Major Developments in NCLEJ Litigation Since 2002

From July 2001 Welfare News

Victory for New York City Poor: Far Reaching Settlement Prohibits Termination 
of Medicaid for TANF and GA Recipients Sanctioned for Allegedly
Violating Welfare-to-Work Requirements and Mandates Restoration of Assistance.

In a sweeping victory for New York City’s poor, the City and State of New York have agreed to discontinue their illegal practice of terminating the Medicaid benefits of TANF and general assistance recipients whose cash assistance is terminated for allegedly violating welfare-to-work requirements.  The settlement also provides for retroactive relief for the class, extensive monitoring, notice, and attorneys’ fees.  This article discusses the background of the case, the scope of relief obtained, and the significance of the settlement.

Background

The 1996 Personal Responsibility and Work Opportunity Reconciliation Act (“PRA”), which terminated the Aid to Families with Dependent Children (“AFDC”) program and replaced it with the Temporary Assistance to Needy Families (“TANF”) block grant, also contains many Medicaid-related changes despite leaving intact the basic structure of the Medicaid program as a joint state-federal entitlement.¹  The principal change is that receipt of assistance under the TANF-funded program no longer automatically qualifies people for Medicaid.  Rather, Medicaid eligibility remains tied to the AFDC eligibility rules that were in effect on July 16, 1996.²   Thus, in general, people who would have qualified for AFDC under the rules in effect in their state on July 16, 1996, remain eligible for Medicaid regardless of whether they are currently eligible for TANF cash assistance. 

Under the PRA, the States were also given the option of terminating Medicaid coverage for adults whose TANF cash assistance is terminated for failure to meet a work program requirement.  Regardless of whether the state chooses this option, the PRA specifically forbids terminating the Medicaid of children who are not heads of household for reasons pertaining to a TANF work program violation.

As part of New York State’s implementation of its TANF plan, the legislature and the governor agreed to fully de-link Medicaid entitlement from cash assistance work program rules.  As a result of this agreement, state legislation passed in 1997 provides that  if a TANF or state-funded public  assistance recipient is sanctioned for failing to satisfy a work program requirement, she may not be terminated from Medicaid so long as a basis for Medicaid eligibility exists.   However, despite the clear legislative mandate,  New York City failed to implement the change and continued to close the Medicaid cases of thousands of recipients whose cash assistance was closed for alleged failure to comply with work program requirements.

As a result, on August 6, 1998, the Welfare Law Center, along with the Legal Aid Society in New York City, filed a federal class action lawsuit, Mangracina v. Turner, in the Southern District of New York,  to challenge New York City’s practice of discontinuing the Medicaid benefits of public assistance recipients whenever it discontinued their cash benefits for an alleged failure to comply with public assistance employment program requirements.  The complaint contended that this practice  violated federal and state Medicaid laws.  The plaintiffs also contended that the City defendant’s termination of plaintiff class members’ Medicaid benefits without timely and adequate notice violated federal regulations and the Due Process clauses of the United States and New York State Constitutions.   Plaintiffs also challenged the State’s failure and refusal to properly oversee and supervise City Defendant’s administration of the public assistance and Medicaid programs so as to prevent the unlawful conduct from occurring.

Computer Problems and a Failure to Train Workers

As the case developed, it became apparent that the root cause of the City’s and State’s failure to follow the law was the failure to program the legislative change into the complex state computer system that governs when benefits are provided and when they are terminated.  The computer system was designed to automatically terminate the Medicaid of any person whose cash assistance case was sanctioned because she allegedly failed to comply with work program rules. 

While the City welfare officials knew computer reprogramming was necessary to make sure a person would continue to receive Medicaid after a cash assistance termination sanction, they did not follow through with reprogramming.  To compound the problem, neither the City nor the State bothered doing the training necessary to insure that front-line eligibility workers would know to manually override the computer so that sanctioned recipients could continue to receive the Medicaid to which they were entitled. 

In fact, it was only the filing of the lawsuit that forced either the State or the City to try to reprogram the computer to prevent the problem from recurring.   In response to the complaint, the State and City formed a joint task-force to address computer programming barriers that discontinued Medicaid whenever a cash assistance case was terminated because the person allegedly failed to follow work program rules.  The joint task-force identified the approximately half-dozen computer codes that needed to be changed, wrote the necessary programming to change the computer system, updated eligibility worker and data entry specialists handbooks, and tested the changes.  The computer changes appeared to address the vast majority of unlawful Medicaid closings addressed in this case.

The Settlement Agreement

The court-ordered Stipulation of Settlement provides several types of relief to the class. 

Prospective relief.   First, in each instance where a recipient’s public assistance benefits are discontinued for allegedly failing to comply with the public assistance employment program or allegedly failing to comply with evaluation of exemption from or limitations in participation in work activities under Title 9-B of the Social Services Law, New York City must continue the recipient’s Medicaid unchanged.

Second, while nothing stops the City of New York from recertifying eligibility for members of the plaintiff class, if it chooses to do so, the worker must send out a notice one month in advance of any required face-to-face or mail-in recertification process. In addition, the worker must send notice once a month in advance for any recertification  process.  Should the recipient fail to recertify or be rejected, the worker must send timely notice of adverse action at least ten days prior to the discontinuance of Medicaid benefits.

Retroactive relief.   Quite significantly, the settlement has a provision requiring the provision of retroactive Medicaid coverage and the payment of past medical expenses.  Under the terms of the settlement, the City must identify all former or current cash assistance recipients whose Medicaid benefits were closed when their cash assistance was terminated.  For those recipients whose Medicaid cases were closed after August 1, 1998, the City must activate their Medicaid benefits prospectively, with notice, and reimburse recipients for medical expenses incurred while their Medicaid benefits were discontinued, as long as they were eligible for such Medicaid coverage.

For those recipients whose Medicaid cases were closed prior to August 1, 1998,  the City defendants must issue a notice to the recipients telling them that within 45 days of the date they receive the notice, they will have the opportunity to schedule an appointment to restore their Medicaid coverage, if they continue to be eligible from that date forward for as long as they continue to be eligible; and that they will be reimbursed for any documented out-of-pocket medical expenditures they incurred after their Medicaid was closed.

Similar provisions also operate to require the State defendants to identify certain cash assistance recipients whose Medicaid cases were unlawfully closed and to restore assistance both prospectively and retrospectively.  The reason for the difference is that in some cases the responsibility for the computer code rests with the State and not the City.                                 

This relief is important because in most cases one cannot obtain retroactive relief from federal courts in Medicaid cases since the Medicaid program is administered by the State. The Eleventh Amendment of the United States Constitution, as interpreted by the United States Supreme Court, precludes any relief against a State except for prospective injunctive relief requiring State officials to do what they are already obligated to do by law.  Under very limited circumstances, it is possible to obtain narrowly proscribed relief requiring the State to provide notice.

Here, far-reaching retroactive relief was possible because New York is one of a handful of states where the Medicaid program is jointly administered by the State and local counties.  The Eleventh Amendment bar against retroactive relief does not apply to the local counties.  In this case, retroactive relief could therefore be obtained against the City.  The State agreed to provide retroactive relief.                       

Training.   The settlement obligates the City to train both its cash assistance and Medicaid program  workers regarding the procedures for continuing the Medicaid benefits for recipients whose public assistance benefits are discontinued for an alleged failure to comply with the public assistance employment program or alleged failure to comply with evaluation of exemption from or limitations in participation in work activities.  This training includes information and  instruction on a special telephone number to receive assistance with inquiries, concerns or problems;  and the recipients’ right to proper notice and a fair hearing.   Plaintiffs’ counsel believed that this training was essential to insure that clients have an effective recourse considering the complexity of the relief obtained.

Notice.  The  City Defendant will post and maintain notices in English and Spanish at all locations serving public assistance and Medicaid applicants and recipients.  The notice will advise the class members of the terms of the relief and how to obtain retroactive Medicaid reimbursement.  Plaintiffs’ counsel believed that notice was crucial because of the complexity of the relief provided.  Another unique feature of this case is that the Court, at plaintiffs’ counsels’ urging, required individual notice to be mailed to all class members advising them of the pending settlement of the case before it would approve the settlement.  As a result, approximately twenty thousand  individual class members were informed of the terms of the settlement and advised of their rights under the agreement.

Monitoring.   Finally, the State agreed to extract  five percent (5%) of the cases from the relevant database on a quarterly basis and review those cases to make sure that the correct closing codes are being used and that recipients are receiving proper notices.  This process will provide a method of monitoring for quality purposes and will ensure that adequate notices are used.

Conclusion

Numerous reports have documented that since implementation of the PRA tens of thousands of eligible Medicaid recipients nationwide have lost Medicaid coverage when their cash assistance cases have been closed.  In some instances, the cash assistance case is closed because of a sanction or because the family has reached its time limit.  In other instances, it is because the family’s earned income disqualifies it for ongoing cash assistance.  However, in all of these examples, the State or local administration must review the case to determine whether there is ongoing eligibility for Medicaid.

Frequently the cause of the unlawful termination of Medicaid is the out-of-date programming of the state’s computer system.  To address this problem, a combined strategy of litigation, policy advocacy with the administrative agency, and individual representation may be necessary. 

Mangracina provides an example of the widespread change that can be possible through aggressive litigation.  The Welfare Law Center is committed to working with advocates around the country to combat the worst aspects of welfare reform.  We are now working with the National Health Law Project to combat illegal terminations of Medicaid eligibility when TANF is denied or terminated.  If you wish further information about this case or to discuss other efforts to help insure that your clients retain Medicaid eligibility when their TANF case is closed, please contact Rebecca Scharf(scharf@welfarelaw.org), Marc Cohan(cohan@welfarelaw.org), or Melanie Cuevas (cuevas@welfarelaw.org).

Plaintiffs in Mangracina are represented by Rebecca Scharf and Marc Cohan of the Welfare Law Center and Elisabeth Benjamin of the Legal Aid Society.

Endnotes