with the authority granted by N.J.S.A. 30:4D-7 to the
    Commissioner of the Department of Human Services (DHS).            The New Jersey
    Division of Medical Assistance and Health Services is a unit within DHS that
    administers the Medicaid program. N.J.S.A. 30:4D-5, -7; N.J.A.C. 10:49-1.1.
    Consequently, the Division is responsible for protecting the interests of the New
    Jersey Medicaid program and its beneficiaries. N.J.A.C. 10:49-11.1(b).
    As opposed to standard Medicaid, eligibility for ACA Medicaid is
    governed by federal statute, 
    42 U.S.C. § 180510
    (e)(1). That same statute
    establishes guidelines designed to ensure that states: meet eligibility verification
    requirements for program participation; meet the requirements for use of Federal
    funds received by the program; and also meet quality and performance standards
    established under this section. 
    Ibid.
     ACA Medicaid beneficiaries and the state
    agencies that administer them are guided by federal regulations 42 C.F.R
    453.900 through 453.965, authorized by section 1102 of the Social Security Act,
    A-4675-18T1
    10
    
    42 U.S.C. § 1302
    . These regulations establish guidelines for beneficiaries and
    the agencies that serve them on a variety of ACA Medicaid implementation
    issues, including but not limited to, applications for benefits, eligibility
    determinations, and eligibility redeterminations among other issues.
    III.
    The Director issued a final decision rejecting the ALJ's recommendation.
    That decision did not include a "review of the record" and a conclusion that the
    ALJ's findings are "arbitrary, capricious or unreasonable or are not supported by
    sufficient, competent, and credible evidence in the record." N.J.S.A. 52:14B-
    10(c).
    The Director failed to consider the facts related to G.S.'s mental health
    diagnosis and any impact that diagnosis may have had on G.S.'s ability to
    comprehend and comply with ACA Medicaid eligibility renewal requirements.
    The Director failed to consider the agency's missed 2017 eligibility
    determination for G.S., a violation of its affirmative duty under 
    42 C.F.R. § 435.948
     to conduct annual ACA Medicaid eligibility determinations. The
    Director did not consider the agency's failure to comply with 
    42 C.F.R. § 435.916
     (f)(1), which requires an agency to determine a recipient's potential
    eligibility for other insurance programs before "making a determination of
    A-4675-18T1
    11
    ineligibility." The Director found "that there is nothing in the record to suggest
    [G.S.] was eligible for the Workability Program [prior to 2018]." This finding
    by the Director contradicts the record that was before the ALJ. At the hearing,
    G.S. introduced testimony and medical records documenting G.S.'s mental
    health diagnoses in 2017 which were at least identical to, if not more severe
    than, the diagnoses that resulted in her Medicaid Workability eligibility
    determination in June 2018. After considering G.S.'s significant 2017 medical
    history, along with the agency's failure to issue a redetermination form to G.S.
    that year, the ALJ inferred that G.S. would have been eligible for Medicaid
    Workability in 2017 had the agency carried out its duty to perform an annual
    redetermination under § 435.916(a) (1)-(2). This finding, along with the others
    listed above, was weighed by the ALJ in balancing the considerations for and
    against waiver. In rejecting this finding, the Director failed to "state with
    particularity the reasons for rejecting the [ALJ's] findings[,]"nor did she "make
    new or modified findings supported by sufficient, competent, and credible
    evidence in the record." 52:14B-10(c). Finally, the Director failed to consider
    the ALJ's witness credibility findings with respect to G.S. or the agency's
    representative. By failing to consider credibility findings of the ALJ, as well
    not considering the other facts cited by the ALJ in her decision, the Director
    A-4675-18T1
    12
    effectively rejected them without giving reasons for doing so. She made no
    findings to support her decision as required by the Act. Ibid.
    We find that the Director, in rejecting the ALJ's decision, did not state
    clearly the reasons for doing so. She did not review the record and conclude that
    the ALJ's credibility and fact finding was arbitrary, capricious, or unreasonable.
    With one exception, the Medicaid Workability eligibility issue, she did not find
    that the ALJ's findings were unsupported by sufficient, competent, or cred ible
    evidence in the record. Lastly, the Director failed to make new or modified
    findings supported by competent evidence in the record in her final decision.
    These steps are mandated by the Administrative Procedure Act. The Director's
    failure to apply the appropriate standard of review in reaching her final decision
    was arbitrary and capricious.     S.D., 349 N.J. Super. at 485 (citing Lefelt,
    Miragliotta & Prunty, Administrative Law & Practice, New Jersey Practice
    Series, § 6.16 at Supp. 23 (2001 ed. Supp.)).
    We remand to the Director of the Division of Medical Assistance and
    Health Services for review of the ALJ's initial decision in a manner consistent
    with the standards outlined in this opinion.
    Reversed and remanded. We do not retain jurisdiction.
    A-4675-18T1
    13