Medicaid and beneficiary enforcement: maintaining state compliance with federal availability requirements.

• Author: Donenberg, Jon

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...