SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
A-1944-93T3F
A-2866-93T3F
A-2997-93T3
A-5047-93T3
A-5151-93T3
A-5824-93T3
A-6039-93T3
A-6305-93T3
A-6750-93T3
A- 903-94T3
A-1621-94T3
A-4018-94T2
A-4791-94T3
A-7037-94T2
COUNTY OF CAMDEN, See footnote 1
Plaintiff-Appellant,
v.
WILLIAM WALDMAN, Commissioner,
New Jersey Department of Human Services,
Defendant-Respondent.
__________________________________________
COUNTY OF MONMOUTH
Plaintiff-Appellant,
v.
WILLIAM WALDMAN, Commissioner,
New Jersey Department of Human Services,
Defendant-Respondent.
___________________________________________
COUNTY OF ATLANTIC
Plaintiff-Appellant,
v.
WILLIAM WALDMAN, Commissioner,
New Jersey Department of Human Services,
Defendant-Respondent.
___________________________________________
COUNTY OF MORRIS
Plaintiff-Appellant,
v.
WILLIAM WALDMAN, Commissioner,
New Jersey Department of Human Services,
Defendant-Respondent.
___________________________________________
COUNTY OF UNION,
Plaintiff-Appellant,
v.
WILLIAM WALDMAN, Commissioner,
New Jersey Department of Human Services,
Defendant-Respondent.
___________________________________________
COUNTY OF HUDSON,
Plaintiff-Appellant,
v.
WILLIAM WALDMAN, Commissioner,
New Jersey Department of Human Services,
Defendant-Respondent.
___________________________________________
COUNTY OF SOMERSET,
Plaintiff-Appellant,
v.
WILLIAM WALDMAN, Commissioner,
New Jersey Department of Human Services,
Defendant-Respondent.
___________________________________________
COUNTY OF OCEAN,
Plaintiff-Appellant,
v.
WILLIAM WALDMAN, Commissioner,
New Jersey Department of Human Services,
Defendant-Respondent.
___________________________________________
COUNTY OF MERCER,
Plaintiff-Appellant,
v.
WILLIAM WALDMAN, Commissioner,
New Jersey Department of Human Services,
Defendant-Respondent.
___________________________________________
COUNTY OF SUSSEX,
Plaintiff-Appellant,
v.
WILLIAM WALDMAN, Commissioner,
New Jersey Department of Human Services,
Defendant-Respondent.
___________________________________________
COUNTY OF MIDDLESEX,
Plaintiff-Appellant,
v.
WILLIAM WALDMAN, Commissioner,
New Jersey Department of Human Services,
Defendant-Respondent.
___________________________________________
COUNTY OF ESSEX
Plaintiff-Appellant,
v.
WILLIAM WALDMAN, Commissioner,
New Jersey Department of Human Services,
Defendant-Respondent.
___________________________________________
COUNTY OF PASSAIC
Plaintiff-Appellant,
v.
WILLIAM WALDMAN, Commissioner,
New Jersey Department of Human Services,
Defendant-Respondent.
___________________________________________
COUNTY OF WARREN,
Plaintiff-Appellant,
v.
WILLIAM WALDMAN, Commissioner,
New Jersey Department of Human Services,
Defendant-Respondent.
___________________________________________
Argued and Submitted: May 30, 1996
Decided: July 15, 1996
Before Judges King, Kleiner and Humphreys.
On appeal from the Department of Human
Services.
Robert J. Millenky, Camden County Counsel,
argued the cause for County of Camden (Mr.
Millenky, on the joint brief filed by Camden,
Monmouth and Atlantic Counties).
Gil D. Messina, Assistant County Counsel,
argued the cause for County of Monmouth
(Malcolm V. Carton, Monmouth County Counsel,
attorney; Mr. Messina, on the joint brief
filed by Camden, Monmouth and Atlantic
Counties).
Carl A. Bergmann, Assistant County Counsel,
argued the cause for County of Atlantic (Terry
J. Dailey, Atlantic County Counsel, attorney;
Mr. Bergmann, on the joint brief filed by
Camden, Monmouth and Atlantic Counties).
W. Randall Bush, First Assistant County
Counsel, argued the cause for County of Morris
(Ronald Kevitz, Morris County Counsel,
attorney; Mr. Bush, on the brief).
Kathleen M. Grant, Assistant Hudson County
Counsel, argued the cause for Counties of
Union and Hudson (Jacqueline R. Drakeford,
Special Counsel, attorney for Union County, of
counsel and on the joint brief filed by Union
and Hudson Counties; Francis De Leonardis,
Hudson County Counsel, attorney for Hudson
County; Ms. Grant, on the joint brief).
Welaj, Miller & Robertson, attorneys for
County of Somerset (Thomas C. Miller, on the
brief).
Kevin B. Riordan argued the cause for County
of Ocean (Berry, Kagan, Sahradnik & Kotzas,
attorneys; Mr. Riordan, joins in the joint
brief filed by Camden, Monmouth and Atlantic
Counties).
Angelo J. Onofri, Deputy County Counsel, argued the cause for County of Mercer (Alfred
B. Vuocolo, Jr., Acting Mercer County Counsel,
attorney; Sydney S. Souter, Deputy County
Counsel, on the brief).
McConnell & Norton, attorneys for County of
Sussex (John E. Ursin, on the brief).
Edward Testino, Assistant County Counsel,
argued the cause for County of Middlesex
(Bruce J. Kaplan, Middlesex County Counsel,
attorney; Mr. Testino, on the brief).
Thomas M. Bachman, Assistant County Counsel,
argued the cause for County of Essex
(Catherine E. Tamasik, Essex County Counsel,
attorney; Mr. Bachman, of counsel and on the
brief).
Raymond P. Vivino, Passiac County Counsel,
attorney for County of Passaic (Eugene G.
Liss, Assistant County Counsel, joins in the
briefs filed by Essex and Camden Counties).
David A. Wallace, Warren County Counsel,
attorney for County of Warren (Mr. Wallace and
Brett M. Reina, on the brief).
Kevin D. Sheehan argued the cause for
intervenor County of Cape May (Serber,
Konschak & Jaquett, attorneys).
Jaynee LaVecchia, Assistant Attorney General,
argued the cause for respondent (Deborah T.
Poritz, Attorney General of New Jersey,
attorney; Joseph L. Yannotti, Assistant
Attorney General, of counsel; Daisy B.
Barreto, Deputy Attorney General, on the
brief).
The opinion of the court was delivered by
KING, P.J.A.D.
This case involves claims by fourteen counties to a substantial portion of funds received by the State from the federal government as compensation for State and county payments to hospitals and institutions involved in the care of the medically indigent. Although the counties present attractive equitable
arguments, the State Legislature has consistently appropriated the
money to the General Fund in annual appropriations legislation and
has refused to share it with the counties. We conclude that we
cannot, consistent with law, compel the State to share the federal
funds with the counties.
On February 2, 1993 the Federal Health Care Financing Administration (HCFA) approved an amendment to New Jersey's State Medicaid Plan, which resulted in payment to the State of approximately $412 million in Federal Financial Participation (FFP) Funds. The FFP funds were provided to the State pursuant to 42 C.F.R. §447.250 to -257, and were related to disproportionate share hospital (DSH) payments made by the State between July 1, 1988 and December 31, 1991. These DSH payments were made to psychiatric hospitals and State facilities for the developmentally disabled which served a disproportionate number of indigent patients. The payments came from both the State and counties. The State placed the $412 million in the General Fund "as anticipated revenue."
Also at issue are FFP funds received in conjunction with DSH expenses incurred after December 31, 1991. The State received over $77 million for expenses incurred in the fiscal year ending June 30, 1992 and $163.3 million for each of the next two fiscal years
(ending June 30, 1993 and June 30, 1994 respectively).See footnote 2 The amount
of FFP funds in dispute is apparently in excess of $816 million.
Over a two-year period, the fourteen appellant counties (the
Counties) wrote separately to William Waldman, Commissioner of the
New Jersey Department of Human Services, asserting that a portion
of the FFP funds should be distributed to them. The Commissioner
determined that the Counties were not entitled to any of the FFP
funds.
The Counties then filed complaints in lieu of prerogative
writs in the Law Division, challenging the Commissioner's decision:
Camden, August 11, 1993; Monmouth, December 7, 1993; Atlantic,
January 13, 1994; Hudson, January 14, 1994; Middlesex, March 3,
1994; Union, March 8, 1994; Ocean, May 13, 1994; Morris, May 25,
1994; Mercer, May 26, 1994; Sussex, July 22, 1994; Essex, October
17, 1994; Passaic, February 6, 1995; Warren, August 17, 1995.
Somerset County made its initial filing in the Appellate Division.
On September 16, 1993 the State moved to transfer the Camden
County action to the Appellate Division. The Law Division judge
denied the motion. Leave to appeal was granted by this court and
we ordered the case transferred to the Appellate Division.
Similarly, the Atlantic and Monmouth County cases were transferred
to the Appellate Division on February 3, 1994 and January 28, 1994,
respectively. The Camden, Atlantic, and Monmouth County cases were
consolidated on March 28, 1994. The remaining Counties' cases were
also transferred to the Appellate Division: Union, April 20, 1994;
Middlesex, May 4, 1994; Morris, May 25, 1994 (simultaneously with
filing its Law Division Complaint); Hudson, July 1, 1994; Ocean,
July 15, 1994; Mercer, July 26, 1994; Sussex, October 17, 1994;
Essex, January 20, 1995; Warren, August 18, 1995; Passaic (date not
in record).
Two types of institutions are within the Commissioner's jurisdiction: "psychiatric facilities" and "developmental centers." Psychiatric facilities, also known as "State hospitals for the
mentally ill," and "mental hospitals," serve individuals with mental illness as defined in N.J.S.A. 30:4-27.2(r), N.J.S.A. 30:4-27.2(u), and N.J.S.A. 30:1-7. Developmental centers are residential institutions for persons with developmental disabilities as defined in N.J.S.A. 30:6D-25b (previously referred to as "mentally retarded"). Primary responsibility for maintaining an individual in a State psychiatric facility or State developmental disability center rests with that person and with LRRs. N.J.S.A. 30:4-66; N.J.S.A. 30:4-165.3. LRRs consist of "the husband, wife, father or mother of a child under 18 years of age, and the children, severally and respectively, being of sufficient ability," including spouses living separately and parents of illegitimate children who are confined. N.J.S.A. 30:4-66. If the individual and his LRRs are unable to pay, "then the cost of his care and maintenance shall be borne by [the county of legal settlement] from the beginning of his confinement...." N.J.S.A. 30:4-68. When an indigent patient is not legally settled in any county, the State is liable for the entire cost of the patient's care and maintenance. N.J.S.A. 30:4-69. County of legal settlement is defined by reference to N.J.S.A. 30:4-49.1 through -49.6. The rates charged to the Counties for the reasonable cost of maintenance and clothing for each indigent patient, whether in State or county psychiatric facilities or a State developmental-disability facility, are fixed by the State House Commission. N.J.S.A. 30:4-78.
The rate to be paid by the State to the
several county institutions for the mentally
ill on behalf of the maintenance of patients
in county hospitals for the mentally ill shall
be 1/2 of the actual per capita cost of
maintenance of such patients in such county
institution.
The rate to be paid by the counties to
the State in [sic] behalf of the maintenance
of county patients in State hospitals for the
mentally ill shall be 1/2 of the actual per
capita cost of maintenance of such patients in
such hospital.See footnote 3
We note that the Counties' proportional obligation was set at the same 50%, whether the patient was being maintained in a county psychiatric facility, State psychiatric hospital, or other State facility.See footnote 4 If the committing judge determined, through application
of certain financial-ability formulas, that a mentally ill patient
with a county settlement or LRRs was able to pay a sum equal to or
in excess of the share chargeable to the county, the judge ordered
the patient or LRR to pay that amount. N.J.S.A. 30:4-60.See footnote 5 If the
amount contributed on the patient's behalf exceeded the County's
50" obligation, "no order shall be entered against the county of
legal settlement for any part of such maintenance." Ibid. The
State paid the remaining costs, if any. Ibid.
[first five paragraphs omitted]
[¶1] The State share of payments to the several county psychiatric facilities on behalf of the reasonable cost of maintenance of patients shall be at the rate of 130" during the period July 1 through December 31 of each year and at the rate of 50" during the period January 1 through June 30 of each year; provided that the total amount to be paid by the State in each year shall not exceed 90" of the total reasonable per capita cost for the
period January 1 through December 31 of each
year.
[¶2] The rate to be paid by the counties
to the State on behalf of the maintenance of
county patients in State psychiatric
facilities and State facilities and receiving
[sic] other residential functional services
for the developmentally disabled shall be 50" of the actual reasonable per capita cost of
maintenance of such patients.
[¶3] During the period of July 1 through
December 31 of each year, the State shall pay
to each county an amount equal to 40" of the
total per capita costs for the reasonable cost
of maintenance and clothing of county patients
in State psychiatric facilities for the period
January 1 through December 31 of that year.
[¶4] During the period of July 1 through
December 31 of each year, the State shall pay
to each county an amount equal to 50" of the
total per capita costs for the reasonable cost
of maintenance and clothing of county patients
residing in State facilities for the
developmentally disabled and receiving other
residential functional services for the
developmentally disabled for the period
January 1 through December 31 of that year.
[final paragraph omitted]
Prior to these 1990 and 1991 amendments, the type of facility the non-full-paying patient lived in did not affect a county's proportional share of costs under N.J.S.A. 30:4-78. After the amendments, however, a county was effectively responsible for 10" of costs at county psychiatric facilitiesSee footnote 7 and State psychiatric
facilitiesSee footnote 8; and none of the costs at State facilities for the
developmentally disabled.See footnote 9
The 1991 amendments also added the following,
... If the State shall directly receive funds,
other than Medicare or Medicaid funds, in
support of the patient, including but not
limited to federal Social Security benefits,
the State shall credit the funds to the county
of settlement, but no credit shall exceed the
county's share of the reasonable cost of
maintenance and clothing costs for the
patient.
N.J.S.A. 30:4-78 (emphasis added). The emphasized language parallels our decision in County of Essex v. Waldman, 244 N.J. Super. 647 (App. Div. 1990), certif. denied, 126 N.J. 332 (1991), which held that the State must turn over to the counties any federal Social Security benefits it receives as representative
payeeSee footnote 10 for indigent patients in State institutions (up to the
amount of the County's share of such patients' costs).See footnote 11
New Jersey, as a participating state, is required by federal
law to submit a Medicaid State Plan (State Plan) describing the
methods and standards by which providers of Medicaid services will
be reimbursed. N.J.S.A. 30:4D-7(a);
42 U.S.C.A.
§1396a(A)(5); 42
C.F.R. §§400.203, 431.10(b), 447.252(b). If the State Plan is
approved by the Secretary of the federal Department of Health and
Human Services, the State is eligible for federal matching funds
for amounts spent in accordance with the plan.
42 U.S.C.A.
§1396b.
These matching funds are known as federal financial participation
(FFP) funds. 42 C.F.R. §400.203.
The State Plan must "take into account the situation of
hospitals which serve a disproportionate number of low income
patients with special needs." 42 U.S.C.A. §1396(a)(13)(A). Such
hospitals are known as disproportionate share hospitals (DSH), if
they meet certain statutory requirements concerning the volume of
indigent patients and expenditures.
42 U.S.C.A.
§1396r-4(a)(4).
Payments made by the State and local governmental units to these
hospitals may qualify as DSH payments, eligible for FFP matching
funds. All federal matching funds are known as FFP, but the cases
before us involve only FFP funds provided as reimbursement for DSH
payments.
The New Jersey Department of Human Services (Department)
disburses Medicaid payments to hospitals and other providers who
render specific services to individual Medicaid recipients. In
addition, the Department provides extra funding to those facilities
which serve a large percentage of indigent patients. Pursuant to
N.J.S.A. 30:4-78, as discussed above, that extra funding comes from
both the State and Counties.
For several years, the State government pursued federal
approval for a State Plan amendment which would allow the State to
classify the cost-sharing payments made pursuant to N.J.S.A. 30:4-78 as DSH payments, enabling it to obtain FFP matching funds for
those amounts. The approval was granted on February 2, 1993.
These funds are the subject of the claims by the Counties.
The Counties argue that County of Essex v. Waldman, 244 N.J. Super. 647 (App. Div. 1990), certif. denied, 126 N.J. 332 (1991) (Essex I), controls and entitles them to the lion's share of the FFP monies as a credit against their payments for patient care under the described statutory scheme.
Essex I addressed Essex County's challenge to the long-standing State practice of retaining 50" of Social Security benefits received by the State in its capacity as representative payee on behalf of indigent patients with Essex County settlements. For forty-five years, the State had kept one-half of these Social Security benefits and credited the other one-half to the County's obligation for indigent-patient care. Essex County claimed that it was entitled to all of the Social Security benefits pursuant to N.J.S.A. 30:4-60, which provides that if the committing judge determines that the patient or the patient's LRRs are able to pay a sum equal to or in excess of the County's obligation as specified by N.J.S.A. 30:4-78, "no order shall be entered against the county
of legal settlement for any part of such maintenance." N.J.S.A.
30:4-60. See Essex I, supra, 244 N.J. Super. at 653. We examined
the legislative purpose behind N.J.S.A. 30:4-60 and stated:
To us, the language of N.J.S.A. 30:4-60
clearly manifests a legislative intention that
that share of a patient's maintenance costs
not covered by the State be paid for with
funds supplied primarily by the patient's
estate and secondarily by the patient's
legally-responsible relatives, if such funds
are available. Only where those two sources
are insufficient is the patient's county of
legal settlement responsible for the patient's
maintenance costs. . .
[Id. at 657-58.]
Next, we considered whether Social Security benefits could be
considered part of the "patient's estate" and explained:
Most assuredly, the Act does not define
the term "patient's estate." But by any
sensible understanding Social Security
benefits are the assets of the individual
entitled to them. . . and thus part of the
patient's estate. We conclude that under
N.J.S.A. 30:4-60, if a county-indigent patient
receives Social Security benefits through a
representative payee, those funds should first
be paid over or credited to the county which
then pays or credits the State the county's
proper share of the patient's maintenance.
The circumstance that benefits are received by
a representative payee on behalf of the
patient does not alter the fact that
ultimately those monies are the property of
the patient.
[Id. at 658.]
The statutory scheme, we explained, revealed "a legislative intent that the State bear ultimate financial responsibility in caring for indigent patients and that the Counties contribute to their own
patients' costs only where those patients or their families cannot
afford to do so." Id. at 660.
The Counties urge that Essex I propounds a rule that "[w]here
there exists a third-party source of payment for the care of
indigent psychiatric patients, that source must be tapped in a
manner which reimburses counties for their statutory share of
indigent care costs" Though this view is consistent with the Essex
I holding, that case stands for a less general proposition. The
Title 30 statutory scheme makes it clear that contributions from
the patient's estate and from LRRs go first to defraying the
County's share of expenses. In Essex I, we held that Social
Security payments, "by any sensible understanding," were part of
the patient's estate and should be credited to the County's share.
Indeed, in Essex I, we relied on the fact that Social Security
payments were ultimately "the property of the patient." Essex I,
supra, 244 N.J. Super. at 658.
Appellants here ask us to consider the FFP monies received as
DSH payment reimbursement essentially as part of the estates of
individual patients. This is a conceptual stretch.
In order to understand whether the FFP funds at issue can
legitimately be regarded as part of the estates of those patients
in State and County psychiatric hospitals, we must understand the
nature of the DSH payments which those funds are designed to
partially reimburse. "Regular" Medicaid payments made by the State
to hospitals cover the reasonable costs of specific services
provided to individual, Medicaid-eligible patients. Those
individual patients must satisfy state and federal eligibility
requirements. See N.J.S.A. 30:4D-6(e) and
42 U.S.C.A.
§1396d.
In addition to individual Medicaid and Medicare payments on
behalf of the specific care provided specific individuals, and in
addition to other patient-resources which fail to cover total
costs, a state or county government may also provide extra money to
some hospitals. These payments are the State's method of taking
"into account the situation of hospitals which serve a
disproportionate number of low income patients with special needs,"
as mandated by
42 U.S.C.A.
§1396(a)(13)(A). In order to be termed
DSH payments and to qualify for FFP funds, this extra money must be
given to a facility which qualifies, under one of the federal law
alternatives, as a disproportionate share hospital. A hospital can
qualify as a DSH if it meets the requirements of U.S.C.A. §1396r-4(b) and (d) or (e).
Though this funding is provided under the auspices of the
Medicaid system, DSH payments are not "Medicaid payments" in the
sense that they cover identifiable costs of individual patients.
In this sense they are unlike the patients' Social Security
payments in Essex I. Rather, DSH payments help to cover the
extraordinary costs of those hospitals which serve a particularly
high number of indigent patients, whether Medicaid- and Medicare-eligible or not, and they are tied to the State's obligation to
consider the exceptional situation of those hospitals. Thus, DSH
payments are designed to address the special financial plight of
the hospitals which serve a high volume of indigent patients; they
are not addressed to the special financial plight of any individual
patients.
The New Jersey Director of Medical Assistance and Health
Services has defined DSH payments as they relate to 1) patient
reimbursement by Medicaid, 2) hospital reimbursement by Medicaid,
3) cost of indigent patient care, and 4) cost of hospital
operation:
a) Patient reimbursement by Medicaid
Disproportionate share payment adjustments are
additional payments made to hospitals that are
providing inpatient care to low-income
patients (also called charity care). By
definition, charity care is hospital care
provided to individual patients who have no
source of payment (including Medicaid), third-party insurance, or personal resources.
Therefore, patient reimbursement by Medicaid
is guided by the relevant provisions of Title
XIX of the Social Security Act and the
approved New Jersey Medicaid State Plan and is
unaffected by disproportionate share payment
adjustments. Nevertheless, actual
disproportionate share payment adjustments
could be made as an add-on to such patient per
diem reimbursement rates.
b) Hospital reimbursement by Medicaid
Disproportionate share payment adjustments are
payments made to hospitals over-and-above the
normal payments to hospitals for inpatient
care provided to Medicaid eligible patients. .
. .
d) Cost of hospital operations
The DSH payment adjustment amount applicable
to a State and County hospital is calculated
using the total cost of hospital operations as
reported on the most recent Medicare/medicaid
cost report for the hospital's reporting
period. . .
[Joint Select Committee on Medicaid
Reimbursement: "To take testimony from invited
individuals from the Department of Human
Services regarding the application made by the
Department for Medicaid uncompensated care
retroactive claims, to July 1, 1988, for
disproportionate share payments for State and
county psychiatric hospitals", October 20,
1992, Memorandum and Attachment 1 by Saul M.
Kilstein, Director of Medical Assistance and
Health Services.]
The State of New Jersey ultimately succeeded in early 1993 in
convincing the Federal Health Care Financing Agency (HCFA) that the
cost-sharing payments made under N.J.S.A. 30:4-78 qualified as DSH
payments for purposes of FFP reimbursement. Because New Jersey's
cost-sharing payment scheme itself is based on unpaid per-patient
costs, one is tempted to see the FFP funds in a similar light,
namely, as reimbursement for half of the unpaid per-patient costs
of indigent patients in State and county psychiatric facilities.
The Counties here so urge. However, the fact that the DSH payments
may coincide with cost-sharing payments made pursuant to the costs
of individual patients in this case is perhaps a matter of
happenstance and may be misleading regarding the general nature of
DSH payments under the federal scheme.
Somewhat tangentially, we observe that initially there was no
limit to the amount of DSH payments for which a state could seek
FFP reimbursement. Now, however, the total reimbursement is
restricted and yearly increments are based on a state's permissible
DSH payments made in the previous year. See
42 U.S.C.A.
§1396r-4(f), 42 C.F.R. §§447.296 to 299. The State notes that in a 1993
HCFA response to general comments regarding the proposed final rule
limiting total DSH payments, one of the responses stated:
A few commenters were concerned with HCFA's
assertion. . . that the interim final
regulations will not have a direct or indirect
affect on recipients since the rule will not
preclude providers from receiving Medicaid
payments for services that are furnished. . .
The response was:
The reference in the impact statement in the
interim final rule to recipients was intended
to mean individual Medicaid recipients. Since
DSH payments are supplemental additional
payments to hospitals not specifically tied to
a specific Medicaid service provided to a
specific Medicaid recipient, we concluded that
the interim final DSH regulations would not
directly or indirectly affect Medicaid
services provided to individual Medicaid
recipients.
[58. Fed. Reg. 43156, 43176 (1993).]
Though this regulatory response is less than particularly
compelling evidence, the excerpt does support the State's notion
that DSH payments are not payments which are made on behalf of
individual patients or become in any way the property of particular
patients.
The Counties also urge that the FFP payments here are truly
third-party payments on behalf of the medically indigent patients.
The Counties argue:
The fact that the FFP funds do not come to the State with specific patients' names attached to them should not stand as a bar to [the application of Essex I]. The FFP funds
represent the aggregation of the monies paid
by the counties and the State[] in connection
with specific patients. . . as such, just as
in the case of social security benefits
received by the State as representative payee,
the State must here be considered a mere
conduit for the payment of funds on behalf of
individuals.
The State responds that the FFP funds at issue in this case cannot
be legitimately characterized as payments on behalf of individuals.
These payments are designed to compensate the State for one-half of
its DSH payments, which payments are neither targeted to individual
indigent patients directly nor based on the specific care provided
to those patients. Rather, DSH payments are designed to compensate
the extraordinary costs incurred by those hospitals which serve a
disproportionate number of indigent patients. Even though the
hospitals' costs are incurred by providing services to individuals,
it is the hospitals and not the individuals which are ultimately
compensated by DSH monies.
The Counties rejoin that in the course of testimony before the
State Legislature's Joint Select Committee on Medicaid
Reimbursement on November 10, 1992, Richard Keevey, then-State
Director of the Office of Management and Budget revealed the true
original intent of the State when it applied for and eventually
obtained FFP funds. In the course of his testimony before the
Select Committee, Director Keevey had the following exchange with
then-Treasurer Samuel Crane and then-Assemblywoman Harriet Derman,
during which he acknowledged that the State's claim for FFP was
made on behalf of the Counties and that the Counties should be
entitled to their share when the State was paid:
ASSEMBLYWOMAN DERMAN: ... Nevertheless, I have
questions. As a numbers man, you'll love
them, I promise you. I have questions about
the numbers. I totally don't understand them.
In the Fiscal Year 1992 budget, it lists $850
million for the Governor's budget with respect
to the item in question; [FFP for
disproportionate share payments to] acute care
[hospitals] $330 million; State retroactive
[claim for the State and county psychiatric
hospitals] [$] 380 [million]; and State terms
[sic] [$] 140 [million].
TREASURER CRANE: Right.
ASSEMBLYWOMAN DERMAN: Was there any
particular methodology with respect to
dividing the 380 and the 140?
TREASURER CRANE: The 380 was a retroactive
claim prior to July 1, 1991. The 140, because
we were still in the fiscal year, was the
annual claim for Fiscal Year 1992, and the 330
was acute care. I think that covers the
three.
ASSEMBLYWOMAN DERMAN: The annual claim, based
on quarterly payments --
TREASURER CRANE: Correct.
ASSEMBLYWOMAN DERMAN: What were those
quarterly payments? Did you assume then that
they were all the same?
TREASURER CRANE: We assumed in the budget, I
guess, about [$] 35 [million] --
MR. KEEVEY: Yes, 35.
TREASURER CRANE: -- to the State a quarter.
ASSEMBLYWOMAN DERMAN: And yet when we look at the quarterly items for, let's say, the end of '91, the period ending March 31 is [$]37 [million]; June 30 is [$]37 [million]; September 30 is [$]41 [million] -- they are
going up -- and December 30 is [$]41
[million]. They are not [$]35 million.
MR. KEEVEY: Some of that money has to do with
filing for county reimbursement, which the
State will not be able to include as its
revenue. We were filing on behalf of the
State and the county, because there --
ASSEMBLYWOMAN DERMAN: Could you elaborate on
that, please?
MR. KEEVEY: Well, I don't know whether I can
go into details --- ... --- but it has to do
with -- The State runs psychiatric hospitals;
the counties run psychiatric hospitals. The
reading of the law was that we were eligible
for reimbursement for both levels of
expenditures, because the State participates
in county sharing of costs. We have a mental
health State aid appropriation. The
calculation that the Human Services Department
did was on the basis on which we filed it.
Part of it -- the State difference between the
$35 million and the $40-some million -- is the
fact that some of the money is county
reimbursement.
ASSEMBLYWOMAN DERMAN: Would the State be able
to retain it, or --
MR. KEEVEY: I think we would retain some of
it, and some of it would go to the county.
ASSEMBLYWOMAN DERMAN: Would be transmitted to
the county.
This dialogue favors the Counties' view of the matter. (For purposes of this decision, we conclude that the counties which operate county psychiatric hospitals, e.g., Essex and Mercer, are on the same footing as the other counties with respect to claims to the FFP funds. These county hospitals have already received their DSH payments from the State.)
We next turn to the Counties' alternative argument under the statutory scheme. The Counties also assert that they have a right to recover FFP funds under N.J.S.A. 30:4-68.1See footnote 12 and County of Essex v. Commissioner, New Jersey Dept. of Human Services, 252 N.J. Super. 1 (App. Div.), certif. denied, 127 N.J. 553 (1991) (Essex II). The Counties appear to argue either that 1) the State, in addition to withholding the FFP monies, has erroneously billed the Counties for patients currently eligible to receive Medicaid or Medicare payments or 2) N.J.S.A. 30:4-68.1 entitles the Counties to the FFP funds even if we hold that Essex I and N.J.S.A. 30:4-78 do not apply.
Apparently assuming that the Counties were making the first argument and, in essence, raising a concern totally unconnected to the FFP monies, the State has argued that this issue "has absolutely nothing to do with the Commissioner's determination concerning FFP and should not be considered part of this appeal." The State explains:
Appellants are not billed for Medicaid patients. However, there may be occasions when a patient does not become eligible for
Medicaid until several months after treatment
begins; in that case, the county would be
credited for its expenses which relate to the
date the patient is deemed eligible for
Medicaid. The mechanics of Medicare payments
are such that the counties may initially be
billed for the services because it may not be
known for months whether a person has Medicare
coverage, but the State has a final
reconciliation process whereby the counties
are fully credited for the care of Medicare
patients.
If the State is correct in its characterization of the Counties'
argument, then it is likewise correct that the issue has not been
properly raised administratively. There is no evidence in the
record concerning Medicaid or Medicare eligibility, State billing
practices, or county payments. In other words, there is no
allegation or supporting documentation that patient X became
eligible for Medicaid on date Y and that, nevertheless, the State
continued to bill a county for that patient's care. To the extent
this is the claim advanced by certain of the Counties, we remand
this aspect of the cases to the Commissioner. The claim may be
properly developed and presented on the remand.
We believe, however, that the Counties actually are advancing a second statutory theory of entitlement to the FFP funds. The New Jersey Medical Assistance and Health Services Act, N.J.S.A. 30:4D-1 to 35, sets out the criteria for medical assistance (Medicaid) eligibility. According to N.J.S.A. 30:4D-6(e):
Anything in this act to the contrary notwithstanding, no payments for medical assistance shall be made under this act with
respect to care or services for any individual
who:
(1) Is an inmate of a public institution
(except as a patient in a medical
institution); provided, however, that an
individual who is otherwise eligible may
continue to receive services for the month in
which he becomes an inmate, should the
commissioner determine to expand the scope of
Medicaid eligibility to include such an
individual subject to the limitations imposed
by Federal Law and regulations, or
(2) Has not attained 65 years of age and
who is a patient in an institution for mental
diseases, or
(3) Is over 21 years of age and who is
receiving inpatient psychiatric hospital
services in a psychiatric facility; provided,
however, that an individual who was receiving
such services immediately prior to attaining
age 21 may continue to receive such services
until he reaches age 22. Nothing in this
subsection shall prohibit the commissioner
from extending medical assistance to all
persons receiving inpatient psychiatric
services provided that there is Federal
financial participation available.
[emphasis added]
The Counties argue that "[t]he approval of Medicaid DSH payments
for State psychiatric hospitals thus provides Medicaid coverage for
those indigent psychiatric patients previously precluded because of
their age." The Counties point to the highlighted language in
N.J.S.A. 30:4D-6(e)(3) and assert:
The Federal approval of State Plan
Amendment #88-29C, was in essence an act by
the Commissioner to extend medical assistance
(Medicaid) to county indigent patients in
State psychiatric hospitals based on the
availability of Federal financial
participation.
Therefore, pursuant to N.J.S.A. 30:4-68.1, the counties are entitled to receive
credits or refunds from the State for the
counties' share of the maintenance costs for
county indigent patients that were included in
the FFP for Medicaid Disproportionate Share
Hospital (DSH) payments.
Essentially, the Counties are advancing the argument that,
because the FFP monies are Medicaid-related and are tied to the
costs incurred by hospitals in treating individual patients,
receipt of the FFP funds by the State transforms those patients
into "Medicaid eligible" patients under N.J.S.A. 30:4-68.1. This
section, as noted, provides, in pertinent part:
In the case of Medicaid and Medicare
eligible patients residing in the State
psychiatric facilities, the maintenance costs
to be paid by the counties shall be satisfied
by federal Medicaid or Medicare Part A
payments to the State.
This argument by the Counties is not particularly persuasive
because it turns the reasonable meaning of "Medicaid eligible" on
its head. "Medicaid eligible" is generally intended to mean the
eligibility of individual patients to direct Medicaid payments on
their behalf. As discussed, DSH payments are not this type of
individual funding, and the FFP payments at issue here, made as a
share of DSH payments, are likewise general.
The statute states, "Nothing in this subsection shall prohibit
the Commissioner from extending medical assistance to all persons
receiving inpatient psychiatric services provided that there is
[FFP] available." N.J.S.A. 40:4D-6(e)(3). This language likely
refers only to those FFP funds which might become available on
behalf of the individual patients and not to FFP payments made as
a portion of DSH payments. Worth noting is the fact that
42 U.S.C.A.
§1396d(a) defines "medical assistance" as:
. . . payment of part or all of the cost of. .
. services. . . for individuals. . . who are....
(i) under the age of 21, or, at the option of
the State, under the age of 20, 19, or 18 as
the State may choose. . .
(iii) 65 years of age or older.
This language parallels the requirements of N.J.S.A. 30:4D-6(e).
A logical reading of the meaning of §6(e) suggests that it aims to
make psychiatric patients ineligible for Medicaid benefits as long
as they are ineligible to receive FFP funds towards their
individual care. Even were we to assume that the FFP payments
referred to in the State's statute were the type at issue in these
cases, however, §6(e)(3), by its plain language, merely gives the
Commissioner the right to extend medical assistance to such
patients. It does not mandate that extension.
The Counties imply that the receipt of the FFP payments was,
essentially, a de facto extension of medical assistance to such
patients. While there is a certain equitable appeal to this
argument, what the Counties are really asking this court to do is
to interpret "Medicaid eligible" in N.J.S.A. 30:4-68.1 to include
those patients whom the Commissioner could, theoretically, make
eligible but did not. This is a stretch of the statute and well
beyond its ostensible meaning.
Some of the Counties assert that "[t]he Essex II holding is
dispositive of the Consolidated Counties' claim to reimbursement of
amounts charged by the State for the maintenance of Medicaid and
Medicare eligible patients in State psychiatric facilities." Essex
II, however, does not illuminate the issues before us in these
cases. It does not interpret "Medicaid eligible" or address
circumstances similar to the present cases. This court in Essex II
simply looked at the pre-1991 version of N.J.S.A. 30:4-68.1 and
held that it applied to patients in facilities for the
developmentally disabled as well as to patients in psychiatric
hospitals. Essex II, supra, 252 N.J. Super. at 10. In 1991, the
Legislature amended §68.1 to add the language "residing in the
State psychiatric facilities." (N.J.S.A. 30:4-78, as amended in
1991, provided for 100" State payment for developmentally disabled
patients.) If we interpret "Medicaid eligible" as the Counties
would have us, Essex II would be helpful in determining the scope
of reimbursement due the Counties under §68.1 before its 1991
amendment. It is not helpful, however, in determining whether
§68.1 is otherwise applicable.
The Counties also argue that if their statutory entitlement
argument does not prevail, the principle of unjust enrichment
warrants imposing a constructive trust on the State for the
Counties' benefit. See Vasconi v. Guardian Life Ins. Co.,
124 N.J. 338, 347 (1991); Carr v. Carr,
120 N.J. 336, 352 (1990), aff'd
after remand,
264 N.J. Super. 10 (App. Div.), certif. denied,
134 N.J. 476 (1993).
We conclude that the Counties do present attractive, if not compelling arguments, that our statutory scheme for financial responsibility for medically indigent patients requires reimbursement to them for their outlays on the patients' behalf. Undeniably, the payments by the Counties were used as part of the State's justification in applying for federal funds. But notwithstanding the basic fairness inherent in the Counties' claims, we are compelled to reject them because of the overriding principles explicated in City of Camden v. Byrne, 82 N.J. 133 (1980), and held applicable to the appropriations process.
The Appropriations Handbooks for Fiscal Years 1992-93, 1993, 1994-95, and 1995-96 state:
Additional federal Title XIX revenue generated
from the claiming of uncompensated care
payments made to disproportionate share
hospitals shall be deposited in the General
Fund as anticipated revenue. [1992-93 at B-138; 1993-94 at B-141; 1994-95 at B-110; 1995-96 at 108.]
In addition, the Appropriations Handbooks for 1994-95 and
1995-96 state:
Notwithstanding the provisions of any law to
the contrary, all past, present and future
revenues representing federal financial
participation received by the State from the
United States and that is based on payments
made by the State to hospitals that serve a
disproportionate share of low-income patients
shall be deposited in the General Fund and may
be expended only upon appropriation by law.
[1994-95 at B-111; 1995-96 at B-108.]
The State argues quite convincingly that any legislative
intent to reimburse the Counties from this "found" federal FFP
money which we might derive from interpreting the statutory scheme
of Title 30 has been effectively suspended by the several
appropriations processes and acts since 1993. By the specific
language in the respective appropriations acts, the politically
responsible branches of government have chosen to divert these
substantial FFP funds to the General Fund and not to reimburse the
Counties for their contributions to the care of the medically
indigent.
The Counties are here challenging the Legislature's decision,
with the Governor's acquiescence, not to appropriate these federal
funds for their use. By seeking to have us exercise judicial power
over legislative expenditures, the Counties urge our intervention
in an essentially political dispute. The Legislature has decided
to treat this politically sensitive matter periodically and
flexibly on an annual basis through the appropriations process.
Though we may question the fairness of the decision, we cannot
change it. The relief sought by the Counties calls for
impermissible judicial intrusion into the exercise of the
appropriation power, a violation of the separation of powers
doctrine. N.J. Const. (1947), Art. III, par. 1. The now-$800
million plus has been placed in the General Fund. There was no
federal mandate that this reimbursement money be used for any
particular purpose. No federal strings were attached.
The scope and efficacy of the appropriations power was treated
extensively in City of Camden v. Byrne,
82 N.J. 133 (1980), where
several municipalities and counties brought actions against various
State officials, including the Governor, to have certain State
revenues appropriated for their use. The suits failed. The
Supreme Court firmly concluded: "New Jersey courts have
consistently adhered to the principle that the power and authority
to appropriate funds lie solely and exclusively with the
legislative branch of government." Id. at 148. There is no
judicial redress from the exercise of that constitutional power.
Id. at 149. Annual appropriation acts which intentionally omit
expenditures called for by previous laws actually "suspended,
supplanted or repealed," id. at 152, prior laws which had purported
to grant fiscal entitlement.
The Court explained the reasoning by which the appropriations
act trumps standard statutory expenditures:
It should be emphasized that in
considering the applicability of the general
doctrine of implied repealer, we are here
concerned with the impact upon existing
statutes of special or unique legislation,
namely a general appropriation law. The
appropriation law has a life limited to its
fiscal year. Hence, at most, its effect upon
inconsistent enactments could endure only for
as long as it itself endures. It is therefore
more accurate to discuss such an effect in
terms of implied suspension rather than
implied repeal. [Ibid., emphasis supplied.]
The Court's analysis continued, emphasizing that the judiciary
cannot, from a wellspring of good intentions, constitutionally
override such conscious appropriations legislation.
In this case, the legislative failure to
appropriate funds to effectuate these several
statutes was an intentional and advertent act.
In several instances, the Governor disregarded
past practice and refused to include these
items in his budget message; in others, he
exercised his line-item veto power to excise
these from the appropriation act. The
Legislature did not reenact these itemized
appropriations by overriding the Governor's
vetoes. Hence, the failure to appropriate on
the part of the Legislature cannot be ascribed
to indifference, coincidence, or accident.
It follows that such a definite
legislative intent as reflected in the general
appropriation laws necessarily supersedes any
previously expressed legislative desires at
least for the duration of the particular
appropriation act. The earlier statutes
cannot coexist with the enacted appropriation
and, consequently, must be deemed to be
suspended by adoption of the later
appropriation acts.
[Id. at 154.]
The Court concluded that "the Legislature itself has expressed its
intent with sufficient clarity to render it singularly
inappropriate for this Court to give any legal effect whatsoever to
the earlier statutory enactments." Id. at 155. See also Karcher
v. Kean,
97 N.J. 483, 488 (1984). Moreover, "the county is a
creature of the State. Its existence and powers depend upon the
Legislature's determinations. It is subject to the dominion of the
Legislature." Clark v. Degnan,
83 N.J. 393, 400 (1980).
Our constitutional scheme consigns the resolution of the
struggle for a share of this largesse from the federal government
to the political, rather than the judicial, arena.See footnote 13 Despite any
inclination we may have to impose an equitable remedy or to
construe Title 30 to require appropriate payments out of the FFP
funds to the Counties, we refrain and affirm the Commissioner, with
the exception of the remand discussed in IV-(A).
Affirmed in part; remanded in part.
Footnote: 1These appeals have been consolidated for purposes of opinion. Footnote: 2 The Counties do not cite to the record in support of these figures; however, the State concedes that "[t]he State continues to receive FFP for DSH payments made after December 1991." Footnote: 3 N.J.S.A. 30:4-165.3 did not provide any ratio for sharing the cost of maintaining patients in State developmental-disability facilities; rather, the statute made the patient, LRRs, State and county of legal settlement responsible for all costs. In practice, however, the State allocated responsibility for costs of maintenance at developmental-disability institutions on the same 50/50 basis as costs incurred at State and county psychiatric hospitals. County of Essex v. Waldman, 244 N.J. Super. 647, 652-53 n.2 (App. Div. 1990), certif. denied, 126 N.J. 332 (1991). Footnote: 4 As to the Counties' obligation to pay for costs incurred at State facilities for the developmentally disabled, see n. 3 supra. Footnote: 5 N.J.S.A. 30:4-60 was twice amended effective July 1, 1991, L. 1990, c.73, §2, and effective December 27, 1995, L.1995, c. 155, §14, but the changes are not relevant to the issues on appeal. Footnote: 6 L. 1990, c. 73, §4; L. 1991, c. 63, §15. According to the Assembly County Government Committee Statement to the original bill, dated June 14, 1990, "The intent of the bill is to provides [sic] property tax relief to taxpayers by requiring the counties to reduce their budgets commensurate with the increased State assistance." Footnote: 7 Under ¶1, the State pays 130" of costs incurred during the first half of the fiscal year and 50" of costs incurred during the second. That yields an average State share of 90%, leaving the county with