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Davis v. Shah

United States Court of Appeals, Second Circuit

March 24, 2016

HARRY DAVIS, RITA-MARIE GEARY, PATTY POOLE, ROBERTA WALLACH, on behalf of themselves and others similarly situated, Plaintiff-Appellees,
v.
NIRAV SHAH, individually and in his official capacity as Commissioner of the New York State Department of Health, Defendant-Appellant

          Argued January 5, 2015

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          Plaintiffs-appellees brought this class action against defendant-appellant Nirav Shah, Commissioner of the New York State Department of Health, challenging New York's restrictions on coverage of certain medical services under its Medicaid plan. Plaintiffs argued that New York's 2011 plan amendments limiting coverage of orthopedic footwear and compression stockings to certain enumerated medical conditions violate the Medicaid Act's reasonable standards, home health services, due process, and comparability provisions, as well as the anti-discrimination provision and integration mandate of the Americans with Disabilities Act and Rehabilitation Act. The district court granted summary judgment to defendants on plaintiffs' home health services claim and the hearing aspect of plaintiffs' due process claim, and granted summary judgment to plaintiffs on all their remaining claims. It subsequently entered a permanent injunction barring New York from enforcing the coverage restrictions.

         We affirm in part and vacate in part. Because neither the Medicaid Act nor the Supremacy Clause confers a private cause of action to enforce the reasonable standards provision, we vacate the grant of summary judgment to plaintiffs on their reasonable standards claim. We decline to reach plaintiffs' integration mandate claim as largely duplicative of their anti-discrimination claim under the Americans with Disabilities Act and Rehabilitation Act. With respect to plaintiffs' other claims, however, we affirm the district court's summary judgment rulings. Nevertheless, because the injunction ordered by the district court is broader than is warranted by our liability determinations, we vacate that injunction and remand for reconsideration of the appropriate relief.

         VICTOR PALADINO, Assistant Solicitor General (Barbara D. Underwood, Solicitor General, and Andrea Oser, Deputy Solicitor General, on the brief), for Eric T. Schneiderman, Attorney General of the State of New York, Albany, New York, for Defendant-Appellant.

         GEOFFREY A. HALE (Bryan D. Hetherington and Jonathan Feldman, Empire Justice Center, and Martha Jane Perkins, National Health Law Program, on the brief), Empire Justice Center, Rochester, New York, for Plaintiffs-Appellees.

         Molly J. Moran, Acting Assistant Attorney General (Mark L. Gross and Robert A. Koch, Attorneys, on the brief), Department of Justice, Civil Rights Division, Washington, D.C., for Amicus Curiae United States Department of Justice in Support of Plaintiffs-Appellees.

         Benjamin C. Mizer, Principal Deputy Assistant Attorney General (Alisa B. Klein and Lindsey Powell, Attorneys, on the brief), Department of Justice, Civil Division, Washington, D.C., for Amicus Curiae United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, in Support of Neither Party.

         Before: LYNCH and CHIN, Circuit Judges, and KORMAN, District Judge.[*]

          OPINION

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          Gerard E. Lynch, Circuit Judge

         Plaintiffs-appellees Harry Davis, Rita-Marie Geary, Patty Poole, and Roberta Wallach (" plaintiffs" ) brought this class action against defendant-appellant Nirav Shah, Commissioner of the New York State Department of Health (the " Commissioner" ), challenging New York's coverage restrictions on certain medical services provided under its Medicaid plan. Plaintiffs argue that New York's 2011 plan amendments, which restrict coverage of orthopedic footwear and compression stockings to patients with certain enumerated medical conditions, violate the Medicaid Act's reasonable standards, home health services, due process, and comparability provisions, as well as the anti-discrimination provision and integration mandate of Title II of the Americans with Disabilities Act (" ADA" ) and § 504 of the Rehabilitation Act. The United States District Court for the Western District of New York (Charles J. Siragusa, Judge ) granted summary judgment to defendant on plaintiffs' home health services claim and the hearing aspect of their due process claim, and granted summary judgment to plaintiffs on all their remaining claims. The court subsequently entered a permanent injunction barring New York from enforcing its coverage restrictions against any beneficiaries under its plan.

         We affirm in part and vacate in part. Because neither the Medicaid Act nor the Supremacy Clause confers a private cause of action to enforce the reasonable standards provision, we vacate the district court's grant of summary judgment to plaintiffs on that claim. We also decline to reach plaintiffs' unequal treatment claim under the ADA and Rehabilitation Act as largely duplicative of their integration mandate claim. With respect to the remaining claims, however, we affirm the summary judgment rulings of the district court. Because orthopedic footwear

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and compression stockings constitute optional " prosthetics" rather than mandatory " home health services" under the Medicaid Act, defendant is entitled to summary judgment on plaintiffs' home health services claim. Because the due process provision required New York to provide plaintiffs with written notice -- though not evidentiary hearings -- prior to terminating their benefits, defendant is entitled to summary judgment on the hearing element and plaintiffs are entitled to summary judgment on the notice element of plaintiffs' due process claim. Because New York's coverage restrictions deny some categorically needy individuals access to the same scope of medically necessary services made available to others, plaintiffs are entitled to summary judgment on their comparability provision claim. Because New York's restrictions violate the integration mandate of the ADA and Rehabilitation Act, plaintiffs are entitled to summary judgment on their anti-discrimination claims under those statutes.

         Finally, because the injunction granted by the district court is broader than is warranted by our liability conclusions, we vacate that injunction and remand for further consideration of the appropriate relief.

         BACKGROUND

         I. The Federal Medicaid Program

          Enacted in 1965 as Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq., the Medicaid Act is a cooperative federal-state program designed to provide medical assistance to persons whose resources are insufficient to meet the costs of their necessary medical care. Himes v. Shalala, 999 F.2d 684, 686 (2d Cir. 1993). On the federal level, the program is administered by the Centers for Medicare and Medicaid Services (" CMS" ), a division of the United States Department of Health and Human Services (" HHS" ). Although no state is required to participate in Medicaid, states that choose to do so must formulate a plan of administration that complies with both the Medicaid Act and regulations promulgated by HHS. 42 U.S.C. § 1396a; Lewis v. Thompson, 252 F.3d 567, 569 (2d Cir. 2001). Once CMS approves the state plan as complying with all statutory and regulatory requirements, the federal government will subsidize a significant portion of the state's expenditures in administering the program. 42 U.S.C. § § 1396a(b), 1396b; Rodriguez v. City of New York, 197 F.3d 611, 613 (2d Cir. 1999).

          A state's Medicaid plan defines both the categories of individuals eligible for benefits and the categories of services that are covered for those different groups. See 42 U.S.C. § 1396a(a); Pharm. Research & Mfrs. of Am. v. Walsh, 538 U.S. 644, 650, 123 S.Ct. 1855, 155 L.Ed.2d 889 (2003). With regard to beneficiaries, the Medicaid Act requires any state participating in Medicaid to provide medical assistance to the " categorically needy." Roach v. Morse, 440 F.3d 53, 59 (2d Cir. 2006). That group includes aged, blind, or disabled individuals who qualify for supplemental security income; individuals eligible for the Aid to Families with Dependent Children program; and other low-income groups, such as pregnant women and children, entitled to poverty-related benefits. See 42 U.S.C. § 1396a(a)(10)(A)(i); Walsh, 538 U.S. at 651 n.4. A state may also, at its option, provide medical assistance to the " medically needy." Roach, 440 F.3d at 59. That group includes individuals whose income or resources exceed the financial threshold for categorical coverage, but who otherwise meet the eligibility requirements that define the categorically needy. See 42 U.S.C. § 1396a(a)(10)(C);

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42 C.F.R. § 435.301; Walsh, 538 U.S. at 651 n.5. Unlike the categorically needy, who can cover the costs of neither their basic needs nor necessary medical care, the " medically needy" have sufficient resources to cover their basic needs but not their necessary medical care. Roach, 440 F.3d at 59.

          With regard to services provided under a state plan, the Medicaid Act similarly specifies certain categories of mandatory and optional medical care. 42 U.S.C. § 1396a(a)(10)(A); id. § 1396d(a); Rodriguez, 197 F.3d at 613. A state is required to provide some benefits to all categorically needy individuals, including, among others, nursing facility services for persons over 21 and " home health care services." 42 U.S.C. § 1396a(a)(10)(A); id. § § 1396d(a)(4), (7). While a state need not provide either service to the medically needy, any state that elects to provide nursing facilities services to those beneficiaries must also provide home health services. Id. § 1396a(a)(10)(D); 42 C.F.R. § 440.220(a)(3). Furthermore, the Medicaid Act identifies a number of purely optional services that a state may provide to either the categorically needy or to both the categorically and medically needy. Optional services include, among other things, " prosthetic devices." 42 U.S.C. § 1396a(a)(10)(A); id. § 1396d(a)(12); see also 42 C.F.R. 440.120(c); id. § 440.225.

          The Medicaid Act imposes several requirements on the administration of both required and optional services under a state plan. Under the so-called " reasonable standards" provision, the Act provides that a participating state must " include reasonable standards . . . for determining eligibility for and the extent of medical assistance under the plan which . . . are consistent with the objectives" of the Medicaid program. 42 U.S.C. § 1396a(a)(17). Under the so called " comparability" provision, the Act requires that the medical assistance available to any categorically needy individual " shall not be less in amount, duration, or scope than the medical assistance made available to any other such individual," nor " less in amount, duration, or scope than the medical assistance made available to [non-categorically needy] individuals." 42 U.S.C. § 1396a(a)(10)(B); see also 42 C.F.R. § 440.240; Rodriguez, 197 F.3d at 615. Finally, under the due process provision, a state plan participating in Medicaid must " provide for granting an opportunity for a fair hearing before the State agency to any individual whose claim for medical assistance under the plan is denied." 42 U.S.C. § 1396a(a)(3). That requirement entails both written notice of any intended actions affecting a beneficiary's claim and an evidentiary hearing to contest denials of service. See 42 C.F.R. § § 431.206(b), (c); id. § 431.210.

         II. New York's 2011 Medicaid Amendments

          The State of New York has participated in the federal Medicaid program since 1966. See N.Y. Soc. Serv. Law § 363; DeJesus v. Perales, 770 F.2d 316, 319 (2d Cir. 1985). The terms of New York's Medicaid plan, which is administered by the New York State Department of Health (" NYSDH" ), are set out in the New York Social Services Law, see N.Y. Soc. Serv. Law § 363 et seq., and Title 18 of the New York Codes, Rules and Regulations, see 18 N.Y.C.R.R. § 500 et seq.

          New York has chosen to provide Medicaid coverage to both the categorically needy and the medically needy. See N.Y. Soc. Serv. Law § 366; Lewis, 252 F.3d at 570. Standard coverage for both types of beneficiaries under its plan is defined as the provision of

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medically necessary medical, dental and remedial care, services, and supplies . . . which are necessary to prevent, diagnose, correct or cure conditions in the person that cause acute suffering, endanger life, result in illness or infirmity, interfere with such person's capacity for normal activity, or threaten some significant handicap . . . .

N.Y. Soc. Serv. Law § 365-a(2). Such standard medical assistance includes both nursing facility services and " home health services provided in a recipient's home." Id. § § 365-a(2)(b), (d). It also includes coverage of " sickroom supplies, eyeglasses, prosthetic appliances and dental prosthetic appliances." Id. § 365-a(2)(g).

         Until 2011, New York's Medicaid program provided orthopedic footwear and compression stockings to all beneficiaries for whom such services were medically necessary. During that time, regulations promulgated by the NYSDH defined " orthopedic footwear" as

shoes, shoe modifications, or shoe additions which are used to correct, accommodate or prevent a physical deformity or range of motion malfunction in a diseased or injured part of the ankle or foot; to support a weak or deformed structure of the ankle or foot, or to form an integral part of a brace.

18 N.Y.C.R.R. § 505.5(a)(4) (effective until Apr. 6, 2011). Although the regulations did not define " compression stockings," the acting director of operations at NYSDH's Office of Health Insurance Programs has described such items as hosiery that exerts pressure against the legs so as to " comfort aching and tired legs," " prevent varicose veins from stretching and hurting," " improve blood and lymph circulation," and minimize swelling.[2] Joint App'x at 353.

         In 2011, New York found itself facing a state-wide fiscal crisis. In searching for ways to reduce its budget, New York discovered that orthopedic footwear and compression stocking were a source of significant waste in its Medicaid program. In the fiscal year for 2010-2011, nearly half of state Medicaid payments for orthopedic footwear went to the treatment of hammertoes and bunions, common medical conditions that can readily be treated through inexpensive off-the-shelf products. Similarly, numerous beneficiaries submitting claims for compression stockings had used such items to treat common and relatively mild complaints, such as varicose veins or aching legs.

          To reduce spending, New York amended its Medicaid plan to limit coverage for both orthopedic footwear and compression stockings to what it deemed to be the most frequently occurring serious conditions requiring their use. In the spring of 2011, the New York legislature added a set of qualifications to N.Y. Soc. Serv. Law § 365-a(2)(g), which addresses New York's provision of " sickroom supplies, eyeglasses, prosthetic appliances and dental prosthetic appliances." The revised version of that provision now provided that

(iii) prescription footwear and inserts are limited to coverage only when used as an integral part of a lower limb orthotic appliance, as part of a diabetic treatment plan, or to address growth and development problems in children; [and]

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(iv) compression and support stockings are limited to coverage only for pregnancy or treatment of venous stasis ulcers . . . .

N.Y. Soc. Serv. Law § § 365-a(2)(g)(iii), (iv) (effective Apr. 1, 2011).

         To reflect the legislature's changes, NYSDH also amended the definitions section at 18 N.Y.C.R.R. § 505.5(a) and added a new limiting provision at § 505.5(g). The regulatory definition of " orthopedic footwear" now described such items as

shoes, shoe modifications, or shoe additions which are used . . . in the treatment of children, to correct, accommodate or prevent a physical deformity or range of motion malfunction in a diseased or injured part of the ankle or foot; in the treatment of children, to support a weak or deformed structure of the ankle or foot; as a component of a comprehensive diabetic treatment plan to treat amputation, ulceration, pre-ulcerative calluses, peripheral neuropathy with evidence of callus formation, a foot deformity or poor circulation; or to form an integral part of an orthotic brace.

18 N.Y.C.R.R. § 505.5(a)(4) (effective Apr. 6, 2011) (emphases added). The new subsection at § 505.5(g) listed several " established defined benefit limits" on Medicaid services, including limitations on orthopedic footwear and compression stockings that tracked the language of the legislature's new qualifications at § 365-a(2)(g). See id. § § 505.5(g)(1), (2).[3] The limitations provision warned that NYSDH " shall not allow exceptions to defined benefit limitations." Id. § 505.5(g).

         Prior to implementing its changes, NYSDH submitted a proposed plan amendment for review by CMS, noting the new restrictions on New York's coverage of orthopedic footwear and compression stockings. CMS informally advised the department that it need not obtain CMS's approval for the new coverage restrictions because, as paraphrased by NYSDH, " such changes in medical necessity criteria were within the State's purview." Joint App'x at 360. The record contains no written statement from CMS embodying this advice. The advice is evidenced only by an affidavit from Jonathan Bick, the acting director of operations at New York's Office of Health Insurance Programs, attesting to what he was told by CMS.

         NYSDH subsequently adopted its new regulations on an emergency basis effective April 6, 2011, and as a permanent rule effective March 28, 2012. It communicated the new changes in service to medical suppliers by issuing a series of " Provider Update[s] for Pharmacy and DME Providers." JA162. It did not notify individual beneficiaries of the changes.

         By restricting coverage for orthopedic footwear and compression stockings, New York saved $14.6 million during the 2011-2012 fiscal year.

         III. The Plaintiffs

         Plaintiffs include both categorically needy and medically needy individuals who

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qualify for New York's Medicaid plan on the basis of their disabilities. They suffer from a variety of ailments, including multiple sclerosis, paraplegia, lymphedema, cellulitis, psoriatic arthritis, peripheral neuropathy, and trans-metatarsal amputation. Plaintiffs' doctors have prescribed them orthopedic footwear or compression stockings as medically necessary items to treat their afflictions. Such products help plaintiffs to maintain mobility and to avoid more serious complications, including skin ruptures, infections, and further amputations, which may require extended hospital care or even institutionalization. The Commissioner does not dispute that orthopedic footwear or compression stockings are in fact medically necessary to treat plaintiffs' conditions.

         Prior to New York's 2011 amendments, most plaintiffs had received Medicaid coverage for their orthopedic footwear or compression stockings.[6] Because none of plaintiffs' diagnoses fall within New York's 2011 list of qualifying conditions, however, plaintiffs lost funding for those services in April 2011. They received no written notice of the new coverage restrictions, but instead learned of New York's change in service when they attempted to fill or refill their orders and were denied by their medical providers.

         IV. Procedural History

         On March 14, 2012, plaintiffs commenced this suit as a putative class action against the Commissioner in the United States District Court for the Western District of New York. They claimed that New York's coverage restrictions violated the Medicaid Act's reasonable standards provision, 42 U.S.C. § 1396a(a)(17), its home health services provision, id. § 1396a(a)(10)(D), its due process provision, id. § 1396a(a)(3), and its comparability provision, id. § 1396a(a)(10)(B). They also claimed that the amendments discriminated against them on the basis of disability and put them at risk of institutionalization in violation of Title II of the ADA, 42 U.S.C. § 12131 et seq., and § 504 of the Rehabilitation Act, 29 U.S.C. § 794. Plaintiffs sought declaratory and injunctive relief prohibiting NYSDH from implementing the service changes, as well as attorneys' fees and costs and disbursements.

         In October 2012, plaintiffs moved for summary judgment on all counts of the complaint, and the Commissioner cross-moved for summary judgment on all counts. Prior to considering those motions, the district court granted plaintiffs' motion for class certification. Echoing the broad certification request in plaintiffs' complaint, the court certified a class that encompassed

[a]ll current and future New York State Medicaid recipients for whom Defendant has directly or indirectly failed to provide coverage for medically necessary orthopedic footwear and compression stockings as a result of New York Soc. Serv. Law § 365-a(2)(g)(iii) and (iv) and regulations and policies promulgated thereto.

Joint App'x at 415.[7]

         On December 9, 2013, the district court issued an order granting in part and denying in part both parties' motions for summary judgment. The district court granted

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judgment to defendant on plaintiffs' home health services claim, holding that orthopedic footwear and compression stockings qualified as " prosthetics" rather than " home health services," and consequently were optional services that failed to trigger that provision. With regard to the remaining claims, however, the district court ruled largely in favor of plaintiffs. Judge Siragusa found that New York's restrictions violated the Medicaid Act's reasonable standards provision by denying coverage of medically necessary services without any consideration of beneficiaries' medical needs, and violated the comparability provision by discriminating among categorically needy beneficiaries on basis of their medical conditions. While concluding that the due process provision did not entitle plaintiffs to evidentiary hearings prior to the termination of their benefits, the judge held that New York had nevertheless violated that provision by implementing its restrictions without first providing written notice to individual beneficiaries. Finally, the court held that New York's plan amendments conflicted with both the ADA and Rehabilitation Act by treating some disabled individuals more favorably than others, and by putting plaintiffs at risk of institutionalization in violation of the integration mandate.

         The district court thus concluded that plaintiffs were entitled to permanent injunctive relief, and directed the parties to " settle and submit a proposed Order concerning such injunctive relief" within fourteen days. Sp. App'x at 62. In light of the court's decision, NYSDH announced that it would cease enforcing its plan amendments, explaining that it would simply " return to its previous coverage policy" for orthopedic footwear and compression stockings. Joint App'x at 465. Subsequently, the district court entered a final order of judgment that, among other things, ...


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