Court Opinion

ID: 7500
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:28:51+00
Date Added: 2024-06-11T12:06:59.930437
License: Public Domain

United States Court of Appeals,

                                Fifth Circuit.

                                No. 94-40265.

                       STATE of Texas, Petitioner,

                                      v.

     UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES,
Respondent.

                                Aug. 22, 1995.

On Petition for Review from the United States Department of Health
and Human Services.

Before REAVLEY, KING and WIENER, Circuit Judges.

      KING, Circuit Judge:

      The State of Texas appeals an administrative order of the

Department   of    Health   and    Human     Services   denying   a   proposed

amendment to its state Medicaid plan.           We affirm.

                  I. FACTUAL AND PROCEDURAL BACKGROUND

      In September of 1990, Texas submitted a proposed amendment to

its state Medicaid plan to the Health Care Financing Administration

("HCFA") of the United States Department of Health and Human

Services ("HHS").      Under this proposed amendment, Texas sought to

expand the Medicaid program to cover inpatient residential chemical

dependency treatment for children under age twenty-one who qualify

for   the   Medicaid    Early     Periodic    Screening,     Diagnostic,   and

Treatment program.     By letter dated May 2, 1991, HCFA rejected the

proposed amendment.

      The State requested reconsideration.          After full briefing by

both parties and numerous meetings, the HCFA administrator upheld

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the initial decision to deny the proposed amendment.            The State

then requested a formal hearing on the disapproval;           after three

days of hearings, the hearing officer recommended that the decision

to deny the proposed amendment be upheld.        Texas appealed to the

Secretary of HHS, who, through the HCFA Administrator, accepted the

hearing officer's recommendation and issued an administrative order

upholding the denial of the proposed amendment.             Texas filed a

timely appeal of this final administrative order and the matter is

now before this court.

                        II. STANDARD OF REVIEW

       The case at hand centers around an issue of statutory

construction.    While each side argues that the "plain meaning" of

a certain portion of the Medicaid statute unambiguously indicates

that Congress intended the statute to be interpreted in its favor,

we find no such "plain meaning" in the statute.              HHS, as the

federal agency with expertise in overseeing the Medicaid program,

has proffered a construction of the implicit statutory gap.           Our

task is to determine whether the statutory construction proffered

by HHS is valid.      Under such circumstances, judicial review is

quite limited.    See Pauly v. BethEnergy Mines, Inc., 501 U.S. 680,

696, 111 S.Ct. 2524, 2534, 115 L.Ed.2d 604 (1991) ("When Congress,

through express delegation or the introduction of an interpretive

gap   in   the   statutory   structure,   has   delegated    policymaking

authority to an administrative agency, the extent of judicial

review of the agency's policy determinations is limited."). In the

seminal case of     Chevron, U.S.A. v. Natural Resources Defense

                                    2
Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984),

the Supreme Court held that:

     [t]he power of an administrative agency to administer a
     congressionally created ... program necessarily requires the
     formulation of policy and the making of rules to fill any gap
     left, implicitly or explicitly, by Congress.... Sometimes the
     legislative delegation to any agency on a particular question
     is implicit rather than explicit. In such a case, a court may
     not substitute its own construction of a statutory provision
     for a reasonable interpretation made by the administrator of
     an agency....

Id. at 843-44, 104 S.Ct. at 2782 (internal quotations, citation and

footnotes omitted) (emphasis added). If Congress has not addressed

the precise question at issue, "the [c]ourt does not simply impose

its own construction on the statute ... [r]ather ... the question

for the court is whether the agency's answer is based on a

permissible construction of the statute."       Id. at 843, 104 S.Ct. at

2782.    Thus, we proceed to analyze whether HHS's denial of the

proposed amendment to the Texas Medicaid plan was based upon a

permissible construction of the relevant Medicaid statute.

                             III. ANALYSIS

        Medicaid is a health care program, primarily for the poor and

disabled, which is jointly financed by the federal and state

governments and which is administered at the state level, subject

to umbrella supervision by HCFA, a division of HHS.         The State of

Texas asked HCFA for permission to amend its state Medicaid plan to

cover residential drug and alcohol treatment for children under age

twenty-one who are eligible to receive other health care services

under   the   Early   Periodic   Screening,   Diagnostic   and   Treatment

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("EPSDT") program.1        Without HCFA's permission to implement the

proposed amendment, the State of Texas cannot receive federal

matching funds if it elects to provide these services.

       HCFA denied Texas's proposed amendment on the grounds that it

would impermissibly result in the flow of federal Medicaid funds to

reimburse room and board expenses.2           Specifically, HCFA contends

that the portion of the Medicaid statute which provides federal

matching funds for the provision of rehabilitative services, 42

U.S.C. § 1396d(a)(13), does not permit matching funds to pay for

room       and   board   costs   associated    with   the   provision    of

rehabilitative services in a residential treatment facility.            The

federal statute at issue provides that federal matching funds may

be used, inter alia, for:

       (13)   other   diagnostic,    screening,   preventive,   and
       rehabilitative services, including any medical or remedial
       services (provided in a facility, a home, or other setting)
       recommended by a physician or other licensed practitioner of
       the healing arts within the scope of their practice under

       1
      EPSDT services include, inter alia, screening, vision,
dental, and hearing services as well as:

       "[s]uch other necessary health care, diagnostic services,
       treatment, and other measures ... to correct or ameliorate
       defects and physical and mental illnesses and conditions
       discovered by the screening services...."

       42 U.S.C. § 1396d(r)(5).
       2
      Initially, HCFA also denied the proposed amendment on the
grounds that the provision of chemical dependency services would
violate the statutory exclusion for coverage of services for
those under age 65 in an institution for mental disease (the
so-called "IMD exclusion"). See 42 U.S.C. § 1396d(a)(14); 42
C.F.R. § 435.1008(a)(2). As HCFA did not pursue this argument
after the initial hearing and the agency's final decision does
not rest upon it, we need not address its validity as a basis for
denying the proposed amendment.

                                      4
     State law, for the maximum reduction of physical or mental
     disability and restoration of an individual to the best
     possible functional level.

42 U.S.C. § 1396d(a)(13).3

     The State contends that because the language of § 1396d(a)(13)

does not explicitly exclude room and board services, the term

"rehabilitative services" should be construed in its broadest sense

to include necessary tangential room and board expenses when those

rehabilitative services are provided in a residential treatment

setting.     The State bolsters its argument by contending that

because the parenthetical "provided in a facility, a home, or other

setting"    evinces    an   explicit   intent    to    provide       coverage   for

services rendered in either an inpatient or an outpatient setting,

this necessarily evinces an implicit intent to provide coverage for

all necessary corollary expenses in either an inpatient or an

outpatient    setting—such     as   room   and   board    in     a    residential

treatment facility.

     The State's final argument is that Congress knew how to

explicitly exclude coverage for room and board expenses when it

wanted to do so, as evidenced by other sections in the Medicaid

statute.     See 42 U.S.C. §§ 1396t(a)(9), 1396u(f)(1) (explicitly

excluding    room     and   board   coverage     for     frail       elderly    and

     3
      The statute also provides federal matching funds for "any
other medical care, and any other type of remedial care
recognized under State law, specified by the Secretary...." 42
U.S.C. § 1396d(a)(25). While Texas initially argued to HHS that
its proposed amendment should be approved under this section, the
Secretary opted not to exercise his discretion under §
1396d(a)(25) in the State's favor. The State concedes in its
brief that "[t]he [S]tate has not brought the (a)(25) issue to
this [c]ourt."

                                       5
developmentally disabled in the provision of home and community

care services).      Thus, Congress's failure to explicitly exclude

room and board expenses in the section authorizing coverage of

rehabilitative services indicates that Congress did not wish to

exclude coverage for such expenses in this particular context.

     HCFA concedes that § 1396d(a)(13) permits the payment of

federal matching funds for rehabilitative services, whether those

services are provided in an inpatient or an outpatient setting.

However, HCFA argues that it historically has construed the federal

Medicaid   statute   as    authorizing      federal     funding    of    inpatient

services—including inpatient substance abuse treatment—only if the

services are provided in one of four types of facilities for which

there are federal quality assurance standards: (1) hospitals; (2)

skilled    nursing   facilities     (SNFs);            (3)   intermediate     care

facilities for the mentally retarded (ICF-MRs);               and (4) inpatient

psychiatric   hospitals.       Thus,       HCFA    contends,    its     historical

construction of the Medicaid statute indicates that Congress would

have explicitly included coverage for room and board if it had

intended such expenses to be covered.              Congressional silence, in

other   words,   more     likely   evinces        an   agreement   with     HCFA's

antecedent interpretation excluding such expenses in unregulated

facilities rather than disagreement:               if Congress had disagreed

with HCFA's longstanding interpretation, it would explicitly have

said so.

     HCFA also contends that the language of § 1396d(a)(13) belies

the State's argument that federal funding for both inpatient and

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outpatient rehabilitation services evinces a congressional intent

to pay for necessary corollary expenses such as room and board.

Specifically, HCFA notes that if the statute is construed as

mandating      federal    matching     funds       for    all   necessary   corollary

services regardless of setting, the result would be extreme.                          For

example, assuming arguendo that the statute mandates matching funds

for room and board expenses associated with a stay in a residential

substance abuse treatment facility, a fortiori it would necessitate

matching       funds   for    room   and     board       expenses    associated      with

rehabilitation treatment in one's own home or in a board and care

home.     In any of these settings—at home, in a board and care home,

or   in    a     residential        treatment       facility—the       recipient      of

rehabilitative services must eat and sleep.                         Yet it would be

unacceptable to suggest that Congress intended federal matching

funds to pay for room and board expenses for those living in their

own home or in a board and care home.                    The reason, HCFA contends,

is that the structure of the statutory scheme crafted by Congress

reveals an intent to use limited Medicaid dollars to pay for room

and board expenses only in those facilities for which Congress has

extracted the quid pro quo of federal quality assurance standards.

No federal standards, no federal Medicaid dollars.

     We are also persuaded by HCFA's argument that the explicit

exclusions      for    room   and    board       which    appear    elsewhere   in    the

Medicaid statute are not apposite to Congressional intent regarding

rehabilitative services because the explicit exclusions were passed

in 1990—subsequent to the passage of § 1396d(a)(13). Indeed, these

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explicit exclusions, which appear at 42 U.S.C. §§ 1396t(a)(9) and

1396u(f)(1), appear in sections that provide coverage for home and

community   care     services       for       the    frail     elderly     and   the

developmentally disabled—services which by their very nature could

have been interpreted as containing an implicit room and board

component if no explicit exclusion had been provided. If anything,

the fact that Congress felt compelled in 1990 to explicitly exclude

payment for room and board evinces a desire to ensure that Medicaid

dollars do not flow to unregulated facilities.

     In short, § 1396d(a)(13) is ambiguous and the legislative

history of the section sheds no light.                  Congress has provided no

guidance as to whether it intended to permit federal matching funds

to pay for room and board services provided in conjunction with

residential chemical dependency treatment.                The construction given

to § 1396d(a)(13) by HHS and HCFA is consistent with the overall

framework of the Medicaid program and with the agency's permissible

historical construction of the statute as restricting federal

matching funds to inpatient services provided in facilities for

which   there      exist     federal          quality     assurance      standards.

Accordingly,    under      the   edict        of    Chevron,   this      permissible

construction is entitled to our deference.

                                 IV. CONCLUSION

     For the foregoing reasons, the administrative order of the

Department of Health and Human Services is hereby AFFIRMED.

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