BOURGOIN et al v. SEBELIUS

Filing 47

ORDER dismissing without prejudice 13 Motion to Certify Class; dismissing without prejudice 14 Motion for Preliminary Injunction. The Court ORDERS the Plaintiffs, if they choose, to file within fourteen days of the date of this Order a motion for leave to amend their Complaint to add a State Defendant. In the event the Plaintiffs fail to file such a motion, the Plaintiffs' Complaint will be dismissed without prejudice. By JUDGE JOHN A. WOODCOCK, JR. (MFS)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
LOUIS BOURGOIN, et al.
Plaintiffs,
v.
KATHLEEN SEBELIUS, Secretary,
United States Department of Health
and Human Services,
Defendant.

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2:13-cv-00055-JAW

ORDER ON DISPOSITIVE MOTIONS
In this case, recipients of Medicaid benefits contend that a recent amendment
to the state of Maine’s Medicaid plan that reduced or terminated their benefits does
not comply with the “maintenance of effort” requirement of the Patient Protection
and Affordable Care Act. The Secretary of the United States Department of Health
and Human Services, who approved the plan amendment and is the only
Defendant, moved to dismiss under Rule 12(b)(6), and the Plaintiffs moved for
summary judgment. The Court concludes that it would be improper to proceed in
the state of Maine’s absence, given both Article III’s case or controversy
requirement and Federal Rule of Civil Procedure 19’s direction that required parties
be joined if feasible.
I.

PROCEDURAL HISTORY
On February 20, 2013, Louis and Katherine Bourgoin, Donna Stevens, Heidi

Brooks, and Katherine Sherrard filed a complaint against Kathleen Sebelius,

Secretary of the United States Department of Health and Human Services (DHHS),
on behalf of themselves and all others similarly situated. Compl. (ECF No. 1). On
February 21, 2013, the Plaintiffs filed a motion for class certification under Federal
Rules of Civil Procedure 23(a) and 23(b)(2), stating that the class includes “over
6000 low-income recipients of health care benefits under . . . MaineCare . . . whose
eligibility for Medicaid will be reduced or terminated on or after March 1, 2013.”
Pls.’ Mot. for Class Certification (ECF No. 13). The same day, the Plaintiffs moved
for a temporary restraining order and preliminary injunction. Pls.’ Mot. for TRO
and Prelim. Inj. (ECF No. 14) (Pls.’ Mot.).

The Court denied the motion for

temporary restraining order on February 28, 2013. Order on Mot. for a TRO (ECF
No. 23).
On March 18, 2013, the Secretary filed a copy of the agency record along with
a certification. Certification of Agency Record (ECF No. 32) (AR). On April 8, 2013,
the Secretary filed a motion to dismiss or, in the alternative, for summary
judgment, supporting her motion with the declaration of Jennifer Ryan.1 Def.’s Mot.
to Dismiss or, in the Alternative, for Summ. J. (ECF No. 34) (Def.’s Mot.); id. Attach.
1, Decl. of Jennifer Ryan (ECF No. 34-1) (Ryan Decl.).

On April 22, 2013, the

Plaintiffs responded to the Secretary’s motion and moved for summary judgment,
supporting their motion with a statement of material facts not in dispute. Pls.’
Mem. of Law in Opp’n to Def.’s Mot. to Dismiss or, in the Alternative, for Summ. J.,

Jennifer Ryan is the Acting Director of the Children and Adults Health Program Group, an
office within the Center for Medicaid and CHIP Services, Centers for Medicare & Medicaid Services,
the federal agency within the United States Department of Health and Human Services responsible
for administering the Medicare and Medicaid programs. Ryan Decl. ¶ 1.
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and Pl.’s Mot. for Summ. J. (ECF No. 37) (Pls.’ Opp’n/Mot.); Pls.’ Statement of
Material Facts Not in Dispute (ECF No. 38) (PSMF).

On April 29, 2013, the

Secretary replied to the Plaintiffs’ opposition to her motion and responded to the
Plaintiffs’ motion.

Def.’s Reply in Support of Her Mot. to Dismiss or, in the

Alternative, for Summ. J. and Opp’n to Pls.’ Mot. for Summ. J. (ECF No. 40) (Def.’s
Reply/Opp’n); Def.’s Opposing Statement of Material Facts (ECF No. 41) (DRPSMF);
id. at 27 (DSAMF).

On May 6, 2013, the Plaintiffs replied to the Secretary’s

opposition to their motion for summary judgment. Pls.’ Reply to Def.’s Opp’n to Pls.’
Mot. for Summ. J. (ECF No. 43) (Pls.’ Reply); Pls.’ Reply to Def.’s Statement of
Additional Facts and to Def.’s Request to Strike Various Paragraphs of Pls.’
Statement of Material Facts (ECF No. 44) (PRDSAMF and Pls.’ Loc. R. 56(e) Resp.).
II.

LEGAL BACKGROUND
A.

General Background on Medicare and Medicaid

In 1965, the United States established Medicare and Medicaid. See History,
Centers for Medicare & Medicaid Services, http://www.cms.gov/About-CMS/AgencyInformation/History/ (last visited Sept. 30, 2013). “Medicare is a health insurance
program for those who are over age 65 or have certain disabilities.” Massachusetts
v. Sebelius, 638 F.3d 24, 26 (1st Cir. 2011); see 42 U.S.C. §§ 1395 to 1395kkk-1
(2012).

Medicaid provides federal funding to states that have established a

qualifying plan to assist certain types of needy individuals in obtaining medical care
and insurance, including Medicare. See Nat’l Fed’n of Indep. Bus. v. Sebelius, 132
S. Ct. 2566, 2581 (2012) (NFIB); 42 U.S.C. §§ 1396 to 1396w-5 (2012). In 2010,

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Congress enacted the Patient Protection and Affordable Care Act, Pub. L. No. 111148, 124 Stat. 119 (ACA), which “aims to increase the number of Americans covered
by health insurance and decrease the cost of health care.” NFIB, 132 S. Ct. at 2580.
“The [ACA’s] 10 titles stretch over 900 pages and contain hundreds of provisions,”
id., including amendments to Medicaid.
Federal Medicaid funding is conditioned on a state’s compliance with
federally-prescribed parameters. See 42 U.S.C. §§ 1396b(a), 1396c. Federal law
tasks the Secretary of the Department of Health and Human Services with
determining whether a state plan is compliant.2
1396a(b), 1396c, 1396n(f)(2).

See 42 U.S.C. §§ 1316(a)(1),

Federal law permits the Secretary to waive

compliance with certain requirements under certain circumstances. See, e.g., 42
U.S.C. §§ 1315, 1396n(b)-(c), (e)-(f). To qualify for federal funds under Medicaid, a
State
must submit to a federal agency (CMS, a division of the Department of
Health and Human Services) a state Medicaid plan that details the
nature and scope of the State’s Medicaid program. It must also submit
any amendments to the plan that it may make from time to time. And
it must receive the agency’s approval of the plan and any amendments.
Before granting approval, the agency reviews the State’s plan and
amendments to determine whether they comply with the statutory and
regulatory requirements governing the Medicaid program.
Douglas v. Indep. Living Ctr. of S. Cal., Inc., 132 S. Ct. 1204, 1208 (2012). When a
state wishes to amend its Medicaid plan, the federal government “will not provide

The Secretary has delegated her authority to approve or disapprove a state plan or plan
amendment to the Administrator and the Regional Administrator. 42 C.F.R. § 430.15(b)-(c); see 42
U.S.C. § 1302.
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federal funds for any state plan amendment until the agency approves the
amendment.” Douglas, 132 S. Ct. at 1208.
The Medicaid Act prescribes mandatory coverage of certain categories of
individuals and optional coverage of others.

A state plan “must—provide—for

making medical assistance available . . . to—all individuals—” in the seven
categories listed under 42 U.S.C. § 1396a(a)(10)(A)(i).3
1396a(a)(10)(A)(i)(I)-(VII).

See 42 U.S.C. §

Federal law further provides that a state plan “must—

provide—for making medical assistance available . . . to—at the option of the State,
. . . any group or groups of individuals described in section 1905(a) [42 U.S.C. §
1396d(a)] (or, in the case of individuals described in section 1905(a)(i) [42 U.S.C. §
1396d(a)(i)], to any reasonable categories of such individuals) who are not
individuals described in clause (i) of this subparagraph but—” are described in one
of twenty-two categories that follow. See 42 U.S.C. § 1396a(a)(10)(A)(ii)(I)-(XXII).
In addition, and relevant here, federal law provides that a state plan must
provide certain Medicaid benefits “for qualified medicare beneficiares (QMBs)
described in section 1905(p)(1) [42 U.S.C. § 1396d(p)(1)].”
1396a(a)(10)(E)(i).

42 U.S.C. §

To qualify as a QMB, one must: (1) be entitled to certain

Medicare benefits, (2) have income that does not exceed the federal poverty line,
and (3) have resources that do not exceed a specified level. 42 U.S.C. § 1396d(p).
Federal law likewise mandates certain Medicaid benefits “for individuals who would
be [QMBs] but for the fact that their income exceeds” the federal poverty line but is
The ACA adds two additional categories on January 1, 2014, although coverage of one of
these additional categories is optional following the Supreme Court’s decision in NFIB. 42 U.S.C. §
1396a(a)(10)(A)(i)(VIII)-(IX); NFIB, 132 S. Ct. at 2601-09.
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less than 120 percent of the poverty line—these individuals are known as “Specified
Low-Income Medicare Beneficiares” (SLMBs)—and “for individuals who would be
[QMBs] but for the fact that their income . . . is at least 120 percent, but less than
135 percent, of the official poverty line . . . ”—these individuals are known as
“Qualified Individuals” (QIs), and are limited in number based on annual federal
outlays. 42 U.S.C. §§ 1396a(a)(10)(E)(iii)-(iv), 1396u-3.
In general, a state plan must “include reasonable standards . . . for
determining eligibility for and the extent of medical assistance under the plan,” 42
U.S.C. § 1396a(a)(17), and must generally “apply the financial methodologies and
requirements of the cash assistance program that is most closely categorically
related to the individual’s status.”4 42 C.F.R. § 435.601(b). In determining income
and resource eligibility for QMBs, SLMBs, and QIs, however, states may employ a
“less restrictive” methodology.

42 U.S.C. § 1396a(r)(2)(A); 42 C.F.R. §

435.601(d)(iii). Before adopting the plan amendment at issue in this case, Maine’s
less restrictive methodology “disregarded” income equal to 50% of the federal
poverty level. Pls.’ Mot. Attach. 2 State Plan Under Title XIX of the Social Security
Act (ECF No. 14).
B.

Maintenance of Effort

The ACA added a “maintenance of effort” (MOE) requirement to the Medicaid
statute. See Pub. L. No. 111-148, § 2001(b), 124 Stat. 119, 275-76 (codified at 42

Under the ACA, beginning January 1, 2014, “income” will generally be defined as modified
adjusted gross income under the Internal Revenue Code, except for determining the eligibility of
certain individuals, including QMBs, SLMBs, and QIs. Pub. L. No. 111-148, § 2002, 124 Stat. 119,
279-82 (codified at 42 U.S.C. § 1396a(e)(14)); 42 U.S.C. § 1396(e)(14)(D)(V).
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U.S.C. §§ 1396a(a)(74), 1396a(gg)).

As amended by the ACA, the Medicaid Act

provides that a state Medicaid plan “must—provide for maintenance of effort under
the State plan or under any waiver of the plan in accordance with subsection (gg).”
42 U.S.C. § 1396a(a)(74). Subsection (gg) reads:
(gg) Maintenance of effort.
(1) General requirement to maintain eligibility standards until
state exchange is fully operational. Subject to the succeeding
paragraphs of this subsection, during the period that begins on the
date of enactment of the Patient Protection and Affordable Care Act
and ends on the date on which the Secretary determines that an
Exchange established by the State under section 1311 of the Patient
Protection and Affordable Care Act is fully operational, as a condition
for receiving any Federal payments under section 1903(a) [42 U.S.C. §
1396b(a)] for calendar quarters occurring during such period, a State
shall not have in effect eligibility standards, methodologies, or
procedures under the State plan under this title or under any waiver
of such plan that is in effect during that period, that are more
restrictive than the eligibility standards, methodologies, or
procedures, respectively, under the plan or waiver that are in effect
on the of enactment of the Patient Protection and Affordable Care
Act.
...
(3) Nonapplication. During the period that begins on January 1,
2011, and ends on December 31, 2013, the requirement under
paragraph (1) shall not apply to a State with respect to nonpregnant,
nondisabled adults who are eligible for medical assistance under the
State plan or under a waiver of the plan at the option of the State and
whose income exceeds 133 percent of the poverty line (as defined in
section 2110(c)(5)) applicable to a family of the size involved if, on or
after December 31, 2010, the State certifies to the Secretary that,
with respect to the State fiscal year during which the certification is
made, the State has a budget deficit, or with respect to the succeeding
State fiscal year, the State is projected to have a budget deficit. Upon
submission of such a certification to the Secretary, the requirement
under paragraph (1) shall not apply to the State with respect to any
remaining portion of the period described in the proceeding sentence.

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(4) Determination of compliance.
(A) States shall apply modified adjusted gross income. A State’s
determination of income in accordance with subsection (e)(14) shall
not be considered to be eligibility standards, methodologies, or
procedures that are more restrictive than the standards,
methodologies, or procedures in effect under the State plan or under a
waiver of the plan on the date of enactment of the Patient Protection
and Affordable Care Act for purposes of determining compliance with
the requirements of paragraph (1), (2), or (3).
...
42 U.S.C. § 1396a(gg).
C.

NFIB v. Sebelius

The Medicaid Act authorizes the Secretary to withhold all federal
payments if a state fails to comply with any federal requirement. 42 U.S.C. §
1396c.

The Supreme Court recently held, however, that the Constitution

limits the reach of this authority. NFIB, 132 S. Ct. at 2601-2609. The NFIB
Court noted that Medicaid spending accounts for over 20 percent of the
average State’s total budget, with federal funds covering 50 to 83 percent of
those costs.5 Id. at 2604-05. Given the financial burden that would result if
the Secretary were to withhold all federal Medicaid funding from a state, the
Supreme Court called 42 U.S.C. § 1396c a “gun to the head” and prohibited
the Secretary from using it to coerce a state into complying with section
2001(a) of the ACA, which amended the Medicaid Act to require states to

“Federal funds received through the Medicaid program have become a substantial part of
state budgets, now constituting over 10 percent of most States’ total revenue.” AR Attach. 2 at 103
(ECF No. 32-2). Maine relies even more heavily on federal Medicaid funding than the average
state;“[i]n Maine, for the state’s fiscal year 2013 (July 1, 212 to June 30, 2013) the Medicaid
program, which is known as MaineCare, constitute[d] 33.7 percent of the total state budget, and the
federal Medicaid funds constitute[d] 21.97 percent of the state’s budget.” Id.
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expand their Medicaid programs by 2014 to cover all individuals under the
age of 65 with incomes below 133 percent of the federal poverty line. Id. at
2604-2608; Pub. L. No. 111-148, § 2001(a), 124 Stat. 119, 271-75 (codified at
42 U.S.C. § 1396a(a)(10)(A)(i)(VIII). The Supreme Court did not mention the
ACA’s “maintenance of effort” requirement, which is included in the same
section that contains the Medicaid expansion that the Court ruled was
effectively optional. Pub. L. No. 111-148, § 2001(b), 124 Stat. 119, 275-76.
D.

Maine State Law

In 2012, Maine passed an appropriations bill that included the
following provision:
The Department of Health and Human Services shall prepare and
submit a Medicaid state plan amendment to the federal Centers for
Medicare and Medicaid Services that, effective October 1, 2012,
effectively reduces income eligibility levels for the Medicare savings
program as follows: for the Qualified Medicare Beneficiary program, to
income not more than 140% of the federal poverty level; for the
Specified Low-Income Medicare Beneficiary program, to income more
than 140% but not more than 160% of the federal poverty level; and for
the Qualified Individuals program, to income more than 160% but not
more than 175% of the federal poverty level.
2011 Me. Laws ch. 657 § HH-2. The bill provides that section HH-2 takes
effect only if:
1. The Commissioner of Health and Human Services receives
written approval of the application for a waiver of the maintenance of
effort requirements of the federal Patient Protection and Affordable
Care Act for the changes in section 2 from the federal Centers for
Medicare and Medicaid Services or the commissioner receives written
notification from the Centers for Medicare and Medicaid Services that
such a waiver is not necessary; and
2. The Commissioner of Health and Human Services notifies the
Secretary of State, the Secretary of the Senate, the Clerk of the House
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of Representatives and the Revisor of Statutes that written approval of
the application for a waiver or written notification that such a waiver
is not necessary has been received.
Id. § HH-3.6
III.

STATEMENT OF FACTS
A.

Constructing the Record

Given that the parties agree that this case centers on a nearly pure question
of law, presenting the Court with an evidentiary record proved surprisingly
contentious.

Before delving into the facts, the Court resolves a few disputes

regarding the record.
First, the Secretary maintains that it is appropriate for the Court to decide
her motion based on the administrative record and the declaration of a government
official. Def.’s Mot. at 9-10; Def.’s Reply/Opp’n at 2 n.4. The Plaintiffs counter that
the Secretary’s failure to file a statement of material facts in accordance with Local
Rule 56(b) makes her motion improper to the extent it seeks summary judgment.
Pl.’s Opp’n/Mot. at 2.

Nothing turns on this skirmish.

The Secretary cites

Marshall Cnty. Health Care Auth. v. Shalala, 988 F.2d 1221, 1226 (D.C. Cir. 1993),
as supporting the proposition that “[i]n an APA action for judicial review, a motion
to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure or, in the
alternative, for summary judgment under Rule 56 based on the administrative
record is an appropriate mechanism for resolving the action.” Def.’s Mot. at 9. The
Shalala Court, however, affirmed a dismissal under Rule 12(b)(6) and wrote that
Section HH-1, however, amends the uppermost income eligibility level for “the basic program
and the supplemental program” from 185% to 175% of the applicable federal poverty guideline, and
is not contingent on approval from CMS. 2011 Me. Laws ch. 657 § HH-1.
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“[w]hen a district court is reviewing agency action—sitting as an appellate
tribunal—the legal questions raised by a [Rule] 12(b)(6) motion and a motion for
summary judgment are the same” and the court may “examine matters of public
record in ruling on a Rule 12(b)(6) motion.”

Shalala, 988 F.2d at 1222.

The

Secretary does not explain why she has moved in the alternative for summary
judgment if her position is that an APA challenge may be resolved on a motion to
dismiss. The Court treats the Secretary’s motion as a motion to dismiss only and
ignores the summary judgment request as irrelevant and unsupported by a
statement of material facts. In ruling on the Secretary’s motion to dismiss, the
Court is required to accept as true the Plaintiffs’ well-pleaded factual allegations
and to draw all reasonable inferences in favor of the Plaintiffs but is “‘not bound to
accept as true a legal conclusion couched as a factual allegation.’”

See San

Gerónimo Caribe Project, Inc. v. Acevedo-Vilá, 687 F.3d 465, 471 (1st Cir. 2012) (en
banc) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). In doing so, the Court
may also “examine matters of public record in ruling on a Rule 12(b)(6) motion.”
Shalala, 988 F.2d at 1222.
Turning to the Plaintiffs’ motion for summary judgment, of the forty-two
statements of material fact proposed by the Plaintiffs, the Secretary admitted just
eleven.

See DRPSMF ¶¶ 1-42.

Two categories of statements bear general

discussion. In the first category are descriptions of the relevant law. The Secretary
interposed qualified responses to these statements, requested that they be stricken,
and denied them to the extent they are inconsistent with the relevant law (without

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specifying any inconsistencies).

As an example, the Plaintiffs proposed the

statement:
Title XIX of the Social Security Act establishes the Medicaid Act,
which provides conditional federal funding to states that choose to
participate in the Medicaid program. See 42 U.S.C. § 1396-1396w-5.
PSMF ¶ 1. The Secretary responded:
Qualified.
This statement should be stricken because it is a
characterization of the Medicaid statute and thus a legal conclusion,
not a fact, and is not supported by a citation to record material as
required by Local Rule 56(f). See Rockwell Burr Sign & Design, Inc. v.
Gulf Ins. Co. No. 02-222, 2003 WL 22063550, *1 (D. Me. Sept. 5, 2003).
The statement is denied to the extent it is inconsistent with the
Medicaid statute.
DRPSMF ¶ 1.

In turn, the Plaintiffs replied that “it is clear that accurate

restatements of the law are admissible.” Pls.’ Loc. R. 56(e) Reply ¶¶ 1-8 (citing
United States v. Cap Quality Care, Inc., Docket No. 05-163-P-H, 2006 U.S. Dist.
LEXIS 88830, at *22 n.4 (D. Me. Dec. 7, 2006).
On this point, the Plaintiffs are wrong. Local Rule 56 contemplates the filing
of “a separate, short, and concise statement of material facts . . . as to which the
moving party contends there is no genuine issue of material fact to be tried.” D. ME.
LOC. R. 56(b). Statements of law are not statements of fact.7

Legal argument is

more properly included in a memorandum of law than in a statement of material
facts, and the Court has considered the statements of law included in the Plaintiffs’
statement of material facts only as argument.
In Cap Quality, the Magistrate Judge allowed the citation of a regulation from the Code of
Federal Regulations to stand as a statement of fact. Cap Quality, 2006 U.S. Dist. LEXIS 88830, *22
n.4. Although in an unusual case the quotation of a rule might qualify as a statement of fact, the
better practice is to place statutory quotations in a legal memorandum.
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The second category of statements objected to by the Secretary concern the
named Plaintiffs. To these, the Secretary responds:
Qualified. The statement should be stricken because it is offered in
support of the Plaintiffs’ motion for summary judgment and the
briefing schedule entered by the Court does not contemplate briefing
on Plaintiffs’ motion for preliminary injunction at this time, and such
briefing is beyond the scope of the cross-dispositive motions that the
briefing schedule does contemplate. See Dkt. Entry of Mar. 21, 2013.
Further, the Secretary is without information or knowledge sufficient
to admit or deny the statement.
DRPSMF ¶¶ 29-40.

Because the Court concludes that the case cannot proceed

without the state of Maine, it defers a ruling on the merits of the dispositive
motions, there is no current need to consider facts regarding the named Plaintiffs
and consequently no need to resolve this dispute.
B.

The Facts
1.

Initial Discussions

On April 15, 2011, Maine’s Governor wrote a letter to Secretary Sebelius
requesting a waiver from the APA’s MOE requirements, noting that Maine’s
Medicaid program is extremely generous and exceeds the minimum eligibility
guidelines set by federal law, and that Maine faced an $800 million deficit for fiscal
years 2012 and 2013.

AR Attach. 2 at 136-37.

The same day, the Deputy

Commissioner for Finance of MDHHS submitted a letter to Secretary Sebelius
certifying that Maine projected a budget deficit for fiscal years 2012-2013 and 2014,
representing the period 07/01/2011 – 12/31/2013.

AR Attach. 2 at 138.

CMS

Associate Regional Administrator Richard R. McGreal emailed Commissioner
Mayhew on May 24, 2011:
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In your letter to the Secretary dated April 15, 2011, and in subsequent
followup discussions with State staff, the State of Maine asked
whether the maintenance of effort (MOE) provisions in section
1902(gg) of the Social Security Act, as amended by the Affordable Care
Act, were applicable with respect to the Medicare “buy-in” groups (such
as the “QMB”, “SLMB”, and “QI” groups). The MOE provisions in the
Affordable Care Act would be applicable to such groups.
You have also inquired whether the “non-application” of MOE
provisions in section 1902(gg)(3) of the Act could apply to such groups.
Since the basis for individuals’ eligibility under the Medicare buy-in
groups includes disability, the nonapplication of MOE provisions would
be precluded from being applied to such groups.
AR Attach. 2 at 135; PSMF ¶ 20.
On December 20, 2011, Commissioner H. Sawin Millett, Jr., submitted a
letter to Secretary Sebelius certifying a projected budget deficit for state fiscal year
2013 representing the period 07/01/2012 – 06/30/2013. AR Attach. 2 at 125; Compl.
¶ 39.
2.

SPA # 12-010

On August 1, 2012, Mary C. Mayhew, Commissioner of Maine’s Department
of Health and Human Services, wrote Richard R. McGreal, CMS Associate Regional
Administrator, requesting approval of proposed Medicaid State Plan Amendment
12-010; Governor Paul LePage wrote Secretary Sebelius the same day informing her
of Maine’s request for expedited approval. AR Attach. 2 at 98-111; Compl. ¶ 40;
PSMF ¶ 22; DRPSMF ¶ 22. Proposed SPA # 12-010 contained three components:
(1) a reduction in the maximum income eligibility level from 200% to 100% of the
federal poverty line for parents and other caretaker relatives eligible under Sections
1902(a)(A)(10)(ii)(I) and 1905(a)(ii) of the Social Security Act; (2) a decrease in the
coverage of 19- and 20-year-old individuals; and (3) a decrease equal to 10% of the
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federal poverty line in the income eligibility levels for QMBs, SLMBs, and QIs. Id.
at 101-02. Maine argued that its approval request should be granted for a number
of reasons, including that the MOE requirement cannot be enforced following the
Supreme Court’s decision in NFIB. Id. at 98-99, 103-11. Maine’s Governor argued
that the MOE requirement “is part and parcel of the Medicaid expansion that was
struck down” in NFIB; Maine’s DHHS Commissioner contended that the MOE
requirement “is an even more clear case of an unconstitutional condition than [that]
dealt with in NFIB.” Id. at 99, 108-10.
On August 9, 2012, Sara Gagné-Holmes, Esq., and Jack Comart, Esq.,8 of
Maine Equal Justice Partners, wrote a letter to Secretary Sebelius in opposition to
proposed SPA # 12-010.

AR Attach. 2 at 81-84.

Attorneys Gagné-Holmes and

Comart disagreed with the State’s interpretation of NFIB and of the ACA’s MOE
requirement. Id.
On August 17, 2012, the Commissioner of Maine DHHS posted notice of
public rulemaking (Rule # 261P) to implement the reductions in eligibility for the
Medicare buy-in program.9 PSMF ¶ 41; DRPSMF ¶ 41. Comments on the proposed
rule were due August 17, 2012. Id. The notice of proposed rulemaking stated:
Under state law (P.L. 2011 ch. 657) and federal Medicaid law, the
changes set forth in these proposed rules cannot be implemented until
the Department has received federal approval. The Department has
sought federal approval to amend its State plan. If the Department
does not receive federal approval prior to October 1, 2012, the

Attorney Comart represents the Plaintiffs in this case.
The Court considers this fact for purposes of the Secretary’s motion to dismiss because it is a
matter of public record. Shalala, 988 F.2d at 1222.
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Department will abandon this rulemaking, and the Commissioner will
not adopt these rules.
Id. On August 31, 2012, the Secretary sent a letter to the Maine DHHS advising
that the Secretary has “90 days for review of the state plan amendment.” PSMF ¶
24; DRPSMF ¶ 24.
On September 4, 2012, Maine commenced suit in the United States Court of
Appeals for the First Circuit against the Secretary seeking review of the Secretary’s
failure to act upon Maine’s State Plan Amendment request within the time limits
that the State of Maine had demanded. Id. On September 13, 2012, the First
Circuit summarily denied the State’s petition, stating that the “facts do not warrant
the mandamus-like relief of ordering Respondents to consider or approve the SPA
by October 1, 2012.” Id.; Mayhew v. Sebelius, No. 12-2059, 2012 U.S. App. LEXIS
21083 (1st Cir. 2012).

On October 4, 2012, Governor LePage sent a letter to

Secretary Sebelius asking her to approve Maine’s State Plan Amendment without
delay: “I write to firmly request that you and your staff act on Maine’s state plan
amendment in a timely manner. Your failure to act necessitated Maine’s filing with
the courts . . . .” PSMF ¶ 25; DRPSMF ¶ 25. On November 1, 2012, Commissioner
Mayhew’s office forwarded to CMS a press release from Governor LePage accusing
the federal government of engaging in “political games” by not promptly approving
Maine’s State Plan Amendment, stating that Governor LePage told Secretary
Sebelius that “Maine needs and deserves answers now,” and quoting the Governor
as having said that “[d]elaying tactics, such as the immaterial questions CMS sent
to Commissioner Mayhew, will not solve the problem.” PSMF ¶ 26; DRPSMF ¶ 26.
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3.

Revised SPA # 12-010 and SPA # 12-010A

Following discussions between state and federal officials, Associate Regional
Administrator McGreal issued a formal Request for Additional Information (RAI) on
October 26, 2012.

AR Attach. 2 at 68-69.

Governor LePage sent a letter to

Secretary Sebelius on November 1, 2012, expressing frustration with the delay and
reiterating Maine’s view “that the Supreme Court freed Maine from the ‘economic
dragooning’ of the Affordable Care Act.” AR Attach. 2 at 61-62. On November 5,
2012, Commissioner Mayhew responded to the RAI. AR Attach. 1 at 52-55. She
stated that “Maine would like to split the current SPA in order to have the changes
to non-pregnant, non-disabled adult beneficiaries for families with incomes above
133 percent of the FPL approved immediately, as the law contemplates.” Id. at 52.
On November 14, 2012, Commissioner Mayhew sent Associate Regional
Administrator McGreal revised proposed SPA # 12-010A, which contained only the
proposed amendments to the income eligibility levels for QMBs, SLMBs, and QIs.
Id. at 18. Associate Regional Administrator McGreal approved SPA # 12-010A on
January 7, 2013. Id. at 15-17; Compl. ¶ 41. The approved amendments took effect
March 1, 2013. Compl. ¶ 42. The Secretary’s approval of SPA # 12-010A had the
effect of reducing or terminating the Plaintiffs’ Medicaid eligibility.10 PSMF ¶ 27;
DRPSMF ¶ 27. SPA # 12-010A, effective March 1, 2013, changed Maine’s eligibility
methodology, making it more restrictive than the methodology that existed on
March 23, 2010, by reducing the allowable disregards:
The Secretary interposed a qualified response, stating that she does not know whether the
Plaintiffs are members of the covered groups. The Court deems the statement admitted for purposes
of summary judgment.
10

17

a. for QMBs from the difference between 150% of FPL and 100% of
FPL to the difference between 140% and 100% of FPL;
b. for SLMBs from the difference between 170% of FPL and 120% of
FPL to the difference between 160% and 120% of FPL.
c. for SLMBs from the difference between 185% of FPL and 135% of
FPL to the difference between 175% and 135% of FPL.
PSMF ¶ 28; DRPSMF ¶ 28.
Also on January 7, 2013, Acting Administrator Marilyn Tavenner refused to
approve SPA # 12-010, which contained Maine’s other proposed amendments. Id. at
10-13.

Acting Administrator Tavenner stated that these proposed amendments

would violate the ACA’s MOE requirement and that CMS disagreed with Maine’s
claim that NFIB affected the MOE requirement. Id.
4.

The State of Maine’s Absence

Plaintiffs’ counsel contacted counsel for the Maine Department of Health and
Human Services on several occasions to alert them to this pending lawsuit and to
inquire whether they had any interest in intervening in the case.11 PSMF ¶ 42;
DRPSMF ¶ 42. While largely unresponsive to these various inquiries, they did
inform Plaintiffs’ counsel that they had communicated their views to AUSA John
Osborn. Id.
IV.

THE PARTIES’ POSITIONS
A.

The Secretary’s Motion

The Secretary interposed a qualified response, stating that she “is without information
sufficient to admit or deny the statement.” DRPSMF ¶ 42. The Court deems the statement
admitted for purposes of summary judgment.
11

18

As background, the Secretary describes the provisions of the Medicaid statute
and the Affordable Care Act that she contends are relevant to this case. Def.’s Mot.
at 2-6.12 She also describes the procedural background of the case. Id. at 6-13. She
discusses the legal standards that govern judicial review under the Administrative
Procedure Act (APA) of her decision to approve a state plan amendment. Id. at 1315. She argues that judicial review should be based on the administrative record
and that courts may also consider an agency official’s affidavit or declaration. Id. at
13-14. She maintains that her decision to approve SPA # 12-010A is “entitled to
Chevron deference” because it involved an exercise of the interpretive authority
given her by Congress, and that the approval should thus be upheld so long as it is
reasonable. Id. at 14. She notes the “cardinal rule” that “a statute is to be read as a
whole.” Id. at 15 (quoting Simmons v. Galvin, 575 F.3d 24, 35 (1st Cir. 2009)).
The Secretary argues that because the Medicaid statute “structures Medicaid
eligibility according to membership in specified eligibility groups,” the reference to
“nonpregnant, nondisabled adults” refers to “groups not eligible for Medicaid on the
basis of pregnancy, disability or status as a child.” Id. at 15. She says that the
Medicaid statute “authorizes State plans to cover various groups of individuals and
establishes requirements to be applied on the basis of group eligibility.” Id. at 15.
The Medicaid statute does not, in her view, “authorize coverage of subgroups, with a
single limited exception for ‘reasonable categories’ of children.”

Id. at 16.

Accordingly, the Medicaid statute authorizes a state plan like Maine’s to cover the
entire population of QMBs, SLMBs or QIs “but not to cover subgroups of those
12

The internal pagination differs from the ECF pagination; the Court uses the ECF pagination.

19

populations,” such as “only those QMBs, SLMBs and QIs who are entitled to or
eligible for Medicare Part A or Part B based on a finding of permanent disability.”
Id.

She contends that it would be “inconsistent with the purpose of the MOE

exception to interpret it as precluding states from amending their eligibility
‘standards, methodologies or procedures’ for any group that could have a disabled or
pregnant person in it,” and argues that such an interpretation “would render the
exception meaningless.”

Id.

She notes that states might not even have this

information. Id. at 16-17. She says that “CMS’s interpretation of the Medicaid
statute as allowing state plans to cover the entire population of Medicare buy-in
groups but not permitting coverage of subgroups of that population is
longstanding.” Id. at 17. She observes that this interpretation is consistent with
CMS’s direction to states to ensure that applying more restrictive eligibility
provisions “would not result in the loss of eligibility for individuals who are eligible
based on pregnancy or disability.” Id. at 17-18. She explains that the Plaintiffs are
“not part of a group deemed eligible for Medicaid based on disability, pregnancy or
status as a child, but rather were eligible for the Medicare buy-in program on the
basis of their having been entitled to or eligible for Medicare and having income
below a certain level,” and that they are therefore “nonpregnant, nondisabled
adults” within the meaning of the MOE exception. Id. at 18. She denies that a
contrary interpretation expressed in an April 2011 email should be construed as an
“inconsistent interpretation of the Secretary,” explaining that the email was “part of

20

an open dialogue” and “did not reflect a final decision of the Secretary.” Id. at 18
n.15.
The Secretary argues that “income” under 42 U.S.C. §1396a(gg)(3) refers to
“income calculated without State income disregards.”

Def.’s Mot. at 19.

She

contends that this interpretation is supported by the statute’s plain language and
“is consistent with the statutory scheme of the ACA with respect to Medicaid.” Id.
She explains that under the ACA, persons with incomes at or below 133 percent of
the FPL were to be eligible for Medicaid starting January 1, 2014; the MOE
exception was designed to prevent states from withholding Medicaid from persons
with incomes at or below 133 percent of the FPL prior to January 1, 2014. Id. at 1920.

She observes that the ACA “provides for states to determine income for

eligibility and other purposes under State plans according to the modified adjusted
gross income methodology, which does not factor in the block income disregards.”
Id. at 19.

She notes that “[t]he Medicaid expansion provision and the MOE

nonapplication provision are in adjacent subsections of Section 2001 of the ACA,”
evidencing Congress’s intent to provide continuity of Medicaid coverage. Id. at 20.
The Secretary also notes that 42 U.S.C. § 1396a(gg)(4) “specifies that for
purposes of complying with the MOE requirement a state can determine income
according to modified adjusted gross income.” Id. at 21. She maintains that if the
Court finds the reference to “income” to be ambiguous, the Secretary’s
interpretation is reasonable and should be upheld under Chevron. Id. at 21. She
compares her interpretation to that put forth by the Plaintiffs, and claims that the

21

Plaintiffs’ interpretation would lead to results that are inconsistent with the
purpose of the MOE exception, which is to provide fiscal relief. Id. at 21-22. She
also notes that the Plaintiffs’ interpretation would lead to widely varying
applications of the MOE requirement from state to state. Id. at 22. She contends,
moreover, that the Plaintiffs’ interpretation is based on circular reasoning. Id. at
22-23.
Turning to whether the state of Maine is a necessary party, an issue the
Court directed the parties to address, the Secretary argues that it is “significant
that Maine has not elected to intervene or otherwise participate in this action”
despite knowing of it. Id. at 23. She recites Federal Rule of Civil Procedure 19(a)(1)
and states that “Maine’s presence would not be necessary to effect the relief that the
Complaint seeks: vacatur of the Secretary’s approval of SPA # 12-010A.” Id. at 24.
She notes, however, that if the Court ruled for the Plaintiffs and the Secretary
vacated her approval, Maine might not reinstate the dropped populations, in which
case her only enforcement authority would be to bring a compliance action, which is
discretionary.

Id. at 24.

She notes that if she chose to do so, the compliance

proceedings would be lengthy and only prospective relief in the form of a funding
cut-off would be available. Id. She concludes that Maine is not a necessary party
under Rule 19 and states that Maine’s absence “as a practical matter does not leave
its interests concerning the SPA unprotected.” Id.
B.

The Plaintiffs’ Opposition/Motion

22

The Plaintiffs state the summary judgment standard and note that the
Secretary’s motion for summary judgment is not properly before the Court. Pls.’
Opp’n/Mot. at 2. They describe the legal and factual background. Id. at 3-8. They
argue that under “step one” of the Chevron doctrine, “if the intent of congress is
clear, that meaning controls and no further inquiry is required.” Id. at 8. They
contend that the Secretary’s approval of SPA # 12-010(a) violates the plain language
of the MOE exception. Id. at 9. Regarding the phrase “nondisabled adults” in 42
U.S.C. §1396a(gg)(3), the Plaintiffs note that the phrase is not defined by or used
elsewhere in the statute, and should thus be given its ordinary meaning. Id. at 910. They maintain that “the MOE exception applies to adults who are not disabled.”
Id. at 10. They argue that if Congress had meant for the MOE exception to apply to
groups rather than any individuals, it would have made this clear as it did
elsewhere in the Medicaid statute. Id. at 11. They note that “exceptions should be
read narrowly” and urge the application of that canon here. Id. at 11-12.
The Plaintiffs argue that because the statutory language is clear, the
Secretary’s interpretation is entitled to no deference. Id. at 12. They also dispute
the accuracy of her contention that eligibility standards targeting subgroups are not
permitted under the Medicaid statute, and claim that CMS has acknowledged this.
Id. (citing 42 C.F.R. §§ 435.601(d)(1)(iii)). The Plaintiffs argue that the Secretary’s
“newly announced administrative convenience argument” deserves no deference and
lacks merit. Id. at 13-14.

23

Turning to the proper interpretation of “income,” the Plaintiffs again argue
that the statute’s meaning is clear. Id. at 14. They say that subsections (gg)(1) and
(gg)(3) must be read together and that doing so supports their interpretation of
income as incorporating state-based disregards. Id. at 14-15. The Plaintiffs claim
that the Secretary’s interpretation “has no basis in the statute.” Id. at 15. They
deny that subsection (gg)(4) supports the Secretary’s interpretation. Id.
The Plaintiffs contend that the Secretary’s SPA approval is more analogous
to a Medicaid waiver approval than to formal adjudication or notice-and-comment
rulemaking, and does not warrant Chevron deference. Id. at 16. They note that the
Secretary acted under pressure from the state of Maine, that the amendment was
approved in a simple and conclusory one-page letter without analysis or
explanation, and that the approval letter was written by an official that had
previously informed the State that the MOE exception did not cover the proposed
amendment.

Id. at 17.

Given the “lack of formality and detailed review,” the

Plaintiffs maintain that the Secretary’s interpretation deserves no deference. Id.
The Plaintiffs say that the Secretary’s interpretation of “income” in
subsection (gg)(3) would render (gg)(1) “surplusage” and “makes little sense.” Id. at
18.

They give eight reasons why income should not be interpreted to mean

“modified adjusted gross income.”

Id. at 19.

They say that the Secretary’s

argument is a “post hoc rationalization” due no deference and that accepting her
position “would drive a truck through a narrow exception.” Id. at 20. They warn

24

that the Secretary’s position would “render[ ] obsolete all of the various federal and
state income disregards currently in use.” Id.
The Plaintiffs argue that injunctive relief is warranted because they are
suffering irreparable harm, and because the public interest and balance of equities
favor it. Id. at 21-26. They say that the Maine DHHS is not a necessary party
under Rule 19(a) because they can obtain “complete relief”—which, in their view,
means relief between the extant parties rather than in an overall sense—from the
Secretary. Id. at 26-27. They reiterate that “Rule 19(a)(1)(A) applies to current
parties only.” Id. at 27. They are “confident that DHHS will abide by this Court’s
ruling” and contend that the possibility that it would not does not make it a
necessary party.

Id.

They note that Maine law conditioned the reduction in

coverage on the Secretary’s approval and say that “it is well settled that when a
state operates a Medicaid program, it must obey all federal statutory and regulatory
requirements that govern such programs.” Id. at 27-28. They add that joinder is
also not required under Rule 19(a)(1)(B), noting that the State knew of the case yet
has not attempted to join, and asserting that there is “identity of interests” between
the Secretary and Maine DHHS. Id. at 28-29. They conclude that the Court would
not be issuing a “hollow judgment” without Maine DHHS and state that there is “no
reason or ground to speculate” that the State agency “will not adhere to its earlier
statements and the commands of federal and state law.” Id. at 29.
C.

The Secretary’s Reply/Opposition

25

The Secretary emphasizes that the “Plaintiffs’ interpretation of the MOE
exception as pertaining to individuals rather than groups conflicts with and
contravenes the statutory design of the Medicaid program which operates based on
group eligibility.”

Def.’s Reply/Opp’n at 5.13

She notes that the Plaintiffs’

interpretation would also “conflict with Congress’ intent to offer states facing
budget crises an opportunity for meaningful fiscal relief.”

Id.

She says that

“determination of income is distinct from application of income eligibility standards,
methodologies or procedures.” Id.
She reiterates that her approval of the SPA deserves deference. Id. at 6-7.
She notes that the Ninth Circuit and the D.C. Circuit have held that the Secretary’s
decision to approve a state plan amendment is “an exercise of her specific
interpretive authority expressly delegated by Congress under the Medicaid statute.”
Id. at 7 (citing Managed Pharmacy Care v. Sebelius, 705 F.3d 934, 946 (9th Cir.
2012), and Pharm. Research & Mfrs. Of Am. v. Thompson, 362 F.3d 817, 821-22
(D.C. Cir. 2004)). She disputes the Plaintiffs’ analysis of Bryson v. Shumway, 308
F.3d 79 (1st Cir. 2002), which she notes was decided before more pertinent cases
from other circuits, and labels the First Circuit’s discussion of Chevron “obiter
dictum.” Def.’s Reply/Opp’n at 7-8.
She returns to her interpretation of the phrase “nonpregnant, nondisabled
adults,” and argues that “Plaintiffs’ focus on the plain meaning of ‘Non,’” misses the
point. Id. at 8-9. She says that the use of the word “groups” elsewhere in the
Medicaid statute does not support the Plaintiffs’ position because the statute also
13

The internal pagination differs from the ECF pagination; the Court uses the ECF pagination.

26

refers to “individuals” elsewhere.

Id. at 9.

She argues that the Plaintiffs’

characterization of 42 U.S.C. § 1396a(r) as permitting “subgroups” is inaccurate. Id.
She emphasizes that “the Medicaid program is based on groups, not sub-groups.”
Id. at 9-10. She denies that her interpretation is based on “mere administrative
convenience,” insisting that it is instead based on statutory requirements and
Congressional intent. Id. at 10. The Secretary argues that Acting Director Ryan’s
declaration “is an appropriate explanation of the Secretary’s decision to approve
Maine’s SPA” rather than “a post-hoc litigation affidavit.” Id. at 10-11.
The Secretary contends that her interpretation of “income” is supported by
the plain language of subsections (gg)(3) and (gg)(4). Id. at 12-13. She says that an
“income ‘disregard’” is “not a determination that the individual does not have the
income in question, but instead is a methodology under which that income is not
counted for eligibility purposes.” Id. at 13. She reiterates that her interpretation is
based on the need to interpret the MOE provision in light of the ACA’s Medicaid
expansion, which is based on modified adjusted gross income. Id. at 14-15. She
responds to the Plaintiffs’ argument that this is a post-hoc rationalization by saying
that the argument “elaborates on but does not alter the interpretation underlying
the Secretary’s decision.” Id. at 15. She notes that the Plaintiffs did not refute her
point that, under their interpretation, the MOE exception would apply only to QIs
with incomes between 133 and 135 percent of the FPL—“an unreasonable result”
inconsistent with Congressional intent.

27

Id. at 15-16.

She also repeats her

argument that the Plaintiffs’ interpretation would lead to “widely varying
applications ” of the MOE exception. Id. at 16.
The Secretary argues that the Plaintiffs’ arguments for injunctive relief are
premature and asks for discovery in the event that the Court denies the dispositive
motions. Id. She does not add to her discussion regarding the state of Maine’s
joinder except to deny that her position is that Maine is not a necessary party. Id.
at 17.
V.

DISCUSSION
An aggrieved Medicaid beneficiary typically challenges an arguably unlawful

rule change by suing the state official charged with implementing the rule change
instead of or in addition to the federal official that authorized the change. See, e.g.,
Willey v. Petit, Civil No. 85-0295-B, 1986 U.S. Dist. LEXIS 29459 (D. Me. Feb. 10,
1986) (action to enjoin the Commissioner of the Maine Department of Human
Services from implementing, under direction from the Secretary of the U.S.
Department of Health and Human Services, a rule change regarding the exclusion
of resources for purposes of Medicaid eligibility); Winslow v. Commissioner, Me.
Dep’t of Human Servs., 795 F. Supp. 47 (D. Me. 1992) (class action challenging the
reasonableness of the income eligibility levels set by the Maine Department of
Human Services for the Maine Medicaid program).

In this case, however, the

Plaintiffs have not sued the State or any of the state officials that proposed and
implemented SPA # 12-010A. Their Complaint focuses on the Secretary’s approval
of SPA # 12-010A rather than on SPA # 12-010A itself. Compl. Given Maine’s

28

obvious interest in the case, the Court asked the parties to address whether Maine
is a necessary party.
Under Federal Rule of Civil Procedure 19(a)(1),
A person who is subject to service of process and whose joinder will not
deprive the court of subject-matter jurisdiction must be joined as a
party if:
(A) in that person’s absence, the court cannot accord complete relief
among existing parties; or
(B) that person claims an interest relating to the subject of the action
and is so situated that disposing of the action in the person’s absence
may:
(i) as a practical matter impair or impede the person’s
ability to protect the interest; or
(ii) leave an existing party subject to a substantial risk of
incurring double, multiple, or otherwise inconsistent
obligations because of the interest.
FED. R. CIV. P. 19(a)(1).

The First Circuit explains that “Rule 19 addresses

situations where a lawsuit is proceeding without a party whose interests are central
to the suit. . . . The Rule calls for courts to make pragmatic, practical judgments
that are heavily influenced by the facts of each case.” Bacardí Int’l Ltd. v. V. Suárez
& Co., Inc., 719 F.3d 1, 9 (1st Cir. 2013). “Questions under Rule 19(a) are factbound and driven by the nature of the issues before the court.” Id. at 9-10.
Regarding the first Rule 19(a) factor—whether the Court can “accord
complete relief among existing parties”—the Secretary notes that “Maine’s presence
would not be necessary to effect the relief that the Complaint seeks,” Def.’s Mot. at
24, and the Plaintiffs emphasize that the issue under Rule 19 is whether the Court
can afford relief “not in an overall sense, but between the extant parties,” and
29

observe that all they are asking for is a declaration that the Secretary’s approval of
SPA # 12-010A was unlawful and injunctive relief directing her to withdraw her
approval. Pls.’ Opp’n/Mot. at 26. Rule 19(a)(1)(A) may therefore be satisfied, see
Bacardí, 719 F.3d at 10-11, but the Plaintiffs’ narrowly confined prayer for relief
raises a different, more basic question that the parties have not addressed: whether
the Plaintiffs have standing.

“[T]he irreducible constitutional minimum of

standing” requires that it “be likely, as opposed to merely speculative, that the
injury will be redressed by a favorable decision.” Lujan v. Defenders of Wildlife, 504
U.S. 555, 560-61 (1992) (internal quotations omitted); see also Steel Co. v. Citizens
for a Better Env’t, 523 U.S. 83, 103 n.5 (1998) (standing requires that a plaintiff
“personally would benefit in a tangible way from the court’s intervention”) (internal
quotations omitted).
Although the Plaintiffs are “confident that [Maine] DHHS will abide by this
Court’s ruling,” there are at least plausible arguments that neither state nor federal
law would require that Maine reinstate the Plaintiffs’ benefits following a favorable
ruling from this Court, and it would be surprising if the State did not press these
arguments. Maine’s Governor and DHHS Commissioner argued to the Secretary
that she was required to approve the plan amendments proposed in both SPA # 12010 and SPA # 12-010A because enforcing the ACA’s maintenance of effort
requirement would be unconstitutional under NFIB. The Secretary rejected this
argument in declining to approve SPA # 12-010, AR Attach. 1 at 10-13, but no court
has addressed the question. There appears to be some weight to the argument that,

30

following NFIB, a state that chooses not to expand its Medicaid coverage under
section 2001(a) of the ACA need not comply with the maintenance of effort
requirement of section 2001(b).14

As an absentee, however, the state of Maine

cannot make the argument.
If the Court were to direct the Secretary to vacate her approval, therefore,
Maine would not be bound by this Court’s judgment; Maine could maintain its plan
as amended, and refuse to reinstate the Plaintiffs’ benefits, meaning that no
tangible benefit would result to the Plaintiffs from this Court’s ruling. See Steel
Co., 523 U.S. at 103 n.5.

State law conditioned the plan amendments on the

Secretary’s approval, 2011 Me. Laws ch. 657 § HH-3, but the State has already
received her approval, arguably satisfying the state law’s condition precedent;
whether a subsequent court-ordered vacatur would undo the amendment does not
have an obvious answer and is a question of state law. If Maine did not voluntarily
undo the amendments, the Secretary represents that her “only enforcement
authority would be to bring a compliance action, which is committed to her
discretion.” Def.’s Mot. at 24; see 42 U.S.C. § 1396c. She notes that even if she
chose to do so, “the compliance proceedings would be lengthy and only prospective
relief in the form of a funding cut-off would be available.” Def.’s Mot. at 24. In other
As of June 20, 2013, Maine had not expanded its Medicaid coverage under section 2001(a).
See Matthew Stone and Robert Long, Maine House deals final blow to Medicaid expansion, BANGOR
DAILY NEWS (June 20, 2013), http://bangordailynews.com/2013/06/19/politics/maine-house-fails-tooverride-medicaid-expansion-veto/.
How, if at all, NFIB affects the enforceability of the MOE requirement is a difficult legal
question that is not currently before the Court and has not been briefed. The Court mentions it only
because it would be reasonable to expect the State to continue to press the argument in defense of
SPA # 12-010A were the Court to rule for the Plaintiffs. It appears that Maine is currently
contesting the Secretary’s refusal to approve SPA # 12-010, likely on this ground. See 78 Fed. Reg.
21608 (Apr. 11, 2013).
14

31

words, she has no authority to order Maine to provide benefits; she can only
threaten to withhold federal funds. Cutting Maine off from federal funds would not
directly benefit the Plaintiffs. In addition, Maine would likely defend against a
compliance action by renewing its constitutional argument under NFIB, which only
a court has the authority to decide.
Turning to Rule 19(a)(1)(B)(i), which “is concerned with protecting the
interests of the absent party,” Bacardí, 179 F.3d at 10, the Secretary contends that
because she is defending her approval, “Maine’s absence as a practical matter does
not leave its interests concerning the SPA unprotected.” Def.’s Mot. at 24. She
maintains that a ruling here would not lead to inconsistent obligations. Id. The
Plaintiffs note that the State is aware of this case but has not sought to intervene,
and agree that the federal government will adequately protect the State’s interests.
Pls.’ Opp’n/Mot. at 28-29. The parties ignore, however, that the State defended its
proposed amendment on both statutory and constitutional grounds, while the
Secretary defends her approval based only on a statutory argument; indeed, she
rejected SPA # 12-010 because she disagrees with the State’s constitutional
argument. To this extent, therefore, her interests are not identical but actually
contrary to the State’s.
It is not clear why the Plaintiffs have not sought injunctive relief against a
State officer directly. Given the unusual circumstances of this case—in particular,
the unresolved background dispute between the State and the Secretary over the
constitutionality of the ACA’s maintenance of effort requirement—the Court

32

concludes, based on both Article III’s case or controversy requirement and the Rule
19 factors, that the Plaintiffs cannot proceed against the Secretary alone.
VI.

THE MOTION TO CERTIFY CLASS AND THE MOTION FOR
PRELIMINARY INJUNCTION
This result will impact two other motions: the Motion for Preliminary

Injunction (ECF No. 14) and the Motion for Class Certification (ECF No. 13). The
Court will dismiss this suit unless the plaintiffs implead the state of Maine. If the
plaintiffs choose not to do so, both of the other motions will be dismissed with the
rest of the case. If the plaintiffs do implead the state of Maine, then the State will
likely bring additional and different arguments with respect to the “maintenance of
effort” requirement. In that case, both the Motion for Preliminary Injunction and
the Motion for Class Certification will need to be revised to address the State’s
arguments. Consequently, the Court dismisses without prejudice both the Motion
for Preliminary Injunction and the Motion for Class Certification.
VII.

CONCLUSION
The Court ORDERS the Plaintiffs, if they choose, to file within fourteen days

of the date of this Order a motion for leave to amend their Complaint to add a State
Defendant.

In the event the Plaintiffs fail to file such a motion, the Plaintiffs’

Complaint will be dismissed without prejudice.
The Court DISMISSES WITHOUT PREJUDICE the Motion for Preliminary
Injunction (ECF No. 14) and DISMISSES WITHOUT PREJUDICE the Motion for
Class Certification (ECF No. 13).

33

SO ORDERED.
/s/ John A. Woodcock, Jr.
JOHN A. WOODCOCK, JR.
CHIEF UNITED STATES DISTRICT JUDGE
Dated this 30th day of September, 2013

34