State Medicaid-Related Regulation Voided by the Appellate Division as Inconsistent With State Statute

G.C. v. Division of Medical Assistance and Health Services, 463 N.J. Super. 79 (App. Div. 2020). Appellate review of an administrative agency regulation “begins with a presumption that the [Regulation is] both valid and reasonable.” Few challenges to such regulations can surmount that hurdle. Today, however, in an opinion by Judge Messano, the Appellate Division found grounds to invalidate an administrative regulation.

The case involved a regulation promulgated by the Division of Medical Assistance and Health Services (“the Division”) of the New Jersey Department of Human Services. The regulation, N.J.A.C. 10:72-4.4(d), sets a method for determining eligibility for benefits under the Aged, Blind, and Disabled (“ABD”) program of New Jersey Medicaid.

As Judge Messano summarized it, “N.J.A.C. 10:72-4.4(d) explains those circumstances in which the income of certain family members of an aged, blind or disabled adult or child is ‘deemed,’ or attributed, to the applicant.” The regulation also provides, however, that (regardless of any “deeming”) “[i]f the countable income (before income deeming) of the aged, blind, or disabled individual exceeds the poverty income guideline for one person he or she is ineligible for benefits and deeming does not apply.”

This matter involved two appeals argued back to back. Both appellants were persons whom the Division, in contested cases that went through the Office of Administrative Law, denied Medicaid benefits because, applying the regulation, their “countable income exceeded the monthly federal poverty level (FPL) at the time for one person.” It was stipulated that appellants’ “countable incomes f[e]ll below the FPL for a family of four or two respectively, and, if those limits applied, both would qualify for benefits.”

Appellants offered two bases to invalidate the regulation. First, they claimed, the regulation violated Title XIX of the Social Security Act, 42 U.S.C. 1396 et seq. Judge Messano did not agree. After a careful analysis, he concluded that appellants had “misread the statute,” and that its plain language defeated their argument. Cases from other jurisdictions that appellants cited were “factually and legally unpersuasive.”

Appellants second contention was that the regulation was inconsistent with its authorizing legislation, New Jersey’s Medical Assistance and Health Services Act, N.J.S.A. 30:4D-1 et seq. (“the Act”). That issue was subject to de novo review.

The Act repeatedly treated the relevant income level as “based on” or “adjusted for” family size. So did a Senate Committee Statement that accompanied the legislative amendment that expanded coverage to ABD persons. Thus, despite the strong deference given to administrative agencies, “if the regulation is plainly at odds with the statute, [the court] must set it aside.” Since the regulation did not adjust for family size, the Appellate Division invalidated it.

However, the panel stayed its ruling for 45 days to allow the Division to seek Supreme Court review if it wished. Judge Messano cited “the significant impact [the panel’s] decision may have on other applicants, ” and the need to “avoid disruption to the processing of applications by local social services boards.” The Appellate Division had granted a similar stay in another case in which it voided an administrative regulation, In re N.J.A.C. 12:17-2.1, 450 N.J. Super. 152 (App. Div. 2017), discussed here, and Judge Messano rightly found it prudent to do that in today’s case.