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From Health Law Daily, November 12, 2014

ACA Medicaid eligibility changes direct court to vacate 28-year injunction

By Bryant Storm, JD

A district court vacated an injunction, which prohibited HHS and the Indiana Family and Social Services Administration from denying individuals eligibility for Medicaid on the grounds that they were not eligible for Aid to Families with Dependent Children (“AFDC”) benefits because the income of a sibling residing in the applicant’s household brought the applicant’s income over the eligibility threshold. The court reasoned that the injunction had to be vacated because the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) altered the eligibility requirements regarding the use of sibling income in Medicaid eligibility determinations such that the injunction became moot (Reed v Minott, November 7, 2014, Lawrence, W).

Class action. In 1985, a class action lawsuit was filed against HHS and the state of Indiana in response to a change in eligibility determinations for AFDC and Medicaid benefits. Under the 1984 version of 42 U.S.C. sec. 602(a)(38), the income of an AFDC applicant’s sibling who lived with the applicant was to be considered as part of the AFDC applicant’s income for the purposes of AFDC benefit eligibility. Medicaid eligibility, in some cases was then premised on AFDC eligibility. In other words, if an individual was eligible or ineligible for AFDC benefits, the individual also became, respectively, eligible or ineligible for Medicaid. Therefore, when the sibling income determination changed, some individuals lost AFDC benefits as well as Medicaid eligibility. The class action suit was filed to change that practice as it related to Medicaid.

Injunction. The class of newly ineligible applicants argued 42 C.F.R. sec. 435.113 required that Indiana provide Medicaid to individuals who would be eligible for AFDC “except for an eligibility requirement used in that program that is specifically prohibited under title XIX.” Under 42 U.S.C. sec. 1396a(a)(17)(D), sibling income was one such “specifically prohibited” eligibility requirement. The court agreed with the families who were going to lose Medicaid eligibility due to AFDC eligibility and the court issued an injunction preventing Indiana and HHS from denying Medicaid applicants eligibility on the basis of sibling income.

ACA. In 2013, following the passage of the ACA, HHS filed a motion seeking to have the court grant HHS relief from the injunction because HHS was unable to comply with the requirements of the injunction and the requirements of the ACA. All of the parties to the lawsuit agreed that, in light of the ACA changes to Medicaid eligibility, the injunction could not remain in place. However, the parties disagreed as to whether the injunction should be vacated or modified.  Most notably, for purposes of the injunction, as a result of the ACA, sibling income was no longer “an eligibility requirement used in AFDC that [was] specifically prohibited under title XIX.” However, the class of applicants argued that the injunction should be modified to continue to protect the applicants’ eligibility for Medicaid because there were still circumstances where the new income eligibility provisions of the ACA did not apply.

Proposal. The class of plaintiffs proposed an alternate injunction; however, the court rejected the proposal because the modified injunction was too broad. Specifically, the court held that the proposed modification treated the injunction as though it applied to any individual who sought Medicaid eligibility. The court explained that the original injunction only applied to the class of individuals who were denied Medicaid eligibility on the grounds that they would have been eligible for AFDC but for the income of a sibling. For the original class, the court held that the ACA changed the law and rendered the injunction moot. However, for the remainder of individuals seeking Medicaid, the court held that it would be improper to after the fact extend the injunction to cover individuals whose qualification for Medicaid does not rest on their eligibility for AFDC benefits. Accordingly, the court refused to accept the modified injunction and vacated the injunction outright.

The case number is 1:85-cv-1353-WTL-DKL.

Attorneys: Gavin Minor Rose (ACLU of Indiana) for Brenda Reed. Betsy M. Isenberg, Office of the Indiana Attorney General, for Debra Minott. Jill Z. Julian, United States Department of Justice, for Kathleen Sebelius.

Companies: U.S. Department of Health and Human Services

MainStory: TopStory EligibilityNews CMSNews IndianaNews

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