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Russell Knapp, Sandra Knapp, As Legal Guardians of Jason Knapp; Jana v. Richard Armstrong and Leslie Clement

February 26, 2012

RUSSELL KNAPP, SANDRA KNAPP, AS LEGAL GUARDIANS OF JASON KNAPP; JANA SCHULTZ, AS LEGAL GUARDIAN OF TOBY SCHULTZ, PLAINTIFFS,
v.
RICHARD ARMSTRONG AND LESLIE CLEMENT, IN THEIR OFFICIAL CAPACITIES AS DIRECTOR AND MEDICAID ADMINISTRATOR OF THE IDAHO DEPARTMENT OF HEALTH AND WELFARE, DEFENDANTS.



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

MEMORANDUM DECISION AND ORDER

Before the Court is Defendant's Motion (Dkt. 20) to Vacate Preliminary Injunction. Plaintiff filed a Motion for Leave to Amend the Complaint (Dkt. 23), and also a Motion for Renewed Preliminary Injunction (Dkt. 26). The Court has fully considered the parties' briefing and is familiar with the record. For reasons set forth below, the Court will grant Defendant's Motion to Vacate Injunction, deny Plaintiffs' Motion to Renew Injunction, and grant in part and deny in part Plaintiffs' Motion for Leave to Amend the Complaint.

BACKGROUND

States participating in the federal-state Medicaid program comply with Medicaid Act requirements, and in turn, receive federal funding to provide medical assistance to low-income individuals. See Douglas v. Indep. Liv. Ctr. of So. Cal., Inc., -- S.Ct. -- , 2012 WL 555204 (U.S.); 42 U.S.C. § 1396 et seq.; 42 C.F.R. § 430.15(b). Among its requirements, the Act mandates development of state plans that must be approved by the Secretary of Health and Human Services, through the Centers for Medicare and Medicaid Services (CMS). Id. States may seek waivers of some requirements, to allow Medicaid participants to reside in home and community based -- rather than institutional -- settings.

42 U.S.C. § 1396a(a)(23). Like state plans, waivers and amendments to waivers must be approved by CMS. The Idaho Department of Health and Welfare (IDHW) has requested and received two waivers; the waiver at issue in this matter is the Developmental Disabilities Home and Community Based Services Waiver (DD Waiver). Compl., Dkt. 1, ¶ 8.

Where a Medicaid participant chooses to reside in a Certified Family Home, that Certified Family Home provider must engage with, and receive "affiliation" services from a Residential Habilitation Agency. IDAPA 16.03.10.705.01. Affiliation services, also referred to as residential habilitation services, includes provision of "oversight, training, and quality assurance to the certified home provider," IDAPA 16.03.10.705.01, and also development and execution of plans to meet the Medicaid participant's needs. Scott Dec., Dkt. 2-2, ¶ 11.

On February 25, 2011, IDHW sought proposals for a single contractor to provide all affiliation services, previously provided by various Residential Habilitation Agencies, throughout Idaho. Dunagan Dec., Dkt. 2-5, ¶ 7. In June 2011, the IDHW selected Community Partnerships of Idaho for that contract. Ex. 2 to Dunagan Dec., Dkt. 2-7.

Plaintiffs here are the legal guardians of Jason Knapp and Toby Schultz, suing on their behalf. Compl., Dkt. 1, ¶ 2. Jason and Toby are both residents of Certified Family Homes. Id. Plaintiffs assert that they will suffer harm if IDHW's selective contract with Community Partnerships of Idaho is allowed to take effect. According to Plaintiffs, the selective contract will violate their right to exercise freedom of choice under 42 U.S.C. 1396a(a)(23), as well as their right to maintain adequate access to, and right to quality of, services provided under the Medicaid Act. Compl., Dkt. 1, ¶¶ 25-26.

Plaintiffs moved for a preliminary injunction, which the Court granted on August 4, 2011. In finding the preliminary injunction appropriate, the Court concluded that IDHW was required, but failed, to obtain CMS approval of a waiver amendment before implementing the selective contract. Order, Dkt. 17 at 12. However, the Court also determined that the relevant issue on the ultimate merits of Plaintiff's complaint is whether IDHW has properly obtained a waiver amendment, rather than a state plan amendment. Id. at 15-16. The Court preliminarily enjoined implementation of the selective contract "pending a decision by CMS on the IDHW's waiver amendment," noting that it would consider a renewed motion from Plaintiffs if "CMS renders its decision without analysis of the applicable provisions of the Medicaid Act." Id. at 19.

CMS approved IDHW's waiver amendment on October 17, 2011. Ex. A to 3rd Grooms Dec., Dkt. 20-2 at 5. Thus, Defendants now ask the Court to vacate the preliminary injunction. Plaintiffs object and renew their request for preliminary injunction; concerning these motions, Plaintiffs request an evidentiary hearing. Plaintiffs also seek leave to amend their complaint, to which Defendants object.

DISCUSSION

1. Motions To Vacate And Renew Injunction of IDHW's Selective Contract

The motions to vacate and renew the previously-granted injunction present two issues: (1) whether a presumption of regularity attaches to CMS's approval of the IDHW waiver amendment and proposed selective contract; and (2) whether a continued or renewed injunction is now subject to the Administrative Procedure Act (APA), in light of CMS's approval of IDHW's waiver amendment.

The district court has discretion to modify or overturn terms an injunctive decree where subsequent circumstances of law or fact so warrant. Credit Suisse First Boston Corp. v. Grunwald, 400 F.3d 1119, 1123-24 (9th Cir. 2005). The Court's decision to grant a preliminary injunction here was premised on IDHW's failure to obtain CMS approval for a waiver amendment. CMS has now granted approval for IDHW's waiver, thus it would appear that the ...


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