CtApp Minn: Medicaid free choice requires contract with chosen provider

The Court of Appeals of Minnesota overturned a state agency’s decision to deny Medicaid home and community based waiver services to a beneficiary who was living in an assisted living facility with which the county did not have a contract.

Relying upon the free choice provision in the Medicaid statute, the court ordered the county to execute a contract with the beneficiary’s chosen assisted living facility. Young v. Jesson, 2011 WL 1364428 (Minn. App. Apr. 12, 2011). Southern Minnesota Regional Legal Services represented the beneficiary.

Minnesota operates a medical assistance waiver that allows individuals who would be eligible for Medicaid benefits in a traditional institution to obtain care in their homes or in community-based residences instead. The federal Medicaid statute that authorizes the program providing home or community-based services requires that Medicaid recipients have “free choice” in obtaining services from a qualified provider who is willing to provide those services.” 42 U.S.C. § 1396a(a)(23)(A) and 42 C.F.R. § 431.51(b) (2010).

Valleyview of Owatonna, an assisted living facility, received a contract from Steele County Human Services in 2007 to provide care through the medical assistance waiver program. Harold Young was an 80 year old patient with Alzheimer’s disease, and was admitted to Valleyview for care. Two weeks after Young was admitted, the county terminated its contract with Valleyview. For a time Young continued to receive care through a managed care plan. However in 2008, Young ceased to be eligible for the managed care plan, and because the county had no contract with Valleyview for the medical assistance waiver program, the county informed Young that he would have to leave Valleyview in order to receive Medicaid waiver services.

Young filed for a fair hearing with the Minnesota Department of Human Services (DHS). He claimed that the county had violated his right to free choice of a qualified medical-assistance provider by ending its contract with Valleyview. DHS rejected the challenge, and the Minnesota Commissioner of Human Services affirmed the decision. The state district court affirmed the decision as well, and Young appealed to the Court of Appeals of Minnesota.

The court first found that the Commissioner did have the authority to review the county’s decision to end its contract with Valleyview.

The court then examined the meaning of “free choice” in the Medicaid statute. The county argued that free choice was only required among qualified providers, and that only providers with which the county had a contract were qualified providers. Since Young could choose among any of the providers that still had a contract with the county, he still had free choice among qualified providers.

The court found that the “free choice of qualified providers” provision was not clear on its face, and so it turned to the canons of statutory construction and the statute as a whole to decide what “free choice” required. Examining the federal Medicaid regulations and the state program’s application, the court explained that providers are meant to be deemed “qualified” if they meet certain standards of care. The Medicaid program has a “participant-based mission” and participants are intended to have free choice to use any provider who meets the standard of care. The court acknowledged that a state has discretion to revoke contracts with providers that fail to comply with reimbursement, quality, or utilization standards. However, the county in this case did not claim that its decision to end its contract with Valleyview was related to any failure to comply with such standards.

The Court of Appeals remanded the case to the district court for “an order requiring the county to execute a contract with [Young]’s chosen qualified provider.”

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