Thomas Saunders v. Florida Dept. of Children and Families

IN THE DISTRICT COURT OF APPEAL
FIRST DISTRICT, STATE OF FLORIDA

THOMAS SAUNDERS, NOT FINAL UNTIL TIME EXPIRES TO
FILE MOTION FOR REHEARING AND
Appellant, DISPOSITION THEREOF IF FILED

v. CASE NO. 1D15-1959

FLORIDA DEPARTMENT OF
CHILDREN AND FAMILIES,

Appellee.

_____________________________/

Opinion filed February 29, 2016.

An appeal from the Department of Children and Families.

Robert W. Pass, Martha Harrell Chumbler, and Christine Davis Graves of Carlton
Fields Jorden Burt, P.A., Tallahassee, for Appellant.

Camille Larson, Assistant Region Counsel, NW Region, Department of Children
and Families, Tallahassee, for Appellee.

ROWE, J.

Appellant, Thomas Saunders, challenges a hearing officer’s final order

affirming a decision by the Department of Children and Families (the Department)

regarding the calculation of Saunders’ patient responsibility amount (PRA) under

Medicaid’s Institutional Care Program (ICP). Saunders argued that his substantial
interests were determined when the Department, in reliance on an agency policy

which had not been promulgated by rule, denied his request to reduce his PRA by

deducting expenses he had previously incurred for nursing home care. The hearing

officer declined to consider whether the Department’s denial of Saunders’ request

was based on a policy which should have been promulgated as a rule, concluding

that such an argument must be raised before an administrative law judge in a

proceeding conducted pursuant to section 120.56, Florida Statutes. However,

because the underlying action involved a determination of Saunders’ eligibility to

receive ICP benefits, we hold that the hearing officer was authorized to consider

Saunders’ challenge, and therefore, reverse. We decline to address the merits of

whether the Department relied on an unpromulgated rule when it denied Saunders’

request as the hearing officer has not yet ruled on this issue.

Background

This case involves an individual’s entitlement to benefits pursuant to

Medicaid’s ICP, which is designed to provide reimbursement for nursing home care

expenses for qualifying individuals. Recipients of ICP benefits must contribute to

the cost of their care by remitting their gross income, less certain deductions, to the

nursing home. The PRA is calculated by the Department in accordance with

applicable federal and state regulations. Federal regulations provide that certain

unreimbursed medical expenses must be included as a deduction when the state

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calculates the PRA and authorize states to impose reasonable limitations on the

deductions. 42 C.F.R. § 435.832. Among the unreimbursed medical expenses

authorized as deductions from the PRA are those medical expenses incurred by a

recipient before becoming eligible for Medicaid. Thus, if a recipient incurs nursing

home expenses before becoming eligible for Medicaid, the recipient may deduct the

expense from his PRA and use that protected income to pay down the previously

incurred nursing home debt.

The Agency for Health Care Administration (AHCA) is charged with

managing Florida’s State Medicaid program while the Department is responsible for

making eligibility determinations. § 409.902, Fla. Stat. (2014). The State Medicaid

program is governed in part by a Medicaid State Plan submitted by AHCA and

approved by the Center for Medicare and Medicaid Services (CMS). In 2013, CMS

approved an amendment to Florida’s Medicaid State Plan to limit the deduction from

the PRA for incurred medical expenses to those incurred no earlier than three months

preceding the month of application for ICP benefits. The Department’s chief of

program policy issued a transmittal letter directing caseworkers to implement the

amended Medicaid State Plan, including the three-month limit. In addition, the

Department’s public assistance policy manual was updated to reflect this three-

month limit.

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 Facts

In March 2013, Saunders entered a nursing home. He filed an application for

ICP benefits in July 2014, at which time he had an outstanding bill of over $68,000

for nursing home services through June 2014. In August 2014, the Department

approved Saunders’ application, finding him eligible for Medicaid as of July 1, 2014,

and requiring him to pay $2,115.08 per month for his nursing home services. On

September 2, 2014, Saunders sought a reduction of his monthly PRA, asking the

Department to deduct his unreimbursed nursing home expenses dating back to June

2013. When the Department failed to respond to this request and the three other

requests pertaining to the calculation of his PRA, Saunders instituted proceedings to

challenge the Department’s implicit denial of his request.1 At the time Saunders

filed his request for consideration of one year of unpaid nursing home expenses, the

Department had no promulgated rule codifying the three-month limit on

unreimbursed medical expenses.2

Saunders requested a hearing before the Department’s hearing officer to

challenge the denial of his request to reduce his PRA. Because the Department’s

1
If the Department had granted these requests, Saunders’ PRA would have been
reduced to zero until he paid off his nursing home debt.
2
Subsequently, the Department amended Florida Administrative Code Rule 65A-
1.714 to reflect the three-month limitation contained in the Medicaid State Plan.
This amendment became effective on August 12, 2015. See Fla. Admin. Code R.
65A-1.714 (2015).
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policy limiting the amount of the deduction for medical expenses when calculating

the PRA is generally applied and has an adverse impact on Medicaid recipients,

Saunders argued that the Department was required to adopt the policy through

formal rulemaking.

The Department argued that it correctly applied federal and state law when it

denied Saunders’ request. The hearing officer agreed, concluding that the

Department acted in accordance with the Medicaid State Plan, the Department’s

policy manual, and the Department’s transmittal letter when it denied the request to

lower Saunders’ PRA. The hearing officer concluded that she lacked jurisdiction to

consider Saunders’ argument that the Department’s denial was based on an

unpromulgated rule, finding that such an argument must be brought before an

administrative law judge pursuant to section 120.56, Florida Statutes. This appeal

followed.

Analysis

The final order on appeal is flawed in two respects. First, the hearing officer

incorrectly concluded that Saunders was required to challenge the Department’s

decision in a proceeding pursuant section 120.56. Section 120.56 does not provide

the exclusive means for a party to raise an argument that an agency is acting pursuant

to an unpromulgated rule. Rather, as explained below, chapter 120 provides two

avenues for pursuing such an argument. Second, the hearing officer erroneously

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concluded that only an administrative law judge was authorized to rule on Saunders’

argument that the Department was acting pursuant to an unpromulgated rule.

Because the plain language of the statutes and rules applicable to hearings

concerning the Department’s determination of entitlement to IPC benefits authorizes

the assignment of a hearing officer to such appeals, the hearing officer erred by

concluding that she lacked jurisdiction to rule on Saunders’ unpromulgated rule

challenge.

Although the hearing officer properly observed that such challenges are

typically brought before an administrative law judge pursuant section 120.56(1),

Florida Statutes (2014), this section is not the exclusive means for a party to argue

that an agency action occurred pursuant to an unpromulgated rule:

All proceedings to determine a violation of s. 120.54(1)(a) shall be
brought pursuant to this subsection. A proceeding pursuant to this
subsection may be consolidated with a proceeding under subsection (3)
or under any other section of this chapter. This paragraph does not
prevent a party whose substantial interests have been determined by an
agency action from bringing a proceeding pursuant to s. 120.57(1)(e).

§ 120.56(4)(f), Fla. Stat. (2014) (emphasis added). The plain language of the statute

makes clear that in addition to the relief available under section 120.56, a party

whose substantial interests are determined by the application of an unpromulgated

rule may challenge such agency action under 120.57(1)(e), Florida

Statutes. See Winick v. Dep’t of Children & Family Servs., 161 So. 3d 464, 468-69

(Fla. 2d DCA 2014) (concluding that an individual challenging the Department’s
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decision regarding his entitlement to benefits was not required to bring an

unpromulgated rule challenge pursuant to section 120.56). Here, because the

Department limited Saunders’ Medicaid benefits in reliance on a policy not

promulgated as a rule, Saunders was not limited to challenging the Department’s

decision pursuant to a rule challenge pursuant to section 120.56. Rather, because

his substantial interests were affected by the agency’s action, Saunders was

authorized to bring an action under section 120.57(1)(e). The hearing officer’s

conclusion that Saunders could not raise this challenge under section 120.57(1)(e)

was erroneous.3

3
Notwithstanding Saunders’ authority to challenge the Department’s determinations
under 120.57(1)(e), the Department asserts that Saunders should have been required
to raise his unpromulgated rule argument pursuant to section 120.56 because the
purpose of the rule challenge provisions is to promote the rulemaking process and
public involvement through proper notice and use of public forums. The
Department’s argument ignores the fact that sections 120.56 and 120.57 afford two
different types of relief. Section 120.56 allows a party to obtain a final order
directing the agency to discontinue all reliance on the statement as a basis for agency
action. § 120.56(4)(d), Fla. Stat. (2014). However, section 120.57(1)(e), Florida
Statutes (2014), precludes an agency from relying on an unpromulgated rule to
determine a person’s substantial interest. Section 120.57(1)(e), unlike section
120.56, provides immediate relief. Under section 120.56, if an agency initiates
rulemaking to adopt the challenged policy statement, the unpromulgated rule
challenge must be stayed until such time as the agency completes the rulemaking
process. § 120.56(4)(b), Fla. Stat. (2014). Here, the Department was engaged in
rulemaking when Saunders raised his unpromulgated rule argument; thus, any
unpromulgated rule argument raised by Saunders pursuant to section 120.56 would
have been stayed until the completion of the rulemaking process.
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 The hearing officer similarly erred when she determined that she lacked

jurisdiction to address the merits of Saunders’ argument that the Department was

operating pursuant to an unpromulgated rule when it calculated Saunders’ PRA.

Although chapter 120 typically contemplates an administrative law judge making

the determination of whether an agency policy or statement constitutes an

unpromulgated rule, the Department is exempt from the standard rules governing

administrative proceedings where the proceedings are conducted in the execution of

social and economic programs, such as the Medicaid program. See § 120.80(7), Fla.

Stat. (2014) (providing that, notwithstanding the language in section 120.57(1)(a),

Florida Statutes, hearings before the Department pertaining to the execution of social

and economic programs “need not be conducted by an administrative law judge

assigned by the division.”); French v. Dep’t of Children & Families, 920 So. 2d 671,

677 (Fla. 5th DCA 2006) (holding that section 120.80(7) allows the Department to

use hearing officers instead of administrative law judges for certain types of

proceedings).

Section 409.285, Florida Statutes (2014), expressly authorizes the

Department’s hearing authority to hear appeals of decisions by the Department

which limit or deny public assistance benefits, such as ICP benefits under the

Medicaid program. Thus, where the Department has limited or denied public

assistance benefits to a recipient, that individual may appeal the decision through a

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section 409.285 hearing – where all of the rights under chapter 120, including those

contained in section 120.57(1)(e), are expressly made available. Fla. Admin. Code

R. 65-2.042(4) (2014). Because section 409.285 expressly provides for hearings in

appeals of the Department’s limitation or denial of Medicaid benefits, Saunders was

authorized to challenge the Department’s denial of his request concerning his ICP

benefits and to argue that the Department relied on an unpromulgated rule when

calculating his benefits in violation of section 120.57(1)(e).

Further, the hearing officer, whose decision under section 409.285(2) was the

final decision of the Department, was authorized to address the merits of Saunders’

argument because section 120.57(1)(e) prohibits an agency from relying an on

unpromulgated rule when determining a party’s substantial interests. Section

409.285(2) provides for the appointment of hearing officers to preside over

challenges to the Department’s actions in cases where the Department has limited or

denied public assistance benefits. Pursuant to this statutory authority, the

Department adopted an administrative rule that authorizes hearing officers to preside

over appeals of adverse agency actions in Medicaid proceedings, including those

involving the calculation of an ICP recipient’s PRA. Fla. Admin. Code R. 65-

2.042(3) (2014). Because the above statutes and rules permit the appointment of a

hearing officer in proceedings challenging the denial or limitation of Medicaid

benefits, we conclude that the hearing officer erred in concluding that she could not

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hear Saunders’ unpromulgated rule challenge. See Butler v. State, 838 So. 2d 554,

555-56 (Fla. 2003) (“Because the Legislature does not intend to enact purposeless

or useless laws, the primary rule of statutory interpretation is to harmonize related

statutes so that each is given effect.” (citation omitted)).

Conclusion

Because Saunders’ substantial interests were affected when the Department

limited his Medicaid benefits under the ICP program, Saunders was not required to

appeal the Department’s decision through a section 120.56 rule challenge

proceeding. Rather, Saunders properly challenged the Department’s actions

pursuant to section 120.57(1)(e). Finally, based on the authority set forth in section

409.285, the Department’s hearing officer was authorized to hear Saunders’

challenge to the Department’s actions. Accordingly, we REVERSE the final order

and REMAND for further proceedings. Consistent with this holding, and because

the hearing officer has not yet ruled on the issue, we decline to address the issue of

whether the Department acted pursuant to an unpromulgated rule when determining

Saunders’ PRA under the ICP program.

RAY and SWANSON, JJ., CONCUR.

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