GALLETTA v. VELEZ et al

Filing 25

OPINION. Signed by Judge Robert B. Kugler on 11/10/2013. (tf, )

NOT FOR PUBLICATION

(Doc. No. 15)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
_____________________________________
:
ALMA GALLETTA,
:
individually and on behalf of herself
:
and all others similarly situated,
:
:
Plaintiff,
:
Civil No. 13-532 (RBK/AMD)
:
v.
:
OPINION
:
JENNIFER VELEZ, COMMISSIONER,
:
NEW JERSEY DEPARTMENT OF
:
HUMAN SERVICES; VALERIE HARR, :
DIRECTOR, NEW JERSEY DIVISION
:
OF MEDICAL ASSISTANCE AND
:
HEALTH SERVICES; and BERGEN
:
COUNTY BOARD OF SOCIAL
:
SERVICES
:
:
Defendants.
:
____________________________________ :
KUGLER, United States District Judge:
This matter comes before the Court on the motion of Defendant Jennifer Velez,
Commissioner of the New Jersey Department of Human Services, and Defendant Valerie Harr,
Director of the New Jersey Division of Medical Assistance and Health Services, to dismiss as
moot the complaint of Plaintiff Alma Galletta (“Plaintiff”). 1
For the reasons stated herein, the motion will be DENIED.
I.

1

BACKGROUND

Defendant Bergen County Board of Social Services (“BCBSS”) has also joined in this motion. See Docket No. 18.
BCBSS, Velez and Harr, collectively, are at times referred to as “Defendants.”

This matter arises out of Plaintiff’s application for Medicaid benefits in May, 2012,
which was originally denied. Compl. at ¶ 21. Medicaid is a program created by federal law, but
implemented at the state level, which provides coverage for medical care to individuals who
cannot afford to obtain it on their own. See 42 U.S.C § 1396, et seq. The program is designed to
provide benefits to persons “whose income and resources are insufficient to meet the cost of
necessary medical services.” 42 U.S.C. § 1396-1. State participation is voluntary; however,
states that participate in the Medicaid program must comply with the federal statutory and
regulatory framework governing Medicaid. Sabree v. Richman, 367 F.3d 180, 182 (3d Cir.
2004). New Jersey has authorized participation in the Medicaid program through its Medical
Assistance and Health Services Act, N.J.S.A. 30:4D-1, et seq. The state’s Medicaid program is
administered by the New Jersey Division of Medical Assistance and Health Services
(“DMAHS”), the Director of which is Defendant Valerie Harr. See N.J.A.C. 10:49-1.1(a).
DMAHS, in turn, is a division of the New Jersey Department of Human Services, the
Commissioner of which is Defendant Jennifer Velez. See N.J.S.A. 30:4D-4. Individual
decisions on eligibility are made on the local level by county welfare agencies that DMAHS
contracts with. N.J.A.C. 10:71-1.5. When seeking an eligibility decision, applicants must
provide the county agencies with documentation and evidence related to their resources. See
N.J.A.C. 10:71-2.2(e); N.J.A.C. 10:71-3.1(b). In this case, Plaintiff’s eligibility determination
was made by Defendant Bergen County Board of Social Services (“BCBSS”). Compl. at ¶ 27.
Plaintiff, who is the widow of a World War II veteran, applied for benefits through the
“Global Options for Long Term Care” (“Global Options”) waiver program, which is a program
funded by Medicaid that covers medical care in assisted living facilities. See N.J.S.A. 30:4D17.23 through 30:4D-17.32. In order to be approved for the Global Options program, a person

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must be found eligible, which requires a showing of income and resources below certain
maximum levels, which was $2,094.00 per month at the time of Plaintiff’s application. Id. at ¶¶
19-20. Plaintiff’s application was denied, because her income was found to exceed the income
eligibility ceiling for Medicaid benefits under the Global Options program. Id. at ¶ 21. The
denial related in part to compensation that Plaintiff received through her late husband’s veterans
benefits, paid to her by the Veterans Administration Improved Pension (“VAIP”) pursuant to 38
U.S.C. § 1541(d)(1). Id. at ¶ 22. The relevant statute for Medicaid eligibility provides that
income is not to be counted toward the limit if it is a “[p]ayment from the Department of
Veterans Affairs resulting from unusual medical expenses.” 20 C.F.R. § 416.1103(a)(7). 2 Had
the payments Plaintiff received from VAIP not been included in her monthly income for the
purposes of Medicaid eligibility, Plaintiff would have been eligible for the Medicaid benefits she
applied for. Compl. at ¶ 27. Prior to her denial of benefits, she had submitted to BCBSS a letter
from the Department of Veterans Affairs (“VA”), dated May 23, 2012, which indicated that of
the $1,094.00 Plaintiff received every month, $684.00 was designated as “pension” and $410.00
was designated as “aid and attendance.” Id. at Ex. D. The $684.00 was counted as part of her
income by BCBSS for Medicaid eligibility purposes, and the $410.00 was not. Id. at ¶¶ 24, 27.
Plaintiff contended that the entire income she received from VAIP resulted from
unreimbursed medical expenses, and therefore none of it should have ever been counted toward
her income calculation for Medicaid eligibility purposes. Pl. Opp’n at 6. Prior to filing this
action, she obtained an undated letter from the VA indicating that the entire $1,094.00 per month

2

Defendants cite a different section of the same regulation, which provides that funds received “under a Federal,
State or local government program, whose purpose is to provide medical care or services” are not income for the
purposes of Medicaid eligibility. See Def. Br. at 6 (citing 20 C.F.R. § 416.1103(a)(3)). It appears that
§416.1103(a)(7) is more relevant to the issues raised herein, although the Court recognizes that there may be some
overlap between the two sections. See 59 Fed. Reg. 33906-01 (recognizing that the nature of payments described
under §416.1103(a)(7), which was newly added at the time, “is analogous to that of other forms of medical care that
are . . . not income under § 416.1103(a)).
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that Plaintiff received was for “aid and attendance.” Compl. Ex. F. However, BCBSS refused to
change its decision based upon this letter, indicating that because it was undated and seemingly
conflicted with the earlier letter from the VA, the letter was not reliable evidence and BCBSS
could not tell which one was accurate. Def. Br. at 10-11. Plaintiff believes that a letter should
not have been required and that no VAIP benefits should be treated as income in any event for
purposes of the Medicaid income ceiling.
On January 28, 2013, Plaintiff filed a putative class action complaint against Defendants,
seeking to enjoin Defendants from treating VAIP payments as income for Medicaid eligibility
purposes, a re-determination of eligibility, an order granting such eligibility on a retroactive basis
to class members who would have been eligible for benefits had VAIP payments not been treated
as income, and attorneys’ fees and costs. In February 2013, after filing her complaint, Plaintiff
submitted a new letter from the VA, dated February 14, 2013, to BCBSS. In the new letter, the
VA indicated that the entire amount of VAIP benefits, then totaling $1,113.00 per month,
constituted “aid and attendance.” Def. Mot. Ex. C. Based upon the letter, BCBSS determined
that Plaintiff’s income fell below the income ceiling and that she was thus eligible for the Global
Options program. Id. at Ex. D. Defendants now move to dismiss the complaint, arguing that this
Court can no longer grant effective relief to Plaintiff, and because a class has not been certified,
no plaintiff can assert a justiciable claim.
II.

LEGAL STANDARD
Defendants move to dismiss Plaintiff's complaint on the grounds that her claims are

moot. Article III of the United States Constitution constrains the jurisdiction of federal courts to
“cases and controversies.” U.S. Const. art III § 2; see also Flast v. Cohen, 392 U.S. 83, 94
(1968). Therefore, the issue of mootness is jurisdictional and relates to the very power of the

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Court to hear a case. Sutton v. Rasheed, 323 F.3d 236, 245, 248 (3d Cir. 2003). Any dismissal
such as the one sought by Defendants would be pursuant to Federal Rule of Civil Procedure
12(b)(1), which allows a defendant to seek dismissal for lack of subject matter jurisdiction. If at
any point while the matter is before the court, a claim ceases to be a “live case or controversy,
the claim is moot and the federal court lacks jurisdiction to hear it.” Nextel West Corp v. Unity
Twp., 282 F.3d 257, 261 (3d Cir. 2002). “An offer of complete relief will generally moot the
plaintiff’s claim, as at that point the plaintiff retains no personal interest in the outcome of the
litigation.” Weiss v. Regal Collections, 385 F.3d 337, 340 (citing Rand v. Monsanto Co., 926
F.2d 596, 598 (7th Cir. 1991).
A district court may treat a party's motion to dismiss for lack of subject matter
jurisdiction under Rule 12(b)(1) as either a facial or factual challenge to the court's jurisdiction.
Gould Elecs., Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000). "In reviewing a facial
attack, the court must only consider the allegations of the complaint and documents referenced
therein and attached thereto, in the light most favorable to the plaintiff." Id. (citing PBGC v.
White, 998 F.2d 1192, 1196 (3d Cir. 1993)). "In reviewing a factual attack, the court may
consider evidence outside the pleadings." Id. (citing Gotha v. United States, 115 F.3d 176, 17879, 36 V.I. 392 (3d Cir. 1997)); see also United States ex rel. Atkinson v. Pa. Shipbuilding Co.,
473 F.3d 506, 514 (3d Cir. 2007). A district court has "substantial authority" to "weigh the
evidence and satisfy itself as to the existence of its power to hear the case." Mortensen v. First
Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). "[N]o presumptive truthfulness
attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude
the trial court from evaluating for itself the merits of jurisdictional claims." Id.

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Although courts generally treat a pre-answer motion under Rule 12(b)(1) as a facial
challenge, see Cardio-Med. Assoc., Ltd. v. Crozer-Chester Med. Ctr., 721 F.2d 68, 75 (3d Cir.
1983), a motion to dismiss on the grounds of mootness is a factual challenge. See Ortho Pharma.
Corp. v. Amgen, Inc., 882 F.3d 806, 811 (3d Cir. 1989); Strahan v. Roughead, 910 F. Supp. 2d
358, 364 (D. Mass. 2012). When a defendant raises a factual challenge to jurisdiction, the
plaintiff bears the burden of establishing jurisdiction. Gould Elecs. Inc., 220 F.3d at 176-77. In
determining the merits of such an attack, the Court may consider affidavits and other relevant
evidence outside of the pleadings. Berardi v. Swanson Memorial Lodge No. 48 of Fraternal
Order of Police, 920 F.2d 198, 200 (3d Cir. 1990).
III.

DISCUSSION
Defendants argue that because Plaintiff, as of March, 2013, has been granted coverage

under the Global Options program, Plaintiff has received all the benefits to which she is entitled
and that she sought in her complaint, and thus the complaint should be dismissed on mootness
grounds.

Plaintiff does not dispute that the coverage has been granted, but counters that

although she has been granted benefits, she was not granted the other relief that she sought in her
complaint. She therefore argues that a live case or controversy still exists, and thus her claims
are not moot. In the alternative, she argues that an exception to the mootness doctrine applies.
Because a discussion of exceptions is only necessary if Plaintiff’s claims are moot, the Court
turns first to the issue of mootness.
When, during the course of litigation, developments occur that “eliminate a plaintiff’s
personal stake in the outcome of a suit or prevent a court from being able to grant the requested
relief,” the case must be dismissed as moot. County of Morris v. Nationalist Movement, 273
F.3d 527, 533 (3d Cir. 2001). But, wherever a party still has “a concrete interest, however small,

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in the outcome of the litigation, the case is not moot.” Chafin v. Chafin, 133 S. Ct. 1017, 1023
(2013) (citations omitted). When the question of mootness arises due to a change in
circumstances from the beginning of the litigation, the key question is whether those changes
“have forestalled any occasion for meaningful relief.” In re Surrick, 338 F.3d 224, 230 (3d Cir.
2003). When the named plaintiff in a class action complaint has her claims “become moot
before class certification, dismissal of the action is required.” Lusardi v. Xerox Corp., 975 F.2d
964, 974 (3d Cir. 1992).
Here, Plaintiff sought an order enjoining Defendants from treating any of the VAIP
payments as income for the purposes of determining her eligibility for Medicaid benefits.
Compl. at p. 13. The putative class consists of all persons or have been in the six years prior to
the filing of the complaint, or will be, denied Medicaid benefits by NJDHS or county social
services boards due to the fact that the class members receive income from VAIP pursuant to 38
U.S.C. § 1541(d)(1) as a result of unreimbursed medical expenses. Id. at ¶ 30.
Plaintiff is eligible to receive a pension from the VA under 38 U.S.C. § 1541, which
provides benefits for the surviving spouses of veterans with non-service related disabilities.
These benefits are means-tested, which results in the benefits being reduced by income received
from non-VA sources. 38 U.S.C. § 1541(d). In order to calculate Plaintiff’s VAIP award
amount, the VA first arrives at an entitlement amount, and then applies the means test.
Because Plaintiff has been determined to be in need of regular “aid and attendance” as
defined in 38 U.S.C. § 1502(b), she is eligible for a pension at a special “aid and attendance”
rate, which is 60% above the otherwise applicable pension rate. 38 U.S.C. § 1541(d); Compl.
Ex. C. Plaintiff was approved for a monthly entitlement amount pursuant to the statutory amount
of $1,056.00, starting on July 1, 2011. Compl. Ex. C. The entitlement amount then rose to

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$1,094.00 on December 1, 2011 due to a cost of living adjustment. Id. Of the $1,094.00
entitlement, $684.00 was evidently for the basic statutory amount provided for in § 1541(b), and
the increase of $410.00 was due to Plaintiff being awarded the “aid and attendance” rate under §
1541(d)(1).
As mentioned, the entitlement amount is not automatically paid to a pension recipient,
due to the means-test provisions in § 1541(b) and § 1541(d)(1). These provisions mandate that
the pension be reduced dollar-for-dollar by the amount of countable income an applicant
receives. Countable income does not equal gross income, however. Any unreimbursed medical
expenses are deducted from total income in order to arrive at an income figure for the purposes
of VA benefits. 38 U.S.C. § 1503(a)(8). Because Plaintiff evidently requires a significant
amount of medical care, she appears to regularly incur substantial unreimbursed medical
expenses. When the VA applied the means test, it offset her annual income of less than $20,000
by her medical expenses in the amount of $43,039, to reach a “countable income” figure of zero.
Compl. Ex. C. She was therefore eligible to receive the full VAIP entitlement amount at the “aid
and attendance” rate, because no deduction for income was appropriate in her case. Id.
Plaintiff would have been eligible for Medicaid benefits prior to the time they were
actually awarded in March, 2013, if not for her VA pension placing her in excess of the income
ceiling set by the state for determining eligibility. Her argument is essentially that regardless of
whether VAIP payments are designated by the VA as “aid and attendance,” they should not be
classified as “income” by Defendants for Medicaid eligibility purposes. Under federal
regulations, payments “from the Department of Veterans Affairs resulting from unusual medical
expenses” may not be considered for eligibility purposes. 20 C.F.R. § 416.1103(a)(7). “Unusual

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medical expenses,” (“UMEs”) in turn, means unreimbursed expenditures exceeding five percent
of a person’s annual income. 38 C.F.R. § 3.262(l).
Plaintiff submits that the entire VAIP award—both the statutory entitlement amount
under § 1541(b) and the 60% higher rate for aid and attendance under § 1541(d)(1)—is
“resulting from unusual medical expenses” because had Plaintiff not been allowed to deduct over
$43,000 in medical expenses from her income, she would have received no VAIP payment at all
due to the means test that the VA applies. It is only once she become obligated to use her nonVA income to pay for medical expenses that she would become eligible for VA pension benefits.
Therefore, the pension “resulted from” her UMEs, even if they were not tied dollar-for-dollar to
specific medical costs. She argues that Defendants’ policy is thus a misapplication of §
416.1103(a)(7), and because Defendants continue to misapply the regulation, Plaintiff could be
harmed when her eligibility is reviewed, which is evidently done at annual intervals. Pl. Opp’n
at 17.
Plaintiff argues that a number of courts around the country have decided the identical
issue to the one that Plaintiff initially sought to litigate. See Pl. Opp’n at 6-7. She contends that
these courts have granted the relief that Plaintiff seeks in this case. See id. (citing cases such as
Summy v. Schweiker, 688 F.2d 1233, 1235 (9th Cir. 1982), Peffers v. Bowman, 599 F.Supp.
353, 355 (D. Idaho 1984), and Mitson v. Coler, 670 F. Supp 1568, 1757 (S.D. Fla. 1987)).
However, the issue arising in Plaintiff’s complaint seems to be a related, but not identical one to
those decided in the cases cited in Plaintiff’s brief. The relief that Plaintiff seeks turns on the
application of 20 C.F.R. § 416.1103(a)(7). Section 416.1103 was amended in 1994 to include
part (a)(7), which indicates that VA payments resulting from UMEs are not income. See 59 Fed.
Reg. 33906-01 (July 1, 1994). All of the cases cited by Plaintiff but one were decided prior to

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1994. In fact, it was in response to the cases that Plaintiff cites that Congress amended §
416.1103. See id. (“These final rules conform SSI policy to a number of court rulings that have
required the Social Security Administration to consider Department of Veterans Affairs
payments resulting from UMEs not to be income for SSI purposes.”). The issue, then, appears to
be one of interpretation of the amended § 416.1103(a)(7), and whether Plaintiff’s entire VAIP
award—not only the aid and attendance portion—“result[ed] from unusual medical expenses.”
However, that issue is not directly before the Court at this juncture. The Court must decide
whether Plaintiff’s claim is moot now that she has been awarded Medicaid benefits.
Because Plaintiff seeks to enjoin Defendants from treating her VAIP payments as income
and no such injunction has been handed down, Plaintiff has not been afforded “complete relief,”
and thus her claim is not moot. Weiss, 385 F.3d at 340. Indeed, it seems based on their papers
filed in connection with this motion that Defendants would continue to treat VAIP payments as
income should they be labeled as “pension” by the VAIP, and not as “aid and attendance,” even
if the VAIP pension was awarded as a result of UMEs zeroing out the applicant’s income.
There is no apparent reason to suspect that Plaintiff will not continue to collect VAIP
benefits, some of which may be allocated at a future time as income by some of the Defendants
for the purpose of Medicaid eligibility calculations. This is the outcome that Plaintiff argues is
contrary to federal law and regulations. She therefore has “a concrete interest” in being awarded
an injunction against Defendants counting any portion of her future VAIP payments received as
a result of incurring UMEs as “income” when reviewing her Medicaid eligibility. See Chafin,
133 S. Ct. at 1023. It is likely that the amount of Plaintiff’s VAIP payments will increase and
that Defendants will again demand a letter from the VA in order to maintain Plaintiff’s
eligibility. See 38 U.S.C. § 5312 (providing for periodic adjustments of the statutory pension

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amount provided under § 1541.) Defendants agree that they will review her Medicaid eligibility
on an annual basis. Def. Reply at 11. Based upon their operating procedure, it seems likely that
if Plaintiff’s VAIP award amount is adjusted, Defendants will seek a new letter explaining how
much of the award is for “aid and attendance.” If indeed Plaintiff is correct that none of the
VAIP payments should be “income,” then she has a “concrete interest” in receiving the
injunctive relief she seeks. If she is correct, she should not have to request or produce such a
letter, nor should she be subject to the risk that Defendants will count any future benefit that they
do not believe falls within the “aid and attendance” category as income that could weigh against
her eligibility. Such a finding that she is correct as to the application of § 416.1103(a)(7) would
thus be an “occasion for meaningful relief.” Surrick, 338 F.3d at 230.
Because Plaintiff has “a concrete interest” in the additional relief that she sought in her
complaint, the Court finds that she has met her burden of establishing that jurisdiction exists, and
her claim is not moot. Gould Elecs. Inc., 220 F.3d at 176-77. Because the Court decides that
Plaintiff’s case is not moot, it is not necessary to discuss the issues raised on exceptions to the
mootness doctrine. It is similarly unnecessary to discuss the retroactive eligibility issue raised by
the parties.
IV.

CONCLUSION
For the foregoing reasons, Defendants’ motion to dismiss is DENIED.

Dated: 11/10/2013

/s/ Robert B. Kugler
ROBERT B. KUGLER
United States District Judge

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