Hill v. The Div. of Soc. Servs.

IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA23-197

Filed 16 January 2024

Rutherford County, No. 22 CVS 38

JEAN HILL and JAMES HILL, Petitioners,

v.

THE DIVISION OF SOCIAL SERVICES AND THE DIVISION OF HEALTH

BENEFITS OF THE NORTH CAROLINA DEPARTMENT OF HEALTH AND

HUMAN SERVICES, Respondents.

Appeal by petitioners from order entered 7 October 2022 by Judge J. Thomas

Davis in Rutherford County Superior Court. Heard in the Court of Appeals 3 October

2023.

Ott Cone & Redpath, P.A., by Stephen J. White, for petitioners-appellants.

Attorney General Joshua H. Stein, by Assistant Attorney General Chris D.

Agosto Carreiro and Assistant Attorney General Adrian W. Dellinger, for the

State.

ZACHARY, Judge.

This case concerns a single issue of law: whether great-aunts and great-uncles

were included within the definition of “caretaker relatives” under the North Carolina

State Medicaid Plan prior to 1 May 2022. Petitioners Jean and James Hill (“the Hills”)

appeal from the superior court’s order affirming the ruling by Respondent North

Carolina Department of Health and Human Services (“DHHS”), which approved the

Hills for Family Planning Medicaid benefits rather than retroactive and ongoing full

HILL V. THE DIV. OF SOC. SERVS.

Opinion of the Court

Medicaid benefits covering the medical expenses that they incurred during their

period of caring for their great-niece. After careful review, we affirm.

I. Background

At the outset, the Hills acknowledge that “[t]his appeal does not raise any

substantive disputes concerning the material facts.” We therefore need only recite the

legal and procedural facts pertinent to our analysis.

A. Medicaid

“The Medicaid program was established by Congress in 1965 to provide federal

assistance to states which chose to pay for some of the medical costs for the needy.”

Correll v. Div. of Soc. Servs., 332 N.C. 141, 143, 418 S.E.2d 232, 234 (1992). “Whether

a state participates in the program is entirely optional. However, once an election is

made to participate, the state must comply with the requirements of federal law.” Id.

(cleaned up). In essence, “Medicaid offers the States a bargain: Congress provides

federal funds in exchange for the States’ agreement to spend them in accordance with

congressionally imposed conditions.” Armstrong v. Exceptional Child Ctr., Inc., 575

U.S. 320, 323, 191 L. Ed. 2d 471, 476 (2015).

“The federal and state governments share the cost of Medicaid, but each state

government administers its own Medicaid plan. State Medicaid plans must, however,

comply with applicable federal law and regulations.” N.C. Dep’t of Health & Hum.

Servs. v. Parker Home Care, LLC, 246 N.C. App. 551, 556, 784 S.E.2d 552, 556, disc.

review denied, 369 N.C. 183, 793 S.E.2d 690 (2016) (citation omitted); see also 42

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U.S.C. § 1396c. “Within broad Federal rules, each State decides eligible groups, types

and range of services, payment levels for services, and administrative and operating

procedures.” 42 C.F.R. § 430.0 (2022). A “State plan” is “a comprehensive written

commitment by a Medicaid agency, submitted under [42 U.S.C. § 1396a], to

administer or supervise the administration of a Medicaid program in accordance with

Federal requirements.” Id. § 400.203.

“North Carolina’s Medicaid plan describes the nature and scope of its Medicaid

program and gives assurance that it will be administered in conformity with specific

federal statutory requirements and other applicable official issuances of the federal

Department of Health and Human Services.” Martin v. N.C. Dep’t of Health & Hum.

Servs., 194 N.C. App. 716, 720, 670 S.E.2d 629, 633 (2009). State Medicaid Plans and

State Plan Amendments approved by the Centers for Medicare and Medicaid Services

(“CMS”) “have the force and effect of rules adopted pursuant to Article 2A of Chapter

150B of the General Statutes.” N.C. Gen. Stat. § 108A-54.1B(d) (2021).

B. “Caretaker Relative” Status

CMS has promulgated a regulation defining “caretaker relative,” a category of

individuals who may be eligible for full Medicaid benefits, which includes an optional

expansion of the category that a state may choose:

Caretaker relative means a relative of a dependent child by

blood, adoption, or marriage with whom the child is living,

who assumes primary responsibility for the child’s care (as

may, but is not required to, be indicated by claiming the

child as a tax dependent for Federal income tax purposes),

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and who is one of the following—

(1) The child’s father, mother, grandfather, grandmother,

brother, sister, stepfather, stepmother, stepbrother,

stepsister, uncle, aunt, first cousin, nephew, or niece.

(2) The spouse of such parent or relative, even after the

marriage is terminated by death or divorce.

(3) At State option, another relative of the child based on

blood (including those of half-blood), adoption, or

marriage; the domestic partner of the parent or other

caretaker relative; or an adult with whom the child is

living and who assumes primary responsibility for the

dependent child’s care.

42 C.F.R. § 435.4 (second emphasis added).

Prior to the enactment of the Patient Protection and Affordable Care Act (“the

Affordable Care Act”),1 North Carolina recognized a more expanded definition of

“caretaker relative.” The North Carolina Administrative Code contained a regulation

(“the Rule”)2 that reflected this expanded definition:

“Caretaker Relative” means a parent or a person in one of

the following groups with whom a child lives:

(a) any blood relative, including those of half-blood, and

including first cousins, nephews, or nieces, and

persons of preceding generations as denoted by

prefixes of grand, great, or great-great;

1 The Affordable Care Act is the comprehensive federal health care reform legislation enacted

in 2010 with the primary goals of “increas[ing] the number of Americans covered by health insurance

and decreas[ing] the cost of health care.” Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519, 538, 183

L. Ed. 2d 450, 467 (2012).

2 DHHS repealed the Rule with an effective date of 1 May 2022. 36 N.C. Reg. 1869–72 (June

1, 2022). It is undisputed, however, that at all times relevant to this appeal, this explicit repeal had

not yet taken effect.

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(b) stepfather, stepmother, stepbrother, and stepsister;

(c) persons who legally adopt a child, their parents as

well as the natural and other legally adopted

children of such persons, and other relatives of the

adoptive parents in accordance with state law;

(d) spouses of any persons named in the groups in Sub-

item (19)(a)–(c) of this Rule even after the marriage

is terminated by death or divorce.

10A N.C. Admin. Code 23A.0102(19) (2020) (emphasis added).

In response to the enactment of the Affordable Care Act, which included

revisions to the Medicaid eligibility groups, North Carolina submitted State Plan

amendments to CMS on 26 September 2013. On 10 December 2013, CMS approved

the North Carolina State Plan Amendment NC-13-00014-MM1 (“the SPA”) with an

effective date of 1 January 2014. The SPA includes several pages to be incorporated

into North Carolina’s State Plan. On page S25-1 of the SPA, the State “attests that it

operates [the ‘caretaker relatives’] group[,]” which includes “parents or other

caretaker relatives (defined at 42 CFR 433.4), including pregnant women, of

dependent children (defined at 42 CFR 435.4) under age 18. Spouses of parents and

other caretaker relatives are also included.” Page S25-1 also contains a series of

checkboxes related to the various options in defining the category that the State may

elect. The box labeled “Options relating to the definition of a caretaker relative (select

any that apply)”—which must be checked in order to select an expanded definition of

“caretaker relative”—is unchecked. Meanwhile, on page S51-1 of the SPA, the State

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attests that it declines “to cover individuals qualifying as parents or other caretaker

relatives who are not mandatorily eligible and who have income at or below a

standard established by the State and in accordance with provisions described at 42

CFR 435.220.”

C. Procedural History

The Hills live with and care for their great-niece, a minor child. On 24 June

2021, the Hills submitted an application for retroactive and ongoing Medicaid

Assistance for Families & Children; however, they were only approved for Family

Planning Medicaid benefits, rather than full Medicaid benefits. On 22 July 2021, the

Rutherford County Department of Social Services (“DSS”) notified the Hills via mail

that their application was approved “only for limited services related to Family

Planning and COVID 19 testing.” The Hills appealed DSS’s decision.

On 25 August 2021, after a local appeal hearing, the Hearing Officer affirmed

DSS’s decision. The Hearing Officer agreed with DSS that the Hills “did not qualify

for full coverage” because the “minor in the home [wa]s a ‘great’ niece, making the

applicants ineligible for caretaker benefits.” The Hearing Officer stated that “[t]he

regulation[ ] on which this decision [wa]s based is found in” Section 3235 of the North

Carolina Family and Children’s Medicaid Manual (“the MAF Manual”).

The Hills requested a state appeal, which was heard on 13 October 2021. On

15 October 2021, the State Hearing Officer issued a pair of decisions affirming DSS’s

prior rulings. The State Hearing Officer relied, in significant part, on the federal

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definition of “caretaker relative” found in 42 C.F.R. § 435.4, the SPA, and Section

3235 of the MAF Manual. The Hills appealed again, and on 17 December 2021, the

Assistant Chief Hearing Officer issued a pair of Final Decisions, once again affirming

the earlier rulings.

On 13 January 2022, the Hills filed a petition for judicial review with the

Rutherford County Superior Court pursuant to N.C. Gen. Stat. § 108A-79(k). The

matter came on for hearing on 30 June 2022. On 7 October 2022, the superior court

entered an order affirming the Final Decisions. The superior court concluded:

[N.C. Gen. Stat. § 108A-54.1B(d)] provides that the [SPA]

shall have the force and effect of the Rules. As a result, [the

SPA] and the supporting [MAF] Manual are in direct

conflict with [the Rule]. The later adopted [SPA] and the

[MAF M]anual, however, have the force and effect of a

repeal of [the Rule] since they cannot coexist together.

Therefore, great[-]aunts and great[-]uncles are not

included within the definition of relative caretaker and the

rulings by [DHHS] should be affirmed.

The Hills timely filed notice of appeal.

II. Discussion

Before the superior court, the parties conceded that the sole issue to be

determined was whether great-aunts and great-uncles “are included within the

definition of ‘caretaker relatives.’ ” On appeal to this Court, the Hills argue that the

superior court erred in affirming the previous rulings because the Hills satisfied the

Rule’s definition of “caretaker relative,” which they maintain “is a valid and

enforceable rule congruent with federal Medicaid requirements[.]” The Hills further

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argue that there is “no ‘direct conflict’ with the Rule” and the SPA; “that DHHS may

not ignore its own Rule”; and that the superior court “failed to articulate the standard

of review it applied in upholding the denial of Medicaid benefits[.]”

For the following reasons, we conclude that there is a direct, irreconcilable

conflict between the SPA and the Rule, and that the SPA controls. Accordingly, we

affirm the superior court’s order.

A. Standard of Review

The North Carolina Administrative Procedure Act (“APA”), “codified at

Chapter 150B of the General Statutes, governs trial and appellate court review of

administrative agency decisions.” Amanini v. N.C. Dep’t of Hum. Res., 114 N.C. App.

668, 673, 443 S.E.2d 114, 117 (1994). A party aggrieved by a final decision of an

administrative law judge in a contested case has a right to judicial review by the

superior court. N.C. Gen. Stat. § 150B-43.

Under the APA, the superior court’s scope of review is limited:

The court reviewing a final decision may affirm the

decision or remand the case for further proceedings. It may

also reverse or modify the decision if the substantial rights

of the petitioners may have been prejudiced because the

findings, inferences, conclusions, or decisions are:

(1) In violation of constitutional provisions;

(2) In excess of the statutory authority or

jurisdiction of the agency or administrative law

judge;

(3) Made upon unlawful procedure;

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(4) Affected by other error of law;

(5) Unsupported by substantial evidence admissible

under [N.C. Gen. Stat. §] 150B-29(a), 150B-30, or

150B-31 in view of the entire record as

submitted; or

(6) Arbitrary, capricious, or an abuse of discretion.

Id. § 150B-51(b).

The APA also provides two different standards of review, depending on the

type of error asserted:

In reviewing a final decision in a contested case, the court

shall determine whether the petitioner is entitled to the

relief sought in the petition based upon its review of the

final decision and the official record. With regard to

asserted errors pursuant to subdivisions (1) through (4) of

subsection (b) of this section, the court shall conduct its

review of the final decision using the de novo standard of

review. With regard to asserted errors pursuant to

subdivisions (5) and (6) of subsection (b) of this section, the

court shall conduct its review of the final decision using the

whole record standard of review.

Id. § 150B-51(c).

“A party to a review proceeding in a superior court may appeal to the appellate

division from the final judgment of the superior court as provided in [N.C. Gen.

Stat. §] 7A-27.” Id. § 150B-52. “This Court’s review of the superior court’s order on

appeal from an administrative agency decision generally involves (1) determining

whether the [superior] court exercised the appropriate scope of review and, if

appropriate, (2) deciding whether the court did so properly.” Luna v. Div. of Soc.

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Servs., 162 N.C. App. 1, 3, 589 S.E.2d 917, 919 (2004) (cleaned up). “[O]ur review of a

[superior] court’s order under [N.C. Gen. Stat.] § 150B-52 is the same as in any other

civil case—consideration of whether the court committed any error of law.” Id.

(citation omitted). “[W]e review de novo the legal issues, including whether the

findings of fact are adequate to support the conclusions of law.” Id. at 7, 589 S.E.2d

at 921.

B. Analysis

The crux of this case is the effect that the 2013 adoption of the SPA had on the

Rule. The parties agreed before the superior court that this issue determined the

outcome of this matter. Thus, “the appropriate scope of review” was this single

question of law, id. at 3, 589 S.E.2d at 919 (citation omitted), and the parties agree

that de novo review was the applicable standard of review for the superior court, N.C.

Gen. Stat. § 150B-51(b)(4), (c). Our careful review of the order on appeal shows that

the superior court appropriately conducted de novo review of the Assistant Chief

Hearing Officer’s ruling. We therefore turn to “whether the court committed any error

of law” when conducting its de novo review. Luna, 162 N.C. App. at 3, 589 S.E.2d at

919 (citation omitted).

The Hills argue that because the definition of “caretaker relative” found in the

Rule applies, the superior court erred in concluding, as a matter of law, that

“great[-]aunts and great[-]uncles are not included within the definition of relative

caretaker[.]” According to the Hills, “the Rule exists as a valid legislative rule binding

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on not only the regulated public but also DHHS from promulgation until 1 May 2022.”

By contrast, DHHS contends that “a plain reading of the two definitions indicates

that they are clearly at odds with one another” and that the SPA definition controls

because, inter alia, “it was the most recently adopted definition at the time of [the

Hills’] application.” We agree with DHHS.

The SPA has “the force and effect of rules adopted pursuant to Article 2A of

Chapter 150B of the General Statutes.” N.C. Gen. Stat. § 108A-54.1B. We are thus

tasked with interpreting the Rule and the SPA as a pair of administrative

regulations. When interpreting administrative regulations, our appellate courts

apply the same rules of construction that we apply when interpreting statutes. Cole

v. N.C. Dep’t of Pub. Safety, 253 N.C. App. 270, 278, 800 S.E.2d 708, 714, disc. review

denied, 370 N.C. 71, 803 S.E.2d 156 (2017).

Accordingly, a reviewing court “looks first to the plain meaning of the words of

the [regulation] itself. Interpretations that would create a conflict between two or

more [regulations] are to be avoided, and [regulations] should be reconciled with each

other whenever possible.” Aetna Better Health of N.C., Inc. v. N.C. Dep’t of Health &

Hum. Servs., 279 N.C. App. 261, 266, 866 S.E.2d 265, 269 (2021) (cleaned up).

Further, when determining whether a conflict between regulations exists, “repeals

by implication are not favored and the presumption is always against implied repeal.

Instead, repeal by implication results only when the [regulations] are inconsistent,

necessarily repugnant, utterly irreconcilable, or wholly and irreconcilably

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repugnant.” State ex rel. Utils. Comm’n v. Town of Kill Devil Hills, 194 N.C. App. 561,

567, 670 S.E.2d 341, 345 (emphasis omitted) (cleaned up), aff’d per curiam, 363 N.C.

739, 686 S.E.2d 151 (2009).

In the instant case, the SPA and the Rule are in irreconcilable conflict with one

another. Page S25-1 of the SPA provides that the State declined to adopt the

expanded definition of “caretaker relative” found in 42 C.F.R. § 435.4—that is, the

State declined to include great-aunts and great-uncles in the definition of “caretaker

relative” when it adopted the SPA. This directly and irreconcilably conflicts with the

Rule, which included great-aunts and great-uncles in its definition of “caretaker

relative.”

The Hills do not attempt to harmonize these two regulations; instead, they

question whether “a mere blank checkbox” on Page S25-1 of the SPA truly expresses

the State’s intent to impliedly repeal the Rule via the SPA. The Hills’ arguments are

unpersuasive. Moreover, the Hills cannot resolve the irreconcilable conflict between

the SPA and the Rule: either great-aunts and great-uncles are “caretaker relatives”

per the Rule or they are not per the SPA. There is no reconciling these contradictory

definitions.

“When two statutes apparently overlap, it is well established that the statute

special and particular shall control over the statute general in nature, even if the

general statute is more recent, unless it clearly appears that the legislature intended

the general statute to control.” In re Winstead, 189 N.C. App. 145, 147, 657 S.E.2d

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411, 413 (2008). Again, the same rules of construction apply to administrative

regulations. Cole, 253 N.C. App. at 278, 800 S.E.2d at 714.

In this instance, neither regulation is more “special and particular” or more

“general in nature” than the other, Winstead, 189 N.C. App. at 147, 657 S.E.2d at

413; both the SPA and the Rule define “caretaker relative” for the purposes of North

Carolina’s administration of Medicaid. However, the SPA controls as the most recent

expression of the State’s intent with respect to this issue. See In re Guess, 324 N.C.

105, 107, 376 S.E.2d 8, 10 (1989) (“It is a generally accepted rule that where there is

an irreconcilable conflict between two statutes, the later statute controls as the last

expression of legislative intent.”). Thus, the trial court properly held that the SPA

definition of “caretaker relative” applies in its exercise of de novo review.

Lastly, the Hills contend that the superior court incorrectly compared the Rule

to Page S51-1 of the SPA, and “should have evaluated the Rule as compared to SPA

Page S25-1.” It is true that in its order, the superior court specifically referred to Page

S51-1 of the SPA, which refers to the incorrect CMS regulation—42 C.F.R.

§ 435.220—and concerns income eligibility rather than the definition of “caretaker

relative.” As Page S25-1 explicitly references the appropriate CMS regulation—42

C.F.R. § 435.4—and offers the opportunity for the State to select “[o]ptions relating

to the definition of caretaker relative[,]” the superior court’s order reflects that it did

not consider the appropriate page of the SPA in making its ruling.

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However, this error does not rise to the level of error requiring reversal or

remand. “We need not remand for reconsideration if we can reasonably determine

from the record whether the petitioner’s asserted grounds for challenging the

agency’s final decision warrant reversal or modification of that decision under the

applicable provisions of [N.C. Gen. Stat.] § 150B-51(b).” Early v. Cty. of Durham DSS,

172 N.C. App. 344, 360, 616 S.E.2d 553, 564 (2005) (cleaned up), disc. review

improvidently allowed, 361 N.C. 113, 637 S.E.2d 539 (2006).

Our careful review of the SPA and the Rule demonstrates that the superior

court arrived at the correct outcome on the dispositive issue here. Accordingly, the

superior court’s order is properly affirmed despite the authorities upon which it relies.

III. Conclusion

For the foregoing reasons, the superior court’s order is affirmed.

AFFIRMED.

Judges STROUD and MURPHY concur.

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