No. 85-504
IN THE SUPREME COURT OF THE STATE OF MONTANA
1986
DEACONESS MEDICAL CENTER OF BILLINGS,
INC. ,
Petitioner and Appellant,
DEPARTMENT OF SOCIAL & REHABILITATION
SERVICES & STATE BOARD OF SOCIAL &
REHABILITAION APPEALS, & PETROLEUM
COUNTY, a political subdivision, of
the State of Montana
Defendants and Respondents.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Charles Luedke, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Felt & Martin; Kenneth S. Frazier argued, Billings,
Montana
For Respondent:
Russell E. Cater argued, Dept. of SRS, Helena, Montana
Wilkins & Berger; William Berger argued, Lewistown,
Montana
Submitted: A ~ r l 1,
l 1986
Decided: June 18, 1986
Filed: JUN 1 3 7986
@ -
Clerk
Mr. Chief Justice J. A. Turnage delivered the Opinion of the
Court.
Billings Deaconess Hospital, Inc. (~eaconess),appeals
a judgment of the District Court of the Thirteenth Judicial
District, Yellowstone County, in favor of Petroleum County
and the Department of Social and Rehabilitation Services
(SRS). The judgment affirmed Petroleum County's and SRS ' s
denial of medical benefits to the James D. Wymore family.
On appeal, we will consider the constitutionality of
income limitations in S 53-3-103(3), MCA (1983) and in the
Petroleum County Medical Plan. Appellant contends that the
limitations violate Montana's constitutional guarantee of
assistance for the medically needy. We uphold the constitu-
tionality of the income limitations in the statute and the
county plan. However, our examination of the record also
convinces us that neither the statute nor the plan was prop-
erly applied to the Wymores' situation. We therefore remand
for a determination of whether the Wymores' were medically
indigent and entitled to relief.
Subsection (3) of Section 3 of Article XI1 of the 1972
Montana Constitution provides:
The legislature shall provide such
economic assistance and social and
rehabilitative services as may be neces-
sary for those inhabitants who, by
reason of age, infirmity, or misfortune
may have need for the aid of society.
Pursuant to this mandate, the legislature has established a
county medical assistance program to provide assistance for
eligible parties who are not covered by the Montana Medicaid
program. See (SS 53-3-101 et seq. and 53-6-101 et seq., MCA.
This program is financed and administered by the county but
is supervised by SRS.
Prior to the 1985 legislative session the eligibility
criteria were established in a "county plan" which was adopt-
ed by the counties pursuant to §§ 53-3-103 and 53-3-301, MCA
(1983). We note that these sections were repealed by the
1985 legislature but the substantive contents were reenacted
as § 53-3-206(5), MCA. This opinion therefore applies to
both 5 53-3-206 (5), MCA, and 5 53-3-103 (3), MCA (1983).
Section 53-3-103 (3), MCA (1983), contained the income
limitation challenged by appellant:
(3) The department may promulgate rules
to determine under what circumstances
persons in the county are unable to
provide medical aid and hospitalization
for themselves, including the power to
define the term "medically needy. I'
However, the definition may not allow
payment by a county for general
assistance-medical for persons whose
income exceeds 300% of the limitation
for obtaining regular county general
relief assistance. ...
Section 53-3-301, MCA (1983), delegated to the counties the
power to determine who is eligible for assistance according
to rules established by the county board and approved by SRS.
Petroleum County established such rules in a county medical
plan that was approved by SRS . Section 6.1 (A)(1)(a) of that
plan contains a much lower income limitation than the ceiling
income in the statute. Specifically, $ 6.1 (A) (1) (a) of the
county plan provides as follows:
The maximum gross income level for an
applicant or recipient is ...
current
AFDC [Aid to Families with Dependent
Children] benefit standard for family of
same size.
Since Petroleum County provides for general county relief at
80 percent of the AFDC standard, the income ceiling in
§ 53-3-103 (3), MCA (1983), is nearly 2%-times greater than
the income limitation in the county plan. Because of this
great difference between the income limitation in the county
plan and in the statute, we will consider their constitution-
ality separately.
There is another provision in the county plan that is
important to our analysis of the constitutionality of the
above-quoted income limitation. That provision, called a
"spend-down provision" in the plan, allows medical expenses
to be deducted from an applicant's income in determining
eligibility. See S 6.1 A 1 b , Petroleum County Medical
Plan. By 5 6.1(A) (1) (b) an applicant whose income exceeds
the limit may still be eligible if his medical expenses are
greater than his excess income.
Zane Wymore, the minor son of James D. Wymore, was
hospitalized at Billings Deaconess Hospital from February 10
to April 6, 1983. The bill for the hospitalization came to
$10,000. The Wymores were uninsured and unable to pay the
bill. Mr. Wymore had applied to Petroleum County, where they
resided, for county medical assistance on February 9, 1983.
At the time of application, Mr. Wyrnore drew unemploy-
ment compensation of $740 per month. The AFDC standard at
that time for a family of six, like the Wymores, was $564 per
month. ARM 5 46-10.403. Mr. Wymore's income, therefore,
exceeded the AFDC standard. Because the Petroleum County
Medical Plan limits assistance to families with incomes less
than the AFDC standard, the County denied assistance to the
Wymores. In making this determination, the County did not
reduce the Wymores' income by the amount of medical expenses
as allowed for in the spend-down provision in the county
plan. In the meantime, on April 1, 1983, Wymore started a
new job which paid $1,000 per month and provided housing for
the family.
Deaconess, as the medical provider, challenged the
County's denial in a hearing before the SRS pursuant to AM!I
$5 46-2.202(2) and 46-25.705. The hearing officer then
determined that income criteria in the county plan did not
violate $ 53-3-103(3), MCA (1983), because the plan did not
authorize benefits for families whose income exceeded 300% of
the general relief standard. The hearing officer then deter-
mined that the County was within its authority under
S 53-3-301, MCA (1983), to deny benefits based on criteria in
its plan that had been approved by SRS. The hearing offi-
cer's findings and decision were affirmed on appeal to the
State Board of Social and Rehabilitative Services (Board).
Deaconess then filed a petition for judicial review of
the Board's decision by the District Court. Deaconess's
contention on review was that the income limitation in the
statute and in the county plan were unconstitutional. Both
Deaconess and SRS moved for summary judgment. The District
Court did not rule on the constitutionality issue and instead
remanded the matter to SRS for a determination of whether the
Wymores are medically indigent and therefore entitled to
public assistance. SRS responded that it was without author-
ity to consider the matter further because Wymore's income
exceeded the 300% of general relief limitation in
$ 53-3-103 (3), MCA (1983). In making this contention, SRS
considered Wymore's income to be the $1,000 per month plus
housing provided by his new job. We note that the Wymores'
income of $740 per month that they received while Mr. Wymore
was unemployed and when Zane was in the hospital was under
the 300% (or, $1,353 per month) limitation in the statute but
greater than the straight AFDC standard (or $564 per month)
limitation in the county plan. If SRS had looked to the
earlier income, then it would have found that the statute did
not prohibit aid to the Wymores.
Because SRS refused to consider the matter further, the
District Court entered a final judgment affirming the denial
of benefits. This appeal ensued.
We will test $ 53-3-103 (3), MCA (1983), first.
Deaconess contends that the provision in the statute that
denies benefits to those with incomes in excess of 300% of
the AFDC standard violates Article XII, Section 3 (3), of the
Montana Constitution. Deaconess further contends that the
statute violates state and federal equal protection guaran-
tees. These two contentions actually present only one issue
because we use equal protection analysis to test the consti-
tutionality of a classification by the legislature. In other
words, if the classification in the statute does not violate
equal protection, the statute is constitutional.
The case of Butte Community Union v. Lewis (Mont.
1986), 712 P.2d 1309, 43 St.Rep. 65, is determinative of the
level of scrutiny we will apply to the statute. In Butte
Community Union we determined that welfare mandated by Arti-
cle XII, Section 3 (3), is not a fundamental right. There-
fore, strict scrutiny does not apply and the State is not
required to show a compelling interest to limit we1fa.re.
However, we further determined that since the Montana Consti-
tution, unlike the United States Constitution, specifically
mandates welfare benefits, an abridgement of welfare re-
quires something more than a rational relationship to a
governmental objective. We went on to adopt our own
middle-tier test for classifications affecting the rights
created by Article XII, Section 3(3). This test requires
that the State must demonstrate two factors for us to uphold
a classification of welfare benefit recipients. Those fac-
tors are: (1) that the State's classification of benefit
recipients is reasonable; and (2) that the State's interest
in classifying benefit recipients is more important than the
peoples' interest in obtaining those benefits. We will now
apply this test to the 300% of general welfare assistance
limitation in $ 53-3-103 ( 3 ) , MCA (1983).
Deaconess relies on the Saint Patrick Hospital line of
cases to establish that denials of medical benefits based
solely on income are unreasonable and therefore do not pass
the first prong of the test. See Saint Patrick Hospital v.
Powell County (1970), 156 Mont. 153, 477 P.2d 340; State ex
rel. Hendrickson v. Gallatin County (1974), 165 Mont. 135,
526 P.2d 354; and Sisters of Charity, Etc. v. Glacier County
(1978), 177 Mont. 259, 581 P.2d 830. These cases, however,
are distinguishable from the case at bar. The Saint Patrick
Hospital line of cases involved county denials of medical
benefits to applicants with incomes above the state standard
of eligibility for general assistance. In the case at bar,
$ 53-3-103(3), MCA (1983), sets the maximum income at three
times the income limitation for general assistance. As such,
the statute allows twice again as much income beyond that
needed for basic necessities by which a party can purchase
medical insurance and pay other medical bills. It is there-
fore reasonable to assume that a person with an income of
three times the general assistance level is not medically
indigent. Thus, the income limitation in $ 53-3-103(3), MCA
(1983), passes the first prong of the middle-tier test.
The second factor in our middle-tier analysis is a
balancing test. Specifically, the interest of the State in
limiting medical benefits is weighed. against the interest of
the people in receiving the benefits. We believe the State's
interest is greater.
If the State were not allowed to place a limit on* the
income of medical assistance recipients, there would be
little incentive for anybody to purchase medical insurance.
Given the high cost of medical care, most uninsured parties
would be unable to pay their bill in the event of catastroph-
ic injury. The cost to the State of paying these bills would
be prohibitive. The State cannot afford to become the medi-
cal insurer for individuals who can afford their own medical
insurance. On the other hand, people with income that is
more than 300% of the general assistance level can reasonably
be expected to obtain their own insurance. We hold that the
State's interest in limiting medical assistance to those with
incomes less than 300% of the limitation for general welfare
outweighs the interest in obtaining benefits by those whose
incomes exceed the limitation. Thus, the income limitation
in § 53-3-103(3), MCA (1983), passes middle-tier scrutiny and
is constitutional.
Deaconess also challenges the constitutionality of the
income limitation in the Petroleum County Medical Plan. We
believe the limitation is constitutional on its face. Howev-
er, we also believe the County misapplied the ].imitation to
unconstitutionally deny the Wymores' benefits.
We will first test the constitutionality of the income
limitation as it was applied by the County--that is, we will
test the limitation without the spend-down provision.
Section 6.1 (A)(1) (a) of the county plan denies medical
benefits to families whose incomes exceed the AFDC standard.
The AFDC standard is the standard used by the State for
determining eligibility for general assistance. As such, the
Saint Patrick Hospital line of cases, supra, are applicable.
In those cases, we held that it was unreasonable to deny
relief to the medically indigent solely because their income
exceeded State standards for general assistance. In applying
the rule from Saint Patrick Hospital here, we find that
denying medical benefits solely because the applicant's
income exceeds the AFDC standard is unreasonable.
We would reach the same conclusion without Saint Pat-
rick Hospital. The AFDC standard was developed to set a
maximum limitation on both the income of and the amount of
benefits for recipients of general welfare assistance. The
standard considers the cost of basic necessities but does not
include medical costs. As such, it is unreasonable to assume
that a person or family whose income equals the AFDC standard
has the means to purchase medical insurance and pay medical
bills in addition to the basic necessities. A denial of
benefits based solely on the income limitation in
6.1 (A)(1)(a) of the Petroleum County Medical Plan therefore
fails under middle-tier scrutiny and is unconstitutional.
However, the county plan, if properly applied, would
not deny benefits based solely on the income limitation in
6.1 (A)1 (a). Besides the income limitation, the plan also
has a spend-down provision, 6.1 (A) ( 1 b , which allows
medical expenses to be deducted from the income before com-
parison with the AFDC standard. We will now test the consti-
tutionality of the income limitation with the spend-down
provision.
As stated earlier in this opinion, the AFDC standard is
set at the cost of basic necessities. The spend-down provi-
sion then allows additional. income to go for medical insur-
ance and expenses. Thus, unless the income exceeded 300% of
the limitation for obtaining regular county general relief
assistance, when properly applied the county plan would only
deny benefits to applicants with incomes in excess of that
required to pay for both basic necessities and medical ex-
penses. It is reasonable to assume that a person with income
enough to pay for basic necessities and medical expenses is
not medically indigent. The county plan therefore passes the
reasonableness prong of middle-tier analysis.
The income limitation with the spend-down provision
also passes the second prong balancing test by the same
reasoning we applied to the statute. The State's interest in
limiting medical assistance to those who cannot afford medi-
cal expenses outweighs the interest in obtaining benefits by
those who can. The income limitation in the county plan is
therefore constitutional on its face.
We will now consider whether or not the Wymores were
properly denied benefits. The County and SRS originally
denied the Wymores assistance based on an improper applica-
tion of the income limitation in the county plan which we are
now holding unconstitutional. When the District Court re-
manded to SRS, however, the Department switched to the stat-
ute as its basis for denial. Since we are upholding the
limitation in the statute, this denial would have been proper
unless the statute was improperly applied. The record con-
vinces us that SRS's denial of benefits to the Wymores was
based on an improper application of the statute. SRS's brief
in support of its motion to amend the District Court order
remanding the case reveals that SRS was utilizing the
Wymores' income from Mr. Wymore's new job to find the family
excluded by the statute. However, at the time Zane Wymore
entered the hospital, the family's only income was from
unemployment compensation and was substantially less than the
limitation in § 53-3-103 (3), MCA (1983).
We believe that SRS utilized the wrong income in con-
sidering the Wymores' need on remand. The new general medi-
cal relief provisions of the Montana Code specifically
provide that " [elligibility is determined as of the date
medical service is first provided. I' Section 53-3-206 (2),
MCA. Although this provision was not in effect at the time
of the Wymores' application, it is the only fair rule to
apply now. It is unfair to assume the Wymores could have
afforded medical insurance at the time Zane entered the
hospital based on the income Mr. Wymore began to earn near
the end of the hospitalization period. We hold that it was
improper for SRS to determine the Wymores were ineligible for
benefits based solely on the income from Mr. Wymore's new
job.
We remand for a determination of whether the Wymores
were "medically needy" under $ 53-3-103 (3), MCA (1983), with
.
the instruction that need should be determined as of the date
Zane was first hospitalized. We hold that the income limita-
tion of S 53-3-103(3), MCA (1983), is constitutional. A
denial of benefits based solely on the income limitation in
the Petroleum County Medical Plan, S 6.1 A 1 a , however,
is unconstitutional. If the county plan is used in the need
determination, the Wymores' medical expenses must be deducted
from their income.
zzF
4vlAv Chief Justice
We Concur: