4th Cir: Failure to Timely Provide Appropriate Placement Violates Medicaid Reasonable Promptness

The Fourth Circuit held that the South Carolina Department of Disabilities and Special Needs violated the reasonable promptness provision of the Medicaid statute, 42 U.S.C. § 1396a(a)(8), by failing to timely offer a developmentally disabled beneficiary a choice of appropriate providers for residential habilitation under its home and community based waiver program.

The court dismissed as irrelevant the question of whether states’ obligations under Medicaid are limited to paying for services, since in this instance the services paid for by the agency were not appropriate.  Instead, the state paid for more restrictive services that were desired by the beneficiary.  The court concluded that paying for inappropriate services was equivalent to providing no services, and therefore, the agency violated the Medicaid statute. The case is further complicated by the agency’s determination, after a few years of providing eligibility under the waiver, that the beneficiary is not mentally retarded, as required to qualify for the waiver.  The denial of eligibility is being appealed in state court, and services are being continued during the appeal.  Since the Fourth Circuit’s decision is purely prospective, the beneficiary may not be entitled to any relief if the denial of eligibility is upheld by the state court.  Doe v. Kidd, 2011 WL 1058542 (4th Cir. Mar. 24, 2011).  All three of the Fourth Circuit panel judges –  Motz, King, and Gregory – were appointed by Clinton.

Doe applied for the Medicaid waiver program for the third time in July 2002.  After an administrative appeal, she obtained a plan of care in April 2003 which approved immediate services in her home as well as residential habilitation services in 3 months.  In May 2003, Doe requested residential habilitation in lieu of home services, due to the declining mental health of her mother.  The agency authorized placement at a supervised living program or private foster home and offered a placement at one private foster home.  Doe rejected that proffered placement as inadequate to meet her needs and requested placement at a group home. In June 2003, she filed suit in federal court, alleging, inter alia, a violation of reasonable promptness.  In August 2003, the agency agreed to provide temporary respite services in a group home.  As of Dec. 2010, Doe was residing in the group home, funded by Medicaid as temporary respite services.

In 2005, the agency reevaluated Doe’s eligibility and concluded that she is not mentally retarded and therefore is ineligible for the waiver program.  This decision is being appealed through the state court system and is presently pending at the South Carolina Court of Appeals.

In its first decision in this case, the Fourth Circuit held that the reasonable promptness claim was not moot and could be enforced via 42 U.S.C. § 1983.  Doe v. Kidd, 501 F.3d 358 (4th Cir. 2007).  On remand, in Jan. 2010, the district court dismissed Doe’s reasonable promptness claim.  The district court held that the Medicaid statute did not require the agency to provide services, only to pay for them.  The district court denied Doe’s motion to amend the complaint to challenge the agency’s decisions about eligibility and appropriate placement.  The district court also granted the defendants’ summary judgment motion regarding damages, and Doe did not appeal the denial of damages.

The Fourth Circuit reversed on the reasonable promptness claim.  The court stated: “Defendants’ failure to provide Doe with those residential habilitation services described in her 2003 plan in a reasonably prompt manner constituted a violation of the Medicaid Act.”

The court stated that the issue of whether Medicaid merely pays for services or provides services was not determinative and would not “change the outcome of this case.”  The agency offered only one appropriate placement, which was rejected by the beneficiary.  The court found that the agency was required to offer another appropriate placement.  The court concluded that the agency’s agreement to pay for a more restrictive placement in a group home did not relieve it of its obligation to timely offer an alternative appropriate placement.  The court held that the failure to provide options for appropriate foster care placement “is the same as a failure to provide any services.”

The court focused on the inappropriateness of the reimbursed placement, not on whether Medicaid is required to provide services.  Holding that the agency’s payment for an inappropriate placement did not fulfill the agency’s obligations under Medicaid, the court dismissed the issue of whether the Medicaid statute requires only payment.

The court stated: “Defendants admit that they abdicated their responsibility to furnish Doe with the necessary services in the least restrictive environment, … based upon the whims of Doe’s representatives.”  The court asserted that the Medicaid statute “places the burden on Defendants to work with Doe to find or establish an acceptable” appropriate placement, and the agency had failed to meet this burden.  The court then concluded that “as a matter of law, Defendants have violated the Medicaid Act through their ongoing refusal to finance residential habilitation services at an acceptable [foster home] placement of [Doe’s] choice.”

The court remanded the case to the district court to fashion prospective relief, noting that under § 1983, the court had “broad equitable powers to style any appropriate remedial relief.”  The court acknowledged that Doe had been determined ineligible but was receiving Medicaid pending the outcome of her state appeal.  The court suggested that the district court might order a foster home placement to be provided during the pendency of the state appeal.  The court also suggested that the district court could issue a declaratory judgment “that may guide Defendants should Doe ever become eligible for Medicaid services again.”

The court further held that Doe was the prevailing party and therefore entitled to reasonable attorneys’ fees under § 1988.  It also affirmed the district court’s denial of Doe’s motion to amend her complaint.

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