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Article Excerpt
NOTE CONTENTS
INTRODUCTION I. MEDICAID STRUCTURE AND IMPLEMENTATION II. THE EFFECTS OF THE DEFICIT REDUCTION ACT ON COST SHARING AND BENEFITS UNDER MEDICAID A. New Forms of Cost Sharing and Premiums B. New Restrictions on Benefits III. MEDICAID ENFORCEMENT UNDER 42 U.S.C. [section] 1983 A. Emerging Limitations on [section] 1983 Actions B. The DRA and Compelling the Availability of Benefits Under [section] 1983 1. The Text and Structure of the DRA Eliminate the Enforceability of Medicaid Under [section] 1983 2. The Empirical Effects of DRA-Based Premiums and Cost Sharing Undermine Medicaid Enforceability Under [section] 1983 3. The New DRA Benefits Packages Do Not Confer Individual Rights Enforceable Under [section] 1983 IV. ENFORCING FEDERAL MEDICAID REQUIREMENTS THROUGH STATE-LEVEL "FAIR HEARINGS" A. The Boundaries of the Federal Fair Hearing Requirement 1. Textual Analysis of the HHS Regulations and Supporting Materials 2. Federal Case Law on the Fair Hearing Requirement B. Fair Hearings in the States C. The Efficacy of Fair Hearings for Enforcing the Terms of Medicaid State Plans CONCLUSION
INTRODUCTION
The Medicaid program is the government's primary healthcare financing regime for low-income Americans. Created alongside the more contentious Medicare program in 1965, its original reach was quite limited. (1) Over time, Medicaid has grown significantly, and now helps provide care for more than twelve million elderly and disabled people, in addition to thirty-nine million beneficiaries with incomes in the vicinity of the federal poverty line. (2) Codified in Title XIX of the Social Security Act, (3) the program is supervised by the Centers for Medicare and Medicaid Services (CMS), a federal oversight agency situated within the U.S. Department of Health and Human Services (HHS), (4) but it is administered by individual implementing agencies within each state.
Medicaid, like all joint state-federal spending programs, operates pursuant to a series of contractually styled agreements between the federal government and individual states. (5) States agree to provide financing for certain groups of eligible enrollees and to cover a portion of their healthcare costs. In exchange, the federal government partially subsidizes the financing of healthcare for these individuals. (6) Ostensibly a voluntary program, all fifty states have chosen to participate in Medicaid, taking full political credit for healthcare expansions while shouldering only a portion of the costs of service. Over time, state budgets have become so inextricably linked with federal Medicaid funding that withdrawal from the program on the part of any state seems politically and financially untenable. (7)
Like many state-federal partnerships, ensuring that states faithfully implement the federally defined requirements of the Medicaid program can be a difficult task. When states agree to participate in Medicaid, they must provide assurances that they will act "in conformity with the specific requirements" of the federal Medicaid statute and applicable CMS regulations. (8) Although states may feel compelled for fiscal and political reasons to take Medicaid funding, however, it is not always the case that they will comply with the requirements of the federal statute or continue over time to provide the services that they have agreed to provide. (9)
By design, the intended mechanism for keeping states accountable for their obligations under Medicaid is found in 42 U.S.C. [section] 1396c, which allows the Secretary of HHS, upon a sufficient finding of noncompliance, to withhold some or all of the federal government's grant payments until the state begins to act in accordance with the requirements of its program. (10) As a practical matter, however, this mechanism is ill-equipped to ensure compliance for several reasons. First, since the primary role of federal grant-in-aid agencies is to facilitate cooperation with the states, enforcement takes on a low priority. (11) Second, the remedy is so destructive to the underlying aid program that it is "rarely, if ever, invoked." (12) Third, the funding cutoff provision requires CMS to hold a hearing to determine whether or not a state is out of compliance with the requirements of the program. This process can be burdensome and time-consuming. (13) Finally, federal administrators are not accountable to local beneficiaries and as a result may prioritize good working relations with their state counterparts over the concerns of individual Medicaid enrollees. (14)
In the absence of an effective institutional-level remedy, individual beneficiaries seeking to force states to abide by federal Medicaid requirements historically have turned to 42 U.S.C. [section] 1983, a nineteenth-century civil rights measure that provides a federal cause of action against state officials who violate individual rights secured by federal statutes or the Constitution. (15) The Supreme Court's decision in Maine v. Thiboutot first recognized the right to bring [section] 1983 actions against state actors to enforce federal statutory rights in 1980. (16) A decade later, Wilder v. Virginia Hospital Ass'n expressly affirmed the applicability of [section] 1983 to the Medicaid statute. (17) In recent decades, these actions have become a primary mechanism by which individual beneficiaries and advocacy groups have forced state Medicaid agencies to comply with federal Medicaid requirements. (18) Through [section] 1983, Medicaid beneficiaries have been able to operate as private enforcement agents, using litigation to supplant the traditional role of federal bureaucrats in enforcing the public interest as defined by Congress. (19)
The importance of [section] 1983 for maintaining the fidelity of states to their particular Medicaid agreements extends beyond the ability of beneficiaries to obtain favorable judgments in federal court. A primary purpose of [section] 1983 has always been to deter states from violating federal restrictions. (20) So long as state agencies are faced with a credible threat of being held accountable through the [section] 1983 mechanism, they are likely to be discouraged from moving forward with changes that contravene federal requirements.
Although the historical effectiveness of [section] 1983 for enforcing federal Medicaid requirements is beyond dispute, its continued legal vitality is uncertain. In 2005, Congress overhauled several provisions of the Medicaid statute. In the process, it fundamentally altered the contours of the traditional federal-state relationship, giving states for the first time ever the flexibility to restructure their benefit programs without regard to longstanding statutory rules that had previously made many aspects of the program compulsory. (21) These major legislative modifications, when viewed in light of the movement by the Supreme Court over the last decade to narrow the scope of cognizable [section] 1983 claims generally, cast serious doubt on the continued viability of the provision as a functioning mechanism for ensuring state fidelity to federal Medicaid requirements, in particular with regard to Medicaid's most basic requirement that states make "available" those benefits they are obligated to provide under their state plans. (22) Faced with these new legislative developments, federal courts can be expected to find that [section] 1983 no longer provides a cause of action for beneficiaries suing to force states to provide benefits.
With the threat of [section] 1983 litigation no longer serving as a deterrent to states that might feel compelled to reduce benefits during hard times, beneficiaries are likely to seek alternate means of holding states accountable. In seeking an effective substitute for [section] 1983, beneficiaries and advocacy groups should consider utilizing state law provisions that authorize administrative review of changes in Medicaid coverage. The Medicaid statute requires individual states to provide such "fair hearing[s]" to "any individual whose claim for medical assistance under the [state] plan is denied or is not acted upon with reasonable promptness." (23) States have great flexibility in implementing the "fair hearing" requirement, and the efficacy of these administrative actions as a replacement form of enforcement action will depend largely on the circumstances of each individual state. A thorough analysis of the minimum requirements for these hearings, along with the ways in which they vary across many jurisdictions, suggests that beneficiaries should be able to effectuate some amount of private enforcement of federal Medicaid requirements, including the crucial "availability" requirement, through these state administrative processes. These hearings will not, however, provide an adequate remedy in all cases.
The following examination of modern options for Medicaid beneficiary enforcement proceeds in five parts. Part I outlines the basic administrative structure of Medicaid and the processes by which states are bound to--and can subsequently modify--their individual agreements with the federal government. Part II looks at the changes to Medicaid in the Deficit Reduction Act of 2005 (DRA), (24) focusing in particular on the states' new flexibility to limit or expand the provision of traditionally enumerated benefits to specific subgroups of Medicaid recipients in ways previously barred by statute. Part III examines the evolution of [section] 1083 jurisprudence. It argues that because of the DRA's changes, Medicaid's "availability" requirement will now likely fail the Gonzaga v. Doe standard, which requires a showing that Congress intended "unambiguously" to confer a federal right in order to sustain a [section] 1983 claim. (25)
Part IV examines the extent to which state-level fair hearings can help fill the void once the federal courts begin scaling back [section] 1983 as a cause of action for Medicaid beneficiary enforcement claims. It focuses on the ways in which individual states implement Medicaid hearing requirements, arguing that a robust reading of that requirement can be combined with state Administrative Procedure Acts to allow individual beneficiaries to bring state-level administrative challenges to contest actions by states that violate federal Medicaid requirements. Finally, this analysis concludes by noting that although attempts at enforcement through state administrative hearings provide an incomplete substitute for [section] 1983 enforcement actions, they remain a practical and immediately viable alternate option for ensuring that states continue to provide those benefits they are obligated to provide under the terms of their state Medicaid agreements.
I. MEDICAID STRUCTURE AND IMPLEMENTATION
This Part briefly sketches key characteristics of the Medicaid program, focusing on how states and the federal government agree on the provision of particular benefits, as well as procedures for states to modify those agreements lawfully. At its heart, Medicaid is an optional grant program offering a massive financial subsidy to states that provide healthcare financing to low-income Americans. In exchange for this support, states are obligated to comply with certain federal stipulations. Historically, states participating in Medicaid have been required to provide an enumerated set of mandatory benefits to all eligible beneficiaries. (26) These mandatory benefits cover a broad range of medical assistance, including physicians' services, (27) laboratory and x-ray services, (28) inpatient hospital services, (29) and comprehensive early and periodic screening, diagnostic, and treatment services (EPSDT) for children. (30) The program also provides a variety of nursing facility services for adults, (31) and as a result has seen massive growth as a source of long-term care financing. (32) Beyond the mandatory benefits, which must be provided to all eligible beneficiaries as a condition of receiving any federal subsidies, states also have historically had the option of providing optional services above and beyond the base program. These optional services include, for example, prescription drugs (33) and targeted case management services. (34) Despite their discretionary status, optional services account for a significant portion of most states' Medicaid expenditures. (35)
Medicaid uses both the promise of federal funds and the threat of funding withdrawal to shape the coverage provided by individual states. By reducing the costs to states to provide particular services, federal matching funds facilitate new initiatives and coverage expansions. (36) Despite some attempts to engineer the broad contours of the program from Washington, however, the existence of optional Medicaid services, combined with states' ability to roll Medicaid funds into broader statewide financing schemes, has led to a great deal of variation from state to state in the design and implementation of low-income healthcare financing. (37)
Each state's individual Medicaid program is codified in its "state plan," a public document on file with CMS that records which optional services a state has elected to provide and stipulates how states intend to comply with the requirements of the federal Medicaid statute and any applicable supplementary regulations. (38) State plan documents contain the complete record of state Medicaid programs since their inception. Occasionally, states may modify their state plans beyond those options specifically authorized under current law. In those instances, they must petition the HHS Secretary for "waiver" approval. (39) The rest of the time, when states wish to change the terms by which they implement their programs while staying within the rules laid out by the Medicaid statute and federal regulations, they must file a State Plan Amendment (SPA) with CMS. SPAs must be filed any time a state makes "[m]aterial changes" to the law, organization, policy, or operation of its Medicaid program. (40) SPAs, which must be approved by the HHS Secretary, (41) authorize state plan changes that comply with the existing statute and are presumptively accepted by CMS. (42) Given the statutory enumeration of the grounds upon which states can modify their Medicaid programs through the SPA process, approval of amendments is generally straightforward and fairly predictable. In some cases, CMS even provides "preprint" sheets--skeleton forms that state administrators can fill in containing boxes that they can check off to indicate the options they have chosen to implement--to streamline the process. (43)
Because they define the terms of each individual state's obligations under Medicaid, state plans are at the center of the debate over what benefits states must provide to their Medicaid enrollees. Although the federal statute delineates between mandatory and optional benefits, once a state codifies its intent to provide an optional benefit in a state plan, it must follow through on its promise to provide those benefits as surely as if they were written into the federal statute itself as mandatory requirements. (44) The central focus of this inquiry is on how to respond effectively to actions by states that illegally violate the terms of their state plans without properly amending them.
II. THE EFFECTS OF THE DEFICIT REDUCTION ACT ON COST SHARING AND BENEFITS UNDER MEDICAID
Significant aspects of the traditional conception of Medicaid were called into question by the enactment of the Deficit Reduction Act of 2005 (DRA). (45) Signed on February 8, 2006, Congress designed the DRA to streamline existing federal spending programs and reduce net expenditures. (46) The Congressional Budget Office (CBO) roughly estimates that the legislation will reduce direct federal spending by nearly one hundred billion dollars over the next ten years. (47) Over a quarter of these savings are expected to come from decreases in Medicaid spending. (48)
Title VI of the DRA deals specifically with the Medicaid program. (49) Over sixty percent of the projected savings from the DRA's Medicaid alterations and reductions--sixteen billion dollars over ten years--is expected to come from the new benefits restrictions, cost sharing, and premiums provisions of the DRA. (50) This Part details how these three categories of provisions fundamentally alter the basic, longstanding structure of Medicaid for large swaths of current beneficiaries. Section II.A addresses the new forms of cost sharing and premiums that may be imposed on Medicaid recipients under the DRA, while Section II.B examines the DRA's provisions allowing states to radically restructure their overall Medicaid benefits packages. All of these factors combine to make much of what was once required under Medicaid a matter of state policy discretion. Part III will explain how this statutory shift from the provision of required, enumerated benefits to broad state policy discretion so fundamentally alters the basic assumptions underlying the application of 42 U.S.C. [section] 1983 as to render that remedy inoperable with regard to Medicaid.
A. New Forms of Cost Sharing and Premiums
The DRA grants significant new powers to the states to force many beneficiaries to shoulder a significant portion of their own Medicaid costs. (51) The most common cost-sharing mechanisms are deductibles and various forms of copayments. (52) Although prior Medicaid law allowed for some nominal levels of cost sharing, from 1982, such payments were limited to three dollars for the majority of Medicaid services. (53) Under the new, post-DRA regime, however, states have the option of implementing considerably more robust cost-sharing mechanisms for Medicaid recipients at or above the federal poverty line. (54) The DRA also grants states high levels of discretion regarding when to implement cost sharing, and precisely how much of it to employ. (55)
A similar form of precision control is created by the DRA in the area of premiums. Premium provisions require Medicaid recipients to pay enrollment fees or equivalent charges as a condition of service. (56) Under the old rules governing Medicaid, premiums were narrowly restricted and generally allowed only by waiver. (57) The DRA, however, created a new statutory framework allowing for the imposition of significant new premiums. (58) Under the new law, states can apply different premiums to different state-defined subgroups of the eligible population at values of up to five percent of a family's total income. Although some groups of Medicaid beneficiaries are exempt under the DRA from the new premiums and cost sharing options, (59) the DRA retains the potential to affect the substantial proportion of Medicaid recipients--including many low-income adults--who are without special statutory protection.
The ability of states to impose highly specialized costs is particularly relevant for understanding the implication of these DRA provisions because there is substantial empirical evidence suggesting that, in the context of Medicaid, higher premiums and cost sharing lead to decreased enrollment and service utilization. (60) One examination of the effect of higher premiums in waiver states showed that premiums reaching five percent of income decreased enrollment of eligible beneficiaries by nearly fifty percent. (61) Similar results have been found in case studies commissioned by several state governments, including Oregon, (62) Rhode Island, (63) and Utah. (64) When Oregon implemented cost sharing above nominal levels via waiver in 2003, nearly half of the enrollees targeted for increased premiums and cost sharing lost coverage within six months. (65) Over a quarter of those who withdrew from the program indicated an inability to afford cost-sharing requirements as their primary reason for losing coverage. (66) An analysis of claims before and after the implementation of higher cost-sharing requirements in Oregon showed a thirty-three percent drop in prescription drug claims and a seventeen percent increase in emergency room utilization. (67) These outcomes are consistent with results predicted by the theoretical literature on the effects of cost sharing. (68) Given that raising premiums and cost-sharing requirements can trigger substantial flight from particular programs and services, the power to impose premiums and cost sharing might well be characterized as the power to compel significant disenrollment, or to limit substantially the use of particular services, by selectively deploying these mechanisms.
Furthermore, in addition to allowing unprecedented levels of premiums and cost sharing to be imposed on Medicaid beneficiaries, the new law also provides, for the first time, a viable enforcement mechanism for inducing compliance with those cost provisions. Prior law required service providers to treat patients at the point of service even if individual recipients were unwilling or unable to pay the required cost-sharing expenses. (69) Although providers had the option of terminating service to individuals who were delinquent in their payment of nominal premiums after two months, they were prohibited from requiring prepayment as a condition of service. (70) Under the DRA, however, states can condition service on the prepayment of premiums. (71) Moreover, states are not required to enforce premium payments across all eligible beneficiaries, but rather are explicitly granted the flexibility to apply the prepayment requirement selectively to discrete subgroups of beneficiaries that the state can define in whatever manner it chooses. (72) For cost sharing, states may now permit providers to require the payment of cost sharing "as a condition for the provision" of items or services. (73) Although emergency treatment is still insulated...
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