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January 24, 1992



The opinion of the court was delivered by: NORMA HOLLOWAY JOHNSON


This Medicaid case involves the complex question of how the statutory provision known as the "Pickle Amendment" is to be construed in states that are governed by § 209(b) of the Medicaid Act. Plaintiffs challenge a regulation promulgated by the Secretary of Health and Human Services ("the Secretary") as contrary to the statutory authority set out in the Pickle Amendment, 42 U.S.C. § 1396a (note) (1988), and in section 303(e) of the Medicare Catastrophic Coverage Act, 42 U.S.C. § 1396a(r)(2) (1988). They also claim that the regulation in dispute is arbitrary and capricious. Pending before the Court are the parties' cross-motions for summary judgment. There are no disputes of material fact. For the reasons outlined below, the Court will grant defendant's motion for summary judgment and deny plaintiffs' motion for summary judgment.


 The Medicaid program was established in 1965 under title XIX of the Social Security Act; it offers federal financial assistance to states which choose to provide medical care to those who cannot afford it. 42 U.S.C. §§ 1396-1397 (1988). Originally, Medicaid required participating states to provide medical assistance to persons who received cash payments under one of four welfare programs established by the Social Security Act. In 1972, Congress decided to restructure three of these welfare programs, replacing then with a new government assistance program called Supplemental Security Income ("SSI"). Under SSI, the federal government displaced the states by assuming responsibility for both funding payments and setting standards of need. As a result of more generous federal eligibility standards for SSI, the number of individuals eligible for SSI assistance increased significantly in some states.

 The expansion of welfare assistance under SSI threatened to increase Medicaid obligations for some states, due to the existing requirement that all recipients of categorical welfare assistance, including SSI, were entitled to Medicaid. Because Congress feared that some states might withdraw from the Medicaid program altogether as a result of the expanded SSI eligibility, it enacted what has come to be known as the "§ 209(b) option." 42 U.S.C. § 1396a(f) (1988). Under § 209(b), states could elect not to provide Medicaid automatically to persons who receive SSI, but instead provide Medicaid only to those individuals who would have been eligible under criteria as restrictive as those contained in the state's Medicaid plan in effect on January 1, 1972. States which provide Medicaid to all SSI recipients are known as "SSI states"; states that offer Medicaid only to those who meet the state's own eligibility standards and methodologies are known as "§ 209(b) states." Ohio, the state in which plaintiffs live, is a § 209(b) state.

 Section 209(b) also includes a mandatory "spenddown" provision, which allows individuals to receive Medicaid, notwithstanding the fact that their income is higher than the state eligibility standard, if they incur sufficient medical expenses.

 In 1976, Congress confronted a problem arising from the interaction between SSI, Medicaid, and the Old Age Survivors and Disability Insurance ("OASDI") program. The latter is what is popularly known as "Social Security." See 42 U.S.C. §§ 401-433 (1988). Recipients of OASDI payments receive annual cost of living adjustments ("OASDI COLAs") to their Social Security checks. In some cases, these COLAs increased the beneficiaries' income sufficiently to disqualify them for SSI, causing them to lose, not only SSI benefits, but also Medicaid benefits, in those states which automatically link SSI eligibility to Medicaid eligibility. To redress the problem of the negative effects that COLAs were having on Medicaid eligibility, Congress enacted the "Pickle Amendment" ("the Amendment").

 The Pickle Amendment states, in pertinent part:

 There is hereby imposed the requirement (and each such State plan shall be deemed to require) that medical assistance under such plan shall be provided to any individual, for any month after June 1977 for which such individual is entitled to a monthly insurance benefit under [the Social Security Act] but is not eligible for benefits under [SSI] . . ., in like manner and subject to the same terms and conditions as are applicable under such State plan in the case of individuals who are eligible for and receiving benefits under [SSI] for such month, if for such month such individual would be (or could become) eligible for benefits under [SSI] except for amounts of income received by such individual and his spouse (if any) which are attributable to increase in the level of monthly insurance benefits . . ..

 42 U.S.C. § 1396a (note) (1988). The interpretation of the convoluted wording of this amendment is what is at issue in this case.

 Defendant argues that the Pickle Amendment requires no more than that SSI recipients and individuals who would be SSI recipients but for OASDI COLAs be treated alike for the purposes of granting Medicaid. In those states which automatically link SSI eligibility to Medicaid eligibility, the Pickle Amendment thereby ensures that recipients of OASDI COLAs will not lose Medicaid benefits as a result of their increase in income. However, in § 209(b) states, there is no automatic link between SSI eligibility and Medicaid eligibility. The Secretary of Health and Human Services has interpreted the Pickle Amendment to allow those § 209(b) states with more restrictive Medicaid eligibility requirements than those under SSI to consider COLAs in computing income for the purposes of determining that Medicaid eligibility:

 If the [state] agency adopts more restrictive eligibility requirements than those under SSI, it must provide Medicaid to individuals specified in paragraph (a) of this section on the same basis as Medicaid is provided to individuals continuing to receive SSI or State supplements. . . . In determining the amount of his or her income, the agency may deduct the cost-of-living increases paid under [OASDI] . . . up to the amount that made him or her ineligible for SSI.

 42 C.F.R. § 435.135(c) (1990) (emphasis added). Thus, a § 209(b) state would be required by the Pickle Amendment to disregard COLAs in determining which individuals should be treated as if they were SSI-eligible, but the state would be allowed to include them in determining Medicaid eligibility, since in § 209(b) states, SSI eligibility does not automatically confer Medicaid eligibility.

 Plaintiffs argue that the Pickle Amendment requires § 209(b) states to disregard COLAs at all levels: at the level of income computation for purposes of SSI eligibility and at the level of income computation for purposes of Medicaid eligibility. Plaintiffs are residents of the state of Ohio, a § 209(b) state which has chosen, pursuant to the Secretary's regulation, to include OASDI COLAs in determining eligibility for Medicaid benefits. Both plaintiffs currently receive Social Security disability benefits and annual COLAs to those benefits, as well as SSI benefits. Because of Ohio's policy of including COLAs as income, the spenddown amounts of medical expenses which plaintiffs are required to incur before they are eligible for Medicaid are significantly greater than they would be if these COLAs were disregarded.

 Plaintiffs claim that the Secretary's regulation also is contrary to section 303(e) of the Medicare Catastrophic Coverage Act. This section provides, in pertinent part:

 (2)(A) The methodology to be employed in determining income and resource eligibility for individuals [in § 209(b) states] may be less restrictive, and shall be no more restrictive, than the methodology

 (i) in the case of groups consisting of aged, blind, or disabled individuals, under the Supplemental Security Income program . . ..

 § 303(e)(5)(c) of Medicare Catastrophic Coverage Act of 1988, Pub. L. No. 100-360, codified at 42 U.S.C. § 1396a(r)(2) (1988). Plaintiffs argue that the disregard of OASDI COLAs under the Pickle Amendment is an "income methodology" within the meaning of § 1396a(r)(2), and that therefore § 209(b) states are obligated to disregard these COLAs in determining Medicaid eligibility.

 Finally, plaintiffs challenge the Secretary's regulation as arbitrary and capricious, in violation of the ...

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