The opinion of the court was delivered by: ORRICK
In this case, California recipients of State Disability Insurance ("SDI")
who receive Medi-Cal benefits under the Aid to Families With Dependent Children Act ("AFDC") complain that they presently pay $ 90 per month more than they should, because the State of California ("California") requires them, in violation of the law, in computing the "share of cost"
to treat SDI income as earned income rather than unearned income.
To correct this alleged inequity plaintiff brings this class action against California's health and financial officers, the California Department of Health Services, and the California Department of Finance
(collectively "CDHS"), seeking declaratory and injunctive relief compelling them to comply with California and federal law requiring the Medi-Cal program's method of calculating benefits be no more restrictive than the AFDC method that treats SDI income as earned income.
Medicaid is a joint federal-state cooperative program established under Title XIX of the Social Security Act to provide health care to needy individuals.
States choosing to participate in Medicaid are required to comply with Title XIX of the Social Security Act and with federal regulations implementing the program. 42 U.S.C. § 1396a(a). In return, the federal government shares the costs of Medicaid with participating states.
There are several different categories of people who may be covered by Medicaid, namely, the "categorically needy" and the "medically needy." The "categorically needy" are persons who are eligible for cash assistance under the AFDC program or the Supplemental Security Income ("SSI") program. Participating states must provide coverage to the categorically needy.
The "medically needy" are individuals who satisfy the nonfinancial eligibility criteria for AFDC or SSI, but whose incomes exceed the financial eligibility levels permitted under those programs. States may elect to cover the "medically needy," and California has chosen to provide such coverage calling its program Medi-Cal. Once a state elects to cover the medically needy, it must cover them on an equal basis with the categorically needy. 42 U.S.C. § 1396a(a)(10)(C)(i)(III).
California has mandated that monthly income in its AFDC medically needy ("AFDC-MN") program must be determined "in accordance with Title XIX of the federal Social Security Act." Cal. Welf. & Inst. Code § 14005.7(d) (West 1991). Plaintiff interprets this to mean that monthly income for AFDC-MN Medi-Cal recipients must be calculated in the same manner it is calculated for California AFDC recipients.
To encourage AFDC recipients to work, California has mandated that all federal earned income "disregards" be adopted as part of California's AFDC program. Specifically,
to the extent required by federal law, earned income of a recipient of aid under any public assistance program for which federal funds are available shall not be considered income or resources of the recipient, and shall not be deducted from the amount of aid to which the recipient would otherwise be entitled. . . .
Cal. Welf. & Inst. Code § 11008 (West 1991). The purpose of earned income disregards is to give AFDC recipients incentive to work. If a recipient's grant were reduced by the amount of earned income dollar-for-dollar, there would be no incentive to work.
The application of earned income disregards reduces the amount of the family's countable income when calculating the family's AFDC grant. The disregards include (1) the first $ 90 of earned income; (2) $ 30 and one third of the remaining earned income; and (3) actual child care costs up to $ 175, or $ 200 for infants. The earned income of students and other children is completely exempt.
Since April 1, 1991, California, through its Department of Social Services ("CDSS"), has treated SDI benefits as earned income in the AFDC program, in accordance with a consent decree in Sallis v. McMahon, Sacramento County Superior Court Case No. 364308, filed January 30, 1991.
(See Pl.'s State Statutes, Regulations, and Other Authority, filed Feb. 16, 1995, Ex. 4.) HHS has continued to contribute to the California AFDC program, even after California began to treat SDI payments as earned income for purposes of AFDC. (See Pl.'s Exs. in Supp., filed Feb. 16, 1995, Ex. 1, HHS Mem. to Division of Medicaid.) Specifically, the United States has stated: "We have not approved the State's policy of treating SDI as earned income since we do not approve or disapprove State policy; rather . . . we will allow [Federal financial participation] for AFDC payments in which SDI is treated as earned income." Id.
At issue in this case is whether CDHS must treat SDI benefits as earned income for the purpose of calculating the share of cost for Medi-Cal recipients. California's Medi-Cal regulations allow similar earned income deductions as those allowed for AFDC, except that SDI is treated as unearned income. 22 C.C.R. § 50507(a)(5). Determining the proper outcome of the case involves interpreting the requirements of the Medicaid statute.
Alicia Tinoco ("Tinoco"), the named plaintiff, was employed full time until October 1992, when she stopped working because she needed surgery for a cancerous tumor. She began receiving SDI. In March 1993, she applied for Medi-Cal for herself, her husband, and her three children because she could no longer afford to maintain her private health care coverage. The household would have qualified for AFDC but for the fact that their monthly SDI income was over the AFDC limit. Tinoco sought to participate in the Medi-Cal program as medically needy rather than as categorically needy.
San Mateo County ("County") approved the Tinocos for Medi-Cal, but assigned them a share of cost counting their SDI income as unearned. As discussed above, unearned income is counted dollar-for-dollar for purposes of calculating share of cost, but earned income is subject to several income disregards. The Tinocos were not allowed to take advantage of these disregards. For example, when income is earned, the first $ 90 is deducted from countable income. Because Tinoco's SDI income was considered unearned, her family could not take advantage of the $ 90 deduction, and the monthly share of cost was $ 90 higher than it would have been had the SDI income been computed as earned.
Rule 56(c) of the Federal Rules of Civil Procedure provides that a court may grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c).
The Supreme Court's 1986 "trilogy" of Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986), Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986), and Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986), requires that a party seeking summary judgment identify evidence that shows the absence of a genuine issue of material fact. Once the moving party has made this showing, the non-moving party must "designate 'specific facts showing that there is a genuine issue for trial.'" Celotex, 477 U.S. at 324 (quoting Fed. R. Civ. P. 56(e)). "When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586. "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Liberty Lobby, 477 U.S. at 249-50 (citations omitted).
The Court may properly decide this case at the summary judgment stage because the question at issue is a purely legal one: Is it proper for California to treat SDI income as unearned for the purposes of determining the Medi-Cal share of cost but earned ...