Opinion ID: 752411
Heading Depth: 3
Heading Rank: 1

Heading: Program Sufficiency: the Individual Medicaid Recipient

Text: 74 The district court concluded that a state's use of a list of covered equipment does not in itself violate Title XIX, but held that DSS's fee schedule provides insufficient coverage because: (i) DSS lacks an adequate procedure for updating the fee schedule with new products meeting its definition of DME; and (ii) DSS lacks a procedure for a Medicaid recipient to show that a particular item of unscheduled equipment is medically necessary and meets DSS's definition of DME, such that it can be added to the list or considered for prior authorization. DeSario, 963 F.Supp. at 130, 141-42. 75 We agree that Connecticut's use of a list of covered equipment is permissible. A 1977 Medical Assistance Manual issued to state agencies administering medical assistance programs by HCFA included the following advice: Question 5 76 May the State limit medical supplies and equipment? Answer 77 Yes. States may place a money ceiling upon medical supplies and equipment based on a reasonable, fixed dollar amount per month or per year; or may require prior authorization for items costing more than a certain amount; or may list those items for which it will reimburse; or may require prior authorization for durable equipment. 78 HCFA Medical Assistance Manual, § 5.50.1-00 (Feb. 16, 1977) (emphasis added). The Secretary took the same position in her brief to the district court: To define covered items or services, a specific list of covered items and services would be consistent with the requirements of federal law. Brief of Third-Party Defendant Donna Shalala at 7. As noted, we defer to the agency's interpretation of the statute it enforces, as long as the interpretation is reasonable, which, as plaintiffs seem to concede, it is here. Thus, Connecticut's use of a list of covered DME was not itself improper. 79 As the district court observed, Connecticut does not allow coverage of unscheduled DME even if the item for which coverage is sought could be shown to fall within Connecticut's definition of DME. DSS does not itself review new DME products to see if they fall within the DME definition or allow an individual applicant for prior authorization to make this showing. Inevitably, then, some equipment that falls within Connecticut's definition of DME and that is medically necessary to a particular Medicaid recipient, will be left outside the state's Medicaid coverage. The district court concluded that this renders the fee schedule insufficient. And in fact, the actual effect of the injunction is to remedy this perceived problem and to require the state to provide all equipment falling within the definition of DME that a treating physician determines is medically necessary for a Medicaid patient. According to the district court, for the list to be sufficient, DSS must add to the list any item meeting the definition of DME that is medically necessary for any Medicaid recipient. Once the item is on the list, the only reason for denial would be the recipient's lack of medical necessity. 80 When plaintiffs' able counsel was pressed at oral argument to identify valid reasons why a Medicaid recipient's request for DME might be denied in light of the injunction, he could specify two rationales only: (i) lack of medical necessity, and (ii) the availability of a less costly, equally efficacious item. And as to the latter rationale, counsel conceded that the efficacy of an alternative item is tied into the physician's determination of medical necessity (i.e., that a physician would not state that a particular item of DME is medically necessary unless there was no other, more effective DME available) and that the treating physician is entitled to almost complete deference in determining medical necessity. Thus, as the injunction operates, the state must provide any item of DME that the treating physician prescribes as medically necessary. 8 81 But the fact that a particular Medicaid recipient may not receive an item of DME that his doctor has opined is medically necessary does not render the fee schedule's coverage insufficient under Title XIX unless the state is obligated to cover every medically necessary item that falls within its definition of DME. We hold that a state need not fund every medically necessary item of DME that falls within the state's definition of DME and therefore, the district court attached undue significance in its Title XIX analysis to the absence of procedural devices for obtaining coverage for equipment that falls within the definition of DME but is not included on the fee schedule. 82 There is no requirement that a state fund every medically necessary procedure or item falling within a service it covers under its plan. To begin with, medical necessity and coverage are distinct concepts; a patient's medical necessity does not determine whether a particular item or service is covered. As the Secretary noted in her brief below: 83 [F]ederal law requires that States deny Medicaid payment for services which are not described in the approved State plan (and implementing regulations or policies) as a covered item or service.... Assuming that an item or service is covered under the State plan, however, Medicaid payment is only required for items or services which are medically necessary.... Thus, for Medicaid payment to be proper, the item or service furnished must be both covered and medically necessary. 84 Brief of Third-Party Defendant Donna Shalala at 6-7 (emphasis in original). 85 Title XIX affords states great latitude in determining the scope and extent of coverage of medical services. See Roe v. Norton, 522 F.2d 928, 933 (2d Cir.1975). This latitude is subject to certain federal statutory and regulatory limitations. As noted above, Title XIX requires that the plan include reasonable standards ... for determining eligibility for and the extent of medical assistance under the plan which ... are consistent with the objectives of this subchapter. 42 U.S.C. § 1396a(a)(17) (emphasis added). It is not an objective of the Medicaid program to furnish all things medically necessary unless they are expressly excluded. The program's objective is expressed in Title XIX: 86 as far as practicable under the conditions in such State, to furnish (1) medical assistance on behalf of families with dependent children and of aged, blind or disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services, and (2) rehabilitation and other services to help such families and individuals attain or retain capability for independence or self-care.... 9 87 42 U.S.C. § 1396 (emphasis added); see also New York City Health & Hosps. Corp. v. Perales, 954 F.2d 854, 868 (2d Cir.1992) (Cardamone, J., dissenting). In addition, the plan must provide such safeguards as may be necessary to assure that eligibility for care and services under the plan will be determined, and such care and services will be provided, in a manner consistent with simplicity of administration and the best interests of the recipients. 42 U.S.C. § 1396a(a)(19). 88 Although these statutory guidelines are broadly stated, they are clear enough to indicate that the state need only fund medical services through reasonable standards that are consistent with Title XIX's objective of providing medical assistance, as far as practicable, to the categorically and medically needy and in the best interest of the recipients; there is nothing in the statute which mandates comprehensive coverage of all medically necessary services, even all of those services provided by the state. As the Secretary notes in her brief, [a]lthough 42 U.S.C. § 1396a(a)(19) requires that services must be furnished 'in the best interests of recipients,' that does not limit a State's ability to impose amount, duration and scope limitations which may affect some individuals more than others. Brief of Third-Party Defendant Donna Shalala at 6 n. 2 (citing Alexander v. Choate, 469 U.S. 287, 303, 105 S.Ct. 712, 721, 83 L.Ed.2d 661 (1985)). 10 89 Regulations promulgated pursuant to Title XIX reinforce the view that the statute does not require states to cover all medically necessary services, even within the covered categories of services. Rather, in order to be consistent with the objectives of Title XIX, [e]ach service [provided by the state plan] must be sufficient in amount, duration, and scope to reasonably achieve its purpose. 42 C.F.R. § 440.230(b) (1996). The regulations also provide that [t]he agency may place appropriate limits on a service based on such criteria as medical necessity or on utilization control procedures. 42 C.F.R. § 440.230(d) (1996) (emphasis added). Disregarding the words we have underscored in the foregoing provision, plaintiffs claim that the identified criteria constitute the exclusive grounds for limiting a category of Medicaid service. But we read the regulation's use of the words such criteria as to mean that these are examples. See, e.g., Health Care Financing Administration, Proposed Rules, Payment for Covered Outpatient Drugs under Drug Rebate Agreements with Manufacturers, 60 Fed.Reg. 48442, 48458 (1995) (noting that prior to enactment of an amendment to Title XIX in 1990 applicable to prescription drugs only, [s]tates could establish amount, duration, and scope restrictions on Medicaid services, including prescription drugs .... based on such criteria as medical necessity and utilization control, or [these restrictions] could be based on other factors so long as the amount of the services provided was sufficient to 'reasonably achieve its purpose' ) (emphasis added). Moreover, the statute itself in using the term as far as practicable, clearly signals that states may also allow budgetary and cost considerations to influence their coverage decisions. See Charleston Mem'l Hosp. v. Conrad, 693 F.2d 324, 330 (4th Cir.1982); Dodson v. Parham, 427 F.Supp. 97, 104 (N.D.Ga.1977) (noting that Title XIX expressly recognizes financial matters as relevant considerations in fashioning Medicaid programs). 90 The Supreme Court clarified the mandated amount, duration and scope of coverage in Beal v. Doe, 432 U.S. 438, 97 S.Ct. 2366, 53 L.Ed.2d 464 (1977): [N]othing in the [Medicaid] statute suggests that participating States are required to fund every medical procedure that falls within the delineated categories of medical care. Id. at 444, 97 S.Ct. at 2370-71. Rather, the statute confers broad discretion on the States to adopt standards for determining the extent of medical assistance, requiring only that such standards be 'reasonable' and 'consistent with the objectives' of the Act. Id. The Court suggested without elaboration that serious statutory questions might be presented if a state Medicaid plan excluded necessary medical treatment from its coverage. Id. 91 In Alexander v. Choate, 469 U.S. 287, 105 S.Ct. 712, 83 L.Ed.2d 661 (1985), however, the Supreme Court further clarified the boundaries of state discretion in Medicaid coverage. There, a group of disabled Medicaid recipients challenged Tennessee's new 14-day limit on inpatient hospital stays on the ground that the limit violated the Rehabilitation Act because it disproportionately affected disabled persons and denied them meaningful access to Medicaid benefits. The Court, in its Rehabilitation Act analysis, found that Tennessee's decision to limit the number of hospital days did not deny disabled persons meaningful access to state Medicaid services because they could take advantage of the covered 14 days just as easily as non-disabled individuals: 92 To the extent respondents further suggest that their greater need for prolonged inpatient care means that, to provide meaningful access to Medicaid services, Tennessee must single out the handicapped for more than 14 days of coverage, the suggestion is simply unsound. At base, such a suggestion must rest on the notion that the benefit provided through state Medicaid programs is the amorphous objective of adequate health care. But Medicaid programs do not guarantee that each recipient will receive that level of health care precisely tailored to his or her particular needs. Instead, the benefit provided through Medicaid is a particular package of health care services, such as 14 days of inpatient coverage. That package of services has the general aim of assuring that individuals will receive necessary medical care, but the benefit provided remains the individual services offered--not adequate health care. 93 Id. at 302-03, 105 S.Ct. at 721 (emphasis added). The Court noted that the Medicaid statute gave the States substantial discretion to choose the proper mix of amount, scope, and duration limitations on coverage, as long as care and services are provided in 'the best interests of the recipients,'  id. at 303, 105 S.Ct. at 721 (quoting 42 U.S.C. § 1396a(a)(19)), and that the 14-day limitation was in the best interests of the recipients because, as the district court found, 95% even of the disabled individuals eligible for Medicaid were fully served even with this limitation. 11 94 As other circuits have recognized, a state may impose coverage limitations that result in denial of medically necessary services to an individual Medicaid recipient, so long as the health care provided is adequate with respect to the needs of the Medicaid population as a whole. For example, in Curtis v. Taylor, 625 F.2d 645 (5th Cir.1980), plaintiffs claimed that a limitation of coverage adopted by Florida (three physician visits per month) was insufficient under Title XIX and its regulations. The court endorsed the Department of Health, Education and Welfare's view that a limitation on the 'amount, scope or duration' of a required service [is] 'reasonable' if the coverage provided is adequate to serve the medical needs of most of the individuals eligible for Medicaid assistance. Id. at 653. The plaintiffs did not dispute that Florida's plan met that standard; as the court noted, only 3.9% of the Medicaid population required more than three visits in any month, and only .5% required in excess of three visits in more than one month. Id. at 651 n. 10. 95 Similarly, in Charleston Memorial Hospital, the Fourth Circuit held that South Carolina's reduced coverage (inpatient hospital coverage, with some exceptions, had been cut from 40 days to 12 days a year, and outpatient hospital visits had been reduced to 18 visits per year) was sufficient in amount, duration and scope to reasonably achieve [the services'] purpose[s]. 693 F.2d at 330. According to the court, the remaining services were adequate to service the needs of most of the individuals eligible for Medicaid assistance because the 12-day inpatient limit met the needs of 88% of Medicaid recipients requiring inpatient care and the 18 visit outpatient limit met the needs of 99% of Medicaid recipients requiring such care. Id.; see also Virginia Hosp. Ass'n v. Kenley, 427 F.Supp. 781, 785-86 (E.D.Va.1977) (holding that Virginia's 21-day limitation on inpatient hospital coverage complied with Title XIX and deferring to Department of Health, Education and Welfare's interpretation of the statute that services provided reasonably achieve their purpose if the amount, scope and duration would be sufficient for most persons needing that type of care) (emphasis in original); Dougherty v. Department of Human Servs., 91 N.J. 1, 449 A.2d 1235, 1237 (1982) (We have never held that our statutory program requires state reimbursement for all medically necessary services for every patient.). 96 Plaintiffs seek to distinguish these cases on the ground that they involved limits on the amount and duration of coverage, rather than limits on the scope of coverage, and that scope limitations are subject to different federal standards, which we are invited to invent. We see no basis for that distinction in the statute, regulations, or the case law. A limit on the length of hospital stays will obviously leave uncovered the medically necessary hospitalization of some persons. Put bluntly, discharge from a hospital after 14 days would be a death sentence for some patients. Like Ms. DeSario, who uses a donated (but inferior) environmental control unit, the Medicaid recipient with a foreshortened hospital stay is forced by limited Medicaid coverage to seek other resources in the community. 97 The Health Care Financing Administration, the division within HHS which administers the Medicaid program, seems to have adopted this view of the sufficiency requirement. Its guidelines for state coverage of organ transplants provide that states may choose to cover none, some or all organ transplants. Health Care Financing Administration, Department of Health and Human Services, State Medicaid Manual, HCFA Guidelines on Organ Transplants, Pub. 45-4, § 4201, Transmittal No. 39 (Nov.1988) (hereinafter Organ Transplant Guidelines). However, if a state chooses to provide some coverage, the services must be reasonable in amount, duration and scope to achieve their purpose. Id.; see 42 C.F.R. § 441.35 (1996). Sufficiency is determined as follows: 98 States may cover transplants up to a dollar or day limit and may refuse to continue coverage beyond such limits, even if the patient is currently in a transplant program. However, any limits applicable to transplants, whether in terms of dollars or days, should be reasonably related to the dollars or days necessary to cover the particular type of transplant for most transplant patients in the Medicaid-eligible population. 99 Organ Transplant Guidelines, supra. 100 In short, we find no support in the statute, regulations and Supreme Court precedent, for requiring that a state cover every medically necessary item of DME. 12 101 Moreover, a requirement that states provide all medically necessary services within their covered categories of services would in effect constrict the state's ability to enforce any limitation on coverage, even one based on lack of medical necessity. Cases that have required states to fund all medically necessary services have also emphasized that the patient's physician deserves almost complete deference in determining medical necessity. See, e.g., Weaver v. Reagen, 886 F.2d 194, 200 (8th Cir.1989); Pinneke v. Preisser, 623 F.2d 546, 550 (8th Cir.1980) (The decision of whether or not certain treatment or a particular type of surgery is 'medically necessary' rests with the individual recipient's physician and not with clerical personnel or government officials.). Under that interpretation of the statute, states would need to fund all medically necessary services, and a Medicaid recipient's physician would be able to create coverage by prescribing a particular procedure or item of equipment. Coverage would be unlimited and budgeting would be by blank check. Worse, many of the services enumerated in Title XIX are optional for the states: therefore, if the states were required to provide all medically necessary care within each service, the only cost control measure available to a state would be to avoid adopting new optional services under its Medicaid program, and to end some of the optional services that it already provides. 102 For all these reasons, we reject as baseless and unworkable the view (adopted by some circuits) that a state must cover all medically necessary services. See, e.g., Hern v. Beye, 57 F.3d 906, 911 (10th Cir.), cert. denied, 516 U.S. 1011, 116 S.Ct. 569, 133 L.Ed.2d 494 (1995); Dexter v. Kirschner, 984 F.2d 979, 983 (9th Cir.1993) (as amended on denial of rehearing and rehearing en banc); Weaver, 886 F.2d at 198. We hold that Title XIX does not require that a state cover every item or service of home health care services that is medically necessary for each individual Medicaid recipient. Rather, the state must extend coverage through reasonable standards with (in the language of the Supreme Court) the general aim of assuring that individuals will receive necessary medical care and each category of service must be sufficient in amount, duration, and scope to adequately (although not fully) meet the needs of the Medicaid population of the state. See Alexander, 469 U.S. at 303, 105 S.Ct. at 721. That means that an individual with a rare condition or unusual needs, who must have a costly item of DME that Connecticut has not chosen to cover and that is needed by a handful of the Medicaid population, will have to look for other sources of assistance. 103 The district court therefore erred in its finding that the DSS fee schedule is insufficient under Title XIX by reason of the lack of procedures to add to the fee schedule equipment that meets the definition of DME. 104