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Ohio Department of Medicaid v. Price

United States Court of Appeals, Sixth Circuit

July 24, 2017

Ohio Department of Medicaid, Petitioner,
v.
Thomas E. Price, Secretary of Health and Human Services, Respondent.

          Argued: January 26, 2017

         On Petition for Review of a Final Determination of the Secretary of Health and Human Services No. 15-01.

         ARGUED:

          Ara Mekhjian, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Petitioner.

          Lucy C. Lisiecki, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Chicago, Illinois, for Respondent.

         ON BRIEF:

          Ara Mekhjian, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Petitioner.

          Lucy C. Lisiecki, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Chicago, Illinois, for Respondent.

          Before: GUY, CLAY, and GRIFFIN, Circuit Judges.

          OPINION

          GRIFFIN, Circuit Judge.

          The Ohio Department of Medicaid petitions this court for review of an order entered by the Centers for Medicare and Medicaid Services (CMS) denying a proposed amendment to the State's Medicaid plan. At issue is whether Ohio's juvenile pretrial detainees are "inmate[s] of a public institution"-a population ineligible for federal Medicaid reimbursement under 42 U.S.C. § 1396d(a)(29)(A). CMS has determined they are. Because the agency's interpretation is not arbitrary, capricious, or an abuse of its discretion, we deny the petition for review.

         I.

         A.

         Medicaid is a cooperative federal-state program that provides funds to participating states for the medical care of needy individuals. Harris v. Olszewski, 442 F.3d 456, 460 (6th Cir. 2006). To qualify for federal funds, states must submit to CMS "a state Medicaid plan that details the nature and scope of the State's Medicaid program. It must also submit any amendments to the plan that it may make from time to time." Douglas v. Indep. Living Ctr. of S. Cal., Inc., 565 U.S. 606, 610 (2012). Before approving a state's plan or an amendment to it, CMS reviews the plan for compliance with all statutory and regulatory requirements. See Rosen v. Goetz, 410 F.3d 919, 927 (6th Cir. 2005); see also 42 U.S.C. §§ 1316(a)(1), (b) & 1396a(b). "And . . . the agency will not provide federal funds for any state plan amendment until the agency approves the amendment." Douglas, 565 U.S. at 611.

         One constraint on state plans is Medicaid's inmate exclusion, which prohibits federal financial participation (FFP) for state medical expenditures made on behalf of "any individual who is an inmate of a public institution (except as a patient in a medical institution)." 42 U.S.C. § 1396d(a)(29)(A).[1] State governments are traditionally responsible for the medical care of those they punish by incarceration. See Estelle v. Gamble, 429 U.S. 97, 103 (1976); see also Brown v. Plata, 563 U.S. 493, 510-11 (2011). And "[t]he intent of [this] prohibition is to ensure that federal Medicaid funds are not used to finance care that is the responsibility of state and local authorities." Carolyn L. Yocom, U.S. Gov't Accountability Off., GAO-14-752R Medicaid: Information on Inmate Eligibility and Federal Costs for Allowable Services (2014) (footnote omitted).

         CMS defines who is, and who is not, an "inmate of a public institution" in 42 C.F.R. § 435.1010. The regulation provides in pertinent part:

Inmate of a public institution means a person who is living in a public institution. An individual is not considered an inmate if-
(b) He is in a public institution for a temporary period pending other arrangements appropriate to his needs.

Id. (emphasis added). An individual is an "inmate of a public institution" barred from coverage if he "is living in a public institution." Id. However, an individual living in a public institution is not an "inmate of a public institution"-and therefore not barred from coverage-if he resides in the public institution "for a temporary period pending other arrangements appropriate to his needs." Id.

         B.

         In early 2014, Ohio submitted a proposed plan amendment to CMS aimed at exploiting this distinction. Specifically, it sought to classify pretrial detainees under age 19 as non-inmates-i.e., those who live in a public institution for only "a temporary period pending other arrangements appropriate to [their] needs, " and for whom the State can claim federal Medicaid reimbursement. In so doing, petitioner acknowledged it was "requesting . . . Medicaid coverage for a specific population that is currently ineligible for Medicaid benefits."

          After requesting and receiving further information from Ohio, CMS denied the amendment. Respondent explained that the inmate exclusion recognizes "no difference" between adults and juveniles, or convicted detainees and those awaiting trial. "For purposes of excluding FFP, for example, a juvenile awaiting trial in a detention center is no different than an adult in a maximum security prison, " "both are considered inmates of a public institution." It also rejected Ohio's argument that juvenile pretrial detainees fit the regulatory exception for individuals living in a public institution for a "temporary period, " and instead emphasized that the involuntary nature of the stay is the determinative factor: "This exception . . . does not apply when the individual is involuntarily residing in a public institution awaiting adjudication of a criminal matter."

         Ohio challenged the decision through a CMS hearing officer and an administrator, and both affirmed the denial. It now petitions for review of the administrator's ruling as the Secretary's final decision.

         II.

         The Administrative Procedure Act governs our review of the Secretary's decision. Battle Creek Health Sys. v. Leavitt, 498 F.3d 401, 408-09 (6th Cir. 2007). "The APA, which is incorporated by the Social Security Act, see 42 U.S.C. § 1359oo(f)(1), commands reviewing courts to 'hold unlawful and set aside' agency action that is 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.'" Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994) (quoting 5 U.S.C. § 706(A)(2)). CMS falls short of this standard if its decision "relie[s] on factors which Congress has not intended it to consider, entirely fail[s] to consider an important aspect of the problem, offer[s] an explanation that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise." Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).

         A.

         "The Medicaid Act commits to the federal agency the power to administer a federal program." Douglas, 565 U.S. at 614. "And here, " in denying Ohio's proposed amendment, "the agency has acted under this grant of authority." Id. Section 1396a(b) of the Act directs the Secretary to approve state plans that "fulfill[] the conditions specified" in the statute, and reject those that do not. 42 U.S.C. § 1396a(b). Through this "express delegation of specific interpretive authority, " United States v. Mead Corp., 533 U.S. 218, 229 (2001), "Congress manifested its intent that the Secretary's determinations, based on interpretation of the relevant statutory provisions, have the force of law." Pharm. Research & Mfrs. of Am. v. Thompson, 362 F.3d 817, 822 (D.C. Cir. 2004). Accordingly, we give the agency's decision to disapprove the amendment the benefit of Chevron deference. See Harris, 442 F.3d at 467, 470; see also Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843-44 (1984).

         "When a court reviews an agency's construction of the statute which it administers" under Chevron, "it is confronted with two questions." 467 U.S. at 842. "First, always, " is whether "Congress has directly spoken to the precise question at issue." Id. (emphasis added). "If it has, 'that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.'" Harris, 442 F.3d at 466 (quoting Chevron, 467 U.S. at 842-43). Second, if Congress has not spoken to the precise question at issue, and the statute is silent or ambiguous, we ask "whether the agency's answer is based on a permissible construction of the statute." Chevron, 467 U.S. at 843. "Permissible" does not mean the agency's construction was "the only one" CMS could have adopted, or "even the reading we would have reached if the question initially had arisen in a judicial proceeding." Battle Creek, 498 F.3d at 408-09 (quoting Jewish Hosp., Inc. v. Sec'y of Health & Human Servs., 19 F.3d 270, 273-74 (6th Cir. 1994)). It means we defer to the agency's reading unless it is "arbitrary, capricious, or manifestly contrary to the statute." Chevron, 467 U.S. at 844 (footnote omitted). Because the Medicaid Act is silent regarding the precise question at issue here-whether the term "inmate" encompasses juvenile pretrial detainees-we proceed to the second step of the inquiry.

         The administrator found § 1396d(a)(29)(A) "unambiguous[ly]" prohibits federal funding "for medical care of an 'inmate' . . . unless the inmate is in a medical institution." "In set[ting] forth this prohibition, " he noted, "the statute does not differentiate between types of inmates, for example by age (juvenile or adult) or by status (detained or sentenced)." Nor does the term "inmate" imply such a distinction. "[I]nmate" is "synonymous with . . . prisoner, convict, and detainee, " or in other words, "a person confined to an institution." Like their adult "inmate" counterparts, juvenile pretrial detainees are "confined to an institution." "Thus, " he determined that the statute treats them the same as any adult "prisoner, convict or detainee"-it precludes federal funding for their care. This construction is permissible.

         1.

         First and foremost, it accords with the plain language of § 1396d(a)(29)(A) and the "ordinary and natural meaning" of "inmate." Harris, 442 F.3d at 466 (brackets and citation omitted). "In determining a term's ordinary meaning, dictionaries are a good place to start." Wheaton v. McCarthy, 800 F.3d 282, 287 (6th Cir. 2015) (brackets and citation omitted). An "inmate" is "a person confined in a prison, hospital, or similar institution"-with "confined" being the operative word. Inmate, Black's Law Dictionary 908 (10th ed. 2009). "Prisoner; inmate; confinee . . . . These terms all denote one who is deprived of liberty and held in custody." See Garner's Dictionary of Legal Usage 708-09, 459 (3d ed. 2011) (directing readers to "prisoner" in order to define the term "inmate"). This "ordinary meaning" does not differentiate by age or conviction status, Wheaton, 800 F.3d at 287, and neither did Congress in drafting the exclusion. Whether juvenile or adult, pretrial detainees fit this definition; they are "confined, " "deprived of liberty, " and "held in custody."

         Even so, Ohio argues "it would be a mistake to import significance" to Congress's "failure to distinguish between adults and children, " because at the time of Medicaid's 1965 enactment, "it was self-evident" that the law treated juveniles differently, affording them fewer rights than those granted to adults facing criminal charges.[2] We think it more "self-evident" that when Congress intends to apply an age-based distinction, it drafts one. In other subsections of § 1396d, it did just that. See 42 U.S.C. §§ 1396d(a)(i), (iii), & (v) (referring to individuals "under the age of 21, " "65 years of age or older, " and "18 years of age or older"); id. at § 1396d(h) ("Inpatient psychiatric hospital services for individuals under age 21"); id. at § 1396d(w)(1)(A) (defining an "independent foster care adolescent" as an individual who is "under 21 years of age"). Had it intended a similar age-based distinction for the inmate exclusion, "Congress, we take it, would have included a similar direction in that section." E.P.A. v. EME Homer City Generation, L.P., 134 S.Ct. 1584, 1601 (2014). However, it did not. See Jama v. Immigration and Customs Enf't, 543 U.S. 335, 341 (2005) ("We do not lightly assume that Congress has omitted from its adopted text requirements that it nonetheless intends to apply, and our reluctance is even greater when Congress has shown elsewhere in the same statute that it knows how to make such a requirement manifest."). Congress instead gave the exclusion a broad reach, precluding "any such payments with respect to care or services for any individual who is an inmate of a public institution"-and permitting an exception for reimbursement based not on age, but on location of the service, i.e., when the inmate is "a patient of a medical institution." 42 U.S.C. § 1396d(a)(29)(A) (emphasis added, parenthesis omitted).

         Ohio alternatively suggests that if the text of § 1396d(a)(29)(A) does not include an exception for juvenile pretrial detainees, we may opt to ignore it. To petitioner, the statutory inmate exclusion is "not [even] at issue" here "because CMS has created regulations implementing that statute" in 42 C.F.R. § 435.1010-the regulation that defines "inmate" and sets forth the "temporary period" exception upon which petitioner relies. Ohio insists it is "[t]hose regulations, " and "not the Medicaid Act" that ought to "control [the] availability of FFP in this case."

         We agree the regulation is central to the petition for review; but not to the exclusion of the statute. Ohio seems to believe its chances at Medicaid reimbursement are better under the regulation penned by CMS than the statute penned by Congress. But if that were the case, it would not mean petitioner's amendment should be approved-it would mean CMS's regulation is overbroad. "Agencies, " after all, "are creatures of statutory authority." Friends of Crystal River v. E.P.A., 35 F.3d 1073, 1080 (6th Cir. 1994). They "may not confer power upon [themselves], " and have "literally no power to act . . . unless and until Congress confers power upon [them]." La. Pub. Serv. Comm'n v. F.C.C., 476 U.S. 355, 374 (1986). And agency "regulations, in order to be valid, must be consistent with the statute under which they are promulgated." Decker v. Nw. Envtl. Def. Ctr., 133 S.Ct. 1326, 1334 (2013) (quoting United States v. Larionoff, 431 U.S. 864, 873 (1977)). CMS is free to adopt regulations in order to fill legislative gaps or resolve ambiguities. See Chevron, 467 U.S. at 843-44; see also Mead, 533 U.S. at 229. But it cannot "override Congress" with a regulation permitting broader coverage than the Medicaid Act itself. La. Pub. Serv. Comm'n, 476 U.S. at 375. Neither can we in interpreting Congress's language-our "task is to apply the text of the statute, not improve upon it." EME Homer City Generation, 134 S.Ct. at 1600 (citation and brackets omitted).

         2.

         The administrator's interpretation is also consistent with the statute's legislative history, which reflects a Congressional judgment that Medicaid should not fund "items and services which are paid for directly or indirectly by [another] governmental entity, " such as the states. S. Rep. 89-404, 1965 U.S.C.C.A.N. 1943, 1989 (June 30, 1965); see also Medicaid Program; Federal Financial Participation for Inmates in Public Institutions and Individuals in an Institution for Mental Disease or Tuberculosis, 50 Fed. Reg. 13196-01, 13196 (April 3, 1985) (codified at 42 C.F.R. pts. 435 & 436) ("The intent of this provision is to ensure that Medicaid funds are not used to finance care which traditionally has been the responsibility of State and local governments."). Requiring states to pay for some of the care they traditionally provide is not unreasonable "in the context of a federal statute that relies on state and federal cooperation (and state and federal money)." Harris, 442 F.3d at 468.

         Ohio acknowledges that Medicaid is not intended to "supplant[]" its obligation to provide its prisoners medical care. For juveniles, however, petitioner argues it "does not have that obligation . . . in the first instance" thanks to Ohio Revised Code § 2151.36. Section 2151.36 requires juvenile courts to order a child's parents or guardians to "pay for the care, support, maintenance and education of the child" while in state custody. Id. Ohio therefore reasons that "[a]t most, " CMS "might be supplanting a parent's obligation" to provide for a juvenile detainee's care, not the state's obligation. And supplanting a parent's obligation is what CMS does "any time it provides FFP for services . . . to a minor, " so there is no harm in granting the state's proposed amendment here.

         But a statute that shifts an expense to parents is not a license to further shift that expense to the federal government. Parents "[u]nquestionably" have a duty to provide for their children's medical care when they are financially "able" to do so. In re J.J., 582 N.E.2d 1138, 1141 (Ohio Ct. App. 1990) (per curiam) (emphasis in original). However, parents of children eligible for Medicaid are not able to do so. In that circumstance, § 2151.36 provides that the cost of juvenile detainee medical care "shall be paid from the county treasury."[3] Ohio Rev. Code § 2151.36; see e.g., In re Hoodlet, 593 N.E.2d 478, 481-82 (Ohio Ct. App. 1991). Ultimately then, Ohio's proposed amendment does not merely "supplant[]" a parent's obligation. It does just what Congress ...


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