G.C. v. Division of Medical Assistance and Health Services (084417) (Statewide)

SYLLABUS

This syllabus is not part of the Court’s opinion. It has been prepared by the Office of the
Clerk for the convenience of the reader. It has been neither reviewed nor approved by the
Court. In the interest of brevity, portions of an opinion may not have been summarized.

G.C. v. Division of Medical Assistance and Health Services (A-35/36/37-20) (084417)

Argued September 14, 2021 -- Decided November 18, 2021

LaVECCHIA, J., writing for a unanimous Court.

The issue in this consolidated appeal is whether N.J.A.C. 10:72-4.4(d)(1), which
implements New Jersey’s 1987 expansion of its Medicaid program, is inconsistent with
the language and intent of the enabling state and federal legislative amendments that
authorized the expansion, N.J.S.A. 30:4D-3(i)(11) and 42 U.S.C. § 1396a.

The program known as Medicaid is designed to provide medical assistance to
persons whose income and resources are insufficient to meet the costs of necessary care
and services. The Federal Government shares the costs of Medicaid with states that elect
to participate in the program, and in return, participating states comply with requirements
imposed by the federal statutes and regulations that govern the program.

The parameters that a “State plan for medical assistance must” follow are set forth
in 42 U.S.C. § 1396a, which was amended in 1986 to expand coverage options. Within
an assistance plan, participating states are required to provide coverage to certain groups
and can choose to provide coverage to other groups. The line between mandatory and
optional coverage is primarily drawn in § 1396a(a): mandatory coverage is specified in
§ 1396a(a)(10)(A)(i), and the state options are set forth in subsection (ii).

Within the mandatory category, subsection (a)(10)(A)(i) includes, among other
groups, people who receive certain types of benefits such as Supplemental Security
Income (SSI). Within the optional category, subsection (a)(10)(A)(ii)(I) includes people
who are not receiving aid as described in the previous subsection but who nevertheless
“meet the income and resources requirements” for such aid or for “the supplemental
security income program.” The optional category also includes, in subsection
(a)(10)(A)(ii)(X), people not receiving the type of aid described in (a)(10)(A)(i) who are
sixty-five years of age or older, or disabled, and whose income level does not exceed a
specified percentage (decided by the state) of the federal poverty line (FPL) as applicable
to a family of the size involved. People eligible for benefits under that second optional
category are known as “ABD beneficiaries.”

1
 Subsection (a)(10)(A)(ii)(X)’s requirements reference 42 U.S.C. § 1396a(m)(1) to
(2). Particularly central to these appeals is subsection (m)(2)(A), which specifies that
“[t]he income level established under paragraph (1)(B) may not exceed a percentage (not
more than 100 percent) of the official poverty line (as defined by the Office of
Management and Budget . . .) applicable to a family of the size involved.” (emphasis
added). Thus, while people in the optional category identified in 42 U.S.C.
§ 1396a(a)(10)(A)(ii)(I) must be eligible for, but not actually receive, SSI to qualify for
Medicaid benefits, the Medicaid eligibility of those in the optional category identified in
(a)(10)(A)(ii)(X) is not dependent on eligibility for SSI, but rather is determined based on
a comparison of the group member’s income against whatever percentage of the FPL
“applicable to a family of the size involved” a given state chooses for its ABD program.

New Jersey is a long-time participant in the Medicaid program and has chosen to
provide coverage to the optional groups identified in § 1396a(a)(10)(A)(ii). New Jersey’s
definitions of a “qualified applicant” in N.J.S.A. 30:4D-3(i)(2), (7), and (11) track groups
of qualified individuals under the federal Medicaid statute. The definition in 30:4D-
3(i)(2) tracks the example of the mandatory group described in 42 U.S.C.
§ 1396a(a)(10)(A)(i)(I), i.e., recipients of SSI. The definition in 30:4D-3(i)(7) tracks the
optional group comprised of people who are eligible for SSI but not recipients of it. See
42 U.S.C. § 1396a(a)(10)(A)(ii)(I). And, importantly, the definition in 30:4D-3(i)(11)
tracks the ABD beneficiary group. See id. at (a)(10)(A)(ii)(X), (m)(1). The legislative
history makes crystal clear that N.J.S.A. 30:4D-3(i)(11) was enacted to provide coverage
for the new group established by federal law in 1986 through the enactment of 42 U.S.C.
§ 1396a(a)(10)(A)(ii)(X) and 1396a(m).

The Division of Medical Assistance and Health Services (DMAHS) has
promulgated regulations for administering Medicaid benefits, including Chapter 72 of
Title 10 of the Administrative Code, which applies to the ABD program. The applicants
here challenge N.J.A.C. 10:72-4.4(d)(1), which explains how to determine eligibility for
the ABD program based on income as follows: “If the countable income (before income
deeming) of the aged, blind, or disabled individual exceeds the poverty income guideline
for one person he or she is ineligible for benefits and income deeming does not apply.”
(emphasis added).

Both applicants in these matters, E.M. and G.C., were denied ABD benefits under
N.J.A.C. 10:72-4.4(d)(1) because DMAHS determined that their individual incomes --
unadjusted for household size -- placed them just above the limit. E.M. lives with his
wife, who is partially blind, has diabetes, and has no income. E.M.’s income of $1,193
exceeded the allowable standard of $1,005 under the FPL for individual applicants, and E.M.
was denied benefits. G.C. lives with her husband, who has no income, and her two minor
children, who each receive about $280 in monthly Social Security benefits as dependents of a
disabled parent. G.C.’s application was denied because her income of $1,141 exceeded the
allowable standard of $1,005 for individual applicants.

2
 The administrative law judge (ALJ) who presided over E.M.’s challenge to the
agency’s denial of his application recommended reversal, finding that N.J.A.C. 10:72-
4.4(d)(1) conflicts with federal law. DMAHS rejected the ALJ’s decision. As for G.C.,
the ALJ who heard the matter concluded she was ineligible for ABD benefits under the
regulation, and DMAHS adopted that decision. Both applicants appealed from
DMAHS’s final decisions, arguing that N.J.A.C. 10:72-4.4(d)(1) conflicts with both 42
U.S.C. § 1396a(m) and N.J.S.A. 30:4D-3(i)(11).

The Appellate Division reversed and remanded the matters for further action. 463
N.J. Super. 79, 95 (App. Div. 2020). The Appellate Division determined that N.J.A.C.
10:72-4.4(d)(1) does not violate the federal Medicaid statute. Id. at 89-92. However, the
Appellate Division found the regulation inconsistent with state law. Id. at 92-95.

The Court granted DMAHS’s petition for certification seeking review of whether
N.J.A.C. 10:72-4.4(d)(1) conflicts with N.J.S.A. 30:4D-3(i)(11). 245 N.J. 75 (2021). The
Court also granted the cross-petitions filed by G.C. and E.M., who maintain that the
regulation conflicts with federal law. 245 N.J. 53 (2021); 245 N.J. 54 (2021).

HELD: The Court affirms the Appellate Division’s invalidation of N.J.A.C. 10:72-
4.4(d)(1) as inconsistent with its state enabling legislation and contrary to legislative
intent. But the Court has grave concerns that the regulation’s method of operation is also
inconsistent with the federal Medicaid law. The Court accordingly vacates that portion of
the Appellate Division’s analysis that rejected the federal-law argument by cross-petitioners.

1. Comparing a plain language construction of N.J.S.A. 30:4D-3(i)(11) to N.J.A.C. 10:72-
4.4(d)(1), the Court finds the regulation, on its face, to be in patent conflict with the statute.
N.J.S.A. 30:4D-3(i)(11) explicitly makes medical assistance available to those who are
disabled or over the age of 65 and “whose income does not exceed 100% of the poverty
level, adjusted for family size.” The regulation, in contrast, explicitly requires an
individual’s countable income to be compared against the “poverty income guideline for one
person.” N.J.A.C. 10:72-4.4(d)(1) thus alters the language of the legislation and frustrates
the plain import of the legislative direction to adjust the poverty level to family size when
determining eligibility. The regulation’s label -- as “income-deeming methodology” --
does not affect the analysis. Each part of the regulatory scheme must flow from the statute
that enables it; DMAHS cannot selectively follow the enabling statute. Moreover, the
challenged portion of N.J.A.C. 10:72-4.4 is triggered regardless of whether income is
deemed, which suggests that the initial eligibility determination is not even rationally related
to, let alone a necessary component of, the income-deeming methodology. And the
legislative history of N.J.S.A. 30:4D-3(i)(11) further supports that the FPL was to be
adjusted for family size when determining an applicant’s eligibility. N.J.A.C. 10:72-
4.4(d)(1) may not, consistent with the state statutory language, find an applicant
ineligible without making the proper adjustment for family size. (pp. 30-33)

3
2. Reliance on the fact that eligible candidates under 42 U.S.C. § 1396a(m)(1)(A) must
have their income determined under SSI income methodology conflates two different
concepts: determining income and determining eligibility. The Medicaid Act does not
support such a conflation. Although 42 U.S.C. § 1396a(m)(1)(B) requires income to be
determined based on SSI methodology, the statutory provision also makes clear that
Medicaid eligibility is determined by comparing the calculated income to a state’s chosen
percentage of the FPL adjusted for family size. In other words, while subsection
(m)(1)(B) borrows the SSI income calculation methodology, it provides its own distinct
test for determining eligibility. In explaining why that is so, the Court underscores three
points: (1) the reference in 42 U.S.C. § 1396a(m)(1)(B) to section 1382a (which defines
“income”) -- but not to section 1382 (which is entitled, “Eligibility for benefits”); (2) the
fact that Medicaid eligibility is tied to SSI eligibility in 42 U.S.C. § 1396a(a)(10)(A)(i)(I)
and (ii)(I), but not in (a)(10)(A)(ii)(X); and (3) the fact that N.J.A.C. 10:72-4.4 does not
actually track the SSI methodology, that DMAHS claims compels its initial eligibility
determination. The Court also stresses that, on a practical level, the Regulation can lead
to an absurd outcome: an individual with $900 in countable individual income (below
the $1,005 FPL amount for a single individual) whose spouse has $293 in countable
income would have the same total income as E.M. and his wife (who has no income) --
$1,193 -- but would be eligible for Medicaid under the regulation because that
individual’s income would be able to vault the first step of N.J.A.C. 10:72-4.4(d).
(pp. 33-38)

3. The Appellate Division rejected the applicants’ argument that N.J.A.C. 10:72-
4.4(d)(1) is inconsistent with federal law, reasoning that the FPL for a single person will
necessarily be lower than the FPL adjusted for the size of the applicant’s family. But the
federal Medicaid Act is clear for this specific program: states may choose a percentage,
“not more than 100 percent,” of the FPL “applicable to a family of the size involved,” by
which to compare an applicant’s income to determine Medicaid eligibility. N.J.A.C.
10:72-4.4(d)(1) does not do that. Rather, it indiscriminately compares any applicant’s
income, regardless of his or her family size, against the FPL for one person. Although
that benchmark may necessarily amount to a percentage less than 100% of the
appropriate FPL, that result is reached under a procedure that ignores Congress’s chosen
approach. Congress would not have chosen the language requiring adjustment for family
size if it did not care that states did exactly the opposite. Because the Court has
invalidated N.J.A.C. 10:72-4.4(d)(1) on state law grounds, it does not reach this question
of federal law; however, the Court vacates the contrary conclusion that the Appellate
Division included as part of its holding. (pp. 38-41)

AFFIRMED AS MODIFIED.

CHIEF JUSTICE RABNER and JUSTICES ALBIN, PATTERSON, FERNANDEZ-
VINA, SOLOMON, and PIERRE-LOUIS join in JUSTICE LaVECCHIA’s opinion.

4
 SUPREME COURT OF NEW JERSEY
A-35/36/37 September Term 2020
084417

G.C.,

Petitioner-Respondent/Cross-Appellant,

v.

Division of Medical Assistance
and Health Services,

Respondent-Appellant/Cross-Respondent,

and

Ocean County Board of
Social Services,

Respondent.

E.M.,

Petitioner-Respondent/Cross-Appellant,

v.

Division of Medical Assistance
and Health Services,

Respondent-Appellant/Cross-Respondent,

and

Essex County Board of
Social Services,

1
 Respondent.

On certification to the Superior Court,
Appellate Division, whose opinion is reported at
463 N.J. Super. 79 (App. Div. 2020).

Argued Decided
September 14, 2021 November 18, 2021

Stephen Slocum, Deputy Attorney General, argued the
cause for appellant/cross-respondent (Andrew J. Bruck,
Acting Attorney General, attorney; Melissa H. Raksa,
Assistant Attorney General, of counsel, and Francis X.
Baker, Deputy Attorney General, on the briefs).

Joshua M. Spielberg argued the cause for
respondent/cross-appellant E.M. (Legal Services of New
Jersey, attorneys; Joshua M. Spielberg, Melville D.
Miller, Jr., Kristine Marietti Byrnes, Maura Sanders, and
Dawn K. Miller, on the briefs).

Kenneth M. Goldman argued the cause for
respondent/cross-appellant G.C. (South Jersey Legal
Services, attorneys; Kenneth M. Goldman, and Thomas
LaMaina, on the briefs).

Timothy P. Malone argued the cause for amici curiae
Community Health Law Project and Disability Rights
New Jersey (Pashman Stein Walder Hayden, attorneys;
Timothy P. Malone, on the brief).

JUSTICE LaVECCHIA delivered the opinion of the Court.

Medicaid is a shared federal-state program that provides a lifeline of

medical services to eligible individuals. New Jersey participates in the

2
Medicaid program by virtue of its adoption of the New Jersey Medical

Assistance and Health Services Act (the New Jersey Act), N.J.S.A. 30:4D-1 to

-19.5.

Pertinent to this appeal, New Jersey amended the New Jersey Act in

1987 to expand coverage, creating a new category of eligible persons under the

state’s optional categorically needy program. L. 1987, c. 349 (codified at

N.J.S.A. 30:4D-3(i)(11)). Federal law had been altered to permit states to

extend Medicaid coverage to previously ineligible persons who are aged,

blind, or disabled and who do not receive Social Security public assistance

benefits but whose lack of means renders them unable to afford certain

medical expenses not covered through Medicare. Specifically, the amendment

to the federal Medicaid law gave states the option to extend Medicaid coverage

to certain individuals who are aged, blind, or disabled and whose income is not

greater than 100% of the federal poverty guidelines “applicable to a family of

the size involved.” 42 U.S.C. § 1396a(a)(10)(A)(ii)(X), (m)(1) to (2).1 The

law allows participating states discretion to choose the percentage of the

federal poverty guideline up to which coverage will be available. Id. at

1
The amendments were added through Title XIX as part of the Omnibus
Budget Reconciliation Act of 1986, P.L. 99-509, § 9402. Section 9402 in
Public Law 99-509 is entitled “Optional Coverage of Elderly and Disabled
Poor for all Medical Benefits,” and subsection (a) of section 9402 is titled
“Creation of New Optional Categorically Needy Groups.”
3
(m)(1)(B), (m)(2)(A). New Jersey has chosen to use the maximum, 100% limit

of the federal poverty guideline. See N.J.S.A. 30:4D-3(i)(11) (defining as

qualified an applicant age 65 or older, or who is blind or disabled, “whose

income does not exceed 100% of the poverty level, adjusted for family size”) .

The issue in this consolidated appeal is whether one of the State’s

regulations that implements this particular expansion of New Jersey’s

Medicaid Program is inconsistent with the language and intent of the enabling

state and federal legislative amendments that authorized the expansion. The

challenge focuses on N.J.A.C. 10:72-4.4(d)(1) (the Regulation). This

challenge arose when two applicants, one who resided with his spouse and one

who resided with her husband and two children, filed for benefits under this

Medicaid program, known as the NJ Medicaid -- Aged, Blind, and Disabled

Program (ABD program).

The Division of Medical Assistance and Health Services (DMAHS)

dismissed the claims of the two applicants. Each was denied coverage on the

basis that the applicant’s income -- as an individual and irrespective of his or

her family size -- exceeded the maximum income permitted under the federal

poverty guideline for a single individual because N.J.A.C. 10:72-4.4(d)(1)

provides in relevant part that, “[i]f the countable income . . . of the aged, blind,

4
or disabled individual exceeds the poverty income guideline for one person he

or she is ineligible for benefits.” (emphasis added).

New Jersey’s regulatory calculation does not adjust the individual’s

income based on family size when comparing that income to the federal

poverty guideline. Rather, the Regulation compares the applicant’s individual

income against the federal poverty guideline at the 100% limit for an

individual. If the applicant’s income exceeds that limit by even one dollar, the

analysis stops there. He or she is excluded from the ABD program at that first

step. There is no adjustment for family size.

In a consolidated opinion, the Appellate Division reversed DMAHS’s

determination in each of the cases before us, concluding that the Regulation

violated the state statutory law enabling the ABD program. That said, the

appellate court was unpersuaded by the applicants’ arguments that the

Regulation was also invalid under federal Medicaid law.

We granted DMAHS’s petition for certification seeking our review of

whether N.J.A.C. 10:72-4.4(d)(1) conflicts with N.J.S.A. 30:4D-3(i)(11). 245

N.J. 75 (2021). We also granted the cross-petitions filed by the individual

claimants, G.C. and E.M., who maintain that the Regulation conflicts with

federal law. 245 N.J. 53 (2021); 245 N.J. 54 (2021). And we granted amicus

5
status to Community Health Law Project and Disability Rights New Jersey,

who participated jointly.

We now affirm and modify the Appellate Division judgment holding

invalid the challenged Regulation. We agree that the Regulation is contrary to

the plain language and evident legislative intent of the state law amendment

that authorized this Medicaid extension for New Jersey’s Medicaid State Plan.

We modify because, although we need not reach the question, we have grave

concerns that the Regulation’s method of operation is also inconsistent with

the federal Medicaid law that enabled this expansion of Medicaid eligibility.

Accordingly, for the reasons expressed, we vacate that portion of the Appellate

Division’s analysis that rejected the federal-law argument by cross-petitioners.

I.

For necessary context, we begin by reviewing the structure and key

provisions of the federal and state law governing Medicaid.

A. Federal Legislation

With respect to the intent and structure of the shared program known as

Medicaid, it is well recognized that “Medicaid, enacted in 1965 as Title XIX

of the Social Security Act, [42 U.S.C. §§ 1396 to 1396w-6], is designed to

provide medical assistance to persons whose income and resources are

insufficient to meet the costs of necessary care and services.” Atkins v.

6
Rivera, 477 U.S. 154, 156 (1986). “The Federal Government shares the costs

of Medicaid with States that elect to participate in the program,” and “[i]n

return, participating States are to comply with requirements imposed by the

Act and by the Secretary of Health and Human Services.” Id. at 156-57 (citing

42 U.S.C. § 1396a).

The basic operational principles are as follows. The federal

administration of Medicaid authorizes annual appropriations of money for

payments to states whose plans for medical assistance have been approved by

the Secretary of Health and Human Services. 42 U.S.C. § 1396-1. The

parameters that a “State plan for medical assistance must” follow are set forth

in 42 U.S.C. § 1396a. Within such a plan, participating states are required to

provide coverage to certain groups and can choose to provide coverage to

other groups. As the Second Circuit has succinctly explained, “[t]he line

between mandatory and optional coverage is primarily drawn in § 1396a(a):

mandatory coverage is specified in § 1396a(a)(10)(A)(i), and the state options

are set forth in subsection (ii).” Skandalis v. Rowe, 14 F.3d 173, 175-76 (2d

Cir. 1994).

Within the mandatory category, which has been referred to as the

“categorically needy,” see L.M. v. Div. of Med. Assistance & Health Servs.,

140 N.J. 480, 485 (1995), subsection (a)(10)(A)(i)(I) includes, among other

7
groups, “all individuals . . . who are receiving aid or assistance under any plan

of the State approved under [Title] I [‘Grants to States for Old-Age Assistance

for the Aged’], X [‘Grants to the States for Aid to the Blind’], XIV [‘Grants to

States for Aid to the Permanently Disabled’], or XVI [‘Supplemental Security

Income for the Aged, Blind, and Disabled’]” of the Social Security Act. 42

U.S.C. § 1396a(a)(10)(A)(i)(I).

Within the optional category, referred to as the “optional categorically

needy,” see L.M., 140 N.J. at 485, subsection (a)(10)(A)(ii) includes

any group of individuals described in [42 U.S.C.
§ 1396d(a)2] . . . who are not individuals described in
clause (i) of this subparagraph but --

(I) who meet the income and resources
requirements of the appropriate State plan

2
42 U.S.C. § 1396d(a) states that

“medical assistance” means payment of part or all of
the costs [of various] care and services or the care and
services themselves, or both . . . to individuals . . . not
receiving aid or assistance under any plan of the State
approved under title I, X, or XVI . . . and with respect
to whom supplemental security income benefits are not
being paid under title XVI, who are

....

(v) 18 years of age or older and permanently and totally
disabled . . .

[(emphasis added).]

8
 described in clause (i) or the supplemental
security income program . . . , [or]

....

(X) who are described in subsection (m)(1) . . . .

[42 U.S.C. § 1396a(a)(10)(A)(ii)(I), (X) (emphasis
added).]

Subsection (a)(10)(A)(ii)(X) references subsection (m)(1), which is also

found in 42 U.S.C. § 1396a. Due to the importance of subsubsection (m), we

quote its relevant provisions in full:

(m) Description of individuals.

(1) Individuals described in this paragraph are
individuals --

(A) who are 65 years of age or older or are
disabled individuals (as determined under [42
U.S.C. § 1382c(a)(3)]),

(B) whose income (as determined under [42
U.S.C. § 1382a] for purposes of the supplemental
security income program, except as provided in
paragraph (2)(C)) does not exceed an income
level established by the State consistent with
paragraph (2)(A), and

(C) whose resources (as determined under [42
U.S.C. § 1382b] for purposes of the supplemental
security income program) do not exceed (except
as provided in paragraph (2)(B)) the maximum
amount of resources that an individual may have
and obtain benefits under that program.

9
 (2)

(A) The income level established under
paragraph (1)(B) may not exceed a percentage
(not more than 100 percent) of the official
poverty line (as defined by the Office of
Management and Budget, and revised annually in
accordance with [42 U.S.C. § 9902(2)3])
applicable to a family of the size involved.

(B) In the case of a State that provides medical
assistance to individuals not described in
subsection (a)(10)(A) and at the State’s option,
the State may use under paragraph (1)(C) such
resource level (which is higher than the level
described in that paragraph) as may be applicable
with respect to individuals described in
paragraph (1)(A) who are not described in
subsection (a)(10)(A).

(C) The provisions of [42 U.S.C.
§ 1396d(p)(2)(D)] shall apply to determinations
of income under this subsection in the same
manner as they apply to determinations of
income under [42 U.S.C. § 1396d(p)].

[42 U.S.C. § 1396a(m)(1) to (2).]

Summarizing the structure detailed so far, in order to have an acceptable

state Medicaid plan, a state must provide “medical assistance” to “the

3
“The term ‘poverty line’ means the official poverty line defined by the
Office of Management and Budget based on the most recent data available
from the Bureau of the Census. The Secretary shall revise annually (or at any
shorter interval the Secretary deems feasible and desirable) the poverty line
. . . .” 42 U.S.C. § 9902(2).

10
categorically needy,” a group that includes people who receive certain types of

benefits such as Supplemental Security Income (SSI). See id. at

(a)(10)(A)(i)(I). States also have the option of providing “medical assistance”

to “the optional categorically needy.” Id. at (a)(10)(A)(ii).

The “optional categorically needy” group may include people who are

not receiving the type of aid described in (a)(10)(A)(i), which includes SSI, 42

U.S.C. § 1396d(a), but who nevertheless “meet the income and resources

requirements” of an appropriate State plan for such aid or for “the

supplemental security income program,” 42 U.S.C. § 1396a(a)(10)(A)(ii)(I).

That category also includes people not receiving the type of aid described in

(a)(10)(A)(i), id. § 1396d(a), and who are sixty-five years of age or older or

disabled, id. § 1396a(a)(10)(A)(ii)(X), (m)(1)(A), and whose income level

does not exceed, id. at (m)(1)(B), a specified percentage (decided by the State)

of the federal poverty line (FPL) as applicable to a family of the size involved,

id. at (m)(2)(A). Although a mouthful, that is the group described by

subsection (m)(1), or as used herein -- the ABD beneficiaries. 4

4
Although there are other groups of people who fall under either the
categorically or optional categorically needy classifications, we focus on the
group directly at issue in this appeal, ABD beneficiaries, and the two other
previously mentioned examples for context.

11
 Furthermore, it is notable that, as to the two “optional categorically

needy” groups described above, the first group must be eligible for, but not

actually receive, aid such as SSI, while the ABD group’s eligibility is not

dependent on eligibility for SSI, but rather is determined based on a

comparison of the group member’s income against the FPL. That said, under

(m)(1)(B), income for that latter group is calculated under the same standard

for calculating income for SSI purposes.

Turning to subsection (m)(1)(B), it cross-references 42 U.S.C. § 1382a

as the appropriate statute for determining the income of a potential ABD

beneficiary. Section 1382a defines “earned” and “unearned” income, both of

which are counted as income, 42 U.S.C. § 1382a(a)(1) to (2), and describes

various exclusions to an individual’s calculated income. 5 The statutory

provision does not otherwise address eligibility; rather, it explains what is and

is not counted as “income.” Under subsections (m)(1)(B) and (m)(2)(A), it is

that calculated “income” that is compared against whatever percentage of the

FPL, “applicable to a family of the size involved,” a given state chooses for its

ABD program.

5
The Social Security Administration (SSA) has promulgated extensive
regulations regarding SSI eligibility and income calculation, which include a
process of deeming income to an applicant. See 20 C.F.R. § 416.1160. The
“income” regulations, codified at 20 C.F.R, Chapter III, Part 416, Subpart K,
list, among other statutory provisions, § 1382a as a statutory authority.
12
 B. State Law

New Jersey is a long-time participant in the Medicaid program. L.M.,

140 N.J. at 485 (noting that New Jersey made that election with enactment of

the New Jersey Act and that DMAHS is the agency designated to administer

the state’s Medicaid program). Further, “New Jersey has chosen to provide

coverage to ‘optional categorically’ needy persons.” Id. at 486 (citing N.J.S.A.

30:4D-3(i)(7)). Relevant to this appeal, the New Jersey Act defines a

“qualified applicant” for Medicaid as

a person who is a resident of this State, and either a
citizen of the United States or an eligible alien, and is
determined to need medical care and services as
provided under L. 1968, c. 413, with respect to whom
the period for which eligibility to be a recipient is
determined shall be the maximum period permitted
under federal law, and who:

....

(2) Is a recipient of Supplemental Security
Income for the Aged, Blind and Disabled under
Title XVI of the Social Security Act;

....

(7) Would be eligible for the Supplemental
Security Income program, but is not receiving
such assistance and applies for medical
assistance only; [or]

....

13
 (11) Is an individual 65 years of age and older,
or an individual who is blind or disabled pursuant
to section 301 of Pub. L. 92-603 (42 U.S.C.
§ 1382c), whose income does not exceed 100%
of the poverty level, adjusted for family size, and
whose resources do not exceed 100% of the
resource standard used to determine medically
needy eligibility pursuant to paragraph (8) of this
subsection[.]

[N.J.S.A. 30:4D-3(i)(2), (7), (11).]

Those three definitions of a “qualified applicant” track the groups of

qualified individuals under the federal Medicaid statute. The definition in

30:4D-3(i)(2) tracks the example of the “categorically needy” group described

in 42 U.S.C. § 1396a(a)(10)(A)(i)(I), i.e., recipients of SSI. The definition in

30:4D-3(i)(7) tracks the group of “optional categorically needy” people who

are eligible for SSI but not recipients of it. See 42 U.S.C.

§ 1396a(a)(10)(A)(ii)(I). And, importantly, the definition in 30:4D-3(i)(11)

tracks the ABD beneficiary group. See id. at (a)(10)(A)(ii)(X), (m)(1).

To put a fine point on it, the legislative history of N.J.S.A. 30:4D-

3(i)(11) makes crystal clear that the provision was added to the New Jersey

Act specifically to provide coverage for the new optional categorically needy

group added under federal law through the Omnibus Budget Reconciliation

Act of 1986, the law that amended Title XIX to include both subsection

14
(a)(10)(A)(ii)(X) and subsection (m). See S. Inst., Health, & Welfare Comm.

Statement to S. 2972 (Feb. 26, 1987).

Pursuant to N.J.S.A. 30:4D-4 and -7, DMAHS is the administrative

agency responsible for Medicaid implementation. And DMAHS has, in turn,

promulgated regulations for administering Medicaid benefits.

Corresponding to N.J.S.A. 30:4D-3(i)(7), DMAHS has set up a system

for “Medicaid Only.” See N.J.A.C. 10:71-1 to -9.5. Those regulations explain

that “[t]he Social Security Administration administers Title XVI, Supplemental

Security Income (SSI), which provides cash payments to the aged, blind and

disabled. Individuals who desire medical care only apply through the county

welfare agency for the Medicaid Only program under Title XIX.” N.J.A.C.

10:71-1.1. Accordingly, “[a]n aged, blind or disabled person who desires

Medicaid and does not wish to receive a money payment may apply for the

Medicaid Only program.” N.J.A.C. 10:71-1.2(a) (emphasis added). The

regulations explicitly tether the availability of “Medicaid Only” to SSI

eligibility: “[a]ged, blind and disabled persons who are living in the

community and meet the requirements of the SSI program may receive

Medicaid Only.” N.J.A.C. 10:71-1.3(a). Indeed, the regulations state, “[t]he

criteria for determination of eligibility [for Medicaid Only] are based on SSI

policy and procedure which do not necessarily coincide with standards for

15
other public assistance programs and therefore require separate instructions.”

N.J.A.C. 10:71-1.4.

Accordingly, as with SSI, the Medicaid Only regulations provide

definitions and methodologies for calculating income. See N.J.A.C. 10:71-5.1

to -5.9. Within those regulations, as is also true for SSI, is a procedure for

“income deeming.” N.J.A.C. 10:71-5.5. That regulation provides the

following regarding the deeming of income from spouse to spouse:

If the applicant’s/beneficiary’s own countable income,
as determined in accordance with N.J.A.C. 10:71-5.2,
less appropriate exclusions in N.J.A.C. 10:71-5.3,
exceeds the applicable Medicaid Only income
eligibility standard in Table B at N.J.A.C. 10:71-
5.6(c)5, the applicant/beneficiary is financially
ineligible for Medicaid Only based on his or her own
countable income, and there is no deeming. However,
if the applicant’s/beneficiary’s own countable income
renders him or her financially eligible for Medicaid
Only, the following steps shall be used to compute
deemed income[.]

[N.J.A.C. 10:71-5.5(c).]

Table B at N.J.A.C. 10:71-5.6(c)(5) sets the income standards; for

example, for an individual living alone or with an ineligible spouse, the

amount is “$1,107.36” per month. Accordingly, under N.J.A.C. 10:71-5.5, if

an individual who lives alone or with an ineligible spouse has an individual

income above “$1,107.36,” no income deeming occurs because that individual

is not eligible for Medicaid Only in the first place.
16
 C. The Challenged Regulation

We turn now to the chapter of the New Jersey Administrative Code

containing the regulation pertaining to ABD beneficiaries that is challenged in

this appeal.

Corresponding in part to, and indeed promulgated as an emergency

regulation following the enactment of N.J.S.A. 30:4D-3(i)(11), see 20 N.J.R.

548(a), 1103(a), are DMAHS’s regulations for the ABD program. N.J.A.C.

10:72 (titled “New Jersey Care . . . Special Medicaid Programs Manual”).

This chapter of regulations contains “the criteria for Medicaid eligibility for

. . . certain aged, blind and disabled persons not eligible under the provisions

of N.J.A.C. 10:71 [Medicaid Only].” N.J.A.C. 10:72-1.1 (emphasis added).

Like the Medicaid Only program, the ABD program sets a level of income

eligibility and provides a process for income deeming. The applicants

challenged a subsection within the income deeming process and how it affects

eligibility. The Regulation states:

(a) Except as specified below, countable income for
aged, blind, and disabled individuals shall be
determined in accordance with rules applicable to
income in Medicaid Only--Aged, Blind, and Disabled
(see N.J.A.C. 10:71-5).

....

(d) In accordance with the rules at N.J.A.C. 10:71-5.5,
the income of the spouse of an aged, blind, or disabled
17
individual shall be deemed to the aged, blind, or
disabled individual if they are residing in the same
household. Income of the parent(s) of a blind or
disabled child under the age of 18 residing in the same
household shall be deemed available to the child in
determining income eligibility for benefits under this
chapter. No income shall be deemed to an aged, blind,
or disabled individual from a person who is a member
of a household unit of an eligible pregnant woman or
child under the provisions of this chapter or who is in
the budget unit of eligible AFDC-related Medically
Needy cases (including a case that is eligible pending
spend-down).

1. If the countable income (before income
deeming) of the aged, blind, or disabled
individual exceeds the poverty income guideline
for one person he or she is ineligible for benefits
and income deeming does not apply.

2. When income of a spouse is deemed to an
aged, blind, or disabled individual, the total
countable income after deeming is compared to
the poverty income guideline for two persons.

3. In determining income eligibility of a child,
the child’s income after deeming is compared to
the poverty income guideline for one person.

4. When the income of a spouse must be deemed
to both an aged, blind, or disabled individual and
a blind or disabled child, the income is first
deemed to the aged, blind, or disabled spouse. If
the income (after deeming) of the aged, blind, or
disabled spouse does not exceed the poverty
income guideline, he or she is income eligible
and there is no income to be deemed to the blind
or disabled child. If the poverty income
guideline is exceeded, the aged, blind, or disabled

18
 adult is income ineligible and the excess income
is deemed to the blind or disabled child.

5. When parental income must be deemed to
more than one blind or disabled child, the
deemable income shall be divided equally among
such children.

[N.J.A.C. 10:72-4.4(a) and (d) (emphasis added).]

II.

This appeal provides two striking personal examples of the operational

impact of the Regulation under review. Both of the individuals who applied

and were denied eligibility for the ABD program were disabled, were receiving

Medicare, and had individual income through Social Security benefits.

DMAHS determined that their income placed them just above the FPL limit

for ABD benefits when unadjusted for household size. Yet their modest

“excess” incomes and their financial situations made it difficult to manage

Medicare co-pays, deductibles, and other medical services that are not covered

by Medicare, which, each argues, was the intended purpose of this specific

Medicaid extension program. Their matters unfolded as follows.

In July 2017, E.M. applied to the Essex County Board of Social

Services, the county welfare agency (CWA), for medical-assistance benefits

through the ABD program. At the time his application was denied, E.M. was

57 years old, and his only source of income was $1,193 per month in Social

19
Security Disability Income (SSDI). 6 E.M. lives with his wife, who is partially

blind, has diabetes, and has no income. The CWA, which administers the

eligibility determinations for DMAHS, denied E.M.’s application because his

income of $1,193 exceeded the allowable standard of $1,005 under the FPL for

individual applicants.

In November 2017, G.C. applied to the Ocean County Board of Social

Services, the CWA for Ocean County, for medical assistance benefits through

the ABD program. At the time of her application, G.C. was 49 years old, and

her only source of income was $1,141 per month in SSDI benefits. G.C. lives

with her husband, who has no income, and her two minor children. G.C.’s

children each receive $279.90 in monthly Social Security benefits as

dependents of a disabled parent. The CWA denied G.C.’s application be cause

her income of $1,141 exceeded the allowable standard of $1,005 for individual

applicants.

6
SSDI is a benefit program under Title II of the Social Security Act,
42 U.S.C. §§ 401 to 434, distinct from SSI, which is statutorily authorized
under Title XVI of the Social Security Act. The SSDI “program provides
benefits to a person with a disability so severe that she is ‘unable to do [her]
previous work’ and ‘cannot . . . engage in any other kind of substantial gainful
work.’” Cleveland v. Pol’y Mgmt. Sys. Corp., 526 U.S. 795, 797 (1999)
(alteration in original) (quoting 42 U.S.C. § 423(d)(2)(A)). Its calculation is
tied to work history and to the average salary from the person’s work history.
See 20 C.F.R. §§ 404.110 to -.120, 404.210 to -.212. Hence, the amount can
and does, as here, come in somewhat above the FPL. SSI is not tied to a prior
work history and earnings of a disabled person.
20
 E.M. and G.C. each requested hearings. Their matters were transferred

to the Office of Administrative Law (OAL), where divergent results were

reached in their matters.

Following a hearing in E.M.’s contested case proceeding, the

administrative law judge (ALJ) who presided over the matter issued an Initial

Decision recommending that the denial of E.M.’s application for Medicaid

eligibility be reversed. The ALJ concluded that N.J.A.C. 10:72-4.4(d)(1) --

which renders an ABD applicant ineligible if their countable income “exceeds

the poverty income guideline for one person” -- conflicted with 42 U.S.C.

§ 1396a(m). The ALJ noted that § 1396a(m)(2)(A) states that the level of

income at which a state may set its eligibility requirements for ABD benefits

“may not exceed a percentage (not more than 100 percent) of the official

poverty line . . . applicable to a family of the size involved.” Accordingly, the

ALJ reversed the denial of E.M.’s application because he has a family of two

and N.J.A.C. 10:72-4.4(d)(1) incorrectly fails to consider the size of the

applicant’s family. DMAHS issued a Final Agency Decision rejecting the

ALJ’s Initial Decision.

As for G.C., the ALJ who heard the matter hewed to N.J.A.C. 10:72-4.4,

found that G.C.’s countable income exceeded the FPL for a household of one,

21
and concluded that G.C. was ineligible. DMAHS issued a Final Agency

Decision adopting the Initial Decision and rejecting G.C.’s application.

Both applicants appealed, arguing that N.J.A.C. 10:72-4.4(d)(1) conflicts

with 42 U.S.C. § 1396a(m) and the New Jersey Act.

In a consolidated opinion authored by the Honorable Carmen Messano,

P.J.A.D., the Appellate Division reversed DMAHS’s Final Agency Decisions

and remanded the matters for further action. G.C. v. Div. of Med. Assistance

& Health Servs., 463 N.J. Super. 79, 95 (App. Div. 2020).

After a thorough review of Medicaid and the statutory and regulatory

regime adopted in New Jersey, id. at 85-89, the Appellate Division first

determined that N.J.A.C. 10:72-4.4(d)(1) does not violate the federal Medicaid

statute, id. at 89-92. Relying on its interpretation of the language of 42 U.S.C.

§ 1396a(m)(1)(A) to (B) and (m)(2)(A), the court noted that subsection

(m)(2)(A) “only prohibits [DMAHS] from establishing an income level for

eligibility purposes at an amount that ‘exceed[s] a percentage (not more than

100 percent) of the official poverty line . . . applicable to a family of the size

involved.’” Id. at 89-90 (second alteration and omission in original) (quoting

42 U.S.C. § 1396a(m)(2)(A)). The Appellate Division concluded that

DMAHS’s promulgation of N.J.A.C. 10:72-4.4(d)(1) “does not set an income

level for eligibility that exceeds the FPL for a family of four or two people;

22
rather, the Regulation sets an income level for eligibility that is less than the

FPL for a family of four or two.” Id. at 90. The court therefore determined

there was no conflict between the Regulation and the federal provision. Ibid.

The court found the out-of-state cases cited by E.M. and G.C. unpersuasive.

Id. at 90-92.

However, the Appellate Division found a fatal problem with the

Regulation under state law. Turning to E.M. and G.C.’s argument that

N.J.A.C. 10:72-4.4(d)(1) conflicts with its enabling statute, the court pointed

to N.J.S.A. 30:4D-3(i)(11), which defines a “qualified applicant” for ABD

benefits, and quoted its part that includes “an individual . . . who is . . .

disabled . . . whose income does not exceed 100% of the poverty level,

adjusted for family size, and whose resources do not exceed 100% of the

resource standard used to determine medically needy eligibility.” Id. at 92-93

(omissions in original) (quoting N.J.S.A. 30:4D-3(i)(11)). In addition to the

clear language found in the statutory definition of “qualified applicant” that

pertains to the ABD program, the court also found support in a Senate

Committee statement accompanying the 1988 amendment to N.J.S.A. 30:4D-3,

which expanded coverage to ABD individuals. Id. at 93. Per that statement,

the amendment was intended to “expand[] the eligibility criteria . . . to include

persons who are . . . disabled . . . and whose incomes are less than the

23
appropriate poverty level of their family size and whose assets do not exceed

the level permitted under the State’s medically needy program.” Ibid.

(alterations in original) (emphasis added) (quoting S. Rev., Fin., &

Appropriations Comm. Statement to L. 1987, c. 349 (June 15, 1987)). Based

on those indicators of legislative intent concerning the operation of the

extended ABD program, the Appellate Division then held that “N.J.A.C.

10:72-4.4(d)(1)[] conflicts with the Act and must be stricken.” Id. at 94-95.

III.

We address first the state law arguments raised by the State’s petition.

A.

In seeking reversal of the Appellate Division judgment, DMAHS argues

that the Appellate Division performed a myopic “plain reading” analysis and

did not consider the Regulation in the broader context of the New Jersey Act

and Medicaid’s federal regulatory scheme. DMAHS essentially posits that

certain words within the Medicaid regulatory scheme do not always follow

their “ordinary meaning.”

According to DMAHS, the seeming conflict between the Regulation and

the enabling statute is not actually a conflict at all -- the Regulation merely

applies the same income calculation methodology as the Medicaid Only

24
program and, the argument goes, there was no indication from the Legislature,

when it enacted N.J.S.A. 30:4D-3(i)(11), for DMAHS to do otherwise.

DMAHS’s argument begins with 42 U.S.C. § 1396a(m)(1)(B), which

states that an individual’s income must be determined under 42 U.S.C. § 1382a

for purposes of the supplemental security income program. DMAHS then

relies on the income deeming procedures in federal regulations for SSI, citing

20 C.F.R. § 416.1160(a), which defines “deeming” as “the process of

considering another person’s income to be your own.” The regulations on

which DMAHS relies instruct that if an applicant lives with a spouse who is

ineligible for SSI benefits, the Social Security Administration “look[s] at your

spouse’s income to decide whether we must deem some of it to you. We do

this because we expect your spouse to use some of his or her income to take

care of some of your needs.” Id. at (a)(1). The regulations further explain that

the Administration “consider[s] the income of your ineligible spouse . . . in the

current month to determine whether you are eligible for SSI benefits for that

month.” Id. at (b)(1). The regulations provide the steps for deeming the

income of an ineligible spouse. 20 C.F.R. § 416.1163 (a) to (c). The

regulations then provide:

(d) Determining your eligibility for SSI.

(1) If the amount of your ineligible spouse’s
income that remains after appropriate allocations
25
 is not more than the difference between the
Federal benefit rate for an eligible couple and the
Federal benefit rate [7] for an eligible individual,
there is no income to deem to you from your
spouse. In this situation, we subtract only your
own countable income from the Federal benefit
rate for an individual to determine whether you
are eligible for SSI benefits.

(2) If the amount of your ineligible spouse’s
income that remains after appropriate allocations
is more than the difference between the Federal
benefit rate for an eligible couple and the Federal
benefit rate for an eligible individual, we treat
you and your ineligible spouse as an eligible
couple.

[Id. at (d) (then listing further steps to the analysis).]

Specifically, in advancing this argument, DMAHS takes its cue from

416.1163(d)(1)’s statement that where an ineligible spouse’s countable income

“is not more than the difference between the Federal benefit rate for an eligible

couple and the Federal benefit rate for an eligible individual, there is no

income to deem to you from your spouse,” because, in that situation, the

7
As defined,

Federal benefit rate means the monthly payment rate for
an eligible individual or couple. It is the figure from
which we subtract countable income to find out how
much your Federal SSI benefit should be. The Federal
benefit rate does not include the rate for any State
supplement paid by us on behalf of a State.

[20 C.F.R. § 416.1101.]
26
regulation states “we subtract only your own countable income from the

Federal benefit rate for an individual to determine whether you are eligible for

SSI benefits.” Ibid. DMAHS asserts that regulatory language supports the

operational structure followed in N.J.A.C. 10:72-4.4(d), because, it argues,

when an applicant lives with an ineligible spouse, the SSI methodology for

calculating an applicant’s countable income, which includes income deeming,

entails a threshold determination whether the applicant should be evaluated as

an individual or an eligible couple.

DMAHS asserts that its Medicaid Only program tracks the above federal

income deeming regulations; it reasons that, because the ABD program cross-

references Medicaid Only, the ABD program also follows that already existing

framework. Thus, when DMAHS adopted N.J.A.C. 10:72-4.4(d), which cross-

references N.J.A.C. 10:71-5.5, it contends that it was merely aligning the

income deeming methodology for ABD beneficiaries with the existing

methodology for the Medicaid Only program and the SSI income-deeming

methodology. See N.J.A.C. 10:71-5.5(c). DMAHS argues that the Medicaid

Only program requires an applicant to first be individually eligible before

adjustment is made for family size and that therefore, in the ABD program, the

Regulation follows the same income deeming methodology: An initial

determination is made under N.J.A.C. 10:72-4.4(d)(1) as to whether the

27
applicant’s income exceeds the FPL for a single person, and then -- after

income-deeming -- the applicant’s deemed income is compared to “the income

level established by the State” as required by § 1396a(m)(1)(B) and (m)(1)(A).

It is at that point that DMAHS accounts for family size, a procedure it argues

is in accord with the New Jersey Act.

B.

In response to the State’s petition, E.M. and G.C. argue that N.J.A.C.

10:72-4.4(d) explicitly requires an individual’s countable income to be

measured against the “poverty income guideline for one person,” and if the

individual’s income exceeds that poverty level, the individual is ineligible for

benefits. That clear language, they contend, renders the Regulation, on its

face, in conflict with N.J.S.A. 30:4D-3(i)(11), which explicitly makes medical

assistance available to those who are disabled or over the age of 65, “whose

income does not exceed 100% of the poverty level, adjusted for family size.”

They urge that the Appellate Division’s compelling reasoning on this issue be

affirmed.

Amici support the position advanced by G.C. and E.M. and similarly

urge affirmance of the Appellate Division’s judgment holding the Regulation

in conflict with state enabling law.

28
 IV.

A.

In this review, we note that an appellate court is not “bound by the

agency’s interpretation of a statute or its determination of a strictly legal

issue.” Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93 (1973). That

principle holds because an agency cannot ignore or change legislative terms

“or frustrate the policy embodied in the statute.” T.H. v. Div. of

Developmental Disabilities, 189 N.J. 478, 491 (2007) (quoting N.J. Chamber

of Com. v. Election Law Enf’t Comm’n, 82 N.J. 52, 82 (1980)). That said,

when reviewing an administrative agency’s interpretation of one of its

regulations implementing a state statute, we ordinarily defer to an agency’s

reasonable interpretation. An agency’s reasonable interpretation receives

favorable treatment by a reviewing court, but “not blind deference.” In re N.J.

Individual Health Coverage Program’s Readoption of N.J.A.C. 11:20-1, 179

N.J. 570, 584 (2004). Here, we have difficulty deferring to the agency because

the interpretation adopted and implemented through the Regulation is at odds

with the plain language adopted by the Legislature in enacting this Medicaid

expansion for New Jersey.

29
 B.

As G.C. and E.M. argue, and as the Appellate Division held, the

Regulation explicitly requires an individual’s countable income to be

compared against the “poverty income guideline for one person.” The

Regulation then requires that if the individual’s income exceeds that poverty

level, the individual is ineligible for benefits, and thus ends the need for any

further analysis. One of the first rules of statutory construction is to follow the

plain language of the Legislature and give those words their ordinary meaning.

DiProspero v. Penn, 183 N.J. 477, 492-93 (2005). Comparing a plain language

construction of the statute to the Regulation, we find the Regulation, on its

face, to be in patent conflict with N.J.S.A. 30:4D-3(i)(11), which explicitly

makes medical assistance available to those who are disabled or over the age

of 65, “whose income does not exceed 100% of the poverty level, adjusted for

family size.” The Regulation alters the language of the legislation and

frustrates the plain import of the legislative direction to adjust the poverty

level to family size when determining eligibility.

The fact that the Regulation operates in the regulatory context of

“income deeming,” which DMAHS forcefully argues is the pre-condition that

must be vaulted before family size is considered, is of no avail. That

interpretation cannot be squared with the language chosen by the Legislature.

30
In a situation like E.M.’s, for example, where the ineligible spouse has no

income, so no income is deemed, the mere fact that N.J.A.C. 10:72-4.4(d)

makes an initial eligibility determination within the deeming methodology is

functionally no different than if, after income calculation, the applicant’s own

personal or individual income is compared against the FPL for a single person.

Under either circumstance, an applicant who may otherwise be eligible based

on income and family size to receive Medicaid would be rendered ineligible.

Yet, according to DMAHS, because that eligibility determination takes place

within the income-deeming methodology, it is justified. Apparently, DMAHS

believes that by placing an initial -- and plainly unsupported -- eligibility

requirement under the label of “income-deeming methodology,” that

requirement can conflict with the enabling statute’s clear mandates governing

ABD eligibility.

We cannot agree. The placement of this eligibility determination within

the income-deeming methodology that disqualified both E.M. and G.C. does

not make it any more acceptable. Each part of the regulatory scheme must

flow from the statute that enables it; DMAHS cannot selectively follow the

enabling statute. Moreover, the challenged portion of N.J.A.C. 10:72-4.4 is

triggered regardless of whether income is deemed, which suggests that the

31
initial eligibility determination is not even rationally related to, let alone a

necessary component of, the income-deeming methodology.

Our review of the legislative history only further supports that the

Legislature meant what it said when creating this new program, namely that

the federal poverty line was to be adjusted for family size when determining an

applicant’s eligibility. As explained in a Senate Committee statement to the

bill as it wound its way to passage, the bill expanded the criteria for Medicaid

eligibility “to include persons who are 65 years of age and older, disabled or

blind and whose incomes are less than the appropriate poverty level for their

family size and whose assets do not exceed the level permitted under the

State’s medically needy program.” S. Rev., Fin., & Appropriations Comm.

Statement to S. 2972 (June 15, 1987) (emphasis added). That Committee

Statement explained that “[t]he provisions of the bill that establish a higher

income eligibility standard for applicants than is currently the standard for the

State’s medically needy program . . . will permit some of the medically needy

recipients to now receive Medicaid while others will be new recipients

altogether due to the new standard.” Ibid. Then-Governor Thomas H. Kean

signed the legislation into law, a step described as “in keeping with the spirit

of compassion and caring which has come to typify New Jersey and our

32
people.” Office of the Governor, Press Release: Statement upon Signing S-

2972 (Jan. 4, 1988).

In sum, the Regulation contravenes the plain language and legislative

intent of the New Jersey Act, which requires that the income of prospective

ABD beneficiaries be compared against the FPL as adjusted for family size.

The Regulation may not, consistent with the state statutory language, find an

applicant ineligible without making the proper adjustment for family size.

C.

DMAHS adds another layer to its argument that seeks to have us look

beyond the plain language of the New Jersey Act and conclude that the broader

federal Medicaid scheme justifies the Regulation. To the extent that DMAHS

argues that the Appellate Division’s plain language reading distorts the intent

of the Medicaid scheme as a whole and that the Regulation’s approach is still

reasonable when viewed in this larger context, its argument proves unavailing. 8

To support this argument, DMAHS relies predominantly on the fact that

eligible candidates under 42 U.S.C. § 1396a(m)(1)(A) must have their income

determined under SSI income methodology. That is true and, in fact, not

8
To a certain extent, this argument intersects with DMAHS’s defense of G.C.
and E.M.’s claims that the Regulation is inconsistent with the letter and intent
of the federal enabling law for this expanded Medicaid program. We try here
to keep distinct the two arguments so that both receive attention.
33
disputed by the applicants here. But -- and it is a significant but -- DMAHS

conflates two different concepts: determining income and determining

eligibility. The Medicaid Act does not support such a conflation.

Although subsection (m)(1)(B) requires income to be determined based

on SSI methodology, see 42 U.S.C. § 1396a(m)(1)(B), the statutory provision

also makes clear that Medicaid eligibility is determined by comparing the

calculated income to a state’s chosen percentage of the FPL adjusted for

family size. In other words, while subsection (m)(1)(B) borrows the SSI

income calculation methodology, it provides its own distinct test for

determining eligibility.

Indeed, subsection (m)(1)(B) references specifically, and only, 42 U.S.C.

§ 1382a, which is the SSI statute pertaining to income calculation. That

provision is titled, “Income; earned and unearned income defined” and defines

what is and is not “income.” However, immediately before that provision is a

separate section, 42 U.S.C. § 1382, which is entitled “Eligibility for benefits.”

That provision relies on income calculations under section 1382a, and then

describes eligibility criteria. In other words, it is a separate provision, which

plainly goes unreferenced by subsection (m)(1)(B), that defines an eligible

individual for SSI purposes. We find subsection (m)(1)(B)’s cross-reference

to section 1382a, without an accompanying reference to section 1382,

34
significant. That legislative choice bolsters what E.M. and G.C. maintain:

although this Medicaid program calculates income in the same manner as SSI,

its eligibility criteria are different and divorced from those of SSI.

Our review of the federal legislative scheme, as earlier detailed, leads to

the same inexorable conclusion that Congress explicitly intended eligibility

determinations for applicants under (m)(1)(A) to be distinct from SSI

eligibility. That is evident from the fact that 42 U.S.C. § 1396a(a)(10)(A)(i)(I)

and (ii)(I) tie Medicaid eligibility to SSI eligibility, whereas, as discussed

above, the language used in subsection (a)(10)(A)(ii)(X) and subsection

(m)(1)(B) not only prescribes a unique eligibility formula, but also goes out of

its way to avoid reference to SSI’s eligibility criteria.

That severance between Medicaid eligibility and SSI eligibility is a flaw

in the logic of DMAHS’s argument. Requiring income to be calculated under

SSI methodology does not implicitly carry with it a requirement that an

individual also vault SSI eligibility standards. Thus, DMAHS’s argument that

the Regulation must follow any initial eligibility determination that may be

present in either the SSI income-deeming methodology or Medicaid Only

program simply does not follow.

It also bears noting that N.J.A.C. 10:72-4.4 does not actually track the

SSI methodology that DMAHS claims compels its initial eligibility

35
determination. Under the cited SSI regulation, an individual is treated as an

individual only if he or she has no “deemed” income at all. See 20 C.F.R.

§ 416.1163(d). It is only when the ineligible spouse’s income is not deemed

that the applicant’s countable income is subtracted from the Federal Benefit

Rate for an individual, which, it bears emphasis, is distinct from the FPL. See

supra note 8. Yet, under N.J.A.C. 10:72-4.4, an individual must vault the

initial eligibility determination against the FPL regardless of whether income

is deemed or not.

On a question of interpretation of a federal statute, we are not bound by,

nor need we defer to, a state agency’s interpretation of federal law. See, e.g.,

K.K. v. Div. of Med. Assistance & Health Servs., 453 N.J. Super. 157, 161

(App. Div. 2018) (citing In re RCN of N.Y., 186 N.J. 83, 92 (2006)).9 Thus, in

9
Chief Justice Zazzali explained the Court’s reasoning for this approach in
RCN of N.Y., stating, in that cable communications setting, that

we will not afford to the BPU the deference that
Chevron provides to federal agencies interpreting
federal law. “A state agency’s interpretation of federal
statutes is not entitled to the deference afforded a
federal agency’s interpretation of its own statutes under
[Chevron].” Orthopaedic Hosp. v. Belshe, 103 F.3d
1491, 1495 (9th Cir. 1997) (reviewing state agency’s
interpretation of federal Medicaid Act de novo)
(citation omitted) . . . . [A]lthough this Court has
applied a Chevron-like deference to our state agencies’
interpretations of state law, see Matturri v. Bd. of Trs.
of the Judicial Ret. Sys., 173 N.J. 368, 381-82, (2002),
36
this challenge to the Regulation, we review de novo DMAHS’s interpretation

of the federal program. For the reasons stated, and applying a de novo

standard of review, we reject the agency’s asserted interpretation of the

claimed requirement under federal law. We conclude that, contrary to

DMAHS’s interpretation, the Regulation is not compelled by federal law to

operate in a manner that is at odds with the New Jersey Act.

Finally, we add that, on a practical level, the Regulation, as G.C. and

E.M. argue, can lead to an absurd outcome. As pointed out in a hypothetical,

an individual with $900 in countable individual income (below the $1,005 FPL

amount for a single individual) whose spouse has $293 in countable income

would have the same total income as E.M. and his wife (who has no income) --

$1,193 -- but would be eligible for Medicaid under the Regulation because that

individual’s income would be able to vault the first step of N.J.A.C. 10:72-

4.4(d).

we find that applying any form of deference, whether
under Chevron or our own jurisprudence, is
inappropriate in these circumstances.

[186 N.J. at 92, 93 (discussing Chevron, U.S.A., Inc. v.
NRDC, Inc., 467 U.S. 837 (1984)).]

37
 In conclusion, we affirm the Appellate Division’s invalidation of the

Regulation as inconsistent with its state enabling legislation and contrary to

legislative intent.

V.

Cross-petitioners G.C. and E.M. urge rejection of the Appellate

Division’s conclusion that the Regulation’s operation is not inconsistent with

federal law. Again, here the cross-petitioners and DMAHS press their

conflicting views of the federal statutory and regulatory requirements .

The two key provisions bear repeating. Pursuant to the enabling federal

provision for this ABD program,

(A) The income level established under paragraph
(1)(B) may not exceed a percentage (not more than 100
percent) of the official poverty line (as defined by the
Office of Management and Budget, and revised
annually in accordance with [42 U.S.C. § 9902(2)])
applicable to a family of the size involved.

[42 U.S.C. § 1396a(m)(2)(A) (emphasis added).]

And, under the Regulation,

1. If the countable income (before income deeming) of
the aged, blind, or disabled individual exceeds the
poverty income guideline for one person he or she is
ineligible for benefits and income deeming does not
apply.

[N.J.A.C. 10:72-4.4(d)(1).]

38
 The Appellate Division rejected the applicants’ argument that the

Regulation was inconsistent with federal law by focusing on the result

achieved by the Regulation’s application. Because the federal provision,

subsection (m)(2)(A), only sets an upper limit and N.J.A.C. 10:72-4.4

necessarily establishes an income level that is below that limit, the Appellate

Division viewed the Regulation as functionally meeting the requirement of

(m)(2)(A). Simply put, it viewed the income level set by N.J.A.C. 10:72-4.4

as compliant with the federal law’s mandates because the FPL for a single

person will necessarily be lower than the FPL adjusted for the size of the

applicant’s family.

The problem with the Appellate Division’s analysis is that it elevates the

ultimate result over the method of operation explicitly dictated by Con gress.

We believe Congress’s choice of language, “applicable to a family of the size

involved,” carries with it a procedural requirement that the Regulation plainly

evades and thus renders a nullity. The well-known canon of construction that

instructs courts to give effect to all words in a statute applies with equal force

for federal as well as state law enactments. See, e.g., Advoc. Health Care

Network v. Stapleton, 581 U.S. ___, 137 S. Ct. 1652, 1659 (2017) (noting that

the Court’s “practice . . . is to ‘give effect, if possible, to every clause and

word of a statute’” (quoting Williams v. Taylor, 529 U.S. 362, 404 (2000)));

39
Delanoy v. Township of Ocean, 245 N.J. 384, 401 (2021) (“Traditional

principles of statutory construction require courts to give meaning to all words

used in a statute, for example, to avoid treating the Legislature’s language as

mere surplusage.”); see also Norman J. Singer & J.D. Shambie Singer, 2A

Sutherland on Statutory Construction §46:6 (7th ed. 2007) (“Courts construe a

statute to give effect to all its provisions.”).

The federal Medicaid Act is clear for this specific program: states may

choose a percentage, “not more than 100 percent,” of the FPL “applicable to a

family of the size involved,” by which to compare an applicant’s income to

determine Medicaid eligibility. The Regulation does not do that. Rather, it

indiscriminately compares any applicant’s income, regardless of his or her

family size, against the FPL for one person. Although that benchmark may

necessarily amount to a percentage less than 100% of the appropriate FPL, that

result is reached under a procedure that ignores Congress’s chosen approach.

We believe Congress would not have chosen the respective language requiring

adjustment for family size if it did not care that states did exactly the opposite.

We have grave concerns that the Regulation’s method of operation is

inconsistent with the Medicaid Act, as cross-petitioners maintain.10 Because

10
In expressing this view, we note our agreement with the Appellate Division
that the out-of-state cases cited by cross-petitioners are not helpful. See G.C.,
463 N.J. Super. at 90-92 (discussing out-of-state cases). We add the
40
we have invalidated the Regulation on state law grounds, we need not reach

this question of federal law; however, we vacate the contrary conclusion that

the Appellate Division included as part of its holding.

VI.

The judgment of the Appellate Division is affirmed as modified.

CHIEF JUSTICE RABNER and JUSTICES ALBIN, PATTERSON,
FERNANDEZ-VINA, SOLOMON, and PIERRE-LOUIS join in JUSTICE
LaVECCHIA’s opinion.

following. Three of those decisions address state programs run under a
differently structured federal provision that sets a statutory floor -- rather than
a ceiling -- of 100% of the FPL as the benchmark in which an applicant’s
income must be compared. See 42 U.S.C. § 1396d(p)(1)(B), (2)(A). Those
cases are unhelpful because, by reason of that statutory floor alone, the
Regulation would fail under Section 1396d(p)(1)(B). Section 1396a, however,
does not set a statutory floor, only a ceiling. Thus, despite some similar
language, an interpretation of Section 1396d(p) cannot logically be engrafted
onto Section 1396a(m), at least for our purposes in addressing the validity of
the Regulation.

Additionally, we find the fourth case cited by E.M. and G.C., which did
implicate Section 1396a(m), unpersuasive for the same reason expressed by
the Appellate Division: there is no substantive ruling or interpretation
examining the specific language of Section 1396a(m). See G.C., 463 N.J.
Super. at 91-92.

41