Amicus Curiae Brief — Whitburn v. Addis

Jn the Supreme Court of the Gnited States

GERALD WHITBURN, SECRETARY,

WISCONSIN DEPARTMENT OF HEALTH AND FAMIL"

SERVICES, ET AL., PETITIONERS

PATRICK ADDIS, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEA

FOR THE SEVENTH CIRCI

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE

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No. 98-1041 wit

QUESTION PRESENTED

Whether Wisconsin’s method of determining benefit

eligibility and need levels for a class of Medicaid

applicants is consistent with the requirement of

42 U.S.C. 1896a(a)(17)(D) that such methods not “take

into account the financial responsibility” for the appli-

cant of any other person except a parent or spouse.

TABLE OF CONTENTS

Page

ERIE TE SEALS OE RO Fe NIM ORT eB SOR rt Re l

RUNNIN Seirecsackkchecitce Lacs cdnsticsibiie tebihi anc buck. cchcdicltta sic: 8

RARE IRI Ay SEN anda Nb OED OE GT EE OS 19

TABLE OF AUTHORITIES

Cases:

Atkins v. Rivera, 477 U. S. ME ERIUEY Siusciciccnadiccasinacs 2.17

Bowen y. Gilliard, 483 U.S. 587 (1987) ..........000000.. 5, 9

Chevron USA. Ine. Metaiel Resources Defense

Council, Inc., 467 u s. SPE CE UIUD ins srecekidcachovaindsaie 17

Georgia Dep't of Med. Assistance v. Bowen, 846

We Pe AUN RN SO oe 9

Malloy v. Eichler, 860 F.2d 1179 (3d Cir.

og EBT EE BELL IEE SLED OC EE 9

Saenz v. Roe, No. 98-97 RM Bes AMEE cisco cdeviseteicks 4

Schweiker v. Gray Panthers, 453 U.S. 3

EMRE akeiineccduicccdelccacsts i dcbpbuncs demdabaiuh ulesbieinaeckchdackcssis 17

Sneede v. Coye, 856 F. Supp. 526 (N.D. Cal

NE ated pecs inde piithsrenpsschibseosaliia knicks eo hk S 1]

Sneede v. Kizer:

728 F. Supp. ae Giekts Se ROOD cock es 1]

No. C89-1932-THE, 1990 WL 155532 (N.D. Cal.

May 3 & June 8, 1990), aff'd mem., 951 F. 2d 360

and 362 (9th Cir. 1990), cert. denied. 506 U.S

RSLS EIGS SRR otal aera eae saat 11, 12. 15

No. 90-15141, 1991 WL 26880 (9th C ir. Dec. 13,

1991), cert. denied, 506 U.S. 939 (19: 2) siailall alin 12, 16. 17

Wilder vy. Virginia Hosp. Ass'n, 496 U.S. 498

Se SER gas 70, SBE SEEN RESET es OD 2

Your Home Visiting Nurse Servs., Inc. v. Shalala.

Pe a et A a a eae ea” 17

(IIT)

— . ere aa cee

IV

Statutes, regulations and rule: Page

Personal Responsibility and Work Reconciliation

Act of 1996, Pub. L. No. 104-193, Tit. I, 110 Stat.

B51 ssssitainieiarctlicihchisimrensabenneatbiniiicetisians . 4

SS REGENTS, SE CE BEET ciiciacciicssatsetvccninsetesensatnincinniesinns 4

Social Security Act, 42 U.S.C. 301 et seq.:

Tit. IV, 42 U.S.C. 601:

Me Peas? SEI TD ccs senssciascinnsnscesiiobapionsnsidindmeniuisainenn 4

SE UE ac ROD viteratninsiatiensssnccirniinnteinisksicvicsesenenidi 4

GE ULTRA. SRO AD witesscsatbnsgincorntsenstishanainiiahsnhionab 4

SE aa. SOT wietininstccesinicernecinnintnibeninncineiied 4,9

Tit. XI, 42 U.S.C. 1301:

GD TR. SII) caccinsiesnsesssesinnsstiostcetpbintiucessnctenisia 2

Tit. XIX, 42 U.S.C. 1396 et seg. (Medicaid Act) .............. 1

Gat UL ZEA As. SAPONE semetinensedarsiatieaianacinlacsbsanibasesismiaaiaaniancii 1,2

42 U.S.C. 1396(a) (1994 & Supp. IIL 1997) oc 2

42 U.S.C, TERG AA TOM ANT) cccicessesccscsesssessscoonesscoseeess 4

42 U.S.C. 189Galay(LOA)IM(T) ....ccccscsssorsereressereeevsesees 2

42 U.S.C. 189Ga(a)(LO)(A)G)(TT) .....ccsccsscsvsscesssnsesecesees 2

42 U.S.C. 1396a(a)(LO)A) GID) ...cscccseecescssessseneesesenes 3

42 U.S.C. 139Ga(a)(LOMA) TV) .......ccscsessessssesveeseesees 3

42 U.S.C. 189Gala OAD) .......cceccessssssssssessscsessnesenes 3,4

42 U.S.C. 1896a(a)(1O)(C)G)(TIT) «0... seccccsecseenscssesseees 4

ME CAD. SIRF sciiwitescicscnsiseshnsnssncsasncaningstlibeasic 2,14

4S UC: TEED) Voi ssctsssrcscscnsiscncvsesinasvccictannens 2,17

SE UA. : SERRA ETI nsscistevscsiniecsiesnctinenctivios passim

42 UGA, : TEGGREI TA Ss) cisnscstnsciirensernsivistimbpmintoanntenes 4,9

42 U.S.C. 1396(b) (1994 & Supp. ITI 1997) .............. 2

SE UTA. TION ctrvsistadicasiacsbiesdisthidakciicninidaiierscus 4

GE UG, “GEIR DD). sacstipchracintabeaicioentscraeesnsoncsinics 4

BE AR Sr eerdihicinicheninceeestcdeiesbotbesnsidosanianate 4

42 U.S.C. 1896u-1(a) (Supp. IIT 1997) wo. eeceeseeees 4

42 U.S.C. 1396u-1(b) (Supp. IIT 1997) ........cccsecseesee 4

Tit. XXI, 42 U.S.C, 1397aa et seq.:

42 U.S.C. 1397aa(a) (Supp. ITT 1997) ......cecsecsecseesseees 18

42 U.S.C. 1397bb(3)(A)-(B) (Supp. IIT 1997) ............. 18

42 U.S.C. 1397dd(d) (Supp. LIT 1997) .....ccceccecsecsecseeees 18

42 U.S.C. 1397jj(b) (Supp. LIT 1997) .........cccssssesessesseees 18

Wis. Stat. Ann. § 49.47(4)(¢c)(2) (West Supp. 1998) .......... 5

V

Regulations and rule—Continued: Page

42 C.F.R.:

2 eae Weer sea eR cin veer nner 4

CE C1, AR A RAAT aS A CI hie BN Moe Rhee 4

en 2

OUI I i Ok 12

EO S| AREER EES aetna harks Aisa EOE m/e ae aR: 12

NIE MEIIIUIE cane cdeceuekcchsededdsusnonslelKadelacdsnighatinesna 12

ME St OIE ics os se tnalediansaibobunasindonscomnsai cagacklociioa 12

Miscellaneous:

54 Fed. Reg. (1989):

SSUES dss bcdsuhenve kn sdescspiqeakevaneeusanbicenssteineens 10

Ns SE NEED Sidicinvidiseicisssecoschicumumapacchicdvbareiesasind 10, 16

hy RAE Gaia Da dbah csr airings iiscigecleniinyccueiniatecemusbecinaias 16

58 Fed. Reg. (1993):

Fie; SUPPUN deaabanstiei chaus sbibdvebasuseibiantccestarechackasdvacedesics koe 12

SRD MIPNNIRIEE “dvs cos sunsevanvasccussdqdnandsvaacdenscsbuuierthacsized 3

Di SPE Sasetdeaicknrakscicsus satiiecedsudantidceissasagstace ciediocaunees 3

Nh, MER DEE, siwissusuhaesvascea cinbanaheeskaakcaccintasoucseerny cla 12

BD GURID niles ba vitndcnandeusiviiausaivan tecgksnakesedeaaeincdiooniias 11, 18, 16 -

ihe MITE blioeeavokaackiascsececdaniasascsniadsacitecsansbtinnies 12

Oh, GIN Si dccligcavanabavourhaniacmvds teadiashdkebitvebcedie ti skejaneabouie 10, 13

el EMMMNED | Scions iahenbousnvenpaauseuiacnebaaeeccalenonmemaualonin 12

59 Fed. Reg. (1994):

Ps: GARAPEPR. Son apiscensvskavins Adntsianpouabvediacddbedabaieioasecdbencadeass 10, 13

BD, SERAMEE:- nig ssibihss abdenscidnnsbad aus siocanibinesuamearenenl seucneeias 3,18

Jn the Supreme Court of the Gnited States

No. 98-1041

GERALD WHITBURN, SECRETARY,

WISCONSIN DEPARTMENT OF HEALTH AND FAMILY

SERVICES, ET AL., PETITIONERS

Vv.

PATRICK ADDIS, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE

This brief is submitted in response to the Court’s

order inviting the Solicitor General to express the

views of the United States.

STATEMENT

1. The Medicaid Act, 42 U.S.C. 1396 et seg., estab-

lishes a cooperative program under which the federal

government provides matching funds to assist partici-

pating States in providing, among other things, medical

assistance for families with dependent children “whose

income and resources are insufficient to meet the costs

of necessary medical services.” 42 U.S.C. 1396. The

Act is administered at the federal level by the Secre-

tary of Health and Human Services, who disburses

matching funds to States with approved plans for

providing medical assistance. See generally 42 U.S.C.

1301(a)(6), 1302(a), 1396, 1396b (1994 & Supp. IIT 1997).

Although participation in the program is voluntary, and

state plans may vary considerably in detail,

participating States must comply with a number of

requirements imposed by the Act and the Secretary’s

regulations. See 42 U.S.C. 1396a (1994 & Supp. III

1997); Wilder v. Virginia Hosp. Ass’n, 496 U.S. 498, 502

(1990); Atkins v. Rivera, 477 U.S. 154, 157 (1986).

The Act requires state Medicaid plans to include

“reasonable standards * * * for determining

eligibility for and the extent of medical assistance under

the plan.” 42 U.S.C. 1396a(a)(17). Those standards

must “provide for taking into account only such income

and resources as are * * * available to the applicant

or recipient,” and must not “take into account the

financial responsibility of any individual for any appli-

cant or recipient of assistance * * * unless such

applicant or recipient is such individual’s spouse or

* * * [minor] child.” 42 U.S.C. 1396a(a)(17)(B) and

(D). The Act thus precludes participating States from

assuming, either for purposes of ascertaining threshold

eligibility or for purposes of setting benefit levels, that

anyone other than a spouse or parent is contributing

financially to the support of an applicant for Medicaid

benefits. See also 42 C.F.R. 435.602(a)(1).

2. Some people become eligible for Medicaid benefits

automatically after they qualify for benefits under

another federal or federally supported program, such as

Supplemental Security Income. See 42 U.S.C.

1396a(a)(10)(A)G)()-(d1D. Other forms of eligibility

depend on an assessment of the applicant’s financial

need, measured against standards prescribed by the

States under general rules set by the Medicaid Act and

3

other federal law. See 42 U.S.C. 1396a(a)(10)(A)(i)(IID-

(VIT) and (a)(10)(A)(ii), 1896d(a); see also Pet. App. A5-

A6; 58 Fed. Reg. 4908-4909, 4915 (1993). In performing

such assessments for purposes of its Medicaid plan,

Wisconsin first determines the income and assets that

are deemed to be available to the applicant under plan

rules, and then compares those amounts to applicable

standards of need. See Pet. App. A7-A8, A23-A24.

In the first step of the process (determining income

and assets), the State takes into account only the

applicant’s own income, plus a share of the income of

any financially responsible spouse or parent.' The

share of a spouse or parent’s income to be allocated to

the applicant is determined by dividing that income by

the total number of people for whom the spouse or

parent is financially responsible, including himself or

herself. If, for example, the applicant is a child living

with both parents and one sibling, any income that the

sibling may have (from, for instance, disability benefits

or child support payments) will be ignored, in compli-

ance with 42 U.S.C. 1396a(a)(17)(D). The sibling’s

presence in the household will be taken into account,

however, in attributing the parents’ income, because

each parent is recognized as financially responsible both

for the other parent and for both children. Thus, if one

parent earns $600 each month and the other $400, one-

fourth of each amount will be attributed to each

member of the household. If the applicant child has no

independent income, his or her income for Medicaid

eligibility purposes will be $250. Respondents do not

' Although the Act requires assessment of both income and

assets, in the interest of simplicity we focus on the determination

of income for purposes of this brief.

4

challenge this aspect of Wisconsin’s procedure. See Br.

in Opp. 3.

Having determined the income attributable to a

Medicaid applicant, the State next compares that in-

come to an applicable standard of need. In many cir-

cumstances, including those relevant here, the Act

requires the State, subject to the important exception

assertedly applicable in this case, to use need standards

(as well as methods of determining income) based on

those it used under the former program of Aid to

Families with Dependent Childrén (AFDC). See 42

U.S.C. 1896a(a)(10)(A)(i)-Gi), (C\MCUID and (/)(3)(E)

(1994 & Supp. III 1997), 1396b(f) (1994 & Supp. III

1997), 1896u-1(a) and (b) (Supp. III 1997); 42 C.F.R.

435.601(a) and (b).2. The Medicaid standards, like those

under AFDC, generally treat each family as a unit, and

vary according to family size. See generally, e.g., 42

U.S.C. 602(a)7)-(8), (31) and (38) (1994) (repealed); see

also 42 U.S.C. 1396b(f)(1)(B) and (f)(8). Those stan-

dards are, moreover, established on the premise that

there are economies inherent in group living, so that,

* The AFDC program was replaced in 1996 by a new program,

Temporary Assistance for Needy Families. Personal Responsi-

bility and Work Opportunity Reconciliation Act of 1996

(PRWORA), Pub. L. No. 104-193, Tit. I, 110 Stat. 2110 (enacting

provisions codified at 42 U.S.C. 601 et seg. (Supp. III 1997)); see

Saenz v. Roe, No. 98-97 (May 17, 1999), slip op. 4. PRWORA

simultaneously amended the Medicaid Act, however, to provide

that, subject to qualifications not at issue here, statutory and other

references in or under the Medicaid Act, including those involving

“income and resource standards and income and resource

methodologies,” continue to refer to the former AFDC provisions

and the various state plans implemented under them, “as in effect

as of July 16, 1996, with respect to [each] State.” 42 U.S.C. 1396u-

l(a) (Supp. III 1997), enacted by PRWORA § 11.(a)(2), 110 Stat.

2177.

5

for example, the need standard for a family of two is

less than twice the standard for a family of one, and

one-third the standard for a family of three is less than

one-half the standard for a family of two. See Pet. App.

A831, A33; compare Bowen v. Gilliard, 483 U.S. 587, 599

(1987).

To make need determinations for individual Medicaid

applicants, Wisconsin compares the individual income

levels it has calculated for the applicant to an individual

need standard that it computes by prorating the need

standard for a family the size of the applicant’s entire

family (limited to those family members who live to-

gether in the same household), including family mem-

bers whose incomes were not counted in determining

the income and resources attributable to the applicant.

Thus, in the example given above, the State would use

the need standard for a family of four, even though no

income belonging to the applicant’s sibling was included

in computing the applicant’s income. If the State set its

need standard for a family of four at $360, the individual

need standard would be $90, and the child in the

example would not be eligible for Medicaid assistance,

because his or her income was determined to be $250

for Medicaid purposes.’

3. Petitioners are the Secretary of the Wisconsin

Department of Health and Family Services and other

state officials responsible for the administration of Wis-

consin’s Medicaid program. Respondents sued petition-

ers in federal district court, purporting to represent

3 In some cases, the child would become eligible if an amount

equal to the excess of attributed income ($250) over individual

need ($90) had been spent on medical care, health insurance, or

certain other allowable expenses. See Pet. App. A24; Wis. Stat.

Ann. § 49.47(4)(c)(2) (West Supp. 1998).

6

(among others) a class of actual or potential Medicaid

beneficiaries. Respondents sought declaratory and in-

junctive relief on the ground that Wisconsin’s method

of computing applicable individual need standards takes

into account the financial responsibility for the ap-

plicant of family members other than the appli-

cant’s spouse or parents, in violation of 42 U.S.C.

1396a(a)(17)(D).’

The district court rejected respondents’ challenge to

the State’s method of calculating need. Pet. App. A19-

A37. After reviewing the law governing the federal

and state programs (id. at Al19-A25), the court noted

that responsibility for the operation of Medicaid

programs is committed largely to the States, and that

the state methodology at issue is one that the Secretary

once proposed to mandate through federal regulations

(id. at A26-A27). The court then rejected any general

challenge to the State’s method of calculating income on

the basis of proration within units consisting of an

applicant and his or her spouse and parents, holding

that the State’s procedure reflects a reasonable imple-

mentation of applicable federal rules. Jd. at A28-A30.

The court also rejected respondents’ specific claim that

the use of need standards based on the total number of

family members living in the household, including

members whose income may not be counted as available

* Respondents also challenged the State’s rules for determining

the satisfaction of Medicaid “deductible[s],” and its rules for

determining Medicaid eligibility when a disabled individual applies

for benefits both for himself or herself and for a child or children in

his or her care. See Pet. App. A8; Br. in Opp. 3. The court of ap-

peals struck down the deductible rules (Pet. App. A16), but

sustained the State’s treatment of applications by disabled

caretakers (id. at Al6-A18). Neither of those rulings has been

challenged in this Court. See Pet. 3.

7

to the applicant under Section 1396a(a)(17)(D), violates

that Section. Observing that the provision in question

prohibits taking into account “the financial

responsibility” for the applicant of any individual other

than a parent or spouse (id. at A31), the court reasoned

that “[t]he assumption that an individual’s need is less

because he lives in a household with multiple members

is not the equivalent” of deeming every member’s

income to be available to the applicant, but rather

merely “reflects a common-sense judgment that living

expenses are higher for individuals maintaining their

own independent households than they are for

individuals sharing accommodations.” Id. at Ad32; see

id. at A32-A33. The court accordingly granted

petitioners’ motion to dismiss respondents’ complaint.

Id. at A37.

The court of appeals reversed in relevant part. Pet.

App. A1-A18. The court agreed with respondents that

the State’s use of a need standard based on total family

size, by “assum[ing] that the applicant’s need is less

because of the presence of non-legally responsible

persons in the household,” has “the same effect as

deeming the income of those nonlegally responsible

relatives to [be available to] the applicant,” and on that

basis the court held that that approach to assessing

need violates Section 1396a(a)(17)(D). Jd. at Al1-A12.

Noting that “it is the need standard employe by the

state that ultimately will determine both the applicant’s

eligibility for medical assistance * * * [and] the

amount of benefits that will be available,” the court

observed that “when a state assumes that an appli-

eant’s living expenses are less based solely upon the

presence of non-legally responsible persons in the

household, thereby reducing the applicant’s level of

need,” it “necessarily is assuming that those persons

8

will be contributing to the applicant’s living expenses.”

Id, at A138.

The court rejected the argument that Wisconsin’s

procedure merely takes account of “economies of scale.”

Pet. App. Al3. It reasoned that any computation of

need “premised on the assumption that contributions

from members of the household [who] are not finan-

cially responsible for the applicant are nonetheless

actually benefitting the applicant by reducing the

amount of income/resources that applicant needs for

non-medical essentials” amounts, in effect, to “the

taking into account of the ‘financial responsibility’ of

that non-responsible individual.” /bid. A13. The court

concluded:

[Bly prorating the applicant’s need based upon the

need standard for the applicant’s entire family

group, including individuals * * * who are not

legally responsible for the applicant, Wisconsin is

violating subsection (17)(D) in that it is implicitly

considering the financial responsibility for the

applicant of a non-legally responsible person in the

household.

Id, at Al5-A16. The court of appeals accordingly re-

versed the district court’s dismissal of respondents’

complaint, and remanded the case to that court for

further proceedings. /d. at A18.

DISCUSSION

The court of appeals in this case adopted one plausi-

ble interpretation of the relevant provisions of the

Medicaid Act. While the alternative construction ad-

vanced by petitioner is not unreasonable, it has not

been adopted by any court of appeals, and previous

federal regulations based on that construction were

f\

9

withdrawn before they became effective. In the

absence of any conflict on the issue among the courts of

appeals, or between the courts and the Secretary, the

decision below does not warrant review by this Court.

1. As we have explained (see pp. 2-5, supra), some

individuals or families are eligible for Medicaid benefits

only if their income and assets fall below threshold

amounts. In many cases the Medicaid Act requires,

subject to the important exception at issue in this case,

that each State determine Medicaid eligibility using the

methods for determining income, and the threshold

need standards, that the State used for purposes of the

former AFDC program. See p. 4 & note 2, supra.

The statutory question presented in this case arises

because, beginning in 1984, Congress required that

computations of income and need for AFDC purposes

be made on a combined basis for defined family groups

—including, for example, all eligible siblings living in

the same household. See 42 U.S.C. 602(a)(38) (1994)

(repealed); Bowen v. Gilliard, 483 U.S. 587, 592-594

(1987). A number of courts thereafter held, however,

that States could not apply the new AFDC grouping

requirements in assessing income for purposes of

Medicaid eligibility, if doing so would—as in the case of

siblings—violate the proscription in 42 U.S.C.

1396a(a)(17)(D) against “takling] into account the

financial responsibility of any individual [other than a

spouse or parent] for any applicant or recipient of

[Medicaid] assistance.” See, e.g., Malloy v. Eichler, 860

F.2d 1179, 1182 (8d Cir. 1988); Georgia Dep’t of Med.

Assistance v. Bowen, 846 F.2d 708, 710 (11th Cir. 1988):

see also 42 U.S.C. 1396a(/)(3)(E) (providing that, for

certain groups of Medicaid applicants, family income

“shall be determined” using the State’s AFDC meth-

odology, “except to the extent such methodology is

10

inconsistent with clause (D) of subsection (a)(17)”).

Those decisions, in which the Secretary ultimately

acquiesced, left state Medicaid administrators without

definitive guidance concerning what modifications to

AFDC income-determination and need-determination

methods were required or permitted before those

methods were used for determining eligibility for

Medicaid. See 59 Fed. Reg. 43,051 (1994) (describing

issue); 54 Fed. Reg. 39,427-39,428 (1989) (same); see also

58 Fed. Reg. 4924 (1993) (“States only know that they

cannot use AFDC standard filing unit policy, but do not

know what to use instead.”).

The Secretary initially sought to address that uncer-

tainty in commentary accompanying the pubiication, in

1989, of proposed regulations specifically addressing a

number of other issues under the Act. 54 Fed. Reg. at

39,426-39,428. The commentary identified and dis-

cussed the issue, and proposed the adoption of a

nationwide policy: No one but a spouse or parent would

be automatically grouped with a Medicaid applicant for

purposes of determining eligibility, but all family mem-

bers in a household who applied for Medicaid benefits

would be treated as a single group under the AFDC

rules. /bid. The commentary specifically noted, how-

ever, that there were other possib!2 approaches, and

the Secretary invited comments from all interested

parties concerning how best to reconcile the Act’s

requirements that States make eligibility determina-

tions based on AFDC standards, but at the same time

attribute financial responsibility only to parents and

spouses. /d, at 39,428.

The Secretary’s invitation drew a mixed response.

Some commenters supported the Secretary’s proposal,

while others argued that treating relatives other than

spouses and parents as part of one family unit would

1]

violate Section 1396a(a)(17)(D), even if the family were

allowed the option (not available under AFDC) of

excluding such relatives from the eligibility computa-

tions by not applying for Medicaid benefits on their

behalf. See 58 Fed. Reg. at 4916. That argument was

also made in litigation. In 1990, a federal district court

enjoined the State of California from enforcing eligibil-

ity rules that were consistent with the Secretary’s

initial proposal, and enjoined the Secretary from requir-

ing or permitting the use of such rules by any State

within the Ninth Circuit. Sneede v. Kizer, 728 F. Supp.

607 (N.D. Cal. 1990) (enjoining enforcement of

California rules); Sneede v. Kizer, No. C89-1932-TEH,

1990 WL 155532 (N.D. Cal. May 3, 1990) (certifying

circuit-wide class to challenge Secretary’s policy); see

Sneede v. Coye, 856 F. Supp. 526, 530 (N.D. Cal. 1994)

(noting that initial injunction was later extended to

cover federal defendants).

In attempting to frame a remedial decree responsive

to the district court’s initial decision in Sneede, the Sec-

retary joined California officials in proposing a revised

system for determining Medicaid eligibility in that case.

See Sneede v. Kizer, No. C89-1932-TEH, 1990 WL

155532 (N.D. Cal. June 8, 1990) (addressing dispute

over how to comply with initial decision), aff'd mem.,

951 F.2d 360 and 362 (9th Cir. 1990), cert. denied, 506

U.S. 939 (1992). Under that proposal, Medicaid appli-

cants’ income would have been computed on the basis of

family groups that included only children, parents, and

spouses whose financial responsibility for each other

could properly be taken into account under Section

1396a(a)(17)(D). The resources so determined would

then have been compared, however, to individual need

standards derived by ascertaining the size of the family

group that would have been used for AFDC purposes

12

(which would typically be larger than the special Medi-

caid family group), and then dividing the AFDC need

standard for a family of that size by the total number of

members in the AFDC group. See Sneede, 1990 WL

proposed by the Secretary in Sneede was thus essen-

tially thé same as the Wisconsin method at issue in this

case.

The district court in Sneede rejected the use of that

method, holding that Section 1896a(a)(17)(D) prohibits

taking the presence of a non-financially-responsible

member of a Medicaid applicant’s household into ac-

count in determining the applicable need standard, just

as it prohibits taking such a member’s income into

account in determining the financial resources available

to the applicant. Sneede, 1990 WL 155532, at *5-*7.

The Ninth Circuit affirmed that decision in an unpub-

lished (and hence non-precedential, see 9th Cir. R. 36.3)

opinion. Sneede v. Kizer, No. 90-15141, 1991 WL 268830

(9th Cir. Dee. 18, 1991) (decision noted at 951 F.2d 362

(Table)), cert. denied, 506 U.S, 939 (1992),

After further analysis, and in light of those develop-

ments, the Secretary ultimately abandoned the particu-

lar nationwide policy that had been proposed in the

1989 regulatory commentary. Instead, in early 1998,

the Secretary adopted, subject to public comment and a

deferred effective date, final regulations that would

have required States outside the Ninth Circuit (where

the Sneede injunction remained in effect) to adopt and

apply essentially the same methodology that had been

proposed (and rejected by the courts) in Sneede. See 58

Fed. Reg. at 4908, 4915-4917, 4923-4924, 4930-4931 (§§

435.602(d), 435.604 and 435.606). The commentary

accompanying publication of the new regulations rec-

ognized that the approach adopted “[might] not be

13

ideal,” but it characterized that approach as the

drafters’ “best attempt to harmonize the competing

demands of the various provisions of the Medicaid

statute|,] as interpreted by most of the courts|,| * * *

in a manner consistent with simplicity of administra-

tion.” 58 Fed. Reg. at 4916.

The 1993 regulations addressing this issue were

given a delayed effective date to allow an opportunity

for public comment, and that date was later extended

twice in order to allow for further review, See 58 Fed.

Reg. at 4916, 4924; 59 Fed. Reg. at 48,051. Describing

the comments she received on this issue, the Secretary

explained that, with one exception, the 13 States and

seven interest groups that submitted comments all

objected to the methodology the regulations would

require for determining eligibility, characterizing it as

“error prone,” “unnecessarily complex,” and likely to

result in “significant administrative costs.” 59 Fed.

Reg. at 43,051. A technical advisory group consulted

by the Secretary also expressed a preference for a

policy that would “minimize ] the disruption of current

approaches”; and advocates for benefit recipients “en-

dorse[d] allowing States a choice of several options, but

strongly oppose[d] allowing the budgeting method in

the * * * regulation to be one of [those] options.”

Ibid.

In light of those comments, the Secretary ultimately

decided not to include in her regulations any one federal

policy on how to adapt the rules and methods then

applicable under AFDC for purposes of determining

Medicaid eligibility. She instead withdrew the 1993

regulations on the issue, which had never become

effective, in favor of “allowing States flexibility, within

any constraints imposed by court orders or agreements

with recipient advocate groups, to interpret the current

14

provisions” of federal law. 59 Fed. Reg. at 48,052. As

the Secretary explained, “in the absence of specific

regulatory guidance on the methodologies for establish-

ing income and resource eligibility” for affected Medi-

caid applicants, the States would merely be “required

to use methodologies that comply with the statute and

any applicable court orders.” /bid.

2. The textual question ultimately at issue in this

case is a narrow and rather subtle one: Whether using

a need standard that takes account of certain economies

of scale that are generally involved in group living

amounts to “tak[ing] into account the financial respon-

sibility” of one household member for another, within

the meaning of Section 1896a(a)(17)(D). The court of

appeals adopted one permissible answer to that ques-

tion, holding that the use of such a standard does

violate Section 1396a(a)(17)(D).

Section 1396a(a)(17) governs the determination of

both “eligibility for and the extent of medical assis-

tance” under the Act. The reference to the “extent” of

assistance may be read to suggest that the prohibition

in clause (D) should apply not only to determining the

income attributable to an applicant, but also to deter-

minations that involve comparing that income to a need

standard, especially where that comparison establishes

an amount of medical or similar expenses the applicant

must incur before becoming eligible for Medicaid. See

note 3, supra. In addition, it is possible to read “finan-

cial responsibility” more broadly than did the district

court in this case (see id. at A31-A32), to encompass

“the assumption that contributions from members of

the household [who] are not financially responsible for

the applicant are nonetheless actually benefitting the

applicant by reducing the amount of income/resources

that [the] applicant needs [or that others, such as the

15

applicant’s parents, must expend on the applicant’s

behalf] for non-medical essentials.” Jd. at A13 (quoting

Sneede, 1990 WL 155532, at *6). There may also be a

question whether it is appropriate, as a policy matter,

to import into a medical assistance program, without

any modification, family-size-based need standards that

were designed to reflect the sort of “economies of scale”

that commonly apply to expenses such as housing,

utilities, and to some extent food.® Finally, the decision

below is consistent with the line of appellate cases

holding that Section 1396a(a)(17)(D) requires modifica-

tion of the family units used to determine an apphrant’s

income under AFDC, and with the decision of the only

other court of appeals to have addressed, albeit in a

non-precedential opinion, the precise question pre-

sented by this case. See Malloy, and cases there cited:

Sneede, 1991 WL 268830.

° In the context of a general economic assistance program it

makes sense to take account of the fact that a family of three may

not pay any more for housing or electricity, and not much more for

food, than a family of two. It is not, however, obvious that it will

generally cost a mother less to buy medical care for a second child,

simply because she already has to buy care for the first. Patients

do not typically realize significant “economies of scale” on expenses

for medical essentials such as doctor visits, vaccinations, or

eyeglasses. At the same time, the ascertainment of need under the

Medicaid program also takes account of family expenses other than

those for medical care, and for those expenses economies of scale

presumably are present. Thus, although it is true that the decision

below treats income and need determinations differently in limited

respects (see Pet. 7), it is also true that in the Medicaid context

there are at least some grounds on which it may be sensible to do

so. It is realistic to assume that a parent’s resources will be

stretched evenly over herself, her spouse, and all of her depen-

dents. It is not necessarily realistic to expect that all her financial

needs, or those of her children, can be as easily prorated.

16

That the decision below rests on a permissible inter-

pretation of Section 1396a(a)(17)(D) does not require

the contrary conclusion concerning the different inter-

pretation of that provision advanced by petitioner. As

the district court explained in this case, it is also possi-

ble to read the statutory phrase “financial responsibil-

ity” to refer to an obligation to contribute available in-

come or assets to the common good, without reference

to the distinct question of an applicant’s financial need.

Pet. App. A381-A82 (emphasis altered). Moreover, as

petitioner points out (Pet. 7), the court of appeals’

construction of Section 1896a(a)(17)(D) may result in

seeming inconsistencies between the required determi-

nations of income and need. Indeed, as we have des-

cribed, the Secretary previously advocated adoption of

an eligibility-determination method similar to Wiscon-

sin’s, both in the Sneede litigation and in the 1993

regulations. See also 54 Fed. Reg. at 39,427-39,428;

Sneede, 1991 WL 268830, at **2-**3 (describing

arguments advanced by the State and the Secretary in

that case).

The existence of reasonable textual and policy argu-

ments on both sides of the issue has consistently led the

Secretary to acknowledge that the question presented

in this case is a difficult one, to which there may be a

® All agree, for example, that if a single mother lives with her

three children, one-fourth of the mother’s income is properly

attributed to each child, even if the Medicaid application unit in

question excludes one of the children (perhaps because he has

independent income, which may not properly be attributed to his

siblings). Although the “excluded” child is therefore taken into ac-

count in ascertaining the income deemed available to the applica-

tion unit, under the decision below the existence of the same child

must be ignored when it comes to ascertaining the unit’s financial

need.

17

number of plausible answers. See 54 Fed. Reg. at

39,428 (noting existence of alternatives and soliciting

comments); 58 Fed. Reg. at 4916 (recognizing difficulty

of problem and characterizing new regulation as a “best

attempt”); see also Pet. App. A30-A33 (district court’s

opinion sustaining State’s position in this case); ef.

Sneede, 1991 WL 268830, at **4 (declining to award

attorneys’ fees because position advanced by State and

Secretary in that case “had a reasonable basis in law

and fact”). Such situations are not uncommon in the

administration of complex national benefit programs,

and are often resolved through the adoption, by federal

administrators, of a formal interpretation of the

relevant law. In this case, the Secretary could reasona-

bly have issued regulations adopting either petitioners’

or respondents’ construction of the Medicaid Act, and

that determination would have been not only permissi-

ble, but authoritative. See, e.g., Your Home Visiting

Nurse Servs., Inc. v. Shalala, 119 8. Ct. 930, 933-934

(1999); Atkins v. Rivera, 477 U.S. 154, 162 (1986);

Chevron U.S.A. Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837, 844 (1984); Schweiker v.

Gray Panthers, 453 U.S. 34, 43-44 (1981).

In this unusual instance, however, the Secretary,

after thorough consideration, decided not to promulgate

regulations adopting any definitive interpretation of

* The Ninth Circuit was accordingly wrong to suggest, in its

memorandum opinion in Sneede, that the terms of the Medicaid

Act compelled the result it reached, regardless of the Secretary’s

construction of the Act. See 1991 WL 268830, at **2-**3: compare

Gray Panthers, 453 U.S. at 43 (“The Social Security Act is among

the most intricate ever drafted by Congress,” and Congress has

therefore “conferred on the Secretary exceptionally broad au-

thority to prescribe standards for applying certain sections of the

Act,” including 42 U.S.C. 1396a(a)(17)(B).).

18

the relevant statutory provisions or to impose any one

methodology on the States. She determined that it

would instead be preferable, under all the circum-

stances, to allow States participating in the Medicaid

program the greatest possible flexibility to apply those

provisions, in light of their own state plans, administra-

tive structures, resource constraints, and policy priori-

ties. See 59 Fed. Reg. at 48,052. In her announcement

of that determination, however, the Secretary made

clear that the resulting freedom to adopt different

methods for determining Medicaid eligibility would

remain subject to each State’s ultimate responsibility to

“comply with the statute and [with] any applicable

court orders.” /bid. Respondents brought the present

case on the theory that Wisconsin’s method of deter-

mining Medicaid eligibility does not “comply with the

statute.”

Federal courts have a general obligation to adjudi-

cate federal claims properly before them; and, in the

absence of any authoritative interpretation by the

Secretary, it was proper for both courts that considered

this case to identifv and construe for themselves the

relevant provisions of federal law. As we have

explained, the construction urged by respondents and

adopted by the court of appeals is a permissible one.

The court’s decision does not conflict with any decision

of this Court or of any other court of appeals, or with

any construction presently adopted by the Secretary."

5 In addition, the likely practical impact of the decision is

obscured by Wisconsin’s impending implementation (in July 1999)

of a “child health plan” approved under the State Children’s Health

Insurance Program, 42 U.S.C. 1397aa et seg. (Supp. III 1997),

which makes additional federal funds available to participating

States to help fund health care for low-income children who do not

qualify for Medicaid benefits. See generaliy 42 U.S.C. 1397aa(a)

19

Under these circumstances, the question presented by

the State’s petition for a writ of certiorari does not

warrant review by this Court.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

SETH P. WAXMAN

Solicitor General

DAVID W. OGDEN

Acting Assistant Attorney

General

EDWIN S. KNEEDLER

Deputy Soticitor General

EDWARD C. DUMONT

Assistant to the Solicitor

General

BARBARA C. BIDDLE

FREDDI LIPSTEIN

Attorneys

MAY 1999

(purpose), 1397bb(3)(A)-(B) (eligibility screening and ccordination

with Medicaid), 1397dd(d) (coordination with Medicaid), 1397jj(b)

(defining “targeted low-income child” as one with family income

below specified Medicaid eligibility levels, and not otherwise

eligible for Medicaid) (Supp. III 1997).