The opinion of the court was delivered by: GREEN
Under the National Health Planning and Resources Development Act of 1974, federal funding for health care planning was offered under the Public Health Service Act, 42 U.S.C. §§ 201 et seq., at two levels. Section 1516 of the Public Health Service Act provided for grants to regional planning groups within the states called Health Systems Agencies (HSAs), while Section 1525 provided for grants to statewide planning and development agencies. Because the state agencies were assigned responsibilities similar to those placed upon the HSAs, Congress recognized the possibility for conflict and duplication in small states with centralized health-care delivery systems. As such, section 1536 authorized the Secretary to recognize "single-agency states," which would be allowed to combine regional and statewide health planning operations in a single agency that would be entitled to receive funding through both section 1516 and section 1525. From the beginning, the District of Columbia has been eligible for a single-agency state designation under section 1536, and since 1977 has applied for and received funding from both grant sources. Puerto Rico was authorized to develop a single statewide health planning agency under the terms of section 1536 in 1979 by section 104(c) of the Health Planning and Resources Development Amendments of 1979, Pub. L. No. 96-79, 93 Stat. 592, 596. It received from the Secretary a conditional designation in 1980 and, in 1981, a full designation for single-agency status. In both 1980 and 1981 Puerto Rico's single statewide agency received full funding under both section 1516 and section 1525.
When Puerto Rico and the District of Columbia applied for HSA funding under section 1516 for fiscal 1982, the Secretary refused to grant such funds because of certain language in the Omnibus Budget Reconciliation Act of 1981, Pub. L. No. 97-35, 95 Stat. 357 (Budget Act) which the Secretary read to limit eligibility for section 1516 funding to the 50 states of the Union. See Budget Act § 935, 95 Stat. at 571. Puerto Rico and the District of Columbia did, however, receive full statewide agency funding under section 1525 for fiscal 1982.
Section 935 of the Budget Act gave the Secretary the means to phase out HSA funding under section 1516 to section 1536 single-agency states, with the result that they would be eligible only for section 1525 (statewide) funds. Section 935(a) contains amendments to section 1536 that delete the single-agency states' eligibility for section 1516 funding. Sections 935(b) and (c) are grandfather clauses; they provide an extra year of section 1516 funding to those states that ultimately will lose their right to section 1516 funds because of section 935(a). Of these, only section 935(b), which allows former single-agency states to receive section 1516 funds for 1982 despite the phase-out, is relevant here. Section 935(c), the second grandfather clause, is not relevant to this case, as it does not involve single-agency states under section 1536 but states of small populations with only one HSA.
There is no doubt that, for purposes of section 1536, the District of Columbia is a "state". Section 1531 of the Public Health Service Act which governs section 1536, provides that, except as otherwise provided (and there are no relevant exceptions), "The term 'State' includes the District of Columbia." Public Health Service Act § 1531(1), 42 U.S.C. § 300n(1). Moreover, section 1536 by its own terms provides that Puerto Rico and other enumerated possessions and territories, upon application and approval, "shall . . . be considered to be a State for purposes of this title." Public Health Service Act § 1536, 42 U.S.C. § 300n-5.
However, while section 935(a) of the Budget Act amends section 1536 of the Public Health Service Act and therefore is controlled by the latter act's definitions, section 935(b) of the Budget Act is not part of the Public Health Service Act nor, consequently, (in defendants' view) subject to its broader definitions of "state". Moreover, the Budget Act contains no definition of "state" that expands beyond the 50 states.
Section 935(b) provides that:
(1) because of section 1536(b) of the Public Health Service Act (as in effect on September 30, 1981) received a grant under section 1516 of such Act for fiscal year 1981, and
(2) had an application under section 1536 of such Act (as amended by subsection (a)) approved,
shall be eligible to receive a grant under section 1516 of such Act of fiscal year 1982.
No party disputes that were Puerto Rico and the District of Columbia considered "states" under section 935(b) they would be eligible to receive a section 1516 grant for fiscal 1982. The sole question here is whether Congress meant the term "state" as it appears in the first line of section 935(b) to include plaintiffs.
Defendants point to language in the conference report accompanying the Budget Act in support of their view that Congress did not intend the definition of "state" governing section 935(a) to apply to section 935(b). The conference report explains that the amendment to section 1536 would allow a state to eliminate the federal designation and funding of HSAs (under section 1516) within a state, provided that the state could demonstrate its willingness and ability to carry out the purposes of the health planning program without the presence of HSAs within the state. It also noted that the conferees chose a certain date as the deadline for applications for section 1536 designations "in order to allow HSAs to receive their FY 82 grants without disruption of their established funding cycle." H. Conf. Rep. No. 208, 97th ...