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Toby Schultz, et al v. Richard Armstrong

August 2, 2012


The opinion of the court was delivered by: Honorable B. Lynn Winmill Chief U. S. District Judge



The Court has before it plaintiffs' motion for a temporary restraining order and preliminary injunction. The motion is fully briefed and at issue. For the reasons explained below, the Court will grant the motion in part and deny it in part.


Plaintiffs Toby Schultz, Breann Mullic, and Caleb Hall are developmentally disabled adults, represented in this action by their legal guardians. Plaintiffs are all residents of Idaho and rely on Idaho's Medicaid program for their treatment and care. In their underlying claim, plaintiffs allege that Defendant Richard Armstrong, in his official capacity as director of the Idaho Department of Health and Welfare, unlawfully reduced their 2012-2013 treatment budget without providing notice of the methodology used to calculate their budgets, in violation of the Medicaid Act and the Due Process Clause of the Fourteenth Amendment. The Amended Complaint proposes class certification for "a class consisting of all Idaho residents currently receiving benefits or who received benefits within the past two years under Idaho's Medicaid program that are subject to individual budget determinations made by the Idaho Department of Health and Welfare." See Amended Complaint (Dkt. No. 9) at ¶ 16.

The State of Idaho participates in Medicaid and is required, in order to receive federal reimbursement, to comply with certain requirements set forth in the Medicaid Act.

42 U.S.C. §§ 1396--1396w-5. Idaho, through an application to the U.S. Department of Health and Human Services, has applied for and received a waiver allowing qualified disabled Medicaid applicants to opt for self-directed personal assistance services. Plaintiffs all participate in the Idaho Developmental Disabilities Waiver ("DD Waiver"), a program authorized by Medicaid that is intended to place the disabled in home-based care rather in institutions.

Plaintiffs each receive services through the DD Waiver. Plaintiffs allege that Idaho notified each of them that their treatment budgets for the 2012-2013 treatment plan year would be significantly reduced. The budget reductions ranged from ten to fifteen percent below plaintiffs' 2011-2012 budgets. See Declaration of Jana Schulz (Dkt. No. 4-2) at ¶ 11. Pursuant to a longstanding policy, Idaho's notice to plaintiffs informing them of their 2012-13 budget did not disclose the method the State used to calculate their individual budgets or state any reason for the reductions.

Each plaintiff administratively appealed their 2012-13 treatment year budget. Ms. Mullic's and Mr. Hall's appeals were denied. Mr. Schultz's appeal was pending at the time the Amended Complaint was filed. Ms. Mullic's denial decision informed her that the administrative "Hearing Officer possesses no authority to review the Department [of Health and Welfare's] [budget setting] methodology." Id. at ¶ 17.

On February 8, 2012, plaintiff Toby Schulz filed this action, and plaintiffs Hall and Mullic were added later. Pursuant to 42 U.S.C. § 1983, the complaint asserts that Idaho Department of Health and Welfare's (IDHW's) unexplained reduction in Medicaid funds violates the requirements of Medicaid and divests the recipients of a property benefit without due process of law. The complaint also asserts that IDHW's policy of "setting . . . individual budgets pursuant to secret methodology" is unlawful because it is preempted by the Medicaid Act. It requests preliminary and permanent injunctive relief.

The motion currently before the Court seeks to "enjoin Defendant Richard Armstrong from . . . continuing any Medicaid benefit reductions occurring or that have occurred as a result of the Idaho Department of Health and Welfare's implementation or use of its individualized budget setting methodology." See TRO Motion (Dkt. No. 4) at p.

1. The Motion is related to similar litigation pending before the Court, K.W. v. Armstrong, 1:12-cv-00022-BLW. In K.W., twelve disabled individuals, each receiving assistance through the DD Waiver program, claim that the inadequately noticed reductions in their treatment budgets violate the Fourteenth Amendment and federal law. After a hearing, on February 3, 2012, the Court entered a temporary restraining order enjoining the reductions. See K.W. v. Armstrong, supra, TRO (Dkt. No. 31) at pp. 1-2. The parties then stipulated to a preliminary injunction that was approved by the Court on March 12, 2012. See K.W. v. Armstrong, supra, Preliminary Injunction (Dkt. No. 41). The stipulated injunction prevents the defendants from reducing assistance to any of the K.W. plaintiffs without "adequate advance notice, approved by the Court." Id. at 2. The injunction also obliges the defendants to make available upon request, for any participant in the Idaho Medicaid Adult Developmental Disabilities program, a number of documents, including unaltered copies of the State's current and previous budget calculating tool spreadsheets and the inquiring participants actual budget calculation spreadsheets. Id. at 2-3.

In response to the K.W. litigation, IDHW asserts that it made permanent changes to its policy. First, IDHW revised the form used to notify Medicaid participants when their individual budgets are calculated. The revised notice informs recipients as follows:

If requested, the Department will provide copies of the spreadsheets for calculating your budget for the upcoming year and prior years' budgets and an opportunity to inspect and copy all descriptions, reports, studies and other records concerning the Department's present and prior methodologies, models, tools, spreadsheets, memoranda, training ...

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