Lawsuit Challenges ALJ Final Decision Authority in Medicaid Appeals

The first case to contest North Carolina’s move to Administrative Law Judge (ALJ) final decisions in contested cases challenging administrative agency actions, is limited in scope and theory.  On February 8th, Piedmont Behavioral Healthcare (PBH), a multi-county area mental health, development disabilities and substance abuse authority, initiated a federal lawsuit seeking temporary and permanent injunctions requiring the Acting Secretary of the N.C. Department of Health and Human Services to render final decisions in appeals involving eligibility for certain Medicaid services and prohibiting ALJs in the N.C. Office of Administrative Hearings (OAH) from making final decisions in such cases.  The lawsuit, PBH v. Albert A. Delia and Julian Mann, III, U.S. District Court, Eastern District of North Carolina, 5:12-CV-46, essentially asks the court to put a halt to the amended contested case process and have N.C. DHHS, rather than ALJs, make final decisions in these Medicaid appeals, unless and until the U.S. Department of Health and Human Services waives the requirement under the federal Social Security Act that a single agency must administer the State’s Medicaid program.  The request for such a waiver has been submitted to the feds, but not yet decided. 

In their March 1st responses opposing the preliminary injunction sought by PBH, the DHHS Acting Secretary and the Director of OAH argued that PBH failed to establish the necessary elements to support a preliminary injunction.  Among other things, their responsive arguments included: (1) PBH lacks standing to litigate its claims because its alleged harm is conjectural and hypothetical and it has not suffered any imminent, concrete injury;  (2) PBH’s ability to serve Medicaid recipients and receive payment for that service has not been impacted by the change in the law, and its position is the same regardless of which entity makes the final decision in Medicaid recipient appeals; (3) PBH failed to exhaust its administrative remedies in that it did not challenge rules promulgated by OAH to implement the statutory change in the contested case process; and (4) it is in the public interest to allow the amended appeal process to continue in effect and to allow the federal Centers for Medicare and Medicaid Services to proceed with its review and decision of the requested waiver of the single State agency requirements for final administrative decisions.

The amended procedure for Medicaid contested cases, which is part of the regulatory reform legislation passed by the General Assembly last year, makes the ALJ’s decision final and eliminates the final agency decision step where our State’s Medicaid agency (the Division of Medical Assistance or DMA) previously was able to override or change unfavorable ALJ decisions.  As indicated by the PBH suit, DMA and those aligned with it would likely prefer to re-instate the agency’s final decision authority.  However, many health care providers participating in the State’s Medicaid program -- who sometimes find themselves at odds with DMA, likely welcome the amended process where the decision of the independent ALJ presiding over the administrative hearing in the appeal is final.  In any event, the revised procedure which took effect January 1, 2012 remains in effect for now.