Opinion ID: 752411
Heading Depth: 3
Heading Rank: 2

Heading: Program Sufficiency: the Medicaid Population as a Whole

Text: 105 On plaintiffs' motion for clarification of the injunction, the district court applied the correct coverage standard under Title XIX but still found that the plaintiffs were likely to succeed on the merits. Here, too, the district court erred. 106 Plaintiffs have the burden of demonstrating that Connecticut's DME coverage does not comply with federal law. In general, the normal assumption [is] that an applicant is not entitled to benefits unless and until he proves his eligibility. Lavine v. Milne, 424 U.S. 577, 584, 96 S.Ct. 1010, 1015, 47 L.Ed.2d 249 (1976). Such an assumption is at least as valid when the plaintiff attacks a plan that has been reviewed by a federal agency: in similar circumstances, when plaintiffs challenged a state's reimbursement rate plan that had been reviewed and approved by HCFA, we gave deference to the state plan and required that the plaintiff show that the plan was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law before ruling it invalid. See Pinnacle Nursing Home v. Axelrod, 928 F.2d 1306, 1313 (2d Cir.1991); see also Illinois Health Care Ass'n v. Bradley, 983 F.2d 1460, 1463 (7th Cir.1993) (holding that deference entitles the reimbursement plan to presumption of regularity); Colorado Health Care Ass'n v. Colorado Dep't of Social Servs., 842 F.2d 1158, 1164-65 (10th Cir.1988); Mississippi Hosp. Ass'n, Inc. v. Heckler, 701 F.2d 511, 516 (5th Cir.1983) (A presumption of validity attaches to agency action, and the burden of proof rests with the party challenging such action.). And in Perry v. Dowling, 95 F.3d 231 (2d Cir.1996), we held that a state agency's interpretation of the Medicaid statute was entitled to deference because Medicaid is a joint federal-state program that requires, among other things, HHS approval of state Medicaid plans and their implementation. Id. at 236. 107 Medicaid plans must be submitted to HCFA for review and a determination of whether they conform to the requirements of the statute and regulations. See 42 U.S.C. § 1316 (1994); 42 C.F.R. §§ 430.12-430.15 (1996). State plans are automatically approved unless HCFA disapproves them within 90 days. 42 C.F.R. § 430.16 (1996). Further, Title XIX requires that the federal government suspend payments to a state if that state's Medicaid plan ceases to comply with Title XIX. 42 U.S.C. § 1396c (1994). Although nothing in the record indicates that HHS's scrutiny of the state plans is searching or complete, the statute clearly recognizes agency oversight as the primary check on those plans. And that is as it should be, since HHS is much more familiar with the Medicaid program than courts. 108 As to Connecticut's program in particular, HHS advised the district court in its brief that the Secretary [has not] found the Connecticut Medicaid plan to be out of compliance with federal law with respect to the treatment of [DME]. Brief of Third-Party Defendant Donna Shalala at 3. As to Connecticut's use of an exclusive list, the Secretary stated that HCFA has made no finding that the referenced State policies are contrary to federal Medicaid law. Id. at 13. Because the plan has withstood regulatory oversight, there is no reason these plaintiffs should not bear a plaintiff's ordinary burden of demonstrating that the state plan violates federal law. 109 Plaintiffs argue that Medicaid recipients should only have the burden of proof as to information that is within their knowledge and that individual Medicaid recipients lack access to the Medicaid statistics needed to evaluate the adequacy of DME coverage for the Medicaid population as a whole. However, plaintiffs have discovery procedures at their disposal in this action, as well as in the state fair administrative hearing, see Conn. Gen.Stat. §§ 4-177b & 4-177c, and therefore bear no greater burden than in any other lawsuit. 110 Plaintiffs therefore bore the burden of demonstrating the insufficiency of the DSS fee schedule. But in concluding that plaintiffs were likely to succeed in proving that the fee schedule is inadequate with respect to the needs of the Medicaid population as a whole, the district court relied on the following factors: (i) the absence of a procedure for updating the fee schedule with newly developed DME, (ii) the lack of a procedure for a Medicaid recipient to demonstrate that medically necessary equipment falls within the definition of DME, and (iii) the fact that the fee schedule was developed and maintained with limited input from physicians having the appropriate specializations. DeSario, 963 F.Supp. at 142. 111 Given the allocation of the burdens and this record, we conclude that the district court abused its discretion in finding that plaintiffs would likely succeed in proving that the fee schedule was inadequate to serve the needs of the Medicaid population of the state. The absence of procedures for including every item of equipment that satisfies the definition of DME on the fee schedule does not prove the insufficiency of the fee schedule. Further, a DSS working group revised the fee schedule in 1996, and we have seen no requirement that DSS continuously evaluate newly developed DME. A flood of such products comes continuously to market, as plaintiffs' counsel readily conceded at oral argument, and there are few studies which evaluate this new equipment. In addition, the district court concluded that plaintiffs will likely be able to prove that the schedule is insufficient because of the absence of a doctor from the DSS working group. It is true that there are no doctors in the DSS group that developed the fee schedule; but it does include a nurse and a physical therapist, who are medical professionals. 112 In fact, Connecticut now provides Medicaid recipients an opportunity to appeal the denial of a prior authorization request for DME in a fair hearing, at which the recipient may demonstrate that the absence of a particular item of DME from the fee schedule renders the schedule unreasonable and inadequate with respect to the needs of the Medicaid population of the state. 13 The reasonableness and adequacy of the fee schedule to the Medicaid population of the state has been expressed in percentage terms, see, e.g., Curtis v. Taylor, 625 F.2d 645, 653 (5th Cir.1980); Charleston Mem'l Hosp. v. Conrad, 693 F.2d 324, 330 (4th Cir.1982), but we do not preclude consideration (as part of this analysis) of whether a reasonable cost-benefit calculation could justify denying coverage of the unscheduled item of DME that the recipient is requesting. 14 Any such calculation by the state is of course entitled to great deference. 113 Given the availability of this hearing, any imperfection in the fee schedule can be cured through hearing-by-hearing consideration of the legality of excluding individual items of DME. Thus, the use of the fee schedule to deny coverage does not violate Title XIX, and the district court erred in enjoining DSS from using its fee schedule as the primary determinant of DME coverage. 114 In summary, the district court abused its discretion in enjoining DSS from using its fee schedule to deny coverage for DME because it misconceived a state's funding obligation under Title XIX and lacked a basis for its finding that plaintiffs were likely to succeed on their claim that Connecticut's fee schedule is inadequate to serve the needs of the Medicaid population as a whole. Further, the district court abused its discretion in enjoining DSS from requiring applicants for DME to demonstrate that medical equipment covered by the department is inadequate with respect to the Medicaid population as a whole in order to obtain coverage for DME not on the fee schedule. DeSario, 963 F.Supp. at 143. Accordingly, we vacate the injunction and remand to the district court for further proceedings consistent with this opinion.