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Darjee v. Betlach

United States District Court, D. Arizona

March 31, 2017

Aita Darjee, et al., Plaintiffs,
Thomas Betlach, Defendant.



         Pending before the Court is a Report and Recommendation issued by Magistrate Judge D. Thomas Ferraro. Doc. 72. Judge Ferraro recommends that this Court grant Defendant's Motion to Dismiss (Doc. 35) and dismiss the Complaint with prejudice, and deny as moot Plaintiffs' Motion for Class Certification (Doc. 5), Plaintiffs' Motion for Preliminary Injunction (Doc. 15), and the related motions to strike (Docs. 59, 62, 65). Plaintiffs objected to a majority of the conclusions in Judge Ferraro's recommendation.[1]Doc. 77. The Court reviews those conclusions de novo. 28 U.S.C. § 636(b)(1) (“A judge of the court shall make a de novo determination of those portions of the report . . . to which objection is made.”). . . . . . . . . . . . .

         I. Background

         A. The Complaint

         Plaintiffs filed this putative class action on behalf of low-income Arizona immigrant residents who qualify for Arizona's Medicaid program, the Arizona Health Care Cost Containment System (“AHCCCS”). Compl. ¶ 1, Doc. 1. Plaintiffs allege that AHCCCS, under Defendant's supervision, improperly reduced immigrant beneficiaries' full-scope AHCCCS benefits to emergency-only AHCCCS benefits.[2] Id. ¶¶ 2, 10. Plaintiffs claim that Defendant improperly transferred over 3, 500 individuals, and further claim that such transfers continue today. Id. ¶¶ 40-41. Plaintiffs seek only declaratory relief affirming the unlawfulness of Defendant's practices and injunctive relief enjoining further improper reductions.

         1. Medicaid Framework

         In 1965, Congress created the Medicaid program by adding Title XIX to the Social Security Act. 42 U.S.C. §§ 1396-1396w-5. The purpose of Medicaid is to enable each state “to furnish . . . medical assistance on behalf of families with dependent children and of aged, blind, or disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services.” Id. § 1396-1. To participate in Medicaid, a state must implement the program through a state plan which has been submitted to and approved by the Secretary of the U.S. Department of Health and Human Services. Id. §§ 1396-1, 1396a(b). Arizona participates in Medicaid through the AHCCCS program. Ariz. Rev. Stat. §§ 36-2901 et seq.

         State plans must “provide that all individuals wishing to make application for medical assistance under the plan shall have opportunity to do so, and that such assistance shall be furnished with reasonable promptness to all eligible individuals.” 42 U.S.C. § 1396a(a)(8). Regulations implementing state Medicaid plans, such as AHCCCS, require that states “[c]ontinue to furnish Medicaid regularly to all eligible individuals until they are found to be ineligible.” 42 C.F.R. § 435.930(b).

         The eligibility of a Medicaid beneficiary must be renewed every 12 months. Id. § 435.916(a). Recertification is required to be done through an ex parte process, whereby a state makes the eligibility redetermination without requiring information from the beneficiary, if able to do so based upon reliable information already available to the state. Id. § 435.916(a)(2). If a state cannot make the eligibility redetermination based upon available data, it must send the beneficiary a “pre-populated renewal form” requesting only the information needed to renew eligibility. Id. § 435.916(a)(3).

         Generally, immigrants who enter the United States after August 22, 1996 do not qualify for Medicaid unless they have been “qualified aliens” for 5 years, as that term is defined in the code. 8 U.S.C. § 1613(a). Certain immigrants are exempt from this requirement, including refugees and victims of domestic battery. Id. §§ 1613(a)-(b), 1641(c).

         2. Defendant's Alleged Practices

         Plaintiffs allege their counsel sent AHCCCS a letter in October 2015 concerning the improper reduction of immigrant beneficiaries' Medicaid benefits. Compl. ¶ 9. In response, AHCCCS admitted that the errors were caused by its computer systems and worker errors.[3] Id. AHCCCS subsequently admitted that over 3, 500 immigrants were improperly transferred to emergency-only benefits. Id. The improper transfers continue to the present, and some immigrant beneficiaries have had their benefits improperly reduced a second time. Id. ¶ 41.

         Plaintiffs allege that Defendant fails to process eligibility renewals consistent with the ex parte process mandated by federal law. Id. ¶¶ 32, 51. Specifically, federal law requires States to make the eligibility redeterminations without requiring information from the beneficiary, if able to do so based on reliable information already available to the States. Id. ¶ 32. If a State must obtain additional information, it must use a pre-populated form which seeks only the missing information. Id. The purpose of the ex parte process is to reduce errors that occur at recertification and lessen the burden on beneficiaries to submit duplicative or unchanging information. Id.

         Arizona Administrative Code § R9-22-306(c) is Arizona's method of implementing the ex parte process. Id. ¶ 46. This rule is not as comprehensive as the federal regulation. Id. Additionally, Defendant's policy manual, which instructs workers how to process renewals, does not implement the ex parte process. Id. ¶¶ 47-48. The manual lists information that does not need to be obtained for benefit renewal determinations. Id. ¶ 48. Immigrant alien numbers, which are similar to social security numbers, are not included on this list. Id. Plaintiffs allege on information and belief that Defendant's employees improperly request alien numbers at each recertification, which can lead to errors in the renewal decision. Id.

         The manual lists “non-citizen status” as not needing to be verified at renewal unless there has been a change in immigration status. Id. ¶ 49. Plaintiffs allege on information and belief that Defendant's employees routinely ask about immigration status at each recertification although such information is readily available in each beneficiary's case file. Id. This too can lead to errors in the renewal decision. Id.

         Plaintiffs also allege deficiencies in the notices Defendant sends to those who are transferred from full-scope benefits to emergency-only benefits. Id. ¶ 52. Federal law requires the notices to contain a statement of what action is being taken, “a clear statement of the specific reasons” for the action, the specific regulations or the change in law that requires the action, and an explanation of the hearing process for appeals. Id. ¶¶ 33-37 (citing 42 C.F.R. § 431.210).

         According to Plaintiffs, the notices state that the beneficiary's “Medical Assistance Changed, ” the beneficiary's “full medical services” will “stop, ” and “Federal Emergency Services” will “start.” Id. ¶ 53. The reason for this action is “your immigration status does not let you get full medical services.” Id. The notices do not explain the difference between emergency and full-scope benefits or provide a meaningful explanation for the change in eligibility. Id. Recipients of the notice would not be able to tell whether Defendant made a mistake. Id. Additionally, the notices contain legal citations without explanation; they incorrectly inform the recipient that they can review portions of their case file; and information about “Options to Continue Benefits” is confusing. Id. ¶ 55.

         3. Plaintiff Aita Darjee

         Plaintiff Aita Darjee (“Darjee”) is a refugee from Nepal who lives in Tucson, Arizona. Id. ¶ 8. Prior to 2016, Darjee, her husband, and her minor child all received full-scope benefits without interruption. Id. Plaintiffs allege that the Darjees' full-scope benefits have been improperly reduced to emergency-only benefits twice since 2015. Id. ¶¶ 58-59. Defendant restored the benefits after the first error, and restoration of her benefits from the second error is “imminent if not complete.” Id.

         Darjee suffers from a cold approximately 4-5 times per month, and she goes to the doctor when her symptoms “get bad” so that she can be put on a machine that makes her feel better. Id. ¶ 64. She also suffers from a gastric problem for which she takes medication. Id. ¶ 65. Darjee's husband suffers from diabetes, high blood pressure, high cholesterol, and asthma, and he takes several medications to treat these conditions. Id. ¶ 60. Darjee's son must see a doctor before he starts school, and he also has an allergy for which a doctor prescribed a lotion. Id. ¶ 66.

         Darjee learned about the second reduction in benefits after a doctor's office called and canceled her husband's appointment; she did not receive any notice explaining the reduction. Id. ¶ 62. The Darjees fear they will lose their benefits again and are worried about their health if they cannot see doctors and obtain medications. Id. ¶¶ 67, 69-70.

         4. Plaintiff Alma Sanchez Haro

         Plaintiff Alma Sanchez Haro (“Sanchez Haro”) is a resident of Tucson who received full-scope AHCCCS benefits based on her status as a battered immigrant who entered the United States prior to 1996. Id. ¶ 9. Sanchez Haro became a legal permanent resident in January 2015. Id. ¶ 73. In April 2016, Sanchez Haro received a notice that she was no longer eligible for full-scope benefits and would receive emergency-only benefits. Id. ¶¶ 75, 77. Sanchez Haro could not understand from the notice why she was no longer eligible, so she called the phone number printed on the notice to inquire about the change to her benefits. Id. ¶¶ 75-76.

         Sanchez Haro was informed that she was ineligible because she had not been a legal permanent resident for 5 years. Id. ¶ 76. Although Sanchez Haro entered the United States prior to 1996 and was a victim of domestic battery, both of which exempt her from the 5-year requirement, she was further informed (incorrectly) that the law had changed in January 2016. Id. ¶¶ 24, 26-27, 76.

         Sanchez Haro suffers from severe depression, anxiety, type II diabetes, high blood pressure, high cholesterol, and muscle cramps. Id. ¶¶ 78-79. She takes several medications for these conditions. Id. She sees a doctor once per month at La Frontera for her depression and anxiety issues, and she receives all other medical care from El Rio. Id. ¶¶ 78, 80.

         Now that Sanchez Haro is no longer receiving full-scope benefits, she has not been able to see a doctor at El Rio, which now wants her to pay for her appointments, and she is not guaranteed future care at La Frontera, which is attempting to find an insurance company to pay for her care. Id. ¶¶ 81, 83. Although she is receiving her medication, she worries that the pharmacy will start making her pay for them, and she is stressed about her future health. Id. ¶¶ 81-85.

         5. Plaintiffs' Claims

         Based on the foregoing, Plaintiffs assert two Counts. In Count 1, Plaintiffs allege that Defendant is violating § 1396a(a)(8)'s “reasonable promptness” requirement by improperly reducing the benefits of eligible immigrant residents from full-scope to emergency-only. In Count 2, Plaintiffs allege Defendant is violating the Due Process Clause of the United States Constitution by sending deficient notices to immigrant residents who had their benefits reduced.

         B. Motion to Dismiss and Report and Recommendation

         Defendant moved to dismiss the Complaint on August 29, 2016. Def.'s Mot. Dismiss, Doc. 35. Defendants argued that (1) Plaintiffs failed to state a claim under 42 U.S.C. § 1396a(a)(8) because the statute applies only to initial applications for Medicaid benefits and, therefore, does not provide a cause of action for errors caused on renewals; (2) Plaintiffs failed to state a due process claim because they allege no facts showing that Defendant failed to comply with the statutory notice requirements; and (3) Plaintiffs lack standing to pursue their claims or their claims are moot. Id.

         Plaintiffs opposed. Pls.' Opp'n, Doc. 38. Plaintiffs argued the Complaint contains sufficient factual allegations to state a claim for statutory and due process violations. Id. They further argued that they do have standing and their claims are not moot. Id. Finally, Plaintiffs requested leave to file an amended complaint should the Court determine that any of Defendant's arguments have merit. Id. at 17.

         On October 25, 2016, Judge Ferraro issued a Report and Recommendation recommending that this Court grant Defendant's motion and dismiss this action. R. & R. 18, Doc. 72. Judge Ferraro found that Plaintiff Darjee did not have standing to bring her claims when this action was filed, and although Plaintiff Sanchez Haro had ...

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