K.B. by mother, Next Friend, and guardian T.B. et al v. Michigan Department of Health and Human Services et al
Filing
35
ORDER Denying Defendants' 31 Motion for Reconsideration. Signed by District Judge Thomas L. Ludington. (KWin)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
NORTHERN DIVISION
K.B. BY MOTHER, NEXT FRIEND,
AND GUARDIAN T.B., ET. AL.,
Plaintiffs,
Case No. 18-11795
Honorable Thomas L. Ludington
v
MICHIGAN DEPARTMENT OF
HEALTH AND HUMAN SERVICES,
NICK LYON, RICHARD SNYDER,
Defendants.
__________________________________________/
ORDER DENYING DEFENDANTS’ MOTION FOR RECONSIDERATION
On June 6, 2018, Plaintiffs filed a complaint against Defendants the Michigan Department
of Health and Human Services, Nick Lyon, and Richard Snyder. Compl., ECF No. 1. Plaintiffs are
Michigan children and their families who claim that Defendants are providing them with
inadequate mental health care. Id.
On September 7, 2018, Defendants filed a motion to dismiss Plaintiffs’ claims. ECF No.
17. The order was granted in part and denied in part. ECF No. 29. Defendants then filed a motion
for reconsideration of the Court’s order. ECF No. 31. Defendants contend that the Court
“misunderstood” the legal responsibilities of Prepaid Inpatient Health Plans and local County
Medical Health Service Programs. Id. at 1.
I.
A.
Plaintiffs bring their claim as a class action on behalf of “[a]ll current or future Michigan
Medicaid beneficiaries under the age of 21 with a behavioral, emotional, or psychiatric disorder
who are or may be eligible for, but are not receiving, home and community-based services.” ECF
No. 1 at 12. Plaintiffs contend that Defendants’ failure to provide adequate mental health care
services in their homes and communities have required some Plaintiffs to enter institutions (such
as psychiatric hospitals and juvenile delinquency facilities) while the other Plaintiffs are at risk of
requiring institutionalization in the future. Id. at 3.
Nationally, the Medicaid program is funded through joint contributions by federal and state
governments. Id. at 15. If a state wishes to participate in the Medicaid program and receive federal
funding, it must comply with certain requirements. Id. at 16. One of these requirements is that it
provide Early and Periodic Screening, Diagnosis, and Treatment services (“EPSDT”) for eligible
individuals. Id. The state of Michigan receives Medicaid funds to assist in its facilitation and
provision of health services. Id. at 15.
Defendant the Michigan Department of Health (the “Department”) is responsible for
facilitating the Medicaid program throughout Michigan. Id. To assist in this, the Department has
contracted with ten Prepaid Inpatient Health Plans (“PIHPs”) and local County Medical Health
Service Programs (“CMHSP”) to provide health services. Id. at 17. Plaintiffs contend that the
PIHPs are not fulfilling Medicaid’s requirements and as such, the Department should be held
responsible.
B.
In their complaint, Plaintiffs raise six claims against Defendants for violating the following:
the federal Medicaid EPSDT Mandate, the federal Medicaid reasonable promptness requirement,
the Americans with Disabilities Act, Section 504 of the Rehabilitation Act, the due process
provisions of the Medicaid Act, and due process rights under the Fourteenth Amendment. In
deciding Defendants’ motion to dismiss, the Court dismissed Count II and a portion of Count I of
Plaintiffs’ complaint. ECF No. 32. The balance of Plaintiffs’ allegations remain intact.
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In their motion for reconsideration, Defendants contend that the Court should have
dismissed Counts V and VI which contain allegations of Defendants’ violations of Plaintiffs’ rights
to notice and a hearing. ECF No. 31. Specifically, Count V provides:
242. The Medicaid Act requires that participating states provide an opportunity for
a fair hearing for any individual whose requests for Medicaid services have been
denied or not provided with reasonable promptness. 42 U.S.C. § 1396a(a)(3).
243. The Defendants have failed to establish and maintain customs, policies, and
practices to provide Plaintiffs and members of the Plaintiff Class with adequate
written notice of reductions, terminations, and denials of Medicaid funded intensive
home and community-based mental health services and their rights to a pretermination or reduction fair hearing, in violation of 42 U.S.C. § 1396a(a)(3), which
is enforceable by the Plaintiffs pursuant to 42 U.S.C. § 1983.
ECF No. 1 at 57.
The complaint cites to 42 U.S.C. §1396a(a)(3) which provides that a “State plan for
medical assistance must -- provide for granting an opportunity for a fair hearing before the State
agency to any individual whose claim for medical assistance under the plan is denied or is not
acted upon with reasonable promptness.” The federal regulation 42 C.F.R. §431.210 requires the
State to give the individual notice of this opportunity for a hearing. The notice must contain:
(a) A statement of what action the agency, skilled nursing facility, or nursing
facility intends to take and the effective date of such action;
(b) A clear statement of the specific reasons supporting the intended action;
(c) The specific regulations that support, or the change in Federal or State law that
requires, the action;
(d) An explanation of—
(1) The individual’s right to request a local evidentiary hearing if one is
available, or a State agency hearing; or
(2) In cases of an action based on a change in law, the circumstances under
which a hearing will be granted; and
(e) An explanation of the circumstances under which Medicaid is continued if a
hearing is requested.
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42 C.F.R. §431.210. Plaintiffs’ complaint does not allege that Defendants are not providing
individuals with these hearings. Rather, the complaint contends that Defendants are not providing
individuals notice of their right to a hearing when their benefits are to be reduced, terminated, or
denied. ECF No. 1 at 57.
C.
In Defendants’ reply brief to their motion to dismiss, they attempted to absolve themselves
of responsibility by arguing that
[B]efore reaching a full administrative hearing, there are review mechanisms
through the CMHs, to the PIHPs, each of which requires appropriate notices. Each
such notice can and should be addressed by the agency that issued it. Unless that
action and notice is brought to the Department through the appropriate channels,
Plaintiffs cannot show that the Department violated the U.S. Constitution or federal
law by failing to review each such action or notice individually.
ECF No. 21 at 6–7. The Court disagreed and held that Defendants’ responsibilities were not
absolved simply by delegating their responsibilities to the CMHs and PIHPs. The Court’s opinion
provides:
[A] contractual relationship with the PIHPs does not absolve Defendants of
assuring or auditing to be sure that the requirements of the Medicaid Act are being
met. Here, Defendants represent that they have delegated some of their notice and
hearing responsibilities to the CMHs and PIHPs. Delegation of these
responsibilities is permissible, but it does not excuse the Department from its
obligation to provide notice and a hearing. If notice is not given or is defective due
to the CMH or a PIHP, the Department is still responsible because the obligation to
the individual recipient ultimately lies with the Department. Defendants have not
demonstrated that the Medicaid Act or the Constitution remove the burden from
them by virtue of delegating the responsibility to a CMH or a PIHP.
ECF No. 29 at 21.
II.
Defendants have now filed a motion for reconsideration. Pursuant to Eastern District of
Michigan Local Rule 7.1(h), a party may file a motion for reconsideration of a previous order, but
must do so within fourteen days of the order’s entry. A motion for reconsideration will be granted
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if the moving party shows: “(1) a palpable defect, (2) the defect misled the court and the parties,
and (3) that correcting the defect will result in a different disposition of the case.” Michigan Dept.
of Treasury v. Michalec, 181 F. Supp. 2d 731, 733-34 (E.D. Mich. 2002) (quoting E.D. Mich. LR
7.1(g)(3)). A “palpable defect” is “obvious, clear, unmistakable, manifest, or plain.” Id. at 734
(citing Marketing Displays, Inc. v. Traffix Devices, Inc., 971 F. Supp. 2d 262, 278 (E.D. Mich.
1997)). “[T]he Court will not grant motions for rehearing or reconsideration that merely present
the same issues ruled upon by the Court, either expressly or by reasonable implication.” E.D. Mich.
L.R. 7.1(h)(3). See also Bowens v. Terris, No. 2:15-CV-10203, 2015 WL 3441531, at *1 (E.D.
Mich. May 28, 2015).
III.
Defendants contend that “the Court appears to have misunderstood the role of the
Community Mental Health (CMH) agencies whose decision – or alleged inactions – Plaintiffs ask
this Court to correct.” ECF No. 31 at 1. Defendants’ main argument for reconsideration centers
on the Court’s finding that Defendants’ notice and hearing responsibilities were not absolved
simply by delegating those responsibilities to the CMHs and PIHPs..
A.
Defendants argue that as medicaid managed care organizations (“MCO”), the CMHs and
PIHPs have an independent statutory obligation to provide notice to an enrollee when they receive
an adverse benefit determination. 42 U.S.C. §1396b(m) defines a MCO as
[A] health maintenance organization, an eligible organization with a contract under
section 1395mm…, a provider sponsored organization, or any other public or
private organization…and-(i) makes services it provides to individuals eligible for benefits under this
subchapter accessible to such individuals, within the area served by the
organization, to the same extent as such services are made accessible to
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individuals (eligible for medical assistance under the State plan) not
enrolled with the organization…
42 U.S.C. §1396b(m)(1)(A).
The notice and hearing obligations of managed care organizations is found under 42 U.S.C.
§1396u-2(b)(4) which provides
Each medicaid managed care organization shall establish an internal grievance
procedure under which an enrollee who is eligible for medical assistance under the
State plan under this subchapter, or a provider on behalf of such an enrollee, may
challenge the denial of coverage of or payment for such assistance.
42 C.F.R. §438.404 addresses the requirements of timeliness and adequacy of the notice of
an adverse benefit determination. It provides
(a) Notice. The MCO, PIHP, or PAHP must give enrollees timely and adequate notice
of an adverse benefit determination in writing consistent with the requirements
below and in §438.10.
(b) Content of notice. The notice must explain the following:
(1) The adverse benefit determination the MCO, PIHP, or PAHP has made or
intends to make.
(2) The reasons for the adverse benefit determination, including the right of the
enrollee to be provided upon request and free of charge, reasonable access to
and copies of all documents, records, and other information relevant to the
enrollee’s adverse benefit determination. Such information includes medical
necessity criteria, and any processes, strategies, or evidentiary standards used
in setting coverage limits.
(3) The enrollee’s right to request an appeal of the MCO’s, PIHP’s, or PAHP’s
adverse benefit determination, including information on exhausting the MCO’s,
PIHP’s, or PAHP’s one level of appeal described at §438.402(b) and the right
to request a State fair hearing consistent with §438.402(c).
42 C.F.R. §438.404.
If a MCO issues an adverse benefit decision, a party may appeal the decision within the
MCO. If the decision is upheld on appeal, a party may request a hearing with the state to review
the MCO’s decision. 42 C.F.R. §438.402(a)–(c) (“Each MCO, PIHP, and PAHP must have a
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grievance and appeal system in place for enrollees…An enrollee may file a grievance and request
an appeal with the MCO, PIHP, or PAHP. An enrollee may request a State fair hearing after
receiving notice under § 438.408 that the adverse benefit determination is upheld…”).
B.
Defendants contend that Plaintiffs have not adequately pled a violation by Defendants of
their notice and hearing obligations because Plaintiffs have not alleged any inadequacy by the
PIHPs or CMHs. Defendants argue that:
From what the Department has learned, none of the Plaintiffs has filed state fair
hearing requests alleging that PIHPs failed to comply with the notice and timing
requirements of §438.408. Yet, they did not explain how their failure to request
PIHP-level reviews supports their claim that the Department violated their due
process rights…
Thus, when Plaintiffs complain about decisions or inactions made in the first
instance by the CMHs that help to pay for their care - and do not allege that they
availed themselves of even PIHP-level review, they must plead - and ultimately
show - that those entities violated this (and related) regulations when they
interacted with Plaintiffs. Yet, Plaintiffs have not sued their PIHPs and/or CMHs,
nor have they pleaded any violation of these key provisions.
Id. at 5–7 (emphasis added).
At this stage of litigation, Plaintiffs are required to only plead their allegations. They are
not required to prove them. A pleading does not require “detailed factual allegations” to survive
dismissal. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). In essence, the pleading
“must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible
on its face.” Iqbal, 556 U.S. at 678 (quotations and citation omitted). In their complaint, Plaintiffs
do not explain the specific process by which Defendants failed to provide them notice. However,
they included sufficient facts (including discussion of PIHPs and CMHs) supporting their
allegations that Defendants did not provide adequate notice and hearing.
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Defendants have presented various factual arguments supporting their contention that the
PIHPs and CMHs are initially responsible for providing notice and hearing. The factual arguments
may have merit, but a motion to dismiss is not the appropriate stage of litigation to determine the
merits of these factual arguments. For example, Defendants present four exhibits that they contend
prove that four of the seven Plaintiffs received notice from CMHs of a change in benefits, but that
the four Plaintiffs did not file any PIHP-level reviews. This does not resolve the issue of whether
Defendants may still be liable or whether the notices from the CMHs were adequate. It also does
not address the remaining three Plaintiffs and whether they received adequate notice. The
possibility exists that some Plaintiffs exhausted their appeals before the PIHPs and CMHs and that
the Defendants were subsequently deficient in performing their notice and hearing duties.
Defendants have also identified authority indicating that PIHPs and CMHs have an
independent statutory obligation to ensure that enrollees are provided notice when their benefits
are adversely affected. However, Defendants do not address their agency relationship with the
PIHPs and CMHs. Though the PIHPs and CMHs have an independent statutory obligation,
Defendants have not demonstrated that delegation to the PIHPs and CMHs is the equivalent of
absolution of the state’s obligation to provide notice and a hearing under 42 U.S.C. §1396a(a)(3)
and 42 C.F.R. §431.210.
Defendants have not demonstrated that the Court committed a palpable defect in partially
denying Defendants’ motion to dismiss. Accordingly, Defendants’ motion for reconsideration will
be denied.
C.
Defendants explain that it was not their intent to misconstrue Plaintiff’s allegations. They
quote from the Court’s order as follows:
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Plaintiff’s complaint does not allege that Defendants are not providing individuals
with these hearings. Rather, the complaint contends that Defendants are not
providing individuals notice of their right to a hearing when their benefits are to be
reduced, terminated, or denied.
ECF No. 29 at 19 (emphasis in original). Defendants explain that in their motion to dismiss they
“did not seek to recast Plaintiff’s position, but rather to give the Court a more complete picture of
the process available to Plaintiff.” ECF No. 31 at 2. They then request that “[t]o the extent that the
Court based its decision on its understanding that the Department misconstrued Plaintiff’s claim,
the Department asks that it reconsider its denial of the motion to dismiss.” Id. at 3. The order
denying Defendants’ motion to dismiss was not based on this concern. Accordingly, Defendant’s
motion for reconsideration will not be granted on this basis.
IV.
Accordingly, it is ORDERED that Defendants’ motion for reconsideration, ECF No. 31,
is DENIED.
Dated: May 24, 2019
s/Thomas L. Ludington
THOMAS L. LUDINGTON
United States District Judge
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