Health Law Daily Practice of terminating appeals hearings via remand violated fair hearing
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Monday, February 5, 2018

Practice of terminating appeals hearings via remand violated fair hearing

By Jeffrey H. Brochin, J.D.

The practice by New York State Department of Health (DOH) and New York State Office of Temporary and Disability Assistance (OTDA) of terminating fair hearing appeals of local agency denial of benefit decisions by reversing and remanding those matters back to local agencies violated the Medicaid beneficiary’s right to a timely fair hearing decision, a federal district court in New York has ruled. Despite the fact that the ALJ gave specific direction to the local agency to determine cost effectiveness following the directives set forth in Administrative Directive 87 ADM-40., the beneficiary was entitled to "final administrative action" on his claim within 90 days after the fair hearing request, notwithstanding the remand (Lisnitzer v. Zucker, January 26, 2018, Wexler, L.).

Background. A Medicaid applicant whose claim is denied by a local agency is entitled to an opportunity for "a fair hearing before the State agency" under 42 U.S.C. § 1396a(a)(3). In New York, DOH has established a system to provide an opportunity for a fair hearing to any individual whose claim for medical assistance is denied or is not acted upon with reasonable promptness. DOH has designated OTDA to conduct Medicaid fair hearings and to make findings and recommendations to DOH, and DOH remains responsible for making final administrative determinations and issuing final decisions.

The beneficiary had requested that a county agency approve Medicaid payment of his monthly Medicare Part B premium pursuant to a state policy directive designed to maximize Medicare coverage for high users of medical services. After the county agency denied his application without considering the directive, he requested a fair hearing from the state’s Office of Administrative Hearings (OAH) to contest the adverse action. On September 6, 2011, the DOH reversed the County Agency’s denial of benefits and remanded the matter to the county agency, directing the agency to make the eligibility determination based on the directives in 87 ADM-40 and to immediately comply with the directives as required by 18 N.Y.C.R.R. 358-6.4. The "Transmittal of Fair Hearing Decision to Appellant" further provided: "If the decision shows that you won your hearing and your local social services Agency is directed to take certain action, the Agency should do this forthwith (as quickly as possible). If you do not feel that the Agency has taken the action which the decision tells it to take within 10 days after you receive this decision, you may fill out the attached form to submit a complaint to the Compliance Unit." On September 23, 2011, the beneficiary filed this federal action.

Practice being challenged. The practice of DOH has been that if a fair hearing decision reverses the denial of Medicaid benefits and remands the matter to the local agency for further consideration, DOH prohibits the local agency from denying the application upon the reason set forth in the local agency’s denial that was reversed. However, when the matter is remanded to the local agency for further consideration, DOH requires the local agency to continue to process the application if one or more eligibility factors need to be considered and issue a new decision as soon as possible, while preserving the applicant’s original application date. The beneficiary argued that the practice of terminating fair hearings by reversing and remanding rather than by determining eligibility for Medicaid benefits by a definitive and final fair hearing decision within the required time limit violated his right to a fair and timely hearing. He further petitioned to have the case certified as a class action.

Action not moot by agency approval. DOH contended that the action became moot when the county agency determined on May 17, 2012 that Medicaid would pay the beneficiary’s monthly Medicare Part B premium. Furthermore, they opposed the renewed motion for class certification, mainly on the grounds that the beneficiary failed to renew the motion during the trial and that he was not an adequate class representative. The beneficiary responded that he properly renewed his motion for class certification and that (1) his claims were not moot because they were "capable of repetition yet evading review," and (2) that his claim for purposes of a class action was preserved by the "relation-back doctrine," under which the granting of class certification relates back to the filing of the complaint.

Standing for class action and ‘relation-back’. The court agreed that the beneficiary properly renewed his motion for class certification, noting that a class action cannot be maintained without a named plaintiff who has standing, but that once standing is established for a named plaintiff, standing is established for the entire class. Constitutional standing requires a plaintiff to demonstrate that he has personally suffered: (1) an injury-in-fact; (2) that is fairly traceable to defendants’ alleged misconduct; and (3) is likely to be redressed by a favorable decision. The related mootness doctrine ensures that the occasion for judicial resolution established by standing persists throughout the life of a lawsuit.

Regarding class certification and the relation-back doctrine, the court found that the relation-back doctrine has unique application in the class action context, preserving the claims of some named plaintiffs for class certification purposes that might well be moot if asserted only as individual claims.

DOH practice violated right to fair hearing. The beneficiary contended that by remanding matters rather than developing an administrative record to support a substantive ruling on the merits, the local agency was free to issue a post-remand determination matching the one that initiated the appeal, and that this left the applicants to exhaust an administrative remedy that potentially has no end. The court agreed with the beneficiary and held that the DOH and OTDA practice of terminating fair hearing appeals of local agency denial of benefit decisions by reversing and remanding those matters back to local agencies violated the Medicaid beneficiary’s right to a timely fair hearing decision.

The case is No. 2:11-cv-04641-LDW-ARL.

Attorneys: John F. Castellano (Mercy Advocate Program) and Peter Vollmer (Law Office of Peter Vollmer, PC) for Leslie Lisnitzer. Susan M. Connolly, Office of the Attorney General, for Howard Zucker.

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