Court Opinion

ID: 8945347
Source: CourtListenerOpinion
Date Created: 2022-11-27 08:18:24.104427+00
Date Added: 2024-06-11T17:09:49.795070
License: Public Domain

OAKES, Circuit Judge
(dissenting):
I respectfully dissent.
*628The Department of Health and Human Services’ (“HHS”) requirement that a three-month spend-down period be used to determine eligibility for retroactive Medicaid coverage, set forth in the 1976 Action Transmittal SRS-AT-76-109 (MSA) (“the ATL”) and included in the agency’s Medical Assistance Manual § 4-30-30, is an interpretive rule issued pursuant to 42 U.S.C. § 1396a(a)(34) (1982) (authorizing retroactive eligibility) and 42 C.F.R. § 435.-914 (1985) (regulation implementing three-month retroactive coverage). Interpretive rules are entitled to be given weight, St. Mary’s Hospital v. Blue Cross & Blue Shield Association, 788 F.2d 888, 890 (2d Cir.1986), and, as Judge Friendly observed in our earlier “spend-down” case, Dejesus v. Perales, 770 F.2d 316, 327 (2d Cir.1985), cert. denied, — U.S.-, 106 S.Ct. 3301, 92 L.Ed.2d 715 (1986), “courts must exhibit particular deference to the Secretary’s position with respect to legislation as intricate as Title XIX.” The seasoned judgments of administrators about Title XIX’s application should not lightly be overturned. See id. at 321.
It might be said that the language of the ATL is ambiguous as to whether the agency intended to mandate a three-month spend-down period or merely to respond to assumed facts set forth in the ATL. But the ATL has been in place since 1976, and since then has consistently been treated by the agency as requiring a three-month spend-down period to determine eligibility for retroactive Medicaid applicants, and as precluding the use of a combined budget period to determine such eligibility. The consistency with which HHS, with its considerable expertise, has maintained this interpretation is a factor that supports judicial deference to the agency. See Batterton v. Francis, 432 U.S. 416, 425 n. 9, 97 S.Ct. 2399, 2405 n. 9, 53 L.Ed.2d 448 (1977). See generally 2 K. Davis, Administrative Law Treatise § 7-14 (2d ed. 1979). The ATL, then, as consistently interpreted by the agency, is in direct conflict with 18 N.Y.C.R.R. § 360.5(d)(1).
True, in September 1983 HHS issued a Notice of Proposed Rulemaking (“NPR”) proposing a rule that would allow New York to use a combined six-month budget period. 48 Fed.Reg. 39, 960-39, 961 (proposed Sept. 2, 1983). But the appellant Liegl applied for Medicaid in November 1981, to cover an August 1981 hospital bill for her daughter. Her application was denied in December 1981 and the denial affirmed by the State Commissioner in June 1982. Throughout the application and review process, the governing federal policy was that a single three-month spend-down period be used in determining Medicaid eligibility in circumstances such as those in which Liegl found herself.
While not required by the governing statute, as noted in the preamble to the proposed rule, id. at 39, 961, neither is this established policy inconsistent with the statute. Where a statute leaves open a number of possible interpretations, the agency may be expected to adopt the interpretation that it believes best effectuates the policies of the statute. It may refine its interpretation over time: “An initial agency interpretation is not instantly carved in stone. On the contrary, the agency, to engage in informed rulemaking, must consider varying interpretations and the wisdom of its policy on a continuing basis.” Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 863-64, 104 S.Ct. 2778, 2792-93, 81 L.Ed.2d 694 (1984). But such refinements do not automatically have retroactive effect.
Retroactive application of policy is disfavored when the ill effects of such application will outweigh the need of immediate application, NLRB v. Majestic Weaving Co., 355 F.2d 854, 861 (2d Cir.1966), or when the hardship on affected parties will outweigh the public ends to be accomplished. SEC v. Chenery Corp., 332 U.S. 194, 203, 67 S.Ct. 1575, 1580, 91 L.Ed. 1995 (1947).
Iowa Power & Light Co. v. Burlington Northern, Inc., 647 F.2d 796, 812 (8th Cir. 1981), cert. denied, 455 U.S. 907, 102 S.Ct. 1253, 71 L.Ed.2d 445 (1982). Here no need for retroactive application of the new policy articulated in the NPR has been shown, either in the NPR or the briefs submitted *629by HHS or the New York Department of Social Services. Nor has it been suggested that the public ends accomplished by changing the policy retroactively would outweigh the hardship to Medicaid applicants such as the appellant Liegl. At the time her application for Medicaid was denied under the 18 N.Y.C.R.R. § 360.5(d)(1) eligibility requirements, the New York regulation was inconsistent with established federal policy, and no adequate reasons have been provided why that regulation should be saved retroactively by the NPR’s proposed new policy. Furthermore, it is in just the circumstances here, where a retroactive change of a settled policy, rather than a retroactive settling of unsettled policy, is involved, that courts are most reluctant to allow a regulation retroactive effect in the absence of very good cause being shown. See 2 K. Davis, Administrative Lava Treatise § 7-23, at 115-16 (2d ed. 1979) (favorably discussing Anderson, Clayton & Co. v. United States, 562 F.2d 972 (5th Cir.1977), cert. denied, 436 U.S. 944, 98 S.Ct. 2845, 56 L.Ed.2d 785 (1978)).
Another point in Liegl’s favor is that the proposed new policy has never been adopted as a regulation. Although modification of the policy articulated in the ATL does not require notice or comment, see Administrative Procedure Act § 553(d)(2), 5 U.S.C. § 553(d)(2) (1982); see, e.g., Continental Oil Co. v. Burns, 317 F.Supp. 194 (D.Del.1970), nevertheless it would be premature to regard the NPR as fixing current policy. The whole purpose of a proposal for a rule — even a rule that does not require notice and comment — must be to air a change before that change is finalized. The majority, I fear, threatens to close off a potentially valuable mode in which agencies may proceed to rulemaking when it treats a mere proposal as establishing current policy and as replacing an agency’s long established interpretation of a statute. A proposed rule is just that; it does not itself change established policy.
The most compelling argument in favor of the court’s construction is that, if the ATL is enforced, Medicaid applicants may be in a better position if they apply after expenses have been incurred and thus have their eligibility judged under the retroactive three-month spend-down test than if they apply prospectively, in which case a six-month test would be used. But there was presumably a valid administrative reason for the distinction between prospective and retrospective Medicaid applications brought about by the rule in the ATL, and while the NPR shows a concern with bringing the prospective and retrospective spend-down periods into line, the agency’s concern with doing so cannot be very great, because in the three years since the proposal was made, no new rule has resulted.
I would accordingly reverse.