United States District Court, District of Columbia
Gladys Kessler, United States District Judge
The District of Columbia ("the District, " "D.C." or "Defendants") manages a large Medicaid program, see 42 U.S.C. § 1396 et seq., which provides healthcare benefits for eligible children and adults. In 1993, Plaintiffs filed a Complaint alleging various statutory and constitutional violations in the course of the District's provision of these much-needed benefits for children and low income adults.
In 1996, following a bench trial, the Court found the District | liable for violations of statutory provisions of the Medicaid statute and other federal law: (1) the District did not process and decide applications for Medicaid eligibility in a timely manner; (2) the District did not provide adequate advance notice before suspending or terminating benefits; (3) the District failed to provide early and periodic screening, diagnostic and treatment ("EPSDT") services for children under 21 years of age when requested; and (4) the District did not adequately notify eligible families regarding the availability of EPSDT services. See Salazar v. District of Columbia, 954 F.Supp. 278, 324-34 (D.D.C. 1996).
On January 25, 1999, the Parties' negotiated, and the Court entered, a Settlement Order memorializing the District's obligations to remedy these violations. See Order Modifying the Amended Remedial Order of May 6, 19 97 and Vacating the Order of March 27, 1997 [Dkt. No. 663] (referred to throughout as the "Settlement Order"). Some elements of that Settlement Order remain in place today.
On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act of 2010, Pub. L. No. 111-148, 124 Stat. 119, et. seq., ("ACA"), ushering in major reforms in many different areas of the American health care system, including far-reaching changes to the District's Medicaid program.
The Court predicted that "implementation [of the ACA's reforms] w[ould] undoubtedly be both rocky and fairly long in coming." Amended Memorandum Opinion and Order of Oct. 17, 2013 at 6 [Dkt. No. 1886]. That prediction has been borne out, but no one -- neither the Parties nor the Court -- anticipated the scope and difficulty of the problems that have arisen. Although the District has devoted huge amounts of staff time and other resources to, essentially, rewrite the Medicaid program to comply with the ACA, Plaintiffs have identified severe technical and logistical problems in the processing of initial Medicaid applications and in the Medicaid benefits renewal process. These problems have affected thousands of Medicaid beneficiaries and have deprived many District residents of necessary medical care to which they are entitled.
In light of the severe backlogs in the processing of Medicaid applications, delays in the Medicaid renewal process, and a number of computer glitches caused by ACA-related changes to the District's administration of the Medicaid program, Plaintiffs filed, on December 22, 2015, a Motion for Preliminary Injunction Concerning District of Columbia Medicaid Applications and Renewals ("Pls.' Mot. for P.I.") [Dkt. No. 2070], seeking preliminary relief on behalf of Medicaid applicants and recipients in the District who may be prejudiced by these implementation difficulties. Plaintiffs' Motion seeks a two-pronged order requiring
1) that [the District] shall provisionally approve all Medicaid applications pending over 45 days until a final determination can be made; [and] . . .
2) that [the District] shall continue the eligibility of all Medicaid recipients due [to have their Medicaid benefits] renewed or recertified[.]
See Proposed Order accompanying Pls.' Mot. . for P.I. [Dkt. No. 2070-1].
On January 15, 2016, the District filed its Opposition to Plaintiffs' Motion for a Preliminary Injunction ("Defs.' Opp'n to P.I.") [Dkt. No. 2077], and on January 29, 2016, Plaintiffs filed their Reply in Support of their Motion ("Pls.' Reply in Support of P.I.") [Dkt. No. 2083] .
On February 9, 2016, Plaintiffs chose to supplement their request for preliminary relief with a Motion for Modification of the Settlement Order ("Pls.' Mot. for Mod.") [Dkt. No. 2093], which seeks relief on a permanent basis that is nearly identical to the relief requested in their Motion for Preliminary Injunction. Compare Proposed Order accompanying Pls.' Mot. for P.I. [Dkt. No. 2070-1] with Proposed Order Accompanying Pls.' Mot. for Mod. [Dkt. No. 2093-5] . Plaintiffs' requests for relief are identical except that the Proposed Order accompanying their Motion for Modification adds one additional duty: "that during the time this Order is in effect, [D]efendants shall report monthly on their compliance with its terms." Proposed Order Accompanying Pls.' Mot. for Mod. at 2.
On February 26, 2016, the District filed its Opposition to Plaintiffs' Motion for Modification ("Defs.' Opp'n to Mot. for Mod.") [Dkt. No. 2097], On March 9, 2016, Plaintiffs filed their Reply in Support of their Motion for Modification ("Pls.' Reply in Support of Mot. for Mod.") [Dkt. No. 2102]. On March 28, 2016, the District filed its Surreply [Dkt. No. 2108].
Before Plaintiffs' second Motion was fully briefed, on February 19, 2 016, the Court held an on-the-record teleconference with the Parties to discuss how best to resolve Plaintiffs' Motions. Both Parties agreed with the Court that the two Motions are deeply intertwined and best resolved concurrently.
Thus, on February 19, 2 016, with the Parties' consent, the Court decided to resolve the two Motions simultaneously. Plaintiffs and the District rely to a large extent on the same factual and legal arguments in support of their positions on the Motion for Preliminary Injunction as they do with respect to the Motion for Modification of the Settlement Order. See Pls.' Mot. for Mod. at 2 (incorporating into Motion for Modification all "briefing and evidence submitted in connection with  Motion for a Preliminary Injunction"); Defs.' Opp'n to Mod. for Mod. at 1. Additionally, Plaintiffs request precisely the same relief in their Motion for Preliminary Injunction and in their Motion for Modification (with the one exception of a request for monthly reports from the District, which appears only in the latter Motion). Because Plaintiffs' two Motions rest on the same factual and legal foundations and call for nearly identical relief, it is clear that the merits question presented by the Motion for Preliminary Injunction is the same as the question presented by the Motion for Modification.
Although the District has made substantial progress since Plaintiffs' initial filing on December 22, 2015, in addressing the problems caused by changes in its administration of the Medicaid program to comply with the ACA, it is clear from the Parties' submissions that significant obstacles remain. These obstacles stand between Medicaid eligible individuals and the healthcare to which they are entitled. For that reason, as well as others, Plaintiffs' Motion for Modification of the Settlement Order shall be granted with certain modifications to the requested relief, and Plaintiffs' Motion for Preliminary Injunction shall be denied as moot.
A. Prior Relevant Orders in This Case
In 1993, when Plaintiffs filed this class action the Plaintiff class ultimately certified consisted of "a collection of several sub-classes, with each sub-class consisting of Medicaid applicants and recipients with a particular set of claims." Memorandum Opinion at 2 [Dkt. No. 2046]. At the time of trial, the following subclasses remained:
All persons who have applied, have attempted to apply, or will apply in the future during the pendency of this litigation, for medical assistance pursuant to Title 19 of the Social Security Act ("Medicaid"), and all persons who have received, are receiving, or will receive in the future during the pendency of this litigation, Medicaid in the District of Columbia with respect to the following claims:
Any claims for declaratory, injunctive, or other relief premised on an alleged delay in excess of 45 days in the processing of Medicaid applications [Sub-class III]
Any claims for declaratory, injunctive, or other relief premised on an alleged lack of advance notice of the discontinuance, suspension or obligation to recertify Medicaid benefits, after being found eligible [Subclass IV]
Any claims for declaratory, injunctive, or other relief premised on an alleged lack of effective notice of the availability of early and periodic screening, diagnostic and treatment ("EPSDT") services for children under 21 years of age, and/or an alleged lack of EPSDT services for eligible children under 21 years of age [Subclass V] .
Order at 1-2 [Dkt. No. 100] (brackets in original).
After years of litigation and some successful negotiation by the Parties, on October 16, 1996, the Court issued a 58-page Opinion setting forth extensive findings of fact and conclusions of law. See Salazar, 954 F.Supp. 278. "In particular, the Court ruled that Defendants had failed to process Medicaid applications for non-disabled, non-foster care [non-public assistance] applicants within 4 5 days, had terminated or suspended eligible persons' benefits without adequate notice, had failed to provide EPSDT services to eligible families, and had failed to notify those eligible families about the availability of such services." Memorandum Opinion of December 28, 1998 at 2 [Dkt. No. 653] (summarizing findings detailed in Salazar, 954 F.Supp. 278).
In order to remedy these violations of the law and to avoid further litigation, the Parties crafted and agreed upon the terms of a Settlement Order, which the Court entered on January 25, 1999. See Settlement Order at 1 [Dkt. No. 663] . Section II of the Settlement Order detailed steps the District was to take to redress problems related to the timely processing of initial applications for Medicaid on behalf of members of Sub-class III. Settlement Order ¶¶ 6-16. In general, Section II required the District to decide Medicaid applications and notify beneficiaries of its decision within 45 days of receiving an application. Id. ¶ 6(a). The Settlement Order also provided that if the District demonstrated compliance over three consecutive years, Section II of the Order would terminate. Id. ¶ 74.
On February 24, 2009, the District notified the Court that it had satisfied the exit criteria for, Section II and represented that Plaintiffs were in agreement with that position. See Consent Motion to Vacate Sections II and IV of the Settlement Order of January 22, 1999 [Dkt. No. 1443]. The District therefore requested, with Plaintiffs' consent, that the Court vacate Section II. Id. The Court granted the District's Motion to Vacate that same day. See Minute Order of Feb. 24, 2 009.
Section III of the Settlement Order concerned the annual recertification of Medicaid benefits on behalf of Sub-class IV. See Settlement Order ¶¶ 17-28. At the time the Settlement Order was issued, Medicaid required the District to provide annual recertification forms to beneficiaries that they were required to complete in order to retain their Medicaid benefits. Section III required the District to mail recertification forms and various notices to advise beneficiaries of their recertification status. Id. ¶ 17. Section Ill's requirements were specific, setting forth a schedule which the District was required to adhere to and language that the District was required to use. Id.
Passage of the ACA in March of 2010 ushered in a host of changes to the Medicaid program, including significant modifications to the Medicaid recertification process. The ACA requires the District to move to a "passive renewal" model in which beneficiaries' eligibility is determined to the extent possible on the basis of reliable information available to the District, such as data available through the IRS or the Social Security Administration. See 42 C.F.R. § 435.916. Section III of the Settlement Order does not rest on the ACA's passive renewal model. Instead, it assumes that Medicaid beneficiaries would have to actively renew their benefits on an annual basis.
In light of the ACA's October 1, 2013 effective date for .significant changes to the Medicaid renewal process, see Amended Memorandum and Order at 2 [Dkt. No. 1886], on September 20, 2013, the District filed a Motion to Modify the Settlement Order [Dkt. No. 1870] pursuant to Federal Rule of Civil Procedure 60(b)(5). The District asked the Court to relieve it from complying with Section III entirely, contending that it could not implement the ACA's passive renewal system while still bound by the conflicting provisions of Section III. Motion to Modify the Settlement Order at 1. Plaintiffs opposed the District's Motion, arguing that limited modifications to Section III could address any apparent conflicts between the ACA and Section III. Plaintiffs' Brief in Opp'n at 1-2 [Dkt. No. 1876].
On October 17, 2013, the Court granted the District's Motion. See Amended Memorandum Opinion and Order [Dkt. No. 1886] . The Court found that "[t]here is simply no comparison between the statutory framework that existed at the time this Court made its factual findings in 1996 and what implementation of the ACA envisions[.]" Moreover, many of the ACA's renewal provisions "are in direct conflict with the renewal process in Section III." Id. at 6. Accordingly, the Court "conclude[d], pursuant to Fed.R.Civ.P. 60(b) (5), that passage of the ACA has created a 'significant change in circumstances' that justifies termination of the provisions of Section III of the Consent Order." Id. at 5. Notably, Plaintiffs declined to appeal the Court's termination of Section III.
Thus, following the termination of Section III, no provisions of the Settlement Order relating to Medicaid application processing or benefits renewal remained in effect. The only portions of the Settlement Order affecting programmatic elements of the District's Medicaid program that remained in force related to the delivery of EPSDT services. See Settlement Order Sections V & VI.
Sections V & VI of the Settlement Order resolve the claims of Sub-class V, which were premised on the lack of effective notice of the availability of EPSDT services for children under 21 years of age and the failure to provide those services. Order at 1-2 [Dkt. No. 100] . Section V sets forth detailed procedures for providing and tracking the provision of EPSDT services through entities that participate in the District's Medicaid program. See Settlement Order Section V. Section VI sets forth similarly detailed procedures for providing notice to eligible Medicaid beneficiaries regarding the availability and nature of EPSDT services. See id. Section VI.
In 2014, the District reported to the Centers for Medicare and Medicaid Services ("CMS") that there were 98, 350 children in the District eligible for EPSDT services under Medicaid. Form CMS-416, line la [Dkt. No. 2039-1]. As of October 2014, there were a total of 247, 850 District residents on Medicaid. Pls. Ex. 61, column 1 [Dkt. No. 2102-1] (figure reflects subtraction of certain non-Medicaid beneficiaries included in the District's data). Thus, children eligible for EPSDT services constitute a large portion of the District's Medicaid population.
B. ACA Implementation
Beginning on October 1, 2013, the District began processing Medicaid applications pursuant to new eligibility rules established by the ACA and its implementing regulations. See 42 U.S.C. § 1396a(e)(14); 42 C.F.R. §§ 435.603, 457.315(a). In order to facilitate implementation of the ACA's new rules, the District took steps to build a new, automated Medicaid application and eligibility determination system called the DC Access System ("DCAS"), which is intended to eventually entirely replace the District's legacy system, called the Automated Client Eligibility Determination System ("ACEDS"). Schlosberg Decl. ¶¶ 14-15 [Dkt. No. 2077-1] .
As required by ACA regulations, the District also implemented a "no wrong door" approach to applications under which individuals may apply for Medicaid benefits online through DCAS, on paper, by telephone, or in person at D.C. Department of Human Services ("DHS") Economic Security Administration ("ESA") Service Centers ("Service Centers"). See 42. C.F.R. § 435.907(a). Finally, the District took steps to establish a system for processing "passive renewals" of Medicaid benefits, as required by the ACA. See 42 C.F.R. § 435.916.
These changes did not go smoothly. The Parties disagree as to the scope of the problems that developed; however, it is clear that thousands of Medicaid beneficiaries were affected by (1) the District's failure to process Medicaid applications within 45 days in violation of 42 C.F.R. § 435.912 (c) (3) and D.C. Code § 4-205.26 (2014); and (2) the District's failure to timely renew Medicaid benefits or to provide adequate notice to Medicaid recipients before terminating their benefits in violation of federal law.
The roots of these failures are technical in nature, but the facts below demonstrate the deeply personal calamity that befell many Medicaid applicants and beneficiaries when they and their children were unable to get the care to which they were entitled. The number and narratives of affected District residents demonstrate the gravity of the situation, as the following information shows.
1. Initial Processing
The District of Columbia is required to make an eligibility determination on all Medicaid applications within 45 days of submission. 42 C.F.R. § 435.912(c)(3); D.C. Code § 4-205.26.During 2015 and the beginning of 2016, the District failed to comply with this duty.
Around March or April 2015, the District became aware that as many as 12, 000 applications were listed as pending in the DCAS system for 45 days or more. Pl. Ex. 1 at 3 [Dkt. No. 2070-2]. The District had previously been unaware of this backlog until staff-members ran new queries as part of their backlog reports. Id.
The District states that the 12, 000 application figure overstates the number of District residents who had actually been denied Medicaid coverage. For instance, of the approximately 12, 000 cases appearing on the report, around 15 percent already had active Medicaid coverage. Schlosberg Decl. ¶ 69. Another quarter of these cases were applications that had been determined to be ineligible, but the system simply had not closed them out. Id. Even if these figures are accurate, approximately 7, 000 applications - and people -- were affected.
In August 2015, the District reported that there were still 5, 263 applications that had been pending in DCAS for more than 45 days. Pl. Ex. 2 at DHCF 32 [Dkt. No. 2070-3]. District staff "work[ed] overtime to resolve these cases as soon as possible, " but as of November 23, 2015, there were still 5, 215 Medicaid applications in DCAS pending over 45 days. Pl. Ex. 21 Response 5(c)&(d) [Dkt. No. 2070-19]. By December 2015, the District had reduced the number of pending applications to 4, 4 97. See Pl. Ex. 1 at 3 [Dkt. No. 2070-2] (figure combines pending and stuck/malformed applications).
The backlog of applications can be divided into two main groups, based on the source of the problem. The first group of backlogged applications, the "stuck/malformed" group, consisted of approximately 1, 970 cases as of December 2015. "A malformed case is a case that did not generate all the information to create a fully formed case when it was entered into the system [case worker portal] because of a technical system issue." See Pl. Ex. 23 at 6 [Dkt. No. 2070-21] . As the District of Columbia Department of Human Services explains, "[w]hat this means . . . [is that] [t]here are individuals who are not getting Medicaid that should be." Pl. Ex. 2 at DHCF 34.
The second group of backlogged applications, the "case processing backlog, " consisted of 2, 527 individuals as of December 2015. Pl. Ex. 1 at 3. The case processing backlog is a catch-all category, which consists of applications that have not been processed due to the District's inability to verify income, residency, or some other type of required verification or due to other "[computer] system performance issues." Id.
As of August 2 015, over 1, 500 applicants in the case processing backlog had not been notified that their applications could not be processed because of the District's inability to verify some piece of information. Pl. Ex. 2 at DHCF 32. Plaintiffs point out that since the backlog was discovered in March or April of 2015, it is possible that, as of late December, 2015, many of the backlogged applications had been pending for nine months or longer.
In addition to the serious application backlogs, Plaintiffs also describe significant hurdles facing Medicaid applicants as they attempt to file their initial applications. Plaintiffs cite evidence that documents scanned into the District's document management system cannot always be found and must often be resubmitted. See Pls. Ex. 42 at 20 [Dkt. No. 2070-40]. The testimony of Medicaid advocates who assist Medicaid beneficiaries on a daily basis demonstrates that lost or misplaced paperwork is a substantial problem. See, e.g., Loubier Decl., Pl. Ex. 27 ¶ 9 [Dkt. ...