No. 85-504 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1986 

DEACONESS MEDICAL CENTER OF BILLINGS, 

INC. , Petitioner and Appellant, 

DEPARTMENT OF SOCIAL & REHABILITATION 

SERVICES & STATE BOARD OF SOCIAL & 

REHABILITAION APPEALS, & PETROLEUM 

COUNTY, a political subdivision, of 

the State of Montana 

Defendants and Respondents. 

APPEAL FROM: District Court of the Thirteenth Judicial District, 

In and for the County of Yellowstone, 

The Honorable Charles Luedke, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Felt & Martin; Kenneth S. Frazier argued, Billings, 

Montana 

For Respondent: 

Russell E. Cater argued, Dept. of SRS, Helena, Montana 

Wilkins & Berger; William Berger argued, Lewistown, 

Montana 

Submitted: A~rll 1, 1986 

Decided: June 18, 1986 

Filed: JUN 1 3 7986 

@ - 

Clerk 
Mr. Chief Justice J. A. Turnage delivered the Opinion of the 

Court. 

Billings Deaconess Hospital, Inc. (~eaconess), appeals 

a judgment of the District Court of the Thirteenth Judicial 

District, Yellowstone County, in favor of Petroleum County 

and the Department of Social and Rehabilitation Services 

(SRS) . The judgment affirmed Petroleum County's and SRS ' s 

denial of medical benefits to the James D. Wymore family. 

On appeal, we will consider the constitutionality of 

income limitations in S 53-3-103(3), MCA (1983) and in the 

Petroleum County Medical Plan. Appellant contends that the 

limitations violate Montana's constitutional guarantee of 

assistance for the medically needy. We uphold the constitutionality of the income limitations in the statute and the 

county plan. However, our examination of the record also 

convinces us that neither the statute nor the plan was properly applied to the Wymores' situation. We therefore remand 

for a determination of whether the Wymores' were medically 

indigent and entitled to relief. 

Subsection (3) of Section 3 of Article XI1 of the 1972 

Montana Constitution provides: 

The legislature shall provide such 

economic assistance and social and 

rehabilitative services as may be necessary for those inhabitants who, by 

reason of age, infirmity, or misfortune 

may have need for the aid of society. 

Pursuant to this mandate, the legislature has established a 

county medical assistance program to provide assistance for 

eligible parties who are not covered by the Montana Medicaid 

program. See (SS 53-3-101 et seq. and 53-6-101 et seq., MCA. 

This program is financed and administered by the county but 

is supervised by SRS. 
Prior to the 1985 legislative session the eligibility 

criteria were established in a "county plan" which was adopted by the counties pursuant to §§ 53-3-103 and 53-3-301, MCA 

(1983). We note that these sections were repealed by the 

1985 legislature but the substantive contents were reenacted 

as § 53-3-206(5), MCA. This opinion therefore applies to 

both 5 53-3-206 (5), MCA, and 5 53-3-103 (3), MCA (1983). 

Section 53-3-103 (3), MCA (1983), contained the income 

limitation challenged by appellant: 

(3) The department may promulgate rules 

to determine under what circumstances 

persons in the county are unable to 

provide medical aid and hospitalization 

for themselves, including the power to 

define the term "medically needy. I' 

However, the definition may not allow 

payment by a county for general 

assistance-medical for persons whose 

income exceeds 300% of the limitation 

for obtaining regular county general 

relief assistance. . . . 

Section 53-3-301, MCA (1983), delegated to the counties the 

power to determine who is eligible for assistance according 

to rules established by the county board and approved by SRS. 

Petroleum County established such rules in a county medical 

plan that was approved by SRS . Section 6.1 (A) (1) (a) of that 

plan contains a much lower income limitation than the ceiling 

income in the statute. Specifically, $ 6.1 (A) (1) (a) of the 

county plan provides as follows: 

The maximum gross income level for an 

applicant or recipient is . . . current 

AFDC [Aid to Families with Dependent 

Children] benefit standard for family of 

same size. 

Since Petroleum County provides for general county relief at 

80 percent of the AFDC standard, the income ceiling in 

§ 53-3-103 (3), MCA (1983), is nearly 2%-times greater than 

the income limitation in the county plan. Because of this 
great difference between the income limitation in the county 

plan and in the statute, we will consider their constitutionality separately. 

There is another provision in the county plan that is 

important to our analysis of the constitutionality of the 

above-quoted income limitation. That provision, called a 

"spend-down provision" in the plan, allows medical expenses 

to be deducted from an applicant's income in determining 

eligibility. See S 6.1 A 1 b , Petroleum County Medical 

Plan. By 5 6.1(A) (1) (b) an applicant whose income exceeds 

the limit may still be eligible if his medical expenses are 

greater than his excess income. 

Zane Wymore, the minor son of James D. Wymore, was 

hospitalized at Billings Deaconess Hospital from February 10 

to April 6, 1983. The bill for the hospitalization came to 

$10,000. The Wymores were uninsured and unable to pay the 

bill. Mr. Wymore had applied to Petroleum County, where they 

resided, for county medical assistance on February 9, 1983. 

At the time of application, Mr. Wyrnore drew unemployment compensation of $740 per month. The AFDC standard at 

that time for a family of six, like the Wymores, was $564 per 

month. ARM 5 46-10.403. Mr. Wymore's income, therefore, 

exceeded the AFDC standard. Because the Petroleum County 

Medical Plan limits assistance to families with incomes less 

than the AFDC standard, the County denied assistance to the 

Wymores. In making this determination, the County did not 

reduce the Wymores' income by the amount of medical expenses 

as allowed for in the spend-down provision in the county 

plan. In the meantime, on April 1, 1983, Wymore started a 

new job which paid $1,000 per month and provided housing for 

the family. 
Deaconess, as the medical provider, challenged the 

County's denial in a hearing before the SRS pursuant to AM!I 

$5 46-2.202(2) and 46-25.705. The hearing officer then 

determined that income criteria in the county plan did not 

violate $ 53-3-103(3), MCA (1983), because the plan did not 

authorize benefits for families whose income exceeded 300% of 

the general relief standard. The hearing officer then determined that the County was within its authority under 

S 53-3-301, MCA (1983), to deny benefits based on criteria in 

its plan that had been approved by SRS. The hearing officer's findings and decision were affirmed on appeal to the 

State Board of Social and Rehabilitative Services (Board). 

Deaconess then filed a petition for judicial review of 

the Board's decision by the District Court. Deaconess's 

contention on review was that the income limitation in the 

statute and in the county plan were unconstitutional. Both 

Deaconess and SRS moved for summary judgment. The District 

Court did not rule on the constitutionality issue and instead 

remanded the matter to SRS for a determination of whether the 

Wymores are medically indigent and therefore entitled to 

public assistance. SRS responded that it was without authority to consider the matter further because Wymore's income 

exceeded the 300% of general relief limitation in 

$ 53-3-103 (3) , MCA (1983). In making this contention, SRS 

considered Wymore's income to be the $1,000 per month plus 

housing provided by his new job. We note that the Wymores' 

income of $740 per month that they received while Mr. Wymore 

was unemployed and when Zane was in the hospital was under 

the 300% (or, $1,353 per month) limitation in the statute but 

greater than the straight AFDC standard (or $564 per month) 

limitation in the county plan. If SRS had looked to the 
earlier income, then it would have found that the statute did 

not prohibit aid to the Wymores. 

Because SRS refused to consider the matter further, the 

District Court entered a final judgment affirming the denial 

of benefits. This appeal ensued. 

We will test $ 53-3-103 (3), MCA (1983), first. 

Deaconess contends that the provision in the statute that 

denies benefits to those with incomes in excess of 300% of 

the AFDC standard violates Article XII, Section 3 (3), of the 

Montana Constitution. Deaconess further contends that the 

statute violates state and federal equal protection guarantees. These two contentions actually present only one issue 

because we use equal protection analysis to test the constitutionality of a classification by the legislature. In other 

words, if the classification in the statute does not violate 

equal protection, the statute is constitutional. 

The case of Butte Community Union v. Lewis (Mont. 

1986), 712 P.2d 1309, 43 St.Rep. 65, is determinative of the 

level of scrutiny we will apply to the statute. In Butte 

Community Union we determined that welfare mandated by Article XII, Section 3 (3) , is not a fundamental right. Therefore, strict scrutiny does not apply and the State is not 

required to show a compelling interest to limit we1fa.re. 

However, we further determined that since the Montana Constitution, unlike the United States Constitution, specifically 

mandates welfare benefits, an abridgement of welfare requires something more than a rational relationship to a 

governmental objective. We went on to adopt our own 

middle-tier test for classifications affecting the rights 

created by Article XII, Section 3(3). This test requires 

that the State must demonstrate two factors for us to uphold 
a classification of welfare benefit recipients. Those factors are: (1) that the State's classification of benefit 

recipients is reasonable; and (2) that the State's interest 

in classifying benefit recipients is more important than the 

peoples' interest in obtaining those benefits. We will now 

apply this test to the 300% of general welfare assistance 

limitation in $ 53-3-103 (3), MCA (1983). 

Deaconess relies on the Saint Patrick Hospital line of 

cases to establish that denials of medical benefits based 

solely on income are unreasonable and therefore do not pass 

the first prong of the test. See Saint Patrick Hospital v. 

Powell County (1970), 156 Mont. 153, 477 P.2d 340; State ex 

rel. Hendrickson v. Gallatin County (1974), 165 Mont. 135, 

526 P.2d 354; and Sisters of Charity, Etc. v. Glacier County 

(1978), 177 Mont. 259, 581 P.2d 830. These cases, however, 

are distinguishable from the case at bar. The Saint Patrick 

Hospital line of cases involved county denials of medical 

benefits to applicants with incomes above the state standard 

of eligibility for general assistance. In the case at bar, 

$ 53-3-103(3), MCA (1983), sets the maximum income at three 

times the income limitation for general assistance. As such, 

the statute allows twice again as much income beyond that 

needed for basic necessities by which a party can purchase 

medical insurance and pay other medical bills. It is therefore reasonable to assume that a person with an income of 

three times the general assistance level is not medically 

indigent. Thus, the income limitation in $ 53-3-103(3), MCA 

(1983), passes the first prong of the middle-tier test. 

The second factor in our middle-tier analysis is a 

balancing test. Specifically, the interest of the State in 

limiting medical benefits is weighed. against the interest of 
the people in receiving the benefits. We believe the State's 

interest is greater. 

If the State were not allowed to place a limit on* the 

income of medical assistance recipients, there would be 

little incentive for anybody to purchase medical insurance. 

Given the high cost of medical care, most uninsured parties 

would be unable to pay their bill in the event of catastrophic injury. The cost to the State of paying these bills would 

be prohibitive. The State cannot afford to become the medical insurer for individuals who can afford their own medical 

insurance. On the other hand, people with income that is 

more than 300% of the general assistance level can reasonably 

be expected to obtain their own insurance. We hold that the 

State's interest in limiting medical assistance to those with 

incomes less than 300% of the limitation for general welfare 

outweighs the interest in obtaining benefits by those whose 

incomes exceed the limitation. Thus, the income limitation 

in § 53-3-103(3), MCA (1983), passes middle-tier scrutiny and 

is constitutional. 

Deaconess also challenges the constitutionality of the 

income limitation in the Petroleum County Medical Plan. We 

believe the limitation is constitutional on its face. However, we also believe the County misapplied the ].imitation to 

unconstitutionally deny the Wymores' benefits. 

We will first test the constitutionality of the income 

limitation as it was applied by the County--that is, we will 

test the limitation without the spend-down provision. 

Section 6.1 (A) (1) (a) of the county plan denies medical 

benefits to families whose incomes exceed the AFDC standard. 

The AFDC standard is the standard used by the State for 

determining eligibility for general assistance. As such, the 
Saint Patrick Hospital line of cases, supra, are applicable. 

In those cases, we held that it was unreasonable to deny 

relief to the medically indigent solely because their income 

exceeded State standards for general assistance. In applying 

the rule from Saint Patrick Hospital here, we find that 

denying medical benefits solely because the applicant's 

income exceeds the AFDC standard is unreasonable. 

We would reach the same conclusion without Saint Patrick Hospital. The AFDC standard was developed to set a 

maximum limitation on both the income of and the amount of 

benefits for recipients of general welfare assistance. The 

standard considers the cost of basic necessities but does not 

include medical costs. As such, it is unreasonable to assume 

that a person or family whose income equals the AFDC standard 

has the means to purchase medical insurance and pay medical 

bills in addition to the basic necessities. A denial of 

benefits based solely on the income limitation in 

6.1 (A) (1) (a) of the Petroleum County Medical Plan therefore 

fails under middle-tier scrutiny and is unconstitutional. 

However, the county plan, if properly applied, would 

not deny benefits based solely on the income limitation in 

6.1 (A) 1 (a) . Besides the income limitation, the plan also 

has a spend-down provision, 6.1 (A) (1 b , which allows 

medical expenses to be deducted from the income before comparison with the AFDC standard. We will now test the constitutionality of the income limitation with the spend-down 

provision. 

As stated earlier in this opinion, the AFDC standard is 

set at the cost of basic necessities. The spend-down provision then allows additional. income to go for medical insurance and expenses. Thus, unless the income exceeded 300% of 
the limitation for obtaining regular county general relief 

assistance, when properly applied the county plan would only 

deny benefits to applicants with incomes in excess of that 

required to pay for both basic necessities and medical expenses. It is reasonable to assume that a person with income 

enough to pay for basic necessities and medical expenses is 

not medically indigent. The county plan therefore passes the 

reasonableness prong of middle-tier analysis. 

The income limitation with the spend-down provision 

also passes the second prong balancing test by the same 

reasoning we applied to the statute. The State's interest in 

limiting medical assistance to those who cannot afford medical expenses outweighs the interest in obtaining benefits by 

those who can. The income limitation in the county plan is 

therefore constitutional on its face. 

We will now consider whether or not the Wymores were 

properly denied benefits. The County and SRS originally 

denied the Wymores assistance based on an improper application of the income limitation in the county plan which we are 

now holding unconstitutional. When the District Court remanded to SRS, however, the Department switched to the statute as its basis for denial. Since we are upholding the 

limitation in the statute, this denial would have been proper 

unless the statute was improperly applied. The record convinces us that SRS's denial of benefits to the Wymores was 

based on an improper application of the statute. SRS's brief 

in support of its motion to amend the District Court order 

remanding the case reveals that SRS was utilizing the 

Wymores' income from Mr. Wymore's new job to find the family 

excluded by the statute. However, at the time Zane Wymore 

entered the hospital, the family's only income was from 
unemployment compensation and was substantially less than the 

limitation in § 53-3-103 (3), MCA (1983). 

We believe that SRS utilized the wrong income in considering the Wymores' need on remand. The new general medical relief provisions of the Montana Code specifically 

provide that " [elligibility is determined as of the date 

medical service is first provided. I' Section 53-3-206 (2) , 

MCA. Although this provision was not in effect at the time 

of the Wymores' application, it is the only fair rule to 

apply now. It is unfair to assume the Wymores could have 

afforded medical insurance at the time Zane entered the 

hospital based on the income Mr. Wymore began to earn near 

the end of the hospitalization period. We hold that it was 

improper for SRS to determine the Wymores were ineligible for 

benefits based solely on the income from Mr. Wymore's new 

job. 

We remand for a determination of whether the Wymores 

were "medically needy" under $ 53-3-103 (3), MCA (1983), with 

. the instruction that need should be determined as of the date 

Zane was first hospitalized. We hold that the income limitation of S 53-3-103(3), MCA (1983), is constitutional. A 

denial of benefits based solely on the income limitation in 

the Petroleum County Medical Plan, S 6.1 A 1 a , however, 

is unconstitutional. If the county plan is used in the need 

determination, the Wymores' medical expenses must be deducted 

from their income. 

4vlAv Chief Justice zzF 
We Concur: