Rosen v. Goetz , 410 F.3d 919 ( 2005 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 05a0233p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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MICHAEL ROSEN; SANFORD BLOCH; MARK LEVINE,
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Plaintiffs-Appellees /
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Cross-Appellants,
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Nos. 05-5633/5779
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v. >
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M. D. GOETZ, JR., Commissioner, Tennessee
Defendant-Appellant/ -
Department of Finance and Administration,
Cross-Appellee. -
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Appeal from the United States District Court
for the Middle District of Tennessee at Nashville.
No. 98-00627—William J. Haynes, Jr., District Judge.
Argued: May 24, 2005
Decided and Filed: May 27, 2005
Before: COLE and SUTTON, Circuit Judges; ZATKOFF, District Judge.*
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COUNSEL
ARGUED: Charles J. Cooper, COOPER & KIRK, Washington, D.C., for Appellant. G. Gordon
Bonnyman, Jr., TENNESSEE JUSTICE CENTER, Nashville, Tennessee, Edmund L. Carey, Jr.,
BARRETT, JOHNSTON & PARSLEY, Nashville, Tennessee, for Appellees. ON BRIEF: Charles
J. Cooper, Michael W. Kirk, COOPER & KIRK, Washington, D.C., Linda A. Ross, OFFICE OF
THE ATTORNEY GENERAL, Nashville, Tennessee, Ronald G. Harris, Aubrey B. Harwell, Jr.,
NEAL & HARWELL, Nashville, Tennessee, for Appellant. G. Gordon Bonnyman, Jr., Russell J.
Overby, TENNESSEE JUSTICE CENTER, Nashville, Tennessee, Edmund L. Carey, Jr., George
E. Barrett, BARRETT, JOHNSTON & PARSLEY, Nashville, Tennessee, Andrew Dunlap, Sarah
Reynolds, KIRKLAND & ELLIS, New York, New York, Margaret M. Huff, Nashville, Tennessee,
Michael Cohan WELFARE LAW CENTER, New York, New York, for Appellees. Mark B. Stern,
Dana J. Martin, U.S. DEPARTMENT OF JUSTICE, CIVIL RIGHTS DIVISION, Washington,
D.C., for Amicus Curiae.
*
The Honorable Lawrence P. Zatkoff, United States District Judge for the Eastern District of Michigan, sitting
by designation.
1
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OPINION
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PER CURIAM. The State of Tennessee appeals a district court order enjoining it from
beginning the process of disenrolling members from its Medicaid program, which is known as
TennCare. The district court held that the State’s disenrollment procedures, which have been
approved by the federal Centers for Medicaid and Medicare Services (CMS), violate (1) a 2001
consent decree requiring compliance with certain federal Medicaid regulations and (2) the Due
Process Clause of the United States Constitution. Because the State’s procedures comply with the
applicable Medicaid regulations and with CMS’s own interpretation of those regulations and
because the State’s procedures otherwise comply with the due process requirements set forth in
Goldberg v. Kelly, 397 U.S. 254 (1970), we reverse.
I.
A.
This case has its genesis in a March 2001 consent decree entered into by the State and the
plaintiff class, which represents all beneficiaries of TennCare. The consent decree enjoins the State
from terminating, reducing or suspending the TennCare coverage of members of the
plaintiff class who are enrolled in the TennCare program, without affording such
individuals notice and an opportunity for a hearing in accordance with 42 C.F.R. Part
431, Subpart E.
JA 129. See generally Rosen v. Tenn. Comm’r of Fin. & Admin., 288 F.3d 918 (6th Cir. 2002)
(describing the litigation that led to the consent decree).
On January 10, 2005, Tennessee’s Governor, Phil Bredesen, informed the public that a
severe budgetary shortfall, together with the State of Tennessee’s constitutionally mandated
balanced budget requirement, would require the State to eliminate three of the seventeen TennCare
eligibility categories and to disenroll 323,000 beneficiaries from the TennCare program. TennCare
is the State of Tennessee’s federally approved Medicaid demonstration project, through which the
State extends health care benefits above and beyond federal requirements. See
http://www.cms.hhs.gov/medicaid/1115/tnfact.pdf (CMS fact sheet describing the TennCare
program). Due to expansions of the program since 1994, Tennessee’s Medicaid program is the
nation’s most generous, providing health care to one-fifth of the State’s population. It also has
consumed 33.9 and 33.3 percent of the State’s total spending over the last two years, the highest of
any State in the country and well in excess of the national averages (21.4 and 21.9 percent,
respectively) during those years. Current projections, according to the Governor, show that the
TennCare program’s expenses during fiscal year 2006 would (if left unchanged) increase by $650
million in state funds, a figure exceeding the State’s growth in total revenue by approximately $325
million. An increase in TennCare spending of this magnitude, the Governor concluded, would
prompt large cuts to the remainder of Tennessee’s budget—to education, transportation, public
safety and other programs—in view of Tennessee’s balanced budget requirement. See Tenn. Const.
art. II, § 24.
Within days of this announcement, the district court on its own initiative determined that the
consent decree barred the disenrollment proposal and enjoined the State from commencing the
disenrollment process, a decision that the State appealed to the Sixth Circuit on January 31, 2005.
At this point, a group of individuals successfully moved to intervene in the case on behalf of a class
of individuals who would be subject to the disenrollment proposal. While the plaintiffs-intervenors
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did not favor the TennCare changes, they took the position that the disenrollment process should not
be enjoined because immediate implementation of Governor Bredesen’s proposal would permit the
State to minimize the number of TennCare members that the State proposed to cut from the program
this year.
On April 12, 2005, at the urging of the State and the plaintiffs-intervenors, we reversed the
injunction. Rosen v. Goetz, No. 05-5202, 2005 U.S. App. LEXIS 6444 (6th Cir. Apr. 12, 2005). We
held that the district court had mistakenly assumed authority under the 2001 consent decree to limit
the State’s substantive policy choices in deciding whether to eliminate certain types of “expanded”
or “optional” Medicaid coverage, which is to say a State’s provision of Medicaid benefits that
federal law does not require participating States to provide. See 42 U.S.C. § 1315(a) (2005)
(authorizing the waiver of certain federal requirements for “demonstration” projects that “assist in
promoting the objectives” of the Medicaid system); see generally Pharm. Research & Mfrs. of Am.
v. Thompson, 313 F.3d 600, 602 (D.C. Cir. 2002). In reaching this conclusion, we noted that the
consent decree gave the district court authority to determine whether the State’s procedures for
disenrolling TennCare beneficiaries complied with Part 431 of the Medicaid regulations but did not
give it authority to question the State’s substantive policy decision whether to eliminate certain
forms of non-mandatory Medicaid coverage. See Rosen, 2005 U.S. App. LEXIS 6444, at *12–13.
B.
Consistent with this decision, the district court on remand examined whether the State’s
proposed disenrollment process complied with Part 431 of the Medicaid regulations and the Due
Process Clause. See 42 C.F.R. § 431.205(d) (2005) (requiring that a State Medicaid agency’s
hearing system “must meet the due process standards set forth in Goldberg v. Kelly, 397 U.S. 254
(1970), and any additional standards specified in this subpart”). In making this assessment, the
district court held an evidentiary hearing, which among other things allowed the State to outline the
process by which it planned to disenroll certain TennCare recipients. As early as June 1, 2005, the
State plans to begin mailing three different notices to members of the plaintiff class about the
disenrollment process: a Request for Information (RFI), a Verification Request and a Termination
Notice. All three of the notices have been written in a way that ensures they are comprehensible to
individuals who have a sixth-grade reading level. Each TennCare recipient who has not been
identified by the State as eligible to receive benefits under another Medicaid category and who is
therefore scheduled for disenrollment will receive a 14-page RFI packet. The RFI informs
beneficiaries that their eligibility category for TennCare is ending and that they may continue to
receive benefits only if they qualify for an open Medicaid category. The recipient then must
complete a 7-page form within 30 days, provide proof of income and resources, provide a statement
completed by employers and provide proof of pregnancy or special health conditions. The RFI
informs beneficiaries that the State has the discretion to extend the 30-day submission time frame
for good cause on a case-by-case basis. The point of this information exchange is to help the State
determine whether a given TennCare beneficiary is eligible for benefits under another Medicaid
program. JA 586.
If a recipient fails to complete the RFI fully, the State will send the beneficiary a Verification
Request, informing the recipient that he or she has ten extra days to respond. JA 648. If the
beneficiary does not respond at all or if the response establishes that the beneficiary is not eligible
for an open Medicaid category, the State will send a Termination Notice 20 days in advance of the
termination date that specifies the reasons why the enrollee is being terminated. The Termination
Notice will inform beneficiaries that they have 40 days in which to request a hearing to resolve
factual disputes related to termination (and that their coverage will continue until their appeal is
resolved if they appeal and request an evidentiary hearing within 20 days).
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The State will then route any requests for a hearing to the Tennessee Department of Human
Services (DHS), where an employee known as a “Conciliation Specialist” will determine whether
the hearing request is timely and whether it raises a “valid factual dispute”—which the State defines
as “a dispute, [that] if resolved in favor of the appellant, would prevent the state from taking the
adverse action that is the subject of the appeal.” D. Ct. Op. at 25. If the Conciliation Specialist
determines that there is a legitimate factual dispute about the TennCare member’s eligibility to
participate in another Medicaid program, the evidentiary hearing will go forward. Otherwise, the
appeal will be sent to another DHS employee, a “Conciliation Attorney.” If the Conciliation
Attorney also decides that there is not a “valid factual dispute” requiring an evidentiary hearing, then
the State will send the beneficiary a letter asking for additional clarification in ten days, without
which the State will not conduct a hearing. If and when the beneficiary does respond, the
Conciliation Specialist will again determine whether there is a “valid factual basis” for the
evidentiary hearing. If no such basis exists, the State will dismiss the appeal.
The State also has proposed specific procedures for accommodating the approximately
30,000 individuals slated for disenrollment who have been assessed within the past year as being
Severely and Persistently Mentally Ill (SPMI). The notice mailed to all TennCare beneficiaries asks
them whether they have a disability. If so, it offers them the use of a TennCare Partners Advocacy
Line, which SPMI individuals may call to seek advice about the disenrollment process. The letter
also notifies SPMI individuals that they may request an extension to complete the RFI or to ask for
help generally. On top of this, the State plans to attempt to identify each SPMI individual by
contacting them through the Community Mental Health Center at which they most recently received
care. The RFI also explains how SPMI individuals or beneficiaries with limited English proficiency
may seek assistance in completing the forms and in understanding the disenrollment process.
The Secretary of the United States Department of Health and Human Services has delegated
to CMS the authority to promulgate regulations implementing the Medicaid provisions of the Social
Security Act as well as to enforce them. On March 24, 2005, after several meetings with federal
officials and after modifying aspects of its disenrollment procedure in accordance with CMS’s
requirements and suggestions, CMS gave the State approval to use this disenrollment process. JA
626.
C.
On April 28, 2005, the district court held that the State’s proposed termination procedures
violated federal Medicaid regulations and the Due Process Clause of the Fourteenth Amendment.
It identified the following deficiencies in the State’s disenrollment procedure:
1. The State’s failure to inform enrollees of an extension of the 30 day period by the
State in the request for information form violates the Plaintiffs’ procedural due
process rights and 42 C.F.R. § 431.210(a)–(c).
2. Absent additional proof, the State’s notices to SPMI enrollees violate those
enrollees’ procedural due process rights and 42 C.F.R. § 431.210.
3. The State’s verification request violates due process by failing to display
prominently the acceptability of alternative forms of proof of eligibility.
4. The State’s notices of termination violate due process by failing to disclose the
specifics of any defect in the enrollee’s response and failing to give adequate notice
in its description of the appeal process.
5. The State’s hearing and appeals procedures violate due process and 42 C.F.R.
§ 431.220(a).
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6. The State’s hearing procedure violates due process and 42 C.F.R. §§ 431.221 and
431.242 by failing to provide a hearing unless the beneficiary responds to a request
for clarification.
7. The State violates due process by failing to provide a neutral and impartial hearing
officer.
8. The State’s unfunded protocol to provide accommodations for SPMI enrollees
violates the district court’s earlier ruling in Rosen v. Tenn. Comm’r of Fin. & Admin.,
280 F. Supp. 2d 743, 832–34 (M.D. Tenn. 2002).
See D. Ct. Order at 1–2.
In a later order, the district court clarified that it was holding that all appeals must be heard
by an administrative law judge from the Tennessee Secretary of State’s office and that the State
could not deny hearings simply because a TennCare recipient failed to submit a completed
information form. (That order was separately appealed and has been consolidated with this appeal.)
In response, the State explained to the district court that neither the Medicaid regulations nor the
Constitution required these modifications and that they would potentially require a hearing for all
323,000 of the disenrolled beneficiaries, a process that would deny the State the needed savings to
balance the budget and would scuttle the State’s (and plaintiffs-intervenors’) efforts to minimize the
number of disenrolled beneficiaries. Because the State refused voluntarily to comply with its order,
the district court enjoined the State from sending out notices beginning the termination process.
As these proceedings were ongoing in the district court, the State and plaintiffs-intervenors,
along with two hospital associations and several safety-net hospitals, entered into a Memorandum
of Understanding (MOU) on April 26, 2005. Under the terms of the MOU, the State proposes to
continue medical coverage for 97,000 to 100,000 medically needy persons over the next two years
through a new Waiver-Based Spend Down Program. Among approximately two dozen conditions,
the MOU was made contingent on (1) approval of additional funds by the Tennessee legislature, (2)
timely and favorable rulings in this case and (3) a successful effort to modify a consent decree in
Grier v. Goetz, No. 79-3107 (M.D. Tenn.), see Rosen, 2005 U.S. App. LEXIS 6444, at *13, which
places substantive restrictions on the State’s ability to alter certain Medicaid benefit levels.
On May 6, 2005, at the urging of the State and the plaintiffs-intervenors, we stayed the
district court’s injunction and expedited consideration of the appeal. The State does not challenge
and has agreed to comply with two of the district court’s eight conclusions quoted above—its
requirement that the RFIs disclose that enrollees may take an additional 10 days to supplement
incomplete information (conclusion one of the district court’s decision) and its requirement that the
Verification Request form disclose the acceptability of alternative forms of proof of eligibility
(conclusion three of the district court’s decision). And plaintiffs do not defend conclusion eight of
the district court’s decision. The remaining bases for the district court’s injunction fall into three
broad categories: those concerning the State’s procedures with respect to evidentiary hearings, those
concerning the content of the Termination Notices and those concerning the accommodation of
SPMI beneficiaries. For the reasons that follow, we reverse.
II.
A.
In defending the district court’s decision, the plaintiffs first argue that the State, when
eliminating a non-mandatory Medicaid program, must provide all recipients a pre-termination
hearing to determine whether they remain eligible for coverage under another Medicaid program.
We disagree.
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In relevant part, the Medicaid regulations in Part 431 provide that:
(a) The State agency must grant an opportunity for a hearing to the following:
...
(2) Any recipient who requests it because he or she believes the agency has taken an
action erroneously.
...
(b) The agency need not grant a hearing if the sole issue is a Federal or State law
requiring an automatic change adversely affecting some or all recipients.
42 C.F.R. § 431.220. These provisions apply where, as here, a State takes an “action,” which the
regulations define as “a termination, suspension, or reduction of Medicaid eligibility or covered
services.” Id. § 431.201.
As the plaintiffs see it, the exception to the hearing requirement (§ 431.220(b)) does not
apply when the State proposes to eliminate one Medicaid program and a beneficiary claims
continued eligibility under another program, even if the beneficiary fails to allege a “valid factual
dispute” about her eligibility for this other form of Medicaid coverage. All beneficiaries threatened
with disenrollment, in other words, are entitled to a hearing—so long as they request one. As the
State sees it, the government need not provide hearings to beneficiaries who have failed to raise a
“valid factual dispute” about their eligibility for coverage under another Medicaid program.
We accept the State’s reading of the regulations for several reasons. For one reason, no party
has argued that this interpretation exceeds the agency’s authority under the pertinent statute. See
42 U.S.C. § 1302(a) (2005) (authorizing the Secretary of Health and Human Services to “make and
publish such rules and regulations, not inconsistent with this chapter, as may be necessary to the
efficient administration of [his or her] functions”). For another reason, this approach plausibly
interprets the language of the regulations. The regulations grant a broad right to an evidentiary
hearing (when a recipient believes that the agency has “taken an action erroneously” in terminating
benefits, § 431.220(a)(2)) and impose a broad limitation on that right (when the sole issue is a law
“requiring an automatic change” in benefits, § 431.220(b)). An interpretation of the regulations that
invariably respects a recipient’s claim that “erroneous[]” action has been taken, even when the
termination of benefits arises solely from a change in state or federal law, necessarily slights the
provision stating that a hearing need not be given in the face of “an automatic change” in benefits.
By contrast, a reading of the regulations that draws a dichotomy between impermissible challenges
to a State’s legal or policy judgment on the one hand and permissible challenges to the relevant facts
or application of law to a given beneficiary respects both regulations.
For still another reason, this reading adheres to precedent. In construing a predecessor
version of these regulations, we have held that “matters of law and policy,” as opposed to matters
of fact or the application of law, “are not subject to any hearing requirements under the applicable
regulations, whether the hearing be pre- or post-reduction.” Benton v. Rhodes, 586 F.2d 1, 3 (6th
Cir. 1978) (holding that “when a state decides to terminate optional benefits on the basis of lack of
appropriated funds, or for any other state reason, this is a matter of state law or policy which it was
permitted to adopt”).
All of this is prelude, however, to the principal explanation for our decision. In interpreting
these regulations and in ascertaining whether the State has complied with them, we do not write on
a blank slate. CMS, the agency that authored and promulgated the regulations, has approved the
State’s policies as fully compliant with its regulations, a determination to which we owe “substantial
No. 05-5633 Rosen, et al. v. Goetz Page 7
deference.” Air Brake Sys., Inc. v. Mineta, 357 F.3d 632, 646 (6th Cir. 2004); see also id. at 643–44
(holding that an “agency’s interpretation of its own regulation is entitled to ‘controlling weight
unless it is plainly erroneous or inconsistent with the regulation’”) (quoting Bowles v. Seminole Rock
& Sand Co., 325 U.S. 410, 414 (1945)); St. Francis Health Care Ctr. v. Shalala, 205 F.3d 937,
943–44 (6th Cir. 2000) (giving deference to CMS manual); Auer v. Robbins, 519 U.S. 452, 461
(1997); see also S.D. ex rel. Dickson v. Hood, 391 F.3d 581, 595–96 (5th Cir. 2004) (“As the agency
entrusted with the administration of the Medicaid statute, CMS is required to determine that each
state plan is in conformity with the specific requirements of the Medicaid act.”); Cmty. Health Ctr.
v. Wilson-Coker, 311 F.3d 132, 134 (2d Cir. 2002) (CMS “reviews each plan to assure that it
complies with a long list of federal statutory and regulatory requirements”); Pharm. Research &
Mfrs. of Am., 362 F.3d at 822.
CMS has conveyed its interpretation of these regulations in three ways. First, it reviewed
and expressly approved the State’s proposed disenrollment process, including its hearing and
appeals procedures. See JA 628 (approving, contingent on compliance with enclosed procedures,
Tennessee’s requests for eligibility amendments to TennCare); see also id. at 645 (listing as one of
those procedures that “the State will grant hearings only for those enrollees raising valid factual
disputes related to the termination”). Second, at our invitation, it filed an amicus curiae brief in this
case, explaining that Tennessee’s proposed procedures are consistent with its regulations. “By
permitting a hearing when an enrollee raises a valid factual dispute,” CMS writes, “the proposed
procedures ensure that an enrollee will receive a hearing to contest factual matters pertaining to their
particular eligibility to continued enrollment” but “relieve[] the state agency of the need to provide
pro forma hearings for those enrollees who are . . . challenging only the program-wide changes that
automatically end their enrollment eligibility.” CMS Br. at 20–21. Third, CMS’s Medicaid manual
for state agencies expressly embraces this interpretation. See CMS State Medicaid Manual § 2902.4
(instructing States to “[d]etermine whether the appeal involves issues of law or policy, or issues of
fact or judgment. The decision will affect whether a hearing is granted and whether Medicaid will
be continued pending the hearing decision”), available at
http://www.cms.hhs.gov/manuals/45_smm/pub45toc.asp.
Soskin v. Reinertson, 353 F.3d 1242 (10th Cir. 2004), is not to the contrary. In Soskin, the
State of Colorado proposed an elimination of Medicaid coverage for legal aliens living in the State
and determined that it would deny hearings in all cases in which an affected beneficiary claimed that
the disenrollment was in error, without regard to whether the beneficiary could establish a valid
factual dispute about eligibility for coverage or not. Here, by contrast, the State will grant hearings
to affected beneficiaries so long as they raise a valid factual dispute about their continued eligibility
for coverage, as opposed to a mere challenge to the change in law or policy. Consistent with this
approach, Soskin itself distinguished our decision in Benton on this precise ground. See 353 F.3d
at 1263 (distinguishing Benton on the ground that “the sole issue” in that case “was legal, not
dependent upon the factual circumstances of individual recipients”). No less importantly, the
plaintiffs in Soskin did not take on the daunting task that the plaintiffs seek to shoulder here—asking
us to override CMS’s interpretation of its own administrative regulations.
B.
Plaintiffs respond that this interpretation of the regulations would violate the constitutional
due process requirements set forth in Goldberg v. Kelly, 397 U.S. 254 (1970). See 42 C.F.R.
§ 431.205(d) (requiring that a State Medicaid agency’s hearing system “must meet the due process
standards set forth in Goldberg v. Kelly, 397 U.S. 254 (1970), and any additional standards specified
in this subpart”); cf. Shepard v. United States, 125 S. Ct. 1254, 1263 (2005) (interpreting statute to
avoid “serious risks of unconstitutionality”). Due process, it is true, requires “the opportunity to be
heard . . . at a meaningful time and in a meaningful manner” before the termination of public
assistance payments. Goldberg, 397 U.S. at 267 (quotations and citations omitted). But, at the same
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time, “[d]ue process is flexible and calls for such procedural protections as the particular situation
demands.” Mathews v. Eldridge, 424 U.S. 319, 334 (1976) (quoting Morrissey v. Brewer, 408 U.S.
471, 481 (1972)). In this instance, plaintiffs have not shown that the requirement of establishing a
valid factual dispute before being entitled to a hearing violates due process.
Goldberg, to start with, does not sustain the plaintiffs’ position. In that case, the Court
declined to reach the issue of “whether due process requires only an opportunity for written
submission, or an opportunity both for written submission and oral argument, where there are no
factual issues in dispute or where the application of the rule of law is not intertwined with factual
issues.” Goldberg, 397 U.S. at 268 n.15 (emphasis added).
And since Goldberg, the Court has explained that the due process requirement that the
government provide a hearing before the termination of benefits turns on the sensible fact/law
dichotomy that CMS, the State and Benton have drawn. In order for “the hearing mandated by the
Due Process Clause [ ] to serve any useful purpose, there must be some factual dispute between an
employer and a discharged employee which has some significant bearing on the employee’s
reputation.” Codd v. Velger, 429 U.S. 624, 627 (1977) (holding that evidentiary hearing was
unnecessary where a discharged employee did not raise a factual dispute about the terms of his
discharge).
In a more general way, Mathews v. Eldridge also supports the State’s and CMS’s position,
as it reminds courts to consider “the fairness and reliability of the existing pretermination
procedures, and the probable value, if any, of additional procedural safeguards.” 424 U.S. at 343.
“[P]rocedural due process rules,” after all, “are shaped by the risk of error inherent in the
truthfinding process as applied to the generality of cases, not the rare exceptions.” Id. at 344. And
“the cost of protecting those whom the preliminary administrative process has identified as likely
to be found undeserving may in the end come out of the pockets of the deserving since resources
available for any particular program of social welfare are not unlimited.” Id. at 348; see generally
Henry J. Friendly, Some Kind of Hearing, 123 U. Pa. L. Rev. 1267 (1975).
In applying this pragmatic approach, Mathews upheld “carefully structured procedures” that
permitted the Secretary of Health, Education and Welfare to disenroll individuals from Social
Security’s disability benefits program without a hearing. Id. at 346. Among other protections, the
government relied on the following to guard against erroneous terminations of benefits: (1) a
“detailed questionnaire . . . identifying with particularity the information relevant to the entitlement
decision,” (2) the “recipient [was] invited to obtain assistance from [a] local [ ] office in completing
the questionnaire,” (3) “the information critical to the entitlement decision usually is derived from
medical services” and was “communicate[d] more effectively through written documents” than oral
presentations and (4) the “[o]pportunity [was] then afforded the recipient to submit additional
evidence or arguments, enabling him to challenge directly the accuracy of information in his file.”
Id. at 345–46.
No less than the procedures at issue in Mathews, Tennessee’s procedures are “carefully
structured” to determine who should receive a hearing and who should not. The State, as an initial
matter, has culled its own records to ensure that individuals eligible for an open Medicaid program
are not disenrolled when the State eliminates three categories of TennCare coverage. After this
initial review, the State asks affected TennCare recipients for information that would indicate
whether they are eligible for another Medicaid program, asks for that information again and at all
points permits a request for a hearing if a beneficiary presents a “valid factual dispute” about their
continued eligibility for coverage. In implementing this “valid factual dispute” inquiry, the State
has assured us, (1) a recipient will not be required to establish Medicaid eligibility in order to be
entitled to a hearing and (2) a recipient will be entitled to all reasonable inferences, in other words
the benefit of the doubt, in determining whether a material fact dispute has been established or
No. 05-5633 Rosen, et al. v. Goetz Page 9
whether a material dispute about the application of the regulations to a given fact pattern has been
established. These “good-faith judgments,” id. at 349, are a far cry from the complete absence of
any similar protections in Goldberg and suffice to establish the constitutionality of CMS’s and the
State’s interpretation of the Medicaid regulations.
C.
The plaintiffs’ other contentions relating to the hearing procedure also come up short. They
next challenge the State’s requirement that potential disenrollees fill out information forms in order
to retain eligibility in another Medicaid category. But what else is the State to do? The State
initially plans to review TennCare records on its own to determine whether a disenrolled individual
is eligible for another form of Medicaid coverage. If eligibility is established, the individual will
receive continued coverage. If State records fail to identify a basis for continued coverage, the State
must obtain information from the individual to ascertain whether another form of coverage applies.
Plaintiffs have failed to identify any Medicaid regulations, or for that matter any CMS
interpretations of those regulations, that support a contrary view.
Nor is this approach inconsistent with Soskin. There, the State refused to grant a hearing to
an individual who failed to return the requested information even if the individual raised a fact
dispute about the request—for example, whether it had been sent to the individual. See Soskin, 353
F.3d at 1263 (noting that individuals would not receive hearings if they “assert[ed] that they did
return the form but that the county lost it or failed to process it” or asserted “that they never received
either of the two redetermination forms that the county allegedly mailed”). Here, the State concedes
that individuals who establish a valid factual dispute about the request for information—for
example, whether they ever received it—may obtain a hearing to resolve the issue. See JA 645
(defining “valid factual disputes” to include circumstances in which the State sent the Expiration
Notice to the wrong address, the enrollees received the Expiration Notice in error, the State failed
timely to process information submitted by the enrollee or the State granted a good cause extension
of time but failed to extend the time).
Plaintiffs are similarly mistaken in contending that the State has violated the Medicaid
regulations by using DHS attorneys to decide whether an enrollee raises a valid factual dispute.
Section 431.230(a) of the regulations, the plaintiffs rightly point out, provides that a hearing officer
may “determine[] at the hearing that the sole issue is one of Federal or State law or policy.”
(Emphasis added.) But § 431.220(b) explicitly says that “[t]he agency need not grant a hearing if
the sole issue is a Federal or State law requiring an automatic change adversely affecting some or
all recipients,” without specifying who makes that decision. (Emphasis added.) The plaintiffs’
argument that only the hearing officer may make that decision reads out of the regulations
§ 431.220(b) and the State’s ability, before a hearing, to determine whether “the sole issue is a
Federal or State law requiring an automatic change.” The two provisions simply are not mutually
exclusive. That a hearing officer may decide “at the hearing,” see § 431.230(a), that a hearing is no
longer required does not preclude the State from delegating to another state employee the screening
task of determining whether “[t]he agency need not grant a hearing,” see § 431.220(b), in the first
instance.
Relatedly, the district court found fault with the State’s procedure because it did not require
this screening function to be performed by attorneys from another state agency—for example,
administrative law judges employed by the Tennessee Secretary of State. The plaintiffs do not
defend this aspect of the district court’s decision—and correctly so. As CMS points out, the relevant
statutes require that state Medicaid plans “provide for the establishment or designation of a single
State agency to administer or to supervise the administration of the plan,” 42 U.S.C. § 1396a(a)(5),
and provide that the state plan must “provide for granting an opportunity for a fair hearing before
the State agency,” 42 U.S.C. § 1396a(a)(3). CMS, to its credit, has identified one potential wrinkle
No. 05-5633 Rosen, et al. v. Goetz Page 10
in the hearing process—namely, whether the DHS attorney who performs this screening function
is employed by the single state agency that administers the TennCare program. See CMS Br. at 25
n.9. Neither the plaintiffs nor the district court registered a complaint about this aspect of the
program, and the State assured us at oral argument that it would work with CMS to address and, if
necessary, resolve this issue.
Nor, contrary to plaintiffs’ suggestion, has there been any showing that the DHS attorneys
who will screen the request have a conflict of interest at this stage of the litigation or that there is
any other reason why administrative law judges or attorneys from another state agency must handle
this fact-dispute screening function. Until proven otherwise, the Supreme Court has explained, we
must start with the assumption that government employees tasked with performing an adjudicatory
or quasi-adjudicatory function will do so fairly and impartially. See Schweiker v. McClure, 456 U.S.
188, 196–97 (1982) (holding that courts “must start [ ] from the presumption that [ ] hearing officers
. . . are unbiased”); Navistar Int’l Transp. Corp. v. EPA, 941 F.2d 1339, 1360 (6th Cir. 1991). CMS
also did not find fault with this aspect of the disenrollment procedure when it approved the State’s
plan and its State Medicaid Manual appears to countenance this type of procedure. See CMS Br.
at 26; see also CMS State Medicaid Manual § 2902.7 (The “State official or panel conducting the
hearing shall not have been connected in any way with the previous actions or decisions on which
the appeal is made. For example, a field supervisor who has advised the local agency in the
handling of a case would be disqualified from acting as the hearing officer, however a different field
supervisor could serve.”) (emphasis added).
III.
The plaintiffs next argue that the contents of the Termination Notice violate Part 431 and
their due process rights by failing to provide specific, individualized reasons supporting the agency’s
conclusions. We disagree.
The applicable regulations establish that the Termination Notices must include (1) “[a]
statement of what action the State . . . intends to take”; (2) “[t]he reasons for the intended action”;
(3) “[t]he specific regulations that support, or the change in Federal or State law that requires, the
action”; (4) “[i]n cases of an action based on a change in law, the circumstances under which [an
evidentiary] hearing will be granted”; (5) and “[a]n explanation of the circumstances under which
Medicaid is continued if a hearing is requested.” 42 C.F.R. § 431.210. The Termination Notices
include all of this information and accordingly comply with this regulation. In attempting to counter
this point, plaintiffs argue that the notices do not say that TennCare members will receive a hearing
whenever one is requested, regardless of whether a valid factual dispute is alleged. But, as shown,
the regulations do not require hearings in that kind of a setting and accordingly the notices need say
no such thing.
Plaintiffs persist that, even if the Termination Notices comply with the letter of the
regulations, they fail to satisfy the due process requirements of Mullane v. Central Hanover Bank
& Trust Co., 339 U.S. 306, 314 (1950) (notice “reasonably calculated, under all the circumstances,
to apprise interested parties of the pendency of the action and afford them an opportunity to present
their objections”), because they do not include sufficiently specific facts—apparently because they
do not inform TennCare members both why they are being disenrolled and why they are not eligible
for benefits under another Medicaid program. But the very facts that the plaintiffs claim are missing
are supplied by the State through a second letter that follows the Termination Notice and that the
Termination Notice itself references and brings to the attention of recipients. See Garrett v. Puett,
707 F.2d 930 (6th Cir. 1983). Due process does not require “reasonably calculated” notice to come
in just one letter, as opposed to two.
No. 05-5633 Rosen, et al. v. Goetz Page 11
IV.
Plaintiffs, finally, argue that the State violates the Mullane due process requirement, 339 U.S.
at 314, by “proposing the same fourteen-page RFI for the SPMI population as it proposes for all
other recipients.” Plaintiff Br. at 40. But the fact that SPMI individuals receive the same notice as
other recipients does not in and of itself raise due process concerns if that notice, however widely
distributed, is “reasonably calculated” to inform SPMI enrollees of the pending process.
Plaintiffs’ case citations also do not support this argument. In Covey v. Town of Somers, 351
U.S. 141 (1956), the Court identified a due process violation where the State provided notice of
judicial foreclosure through simple mailing and nothing more, “[a]lthough [the taxpayer] was known
by the officials and citizens of the Town of Somers to be a person without mental capacity to handle
her affairs or to understand the meaning of any notice served upon her, [and] no attempt was made
to have a Committee appointed for her person or property until after entry of the judgment of
foreclosure in this proceeding.” Id. at 146. And in Parker v. Califano, 644 F.2d 1199 (6th Cir.
1981), this court remanded a due process claim for further consideration when a social security
applicant with mental illness received a standard denial of benefits notice requiring her to file an
appeal within six months, with no notice accommodations to account for her mental illness. See id.
at 1200, 1203.
Here, however, the RFI seeks to account for SPMI enrollees and non-SPMI enrollees alike.
The RFI’s cover letter includes this passage: “Do you have a mental illness? The TennCare
Partners Advocacy Line can help you. Call them for free at 1-800-758-1638.” JA 405. And on
page 13 of the RFI, under the section entitled “Do you need special help?” it states: “Do you have
a disability, learning problem, or mental health problem? If you need any help with TennCare, call
the Family Assistance Service Center. . . . [providing phone numbers].” Id. Nor does the State wait
to receive a phone call to assist an SPMI enrollee with the response process. As the district court
noted:
For each SPMI enrollee, TennCare and DMHDD [Tennessee’s Department of
Mental Health and Developmental Disabilities] will identify the Community Mental
Health Center (“CMHC”) which most recently provided services to the enrollee. The
DMHDD will also provide this information to the TennCare Partners Advocacy Line
(“TPAL”). TPAL informs the CMHCs in advance of those SPMI enrollees who will
be receiving requests for information. Thus, the CMHC[] is expected to expedite an
outreach for the response process.
The state will rely on TPAL and [CMHCs] to [contact] all enrollees who are
legally designated SPMI so as to enable those enrollees to navigate the eligibility
process. . . . If a CMHC is unable, unwilling, or unavailable to perform outreach for
any reason, then TPAL will perform that function.
JA 403–04 (citations omitted).
Plaintiffs also argue that the 30-day period for responding to the RFI is too short for
members of the SPMI population. But that is just the initial response period. As the RFI makes
clear, SPMI individuals may freely seek extensions of the response period. On top of that, the 30-
day period for responding to the RFI is more than four times the seven-day period permitted by
Goldberg, 397 U.S. at 268, three times the ten-day period required by regulation, 42 C.F.R.
§ 431.211, and equals or exceeds the periods afforded by other States, see JA 492 (noting that
Illinois provides only 21 days for return of a form to reverify eligibility and Missouri provides 10
days). On this record and under these circumstances, the express accommodations provided by the
No. 05-5633 Rosen, et al. v. Goetz Page 12
RFI together with the State’s specific outreach to the SPMI population satisfy the Mullane
“reasonably calculated” standard.
*****
In reaching these conclusions, it is not lost on us that the implementation of the State’s
disenrollment process will cause hardship for numerous Tennesseans. When a State to its credit
achieves the status of becoming one of the most generous providers of Medicaid services in the
nation, it may occasionally happen that the zero-sum fiscal realities of administering a state budget
will prohibit the State from sustaining that level of support. If that should happen, it is not for the
federal courts to compel the State to maintain non-mandatory Medicaid programs that it no longer
can support. So long as the State’s disenrollment process satisfies the requirements of the Medicaid
regulations and statute, any relevant consent decrees and the Constitution, those policy choices must
be left to the elected representatives of the residents of the State.
In addressing whether the State’s disenrollment procedures satisfy these requirements, we
have concluded that on their face and with respect to all of the SPMI population they indeed satisfy
them. See United States v. Salerno, 481 U.S. 739, 745 (1987) (holding that in a facial challenge
plaintiffs must show that “no set of circumstances exists” under which the statute can be
implemented constitutionally). That conclusion, however, does not prohibit an individual TennCare
recipient, who is not treated in accordance with these requirements or for whom it is uniquely
inappropriate to apply these requirements, from bringing a specific as-applied challenge to the
disenrollment process. See Overton v. Bazzetta, 539 U.S. 126, 137 (2003). We resolve only whether
these procedures may be applied to TennCare recipients in general or to the SPMI population as a
whole.
Throughout this appeal, plaintiffs have urged us to ignore the MOU and the 100,000 or so
TennCare recipients that may be spared the hardship of initial disenrollment if the State is allowed
expeditiously to proceed with its proposed changes to the TennCare program. In their view, the
MOU contains numerous speculative conditions and is otherwise unenforceable in its current state.
In expediting this appeal and in expediting the decision below, the federal courts have strived to
eliminate one of those conditions. And whether the MOU happens to be an enforceable agreement
need not detain us at this point. A State that chooses to be one of the most generous in the country
in providing non-mandatory Medicaid services strikes us as an improbable candidate for backing
out of such a commitment in bad faith. And elected officials who choose to play fast and loose with
such an agreement, we suspect, would face more risks than any federal lawsuit can bring.
For these reasons, we reverse.