States bear the ultimate responsibility for ensuring their Medicaid programs comply with federal law, despite the passage of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). In a split decision (2-1), the Sixth Circuit affirmed the grant of a preliminary injunction ordering fair hearings to a class of Tennessee Medicaid applicants that had their applications delayed due to computer problems occasioned by the ACA requirement to use the modified adjusted gross income method to determine Medicaid eligibility for nondisabled beneficiaries. The dissenting judge felt the preliminary injunction action was moot because all of the Medicaid applicants received an eligibility determination before the district court certified the proposed class (Wilson v. Gordon, May 23, 2016, Moore, K.).
Background. Eleven residents of Tennessee who applied for Medicaid (residents), filed a class action complaint for injunctive relief against Darin Gordon, the Director of the Bureau of TennCare; Larry Martin, the Commissioner of the Department of Finance and Administration; and Dr. Raquel Hatter, the Commissioner of Human Services (collectively, Tennessee). The residents allege that the delays they experienced in receiving eligibility determinations on their Medicaid applications violated the Medicaid statute, and that the Tennessee’s failure to provide a fair hearing on their delayed applications violated both federal law and the Due Process Clause of the United States Constitution.
Statutory and regulatory requirements. Soc. Sec. Act §1902(a)(8) requires that states allow anyone who wishes to apply for Medicaid to do so and to provide assistance to eligible individuals with reasonable promptness. The regulations at 42 C.F.R. sec. 435.912 require the agency to make eligibility determinations within 45 days of receipt of an application (90 days when applicants claim eligibility based on disability). If the deadline is not met, the regulation and Soc. Sec. Act §1902(a)(3) require that the applicant be given an opportunity for a hearing.
Tennessee technology issues. In order to implement the ACA Section 2002 requirement to use the modified adjusted gross income method to determine Medicaid eligibility for nondisabled beneficiaries, Tennessee needed to make extensive changes to its computer system. When state officials realized that their new Tennessee Eligibility Determination System (TEDS) would not be operative on October 1, 2013, they prevailed upon CMS to allow Medicaid eligibility determinations to be made by the federal marketplace. As such, Tennessee essentially stopped processing applications for Medicaid on October 1, 2013, and referred all potential applicants to the federal marketplace and made no effort to resolve the pending applications.
District court. The district court certified the class and granted the Residents’ motion for a preliminary injunction, which required Tennessee to grant a fair hearing on delayed applications to class members who request one (see Volunteer State must resume responsibility for eligibility, hearings, September 10, 2014). Tennessee appealed the grant of the preliminary injunction.
Appeal of preliminary injunction. The Sixth Circuit held that the district court did not abuse its discretion in granting the preliminary injunction because the residents were likely to succeed on the merits and because Tennessee retains ultimate responsibility for ensuring their Medicaid program complies with federal law, despite the passage of the ACA.
The court noted that the Medicaid statute requires that the state designate a single state agency to administer or to supervise the administration of the plan (42 U.S.C. §1396a(a)(5)). And although a state can delegate authority to other entities to perform certain functions, the state Medicaid agency may not delegate, to other than its own officials, the authority to supervise the plan or to develop or issue policies, rules, and regulations on program matters (42 C.F.R. sec. 431.10(c), (e)). As such, Tennessee could not point the finger at CMS for its failure to enroll applicants and provide timely hearings.
The court also rejected Tennessee’s argument that the preliminary injunction would require it to supervise federal officials at CMS. According to the court, the preliminary injunction merely requires Tennessee to provide its own hearing on delayed applications; it does not require Tennessee to commandeer or directly supervise CMS.
Tennessee also claimed that CMS is a required party in the case because CMS bears more responsibility than Tennessee for the delays the residents experienced and no regulation compels CMS to provide information to states on pending applications. The court decided that just because there is no mechanism compelling CMS to transfer information to states on pending applications does not mean that there is no way for a state to obtain the information necessary to hold a hearing on delayed applications. In fact, this was proven by the way Tennessee was able to act on the applications of several of the residents and other individuals whose names were brought to the attention of Tennessee.
Dissent. In a dissent, Circuit Judge Sutton wrote that the injunction action is moot because before the district court certified the proposed class, the residents obtained a commitment from Tennessee, through a bargained-for agreement between the parties, that Tennessee would provide each of the named residents and 100 others of their choosing with an eligibility determination. According to Sutton, Tennessee delivered on its promise, with all 11 residents receiving a determination and obtaining Medicaid benefits. The 100 other individuals obtained the sought-after determinations, and the vast majority of them now receive Medicaid benefits. The others were not fully processed because Tennessee had not received the proper documentation.
The case is No. 14-6191.
Attorneys: Christopher E. Coleman (Tennessee Justice Center) for Melissa Wilson. Brian Barnes (Cooper & Kirk PLLC) for Darin Gordon, Deputy Commissioner, Tennessee Department of Finance and Administration.
Companies: TennCare; Tennessee Department of Finance and Administration; Tennessee Department of Human Services
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