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From Health Law Daily, June 4, 2015

Fragile Medicaid contribution appeal dismissed before it reaches a ‘breaking point’

By Bryant Storm, J.D.

The Second Circuit affirmed the dismissal of a Medicaid beneficiary’s lawsuit asserting that Medicaid law permitted her to deduct guardianship fees from her Medicaid-required contributions to the costs of nursing home care. Although the Second Circuit held that the district court improperly dismissed the case on standing grounds, the appellate court reasoned that dismissal was still appropriate because the beneficiary failed to state an adequate claim for relief. Specifically, the beneficiary failed to identify how the determination of her Medicaid-required contribution constituted a violation of a federal right (Backer v. Shah, June 3, 2015, Winter, R.).

Income. Although Medicaid covers some or all of nursing home expenses for Medicaid beneficiaries, under the Medicaid Act (42 U.S.C. §1396), beneficiaries are obligated to contribute their available income to the cost of the institutional care. The “available income” is modified by a deduction for a personal needs allowance, which in New York is $50. The remaining income is known as “net available monthly income” (NAMI).

Guardian. Mindy Backer resides in a New York nursing home. Gay Lee Freedman, Backer’s sister, was appointed to serve as her guardian under New York law. The order appointing Freedman indicated that income deposited in the guardian account would be unavailable income and not included in the NAMI. However, in a separate determination from the New York Department of Health, it was decided that Backer “could not deduct the guardianship fees and was required to contribute approximately $1,800 per month in NAMI toward her nursing home costs.”

Lawsuits. Backer first filed suit in state court challenging the Department of Health determination on the grounds that the guardianship order exempted the guardianship fees from inclusion in the NAMI. The state court upheld the Department of Health determination, finding that the agency had a rational basis and Medicaid regulations did not authorize the deduction from the NAMI. While the state challenge was ongoing, Backer filed suit in federal district court seeking an injunction under 42 U.S.C. §1983, alleging that the Department of Health violated the Medicaid Act. The district court dismissed the lawsuit on the grounds that Backer lacked standing because she failed to tie any injury that was “fairly traceable” to the Department of Health. The district court also held that she failed to state a valid claim for relief. Backer appealed the district court’s decision.

Standing. On appeal, the Second Circuit started with the question of standing. The appellate court disagreed with the lower court’s analysis that Backer’s “injury was ‘solely attributable’ to her own action in paying her guardian instead of her nursing home costs.” The court reasoned that although Backer may have contributed to her injury by not seeking relief from the guardianship fees before the guardianship court, Backer’s injury was not “solely attributable” to her own actions. The court held that the Department of Health ruling contributed to her injury as well.

Merits. The court then determined that to succeed on the merits of her claim under Section 1983, Backer needed to show a violation of a federal right and not just a violation of federal law. The court considered Backer’s argument that she could show a violation of a federal right under Section 1396, because the Medicaid Act requires that Medicaid plans “provide such safeguards as may be necessary to assure that eligibility for care and services under the plan will be determined . . . in a manner consistent with simplicity of administration and the best interests of the recipients.”

The court was unpersuaded by the argument and held that Section 1396 of the Medicaid Act was too “vague and amorphous” to create a Section 1983 private right of action. The court held that balancing the costs and balances of the Medicaid act under Section 1396 “would strain judicial competence to a breaking point.” The court also added that the Department of Health could not have been said to have been unambiguously obligated to expand the $50 personal needs allowance to encompass the high costs of guardianship fees.

The case is Docket No. 14-1367-cv.

Attorneys: Michael Korsinsky (Korsinsky & Klein, LLP), Mindy Backer. Bethany Aryn Davis Noll, New York State Office of the Attorney General, for Nirav R. Shah, M.D., M.P.H., Commissioner of the New York State Department of Health.

Companies: New York State Department of Health

MainStory: TopStory MedicaidNews EligibilityNews MedicaidPaymentNews ConnecticutNews NewYorkNews VermontNews

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