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Matched Legal Cases: ['§ 1396', '§ 1396', '§ 1396', '§ 1396', '§ 1343', '§ 1983', '§ 1343', '§ 1343', '§ 1343', '§ 1343', '§ 1983', '§ 1343', '§ 1396', '§ 248', '§ 435', '§ 1396', '§ 435', '§ 1396', '§ 1396', '§ 1396', '§ 435', '§ 435', '§ 435', '§ 1396', '§ 1396', '§ 1396', '§ 435', '§ 1396', '§ 1382', '§ 435', '§ 1396', '§ 1382', '§ 1396', '§ 1396', '§ 1396', '§ 1382', '§ 1396', '§ 1382', '§ 1396', '§ 209', '§ 209', '§ 1382', '§ 1396', '§ 209']

619 F2d 1265 Herweg v. D Ray J
Home > 619 F2d 1265 Herweg v. D Ray J
619 F2d 1265 Herweg v. D Ray J 619 F.2d 1265
Elvina M. HERWEG, by her husband and next friend, Darrell E.Herweg, and Darrell E. Herweg, and all otherssimilarly situated, Appellants,v.Robert D. RAY, Individually and in his capacity as Governorof the State ofIowa, and Kevin J. Burns, Individually and inhis capacity as Commissioner ofthe Iowa Department of SocialServices, Appellees.
Submitted Sept. 10, 1979.Decided March 18, 1980.Rehearing Denied April 22, 1980.
Gill Deford, National Senior Citizens Law Center, Los Angeles, Cal., for appellants; Neal S. Dudovitz, Los Angeles, Cal., and Robert L. Bray, Legal Services, Corp. of Iowa, Des Moines, Iowa, on brief.
Stephen C. Robinson, Asst. Atty. Gen., Des Moines, Iowa, for appellee; Richard C. Turner, Atty. Gen., Des Moines, Iowa, on brief.
Thomas J. Miller, Atty. Gen., and Stephen C. Robinson, Special Asst. Atty. Gen., Des Moines, Iowa, on supplementary brief.
David R. Smith, Washington, D. C., for amicus curiae, U. S. Dept. of Health, Education and Welfare.
Before GIBSON, Chief Judge,* and LAY, HEANEY, BRIGHT, ROSS, STEPHENSON, HENLEY, and McMILLIAN, Circuit Judges.
Pursuant to the attached opinion, the judgment of the district court is affirmed by an equally divided court, except that portion relating to the sources of income the state may consider as available to Medicaid applicants and recipients, which is reversed and remanded.
Elvina M. Herweg and her husband, Darrell E. Herweg, individually and as representatives of a class, appeal a decision by the district court1 making Medicaid eligibility determinations affecting the Herwegs and the class. The district court, in January 1978, enjoined the state of Iowa from determining Medicaid eligibility by "deeming," through the use of an arbitrary formula, the income of a noninstitutionalized spouse as available to the institutionalized spouse. Herweg v. Ray, 443 F.Supp. 1315, 1320 (S.D.Iowa 1978).
Later, upon request of the parties, the district court defined the contours of relief it decided to be appropriate. Based on the relevant Medicaid statute, 42 U.S.C. § 1396a(a)(17) the district court disapproved deeming by an arbitrary formula but approved Iowa's use of a factual determination in each case as to the amount the state could consider as available from the noninstitutionalized spouse for the care of the institutionalized spouse. Herweg v. Ray, 481 F.Supp. 914, 917 (S.D.Iowa 1978). Appellants, however, contend that this solution violates Medicaid statutes and regulations. They argue that Medicaid eligibility must be determined only on the basis of contributions actually made by the noninstitutionalized spouse to the institutionalized spouse's care. They further argue that if the spouse does not actually contribute, even though financially able, the state should determine that the institutionalized spouse is eligible and make full payment of benefits. Then if it desires, the state could sue the financially responsible spouse under its relative responsibility law.
Because the district court invalidated Iowa's "deeming" procedure on statutory grounds the constitutional claims of the plaintiffs were not reached. Herweg v. Ray, supra, 443 F.Supp. at 1320. Those claims allege that "deeming" violates the due process clause and the equal protection clause by creation of an irrebuttable presumption and an arbitrary classification.
Before addressing the issues raised by appellants, we will review Iowa's prior "deeming" procedures as applied to the Herwegs' situation.
Since August 1976, 47 year old Elvina Herweg has been in a comatose state which resulted from two cerebral hemorrhages. Mrs. Herweg was placed in a long-term care facility in November 1976.
Darrell Herweg was employed as a butcher when this action was instituted and his gross monthly income was $1,350 (net $1,032). The Herwegs have three teenage daughters at home.
In January 1977, Mr. Herweg applied for Medicaid assistance for his wife. Mrs. Herweg was found eligible for Medicaid and Mr. Herweg was required to pay $234.80 per month toward his wife's medical expenses which were approximately $1,374 per month. The "deemed" amount, $234.80 per month, was arrived at by use of a formula which excluded half of Mr. Herweg's earned income and then excluded standard living allowances for Mr. Herweg and the children at home. Standard exclusions for work expenses and the personal needs of the institutionalized spouse were also allowed.
In June 1977, apparently upon advice from HEW, the state of Iowa's formula for determining eligibility was changed in that one-half of Mr. Herweg's earned income was not excluded. This change resulted in a determination that Mrs. Herweg was no longer eligible for Medicaid and led to the filing of this suit. After the district court granted a temporary restraining order, the state again changed the formula to exclude one-half of Mr. Herweg's earned income. Mrs. Herweg was again determined eligible for Medicaid and based on increased living allowance exclusions, $150.30 of Mr. Herweg's monthly income was deemed available for Mrs. Herweg's medical expenses.
The district court held that the state of Iowa's method of "deeming" through the use of an arbitrary formula conflicted with 42 U.S.C. § 1396a(a)(17) and the applicable regulations 45 C.F.R. 248.3(b)(a)(ii) (currently, 42 C.F.R. 435.723(d) (1978)). Id. at 1320. However, without specifically ruling on the validity of the regulation, the district court found that under the statute, 42 U.S.C. § 1396a(a)(17) the state should be allowed to make a factual determination of actual income and expenses of the noninstitutionalized spouse and determine a reasonable amount to require as a contribution. Id. at 1320. The state of Iowa submitted to the district court proposed procedures for making such a factual determination in each case and the district court approved the state's new procedures as entirely consistent with federal law.
It is important to note that the state of Iowa is not challenging the district court's determination that "deeming" through the use of an arbitrary formula is contrary to § 1396a(a)(17). Rather, the conflict involved in this appeal is the method the state of Iowa now uses, which is a factual determination of income actually received and expenses necessarily incurred, to determine the amount of money a state may require as a contribution from the noninstitutionalized spouse who is reasonably able to pay some of the medical expenses of his Medicaid eligible, institutionalized spouse.
The district court certified the class, as requested by plaintiffs, as including instances where the institutionalized spouse is eligible for Medicaid.2 However, it is clear that the procedures plaintiffs challenge involve the method used to calculate the institutionalized spouse's available income. This same calculation is used not only when determining the amount of the required contribution as in the case of the Herwegs, but also in determining initial eligibility for Medicaid. Therefore, our concern in this case must of necessity focus on not only the application of the procedure to one who is eligible for Medicaid but also the application of the procedure to one who seeks Medicaid eligibility but whose income and expenses may justify the denial of eligibility under the statute.Jurisdiction
In view of the recent Supreme Court decision in Chapman v. Houston Welfare Rights Organization, 441 U.S. 600, 99 S.Ct. 1905, 60 L.Ed.2d 508 (1979), a brief review of jurisdiction is necessary. Chapman involved a challenge to state welfare regulations based solely on the grounds that the regulation conflicted with the Social Security Act. The Supreme Court indicated that "an allegation of incompatibility between federal and state statutes and regulations does not, in itself, give rise to a claim 'secured by the Constitution' within the meaning of (28 U.S.C.) § 1343(3)." Id. at 615, 99 S.Ct. at 1915. The Court also rejected the argument "that § 1983 is an Act of Congress 'providing for equal rights' within the meaning of § 1343(3)" or a "statute 'providing for the protection of civil rights, including the right to vote' " within the meaning of § 1343(4). Id. at 617-18, 99 S.Ct. at 1915-1916. The Supreme Court then held that "(t)he Social Security Act does not deal with the concept of 'equality' or with the guarantee of 'civil rights,' as those terms are commonly understood." Id. at 621, 99 S.Ct. at 1917. Therefore, the Social Security Act is not included within the meaning of § 1343(3) or (4). Id. at 621, 99 S.Ct. at 1917. However, neither Chapman nor the case with which it was consolidated on review, Gonzalez v. Young, involved any constitutional claims other than a basic supremacy clause challenge. Further, the Supreme Court specifically noted that "(w)here the underlying right is based on the Constitution itself, rather than an Act of Congress, § 1343(3) obviously provides jurisdiction." Id. at 618 n.36, 99 S.Ct. at 1916 n.36. The Supreme Court in Chapman did not alter its previous decision in Hagans v. Levine, 415 U.S. 528, 94 S.Ct. 1372, 39 L.Ed.2d 577 (1974). In Hagans, the Supreme Court approved the review of a statutory conflict claim under a pendent jurisdiction rationale where the district court had found a substantial constitutional question presented. Id. at 536, 94 S.Ct. at 1378. The Supreme Court also noted that:
A (constitutional) claim is insubstantial only if ' "its unsoundness so clearly results from the previous decisions of this court as to foreclose the subject and leave no room for the inference that the questions sought to be raised can be the subject of controversy." '
Id. at 538, 94 S.Ct. at 1379 (citations omitted).
In the present case, the complaint alleged a violation of the due process clause, in that "deeming" constitutes an irrebuttable presumption not rationally related to a legitimate state interest. The plaintiffs also raised an equal protection claim regarding different treatment of married versus unmarried Medicaid recipients.
Although the district court specifically did not reach the constitutional claims, we hold that the claims present substantial constitutional questions. Thus, the district court possessed pendent jurisdiction over the statutory issues based on its proper jurisdiction over the constitutional claims under 42 U.S.C. § 1983 and § 1343(3).
The Medicaid Statute
The district court found that Iowa's "deeming" procedure was contrary to both the relevant statute § 1396a(a)(17) and the relevant HEW regulation 45 C.F.R. § 248.3(b) (currently 42 C.F.R. § 435.723 (October 1, 1978)). Herweg v. Ray, supra, 443 F.Supp. at 1320. However, the district court also found that "deeming" income to be unavailable unless actually contributed, as required by the regulation, "seemed" contrary to congressional intent. Id. at 1320. Thus, the district court approved the state of Iowa's new procedure for making a reasonable evaluation as consistent with § 1396a(a)(17). However, there is no dispute that the new procedure approved by the district court is contrary to regulation, § 435.723. Therefore, the issue this court must face is whether the regulation is an incorrect interpretation of the statute, § 1396a(a)(17), thus justifying the result reached by the district court. Other courts have consistently struck down "deeming"; however, the courts have varied or been unclear on the method the state may then use to enforce financial responsibility.3 But see Norman v. St. Clair, 610 F.2d 1228 (5th Cir. 1980) and discussion, infra, at 1274, n.6.
In undertaking this review, we recognize that "the construction of a statute by those charged with its execution should be followed unless there are compelling indications that it is wrong * * *." Beal v. Doe, 432 U.S. 438, 447, 97 S.Ct. 2366, 2372, 53 L.Ed.2d 464 (1977); New York Dept. of Soc. Services v. Dublino, 413 U.S. 405, 421, 93 S.Ct. 2507, 2516, 37 L.Ed.2d 688 (1973); Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 381, 89 S.Ct. 1794, 1801, 23 L.Ed.2d 371 (1969). "But the courts are the final authorities on issues of statutory construction and 'are not obliged to stand aside and rubber-stamp their affirmance of administrative decisions that they deem inconsistent with a statutory mandate or that frustrate the congressional policy underlying a statute.' " (Citations omitted.) Volkswagenwerk v. FMC, 390 U.S. 261, 272, 88 S.Ct. 929, 935, 19 L.Ed.2d 1090 (1968).
42 U.S.C. § 1396a(a)(17) provides in pertinent part:
(17) include reasonable standards * * * for determining eligibility for and the extent of medical assistance under the plan which (A) are consistent with the objectives of this subchapter, (B) provide for taking into account only such income and resources as are, as determined in accordance with standards prescribed by the Secretary, available to the applicant or recipient * * * (C) provide for reasonable evaluation of any such income or resources, and (D) do not take into account the financial responsibility of any individual for any applicant or recipient of assistance under the plan unless such applicant or recipient is such individual's spouse or such individual's child who is under age 21 * * *.
The legislative history of § 1396a(a)(17) is set out in S.Rep.No. 404, 89th Cong., 1st Sess. 4, reprinted in (1965) U.S.Code Cong. & Admin. News, pp. 1943, 2018:
Another provision is included that requires States to take into account only such income and resources as (determined in accordance with standards prescribed by the Secretary), are actually available to the applicant or recipient and as would not be disregarded (or set aside for future needs) in determining the eligibility for and the amount of the aid or assistance in the form of money payments for any such applicant or recipient under the title of the Social Security Act most appropriately applicable to him. Income and resources taken into account, furthermore, must be reasonably evaluated by the States. These provisions are designed so that the States will not assume the availability of income which may not, in fact, be available or overevaluate income and resources which are available. Examples of income assumed include support orders from absent fathers, which have not been paid or contributions from relatives which are not in reality received by the needy individual.
We note that although a state may not "assume the availability of income," Congress did specify that state "requirements for support may reasonably include the payment by (a spouse), if able, for medical care." However, "States may not include * * * provisions for requiring contributions from relatives other than a spouse * * *." But, "contributions actually made by relatives or friends * * * will be taken into account * * *."
In contrast, the relevant regulation 42 C.F.R. § 435.723 (October 1, 1978) indicates:
§ 435.723 Financial responsibility of spouses.
(a) If the agency provides medicaid to SSI recipients, it must meet the requirements of this section in determining eligibility of aged, blind and disabled individuals under the optional coverage provisions of §§ 435.210, 435.211, and 435.231.
It is interesting to note that earlier HEW interpretation of § 1396a(a)(17) directly followed the statute. Those regulations 45 C.F.R. 248.3(b)(1) (October 1, 1975) stated "that only such income and resources as are actually available will be considered and that income and resources will be reasonably evaluated." We find that the term "available" in § 1396a(a)(17) when read in conjunction with the legislative history cannot by any stretch of the imagination be translated into the "actually contributed" language of the current regulation. We find that HEW's interpretation of the statute is wrong. In effect it has substituted the words "actually contributed" for the statutory word "available." In our view, which is based partially on the legislative history quoted, the words "actually available" encompass funds which a spouse has available to contribute even though he or she does not actually contribute them to the spouse.
Furthermore, the statute specifically allows a state to consider the financial responsibility of a spouse in determining eligibility. Nothing in the statute or legislative history limits a state to enforcing this responsibility only through use of the state's relative responsibility law. We find that HEW's regulation nullifies the congressional intent of § 1396a(a)(17)(D), which indicates the financial responsibility of a spouse can be considered by a state.4 Leaving the state of Iowa to sue retroactively and periodically for payments the noninstitutionalized spouse could reasonably afford, is to us an inequitable and burdensome result requiring repeated lawsuits against the same person. Furthermore, we will not force Iowa to grant Medicaid eligibility to a person whose spouse is extremely wealthy but whose income cannot be considered (unless actually contributed) after the first month of institutionalization. In addition to the legality of the question, a contrary result would be most unfair to the noninstitutionalized spouse who does contribute what he can to the care of his spouse or to the taxpayers who pay for such care when they are not legally obligated to do so.
Both the Fifth Circuit in Norman v. St. Clair, 610 F.2d 1228 at 1238 (5th Cir. 1980) and Judge Pell in Brown v. Stanton, 617 F.2d 1224 (7th Cir. 1980) (dissenting in part) recognized the inevitable consequences of limiting a state's recourse to its relative responsibility laws. Judge Pell, in the course of an unusually short and cogent dissent stated:
Under (that result), there is an open invitation for the spouse to decide that he or she does not wish to make the excess payment. In this era of inflation, and giving consideration to the human inclination not to pay out money when one doesn't have to, I think it reasonable to conclude that few would decline the invitation.
The SSI-Medicaid Link
Upon request of the court, HEW filed an amicus brief concerning the validity of the regulation, § 435.723. HEW argues that there is a link between SSI (Supplemental Security Income) and Medicaid eligibility standards based on 42 U.S.C. § 1396a(a)(10)(A). Based on this link, HEW believes that an SSI statute, 42 U.S.C. § 1382c(f)(1) dictates that income be "deemed" for at least the first month of institutionalization where there is an ineligible noninstitutionalized spouse.5 However, HEW does not cite any SSI statute that dictates the "actually contributed" language of the Medicaid regulation, § 435.723.
42 U.S.C. § 1396a(a)(10)(A), the Medicaid statute, indicates that a state plan for medical assistance must:
(A) for making medical assistance available to all individuals receiving aid or assistance under any plan of the State approved under subchapter I, X, XIV, or XVI, or part A of subchapter IV of this chapter, or with respect to whom supplemental security income benefits are being paid under subchapter XVI of this chapter;
The SSI statute on which HEW bases its argument is 42 U.S.C. § 1382c(f)(1), which states:
(f)(1) For purposes of determining eligibility for and the amount of benefits for any individual who is married and whose spouse is living with him in the same household but is not an eligible spouse such individual's income and resources shall be deemed to include any income and resources of such spouse, whether or not available to such individual, except to the extent determined by the Secretary to be inequitable under the circumstances.
In response to HEW, appellants argue that the Medicaid statute, § 1396a(a)(17) does not allow any deeming, even for one month. Appellants state that the "SSI statute did not implicitly or explicitly alter the meaning and intent of the Medicaid provisions regarding availability." But appellants also state that if we reject their argument that § 1396a(a)(17) only allows actually contributed income to be considered, then appellants will agree with HEW that the SSI-Medicaid link justifies the current regulation.
We believe that the answer to this conflict lies in the language of § 1396a(a) (17), itself. Deeming by use of an arbitrary formula is not allowed. However, the statute does allow a reasonable evaluation of income available to the applicant or recipient, taking into account the financial responsibility of their spouse.
HEW, as previously indicated, cites no SSI statute which demands the use of the term "actually contributed" in the current regulation, 435.723, rather than the term used in the Medicaid statute (and previous HEW regulations) "available." The SSI statute HEW does cite, 42 U.S.C. § 1382c(f)(1) allows "deeming" by use of an arbitrary formula when an eligible person lives with their ineligible spouse. Apparently, HEW decided that where a couple does not live together (even involuntarily as in the institutionalized spouse's case) then the opposite of arbitrary "deeming" must apply "actually contributed." However, this view fails to recognize the middle ground specifically provided for in § 1396a(a)(17) which the district court identified. That middle ground is a reasonable evaluation of available income and expenses, which reasonable evaluation is also the opposite of arbitrary "deeming."Additionally, the SSI statute, § 1382c(f)(1) provides that when an eligible spouse lives with her ineligible spouse, the eligible spouse's income is "deemed to include any income" of the ineligible spouse "whether or not available." Therefore, under the SSI statute there is no need to define the term "available"; its definition is essentially irrelevant. In contrast, the Medicaid statute, § 1396a(a)(17) demands that the standards drawn consider availability, thus, the effort to define "available" must be controlled by the Medicaid statute not the SSI statute.
Although Norman v. St. Clair, supra, and Brown v. Stanton, supra, involved § 209(b) states rather than an SSI-state such as Iowa, it appears that in Norman the Fifth Circuit reached essentially the same result as we do here, by reasoning from the SSI-states' situation to that of a " § 209(b) state." The court in Norman in discussing the previously cited SSI statute, § 1382c(f)(1), indicates the following:
Thus under certain circumstances Medicaid eligibility determinations in an "SSI state" must, because of the statutory mandate in the SSI legislation, take into account income that is deemed available, without regard to whether that income is actually contributed. Since this statutory mandate exists concurrently in the Medicaid law with the provision of 42 U.S.C. § 1396a(a)(17) directing that only income which is "available" be taken into account, it must be concluded that the income deemed to Medicaid applicants pursuant to provisions of law applicable to SSI states is available income. A concept of available income which includes income deemed to spouses in SSI states must also encompass income deemed6 to spouses in the more restrictive programs of the § 209(b) states.
At 1238.
There are also additional reasons for finding SSI eligibility requirements inapplicable to the institutio