United States Court of Appeals,
Fifth Circuit.
No. 94-40265.
STATE of Texas, Petitioner,
v.
UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES,
Respondent.
Aug. 22, 1995.
On Petition for Review from the United States Department of Health
and Human Services.
Before REAVLEY, KING and WIENER, Circuit Judges.
KING, Circuit Judge:
The State of Texas appeals an administrative order of the
Department of Health and Human Services denying a proposed
amendment to its state Medicaid plan. We affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
In September of 1990, Texas submitted a proposed amendment to
its state Medicaid plan to the Health Care Financing Administration
("HCFA") of the United States Department of Health and Human
Services ("HHS"). Under this proposed amendment, Texas sought to
expand the Medicaid program to cover inpatient residential chemical
dependency treatment for children under age twenty-one who qualify
for the Medicaid Early Periodic Screening, Diagnostic, and
Treatment program. By letter dated May 2, 1991, HCFA rejected the
proposed amendment.
The State requested reconsideration. After full briefing by
both parties and numerous meetings, the HCFA administrator upheld
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the initial decision to deny the proposed amendment. The State
then requested a formal hearing on the disapproval; after three
days of hearings, the hearing officer recommended that the decision
to deny the proposed amendment be upheld. Texas appealed to the
Secretary of HHS, who, through the HCFA Administrator, accepted the
hearing officer's recommendation and issued an administrative order
upholding the denial of the proposed amendment. Texas filed a
timely appeal of this final administrative order and the matter is
now before this court.
II. STANDARD OF REVIEW
The case at hand centers around an issue of statutory
construction. While each side argues that the "plain meaning" of
a certain portion of the Medicaid statute unambiguously indicates
that Congress intended the statute to be interpreted in its favor,
we find no such "plain meaning" in the statute. HHS, as the
federal agency with expertise in overseeing the Medicaid program,
has proffered a construction of the implicit statutory gap. Our
task is to determine whether the statutory construction proffered
by HHS is valid. Under such circumstances, judicial review is
quite limited. See Pauly v. BethEnergy Mines, Inc., 501 U.S. 680,
696, 111 S.Ct. 2524, 2534, 115 L.Ed.2d 604 (1991) ("When Congress,
through express delegation or the introduction of an interpretive
gap in the statutory structure, has delegated policymaking
authority to an administrative agency, the extent of judicial
review of the agency's policy determinations is limited."). In the
seminal case of Chevron, U.S.A. v. Natural Resources Defense
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Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984),
the Supreme Court held that:
[t]he power of an administrative agency to administer a
congressionally created ... program necessarily requires the
formulation of policy and the making of rules to fill any gap
left, implicitly or explicitly, by Congress.... Sometimes the
legislative delegation to any agency on a particular question
is implicit rather than explicit. In such a case, a court may
not substitute its own construction of a statutory provision
for a reasonable interpretation made by the administrator of
an agency....
Id. at 843-44, 104 S.Ct. at 2782 (internal quotations, citation and
footnotes omitted) (emphasis added). If Congress has not addressed
the precise question at issue, "the [c]ourt does not simply impose
its own construction on the statute ... [r]ather ... the question
for the court is whether the agency's answer is based on a
permissible construction of the statute." Id. at 843, 104 S.Ct. at
2782. Thus, we proceed to analyze whether HHS's denial of the
proposed amendment to the Texas Medicaid plan was based upon a
permissible construction of the relevant Medicaid statute.
III. ANALYSIS
Medicaid is a health care program, primarily for the poor and
disabled, which is jointly financed by the federal and state
governments and which is administered at the state level, subject
to umbrella supervision by HCFA, a division of HHS. The State of
Texas asked HCFA for permission to amend its state Medicaid plan to
cover residential drug and alcohol treatment for children under age
twenty-one who are eligible to receive other health care services
under the Early Periodic Screening, Diagnostic and Treatment
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("EPSDT") program.1 Without HCFA's permission to implement the
proposed amendment, the State of Texas cannot receive federal
matching funds if it elects to provide these services.
HCFA denied Texas's proposed amendment on the grounds that it
would impermissibly result in the flow of federal Medicaid funds to
reimburse room and board expenses.2 Specifically, HCFA contends
that the portion of the Medicaid statute which provides federal
matching funds for the provision of rehabilitative services, 42
U.S.C. § 1396d(a)(13), does not permit matching funds to pay for
room and board costs associated with the provision of
rehabilitative services in a residential treatment facility. The
federal statute at issue provides that federal matching funds may
be used, inter alia, for:
(13) other diagnostic, screening, preventive, and
rehabilitative services, including any medical or remedial
services (provided in a facility, a home, or other setting)
recommended by a physician or other licensed practitioner of
the healing arts within the scope of their practice under
1
EPSDT services include, inter alia, screening, vision,
dental, and hearing services as well as:
"[s]uch other necessary health care, diagnostic services,
treatment, and other measures ... to correct or ameliorate
defects and physical and mental illnesses and conditions
discovered by the screening services...."
42 U.S.C. § 1396d(r)(5).
2
Initially, HCFA also denied the proposed amendment on the
grounds that the provision of chemical dependency services would
violate the statutory exclusion for coverage of services for
those under age 65 in an institution for mental disease (the
so-called "IMD exclusion"). See 42 U.S.C. § 1396d(a)(14); 42
C.F.R. § 435.1008(a)(2). As HCFA did not pursue this argument
after the initial hearing and the agency's final decision does
not rest upon it, we need not address its validity as a basis for
denying the proposed amendment.
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State law, for the maximum reduction of physical or mental
disability and restoration of an individual to the best
possible functional level.
42 U.S.C. § 1396d(a)(13).3
The State contends that because the language of § 1396d(a)(13)
does not explicitly exclude room and board services, the term
"rehabilitative services" should be construed in its broadest sense
to include necessary tangential room and board expenses when those
rehabilitative services are provided in a residential treatment
setting. The State bolsters its argument by contending that
because the parenthetical "provided in a facility, a home, or other
setting" evinces an explicit intent to provide coverage for
services rendered in either an inpatient or an outpatient setting,
this necessarily evinces an implicit intent to provide coverage for
all necessary corollary expenses in either an inpatient or an
outpatient setting—such as room and board in a residential
treatment facility.
The State's final argument is that Congress knew how to
explicitly exclude coverage for room and board expenses when it
wanted to do so, as evidenced by other sections in the Medicaid
statute. See 42 U.S.C. §§ 1396t(a)(9), 1396u(f)(1) (explicitly
excluding room and board coverage for frail elderly and
3
The statute also provides federal matching funds for "any
other medical care, and any other type of remedial care
recognized under State law, specified by the Secretary...." 42
U.S.C. § 1396d(a)(25). While Texas initially argued to HHS that
its proposed amendment should be approved under this section, the
Secretary opted not to exercise his discretion under §
1396d(a)(25) in the State's favor. The State concedes in its
brief that "[t]he [S]tate has not brought the (a)(25) issue to
this [c]ourt."
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developmentally disabled in the provision of home and community
care services). Thus, Congress's failure to explicitly exclude
room and board expenses in the section authorizing coverage of
rehabilitative services indicates that Congress did not wish to
exclude coverage for such expenses in this particular context.
HCFA concedes that § 1396d(a)(13) permits the payment of
federal matching funds for rehabilitative services, whether those
services are provided in an inpatient or an outpatient setting.
However, HCFA argues that it historically has construed the federal
Medicaid statute as authorizing federal funding of inpatient
services—including inpatient substance abuse treatment—only if the
services are provided in one of four types of facilities for which
there are federal quality assurance standards: (1) hospitals; (2)
skilled nursing facilities (SNFs); (3) intermediate care
facilities for the mentally retarded (ICF-MRs); and (4) inpatient
psychiatric hospitals. Thus, HCFA contends, its historical
construction of the Medicaid statute indicates that Congress would
have explicitly included coverage for room and board if it had
intended such expenses to be covered. Congressional silence, in
other words, more likely evinces an agreement with HCFA's
antecedent interpretation excluding such expenses in unregulated
facilities rather than disagreement: if Congress had disagreed
with HCFA's longstanding interpretation, it would explicitly have
said so.
HCFA also contends that the language of § 1396d(a)(13) belies
the State's argument that federal funding for both inpatient and
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outpatient rehabilitation services evinces a congressional intent
to pay for necessary corollary expenses such as room and board.
Specifically, HCFA notes that if the statute is construed as
mandating federal matching funds for all necessary corollary
services regardless of setting, the result would be extreme. For
example, assuming arguendo that the statute mandates matching funds
for room and board expenses associated with a stay in a residential
substance abuse treatment facility, a fortiori it would necessitate
matching funds for room and board expenses associated with
rehabilitation treatment in one's own home or in a board and care
home. In any of these settings—at home, in a board and care home,
or in a residential treatment facility—the recipient of
rehabilitative services must eat and sleep. Yet it would be
unacceptable to suggest that Congress intended federal matching
funds to pay for room and board expenses for those living in their
own home or in a board and care home. The reason, HCFA contends,
is that the structure of the statutory scheme crafted by Congress
reveals an intent to use limited Medicaid dollars to pay for room
and board expenses only in those facilities for which Congress has
extracted the quid pro quo of federal quality assurance standards.
No federal standards, no federal Medicaid dollars.
We are also persuaded by HCFA's argument that the explicit
exclusions for room and board which appear elsewhere in the
Medicaid statute are not apposite to Congressional intent regarding
rehabilitative services because the explicit exclusions were passed
in 1990—subsequent to the passage of § 1396d(a)(13). Indeed, these
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explicit exclusions, which appear at 42 U.S.C. §§ 1396t(a)(9) and
1396u(f)(1), appear in sections that provide coverage for home and
community care services for the frail elderly and the
developmentally disabled—services which by their very nature could
have been interpreted as containing an implicit room and board
component if no explicit exclusion had been provided. If anything,
the fact that Congress felt compelled in 1990 to explicitly exclude
payment for room and board evinces a desire to ensure that Medicaid
dollars do not flow to unregulated facilities.
In short, § 1396d(a)(13) is ambiguous and the legislative
history of the section sheds no light. Congress has provided no
guidance as to whether it intended to permit federal matching funds
to pay for room and board services provided in conjunction with
residential chemical dependency treatment. The construction given
to § 1396d(a)(13) by HHS and HCFA is consistent with the overall
framework of the Medicaid program and with the agency's permissible
historical construction of the statute as restricting federal
matching funds to inpatient services provided in facilities for
which there exist federal quality assurance standards.
Accordingly, under the edict of Chevron, this permissible
construction is entitled to our deference.
IV. CONCLUSION
For the foregoing reasons, the administrative order of the
Department of Health and Human Services is hereby AFFIRMED.
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