Opinion ID: 4582045
Heading Depth: 2
Heading Rank: 1

Heading: Michigan’s Medicaid Framework

Text: The joint federal-state Medicaid program provides medical assistance to qualifying individuals who are unable to pay or do not have private insurance, pursuant to Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. (the “Medicaid Act”). In order to receive federal Medicaid funds, states must develop a plan to administer their program in compliance with federal statutory and regulatory requirements. 42 U.S.C. § 1396a(a); 42 C.F.R. § 430.10. Once their plan is approved by the Centers for Medicare and Medicaid Services (“CMS”), states receive federal funds to supplement state spending on Medicaid-covered services. See 42 U.S.C. § 1396b(a). Michigan’s Medicaid program is administered by Defendant Michigan Department of Health and Human Services (“the Department”), which is led by Defendant Robert Gordon, its director (collectively, “State Defendants”). 42 U.S.C. § 1396a(a)(5) (requiring that each state “provide for the establishment or designation of a single State agency to administer or to supervise the administration of” their plan); 42 C.F.R. § 431.10(b)(1). The Department then contracts with regional prepaid inpatient health plans (“PIHPs”), which are public managed care organizations that receive funding and arrange and pay for Medicaid services. 42 U.S.C. § 1396u-2(a)(1)(B); Mich. Comp. Laws § 400.109f. Defendant Community Mental Health Partnership of Southeast Michigan (“CMHPSM”) is the PIHP responsible for Washtenaw County, and is led by Defendant Jane Terwilliger, its executive officer (collectively, “PIHP Defendants”).1 The Department has supervisory and policymaking authority over the PIHPs and must ensure that PIHPs retain oversight and accountability over any subcontractors. PIHPs subcontract with community organizations that provide or arrange for mental health services for recipients, including Defendant Washtenaw County Community Mental Health (“WCCMH”). WCCMH is the public community mental health authority for Washtenaw County and is led by Defendant Trish Cortes, its director (collectively, “County Defendants”). The relationships 1 According to Plaintiffs, Defendant Terwilliger left her position at CMHPSM in April 2019. The parties do not further acknowledge this fact in their briefing; their posture has not apparently changed as a result. No. 19-1400 Waskul, et al. v. Washtenaw Cnty. Community, et al. Page 5 between the Department, CMHPSM, and WCCMH are governed by federal and state law, in addition to specific contracts. See, e.g., 42 U.S.C. § 1396u-2(a)(1)(B); Mich. Comp. Laws §§ 330.1100a(18), 400.109f. B. The Community Living Support Program Framework Under this framework, Defendants work together to ensure CLS services are provided to qualifying recipients, including the individual Plaintiffs, pursuant to the terms of Michigan’s Habilitation Supports Waiver. That waiver is financed through so-called “capitation procedures.” This means that the federal government provides the relevant entity—here the PIHP, Defendant CMHPSM—with a fixed amount of funding for each person participating in the CLS program, regardless of how many services the entity ultimately provides to the recipient. The PIHP then determines how to allocate these funds to recipients. (Am. Compl., R. 146 at PageID #3718; Application for Habilitation Supports Waiver, MI.0167.R04.00, at 5–6 (Oct. 1, 2010) (hereinafter, “Waiver”), available at https://www.michigan.gov/documents/mdch/Habilation_Supports_Waiver_340749_ 7.pdf.) PIHPs can make or lose money depending on how the amount they receive in capitation funds compares to the amount of funding they provide recipients, but they must ensure that the services they provide comply with the terms of their contract with the State, which itself must ensure that it complies with the terms of the Medicaid Act, federal regulations, and the Waiver. Once an individual has elected to receive CLS services, they go through what is known as a person-centered planning (“PCP”) process, during which an individual plan of service (“IPOS”) and corresponding budget for CLS services is developed. Mich. Dep’t of Health & Human Servs., Medicaid Provider Manual at 328 (hereinafter “Mich. Medicaid Provider Manual”), available at http://www.mdch.state.mi.us/ dch-medicaid/manuals/MedicaidProviderManual.pdf), see 42 C.F.R. § 441.301(b)(1)(i). The IPOS describes the services that have been deemed “medically necessary” for each recipient based on criteria defined in Michigan’s Medicaid Provider Manual. (Am. Compl., R. 146 at PageID #3713; Mich. Medicaid Provider Manual at 337 (“The determination of a medically necessary support, service or treatment must be . . . [d]ocumented in the individual plan of service.”).) Michigan’s Waiver application, later approved by CMS, explained: No. 19-1400 Waskul, et al. v. Washtenaw Cnty. Community, et al. Page 6 An individual budget includes the expected or estimated costs of . . . obtaining the mental health services and supports included in the IPOS. . . . Once the IPOS is developed, the amount of funding needed to obtain the identified services and supports is determined collectively by the participant, the mental health agency (PIHP or designee), and others participating in the PCP process. This process involves costing out the services and supports using the rates for providers chosen by the participant and the number of hours authorized in the IPOS. . . . The individual budget is authorized in the amount of that total cost of all services and supports in the IPOS. (Waiver at 134.) The individual then enters a “self-determination arrangement” with their local community mental health service program. (Id. at 135.) Under that arrangement, the individual determines how to use the funds in their budget to execute their IPOS. This includes hiring, scheduling, and paying staff, as well as selecting, arranging, and paying for services, supports, and treatments listed in the IPOS. A fiscal intermediary actually holds the funds and pays bills directed to them. C. WCCMH’s Budget Methodology This brings us to the change in budget methodology that prompted this case. Budgets for CLS services are calculated by multiplying how many hours of services a participant’s IPOS calls for by a specific rate. Starting in at least April 2012, the CLS budget for recipients in Washtenaw County was developed by providing a rate for staff or providers and then allowing billing of other services and supports (e.g., workers’ compensation, staff training, and transportation) as separate line items. In 2015, the predecessor to WCCMH, Washtenaw Community Health Organization (“WCHO”), shifted to a budget methodology under which it provided a single, all-inclusive rate to cover both staff and services.2 WCCMH now operates under this methodology. 2 Defendant WCCMH explains that WCHO also used this methodology prior to 2012, and argues that the methodology implemented between 2012 and 2015 duplicated costs by providing for them in calculating the staff rate and then also paying for them separately as additional line items. Defendants previously argued that this billing methodology violated Medicaid regulations and their inter-entity contracts, and the district court denied a preliminary injunction in part because Plaintiffs were not “entitled to the reinstatement of a calculation method that violates Medicaid regulations and existing contracts between WCCMH and the State and PIHP.” (Order Denying Pls. Mot. for Prelim. Inj., R. 55 at PageID #1168.) A court’s determination of substantive issues at the preliminary injunction stage is “not dispositive of those substantive issues on the merits,” Wilcox v. United States, 888 F.2d 1111, 1114 (6th Cir. 1989), and the district court did not rely on this issue or suggest that the prior methodology No. 19-1400 Waskul, et al. v. Washtenaw Cnty. Community, et al. Page 7 As this Court explained in a previous opinion in this case, The budgeting change did not reduce the total number of service hours recipients were authorized to receive. The effect of utilizing an all-inclusive rate, however, was to reduce the total budget amount for each recipient. As a practical matter, service recipients had to reduce the hourly rate they paid service providers to maintain the level of hours authorized prior to the budget change. The notice to recipients acknowledged this reality, stating that “[w]hile this is not a reduction in your current level of services, it may reduce the amount you can pay your staff.” Waskul v. Washtenaw Cty. Cmty. Mental Health, 900 F.3d 250, 254 (6th Cir. 2018). CLS recipients like the individual Plaintiffs now had to begin budgeting from the fixed all-inclusive rate (then $13.88 per hour) and subtract out the costs of non-staff services and supports in order to determine the amount they could pay staff. Plaintiffs Waskul, Schneider, and Wiesner challenged the resulting reductions in their budgets in Medicaid Fair Hearings through the Michigan Administrative Hearing System. An administrative law judge ruled in their favor, and their budgets were increased, but the budget methodology was not changed. Plaintiffs allege that, due to this change in the budget methodology, the funding they receive no longer suffices to cover the services required by their IPOSs. In particular, they say that they cannot find sufficient CLS providers willing to work at the low rates they must pay under the new budgeting method and that, in order to pay providers more, they are now compelled to pay for supports and services themselves and hire family members at below-market rates. As a result of the reduction in support, they allege that they have not been able to receive all of the services identified in their IPOSs and their conditions have deteriorated.