Medicaid Transplant Litigation Proliferates

In the past six months, there has been a substantial increase in Medicaid organ transplant litigation. These cases frequently have originated under emergency circumstances, with attorneys rushing into court seeking temporary restraining orders and/or preliminary injunctions that will require the state Medicaid agency to provide organ transplant coverage for its clients. Increasingly, advocates arguing on behalf of clients requiring organ transplants have been successful in their courtroom efforts. Advocates were able to obtain appropriate court

Increasingly, advocates arguing on behalf of clients requiring organ transplants have been successful in their courtroom efforts.

orders last December in Florida (liver transplant) and last February in Illinois (bone marrow), Texas (liver), and Virginia (liver).

There are a number of factors and considerations that account for increasing Medicaid transplant litigation. First, since Medicaid is a joint federal-state program, and since the Health Care Financing Administration has not provided the states with clear guidance on Medicaid transplant policy, the states differ substantially on what transplants they will or will not cover. Some states follow Medicare's lead and some go beyond Medicare's coverage, while others are far more restrictive. Thus, according to a 1985 survey,' 49 states and the District of Columbia (D.C.) paid co-insurance and deductibles associated with Medicare coverage of kidney transplants; 41 states and D.C. reimbursed for costs associated with bone marrow transplants; 32 states and D.C. offered coverage for liver transplants; 24 states and D.C. reimbursed for heart transplants; 13 states covered heart-lung transplants; and 4 states paid for pancreas transplants. A more recent survey conducted under the direction of the National Health Law Program (NHELP) indicates slightly broader coverage: heart (25 states), heart-lung (15 states), pancreas (6 states), bone marrow (45 states), child liver (43 states), and adult liver (22 states). State agencies often base their provision of transplant

1. Intergovernmental Health Policy Project, Medicaid Coverage and Payment Policies for Organ Transplants: A Fifty-State Review (1985).

coverage on whether the transplant procedure is considered therapeutic or experimental-providing coverage in the former circumstance and denying it in the latter. However, there is not necessarily agreement on a clear definition of whether or when a particular transplant procedure is still in an experimental stage. Moreover, a transplant procedure that is experimental for an elderly recipient may not be so for a teenager or a child. Additionally, it is not clear what kind of success rate is appropriate before a transplant procedure should be considered therapeutic. (50 percent? 75 percent?) Nor is it clear how to define "success rate." (One-year survival? Five years?)

Last year, Congress passed legislation presumably intended to provide some order to the Medicaid transplant coverage dilemma. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)2 provided that federal Medicaid matching funds will be denied a state for organ transplants unless the state's Medicaid plan includes "written standards respecting the coverage of such procedures" and unless these standards require like treatment for "similarly situated individuals." Additionally, COBRA contains a Sense of the Senate resolution encouraging the Secretary of HHS to liberalize the Medicare coverage policy for liver transplants. (Medicare presently covers such transplants only for children under 18.)

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The recently enacted COBRA requirement that states establish written organ transplant standards providing like treatment for similarly situated individuals adds another legal argument if a state provides for transplants for certain groups of recipients but not for others.

Legal arguments made on behalf of organ transplant applicants often look to the Medicaid statutory requirement that states participating in the program provide inpatient hospital services, and to the regulatory provisions regarding the "amount, duration, and scope" of services. The recently enacted COBRA

2. Consolidated Omnibus Budget Reconciliation Act of 1985, Pub. L. No. 99-272, 100 Stat. 82.

3. Id., § 9507 (adding 42 U.S.C. § 1396(i)b(1), effective January 1, 1987).

4. Id., § 9217.

5. 42 U.S.C. § 1396d(a); 42 C.FR. § 440.230. For a legal analysis of Medicaid's amount, duration, and scope services provision, see Dorn, Parks, & Schwartz, Maximizing Coverage for Medicaid Clients, 20 Clearinghouse REV. 411, 411-16 (Summer 1986).

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In Lee v. Page, the court enjoined and directed the State of Florida to fund a liver transplant for a 26-year-old woman "suffering from a fatal liver disease." The district court looked to Medicaid case precedents requiring the provision of "medically necessary services" and concluded that case law would allow the state to limit certain services for fiscal review, but the state "cannot totally refuse to cover one service while covering others, or discriminate against one procedure because of the eligible person's condition or type of illness."9

In an Illinois case, Shannon v. Taylor, 10 a federal district court issued a TRO ordering the state to approve Medicaid payment for a six-year-old girl in need of an autologous bone marrow transplant. The court, in a two-page order, relying on affidavits from two physicians, determined that the bone marrow transplant was medically necessary, not experimental, and that denial of such would violate the Medicaid Act and regulations.

The Fourth Circuit required the State of Virginia to preauthorize liver transplant funding for a four-year-old girl pending appeal of the denial of such an injunction by the district court in Todd v. Sorrell. 12 The district court had denied plaintiff's TRO motion. After oral argument the following day (via telephone conference call), the Circuit Court Judge required the state to be prepared to provide the organ transplant if required prior to expedited hearing. A hearing before a Fourth Circuit panel took place on March 3, 1987. The Todd case is noteworthy since Virginia provides liver transplants for certain liver diseases but not for others, and plaintiff is thus relying, in part, on the “similarly situated" language in COBRA.

Hill-Burton Administrative Decisions Lists Updated

Michael Dowell of the National Health Law Pro

gram has updated an annotated list of Hill-Burton uncompensated care decisions. The list, which covers decisions rendered during the period November 1985 to December 1986, outlines the alleged violation and comments on the administrative decision. Each of the 38 decisions on the list has been assigned a Clearinghouse Number and may be ordered separately. The list is available from the Clearinghouse, No. 38,314D, 8 pp., single copies free. Earlier lists are still available.

In Montoya v. Johnston, 13 a federal district court enjoined the State of Texas, ordering it to authorize Medicaid funding for liver transplants for six-year-old and five-and-one-half-monthold plaintiffs. The court determined that the issue was whether the plaintiffs' liver transplants constituted "medically necessary" treatment. 14 After citing relevant case law, it concluded that such transplants were medically appropriate and that Texas must comply with federal standards prohibiting arbitrary and/or unreasonable denial of services to eligible recipients. In so ruling, the court rejected Texas's self-imposed cap of $50,000 annually on inpatient Medicaid expenses. The decision in Montoya makes good use of Medicaid amount, duration, and scope case law.

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Finally, in Kidd v. Hunt, 16 plaintiff challenged Alabama's refusal to cover the cost of a bone marrow transplant. At the time this article was written, the State of Alabama had revised its rules to include bone marrow transplants as a covered service, but still maintained a yearly 12-day limit on the number of hospital days provided Medicaid recipients. Plaintiffs may therefore refile this case.

Additional Medicaid transplant cases have been decided in Arizona and Illinois.17 For further information on this subject, contact Roger Schwartz, NHeLP, 2025 M St., NW, Suite 400, Washington, DC 20036, (202) 887-5310.

6. Allen v. Mansour, CA No. 86-73429 (E.D. Mich. Nov. 12, 1986) (Clearinghouse No. 41,822) (previously reported in NHELP's Health Advocate 20 (Winter 1987)).

7. Id., slip op. at 14.

8. Lee v. Page, Case No. 86-1081-Civ-J-14 (M.D. Fla. Dec. 19, 1986) (Clearinghouse No. 42,144).

9. Id., slip op. at 18.

10. Shannon v. Taylor, No. 87 C 1159 (N.D. Ill. Feb. 12, 1987) (Clearinghouse No. 42,146).

11. Id. (citing to Pinneke v. Preisser, 623 F.2d 546, 549 (8th Cir. 1980)).

12. Todd v. Sorrell, 87-3806 (4th Cir. Feb. 14, 1987) (Clearinghouse No. 42,151).

13. Montoya v. Johnston, C.A. No. A-87-CA-97 (W.D. Tex. Feb. 18, 1987) (partial judgment issuing TRO and injunctive relief); (Feb. 20, 1987) (opinion and order) (Clearinghouse No. 42,176). 14. Id., slip op. at 3.

15. Id. at 7.

16. Kidd v. Hunt, Case No. 87-D-177-N (M.D. Ala. Mar. 4, 1987) (Clearinghouse No. 42,177).

17. See Brillo v. Schaller, Case No. 233587 (Ariz. Super. Ct., Pima County, June 13, 1986) (Clearinghouse No. 42,178) (court orders Medicaid funding for adult liver transplant patient, finding that denial to an adult was without rational basis and violative of equal protection); Rivera v. Coler (N.D. Ill. Nov. 16, 1985) (Clearinghouse No. 41,164) (court issues TRO ordering state to insure payment through Medicaid program for 19-year-old in need of liver transplant surgery).

Continuing Care Retirement Communities: Some Issues for State Long-Term Care Policy

I. Introduction

Continuing care retirement communities (CCRCs)— facilities that promise housing, meals, and some form of health services for a period of at least a year in return for an entrance fee and payment of monthly charges have been developing in the United States for several decades. Until recently, however, only a handful of states regulated their activities at all, and even now fewer than half of the states have statutes.' CCRCs historically have been of little interest to legal services attorneys because people who could afford CCRCs' large entrance fees and high monthly charges were not likely to be legal services clients. To some extent that continues to be true. However,

Until recently, only a handful of states regulated [CCRCS'] activities at all, and even now fewer than half of the states have statutes.

continuing care structures are becoming more varied; monthly charges may be lower than in the past as some facilities limit the services they include in the fee, and facilities' promises to provide health care are generally less expansive than in earlier

1. Ariz. Rev. Stat. Ann. §§ 20-1801 to -1812 (Supp. 1986); Cal. HEALTH & SAFETY CODE 88 1770-1791 (West 1979 and Supp. 1986); COLO. REV. STAT. §§ 12-13-101 to -119 (1978 & 1984 Supp.); FLA. STAT. §§ 651.011-.134 (1984 & Supp. 1986); ILL. ANN. STAT. Ch. 111 §, para. 4160-1 to -12 (Smith-Hurd 1985 Supp.), Life Care Facilities Act, § 1; IND. CODE ANN. §§ 23-2-4-1 to -16 (Burns 1986); MD. ANN. CODE art. 70B, § 7-23 (1983 and 1986 Supp.); Mass. Gen. LAWS ANN. ch. 93, § 76 (West 1983); MICH. COMP. LAWS ANN. §§ 554.801-.844 (West Supp. 1986); MINN. STAT. ANN. §§ 80 D.01-.20 (West 1986); Mo. ANN. STAT. §§ 376.900-.950 (Vernon Supp. 1987); Continuing Care Retirement Community Regulation and Financial Disclosure Act, ch. 103, 1986 N.J. SESS. LAW SERV. 105 (West 1986); OKLA STAT. ANN. tit. 63, §§ 1-819 to -857 (West 1987 Supp.); OR. REV. STAT. §§ 91.690 and 105.830 (1985); 40 PA. CONS. STAT. Ann. §§ 3201-3225 (Purdon 1986 Supp.); TEX. HUM. Res. Ann. §§ 104.001-.009 (Vernon 1987 Supp.); VA. CODE ANN. §§ 38.2-4900 to -4917 (1986); Wis. Stat. §§ 647.01-.08 (Supp. 1985).

years. So, it is possible that residents once affluent enough to have been accepted into a CCRC may find themselves without sufficient resources to pay for nursing home care needed several years later but no longer covered in the services provided by the CCRC. In any case, questions have always existed about the relationship between the Medicaid program and CCRCs.

After briefly describing CCRCs, this article will discuss some of the issues for Medicaid programs raised by continuing care communities (which few states have addressed), identify some problem areas of resident contracts (some of which relate to Medicaid issues), and examine provisions of a New Jersey law that begin to address some of these problem areas.

II. Background

The American Association of Homes for the Aging defines CCRCs as facilities that include independent living units and health care facilities provided under a contract that includes partial prepayment for health care services.2 Most typically, independent living units may range from studio to two-bedroom apartments, and the CCRC will provide a community dining room and various activity areas in addition to the health care facility. Some CCRCs offer a personal care service for people needing some assistance with daily living but not needing the infirmary or nursing service.

In its earlier forms, what is now called continuing care was called life care, in which an individual assigned most or all of her or his assets to a care provider who promised, in return for the assets and payment of a fixed monthly fee, care for the individual's life. Fraudulent activities and basic poor management and actuarial unsoundness caused scandals in the life care industry when facilities' bankruptcies left residents without any means of caring for themselves.3

The industry's financial troubles gave rise to a regulatory approach, in those states that took any action at all, that emphasizes disclosure requirements and reserve requirements. This basic approach also is found in more recently enacted laws. Common provisions require disclosure of assets and liabilities, ownership interests, and certain facility policies (including when a refund is due, when a resident's occupancy can be terminated, when the agreement can be rescinded, and how much health care is provided). Reserve requirements are set forth in many laws, sometimes equal to one year's principal and

2. AMERICAN ASS'N OF HOMES FOR THE AGING, NATIONAL CONTINUING CARE DIRECTORY (1984).

3. See, e.g., Bennett v. Burg, 685 F.2d 1053 (8th Cir. 1982). See also The Pacific Homes Lawsuit: Can an Entire Church Be Sued 5 CLEARING HOUSE NEWS 1 (Oct. 1981).

Since, generally speaking, one must be capable of independent living to be accepted initially into a CCRC, the health care facility at a new CCRC temporarily may seek to fill its beds with people needing nursing care from the community at large. Several questions arise with respect to state policy on nursing home bed development and utilization:

Should the nursing facility be required to submit to the
Certificate of Need process, since its beds, theoretically, will
be used ultimately by only a limited population (i.e. resi-
dents of the CCRC)?

Should the nursing facility be allowed to participate in
Medicaid?

Can states deny Medicaid eligibility to an individual who has entered into a continuing care contract?

Some states waive Certificate of Need (CON) requirements for a CCRC meeting certain specifications, but then prohibit the facility from participating in Medicaid.' New Jersey requires facilities to go through the CON process, but exempts them from the bed need formula if they submit documentation that they conform to seven criteria. The CON process can prove useful as a means of regulating the activities of individual CCRCs, especially in states that do not extensively regulate the industry as a whole.

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A 1985 New Jersey CON application is instructive." In that case, the CON application showed that entry fees and regular monthly fees did not buy long-term care. After 90 days of health center use, residents paid a skilled nursing fee on top of the apartment fee already paid. This double payment continued for nine months (after which a new benefit period began) or until the resident became a permanent resident of the health center. Residents were given no assurance of continued residency in the health center when their funds ran out. The facility was required by the health systems agency (a local planning agency group) to revise its CON application and Residency and

4. See, e.g., Ariz. Rev. Stat. ANN. §§ 20-1801 to -1812; MINN. STAT. ANN. §§ 80D.01-.20; FLA. STAT. §§ 651.011-.134.

5. See, e.g., ARIZ. REV. STAT. ANN. §§ 20-1801 to -1812; Fla. STAT. §§ 651.011-.134; VA. CODE ANN. §§ 38.2-4900 to -4917. 6. See, e.g., FLA. STAT. §§ 651.011-.134; MINN. STAT. ANN. §§ 80D.01-.20; VA. Code Ann. §§ 38.2-4900 to -4917.

7. AMERICAN ASS'N OF HOMES FOR THE AGING, supra note 2. Florida and Pennsylvania are two such states.

8. NEW JERSEY DEP'T OF HEALTH, THE POLICY MANUAL FOR PLANNING AND CERTIFICATE OF NEED REVIEWS OF LONG TERM CARE FACILITIES AND SERVICES WITHIN THE STATE OF NEW JERSEY, NJAC 8:33H (effective Nov. 5, 1984). Regulations recently promulgated under authority of New Jersey's new law regulating continuing care retirement communities may affect the validity of these policy manual provisions. The author does not have access to those regulations.

9. Health Systems Agency Application Abstract and Record of Wynwood Family (RHPC # 85-019) with the New Jersey Department of Health (May 15, 1985). Papers on file at the National Senior Citizens Law Center, Washington, D.C., office.

Care Agreement to reflect that it would subsidize the monthly fees as needed. Moreover, the facility agreed to obtain longterm care insurance, which would pay for the care of residents in the facility who had exhausted their financial resources and used all of the 90-day benefit period. On another matter, the facility was required to modify its original resident contract to allow residents to refuse treatment, in accordance with the state's nursing home residents' rights requirements.

On the matter of certification for participation in the Medicaid program, federal regulations permit a Medicaid agency, if it has "adequate documentation showing good cause," to refuse to enter into a provider agreement" "Good cause" is not defined in the regulations. A 1977 Health Care Financing Administration (HCFA) memorandum sheds some light on how the federal government might analyze good cause. 12 In the memo, the Acting Director of HCFA's Medicaid Bureau set forth the necessary criteria for a state to limit the number of intermediate care facility (ICF) beds eligible for Medicaid

10. While the modifications made in the application to accommodate the demands of the health systems agency were weak from a residents' advocate's perspective, at least the CON process permitted demands to be made on the CCRC. 11. 42 C.FR. § 442.12(d)(1).

12. Memorandum from Acting Director, Medicaid Bureau, Health Care Fin. Admin., Dep't of Health, Educ. & Welfare to Max Odom, Acting Regional Comm'r (Aug. 18, 1977) (PIQ-MMB-77-5).

EAJA Manual Updated

The National Senior Citizens Law Center has recently updated its manual on the Equal Access to Justice Act (EAJA), which describes how older persons may recover attorney fees in suits against the federal government to secure benefits under social security, SSI, and Medicare. The manual explains the three major provisions of the EAJA, courts' interpretations of them, and changes brought about by the 1985 Amendments. Specific provisions analyzed in the manual include: (1) 5 U.S.C. § 504, which authorizes the awarding of attorney fees for work performed before administrative agencies; (2) 28 U.S.C. § 2412(b), which makes the federal government subject to attorney fees to the same extent a court can find any private party liable under the common law; and (3) 28 U.S.C. § 2412(d), which mandates attorney fees when the federal government loses and its position was not substantially justified. In appendices, the manual includes the full text of the EAJA as amended, full opinions and excerpts from recent federal district and appellate court cases interpreting the EAJA, and sample EAJA pleadings for a disability case. This 73-page manual, entitled Equal Access to Justice Act (EAJA) and written by the National Senior Citizens Law Center is available from the Clearinghouse, No. 41,229. The cost to those other than LSC-grantees is $6.75.