Second Circuit Holds that Medicaid Eligibility Must Be Determined Within 90 Days of a Fair Hearing Request

Second Circuit Holds that Medicaid Eligibility Must Be Determined Within 90 Days of a Fair Hearing Request

Based on its December 23, 2020 Opinion, the U.S. Court of Appeals for the Second Circuit unanimously affirmed that portion of the District Court's Judgment that "final administrative action entails a final determination of Medicaid eligibility and must be made within 90 days of a fair hearing request." Lisnitzer v Zucker, 19-470, Judgment (2d Cir. December 23, 2020).

In construing the meaning of the term "final administration action" found in 42 CFR § 431.244(f)(1)(ii), the Second Circuit held:

     "Neither the Medicaid Act nor the federal Medicaid regulations define the phrase 'final administrative action.' Our job then is to give that phrase a meaning. That is best done in dialogue with three sources: our previous opinion in Shakhnes v. Berlin, 689 F.3d 244 (2d Cir. 2012); the structure and purpose of the federal regulations, helped by a reading of them offered by the United States; and the State Medicaid Manual, a publication of the United States Department of Health and Human Services, to which we owe a degree of deference.

     "Based on those sources, we conclude that 'final administrative action,' as used in § 431.244(f), requires a final determination of Medicaid eligibility. Such determination must, therefore, be made ordinarily within 90 days of an applicant’s fair hearing request. See § 431.244(f)(1)(ii)."

Opinion at p. 3.

Relying on § 2903.2(A) of the State Medicaid Manual, the Second Circuit, concluded that

"The Manual further explains that '[a] conclusive decision in the name of the State agency shall be made by the hearing authority.' Id. § 2903.2(A) (emphasis added). And that '[r]emanding the case to the local unit for further consideration is not a substitute for "definitive and final administrative action."' Id. We believe that this last sentence, in particular, indicates that final administrative action requires more than just a favorable decision on a particular issue raised in a fair hearing. It entails instead a conclusive decision as to eligibility."

Opinion at p. 18.

In contrast to the District Court's Judgment (see Open-Ended Remands in Medicaid-Related Fair Hearing Decisions Violate Federal Law), the Second Circuit does not prohibit the issuance of Fair Hearing Decisions, which remand Medicaid eligibility determinations to local social services districts, as long as final determinations of Medicaid eligibility are made within 90 days of the Fair Hearing request.

     "Under current New York procedure, the hearing authority, after deciding the matters raised by the applicant, may issue a fair hearing decision that remands the case to the local district to resolve the ultimate question of Medicaid eligibility. The local district must then decide eligibility consistent with whatever the hearing authority decided. And, given our holding today, it must do so within the applicable time limit for final administrative action.

     "This way of doing things may not be the simplest. And we tend to agree with the United States that resolving Medicaid eligibility in a single fair hearing at the hearing authority level would serve the interests of efficiency and accountability. See Br. for the United States as Amicus Curiae 19–21.

     "But, that said, we think New York’s approach is permissible under the federal  requirements, as long as final administrative action occurs within 90 days. The hearing decisions regulation requires such action be taken by '[t]he agency,' 42 C.F.R. § 431.244(f), not any particular unit within the agency, see id. Since the agency can delegate to local districts the responsibility to make initial eligibility determinations, see 42 C.F.R. § 431.10(c), (d), we believe it can remand to local districts to make final eligibility determinations, as well, so long as the agency meets the deadlines for final administrative action set by § 431.244(f)."

Opinion at pp. 21-22.

On remand, a local social services district cannot deny Medicaid eligibility for a new reason not listed on the initial denial notice. Citing § VI.A.2 of New York's Administrative Directive 89 ADM-21, the Second Circuit noted the state policy requirement that "'[i]f more than one reason [for a denial of benefits] exists, the local district must state as many reasons for the action(s) as are applicable.'" Opinion at p. 24.

To allow "a 'revolving door' of denials and appeals" would cause defendants to be "out of compliance with the federal requirement for final administrative action within 90 days." Opinion at pp. 23-24.

The Second Circuit sidestepped the issue of class certification. Relying on Galvan v. Levine, 490 F.2d 1255, 1261 (2d Cir. 1973) (Friendly, J.), the Second Circuit concluded that, because

"this case, brought pursuant to Rule 23(b)(2), seeks prohibitory injunctive or corresponding declaratory relief against state officials. In such cases, we have noted that class action designation may be 'largely a formality' where the government 'has made clear that it understands the judgment to bind it with respect to all claimants.'"

Opinion at p. 26.

     "We therefore remand to the district court to seek a commitment from state officials to abide by a declaration in a pending case. If state officials agree, there is no need to rule on the class certification. If state officials refuse, the district court may avoid our having to decide whether the Rule 23 requirements were 'obvious[ly]' met, Shahriar [v. Smith & Wollensky Rest. Grp., Inc.], 659 F.3d [234] at 252, by making additional findings regarding the class, thereby facilitating our review."

Opinion at pp. 26-27.

Mr. Leslie Lisnitzer and the plaintiff class are represented by private practitioner Peter Vollmer and John Castellano of the Mercy Advocacy Program of Mercy Haven, Inc. Steven Wu, Deputy Solicitor General, and Blair Greenwald, Assistant Solicitor General of the New York State Attorney General represented the New York State Department of Health (DOH) and Office of Temporary and Disability Assistance (OTDA). Lewis Yelin, Senior Counsel of the Civil Division of the U.S. Department of Justice, and Alisa Beth Klein of the United States Attorney's Office in Washington, D.C. represented the United States as Amicus Curiae.

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Author: Gene Doyle, LMSW.