Medicaid Denials of Coverage for Prosthetic Devices: A Successful (for now) Challenge

By Leslie P. Francis

A recent Utah Court of Appeals decision is very much worth calling to the attention of those interested in access to health care and in disability rights. As financial pressures on Medicaid increase, and as Medicaid plays a increasingly important role in health reform, states are likely to consider ways of restricting services in order to manage costs. Alexander v. Choate, 469 U.S. 287 (1985), has long stood for the assumption that cutbacks in Medicaid funding are very difficult to challenge as disability discrimination.  In the near future, it will be critical for advocates on behalf of people with disabilities both to challenge this assumption and to consider other ways of arguing that funding cutbacks under the Medicaid program are legally problematic.

Conley v. Department of Health, Division of Medicaid and Health Financing, 2012 Ut. App. 274 (Sept. 27, 2012), is a challenge to the denial of benefits for “speech augmentative communication devices (SACDs)” for non-pregnant Medicaid recipients over the age of 21. These are electronic speech aids used by people with conditions such as cerebral palsy who cannot make themselves heard due to motor difficulties. The ALJ hearing the case had concluded that it was reasonable for the Utah Medicaid Program to provide these devices to persons under the age of 21 and to pregnant women, but not to others qualifying for Medicaid.  The ALJ’s reasoning was that federal regulations and case law allow state Medicaid to use a “utilization control procedure” in deciding what benefits to provide.

In the appeal from final agency action denying the benefit, the state did not challenge whether the petitioners were eligible for Medicaid or whether SACDs are medically necessary devices. Instead, the state argued that the policy of denying coverage for SACDs was reasonable under the Medicaid statute, as SACDs are an optional service. The Utah Court of Appeals reviewed the agency’s interpretation of the statute for correctness.  Because the Utah legislature has granted discretion to interpret the Medicaid program to the agency, the court reviewed the agency’s interpretation for abuse of discretion, which under Utah precedent is understood as “reasonableness and rationality.”

Petitioners made two basic arguments that the coverage denial did not meet the reasonableness and rationality standard.  The court agreed with both arguments.  The first argument was that the denial of coverage for SCADs was unreasonable in light of the purposes of the Medicaid program. In response to this argument, the court examined the structure of the Medicaid Act and the placement of SACDs as a provided benefit.  The court concluded that SACDs could be included as durable medical equipment for those receiving home health services, as supplies and equipment related to speech disorder services, or as prosthetic devices.  Utah Medicaid has elected to provide home health, speech disorder services, and prosthetic devices.  The court rejected Utah’s argument that it could elect to cover SACDs only for the category of Medicaid recipients under the age of 21 and concluded that as Utah had elected to cover services such as prosthetic devices it was arbitrary to restrict SACDs. In the language of the court “it is unreasonable for the State to opt into the categories in which SACDs could be categorized for all categorically and medically needy individuals but then to limit coverage of certain services within those categories by the age of the recipient.”

Petitioners’ second argument was that the denial of coverage of SACDs to non-pregnant individuals over 21 violated the Medicaid Act’s comparability of services requirement. In the judgment of the court, denying SACDs to people over 21, while providing them to people under 21 under the early diagnosis and treatment program was contrary to Medicaid’s requirement that services be provided that are sufficient to achieve their purposes.

This decision clearly has implications more generally for limitations of types of benefits for some groups of Medicaid recipients. It was litigated on behalf of the petitioner by the Disability Law Center, Utah’s Protection and Advocacy agency.  I gather that it is highly likely that it will be appealed to the Utah Supreme Court.

[Cross-posted from HealthLawProf Blog]

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