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K.W. v. Armstrong

United States Court of Appeals, Ninth Circuit

June 5, 2015

K. W., by his next friend D.W.; C. M.; C. L.; A. L., through her guardian E.B.; K. S., through his next friend S.S.; M. S., through his guardian V. S.; N. R., through her next friend G.R.; T. F., through her guardian R.F.; T. M., through his guardian T.W.; B. B., through his next friend D.B.; R. P., through her guardian T.P.; M. S., through her guardian D.S.; E. L.; TOBY SCHULTZ, by and through his legal guardian Jana Schultz on behalf of himself and all others similarly situated; BREANNA MULLIC, by and through her legal guardian Brenda Passmore; CALEB HALL, by and through his next friend Melanie Hall, Plaintiffs-Appellees,
v.
RICHARD ARMSTRONG, in his official capacity as Director of the Idaho Department of Health and Welfare; LISA HETTINGER, in her official capacity as Medicaid Administrator of the Idaho Department of Health and Welfare; IDAHO DEPARTMENT OF HEALTH AND WELFARE, a department of the State of Idaho, Defendants-Appellants

Argued and Submitted, Portland, Oregon November 18, 2014

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[Copyrighted Material Omitted]

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Appeal from the United States District Court for the District of Idaho. D.C. Nos. 1:12-cv-00022-BLW, 3:12-cv-00058-BLW. B. Lynn Winmill, Chief District Judge, Presiding.

SUMMARY[*]

Medicaid Act

The panel affirmed the district court's order expanding a preliminary injunction forbidding the Idaho Department of Health and Welfare from decreasing the individual budgets of participants in and applicants to Idaho's Developmental Disabilities Waiver program without adequate notice.

The DD Waiver program supplants traditional Medicaid plan services for Idaho beneficiaries with home-based support services. The plaintiffs allege that the budget-decrease notices that the Department sent violated both the Due Process Clause and the fair hearing requirements of the Medicaid Act.

The panel held that the dispute was ripe for resolution because the plaintiffs alleged that they suffered a deprivation of services without adequate notice when their budgets were decreased, and thus felt the effects of the Department's actions in a concrete way.

The panel affirmed the district court's order expanding the preliminary injunction to cover a subsequently-certified plaintiffs' class. The panel held that the district court did not abuse its discretion in finding that the plaintiffs were likely to succeed on the merits of their claims under the Due Process Clause and the Medicaid Act. The panel rejected the Department's argument that the preliminary injunction violated the Eleventh Amendment by awarding retrospective relief against the state.

The panel held that it lacked pendent jurisdiction to review the district court's order denying the Department's motion to approve a proposed revised budget notice to the class because this order was not inextricably intertwined with whether the district court abused its discretion in expanding the preliminary injunction.

Concurring in part and dissenting in part, Judge Clifton wrote that the panel had pendent jurisdiction over the district court's denial of the Department's motion to approve a proposed revised notice because if the revised notice were adequate, then the plaintiffs would not have established an ongoing violation, and there would have been no good reason to extend the preliminary injunction.

Cynthia Yee-Wallace (argued), Clay R. Smith, and W. Scott Danzig, Deputy Attorneys General, Office of the Attorney General, Boise, Idaho, for Defendants-Appellants.

Richard Alan Eppink (argued), American Civil Liberties Union of Idaho Foundation, Boise, Idaho; James Piotrowski, Herzfeld & Piotrowski, LLP, Boise, Idaho, for Plaintiffs-Appellees.

Before: Richard R. Clifton, Milan D. Smith, Jr., and Andrew D. Hurwitz, Circuit Judges. Opinion by Judge Milan D. Smith, Jr.; Partial Concurrence and Partial Dissent by Judge Clifton.

OPINION

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M. SMITH, Circuit Judge

Richard Armstrong, in his official capacity as Director of the Idaho Department of Health and Welfare, Lisa Hettinger, in her

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official capacity as Medicaid Administrator of the Idaho Department of Health and Welfare, and the Idaho Department of Health and Welfare (collectively, Department), appeal from the district court's order expanding a preliminary injunction forbidding the Department from decreasing the individual budgets of a class of participants in and applicants to Idaho's Developmental Disabilities Waiver program (DD Waiver program) without adequate notice. The Department also seeks review of the district court's order denying its motion to approve a proposed Budget Notice to the class.

On appeal, the Department argues that the Plaintiffs' claims are not ripe because calculating a lower individual budget does not trigger the fair hearing provisions of the Medicaid Act, 42 U.S.C. § 1396a(a)(3); 42 C.F.R. § 431.206, or deprive a participant of property under the Due Process Clause, U.S. Const. amend. XIV, § 1. The Department also argues that the Plaintiffs failed to show that they were likely to succeed on the merits of their claims and that the injunction violated the Eleventh Amendment.

We affirm the district court's extension of the preliminary injunction to the class and hold that we lack pendent jurisdiction to review the order regarding the proposed notice.

FACTUAL AND PROCEDURAL BACKGROUND

I. Factual Background

The Medicaid Act allows states to apply for a waiver to provide home- and community-based services to developmentally disabled Medicaid beneficiaries to help them avoid institutionalization. See 42 U.S.C. § 1396n; 42 C.F.R. § 440.180. The federal government has approved Idaho's DD Waiver program, which supplants traditional Medicaid plan services for Idaho beneficiaries with homebased support services, including residential habitation services, chore services, supported employment, non-medical transportation, specialized medical equipment, home delivered meals, and skilled nursing. Idaho Admin. Code. r. 16.03.10.700. As of July 2013, there were 3,288 participants in the DD Waiver program.

The Department assigns each DD Waiver program participant an individualized budget. The budget is set " according to an individualized measurement of the participant's functional abilities, behavioral limitations, and medical needs, related to the participant's disability." Id. r. 16.03.10.514. Participants select the services they wish to receive by crafting an annual " plan of service" based on their individualized budgets. Id. r. 16.03.10.513.

The Plaintiffs represent a class of participants in and applicants to the DD Waiver program. They allege that the Department failed to give adequate notice when their individualized budgets were decreased. The Plaintiffs contend that the notices the Department sent violated both the Due Process Clause and the fair hearing requirements of the Medicaid Act.

A. Eligibility and Annual Reevaluation

To be eligible for DD Waiver program services, an adult Medicaid participant must have a developmental disability impairing mental or physical function or independence. See id. rr. 16.03.10.500, .501, .700. Those interested in receiving DD Waiver services must submit an application, and current participants are reassessed annually to determine whether they remain eligible. During the annual reevaluations, the Department administers several assessments to determine a participant's eligibility and level of need.

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B. Budget Calculation and Notice

If the Department determines that an individual is eligible for services, it must calculate the participant's individualized budget. See id. rr. 16.03.10.513., .514. To do so, the Department enters information gathered during the participant's assessments into an Adult Budget Calculation Tool (Budget Tool). The Budget Tool is a statistical model designed to predict a participant's needs based on the participant's characteristics. Once the Department has calculated a participant's budget for the upcoming plan year, it sends a Budget Notice to the participant confirming eligibility and specifying the budget amount. The Budget Notices the Department sent in 2011 (2011 Budget Notices) are the subject of this dispute.

C. The Service Plan

If the participant does not appeal the calculated budget, the participant works with a plan developer or support broker to submit a service plan to the Department. The service plan lists the type and frequency of services and outlines their cost relative to the participant's calculated budget.

After the participant submits a service plan, the Department determines whether it meets the needs of the participant, safeguards the participant's health and safety, and is within the calculated budget. If the plan is inadequate or over-budget, the Department may refer the plan back to the developer for adjustment. If the plan still does not meet the participant's needs or is not within budget, the Department may either authorize some of the services or deny all of the services in the plan.

In such cases, the Department notifies the participant about which services, if any, were approved. The participant may then request an administrative appeal within 28 days. If a participant requests an appeal, a hearing officer is appointed and a hearing is held. The hearing officer may not approve eligibility, modify the budget, or approve denied services. Rather, the hearing officer may only uphold the Department's decision or remand to the Department to update assessment documents, recalculate a participant's budget, or reexamine a service denial. If the participant or the Department disagrees with the hearing officer's decision, either may seek a Director's Review. The Director's decision may be appealed to the district court.

The approved and finalized cost of services in the service plan becomes the participant's authorized budget. A participant may change his service plan with the Department's approval, but may not spend more than his calculated budget.

D. 2011 Changes to the Budget Tool

The Department periodically evaluates and adjusts its Budget Tool. In July 2011, the Department made several changes to the Budget Tool in a purported effort to capture a participant's " living situation." Although the record does not disclose exactly how the 2011 changes accounted for " living situation," it makes clear that a number of the changes were dramatic.

First, the weights assigned to the variables--the inputs from the various assessments used to calculate the budget--changed. Second, some previous variables were dropped entirely. For example, before July 2011, " needing assistance with mobility" was a weighted variable used to calculate budgets; it no longer is.[1]

Additionally, the constant coefficient used in the Budget Tool changed. The constant coefficient before July 2011 was $54,965.65. After " living situation" became

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a weighted variable, the constant coefficient decreased ...


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