Many states, as a cost saving measure, are enacting provisions that privatize parts of the state’s Medicaid program. One aspect that is often not considered is the loss of due process rights by applicants and recipients when part of the Medicaid program is turned over to private hands. The turnover can be anything from the provision of services through a managed care program to delegating eligibility and service determinations to a private entity. The private entity is usually a not-for-profit organization, but could be a profit making business.
New York recently enacted legislation to provide for private Regional Long-Term Care Assessment Centers. Chapter 58 of the Laws of 2009, §29 adding Social Services Law § 367-w. The new law would create a demonstration program in two social services districts transferring from the local social services district to the new private
assessment centers responsibility for assessing a person's need for, and the authorization of, long-term care services and programs. These programs and services would include the Medicaid home care personal attendant program. In other words the assessment centers would determine eligibility for home care and the number of hours of home care services.
The Elder Law Section of the New York State Bar Association raised a red flag when the governor proposed these private assessment centers as part of his 2009-2010 budget proposals. As a cost saving measure it was obvious that these centers were intended to reduce costs by cutting the availability of community based services. But the issue that the bar raised was that privatizing the decision making process would eliminate an applicant’s or recipient’s rights to basic due process. Unlike the state, private decision makers have no obligation to provide fair and adequate notice of changes in services, nor does the applicant/recipient have a right to a hearing before an impartial hearing officer.
Our basic rights to due process flow from the Fifth and 14th Amendments to the U.S. Constitution, which provides that no state shall deprive a person of life, liberty or property without due process of law, and also provide for equal protection under the law. No similar Constitutional protection exists when a private entity deprives a person of life, liberty or property.
A long line of cases by the United States Supreme Court have held that when a state delegates a decision making function to a private entity, even though the state may still make the rules, the due process rights of the individual miraculously disappear. In the 1970’s and 1980’s New York had a tiered system for providing institutional care for the disabled elderly: Skilled nursing services provided in Skilled Nursing Facilities, custodial services provided in Health Related Facilities, and congregate care provided in Adult Homes. When the local Medicaid agency decided to move someone between the three types of facilities, the individual did not get notice or a right to appeal. Legal services programs challenged in federal court this lack of due process. The state acquiesced and agreed to give full due process rights including fair hearings with aid continuing pending a final determination before transferring a resident between levels of care. It then immediately turned around and delegated the decision making process to the Utilization Review Committees of the nursing homes and again denied due process and appeal rights this time based on the theory there was no longer any state action in the decision making process.
In Blum v. Yaretsky, 457 U.S. 991 (U.S. 1982), the U.S. Supreme Court reversed the 2d Circuit Court of Appeals and found that when private nursing homes conducted utilization review under New York state rules to determine the level of care that Medicaid patients needed, there was no state action and no due process rights required.
Later cases followed the precedent set by the Yaretsky Court. In Am. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40. (1999), the U.S. Supreme Court upheld Pennsylvania’s workers' compensation regime where an employer or insurer may withhold payment for disputed medical treatment pending an independent review because the insurers are not "state actors" and therefore due process does not attach. The Court also remanded Shalala v. Grijalva, 526 U.S. 1096 (1999), in light of Am. Mfrs. Mut. Ins. Co. v. Sullivan. In Grijalva 152 F.3d 1115, 1117 (9th Cir. Ariz. 1998) the 9th Circuit had previously affirmed due process rights for Medicare beneficiaries enrolled in health maintenance organizations ("HMOs").
In New York when Medicaid home care decision-making was turned over to Certified Home Health Agencies (CHHA’s) similar results occurred. In Catanzano v. Dowling, 60 F.3d 113 (2d Cir 1995), aff'd in part, vacated in part, 103 F.3d 223 (2d Cir 1996), the 2d Circuit Court of Appeals held that when a private CHHA and the treating physician agree, then there are no appeal rights for the consumer from a determination to grant, terminate or reduce care. The only saving grace is Catanzano was the fact that there is a fair hearing right if the treating physician disagrees with the CHHA.
The privatization of decision making for home and community based services in the 2009 New York budget bill could have been the nail in the coffin for Medicaid due process rights. Fortunately at the urging of the New York State Bar Association the following language was added to the legislation: “When a Long-Term Care Assessment Center is authorized to assess long-term care needs or authorize services pursuant to this section, an applicant or recipient may challenge any action taken or failure to act in connection therewith as if such assessment or authorization were made by a government entity, and shall be entitled to the same medical assistance benefits and standards and to the same notice and procedural due process rights, including a right to a fair hearing and aid continuing pursuant to section twenty-two of this chapter, as if the assessment or authorization were made by a government entity.”
Although not quite the same as a Constitutional right to due process, the statutory language guarantees that applicants and recipients will not be denied their due process rights just because the decision making process has been delegated to a private entity. Elder Law attorneys in other states should be vigilant. What may appear to be an innocuous change may have dire consequences when analyzed in light of the court precedents dealing with due process rights.