Petition — Schweiker v. Gray Panthers

Supreme Court brief1981

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Se or ae ER,

Been ae:

No. NOV 1

In the S Coarrt of the 14 ite? SyGinet ROD/

OCTOBER TERM, 1980

PATRICIA R. HARRIS, SECRETARY OF HEALTH AND

HUMAN SERVICES, AND ADMINISTRATOR, HEALTH CARE

FINANCING ADMINISTRATION, PETITIONERS

Uv.

GRAY PANTHERS

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

WADE H. MCCREE, JR.

Solicitor General

ALICE DANIEL

Assistant Attorney General

GEORGE W. JONES

Assistant to the Solicitor General

Department of Justice

Washington, D.C. 20530

(202) 633-2217

JOAN Z. BERNSTEIN

General Counsel

ROBERT P. JAYE

Deputy Assistant General Counsel

DAVID R. SMITH

Attorney

Department of Health and Human Services

Washington, D.C. 20201

In the Supreme Court of the Wuited States

OCTOBER TERM, 1980

No.

PATRICIA R. HARRIS, SECRETARY OF HEALTH AND

HUMAN SERVICES, AND ADMINISTRATOR, HEALTH CARE

FINANCING ADMINISTRATION, PETITIONERS

Vv.

GRAY PANTHERS

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

QUESTION PRESENTED

Whether regulations of the Secretary of Health and

Human Services governing the extent to which certain

states that participate in the Medicaid program may con-

sider the income of an applicant’s spouse in determining

eligibility for and the amount of Medicaid assistance are

arbitrary, capricious, or otherwise unlawful.

III

TABLE OF CONTENTS

Page

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Statutory provisions and regulations involved. .... 1

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Reasons for granting the petition ................ 7

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TABLE OF AUTHORITIES

Cases:

Allen v. Califano, Civ. No. 78-0212 (D. Utah

Aug. 23, 1979), appeal pending, No. 79-2167

A BNO ieee re Or her er er 7

Batterton v. Francis, 482 U.S. 416 .......... 14, 16

Brown. v. Stanton, 617 F.2d 1224, petition for

cert. pending, No. 79-1690 (filed Apr. 25,

MN c:Se sve ys a's he ola'Vh.s ahh o don oh a¥ee's 7, 8, 9, 10

Califano v. Jobst, 434 U.S. 47............4.4. 14

Citizens to Preserve Overton Park, Inc. v.

MEE MEME 6s 0 s'acadecey thee kenne 6, 16

Harris v. McRae, No. 79-1268 (June 30,

I ARGS oh 44s in:s> dak FuRaa eh Wena h ee 1

Herweg v. Ray, 443 F. Supp. 1315, aff'd, 619

F.2d 1265, petition for cert. pending, No.

80-60 (filed July 14, 1980) .............. 7, 9-10

PREVIOUS PAGE WAS BLANK

Cases—Continued: Page

Norman v. St. Clair, 610 F.2d 1228, petition

for cert. pending sub nom. Harris v.

Norman, No. 80-498 (filed Sept. 27,

LONE Sosa wc NGO wh bed de ee

United States v. Clarke, No. 78-1693 (Mar.

DOIN at AG i cgetirpngs 0 eae SRE RS 16

Constitution, statutes and regulations:

United States Constitution, Fifth Amendmen<,

Due PRocess Cl1AUSG hoo ibs cise kc cents socs 5

Social Security Act, 42 U.S.C. 361 et seq.:

Title I, 42 U.S.C. (1970 ed.) 301 et seq... 2

Title IV, 42 U.S.C. (1970 ed.) 601 et seq. 2

Title X, 42 U.S.C. (1970 ed.) 1201 et seq. 2

Title XIV, 42 U.S.C. (1970 ed.) 1351 et

on MELE EEE hee TERE EEE Ee 2

Title XVI, 42 U.S.C. 1881 et seq. ....... 3

42-U B.C. 1SBZAMT) sei ccceseee 12

‘We UEGn BORN acces cenccecens 4, 12

| SR ee 4, 12

42. U:B.C, UBBZEKY) «5. sviecccecse. 4,12

Title XIX, 42 U.S.C. 1396 et seg. ....... 1

42 U.S.C. 1396a(a)(10)(A) ...... 6, 12, 13

42 U.S.C. 1396a(a)(17) ....... passim, 35a

42 U.S.C. 1396a(a)(17)(D) ...... 2, 5, 6, 15

42 U.8:C. 18960) os... 586s passim, 36a

Social Security Amendments of 1972, Pub. L.

No. 92-603, 86 Stat. 1329 et seq.:

Section 209(b), 86 Stat. 1881 ........ passim

Section 303(a) and (b), 86 Stat. 1484 ..... 3

FCF Mer TE ote de haces i iecesa soak 1, 4, 36a

OE Sie ee Co hae oo bin BGR eee us emacs 15

ew Oy. NDE pu A AP a 1, 4, 5, 7,

9, 15, 36a

Constitution, statutes and regulations—Continued: Page

LLL MEE. Ginig's ba cloceacadecdoece 1, 5, 6, 37a

OE a oo sats és bat elckwes 1, 5, 6, 37a

pera Gi SOME Se kc igi Bis o Bie sin w/e'duwds 1, 5, 6, 38a

Miscellaneous:

a ee Oe. CONTE CSTE) oon vvic ccc cevesesas 4

H.R. Rep. No. 2138, 89th Cong., 1st Sess.

PRESS eee a, gn NY ee Se Se PR 3, 11, 15

S. Rep. No. 404, 89th Cong., Ist Sess.

DR ss een wads See its o cae tin ag S 2, 3, 11, 15

S. Rep. No. 92-1230, 92d Cong., 2d Sess.

UGA Sua th vue wktececa SUa one OES cats s 13

S. Rep. No. 93-553, 93d Cong., 1st Sess.

CN rie, isa caek ieee Geek eae ne 13

United States Department of Health, Educa-

tion, and Welfare, Data on the Medicaid

Program: Eligibility, Services, Expendi-

Se NO athe vive bud uaienaneckiescvéae 10

' i |

The Solicitor General, on behalf of the Secretary of

Health and Human Services and the Administrator of the

Health Care Financing Administration, petitions for a writ

of certiorari to review the judgment of the United States

Court of Appeals for the District of Columbia Circuit in

this case.

OPINIONS BELOW

The opinion of the court of appeals (App. A, infra, la-

17a) is not yet reported. The opinion of the district court

(App. E, infra, 23a-30a) is reported at 461 F. Supp. 319.

JURISDICTION

The judgment of the court of appeals (App. D, infra,

2la-22a) was entered on July 29, 1980. On October 20,

1980, the Chief Justice extended the time in which to peti-

tion for a writ of certiorari to and including November 10,

1980. The jurisdiction of this Court is invoked under 28

U.S.C. 1254(1).

STATUTORY PROVISIONS AND REGULATIONS

INVOLVED .

Section 1902(a)(17) and (f) of the Medicaid Act, 42

U.S.C. 1396a(a)(17) and (f), the regulations invalidated by

the court of appeals (42 C.F.R. 435.734, 436.602, 436.711,

and 436.821), and 42 C.F.R. 435.723 are reprinted, in per-

tinent part, in Ap». H, infra, 35a-38a.

STATEMENT

1. The Medicaid program was established in Title XIX

of the Social Security Act, 42 U.S.C. 1396 et seq., “for the

purpose of providing federal financial assistance to States

that choose to reimburse certain costs of medical treat-

ment for needy persons.” Harris v. McRae, No. 79-1268

(June 30, 1980), slip op. 1-2. As adopted in 1965, Title XIX

required participating states to provide medical assistance

to individuals who received cash assistance under any of

the four “categorically needy” assistance programs estab-

lished in the Social Security Act.' Under Section

1902(a)(17) of the Act, 42 U.S.C. 1396a(a)(17), each par-

ticipating state was required to adopt “reasonable stand-

ards * * * for determining eligibility for and the extent of

medical assistance,” taking into account “only such income

and resources as are * * *available to the applicant or re-

cipient.” Furthermore, in response to practices that had

been adopted by states in administering the medical as-

sistance plans established under the predecessor Kerr-

Mills program, Congress required participating states to

refrain from taking into account “the financial responsibil-

ity of any individual for any applicant or recipient of as-

sistance * * * unless such applicant or recipient is such

individual’s spouse” or minor, blind, or disabled child. 42

U.S.C. 1396a(a)(17)(D) (emphasis added).

With the approval of the Secretary of Health, Educa-

tion, and Welfare (now Health and Human Services), some

participating states took the position that it was reason-

able to expect an applicant’s spouse to help pay the cost of

the applicant’s medical expenses and, therefore, adopted

rules that took into account the income of the spouse in

determining Medicaid eligibility and the amount of assist-

ance. These states calculated an amount considered neces-

sary to pay the basic living expense of the applicant’s

spouse and “deemed” any income of the spouse in excess of

that amount as “available” to the applicant. In accordance

with Congress’ expressed intent that the medical expenses

of the “most needy” be met first under the Medicaid pro-

1Old Age Assistance (OAA), Title I, 42 U.S.C. (1970 ed.) 301 et seq.;

Aid to Families with Dependent Children (AFDC), Title IV, 42 U.S.C.

(1970 ed.) 601 et seqg.; Aid to the Blind (AB), Title X, 42 U.S.C. (1970

ed.) 1201 et seqg.; Aid to the Permanently and Totally Disabled (APTD),

Title XIV, 42 U.S.C. (1970 ed.) 1351 et seg. Par‘icipating states could

also offer medical assistance to the “medically needy”— i.e., individu-

als whose income was greater than permissible under the categorical

assistance plans but inadequate to pay medical expenses. Congress,

however, thought it appropriate that the medical expenses of the

“most needy” be met before extending benefits to the less needy. See,

e.g., S. Rep. No. 404, 89th Cong., 1st Sess. 77 (1965).

gram,” the amount considered necessary to pay the basic

living expenses of the applicant’s spouse was generally set

near subsistence level.

In 1972, Congress replaced three of the four categorical

assistance programs with a new federal program, Supple-

mental Security Income for the Aged, Blind, and Disabled

(SSI), Title XVI, 42 U.S.C. 1381 et seq.* From the begin-

ning of the Medicaid program in 1965, participating states

were required to provide medical assistance to those indi-

viduals receiving benefits under their categorical assist-

ance programs. Adoption of the SSI program was not in-

tended to affect this traditional linkage. But under the SSI

program, the states would no longer control the standards

of need for the aged, blind, or disabled. The group of indi-

viduals who would be eligible for SSI assistance, and

therefore eligible for Medicaid assistance, was in some

states significantly larger than the group that was eligible

under the prior assistance programs for the aged, blind,

and disabled. To avoid forcing the states that participated

in the Medicaid program to choose among (1) expanding

their Medicaid assistance obligations involuntarily, (2)

withdrawing from the Medicaid program, and (3) reducing

the level of benefits provided under the Medicaid program,

Congress offered the states what has come to be called the

“209(b) option,” 42 U.S.C. 1896a(f).* Each state was given

the choice of providing medical assistance to all recipients

of cash assistance under the SSI program or to the more

limited group of individuals who would have been eligible

for assistance under the state’s Medicaid plan on January

1, 1972.

2See, e.g., S. Rep. No. 404, 89th Cong., 1st Sess. 77, 78-79 (1965);

H.R. Rep. No. 213, 89th Cong., 1st Sess. 66, 68 (1965).

3 As its name indicates, the SSI program replaced the categorical as-

sistance plans for the aged, blind, and disabled. The provisions of the

old categorical assistance programs remain in effect in Puerto Rico,

Guam, and the Virgin Islands. See Pub. L. No. 92-608, Title III, Sec-

tion 303(a) and (b), 86 Stat. 1484.

‘The provision was enacted as Section 209(b) of the Social Security

Amendments of 1972, Pub. L. No. 92-603, 86 Stat. 1381.

Under the SSI statute, the income of an applicant’s

spouse is attributed to the applicant for the purpose of de-

termining eligibility and the amount of assistance.5 Any

state that participates in the Medicaid program but fails to

exercise the 209(b) option (an “SSI state”) is required to

provide medical assistance to all SSI benefit recipients.

Because of the relationship betwéen the Medicaid and SSI

statutes, and to avoid the unfairness and administrative

difficulties involved in permitting individual SSI states to

determine Medicaid eligibility by reference to rules differ-

ent from those applied in determining SSI eligibility, the

Secretary issued regulations requiring SSI states to con-

sider the income of an applicant’s spouse in making

Medicaid determinations only to the extent required by

the SSI statute. 42 C.F.R. 435.723.8

In addition, the Secretary required 209(b) states to con-

sider the income of an applicant’s spouse in determining

Medicaid eligibility and the level of benefits at least to the

extent that it would be considered in a SSI state. 42

C.F.R. 435.734. Section 209(b) of the 1972 amendments,

42 U.S.C. 1396a(" however, authorizes the states that

5When the applicant and his spouse live in the same household, the

income of both is considered in deter ining the eligibility of either for

SSI benefits. 42 U.S.C. 1382(a)(2), 1882¢(b), (f)(1). When the applicant

and his spouse cease to share the same household, the income of the

applicant’s spouse is no longer considered in determining the appli-

cant’s eligibility for SSI benefits, unless the applicant’s spouse is an

“eligible spouse,” as defined in 42 U.S.C. 1382c(b). By definition, no

one can remain an “eligible spouse” for more than six months after

separation from his spouse. 42 U.S.C. 1382e(b).

*For example, without such regulations, if an applicant became eli-

gible for and received SSI benefits because his noneligible spouse no

longer lived in his home and therefore her income was not attributed to

him, he would be eligible for Medicaid benefits in an SSI state. But if

the same individual were unwilling to accept SSI benefits and applied

directly to the state Medicaid agency for benefits under a program for

the “medically needy” with higher income standards, he might

nevertheless be denied medical assistance if the state Medicaid rules

continued to take into account the income of his spouse. This discrimi-

nation between needy individuals and equally needy individuals who,

for their own reasons, are unwilling to accept SSI benefits clearly was

not intended by Congress. See 40 Fed. Reg. 60074 (1975).

exercise the 209(b) option to apply the more restrictive

eligibility standards of their Medicaid programs that were

in effect in January 1972. Therefore, the Secretary con-

cluded that it would be appropriate to allow Section 209(b)

states to consider the income of an applicant’s spouse to

the extent they would have done so under their 1972

Medicaid plans. 42 C.F.R. 435.734.

2. Respondent filed suit in the United States District

Court for the District of Columbia, challenging the Secre-

tary’s regulations governing the extent to which the in-

come of an applicant’s spouse could be considered in mak-

ing Medicaid determinations in 209(b) states, Puerto Rico,

Guam, and the Virgin Islands.?7 Respondent argued that

these regulations were inconsistent with Section

1902(a)(17) of the Social Security Act, 42 U.S.C. 1396a(a)

(17), and the Due Process Clause of the Fifth Amendment

(App. E, infra, 26a-27a). Finding the statutory contention

dispositive, the district court did not reach respondent’s

constitutional claims (id. at 27a n.3). According to the dis-

trict court (id. at 28a & n.5), Section 1902(a)(17)(D) of the

Act, 42 U.S.C. 1396a(a)(17)(D), “may allow a state to en-

force its financial responsibility laws against a spouse or

parent,” but a participating state may not consider any

portion of the income of an applicant’s spouse to be “avail-

able” to the applicant without making an individual deter-

mination of the living expenses of the spouse. The court

thus held that the challenged regulations were invalid and

ordered the Secretary to adopt new regulations “requir-

[ing] all [209(b) jurisdictions, Puerto Rico, Guam, and the

Virgin Islands] to cease the deeming of income for any

length of time between institutionalized Medicaid recip-

ients or applicants and their noninstitutionalized spouses

** *” (App. F, infra, 3la-32a; App. G, infra, 33a-34a).®

742 C.F.R. 435.734, 436.602, 436.711, 436.821 (App. H, infra, 36a- .

38a); see App. E, infra, 23a n.2; App. G, infra, 33a. Respondent is “a

voluntary organization dedicated to improving the treatment accorded

our nation’s elderly” (App. A, infra, 2a). The district court found that

respondent had standing to challenge the regulations because some of

its members would have standing (App. E, infra, 27a n.4).

*Given its interpretation of Section 1902(a)(17) of the Act, the dis-

trict court’s invalidation of 42 C.F.R. 435.734 is understandable. The

A divided panel of the court of appeals affirmed, but on

grounds other than those relied on by the district court.

The court of appeals rejected (App. A, infra, 8a) the Sec-

retary’s analysis of the pertinent statutory provisions, as-

serting that “there is no required federal statutory

‘deeming’ in the 209(b) jurisdictions which are the subject

of this case.” The court of appeals acknowledged (id. at

9a) that the “legislative history of the Medicaid statute

explicitly addresses the question of when ‘deeming’ is

proper” and “establishes a broad principle * * * that

‘deeming’ is appropriate between spouses * * *,” but it

found (id. at 10a) that the legislative history of the statute

also “recognizes exceptions to the general rule, requiring

individualized factual determinations of availability to be

made.” Citing this Court’s decision in Citizens to Preserve

Overton Park, Inc. v. Volpe, 401 U.S. 402 (1971), the

court of appeals held the regulations invalid because the

Secretary, in authorizing deeming in 209(b) states, failed

to consider all of the factors and policy concerns the court

thought “relevant” (App. A, infra, 7a). It therefore re-

manded the case to the district court (id. at 13a).“with

direction to remand it to the Secretary for promulgation

basis for the court’s invalidation of the regulations applicable in Puerto

Rico, Guam, and the Virgin Islands is more difficult to discern. First,

42 C.F.R. 436.602, which is essentially a restatement of Section

1902(a)(17)(D), simply prohibits the consideration of the income of any

of the applicant’s relatives, except his spouse or (in some circum-

stances) his parent. Second, 42 C.F.R. 436.711 and 436.821 simply re-

quire the relevant Medicaid agencies to apply the financial eligibility

requirements that would be applied in determining eligibility under the

old categorical assistance plans (see note 1, supra), including the ex-

tent to which the income of a spouse should be considered. Since

Puerto Rico, Guam, and the Virgin Islands are required to provide

medical assistance to al! categorical assistance recipients (see 42

U.S.C. 1396a(a)(10)(A) ) and (except with respect to the “medically

needy” and AFDC beneficiaries) are not entitled to federal assistance

for providing medical assistance to individuals who are ineligible to re-

ceive benefits under the categorical assistance programs, it is difficult

to understand how any other rules could be applied. See also note 6,

supra. The court of appeals also failed to distinguish between the reg-

ulations applicable in 209(b) jurisdictions and those applicable in

Puerto Rico, Guam, and the Virgin Islands.

without delay of new regulations consistent with the

Medicaid statute as interpreted in this opinion.”

Judge MacKinnon concurred in part and dissented in

part (App. A, infra, 13a-17a). Judge MacKinnon agreed

that the Medicaid Act permits participating states to at-

tribute the income of one spouse to another. In }..s view,

however, “there is nothing to suggest that the Secretary’s

action in promulgating the regulations allowing the use of

‘deeming’ in 209(b) States is arbitrary or capricious,

[which is] the limit of our scope of review* * *” (id. at 17a;

App. C, infra, 20a).

REASONS FCR GRANTING THE PETITION

1. The court of appeals’ decision in this case is one of

four recent circuit court decisions concerning deeming

practices under the Medicaid Act. See Herweg v. Ray, 619

F.2d 1265 (8th Cir. 1980), petition for cert. pending, No.

80-60 (filed July 14, 1980); Brown v. Stanton, 617 F.2d

1224 (7th Cir. 1980), petition for cert. pending, No. 79-

1690 (filed Apr. 25, 1980); Norman v. St. Clair, 610 F.2d

1228 (5th Cir. 1980), petition for cert. pending swb nom.

Harris v. Norman, No. 80-498 (filed Sept. 27, 1980).®

Each of these decisions is to some extent irreconcilable

with the others.

Although the court of appeals decision in this case is the

first to invalidate the HHS regulations applicable in 209(b)

jurisdictions for failure to consider all “relevant” factors,

in reaching this result the D.C. Circuit rejected the Secre-

tary’s analysis of the relationship between the Medicaid

statute and the SSI statute as a sufficient basis for the

regulations (App. A, infra, 7Ta-8a). According to the court

of appeals (id. at 8a):

*See also Allen v, Califano, Civ. No. 78-0212 (D. Utah Aug. 23,

1979), appeal pending, No. 79-2167 (10th Cir.) (ordering the Secretary

to rescind 42 C.F.R. 435.734 and to issue regulations that require

20%(b) states, Guam, Puerto Rico, and the Virgin Islands “to cease as-

suming the availability of any income that is not in fact available for

any length of time” (Order at 2)). The proceedings in Allen have been

s'ayed pending consideration of the Secretary’s petition for a writ of

certiorari in this case.

”.

It is enough to say that there is no required federal

statutory “deeming” in the 209(b) jurisdictio ictions which

are the subject of this case, and that there is no jus-

tification for extending the antifraud six-month li

itation on the general policy beyond its statutory con-

fines.

By contrast, in Norman v. St. Clair, supra, the Fifth

Circuit expressly relied on the relationship between the

Medicaid and SSI statutes in rejecting the contention that

deeming is improper in 209(b) states. The Fifth Circuit

explained:

[UJnder certain circumstances Medicaid eligibility de-

terminations in an “SSI state” must, because of the

statutory mandate in the SSI legislation, take into ac-

count income that is deemed available, without regard

to whether that income is actually contributed. Since

this statutory mandate exists concurrently in the

Medicaid law with the provision of 42 U.S.C. § 1396a

(a)(17) directing that only income which is “available”

be taken into account, it must be concluded that the

income deemed to Medicaid applicants pursuant to

provisions of law applicable to SSI states is available

income. A concept of available income which includes

income deemed to spouses in SSI states must also en-

compass income deemed to spouses in the more re-

strictive programs of the § 209(b) states.

610 F.2d at 1238. Whether or not the Fifth Circuit’s read-

ing of the SSI and Medicaid statutes is the only permissi-

ble interpretation, it is certainly a reasonable interpreta-

tion and one with which the Secretary agrees in substan-

tial part. Yet, the D.C. Circuit has ordered the Secretary

to promulgate regulations consistent with its opinion,

which effectively precludes reliance on the relationship be-

tween the two statutes.

Other related aspects of deeming practices under the

Medicaid program have also been the subject of substan-

tial disagreement among the courts of appeals. In Brown

v. Stanton, supra, for example, the Seventh Circuit held

that Indiana, a 209(b) state, could not consider the income

of an applivant’s spouse in determining Medicaid eligibility

or fixing the level of benefits, if the spouse is unwilling to

contribute to the applicant’s medical expenses. Instead,

Indiana must ignore the income of the applicant’s spouse,

advance the full amount of the medical expenses, and then

attempt to recoup the overpayment from the reluctant

spouse. 617 F.2d at i230-1231. In Norman v. St. Clair,

supra, however, the Fifth Circuit expressly rejected the

reasoning adopted by the Seventh Circuit:

We must reject plaintiffs’ contention that 42 U.S.C.

§ 1396a(a)(17)(D) merely authorizes the states to in-

voke formal financial responsibility proceedings for

the support of spouses. We hold instead that 42

U.S.C. § 1396a(a)(17)(D) permits states to deem in-

come from one spouse available to the other and that

such deemed income is part of the “available” income

which states may compute under 42 U.S.C. § 1396a

(a)¢17)(B).

610 F.2d at 1237. But the Fifth Circuit went on to hold

that, contrary to the Secretary’s regulation (42 C.F.R.

435.734), Mississippi, a 209(b) state, must adopt a “flexible

means” test for the purpose of determining what part of

the income of an applicant’s spouse is “available” to the

applicant.?°

Finally, in Herweg v. Ray, supra, the Eighth Circuit

(by an equally divided court) affirmed a district court deci-

sion holding that under Section 1902(a)(17) of the Social

Security Act, 42 U.S.C. 1396a(a)(17), Iowa, an SSI state,

may consider the income of an applicant’s spouse without

regard to the length of time that the applicant has been

separated from his spouse. Since the Secretary was not a

party to the proceeding, the district court declined to pass

on the validity of the HHS regulations applicable in SSI

states. Nevertheless, the district court pointed out that to

the extent the regulations limited the time period during

which SSI states may consider the income of an applicant’s

spouse, they are inconsistent with the Medicaid statute.

Herweg v. Ray, 443 F. Supp. 1315, 1320 (S.D. Iowa 1978),

aff'd by an equally divided court, 619 F.2d 1265 (8th Cir.

1°In Harris v. Norman, No. 80-498, the Secretary of Health and

Human Services seeks review of this aspect of the Fifth Circuit’s deci-

sion.

1980), petition for cert. pending, No. 80-60 (filed July 14,

1980); see also Herweg v. Ray, supra, 619 F.2d at 1272-

1275.

These conflicting decisions are all based, at least in part,

upon interpretations of Section 1902(a)(17) of the Social

Security Act, 42 U.S.C. 1396a(a)(17). That section is one

of the fundamental provisions governing Medicaid eligibil-

ity. Consequently, the divergent interpretations of the

courts of appeals have posed serious problems for the Sec-

retary in supervising the administration of state Medicaid

programs. Because the Court will have the opportunity

to resolve the conflict in the circuits concerning the valid-

ity of “deeming” under the Medicaid Act this Term (see

Brown v. Stanton, supra), it should consider the closely

related issue raised in this case as well. If the Court holds

that the statute allows deeming, it is important that the

form that deeming may take be settled as expeditiously as

possible.

These issues have a direct and immediate impact upon

the federal and state governments as well as millions of

individuals. Every state in the nation, except Arizona, has

implemented a medical assistance program under Title

XIX of the Social Security Act. United States Department

of Health, Education, and Welfare, Data on the Medicaid

Program: Eligibility, Services, Expenditures 40 & n.3

(1979 ed.). In fiscal year 1977, more then 23 million indi-

viduals received federal and state Medicaid payments to-

talling more than $16 billion (id. at 40, 57). The 16 states

that have already decided to exercise the Section 209(b)

option provided Medicaid benefits to nearly eight million

individuals in fiscal year 1977 (id. ac 57; App. A, infra, 4a

n.4).41 The impact of “deeming” practices, however, is not

limited to the millions of individuals who currently are eli-

‘The 209(b) regulations at issue in this case are of significance not

only to the states that have already exercised the option provided by

Congress in 42 U.S.C. 1396a(f), but also to every other participating

state. For example, New York, one of the largest of the participating

states, recently decided to exercise the 209(b) option. (New York is

now awaiting HHS approval of amendments to its Medicaid plan that

would effect the conversion.) Other SSI states are free to follow.

’%

gible for Medicaid notwithstanding the income of their

spouses. It is obvious that both the number of individuals

who would be eligible for Medicaid assistance and the

amount of assistance that would be paid to such individuals

will be significantly enlarged if the income of their spouses

must be ignored.

It is the Secretary’s responsibility to require par-

ticipating states to provide medical assistance to each

qualified applicant with a minimum of administrative delay

and cost and to assure that participating states do not re-

ceive federal financial assistance for providing medical as-

sistance to any applicant who is not among the intended

beneficiaries of the Medicaid program. Because of the

conflicting decisions of the courts of appeals, the Secretary

now must follow different rules in different states con-

cerning whether “deeming” is permissible at all and, if it

is, in what manner and for how long it may be used.

2. Although the court of appeals correctly concluded

that the language and legislative history of the Medicaid

statute establish the “broad principle” that deeming is ap-

propriate between spouses (App. A, infra, 9a), it found

that Congress intended an exception to “the seemingly un-

equivocal expectation that spouses should support each

other” (id. at 10a) in cases where the spouses are not liv-

ing together. In reaching this conclusion, the court below

noted that Congress expressed the view that Section

1902(a)(17) was designed to prevent the states from as-

suming the availability of income from absent fathers in

reliance on “support orders.”!? According to the court of

appeals (App. A, infra, 10a), Congress intended to pre-

clude consideration of the absent father’s income because

“(t]he absence of the father from the home undercuts key

assumptions that make ‘deeming’ ordinarily reasonable,

and thus the practice is forbidden.” Despite the absence of

any reference in the legislative history to absent spouses,

the court remarked: “Likewise, the absence of a spouse

from the home because of institutionalization differs sig-

nificantly * * * from the situation of cohabiting spouses

12See H.R. Rep. No. 215, 89th Cong., Ist Sess. 67 (1965); S. Rep.

No. 404, 89th Cong., 1st Sess. 78 (1965).

’%

which is at the heart of the congressional expectation of

support” (ibid.). As a result, the court held that the Sec-

retary’s deeming regulations are invalid for failure ex-

pressly to consider these differences.

The court of appeals erred in striking down the Secre-

tary’s regulations as inconsistent with the Medicaid Act.

As the court acknowledged, the term “available” income in

42 U.S.C. 1896a(a)(17) includes the income of the appli-

cant’s spouse “deemed” available to the applicant. Under

the SSI statute, the income of an applicant and his spouse

is considered in determining eligibility for as long as they

live together. See 42 U.S.C. 1382(a)(2), 1882e(b), (f)(1). In

determining SSI eligibility, “deeming” may also continue

for six months after the applicant and his spouse begin

living apart from each other. See 42 U.S.C. 1382(a)(1),

1382c(b), (f)(1). Under the Medicaid statute, each par-

ticipating state is required to provide medical assistance to

all SSI recipients, unless the state exercises the 209(b) op-

tion. 42 U.S.C. 1896a(a)(10)(A), (f). It follows, therefore,

that SSI states cannot consider the income of an SSI re-

cipient’s spouse in making Medicaid determinations if the

income would not be considered in making SSI eligibility

determinations. Furthermore, because, with exceptions

not material here (see note 6, supra), participating states

are not entitled to federal financial assistance for provid-

ing Medicaid benefits to individuals who are ineligible for

SSI benefits, it also follows that such states must consider

the income of an applicant’s spouse in making Medicaid de-

terminations if it would be considered in making SSI de-

terminations.

The Secretary acted reasonably in requiring 209(b)

states to follow SSI deeming rules in determining

Medicaid eligibility and the amount of assistance. If, in

SSI states, the term “available” income, as used in 42

U.S.C. 1896a(a)(17), includes the income of an applicant’s

spouse to the extent required by the SSI statute, then

logically the term should be given the same interpretation

in 209(b) states. See Norman v. St. Clair, supra, 610

F.2d at 1238. Moreover, unless 209(b) states are required

to consider the income of an applicant’s spouse at least to

the extent that it would be considered in an SSI state or

under the SSI statute, the congressional intent underlying

the 209(b) option would be wholly frustrated. The 209(b)

option was intended solely to permit participating states

to exclude from coverage individuals who would be eligible

under the SSI criteria, and therefore eligible for Medicaid

coverage (see 42 U.S.C. 1396a(a)(10)(A)), but who would

not have been eligible under the more restrictive stand-

ards of the states’ 1972 Medicaid plans. See S. Rep. No.

92-1230, 92d Cong., 2d Sess. 222 (1972); S. Rep. No. 95-

553, 938d Cong., lst Sess. 56 (1973). Hence, the purpose of

the 209(b) option was to avoid imposing expanded

Medicaid obligations on participating states as a result of

the more liberal SSI eligibility requirements. The option

was not intended to permit 209(b) states to receive federal

aid for providing medical assistance to individuals who

would not be eligible even under the more liberal SSI

criteria. See, e.g., S. Rep. No. 92-1230, supra, at 222.

In addition, the Secretary’s regulations permitting

209(b) states to take the income of an applicant’s spouse

into account to the extent that they would have done so

under their 1972 Medicaid plans are also consistent with

the statute. Section 1902(a)(17) permits participating

states to consider the income of an applicant’s spouse as

“available” to the applicant for the purposes of determin-

ing eligibility and the amount of assistance under the

Medicaid program. If the eligibility criteria of a 209(b)

state’s 1972 Medicaid plan are valid, the Secretary has no

power under the statute to require the state “to provide

medical assistance to any aged, blind, or disabled indi-

vidual * * * unless such State would be (or would have

been) required to provide medical assistance to such indi-

vidual * * * had its plan for medical assistance approved

under this subchapter and in effect on January 1, 1972,

been in effect * * *.” 42 U.S.C. 1396a(f).4* Having ap-

proved each of the state Medicaid plans in effect on

January 1, 1972, the Secretary was not obliged to recon-

sider all of the varying circumstances in which state

13The 209(b) “spend-down” provision qualifies this statement to

some extent but is not pertinent here.

deeming practices would be applied before promulgating

the 209(b) regulations challenged in this case. The regula-

tions merely permit 209(b) states to consider the income of

an applicant’s spouse to the extent that they would have

done so under their 1972 Medicaid plans—as Congress in-

tended by enacting the 209(b) option.

The regulations applicable in 209(b) jurisdictions thus

are based on the Secretary’s sound analysis of the perti-

nent statutory provisions and due regard for the practical

and equitable administration of a nationwide social welfare

program. See Califano v. Jobst, 484 U.S. 47, 53 (1977).

But even if the regulations were not required by the re-

lationship between the Medicaid program and the various

categorical assistance programs, the court of appeals erred

in invalidating the regulations. The Secretary is specif-

ically authorized to establish standards for determining

what is “available” income for purposes of the Medicaid

program. 42 U.S.C. 1396a(a)(17). The SSI statute provides

an appropriate model because the eligibility criteria for

Medicaid have consistently been tied to eligibility under

the categorical assistance programs. Similarly, even if the

language of 42 U.S.C. 1396a(f) did not require the Secre-

tary to permit the 209(b) -tates to use the deeming rules in

effect in 1972, the provision provides ample support for

the Secretary’s decision to do so. As this Court pointed out

in a similar context, “[a] reviewing court is not free to set

aside [such] regulations simply because it would have in-

terpreted the statute in a different manner.” Batterton v.

Francis, 482 U.S. 416, 425 (1977). The Secretary’s regula-

tions are entitled to legislative effect, unless it can be said

that they are arbitrary, capricious, or otherwise unlawful.

Id. at 425-426.

Contrary to the court of appeals’ conclusion, nothing in

the legislative history of the Medicaid statute supports a

general absent-spouse exception to the “broad principle”

that deeming is appropriate between spouses. The court

below relied on the following statement in the House Re-

port accompanying the bill that became Title XIX of the

Social Security Act (App. A, infra, 10a):

[Section 1396a(a)(17) is] designed so that the States

will not assume the availability of income which may

'*%

not, in fact, be available or over-evaluate income and

resources which are available. Examples of income

assumed include support orders from [sic] absent

fathers, which have not been paid or contributions

from relatives which are not in reality received by the

needy individual.

H.R. Rep. No. 218, 89th Cong., 1st Sess. 67 (1965).'* The

court’s reliance on this passage was misplaced.

This case involves only the deeming of income’ between

spouses—more precisely, the deeming of income between

an institutionalized applicant and his spouse. The language

of the statute, 42 U.S.C. 1396a(a)(17)(D), permits consid-

eration of the income of an applicant’s spouse. Moreover,

the legislative history of the statute clearly indicates that

Congress thought it appropriate to require the husband or

wife of a Medicaid applicant to help pay the medical ex-

penses of the applicant. See H.R. Rep. No. 213, supra, at

68; S. Rep. No. 404, swpra, at 78. Nowhere in the vol-

uminous legislative hearings, reports or debates is there

any suggestion of an absent-spouse exception.'® In these

circumstances, the isolated statement in the House Report

disapproving the policy of assuming that an applicant has

income on the basis of a “support order” directed to his

13 See also S. Rep. No. 404, supra, at 78.

14Whether or not this snippet of legislative history would have re-

quired the Secretary to prohibit consideration of the income of an ab-

sent father is not a question raised in this case. In any event, HHS

regulations only require 209(b) states to consider the income of an ap-

plicant’s parent if the applicant is (1) living with his parent and (2)

under age 18 or a student and under age 21. See 42 C.F.R. 435.734,

435.724. In accordance with 42 U.S.C. 1396a(f), however, if under a

state’s 1972 Medicaid plan the income of a parent would have been con-

sidered under additional circumstances, the state may continue to do

so.

15The reference in the House Report to “contributions from relatives

which are not in reality received by the needy individual” cannot be

read to support a general absent-spouse exception. Congress expressly

addressed that problem in 42 U.S.C. 1396a(a)(17)(D), prohibiting con-

sideration of any relative’s financial responsibility for the applicant,

except the applicant’s spouse or, in some circumstances, the applicant’s

parent.

absent father is insufficient to support the conclusion that

the Secretary’s regulations regarding spouses are incon-

sistent with the Medicaid Act.1® Rather, “this is a case in

which the meaning of [the] statute may be determined by

the admittedly old-fashioned but nonetheless still entirely

appropriate ‘plain meaning’ canon of statutory construc-

tion.” United States v. Clarke, No. 78-1693 (Mar. 18,

1980), slip op. 1.

To be sure, the court of appeals’ reading of the legisla-

tive history of the statute is not implausible. But that is

not a sufficient basis for finding that the Secretary’s cur-

rent regulations are arbitrary, capricious, or otherwise

unlawful. As the court of appeals observed (App. A, infra,

12a), “Congress has stated that it is the primary responsi-

bility of the Secretary, and not the courts, to determine

whether and to what extent ‘deeming’ is to be permitted

from an individual to his or her institutionalized spouse.”

It should be emphasized that the regulations permitting

209(b) states to consider the income of an applicant’s

spouse to the extent that they would have done so under

their 1972 Medicaid plans were adopted in light of a

statutory provision, 42 U.S.C. 1396a(f), that was specif-

ically intended to avoid state withdrawals from the

Medicaid program. Without substantially greater support

than that relied on by the court of appeals in this case, a

court should be particularly reluctant to invalidate such

regulations. See Batterton v. Francis, supra, 482 U.S. at

431-432.17

16 The court of appeals’ reliance on the reference in the House Report

to “support orders” directed to “absent” fathers is particularly inap-

propriate in this case. Unlike the situation of a father who abandons his

child and who must be directed by a court to provide financial support

for the child, this case involves spouses who are separated solely be-

cause of the necessary institutionalization of one of them. Under these

circumstances, the separation does not even suggest abandonment or

the break down of the marital relationship.

17Citizens to Preserve Overton Park, Inc. v. Volpe, supra, provides

no support for the court of appeals’ position. In Overton Park, this

Court held that where it was asserted that an agency failed to consider

factors expressly required by the relevant statutes, review of agency

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted.

WADE H. MCCREE, JR.

Solicitor General

ALICE DANIEL

Assistant Attorney General

GEORGE W. JONES

Assistant to the Solicitor General

JOAN Z. BERNSTEIN

General Counsel

ROBERT P. JAYE

Deputy Assistant General Counsel

DAVID R. SMITH

Attorney

Department of Health and Human Services

NOVEMBER 1980

action cannot be based on “‘post hoc’ rationalizations” presented in

litigation affidavits. 401 U.S. at 419-421. Here, however, respondent

has never contended that the Secretary failed to consider any factor

expressly prescribed in the Medicaid statute and, indeed, never relied

on Overton Park in the courts below. Neither the language of the

Medicaid statute nor its legislative history suggests that the Secre-

tary’s regulations prescribing what can be considered “available” in-

come are arbitrary or capricious. Overton Park cannot be read to per-

mit courts to invalidate regulations solely on the ground that factors or

policy concerns the particular court thinks relevant were not expressly

considered by the agency.

APPENDIX A

In the United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 79-1334

GRAY PANTHERS

Vv.

ADMINISTRATOR, HEALTH CARE FINANCING ADMINIS-

TRATION, DEPARTMENT OF HEALTH AND HUMAN SERV-

ICES, ET AL., APPELLANTS

Appeal from the United States District Court

for the District of Columbia

(D.C. Civil Action No. 78-0661)

Argued January 15, 1980

Decided July 29, 1980

Before WRIGHT, Chief Judge, MACKINNON, Circuit

Judge, and MARKEY, * Chief Judge, United States Court of

Customs and Patent Appeals.

Opinion for the court filed by Chief Judge WRIGHT.

Opinion concurring in part and dissenting in part filed

by Circuit Judge MACKINNON.

WRIGHT, Chief Judge: This appeal is from a successful

challenge to regulations of the Department of Health and

Human Services! which implement the Medicaid program

* Sitting by designation pursuant to 28 U.S.C. § 293(a) (1976).

1 This action was filed before the redesignation of the Department of

Health, Education, and Welfare as the Department of Health and

Human Services. See 20 U.S.C.A. § 3508 (Supp. 1980).

and which involve the financial eligibility criteria for in-

stitutionalized individuals and their spouses. Plaintiff-

appellee is Gray Panthers, a voluntary organization dedi-

cated to improving the treatment accorded our nation’s el-

derly. The regulations in question permit, among other

things, a certain amount of a spouse’s funds to be

“deemed” available for use by the institutionalized indi-

vidual, whether or not such funds are in fact provided. Be-

cause “deeming” applies “an arbitrary fe mula, unrelated

to the expenses of a particular couple’s needs,” the Dis-

trict Court held the practice to be forbidden by a statutory

requirement that only income available in fact be taken

into account for Medicaid eligibility purposes. It therefore

vacated the regulations and remanded them to the Secre-

tary for reconsideration. See Gray Panthers v. Secretary,

Dep’t of Health, Educ. & Welfare, 461 F. Supp. 319, 323

(D. D.C. 1978). We agree with the result reached by the

District Court but not for its assigned reasons. We believe

the Secretary has failed to consider all the relevant factors

in determining whether “deeming” is proper in this con-

text. We therefore affirm the judgment of the District

Court which vacated the regulations as invalid, but order

the case remanded to the Secretary for reconsideration

consistent with this opinion.

Medicaid is a cooperative federal-state program estab-

lished pursuant to Title XIX of the Social Security Act, 42

U.S.C. § 1396 et seg. (1976). Regulations promulgated in

accordance with the Act supplement the statutes in pro-

viding a framework within which the states must operate

their Medicaid programs. A state is not required to estab-

lish a Medicaid program, but should it do so the program

must conform to federal requirements. 42 U.S.C. § 1396a.

A “State plan” must be submitted to and approved by the

Secretary. 42 U.S.C. § 1396a(b). The state then becomes

entitled to federal funds which partially reimburse ex-

penditures made to provide specific types of medical as-

sistance. Section 1902 of the Social Security Act, 42

U.S.C. § 1396a, provides the statutory guideline to which

state medicaid eligibility criteria must conform:

(a) Contents

A State plan for medical assistance must —

* * * * *

(17) include reasonable standards * * * for deter-

mining eligibility for and the extent of medical assist-

ance under the plan which (A) are consistent with the

objectives of this subchapter, (B) provide for taking

into account only such income and resources as are, as

determined in accordance with standards prescribed

by the Secretary, available to the applicant or recip-

ient * * *, (C) provide for reasonable evaluation of

any such income or resources, and (D) do not take into

account the financial responsibility of any individual

for any applicant or recipient of assistance under the

plan unless such applicant or recipient is such indi-

vidual’s spouse or such individual’s child * * *[.]

In addition to providing this general framework for

Medicaid eligibility criteria, the statute places limits on

the specific provisions that the states may adopt. States

may choose to be governed by one of two rules in this re-

gard. First, 42 U.S.C. § 1396a(a) provides that Medicaid

assistance must be made available to all individuals who

qualify for cash benefits under the Supplemental Security

Income (SSI) program, Title XVI of the Social Security

Act, 42 U.S.C. § 1381 et seg. (1976). In these “SSI states”

Medicaid eligibility is determined by statute in accordance

with uniform federal standards.

States electing to be governed by the second rale, how-

ever, are not required to conform to the explicit SSI

criteria. Pursuant to the “209(b) option,”? 42 U.S.C.

§ 1396a(f), any state may choose to establish more strin-

gent eligibility criteria, so long as the criteria are no more

restrictive than those in the state’s “categorical assist-

2 The option is so named because it was added by § 209(b) of the 1972

amendments to the Social Security Act, Pub. L. No. 92-603, 86 Star.

1484.

’.%

ance”® program that was validly in effect on January 1,

1972. Such programs were the precursors to the SSI pro-

gram. They were enacted and administered by states in

cooperation with the federal government, and their eligi-

bility criteria varied from state to state. This case chal-

lenged only the HHS regulations permitting “deeming” in

the 209(b) jurisdictions* whose eligibility criteria are not

explicitly prescribed by federal statute.

A bit of history is necessary to understand the purpose

behind the 209(b) option. Before the option was enacted,

creating the SSI and 209(b) classifications, all jurisdictions

were treated alike for purposes of establishing Medicaid

eligibility criteria. Each state was required to provide

Medicaid assistance to any individual who qualified for its

categorical assistance program. When Congress brought

most of these programs under federal administration

through enactment of SSI, this principle of automatic eli-

gibility was retained. But the federal SSI eligibility

criteria allowed for broader coverage than that provided

by many of the state plans. As a result, states would have

been forced to expand their Medicaid programs involun-

tarily, and in some cases significantly. “[I]n order not to

impose a substantial fiscal burden on these States,” S.

Rep. No. 93-553, 93d Cong., Ist Sess. 56 (1973), and to

avoid the threat that some states would withdraw from

* The categorical assistance programs were established by various

subchapters of the Social Security Act then in effect: Old-Age Assist-

ance, Title I, 42 U.S.C. § 301 et seg.; Aid to Families with Dependent

Children, Title IV, 42 U.S.C. § 601 et seq; Aid to the Blind, Title X, 42

U.S.C. § 1201 ct seq; and Aid to the Permanently and Totally Dis-

abled, Title XIV, 42 U.S.C. § 1351 et seg. Titles I, X, and XIV were

subsequently repealed (except in Guam, Puerto Rico, and the Virgin

Islands) by the 1972 amendments to the Social Security Act that es-

tablished SSI, Pub. L. No. 92-608, § 303(a) & (b), 86 STAT. 1484 (ef-

fective Jan. 1, 1974). See discussion infra.

* Fifteen states have exercised the 209(b) option: Connecticut,

Hawaii, Illinois, Indiana, Minnesota, Mississippi, Missouri, Nebraska,

New Hampshire, North Carolina, North Dakota, Ohio, Oklahoma,

Utah, and Virginia. In addition, the same regulations apply to the is-

land jurisdiction of Guam, Puerto Rico, and the Virgin Islands, to

which the SSI program never applies. See note 2 supra.

- '

the Medicaid program entirely rather than fund the ex-

panded coverage, see West v. Cole, 390 F.Supp. 91, 98

(N.D. Miss. 1975), Congress enacted the 209(b) option.

Electing states could thus prevent extension of Medicaid

coverage to any persons not then entitled to benefits.

“Deeming” is a procedure used in determining an appli-

cant’s financial eligibility for Medicaid. A certain amount

of the non-institutionalized individual’s funds is conclu-

sively presumed—is “deemed”—to be available for con-

tribution toward the cost of his or her spouse’s in-

stitutionalization. In SSI jurisdictions “deeming” is spe-

cifically required by statute. The statute provides that the

income and resources of two cohabiting spouses are to be

pooled for purposes of determining the financial eligibility

of either. 42 U.S.C. § 1382(a)(2). In other words, income

earned by one spouse is conclusively presumed to be

earned jointly by the couple, and all such jointly earned

income in excess of the statutorily prescribed maintenance

level for the couple is considered to be available to either

spouse. Where both spouses are otherwise eligible for

Medicaid,® and one spouse is institutionalized, the pooling

of funds continues for six months. The effect of this

scheme is thus to ‘‘deem’”’ a portion of the

non-institutionalized individual’s income and resources to

be available for support of his or her spouse. After six

months of institutionalization only the income and re-

sources of the institutionalized spouse are considered for

determining eligibility, and the “deeming” ceases. 42

U.S.C. § 1382c(b). Where only one of the spouses is

otherwise Medicaid-eligible, pooling of income must cease

with the first month after institutionalization. 42 U.S.C.

§ 1382¢(f).

5 This statement is qualified by the fact that 209(b) jurisdictions

were required to enact “spend down” provisions, whose effect would be

to extend Medicaid coverage to some persons not eligible on January 1,

1972. A “spend down” provision deducts funds spent toward medical

care from those otherwise considered available for purposes of deter-

mining Medicaid eligibility.

* That is, aged, blind, or disabled so as to qualify the applicant for

relief under the SSI program. See 42 U.S.C. § 1381a.

By contrast, “deeming” in the 209(b) jurisdictions at

issue in this case proceeds in a more direct manner, al-

though actual practices vary considerably. Typically, the

state specifies a “maintenance” level of income and re-

sources for the noninstitutionalized spouse. Any funds in

excess of this figure are conclusively presumed to be

available for contribution toward the costs of in-

stitutionalization. In most states direct Medicaid payments

to the institution are automatically reduced by this excess

amount. Required medical care is thus usually withheld or

terminated if the “deemed” amount is not in fact paid by

the noninstitutionalized spouse.? Tle HHS regulations in

question permit this “deeming” to occur in each state to

the extent that it was the state’s practice on January 1,

1972.

This court’s review of the regulations in question must

proceed within narrow bounds. The Medicaid statute pro-

vides that “available” income and resources shall be “as

determined in accordance with standards prescribed by

the Secretary[.]” 42 U.S.C. § 13896a(a)(17)(B). Where, as

here, Congress has explicitly entrusted to the agency the

primary task of defining statutory language, that defini-

tion is “entitled to more than mere deference or weight. It

can be set aside only if the Secretary exceeded his statut-

ory authority or if the regulation is ‘arbitrary, capricious,

an abuse of discretion, or otherwise not in accordance with

7 Of the 209(b) states only Minnesota appears to be an exception:

“The local welfare agency shall not withhold, delay or deny Medical

Assistance because a responsible relative deemed able to contribute

fails or refuses to accept financial responsibility.” 12 Minn. Code of

Agency Rules § 2.047 (Dep’t of Public Welfare 47) C.5.b.(5). In Brown

v. Stanton, __ F.2d ___ (7th Cir. No. 79-1459, decided Jan. 30, 1980),

the Seventh Circuit imposed a similar rule on the operation of the In-

diana Medicaid program as a matter of statutory interpretation of

§ 1396a(a)(17). Recause of our disposition in this case, we have no occa-

sion to comment on the Seventh Circuit’s holding in Brown.

'*%

law.’ 5 U.S.C. §§ 706(2)(A), (C).” Batterton v. Francis,

432 U.S. 416, 426 (1977). See Herweg v. Ray, 619 F.2d

1265 (1980) (equally divided court sitting en banc) (opinion

of McMillian, J.). Although this is a narrow standard, it

does not relieve the court of its duty to conduct a search-

ing inquiry. Even where no specific statutory require-

ments are being enforced, the court “must consider

whether the decision was based on a consideration of the

relevant factors * * *.” Citizens to Preserve Overton

Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971). See Kollett

v. Harris, 619 F.2d 134, 140 (1980). Because we conclude

that the Secretary has not taken the relevant factors into

account in promulgating the regulations at issue in this

case, the District Court’s judgment vacating those regula-

tions must be upheld.

The Secretary argues primarily that no internally con-

sistent interpretation of the Medicaid statute can prohibit

“deeming” in 209(b) jurisdictions. In SSI jurisdictions

“deeming” is required by statute for six months.® SSI

jurisdictions, like 209(b) jurisdictions, are governed by the

requirement of Section 1396a(a)(17) that only “available”

income be considered in determining eligibility for bene-

fits. Because “available” income incorporates “deeming” in

SSI jurisdictions, the Secretary argues, the same term

cannot be defined to prohibit the practice in 209(b) juris-

dictions. “A concept of ‘available income’ which includes

income ‘deemed’ in SSI states for a six month period must

also encompass income ‘deemed’ to institutionalized

spouses in the ‘209(b) states.”” Brief for appellants at 14

(emphasis in original).

We do not believe the statutorily required “deeming” in

SSI states should be given such dispositive weight with

respect to 209(b) jurisdictions. We perceive the governing

principle in SSI states to be that the institutionalized indi-

vidual is to be held solely responsible for his or her own

® See p. 6 supra.

medical care, with “deeming” a very narrow exception.®

See 42 U.S.C. § 1882(a)(1). The six-month “deeming”

period appears in the statute as a limitation on the avail-

ability of cash payments under the SSI program. See 42

U.S.C. § 1882c(b). That limitation might. well apply for

Medicaid purposes in SSI jurisdictions, which have incor-

porated in full the SSI eligibility criteria. But it does not

reflect a decision by Congress that “deeming”—for six

months or for any period of time—is necessarily an appro-

priate practice in the 209(b) jurisdictions that are the

subject of this case. More important, the legislative his-

tory shows that the six-month “ceeming” provision was

designed to serve the limited purpose of deterring fraud in

the form of a voluntary separation of spouses in order to

receive increased benefits. See H.R. Rep. No. 92-231, 92d

Cong., 2d Sess. 150 (1971). By its own terms, for example,

Section 1882c(b) does not apply where only one of the

spouses is otherwise eligible’® for Medicaid. And there is

no indication that its propriety was considered in the con-

text of separations caused by institutionalization, where

fraud is presumably not a concern. In any event, the re-

lationship between Section 1396a(a)(17) and the statutory

“deeming” in SSI states is not now before the court, and

we intimate no opinion with respect to it. It is enough to

say that there is no required federal statutory “deeming”

in the 209(b) jurisdictions which are the subject of this

case, and that there is no justification for extending the

antifraud six-month limitation on the general policy be-

yond its statutory confines.!!

® HHS itself recognizes that “only in highly limited situations does

‘deeming’ apply to physically separated relatives and then only when

they can be said to be ‘constructively’ members of the same house-

hold{.]” See 42 FED. REG. 2685 (1977). Further, this six-month period

applies only where the noninstitutionalized spouse is also Medicaid-

eligible. This fact takes on significance in a different context. See dis-

cussion immediately following.

10 See text at note 5 supra.

1 The extension of the six-month “deeming” suggested by the gov-

ernment would be twofold: first in the application of the policy to

9a -

The Secretary further argues that enactment of the

209(b) option, which permitted states to continue to use

their 1972 Medicaid eligibility criteria, amounted to a spe-

cific congressional approval of those criteria. Because

some states used “deeming” in 1972, the Secretary con-

cludes, the practice was sanctioned by Congress and can-

not now be prohibited by this court. Although this is cer-

tainly a plausible argument, there is nothing in the legisla-

tive history of Public Law No. 92-603, 86 STAT. 1484, to

support it. The purpose of the 209(b) option was only to

ensure that enactment of the SSI program, with its more

generous eligibility criteria, would not automatically in-

crease a state’s Medicaid burden.!? Congress was not ex-

pressing its view that “deeming,” as then practiced in

state Medicaid programs, was consistent with the re-

quirements of the Medicaid statute. We thus agree with

the Fifth Circuit’s declaration that the 209(b) option can-

not be read as an “all-purpose ‘grandfathering’ clause

which effectively legitimizes any and every provision ap-

pearing in a state plan in 1972.” See Norman v. St. Clair,

610 F.2d 1228, 1235 (1980).

We turn now to a discussion of the factors that are rel-

evant to the Secretary’s ultimate determination of

whether and to what extent “deeming” should be per-

mitted from an individual to his or her institutionalized

spouse. The legislative history of the Medicaid statute

explicitly addresses the question of when “deeming” is

proper. It establishes a broad principle, or expectation,

that “deeming” is appropriate between spouses and from

parents to children: “Your committee believes it is proper

to expect spouses to support each other and parents to be

held accountable for the support of their [Medicaid-

eligible) children * * *.” H.R. Rep. No. 213, 89th Cong.,

209(b) jurisdictions where it is not required by statute, and second in

the sense that the HHS regulations permit the policy to be applied in

209(b) jurisdictions beyond the statutory six-month durational limit.

12 See p. 5 supra.

10a

Ist Sess. 68 (1965); S. Rep. No. 404, 89th Cong., 1st Sess.

78 (1965). But with equal clarity the legislative history

recognizes exceptions to the general rule, requiring indi-

vidualized factual determinations of availability to be

made:

[Section 1396a(a)(17) is] designed so that the States

will not assume the availability of income which may

not, in fact, be available or overevaluate income and

resources which are available. Examples of income

assumed include support orders from [sic] absent

fathers, which have not been paid or contributions

from relatives which are not in reality received by the

needy individual. * * *

H.R. Rep. No. 218, supra, at 67. The question for the

Secretary is how the policies underlying the general rule

and its exceptions are to be applied to the diverse factual

situations posed in this case.

At first blush the facts here presented appear to be em-

braced by the seemingly unequivocal expectation that

spouses should support each other. But Congress has

demonstrated that a much more flexible approach must be

taken. Parents of Medicaid-eligible children, for example,

are under a similarly unqualified expectation of support.

And yet the legislative history specifically excludes from

“deeming” support from absent fathers. The absence of

the father from the home undercuts key assumptions that

make “deeming” ordinarily reasonable, and thus the prac-

tice is forbidden. Likewise, the absence of a spouse from

the home because of institutionalizaton differs significantly

in two respects from the situation of cohabiting spouses

which is at the heart of the congressional expectation of

support.

First, the general rule of mutual support proceeds from

the assumption that the spouses maintain a common

household, “sharing” income and expenses, see 42 FED.

REG. 2685, 2686 (1977), and constituting a single economic

unit. But where institutionalization has caused one spouse

to be absent from the home, two households, not one, in

effect must be maintained. Expenses can no longer fairly

lla

be characterized as jointly incurred, and “deeming” no

longer accurately reflects the economic norm. An impor-

tant condition that makes “deeming” ordinarily reasonable

between spouses is thus not met.

Second, and more important, the limited potential for

disruption of the family was a determinative factor in

permitting “deeming” between spouses and from parents

to children. “Beyond such degree of relationship, however,

requirements [of support] imposed are often destructive

and harmful to the relationships among members of the

family group.” S. Rep. No. 404, supra, at 78; H.R. Rep.

No. 213, supra, at 68. The legislative history of Section

1396a(a)(17) recognizes that, especially in the context of

the family structure, great care must be exercised to en-

sure that governmental regulation does not needlessly dis-

rupt people’s lives. In contrast with the ordinary situation

of cohabiting spouses, institutionalized individuals and

their husbands or wives are particularly vulnerable to the

disruptive forces than can be exerted by governmental

regulations. In most cases the individual’s continued in-

stitutionalization depends upon his or her spouse’s ability

(or willingness) to pay the “deemed” amount.!* The spouse

is thus faced with the “choice” of reducing his or her

standard of living to a point apparently set near the pov-

erty line, or being responsible for the eviction of his or her

spouse from the institution.’ The institutionalized indi-

vidual is often literally helpless to temper the harsl.ness of

this dilemma.

These two distinctions appear whenever one spouse has

been institutionalized. Their importance depends upon the

circumstances of each case. It is entirely possible, for

example, that the Secretary would choose to treat spouses

who were living apart before the institutionalization dif-

ferently from spouses who were living together. Similarly,

whether support payments were being made on a regular

13 See text at note 6 supra.

14 One “alternative” to payment of the “deemed” amount is divorce.

We do not consider this an acceptable option to mitigate the potential

disruptive effect of “deeming” in this context.

® 12a

basis from one separated spouse to the other might itself

prove to be a determinative factor. There are many factual

differences with respect to which the propriety of “deem-

ing” must be determined. These are problems for the Sec-

retary to consider. Naturally, not every potential situation

can be addressed by the Secretary’s regulations. But the

regulations must apply reasonably to the situations they

do address, and must develop general principles applicable

to different situations as they arise.

Congress has stated that it is the primary responsibility

of the Secretary, and not the courts, to determine whether

and to what extent “deeming” is to be permitted from an

individual to his or her institutionalized spouse. Such de-

termination, however, must proceed within the framework

established by the Medicaid statute. It is our duty to en-

sure that this occurs. The record in this case reflects that

HHS regulations permit “deeming” in 209(b) jurisdictions

because the Secretary thought that internal consistency

within the Medicaid statute required such permission, and

that Congress has specifically approved the practice. We

disagree. To the contrary, in issuing regulations imple-

menting the 209(b) option the Secretary is required to con-

sider those policy concerns, outlined in part above, which

Congress intended would guide her discretion in deter-

mining under what circumstances, and to what extent,

“deeming” would be permitted.'5

15 Using an approach similar to that taken in this case, the First

Circuit in Kollett v. Harris, 619 F.2d 134 (1980), upheld HEW regula-

tions under which SSI cash payments to disabled children are reduced

by a “deemed” amount. The court recognized as applicable the Overton

Park requirement that the regulations be the product of a considera-

tion of the relevant factors. This requirement was met in Kollett be-

cause the Secretary “gave sufficient attention to a wide range of issues

including the general type of matters mentioned by the district court

[to be relevant.” 619 F.2d at 141. We are confident that the “deeming”

regulations challenged in this case would not pass a comparable test.

Accordingly, we have no occasion to comment on the relatively forgiv-

ing interpretation of Overton Park employed in Kollett.

13a

III

The District Court’s order vacating the subject regula-

tions is affirmed. The case is remanded to the District

Court with direction to remand it to the Secretary for

promulgation without delay of new regulations consistent

with the Medicaid statute as interpreted in this opinion.

So ordered.

MACKINNON, Circuit Judge, concurring in part and dis-

senting in part.

In my view we should uphold the “deeming” practice in-

volved in this appeal, and the basis of my disagreement

with the majority’s approach on this point is set forth

below.

“Deeming” is the use of a formula to make a determina-

tion of the income available to support an institutionalized

spouse, or, as defined by the district court, the “imputing

of income on the basis of an arbitrary formula, without re-

gard to the amount actually available to the in-

stitutionalized spouse .. .” Gray Panthers v. Secretary,

Department of Health, Education and Welfare, 461 F.

Supp. 319, 321 (D.D.C. 1978). As with any formula the ap-

proach may result in hardship in cases where it imper-

fectly reflects the financial condition of the married couple

involved. At the same time, “deeming” is a rational and

necessary method of making a determination of available

support and assessing financial responsibility in a program

like Medicaid which involves hundreds of thousands of

people, millions of dollars, Herweg v. Ray, F.2d __,

No. 78-1664 (8th Cir. March 18, 1980); Norman v. St.

Clair, 610 F.2d 1228, 1242-3 (5th Cir. 1980), and allocates

limited resources. Dandridge v. Williams, 397 U.S. 471,

478-79 (1969). See also Weinberger v. Salfi, 422 U.S. 749

(1975).

My disagreement with the majority opinion centers

upon its failure to accord unequivocal approval to “deem-

ing” as prescribed in the regulations of the agency. While

the majority opinion approves the “deeming” regulations

conceptually, they are nevertheless remanded to the Sec-

l4a

retary for reconsideration in light of a series of ambiguous

factors delineated in the majority’s opinion. Slip Op. at

10-11. This court should resolve this case as it is pre-

sented; a remand is not necessary for the resolution of is-

sues involved in this appeal.

The majority should recognize that the scope of our re-

view is severely circumscribed. The Secretary’s regula-

tions should be set aside only if they are “arbitrary, capri-

cious, an abuse of discretion, or otherwise not in accord-

ance with law.” 5 U.S.C. §§ 706(2)(A), (C). See Batterton

v. Francis, 482 U.S. 416, 426 (1977). The majority opinion

acknowledges that both “SSI States” and “209(b) States”!

are governed by the same requirement, i.e., that only

“available” income be considered in determining eligibility

for Medicaid benefits. However, in the SSI States, income

is deemed by statute to accrue to an institutionalized

spouse for a period of six months. 42 U.S.C. § 1382c(b)

The Secretary identifies this provision as authority for

“deeming” in 209(b) States. The majority deals with this

proposal by stating that

“(i]t is enough to say that there is no required federal

statutory ‘deeming’ in the 209(b) jurisdictions which

are the subject of this case, and that there is no jus-

tification for extending the anti-fraud six-month lim-

abe on the general policy beyond its statutory con-

ines.”

Slip Op. at 7 (footnote omitted).

One additional factor is useful in identifying the extreme

nature of the Gray Panthers’ attack. At oral argument the

following colloquy occured:

1States participating in the Medicaid program fall into two

categories: those which determine eligibility under the Supplemental

Security Income program (“SSI”) Title XVI of the Social Security Act,

42 U.S.C. § 1381 et seg. (1976) and those states which have elected a

more restrictive eligibility criteria, an option authorized by Section

209(b) of the 1972 Amendments to the Social Security Act, Pub. L. No.

92-603, 86 Stat. 1484 codified at 42 U.S.C. § 1396a(f). In shorthand

fashion, the states exercising this option are referred to as “209(b)

States” and others as “SSI States.”

'*%

15a

Judge MacKinnon: “They’re not going back; they’re

staying with them [the standards in effect in 1972].

* * * * #

Mr. DeF ord [counsel for the Gray Panthers]: “Well,

my only point is whatever the standards in 1972, if

they were impermissible at that time a state should

not be allowed to go back to them.”

Judge MacKinnon: “What are you talking about, go

back to them?”

Mr. DeFord: “Well, a state should not be able to

maintain them, then. If they were impermissible in

1972 under the statute as set out in 1965, then the

states should not be able to use the 209(b) option to

maintain any invalid attribution of income.”

Judge MacKinnon: “Well, then your point is they’re

all invalid. The deeming is all invalid.”

Mr. DeF ord: “That’s correct your Honor.. .”.

Later, the court and counsel turned to the question of

what effect invalidating the deeming regulations would

have administratively:

Judge MacKinnon: “Go through determination, you

mean go to hearing?”

Mr. DeFord: “The normal welfare procedure, your

Honor, by which a state determines what the income

and expenses of the individual are. It is a fairly com-

mon procedure.”

Judge Wright: “You mean, there would have to be a

fact hearing in every case?”

Mr. DeFord: “I’m not talking about a hearing, your

Honor. I’m simply talking about the state welfare of-

ficials sitting down with the non-institutionalized

spouse figuring out what the expenses and income of

that individual are.”

These colloquies illustrate several important points.

First, Gray Panthers is attacking the concept of “deem-

ing”, not just its application to Medicaid programs in the

209(b) States. Second, Gray Panthers would substitute an

individual hearing in every case for “deeming.” The ex-

treme nature of these arguments also provides a basis for

’%

l6a

their rebuttal. The purpose of “deeming” is not only to

mitigate fraud, a ubiquitous and monstrously costly prob-

lem in the administration of any assistance program, but

also to facilitate the administration of the program itself,

thereby reducing the percentage of resources devoted to

the administration programs, and increasing the percent-

age which can be actually distributed to program benefici-

aries. See Brown v. Stanton, __ F.2d ___, No. 79-1459 at

18 (January 30, 1980) (Pell, J., concurring in part, and dis-

senting in part). While counsel for Gray Panthers did not

advocate a full dress adversary hearing but an indi-

vidualized, in-person determination of expenses and in-

come for each couple affected by this program, the fact

remains that such a proposal is a limited hearing, albeit

termed an informal one and would involve practically all

the detriments of a hearing. In administering Social Secu-

rity benefits, Congress has often elected to use “simple

criteria”. The Supreme Court has observed that “[g]jeneral

rules are essential if a fund of this magnitude is to be ad-

ministered with a modicum of efficiency even though such

rules inevitably produce seemingly arbitrary consequences

in some individual cases. Weinberger v. Salfi, 422 U.S.

749, 776 (1975].” Califano v. Jobst, 434 U.S. 47, 53 (1977).

Nothing in the statute suggests that Congress intended to

deny the states recourse to similar efficiencies. Nothing in

the statute suggests that Congress intended to burden

participating states with the layers of administrative

structure.

The approach taken by the majority falls well short of

that advocated by the Gray Panthers. But the soft direc-

tion provided by the court will not provide meaningful

guidance for the Secretary to reevaluate her regulations.

Indeed, the groundwork has already been laid for a second

appeal to measure compliance by the Secretary against the

somewhat indefinite benchmarks provided by the major-

ity. We could avoid this recurring review without distort-

ing the statutory scheme by affirming the Secretary’s reg-

ulations.

17a

The only villain here is the level of need which has not

been adjusted to reflect skyrocketing costs of living. How-

ever well-intentioned, the court cannot through a remand

to the Secretary affect the inflationary pressures which

are particularly burdensome to people on fixed incomes. In

a concise concurrence in Kollett v. Harris, _. F.2d __,

No. 79-1453 (1st Cir. April 18, 1980), upholding “deeming”

from a parent to a disabled child in determining the

amount of cash assistance payments under a Supplemental

Security Income program, 42 U.S.C. 1881 et seqg., Judge

Aldrich aptly addressed the issue of “deeming”:

As one who participated in Boucher v. Minter,

D.Mass., 1972, 349 F.Supp. 1240, from which plain-

tiffs would derive much support, I feel I should recite

that I am entirely comfortable with its present rejec-

tion. The enormous enterprise which social insurance

has become would fall of its own weight if practical,

rule of thumb guidelines could not be established to

avoid piece by piece scrutiny of every case. The Su-

preme Court having forcefully recognized that this is

permissible even though occasional hardship is inevi-

table, Weinberger v. Salfi, 1975, 422 U.S. 749, the

principle applies that there must be some reason in

fact, or logic, before the agency’s judgmental exper-

tise is overruled. On the point here in issue the

agency’s experience is obviously considerable. I can-

not think that it abused its discretion in choosing this

rule rather than some other.

Id. at 25.

III

Because in my opinion there is nothing to suggest that

the Secretary’s action in promulgating the regulations al-

lowing the use of “deeming” in SSI States states is arbi-

trary or capricious, the limit of our scope of review, I re-

spectfully dissent from that part of the court’s opinion

which holds to the contrary.

18a

APPENDIX B

Yu the United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

SEPTEMBER TERM, 1979

No. 79-1334

GRAY PANTHERS

Vv.

ADMINISTRATOR, HEALTH CARE FINANCING

ADMINISTRATION, DEPARTMENT OF HEALTH AND

HUMAN SERVICES, ET AL., APPELLANTS

[Filed Sept. 3, 1980]

Before: WRIGHT, Chief Judge and BAZELON, Senior

Circuit Judge.

ORDER

It is ORDERED by the court, sua sponte, that the

opinion for the court filed July 29, 1980 be, and it is

hereby, amended as follows:

Page 1:

Page 3:

Page 4:

Page 8:

Change “Health, Education and Welfare” in

the listing of counsel to “Health and Human

Services”

Change “acocrdance” in line 4 of the first full

paragraph to “accordance”

Delete “a” in line 8 of the same paragraph

Change “precusors to” in the third line from

the bottom of text to “precursors of”

Change “(1980)” in line 4 to “(8th Cir. 1980)”

Change “(1980)” in line 14 to “(1st Cir. 1980)”

i’

19a

Change “as” in the last line of text to “at”

Page 9: Change “SSS” in line 4 to “SSI”

Page 10: Change “(1980)” in the last line of text to

“(5th Cir. 1980)”

Page 14: Change “(1980)” in line 2 of footnote 15 to

“(1st Cir 1980)”

Per Curiam

For the Court

George A. Fischer

/3/ ROBERT A. BONNER

By: Robert A. Bonner

Chief Deputy Clerk

20a

APPENDIX C

Iu the United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

SEPTEMBER TERM, 1979

No. 79-1334

GRAY PANTHERS

Vv.

ADMINISTRATOR, HEALTH CARE FINANCING

ADMINISTRATION, DEPARTMENT OF HEALTH AND

HUMAN SERVICES

[Filed Aug. 12, 1980]

Before: WRIGHT and MACKINNON, Circuit Judges, and

MARKEY, Chief Judge, United States Court of

Customs and Patent Appeals

ORDER

It is ORDERED by the Court, sua sponte, that the dis-

senting opinion in the above captioned case, filed herein

July 29, 1980, be and hereby is, amended as follows:

On page 6, line 3, strike “SSI States states” and in-

sert “209(b) States”.

Per Curiam

For tne Court

/s/George A. Fisher

GEORGE A. FISHER

Clerk

2la

APPENDIX D

Jn the United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

SEPTEMBER TERM, 1979

Civil 78-0661

No. 79-1334

GRAY PANTHERS

Vv.

ADMINISTRATOR, HEALTH CARE FINANCING

ADMINISTRATION, DEPARTMENT OF HEALTH AND

HUMAN SERVICES, ET AL., APPELLANTS

[Filed July 29, 1980]

Appeal from the United States District Court for the Dis-

trict of Columbia.

Before: WRIGHT, Chief Judge, MACKINNON, Circuit

Judge, and MARKEY*, Chief Judge, United

States Court of Customs and Patent Appeals

JUDGMENT

This cause came on to be heard on the record on appeal

from the United States District Court for the District of

Columbia, and was argued by counsel.

On consideration thereof It is ordered and adjudged by

this Court that the judgment of the District Court ap-

pealed from in this cause is hereby affirmed and the case is

remanded to the District Court with directions to remand

* Sitting by designation pursuant to 28 U.S.C. § 293(a)

22a

it to the Secretary for reconsideration, consistent with the

opinion of this Court filed herein this date.

Per Curiam

For the Court

/s/

GEORGE A. FISHER

Clerk

Date July 29, 1980

Opinion for the Court filed by Chief Judge Wright.

Opinion concurring in part and dissenting in part filed by

Circuit Judge MacKinnon

’%

23a

APPENDIX E

UNITED STATES DISTRICT COURT

DISTRICT OF COLUMBIA

GRAY PANTHERS, PLAINTIFF,

Vv.

SECRETARY, DEPARTMENT OF HEALTH, EDUCATION

AND WELFARE ET AL., DEFENDANTS.

Civ. A. No. 78-0661.

Dec. 8, 1978.

MEMORANDUM OPINION

CHARLES R. RICHEY, District Judge.

This case is before the Court on cross motions for sum-

mary judgment.! The basic issue in this case is whether

regulations? promulgated by the defendants, which allow

states to “deem” income from a non-institutionalized

spouse available to an institutionalized spouse, are incon-

sistent with the requirements of the Medicaid statute, in

particular 42 U.S.C. § 1396a(a)(17). The Court finds there

to be no genuine issue of materia] fact in dispute and, for

1 Plaintiff initially filed a motion for partial summary judgment which

sought judgment only as to the statutory claim. However, in its reply

to defendants’ motion for summary judgment, the plaintiff expanded

its initial motion to one for summary judgment on all claims. See Plain-

tiffs Reply Memorandum at 1 n.1) (October 13, 1978).

2 New regulations were made final since the motions were filed. The

parties, however, have stipulated that these new regulations (42

C.F.R. §§ 435.734, 436.602 and 436.711) have the same effect as the

prior regulations (42 C.F.R. $§ 448.3(b)(1), (4), and 448.21(a)X(2). See

Stipulation (November 22, 1978). To be consistent with the papers in

this case, the Court’s Memorandum Opinion and Order will use the

former regulations—but the parties should consider references to the

prior regulations to be references to the appropriate present ones.

24a

the reasons hereinafter stated, will grant summary judg-

ment to the plaintiff on its statutory claim for relief.

I. BACKGROUND

Plaintiff, Gray Panthers seeks in this action to invali-

date as inconsistent with the Medicaid statute regulations

promulgated by the defendants which allow certain states

to “deem” available to an institutionalized spouse income

from the noninstitutionalized spouse.

Medicaid is a cooperative federal-state program estab-

lished pursuant to Title XIX of the Social Security Act, 42

U.S.C. § 1896 et seg. In accordance with the Act, the Sec-

retary of Health, Education and Welfare promulgates reg-

ulations, through the Administrator of the Health Care

Financing Administration, which supplement the statutes

in providing the framework in which participating states

must develop and operate their Medicaid programs. States

are not required to institute a Medicaid program, but if

they choose to do so, they must submit to the Secretary of

HEW a satisfactory “state plan” which fulfills all require-

ments of the Act. 42 U.S.C. § 1896a. The state plan de-

scribes the nature and scope of the state’s Medicaid pro-

gram and provides assurances that the state will adminis-

ter its program in conformity with the requirements of the

federal statute, regulations, and other applicable official

issuances of the Department. 45 C.F.R. § 201.2. If the

state submits a plan which fulfills all the requirements of

the Act, the Secretary must approve it. 42 U.S.C.

§ 1396a(b). The state thereupon becomes entitled to grants

of federal funds in reimbursement of a portion of the ex-

penditures which it makes in providing specific types of

medical assistance to eligible individuals under the plan in

accordance with the federal conditions. 42 U.S.C. § 1896b;

45 C.F.R. § 201.5.

Section 1902 of the Social Security Act, 42 U.S.C.

§ 1396a, provides, in pertinent part:

(a) A state plan for medical assistance must—

* * * * *

25a

(17) include reasonable standards. . . for determining

eligibility for and the extent of medical assistance

under the plan which (A) are consistent with the ob-

jectives of this subchapter, (B) provide for taking into

account only such income and resources as are, as de-

termined in accordance with standards prescribed by

the Secretary, available to the applicant or recipient

. . ., (C) provide for reasonable evaluation of any such

income or resources, and (D) do not take into account

the financial responsibility of any individual for any

applicant or recipient of assistance under the plan

unless such applicant or recipient is such individual’s

spouse or such individual’s child.

Prior to April 13, 1977, all participating states were sub-

ject to the same controlling federal regulations. Section

248.3 of Title 45 of the Code of Federal Regulations stated

that, with respect to the categorically needy and the medi-

cally needy (if included in the state plan), a state plan

must “provide that only such income and resources as are

actually available will be considered and the income and

resources will be reasonably evaluated.” (emphasis

added). On the basis of section 1902(a) of the Act and these

regulations states were expected to evaluate the eligibility

of individuals applying for Medicaid who required in-

stitutionalization and whose spouses continued to live in

the couple’s home. Despite the requirement that only

“available income” should be considered, states considered

an arbitrary portion of the income of non-institutionalized

spouses available for the care of institutionalized spouses

whether in fact that income was available and whether the

noninstitutionalized spouse was actually able to make such

an amount available. This inputing of income on the basis

of an arbitrary formula, without regard to the amount ac-

tually available to the institutionalized spouse, is com-

monly referred to as “deeming.”

New regulations were promulgated and finalized, effec-

tive April 13, 1977. The introductory language of the reg-

ulations read, in part:

(b) With respect to both the categorically needy and,

if they are included in the plan, the medically needy, a

State plan must:

26a

(1) General. Provide that only such income and re-

sources as are considered available under the provi-

sions of this section may be considered as an appli-

cant’s or recipient’s income in determining eligibility

or the amount of assistance and that income and re-

sources will be reasonably evaluated.

42 C.F.R. § 448.3. The effect of this new introductory lan-

guage is the imposition of different requirements amongst

the various jurisdictions. The thirty-four states and the

District of Columbia which automatically provide Medicaid

assistance to recipients of Supplementary Security Income

[“SSI’] are now specifically required to use the SSI rules

on availability of income. 42 Fed.Reg. 2685. When Con-

gress initially created SSI, it intended to require that all

states provide Medicaid assistance automatically to all SSI

recipients. Because this would have resulted in a huge in-

crease in the Medicaid rolls in the various states, and Con-

gress feared that some states might opt out of the

Medicaid program altogether, Congress added a provision

which gave states the option of utilizing more restrictive

eligibility conditions. Under this provision, section 1902(f)

of the Act, 42 U.S.C. § 1396a(f), a state was permitted to

use any financial eligibility condition which was no more

restrictive than that in use under the state’s January 1972

eligibility conditions for its categorical programs. There-

fore, those states which elect this option may deem income

available from noninstitutionalized spouses which may not

in fact be available. At present, fifteen states have chosen

the optional basis for determining Medicaid eligibility pro-

vided by 42 U.S.C. § 1396a(f).

In its complaint, plaintiff raises three claims for relief.

First, plaintiff claims that the “deeming” of income from a

noninstitutionalized spouse to an institutionalized

Medicaid recipient is in violation of 42 U.S.C. § 1396a

(a)(17), and is, therefore, void. Second, plaintiff contends

that the “deeming” of income creates an irrebuttabie pre-

sumption which violates the due process clause of the fifth

amendment. Third, plaintiff contends that the deeming of

27a

income violates the equal protection component of the due

process clause of the fifth amendment.?

II. DISCUSSION

The issue presented for resolution is whether the

deeming of income between spouses separated by in-

stitutionalization, permitted by 42 C.F.R. §§ 448.3(b),

448.21(a)(2) violates the requirements of 42 U.S.C.

§ 1896a(a)(17) of the Medicaid statute. The Court, after

careful consideration of the extensive memoranda filed and

the relevant authorities, finds that deeming is inconsistent

with the statute.* This conclusion is based on the language

of the statute, its legislative history and case law inter-

preting it.

As noted above, 42 U.S.C. § 1396a(a)(17) provides, in

pertinent part, that a state plan for medical assistance

must include reasonable standards for determining eligi-

bility which

(B) provide for taking into account only such income

and resources as are, as determined in accordance

with standards prescribed by the Secretary, available

to the applicant or recipient . . . , (C) provide for rea-

sonable evaluation of any such income or resources,

and (D) do not take into account the financial respon-

sibility of any individual for any applicant or recipient

of assistance under the plan unless such applicant or

3 Because of the Court’s resolution of the statutory issue, the Court

need not and should not reach the constitutional issues raised by the

plaintiff. See Rosado v. Wyman, 397 U.S. 397, 402, 90 S. Ct. 1207, 25

L. Ed.2d 442 (1970); King v. Smith, 392 U.S. 309, 88 S. Ct. 2128, 20

L. Ed.2d 1118 (1968).

* Although defendants have raised an objection to plaintiff's standing

to bring this action, the Court finds, upon review of the affidavits and

complaint, that plaintiff has standing because its members would have

standing to sue in their own right. See Hunt v. Washington Apple

Advertising Co., 432 U.S. 333, 343, 97 S. Ct. 2434, 538 L.Ed.2d 383

(1977); Affidavits of Smith (September 5, 1978), Sandifer (September

5, 1978), Goldfarb (November 7, 1978), and Pittman (November 12,

1978).

28a

recipient is such individual’s spouse or such indi-

vidual’s child... .

The statute clearly states that only such income and re-

sources as are “available to the applicant” may be taken

into account. The phrase “as determined in accordance

with standards prescribed by the Secretary” allows the

Secretary to prescribe broad standards for determining

what is “available;” however, this phrase does not allow

the Secretary to determine in a wholesale fashion what

should be available to the applicant.5 This interpretation is

clear from the legislative history of the statute.

The Senate Finance Committee, which prepared the re-

port on the Medicaid statute, states:

Another provision is included that requires States to

take into account only such income and resources as

(determined in accordance with standards prescribed

by the Secretary), are actually available to the appli-

cant or recipient. .. .

S.Rep. No. 404, 89th Cong., lst Sess. 78, reprinted in

[1965] U.S. Code Cong. & Admin. News, pp. 1943, 2018

(emphasis added). Thus, it is clear that the phrase “de-

termined in accordance with standards prescribed by the

Secretary” in subpart (B) was not intended to remove the

requirement that only “actually available” income and re-

sources would be considered.

5 Subpart (D) of the statute is not to the contrary. That subpart

merely prohibits a state from taking into account the “financial respon-

sibility” of anyone except spouses and parents. While it may allow a

state to enforce its financial responsibility laws against a spouse or

parent, this subpart does not suggest that the amount of contribution

from that person should be a deemed amount. In fact, this is exactly

what Congress had intended subpart (D) to mean.

The committee believes it is proper to expect spouses to support

each other and parents to be held accountable for the support of

their minor children and their blind or permanently and totally

disabled children even though 21 years of age or older. Such re-

quirements for support may reasonably include the payment by

such relative, if able, for medical care.

S. Rep. No. 404, 89th Cong., lst Sess. 78, reprinted in [1965] U.S.

Code Cong. & Admin. News, pp. 1943, 2018 (emphasis added).

29a

If there were any doubt as to whether deeming violates

the Medicaid statute, such doubt evaporates when the

purpose of 42 U.S.C. § 1896a(a)(17) is considered. Ac-

cording to the Finance Committee,

[t]hese provisions are designed so that the States will

not assume the availability of income which may not,

in fact, be available. . .

S.Rep. No. 404, swpra (emphasis added). By applying an

arbitrary formula, unrelated to the expenses of a particu-

lar couple’s needs, deeming may well result in states “as-

sum[ing] the availability of income which may not, in fact,

be available.” This would, therefore, be directly contrary

to the purpose of the statute.

Thus far, every court that has been confronted with the

validity of the deeming procedure has found it to be in

violation of the Medicaid statute. In Herweg v. Ray, 443

F. Supp. 1815, 1819 (S.D. Iowa 1978), the court noted:

This Court joins other courts in holding that state

procedures which “deem” a computed portion of a

spouse’s income to be available for an institutionalized

spouse’s expenses by the application of an arbitrary

formula are contrary to 42 U.S.C. § 1396a(a)(17) as

shown by its language and the expressed Congres-

sional intent.

* * * * *

In the Court’s opinion, the state procedure must

provide for a factual determination in each instance of

the amount of the spouse’s income which is in fact

reasonably available for the support of the in-

stitutionalized spouse. Otherwise the procedures will

be in conflict with 42 U.S.C. § 1396a(a)(17). Such de-

termination must give due consideration to the indi-

vidual obligations and the particular needs of each

spouse and family.

See Norman v. St. Clair, No. 77-1722 (5th Cir. April 11,

1977) (Order of Judge Ainsworth granting injunction

pending appeal to a couple challenging the deeming proce-

dure); Manfredi v. Maher, 435 F. Supp. 1106, 1114 (D.

Conn. 1977) (“It was Congress’ intent, as reflected in the

legislative history . . . , that spouses be obliged to support

30a

each other only ‘if able.’ U.S. Code Cong. & Admin. News

1943, 2018 (1965).”®) Moreover, in Burns v. Vowell, 424

F. Supp. 1135 (S.D. Texas 1976), the court scrutinized the

legislative history of 42 U.S.C. § 1396a(a)(17) and con-

cluded that

deeming is never a proper procedure within the re-

quirements for the establishment of means for rea-

sonably evaluating financial responsibility of non-

institutionalized spouses . .. [T]he income of a non-

institutionalized spouse can [only] be considered .. .

through the application of reasonable standards and

not on the basis of an irrebuttable presumption that

the money is available for the care and support of the

institutionalized spouse. Deeming . . . is not consist-

ent with the federal statutes and regulations, and

cannot be employed to impute income.

424 F. Supp. at 1140-41. Accordingly, this Court is con-

vinced that the deeming procedure violates the Medicaid

statute, and, therefore, is invalid.

III. CONCLUSION

The Court has carefully analyzed the language of the

statute, its legislative history, and the pertinent case law.

All unequivocally indicate that the deeming procedure—42

C.F.R. §§ 448.3(b)(1), (4); 448.21(a)(2)—is inconsistent

with the requirements of the Medicaid statute, 42 U.S.C.

§ 1396a(a)(17).

An Order in accordance with the foregoing will be issued

of even date herewith.

® The court in Franssen v. Juras, 406 F. Supp. 1375 (D. Or. 1975)

appears to also have found deeming invalid. While there is some lan-

guage in the opinion which may suggest that the presence of a relative

responsibility law is determinative, the court expressly noted that the

state must “reasonably evaluat[e] the income and resources actually

available . . . [and] impose responsibility conform[ing] to federal law.”

406 F. Supp. 1379. See Burns v. Vowell, 424 F. Supp. 1135, 1140-41

(S.D. Texas 1976).

3la

APPENDIX F

United States District Court

FOR THE DISTRICT OF COLUMBIA

C.A. No. 78-0661

GRAY PANTHERS, PLAINTIFF

Vv.

SECRETARY, DEPARTMENT OF HEALTH, EDUCATION

AND WELFARE, ET AL., DEFENDANTS.

[Filed Dec. 8, 1978]

ORDER

Upon consideration of the cross motions for summary

judgment, the memoranda filed in support thereof and in

opposition thereto, the entire record herein, and in ac-

cordance with the Memorandum Opinion issued of even

date herewith, and it appearing to the Court that there

exist no genuine issues of material fact in this case, it is,

by the Court, this 8th day of December, 1978,

ORDERED, that plaintiff's motion for summary judg-

ment be, and the same hereby is, granted, as to Count 1 of

the complaint; and it is

FURTHER ORDERED, that defendants’ motion for

summary judgment be, and the same hereby is, denied;

and it is

FURTHER ORDERED, that defendants’ regulations,

codified at 42 C.F.R. §§ 448.3(b)(1), (4), 448.21(a)(2), are

in violation of the Social Security Act; and it is

FURTHER ORDERED, that defendants, their succes-

sors in office, agents, employees, and all persons acting in

concert with them, are enjoined to rescind the offending

regulations, 42 C.F.R. §§ 448.3(b)(1), (4), 448.21(a)(2), to

’%

32a

require all relevant jurisdictions to cease the deeming of

income for any length of time between institutionalized

Medicaid recipients or applicants and their

noninstitutionalized spouses, and to promptly propose and

publish new regulations which will conform with the stat-

ute; and it is

FURTHER ORDERED, that, with respect to Counts II

and III, dealing with the claims of constitutional infir-

mities raised by the plaintiff, the Court will dismiss these

claims, without prejudice, in accordance with the Memo-

randum Opinion of even date herewith, because, in light of

the nature of the Court’s ruling, it is unnecessary to reach

such constitutional issues; and it is

FURTHER ORDERED, that judgment shall be entered

in favor of the plaintiff with costs to be assessed against

defendants.

/s/Charles R. Richey

CHARLES R. RICHEY

United States District Judge

33a

APPENDIX G

United States District Court

FOR THE DISTRICT OF COLUMBIA

C.A. No. 78-0661

GRAY PANTHERS, PLAINTIFF,

Vv.

ADMINISTRATOR, HEALTH CARE FINANCING AND

ADMINISTRATION, ETC., AND SECRETARY, DEPARTMENT

OF HEALTH, EDUCATION AND WELFARE, ETC.,

DEFENDANTS

[Filed Jan. 3, 1979]

ORDER

Upon consideration of defendants’ motion to amend

order and judgment pursuant to Rule 59(e) of the Federal

Rules of Civil Procedure, and the memoranda of the par-

ties in support thereof and in partial opposition thereto,

together with all pleadings and memoranda filed in this ac-

tion, it is, by the Court, this 3rd day of January, 1979,

ORDERED, that the third and fourth paragraphs of the

Court’s order in this action issued on December 8, 1978,

are amended to read as follows:

“FURTHER ORDERED, that defendants’ regula-

tions, formerly codified at 42 C.F.R. §§ 448.3(b)(1)(4),

448.21(a)(2), and now codified at 42 C.F.R.

§§ 435.734, 436.602, 436.711 and 436.821, are in viola-

tion of the Social Security Act; and it is

“FURTHER ORDERED, that defendants, their

successors in office, agents, employees, aid all per-

sons acting in concert with them are enjoined to re-

scind the offending regulations, 42 C.F.R. §§ 435.734,

436.602, 436.711, 436.821, to require all relevant

34a

jurisdictions to cease deeming of income for any

length of time between institutionalized Medicaid re-

cipients or applicants and their noninstitutionalized

spouses, and to promptly propose and publish new

regulations which will conform to the statute; and it

is”;

and it is

FURTHER ORDERED, that an additional paragraph

be added which states:

“The effect of this Order is restricted to states which

exercise their option under § 1902(f) of the Social Se-

curity Act, 42 U.S.C. § 1396a(f) and the jurisdictions

of Guam, Puerto Rico and the Virgin Islands.”

/s/Charles R. Richey

CHARLES R. RICHEY

United States District Judge

35a

APPENDIX H

STATUTORY PROVISIONS AND REGULATIONS

INVOLVED

. 42 U.S.C. 1896a(a) provides in pertinent part:

A state plan for medical assistance must—

* * ok * BS

(17) include reasonable standards (which shall be

comparable for all groups and may, in accordance

with standards prescribed by the Secretary, differ

with respect to income levels, but only in the case of

applicants or recipients of assistance under the plan

who are not receiving aid or assistance under any plan

of the State approved under subchapter I, X, XIV, or

XVI, or part A of subchapter IV of this chapter, and

with respect to whom supplemental security income

benefits are not being paid under subchapter XVI of

this chapter, based on the variations between shelter

costs in urban areas and in rural areas) for determin-

ing eligibility for and the extent of medical assistance

under the plan which (A) are consistent with the ob-

jectives of this subchapter, (B) provide for taking into

account only such income and resources as are, as de-

termined in accordance with standards prescribed by

the Secretary, available to the applicant or recipient

* * * in determining his eligibility for such aid, assist-

ance or benefits, (C) provide for reasonable evalua-

tion of any such income or resources, and (D) do not

take into account the financial responsibility of any

individual for any applicant or recipient of assistance

under the plan unless such applicant or recipient is

such individual’s spouse or such individual’s child who

is under age 21 or (with respect to States eligible to

participate in the State program established under

subchapter XVI of this chapter), is blind or perma-

nently and totally disabled, or is blind or disabled as

defined in section 1382c of this title (with respect to

States which are not eligible to participate in such

program); and provide for flexibility in the application

of such standards with respect to income by taking

into account, except to the extent prescribed by the

36a

Secretary, the costs (whether in the form of insurance

premiums or otherwise) incurred for medical care or

for any other type of remedial care recognized under

State law;

ok OK K ok *

. 42 U.S.C. 1396a(f) provides in pertinent part:

Notwithstanding any other provision of this sub-

chapter, * * * no State not eligible to participate in

the State plan program established under subchapter

XVI of this chapter shall be required to provide medi-

cal assistance to any aged, blind, or disabled indi-

vidual (within the meaning of subchapter XVI of this

chapter) for any month unless such State would be (or

would have been) required to provide medical assist-

ance to such individual for such month had its plan for

medical assistance appreved under this subchapter

and in effect on January 1, 1972, been in effect in such

month, except that for this purpose any such indi-

vidual shall be deemed eligible for medical assistance

under such State plan if (in addition to meeting such

other requirements as are or may be imposed under

the State plan) the income of any such individual as

determined in accordance with section 1396b(f) of this

title (after deducting any supplemental security in-

come payment and State supplementary payment

made with respect to such individual, and incurred

expenses for medical care as recognized under State

law) is not in excess of the standard for medical as-

sistance established under the State plan as in effect

on January 1, 1972. * * *

. 42 C.F.R. 435.734 provides in pertinent part:

In determining medicaid eligibility of an aged,

blind, or disabled individual under requirements more

restrictive than those used under SSI, the agency

must consider the income and resources of spouses

* * * as available to the individual in the manner

specified in § 435.723 * * * or in a more extensive

manner, but not more extensive than the require-

ments in effect under the medicaid plan on January 1,

1972.

. 42 C.F.R. 435.723 provides:

(a) If the agency provides medicaid to SSI recip-

ients, it must meet the requirements of this section in

37a

determining eligibility of aged, blind, and disabled in-

dividuals under the optional coverage provisions of

§§ 435.210, 435.211, and 435.231.

(b) The agency must consider income and resources

of spouses living in the same household as available to

each other, whether or not they are actually contrib-

uted.

blind, or disabled and cease to live together, the

agency must consider their income and resources as

available to each other for the first 6 months after the

month they cease to live together. After this 6-month

period, the agency must consider only the income and

resources that are actually contributed by one spouse

to the other.

(d) If only one spouse in a couple applies or is eli-

gible and they cease to live together, the agency must

consider only the income and resources of the eligible

[sic] spouse that are actually contributed to the eli-

gible spouse after the month in which they cease to

live together.

. 42 C.F.R. 436.602 provides:

Except for a spouse of an individual or a parent for

a child who is under 21 or blind or disabled, the

agency must not—

(a) Consider income and resources of any relative

available to an individual; nor

(b) Collect reimbursement from any relative for

amounts paid by the agency for services provided to

an individual.

. 42 C.F.R. 436.711 provides:

In determining eligibility of individuals specified in

subparts B and C of this part who are not recipients

of cash assistance, the agency must apply the finan-

cial eligibility requirements of the State plan for

OAA, AFDC, AB, APTD, or AABD that would be

used if the individual were applying for cash assist-

ance. This includes requirements on financial respon-

sibility of spouses and parents, except that, in deter-

mining eligibility of families and children, the agency

must consider parental income and resources as avail-

38a

able to a child who is living With the parents until he

becomes 21, even if State law confers adult status

below age 21.

. 42 C.F.R. 436.821 provides:

In determining eligibility of medically needy indi-

viduals, the agency must use the rules for determin-

ing whether the income of a spouse or parent is avail-

able to the individual that would be used if he were

applying for OAA, AFDC, AB, APTD, or AABD.

However, for families and children, the agency must

consider parental income and resources available to a

child who is living with the parent until he becomes

21, even if State law confers adult status below age

21.

t# U.S. GOVERNMENT PRINTING OFFICE: 1980 330327 106

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.