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Inclusion, Inc.; Exceptional Child Center, Inc.; Living Independently For Everyone, Inc v. Richard Armstrong

December 12, 2011


The opinion of the court was delivered by: B. Lynn Winmill Chief Judge United States District Court


Before the Court are cross Motions for Summary Judgment by Plaintiffs (Dkt. 29) and Defendants (Dkt. 30). As memorialized in Docket Entry Order 27, the parties agreed that this case can be resolved on stipulated facts in lieu of a bench trial. The parties submitted Stipulated Facts (Dkt. 28) and briefing, and the Court heard oral argument on October 31, 2011. Having fully considered the parties' written and oral arguments, and being familiar with the record, including stipulated facts, the Court will grant summary judgment as to Plaintiffs, and deny summary as to Defendants, as more fully expressed below.


Plaintiffs are five Idaho corporations providing "residential habilitation" services to Medicaid eligible individuals in supported living settings in the state of Idaho. Stip. Facts at 2-3, Dkt. 28. Residential habilitation describes an array of services designed and provided to assist Medicaid participants in residing successfully in the community. Id. at 3. Such services include, but are not limited to, skills training, and assistance with decision-making, money management, socialization, mobility, and behavior shaping or management, as well as grooming, bathing, eating, administering medications, meal preparation, laundry, shopping and the like. Id. Services may also include skills training for family and non-family caregivers for participants. Id.

Defendants are Richard Armstrong -- Director of Idaho's Department of Health and Welfare (IDHW), and Leslie Clement -- an IDHW Deputy Director and former IDHW Division of Medicaid Administrator. Id. at 2. Clement has had the responsibility of administering and operating Idaho's Medicaid program under the direction and supervision of Armstrong at all times relevant to this case. Id.

Medicaid is a cooperative federal-state program that directs federal funding to participating states to provide medical assistance to "families with dependent children, . . . [and] aged, blind and disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services." 42 U.S.C. § 1396-1; Stip. Facts at 2. States that choose to participate in the Medicaid program -- including Idaho -- must comply with the requirements of the Medicaid Act, which includes development of a state plan. 42 U.S.C. § 1396a(a). The state plan must be approved by the Federal Center for Medicaid and Medicare Services (CMS). 42 C.F.R. § 430.10.

In 1981, Congress passed amendment § 1915(c) "in response to . . . studies showing that many persons residing in Medicaid-funded institutions would be capable of living at home or in the community if additional support services were available." Sanchez v. Johnson, 416 F.3d 1051, 1054 (9th Cir. 2005). Under the amendment, CMS can waive certain Medicaid Act requirements where a state demonstrates that the cost of caring for an individual in a home and community based program would be less than or equal to the cost of providing institutional care. Id. Idaho has been approved by CMS for three waiver programs, including the Developmentally Disabled Home and Community Based Services Waiver (DD Waiver). Stip. Facts at 2. The services provided by Plaintiffs in this case are pursuant to Idaho's DD Waiver. Id. at 3.

Effective October 1, 2004, the IDHW established reimbursement rates for two separate levels of care -- "high support," and "intense support." Id. On July 1, 2006, based on onsite observations and a survey of residential habilitation agencies, those rates (see table below) increased slightly. Id.

In 2005, Idaho's Legislature passed Idaho Code § 56-118, requiring the IDHW to "implement a methodology for reviewing and determining reimbursement rates" for Medicaid services that incorporates providers' actual costs of providing services. I.C. § 56-118(1), (2). In response, the IDHW contracted Johnson, Villegas-Grubb and Associates (JVGA) to conduct applicable studies. Stip. Facts at 4. JVGA's efforts were overseen by Sheila Pugatch, Principal Financial Specialist at IDHW, who manages the Office of Reimbursement Policy and has primary responsibility for setting Medicaid reimbursement rates in Idaho. Id. at 6.

JVGA surveyed Medicaid providers regarding the cost of providing services. Id. at 4. Based on its survey, JVGA submitted a report to the Idaho Legislature on November 30, 2006, recommending increases in reimbursement rates. JVGA continued to conduct studies, and in 2009, the IDHW submitted revised proposed rates that reflected further analysis. The current rates (implemented in July 2006), as well as those based on JVGA's surveys are set forth as follows:

Current rate, JVGA rate proposed IDHW rate effective July 1, November 30, 2006 proposed in 2009 2006 Daily Rate -- High $225.32 $228.48 $248.40 Support Daily Rate -- Intense $268.36 $342.72 $496.56 Support Despite, the proposed amendments based on JVGA's studies, the IDHW has not changed the reimbursement rates implemented in July 2006. According to Pugatch, the rate changes proposed in 2009 would have increased Idaho's Medicaid expenditures by $4 million. Id. at 6. Because Idaho's Legislature did not appropriate the necessary funds, the IDHW did not implement the proposed rate changes. Id. at 6. Thus, the current reimbursement rates are not based on the cost studies performed by JVGA between 2006 and 2009. Id. at 6.

There are currently 61 residential habilitation agencies, such as Plaintiffs, in Idaho. Id. at 7. There are 6,202 participants receiving supported living services. Id. Services covered by the DD Waiver are readily available to eligible participants; there are no waiting lists for any Medicaid services in Idaho. Id. The IDHW Critical Incident and Complaint Data Base, used to track Medicaid benefits and services complaints, including complaints related to access to services, shows no unresolved complaints for supported living services. Id. Neither plaintiff agency has turned away a prospective client based on an inability to afford providing them supported living services. Id.


Plaintiffs challenge the IDHW's compliance with the Medicaid Act, and seek prospective and injunctive relief. Where a movant shows "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law," the court shall grant summary judgment in favor of the movant. Fed. R. Civ. P. 56(a). The parties in this case have stipulated to all relevant facts and filed cross motions for summary judgment, arguing that each ...

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