A lawsuit by children with special needs contending that the state's managed care requirement violates their rights under federal Medicaid law was allowed to proceed, a Hawaii federal court has ruled. The scope of the lawsuit was narrowed significantly, however.
History of the dispute
Soc. Sec. Act §1932 permits state Medicaid agencies to require that recipients receive their services through a managed care organization if the program meets certain requirements. In addition to certain protections for beneficiaries, the statute requires the state agencies to contract only with managed care organizations (MCOs) that meet requirements for adequate capitalization and adequacy of the network to serve the needs of the patient population. Soc. Sec. Act §1932(a)(2) prohibits the state agency from imposing managed care on certain groups of Medicaid recipients, including recipients of Supplemental Security Income, children receiving assistance due to disability, and Medicare beneficiaries.
Hawaii's managed care program required these groups to participate in managed care under a demonstration project waiver. The recipients sued both the state Medicaid agency and HHS, contending that the program violated their rights under the exemption and that the MCOs did not meet the solvency and network requirements, and asking that the court declare the program invalid. Both agencies responded that Hawaii's program was not governed by the statute because it was authorized under Soc. Sec. Act §1115, under which HHS could waive the exemption.
Standing issue
The agencies contended that the Medicaid Act did not create any rights that the recipients could enforce in federal court, so that the recipients had no "standing" to sue. The court ruled that the recipients could not challenge the decision to grant a waiver of their exemption because that was within the discretion of HHS. However, the terms of the waiver did not address the beneficiary protections and the requirements for qualification of MCOs. HHS' past practice had been not to waive those requirements.
The court ruled that the law creating the beneficiary protections was clearly meant to be enforced by beneficiaries. The capitalization and network requirements were written in language that addressed the operations of the state Medicaid program rather than the rights of recipients. Therefore, the recipients could not proceed with their claim that the waiver violated those statutory requirements. However, because the waiver itself did not address those requirements, the recipients could challenge the HHS Secretary's approval of the contracts under the Administrative Procedure Act.
G. v. Hawaii, Department of Human Services, D. Hawaii, May 11, 2009.
For more information on this and related topics, consult the CCH® Medicare and Medicaid Guide.
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