Eldridge v. D.C. DHS

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                                 No. 18-AA-664




                       On Petition for Review of Orders of the
              District of Columbia Office of Administrative Hearings

                 (Hon. Jeremy Alper, Administrative Law Judge)

(Argued Jan. 21, 2020                                      Decided April 8, 2021)

      Bradley E. Oppenheimer, with whom Jacob E. Hartman and Geoffrey M.
Klineberg were on the brief, for petitioners.

      Graham E. Phillips, Assistant Attorney General, with whom Karl A. Racine,
Attorney General for the District of Columbia, Loren L. AliKhan, Solicitor General,
and Caroline S. Van Zile, Deputy Solicitor General, were on the brief, for

      Before GLICKMAN and EASTERLY, Associate Judges, and FISHER, Senior
Judge. *

       Judge Fisher was an Associate Judge at the time of oral argument. His status
changed to Senior Judge on August 23, 2020.

      GLICKMAN, Associate Judge: Petitioners ask us to review an order of the

Office of Administrative Hearings (OAH) affirming the termination of their

Medicaid benefits as participants in the District’s home and community-based

services program for persons who are elderly and individuals with physical

disabilities. The Administrative Law Judge (ALJ) upheld determinations by the

Department of Human Services (DHS) in 2016 and 2017 that petitioners did not

meet applicable income requirements for continuing to receive those benefits

because (1) petitioners’ incomes exceeded the eligibility ceiling for “categorically

needy” beneficiaries, and (2) petitioners did not show they had incurred sufficient

medical costs to bring their remaining income below the considerably lower

eligibility ceiling for “medically needy” beneficiaries (a requirement commonly

referred to as “spending down”). The material facts supporting those determinations

are not at issue; the dispute before us concerns the proper interpretation of federal

and District of Columbia law and regulations governing petitioners’ continuing

Medicaid eligibility.

      Petitioners present three claims of legal error. First, they argue that the ALJ

accorded undue deference to respondents’ interpretation of ambiguous provisions of

federal law. Second, petitioners argue that respondents have misapplied federal law

by promulgating different income eligibility levels for categorically and medically

needy Medicaid applicants in such a way as to create a “benefit cliff,” whereby

someone whose monthly income does not exceed the eligibility ceiling can receive

full Medicaid coverage of their medical costs, but someone whose monthly income

exceeds that ceiling, by however small an amount, can get no coverage at all until

they have spent a substantial portion of their own modest income on medical costs.

Third, petitioners argue that, instead of rescinding their eligibility for Medicaid when

their incomes rose above the eligibility ceiling, respondents were required by “post-

eligibility treatment of income” regulations to adjust the financial contributions

petitioners were expected to make to the cost of their care in light of their higher


      We conclude that petitioners are not entitled to relief. The ALJ did not accord

undue deference to respondents’ interpretation of federal law, but even if the ALJ

had done so, a remand would be unnecessary because we construe the law ourselves

de novo. On the merits, we hold that respondents did not misinterpret or misapply

the law. Federal law permits jurisdictions to establish different income eligibility

ceilings for categorically and medically needy Medicaid beneficiaries, and the post-

eligibility treatment of income regulations do not apply to beneficiaries whose

incomes rise above the applicable eligibility ceiling. We therefore affirm the

termination of petitioners’ benefits.

                         I. Medicaid Law and Regulations

      The District of Columbia, at its option, participates in the federal Medicaid

program, which provides “financial assistance to States that choose to reimburse

certain costs of medical treatment for needy persons.” 1 In order to receive that

assistance, the District must comply with the Medicaid Act and federal regulations

implementing and interpreting it. 2 The Act prescribes, among other things, the

treatments and services the federal government will subsidize and the eligibility

requirements beneficiaries must meet in order for the District to receive federal

Medicaid funds. 3

         Harris v. McRae, 

448 U.S. 297

, 301 (1980). The District is a State for the
purposes of the Medicaid Act, 42 U.S.C. § 1396 et seq. See Hamer v. Dep’t of Hum.
Servs., Gov’t of District of Columbia, 

492 A.2d 1253

, 1254 n.1 (D.C. 1985) (citing
42 U.S.C. § 1301(a)(1)).

Hamer, 492 A.2d at 1255

. See also Nat’l Fed’n of Indep. Bus. v. Sebelius,

567 U.S. 519

, 541–42 (2012). The federal Medicaid regulations are promulgated
and administered by the Department of Health and Human Services and the Centers
for Medicare and Medicaid Services (CMS). See Wilder v. Va. Hosp. Ass’n, 

U.S. 498

, 502 (1990); Arkansas Dep’t of Health and Hum. Servs. v. Ahlborn, 

U.S. 268

, 275 (2006).
          42 U.S.C. § 1396 et seq.

      As pertinent here, the Medicaid program describes three classes of potential

beneficiaries to whom an acceptable State Medicaid program must or may provide

benefits with federal backing: the “mandatory categorically needy,” the “optional

categorically needy,” and the “medically needy.” 4

      States (including the District) participating in Medicaid are required to

provide benefits to “mandatory categorically needy” individuals. 5 This category

comprises certain groups of low-income people who “are receiving or deemed to be

receiving cash assistance,” 6 including those who qualify for Supplemental Security

Income for the Aged, Blind, and Disabled (SSI). 7 To qualify for SSI and be

considered mandatory categorically needy, a person’s “countable income” — their

total income minus certain deductions — must be less than the SSI benefit rate. In

        See Consejo de Salud de la Comunidad de la Playa de Ponce, Inc. v.

695 F.3d 83

, 90–91 (1st Cir. 2012); Coye v. Dep’t of Health &
Human Servs., 

973 F.2d 786

, 789 (9th Cir. 1992); 42 C.F.R. § 435.4.
          42 U.S.C. § 1396a(a)(10)(A)(i); Consejo de 

Salud, 695 F.3d at 90

          42 C.F.R. § 435.4; see also 

Coye, 973 F.2d at 789

        42 U.S.C. § 1396a(a)(10)(A)(i)(I) (state Medicaid plans must make medical
assistance available to “all individuals . . . receiving aid or assistance under any plan
of the State approved under subchapter . . . XVI [titled Supplemental Security
Income for Aged, Blind, and Disabled]”).

2017, the SSI benefit rate was $735 per month for an individual. 8 None of the

petitioners before us was in the “mandatory categorically needy” category.

      States are permitted (but not required) to provide Medicaid benefits to other

groups of low-income persons “who, generally, meet the categorical requirements

or income or resource requirements that are the same as or less restrictive than those

of the cash assistance programs and who are not receiving cash payments.” 9 This is

known as the “optional categorically needy” category. Prior to their terminations,

petitioners qualified for Medicaid benefits under this category in connection with

their participation in a Home and Community-Based Services (HCBS) waiver

program established by the District in accordance with Section 1915(c) of the

Medicaid Act. 10 The District’s program is called the Elderly and Individuals with

Physical Disabilities (EPD) Waiver. 11 Such “waiver” programs permit States to

        See Cost-of-Living Increase and Other Determinations for 2017, 81 Fed.
Reg. 74,854 (Oct. 27, 2016).
       42 C.F.R. § 435.4; 42 U.S.C. § 1396a(a)(10)(A)(ii); see also Herweg v. Ray,

455 U.S. 265

, 268–69 (1982).
         See 42 U.S.C. §§ 1396n(c), 1396a(a)(10)(A)(ii)(VI); 42 C.F.R. § 435.217;
see also Olmstead v. L.C. ex rel. Zimring, 

527 U.S. 581

, 601 & n.12 (1999).
         See District of Columbia Dep’t of Health Care Fin., Application for a
§ 1915(c) Home and Community-Based Services Waiver (Oct. 20, 2015)

provide support services (such as home health aides) enabling eligible Medicaid

beneficiaries who otherwise would be institutionalized to continue residing in their

homes and communities. 12 The Medicaid Act allows States to establish a countable

income ceiling for HCBS waiver beneficiaries at the same elevated level as the States

set for beneficiaries receiving long-term institutional care. That level, referred to as

the Special Income Standard, or “SIS,” may be up to 300% of the SSI benefit rate. 13

The District of Columbia set its Special Income Standard for EPD Waiver

beneficiaries at this maximum allowed level. 14 In 2017, the District’s SIS was

$2,205 per month for individuals. 15

      Finally, the Medicaid Act allows States to extend coverage beyond the

categorically needy to persons who qualify as “medically needy” because their

https://dhcf.dc.gov/node/193812 https://perma.cc/S2EX-GNJM (hereinafter EPD
Waiver) https://perma.cc/4BZ4-NMZK; see also 29 D.C.M.R. §§ 9800.2(b), 9899.
           29 D.C.M.R. § 9899.
           42 U.S.C. §§ 1396a(a)(10)(A)(ii)(V), 1396b(f)(4)(C).
           EPD Waiver 43; 29 D.C.M.R. §§ 9801.1, 9899.
         In 2016, the applicable year in Mr. Eldridge’s case, the District’s SIS was
$2,199 per month.

medical expenses are effectively impoverishing. 16        Persons whose countable

incomes exceed the eligibility ceiling for categorical neediness may become eligible

to receive Medicaid benefits as medically needy “if they incur [medical costs] in an

amount that effectively reduces their income” 17 to a “single income standard,”

termed the “medically needy income level” (MNIL). 18 This income ceiling is not

required to be the same as, or comparable to, the income ceiling for the categorically

needy; the MNIL is not linked to the SSI benefit rate. Instead, “Congress explicitly

stated . . . that federal reimbursement for benefits provided to the medically needy

was available only if the income of those persons, after the deduction of incurred

medical expenses, was less than 133⅓% of the state AFDC [Aid to Families with

Dependent Children] payment level.” 19 In setting the parameters for the MNIL,

           See 42 U.S.C. § 1396a(a)(10)(C); Atkins v. Rivera, 

477 U.S. 154

, 157–58

Atkins, 477 U.S. at 158

        42 C.F.R. §§ 435.811(a), 435.831(a)(1); see also 29 D.C.M.R. § 9800.2(c)
(“Medically Needy Income Level”). This process is colloquially known as
“spending down.”
            Schweiker v. Hogan, 

457 U.S. 569

, 586 (1982); see 42 U.S.C. §
1396b(f)(1)(B). In Hogan, the Supreme Court rejected a constitutional equal
protection challenge to the disparity between the MNIL and the higher income
eligibility ceiling for the categorically 

needy. 457 U.S. at 587

–88, 591–92.
Although Congress subsequently repealed the AFDC program, the MNIL ceiling
remains tied to the value of AFDC benefits as they existed in July 1996, subject to
increases for inflation. See 42 C.F.R. §§ 435.811(e), 435.1007; see also 42 U.S.C.

“Congress recognized that this amount could be lower than categorical assistance

eligibility levels.” 20 The MNIL in the District in 2017 was $643 per month for an

individual. 21 Thus, the maximum qualifying countable income for receiving the

District’s EPD Waiver services is significantly lower for the medically needy than

for the categorically needy.

      To determine whether an applicant for, or an existing beneficiary of, the

District’s EPD Waiver is within one of the eligibility groups, respondent DHS 22

applies an income test, wherein certain deductions (e.g., Child Nutrition Payments,

§ 1396u-1(b)(2)(B), (f)(3). (The current codification of 42 C.F.R. § 435.1007
contains a scrivener’s error: paragraphs (b)(1) and (b)(2) are mistakenly omitted.
The full text of the regulation appears at Medicaid Program; Eligibility and Coverage
Requirements, 58 Fed. Reg. 4908, 4934 (Jan. 19, 1993)).

Hogan, 457 U.S. at 586

          See 29 D.C.M.R. § 9899 (defining the MNIL as a percentage of federal
poverty levels); Annual Update of the HHS Poverty Guidelines, 82 Fed. Reg. 8831,
8832 (Jan. 31, 2017) (identifying federal poverty levels for 2017). The MNIL is also
subject to a floor. See 42 C.F.R. § 435.811(c). While it is unclear that the District’s
MNIL was the highest it could have been set under the Medicaid Act, petitioners do
not claim the MNIL was below the floor.
         DHS processes Medicaid applications and determines eligibility, while
respondent DHCF manages the District’s Medicaid Plan and promulgates
implementing regulations. See D.C. Code § 7-771.07 (2018 Repl.).

governmental housing assistance, etc. 23) are taken from the applicant or

beneficiary’s gross income to calculate a gross countable income. Applicants and

beneficiaries with countable incomes at or below the SIS qualify for categorically

needy eligibility 24; those “who ha[ve] gross countable income exceeding the SIS”

are required “to spend down the excess income to the MNIL . . . to become

financially eligible” 25 as medically needy.

      Federal regulations also require States to calculate an amount each eligible

beneficiary of institutional care or HCBS is expected to contribute to the cost of their

care. 26 In a process referred to as “post-eligibility treatment of income” (PETI),

DHS calculates this financial contribution by applying specified deductions to an

eligible beneficiary’s gross countable income; the amount of countable income that

remains after those deductions is the amount the beneficiary is expected to contribute

for their institutional or community care. 27 Among the required deductions for

           See 29 D.C.M.R. § 9801.5(a)-(w).

Id. § 9801.1.

Id. § 9801.6.

           42 C.F.R. §§ 435.725, 435.726.
           29 D.C.M.R. §§ 9804.4-9804.6.

HCBS beneficiaries is a “Community Maintenance Needs Allowance” (CMNA)

intended to cover their cost of living. 28 A State “may set [the CMNA] at any level,”

provided it is “based on a reasonable assessment of need.” 29 In the District, the

CMNA is equal to the SIS. 30 Consequently, because only persons who have

countable income at or below the SIS (or persons who spend down to the MNIL) are

eligible for the EPD Waiver, their required PETI financial contribution is always

zero. 31

       In accordance with federal regulations requiring periodic reassessment of

Medicaid eligibility, DHS must determine the continuing eligibility of EPD Waiver

beneficiaries at least every twelve months, and also whenever it receives new

information that may affect a beneficiary’s eligibility. 32 The reassessment process

for existing beneficiaries mirrors the initial application process, in that the same

countable income eligibility standards and PETI apply.


id. § 9804.4(b); 42

C.F.R. § 435.726(c)(1).
            42 C.F.R. § 435.726(c)(1)(i).
            29 D.C.M.R. § 9804.4(b).
         In contrast, because the needs allowance for institutionalized beneficiaries
is much smaller, see 29 D.C.M.R. § 9804.4(a), they may have substantial financial
contribution requirements.
            See 29 D.C.M.R. § 9501.14; 42 C.F.R. § 435.916(a), (b), (d).

           II. The Terminations of Petitioners’ EPD Waiver Benefits

      Petitioners are three District of Columbia residents who previously received

HCBS pursuant to the EPD Waiver. In late 2016, DHS notified Mr. Eldridge that

his EPD benefits would not be renewed because his countable income was above the

SIS. At the time his benefits were terminated, Mr. Eldridge’s income was $2,466

per month. Ms. Freeman and Ms. Lee received similar non-renewal notices in early

2017, because their monthly countable incomes were $2,387 and $2,314,

respectively. Each petitioner requested a “fair hearing” before the OAH to contest

DHS’s determination of their ineligibility for benefits 33; their cases were

consolidated and DHCF was permitted to intervene. All parties agreed that an

evidentiary hearing was unnecessary and asked the ALJ to decide the cases as a

matter of law on cross-motions for summary adjudication.

      Petitioners argued before the ALJ that they were optional categorically needy

HCBS beneficiaries, and that in reassessing their eligibility to continue receiving the

EPD Waiver services on which they depended, DHS should have applied PETI

          See 42 U.S.C. § 1396a(a)(3) (State Medicaid plans must provide “an
opportunity for a fair hearing . . . to any individual whose claim for medical
assistance under the plan is denied”).

deductions to their gross incomes before applying the countable income test to

determine whether they remained eligible for benefits. If computed in that way,

petitioners’ countable incomes would have been below the SIS level ($2,205 per

month in 2017) and petitioners still would have been considered eligible as

categorically needy. By not applying the PETI deductions in reassessing their

income eligibility, petitioners argued, respondents subjected them to an unfair and

legally unrequired “benefit cliff,” since they would have to “spend down” on their

care so as to reduce their net incomes to the MNIL ($643 per month) in order to be

deemed “medically needy.”        No petitioner claimed to have satisfied that


      In defending the termination of petitioners’ benefits, respondents argued that

the separate (two-stage) financial eligibility and PETI determinations, and the

requirement that an individual whose countable income exceeds the SIS must spend

down to the MNIL to become eligible for HCBS, were required by the Medicaid Act

and applicable regulations.

      The ALJ granted summary adjudication to respondents. Stating he had

“independently analyzed the applicable federal and local law,” the ALJ concluded

that “[r]espondents’ interpretation of the statutes and regulations at issue are not

inconsistent with the regulatory or statutory language or purpose, or otherwise

unreasonable or improper under applicable law.” The ALJ added that “[t]o the

extent there may be ambiguity in the statutory and regulatory language,

[r]espondents are due substantial deference.” 34 Nowhere in his decision, however,

did the ALJ identify an ambiguity in the law or say he was deferring to respondents

to resolve an issue of interpretation.

      The ALJ proceeded to determine whether petitioners qualified for the

District’s EPD Waiver under the applicable income requirements.            Because

petitioners were not SSI recipients, they did not qualify as mandatory categorically

needy. Nor did they qualify as optional categorically needy, the ALJ concluded, as

their countable incomes exceeded the SIS, and PETI could not be applied to reduce

their incomes below that ceiling. Finally, the ALJ ruled that petitioners did not

qualify as medically needy in the absence of any showing that they had spent down

their incomes to the MNIL.

         Citing Chevron U.S.A., Inc. v. N.R.D.C., Inc., 

467 U.S. 837

, 844 (1984),
and Auer v. Robbins, 

519 U.S. 452

, 461–63 (1997).

            III. Standard of Review and the Question of Deference

      Petitioners claim that the ALJ erroneously deferred to respondents’

interpretation of ambiguous provisions in the Medicaid Act and the federal

regulations implementing it, and that, based on the uncontested facts and a proper

interpretation of the law, they were eligible to continue in the District’s EPD Waiver

program as categorically needy beneficiaries without having spent down their

income to the MNIL level. These contentions challenge the ALJ’s purely legal

rulings, and our review is de novo. 35

      To determine whether the Medicaid Act and its implementing regulations

authorize respondents’ approach to the renewal of HCBS benefits, we look first to

          See, e.g., E.C. v. RCM of Washington, Inc., 

92 A.3d 305

, 313 (D.C. 2014)
(“In reviewing an OAH decision, we determine whether: (1) OAH made findings
of fact on each materially contested issue of fact, (2) substantial evidence supports
each finding, and (3) OAH’s conclusions flow rationally from its findings of fact.
However, the construction of a statute raises a question of law which this court
reviews de novo.” (citations and quotation marks omitted)); District of Columbia
Dep’t of Emp’t Servs. v. Smallwood, 

26 A.3d 711

, 714 (D.C. 2011) (“Our review of
OAH decisions is limited, and we must affirm unless the decision is arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with the law. We
review the OAH’s legal rulings de novo, recognizing that this court is the final
authority on issues of statutory construction.” (citations and quotation marks

the language of those statutes and regulations, and construe their words “according

to their ordinary sense and plain meaning.” 36 As a rule, if the language of a statute

or agency regulation is unambiguous, our inquiry ends there; but where the text

allows for more than one reading, we will defer to “an agency’s interpretation of the

statute and regulations it is charged by the legislature to administer, unless its

interpretation is unreasonable or is inconsistent with the statutory language or

purpose.” 37 Respondent DHCF is the single District agency responsible for the

administration of the District’s Medicaid program; accordingly, if we were to find

          McCormick & Schmick Rest. Corp. v. District of Columbia Alcoholic
Beverage Control Bd., 

144 A.3d 1153

, 1155 (D.C. 2016) (internal quotation marks
           District of Columbia Dep’t of the Env’t v. E. Capitol Exxon, 

64 A.3d 878

880–81 (D.C. 2013) (quotation marks omitted);

id. at 881

(“This deference stems
from the agency’s presumed expertise in construing the statute it administers.”
(quotation marks omitted)). “When, as here, the construction of an administrative
regulation rather than a statute is in issue, deference is even more clearly in order.”

Id. at 881

(citation and quotation marks omitted). We do not grant such deference
to the OAH, however.

Id. (“OAH, on the

other hand, is vested with the
responsibility for deciding administrative appeals involving a substantial number of
different agencies and thus lacks the subject-matter expertise justifying the deference
to agency interpretations of statutes or regulations. It is also well established, then,
that this court does not accord the same deference to the statutory interpretations of
the Office of Administrative Hearings.” (citations and quotation marks omitted)).

the relevant DHCF regulations ambiguous (which in this case we do not), we would

grant appropriate deference to DHCF’s interpretation of the ambiguity. 38

      DHS and DHCF are not, however, owed deference with respect to their

interpretations of the federal Medicaid Act and regulations, as there is “no basis for

assuming that Congress delegated any authority to [local agencies] to propound

authoritative interpretations of either the statute or [the U.S. Department of Health

and Human Services (HHS)]’s regulations.” 39 Petitioners argue the ALJ thought

otherwise and that this error entitles them to a remand for further proceedings before

the OAH, in which the ALJ would interpret and apply federal law in their cases

without deference to respondents’ construction of it. 40 They base this argument on

the ALJ’s statement that “[t]o the extent there may be ambiguity in the statutory and

regulatory language, [r]espondents are due substantial deference.” Although that

statement is overbroad if it is read as encompassing deference to respondents’

interpretations of federal law, we are satisfied that the ALJ did not actually accord

such deference. The ALJ explicitly stated he had “independently analyzed the

           D.C. Code § 7-771.07(1) (2018 Repl.).
         DeCambre v. Brookline Hous. Auth., 

826 F.3d 1

, 19 (1st Cir. 2016); see
also Eyecare v. Dep’t of Hum. Servs., 

770 N.W.2d 832

, 836 (Iowa 2009).
           See, e.g., E. Capitol 

Exxon, 64 A.3d at 882


applicable federal and local law,” and his decision bears that out; he found no

ambiguities in federal law and nowhere purported to defer to respondents’

interpretation of an unclear provision in the Medicaid Act or the federal Medicaid

regulations. We therefore are assured that the putative error in the ALJ’s brief

statement regarding deference is innocuous and immaterial. 41

          See United Dominion Mgmt. Co. v. District of Columbia Rental Hous.

101 A.3d 426

, 430–31 (D.C. 2014). In that case, the Commission had said,
erroneously, that its review of an OAH ALJ’s interpretation of the law was
deferential; we held the error immaterial because the Commission demonstrably
engaged in de novo review of the issues. We explained:

            Although the RHC articulated its standard of agency
            review incorrectly, we decline to reverse on this ground,
            as we find that RHC’s error was ultimately
            immaterial. See D.C. Code § 2-510 (b) (“The Court may
            invoke the rule of prejudicial error.”); see also LCP, Inc.
            v. District of Columbia Alcoholic Beverage Control Bd.,

499 A.2d 897

, 903 (D.C. 1985) (“[R]eversal and remand
            is required only if substantial doubt exists whether the
            agency would have made the same ultimate finding with
            the error removed.”). Although the RHC said that it would
            defer to reasonable legal interpretations of the OAH ALJ,
            its orders demonstrate that it did not do so. The RHC
            painstakingly analyzed “the plain language of the [Rental
            Housing] Act, the Act’s legislative history, the Act’s
            regulations, case law precedent, and the purposes of the
            Act” before announcing its conclusion. Indeed, given the
            thorough nature of the RHC’s decision and order affirming
            the ALJ’s decision, it is apparent that the RHC’s decision
            amounted to a de novo review of the legal issues . . . , even
            though the RHC did not acknowledge it as such.

       But a remand to the OAH would not be necessary or appropriate even if it

were otherwise. This court is the final arbiter of the legal issues at hand, and we can

and will determine whether the ALJ’s construction of the Medicaid Act is “in

accordance with [the] law” 42 without according undue deference to respondents’

interpretation of it.

                IV. Petitioners’ Eligibility for EPD Waiver Benefits

       Petitioners maintain that respondents’ reassessment of their eligibility for

EPD Waiver benefits violated the Medicaid Act and District regulations in two ways.

First, they argue that respondents’ spend-down requirement creates an impermissible

“benefit cliff” by requiring them to spend-down to the MNIL rather than to the

(considerably higher) SIS. Second, they argue that respondents’ refusal to apply

PETI during the financial eligibility determination contravenes federal law and

respondents’ own regulations, because it treats them as new applicants rather than

as existing beneficiaries eligible to have deductions taken from their income to

Id. (internal citation omitted).

Essentially the same rationale applies here.
            D.C. Code § 2-510(a)(3)(A) (2016 Repl.).

determine their share of the cost of care. For the following reasons, we disagree with

both contentions.

                                 A. The “Benefit Cliff”

      Petitioners premise their first challenge on the notion that respondents have

set two different income qualification levels for HCBS applicants: “SIS ($2,205 per

month) for those qualifying without spend-down, and a much lower Medically

Needy Income level ($643 per month) for those initially above SIS who can spend

down through medical expenses.” 43 The use of two different standards, petitioners

argue, violates the federal requirement that there be a “single income standard” for

medically needy individuals 44 and creates an unfair “benefit cliff” imperiling any

beneficiary whose countable income rises by even a single dollar above the SIS. We

sympathize with petitioners and other Medicaid beneficiaries confronting this

“cliff,” but their legal argument lacks merit, for two reasons.

      First, respondents do not use two income standards for medically needy

beneficiaries. The applicable regulation, 29 D.C.M.R. § 9899, unambiguously

           Br. for Pet’rs at 23–24.
           See 42 C.F.R. § 435.811(a).

provides a single definition of the MNIL: “Fifty percent (50%) of the Federal

Poverty Level (FPL) for a household of two (2) or larger; the MNIL for a household

of one is ninety-five percent (95%) of that for a household of two.” Petitioners cite

no other District regulation that authorizes the use of a different MNIL, and there is

no indication that respondents have ever used, in determining an applicant’s or

beneficiary’s Medicaid eligibility, the SIS as the MNIL as opposed to the figure

defined in § 9899. Respondents have consistently represented that there is one

MNIL for petitioners, which was $643 per month in 2017.45

            In furtherance of their position, petitioners point to a passage in
respondents’ motion for summary adjudication before the OAH in which
respondents referred to two “medically needy” categories. The two categories
respondents described were “individuals who have an income of no more than 300%
of the SSI federal benefit payment level and individuals who have an income that
exceeds 300% of the SSI federal benefit payment level.” While respondents referred
to both categories as “medically needy,” that was merely infelicitous phrasing,
because (as we have explained above) individuals with incomes at or below 300%
of the SSI benefit level qualify as categorically needy without having to spend down
to the MNIL to (superfluously) meet the income qualification for being deemed
medically needy. Thus, in their motion for summary adjudication, respondents
proceeded to describe one spend-down process and one MNIL. Because a
“medically needy” individual is by definition a person who has met the spend-down
requirements set by a State, see 42 C.F.R. § 435.4 (defining “medically needy” as
persons “not . . . categorically needy but who may be eligible for Medicaid . . .
because . . . their income and resources are within [State-determined] limits . . . after
their incurred expenses for medical or remedial care are deducted”), we are of the
view that the single spend-down process respondents described in their briefing
below establishes that respondents have not implemented more than one medically
needy income standard.

      Second, requiring petitioners and others with countable incomes above the

SIS to spend down to the much lower MNIL (instead of just to the SIS) in order to

qualify as medically needy does not create a legally improper benefit cliff, for the

simple reason that benefit cliffs are an accepted part of the Medicaid universe that

Congress foresaw and intended.

      The Supreme Court explained and sanctioned the reality of Medicaid benefit

cliffs in Schweiker v. Hogan.      There, a group of individuals, whose incomes

exceeded the ceiling on qualifying for Medicaid as categorically needy, argued that

the medically needy spend-down requirement was unconstitutional and violated the

Medicaid Act because it mandated that they spend down their incomes to an amount

lower than the categorically needy income limit. 46 The Court held that Congress

specifically intended differing income standards for the categorically needy and the

medically needy by choosing to set the MNIL, but not the categorically needy

income ceiling, at a maximum of 133⅓ percent of the AFDC payment rate. 47 That

choice, the Court explained, was “not inconsistent with constitutional principles of

equal treatment”; rather, it reflected a reasonable decision to prioritize the provision


457 U.S. at 571


Id. at 586–87.

of medical benefits to categorically needy persons over the provision of benefits to

those persons who were comparatively wealthy by authorizing coverage of the latter

only if they had medical expenses so substantial that their incomes reached a

significantly lower level. 48

       There is no distinction between the benefit cliff upheld in Hogan and the one

at issue in this case. The District is not required to include the medically needy in

its EPD Waiver at all, 49 and where it has chosen to include such individuals in its

waiver, it is statutorily prevented from raising the MNIL to the level at which the


Id. at 587, 591–93;

see also State of Cal., Dep’t of Health Servs. v. Dep’t
of Health & Hum. Servs., 

853 F.2d 634

, 636 (9th Cir. 1988) (“The medically needy
may qualify for financial assistance if they incur medical expenses in an amount that
effectively reduces their income below that of the categorically needy.”).

          See Skandalis v. Rowe, 

14 F.3d 173

, 181–83 (2d Cir. 1994) (holding that
the State of Connecticut may exclude the medically needy from its HCBS Waiver
program); Centers for Medicare & Medicaid Services, Application for a § 1915(c)
Home and Community-Based Waiver: Instructions, Technical Guide and Review
Criteria at 90 (2019) https://www.hhs.gov/guidance/sites/default/files/hhs-
guidance-documents/instructions technicalguide v3.6 10.pdf,
HTTPS://PERMA.CC/W85R-T563 (hereinafter CMS Guidance) (“If a[n eligibility]
group is included in the Medicaid state plan, a state has the option to include the
group in the waiver.” (emphasis added.)).

District has set its SIS. 50 In point of fact, CMS guidance to the States and the District

explicitly advises that “a medically needy individual with income over the special

income level cannot spend down to the special income level and be eligible under

the § 435.217 [optional categorically needy] group.” 51           Petitioners have not

identified any applicable provision of the Medicaid Act nor any federal regulation

contrary to that guidance. 52

        42 U.S.C. § 1396b(f)(1)(B); see also 

Hogan, 457 U.S. at 586

–87; 42 C.F.R.
§§ 435.811(e), 435.1007(b)(1).
         CMS Guidance, at 91. We consider such guidance persuasive, though it is
not necessarily entitled to the deference owed to formal federal rule-making. See,
e.g., Christensen v. Harris Cty., 

529 U.S. 576

, 587 (2000); Nunnally v. District of
Columbia Metro. Police Dep’t, 

80 A.3d 1004

, 1012 & n.17 (D.C. 2013); Wong v.

571 F.3d 247

, 258–60 (2d Cir. 2009) (according so-called Skidmore
deference, rather than Chevron deference, to CMS interpretive guidance of Medicaid
           There are special situations in which Medicaid beneficiaries are not
required to spend down to the MNIL when their countable incomes exceed SIS. For
example, under 42 U.S.C. § 1382h(b), SSI beneficiaries may retain their Medicaid
benefits with a monthly income in excess of the SIS, under certain conditions, if they
return to work. This provision amounts to a work-incentive exception for SSI
beneficiaries who might otherwise choose not to work for fear of their incomes
increasing beyond the SSI benefit rate such that they would lose their Medicaid
coverage. Under 42 U.S.C. § 1396a(a)(10)(A)(i)(I), the District is required to
provide Medicaid benefits for such persons, because they, unlike petitioners, remain
SSI beneficiaries who are mandatory categorically needy.

      HHS has recognized the precarious position in which this scheme puts

individuals whose incomes exceed categorically needy limits, noting that because

the MNIL is so “very low” it may require individuals who have no other way to

qualify for benefits to spend down large portions of their meager incomes, to a level

lower than that at which they would qualify as SSI beneficiaries in some states. 53

Even so, the Department has concluded that Congress has tied the District’s hands

here — “[u]nder the Medicaid statute, States cannot just increase their medically

needy income levels to deal with this problem.” 54

                       B. Post-Eligibility Treatment of Income

      Petitioners alternatively argue that even if they are not eligible for benefits as

medically needy unless they spend down to the MNIL, they remain optional

categorically needy despite the rise in their countable incomes, because the Medicaid

Act distinguishes between the financial eligibility requirements for “initial”

             Medicaid Program; Change in Application of Federal Financial
Participation Limits, 66 Fed. Reg. 2316, 2319–20 (Jan. 11, 2001) (authorizing a rule
change regarding the method by which a State may calculate an individual’s
countable income for purposes of determining Medicaid eligibility in order to reduce
the number of beneficiaries subject to spend-down); see also 58 Fed. Reg. at 4923
(calling the MNIL ceiling “fundamentally restrictive”).
           66 Fed. Reg. at 2320.

applicants for Medicaid and existing beneficiaries. Under their view of the Act,

petitioners, having been deemed eligible initially for Medicaid and enrolled in the

EPD Waiver, are “beneficiaries” to whom the District’s income test for HCBS

eligibility no longer applies, and “for whom any excess income simply becomes a

copay determined independently of the spend-down level.” 55 In support of this

“copay” argument, petitioners cite 29 D.C.M.R. § 9804.1, which provides that the

income deductions for PETI are applicable “after an initial eligibility

determination.” (Emphasis added.) Essentially, petitioners contend that existing

beneficiaries, who had their “initial” eligibility determination when they first applied

for Medicaid, may never have their eligibility reassessed; rather, DHS may only

conduct “a simple recalculation of their expected contributions.” 56

      As we have explained, respondents do not understand or apply PETI in the

manner petitioners propose. They apply the income eligibility requirements in 29

D.M.C.R. § 9801 for beneficiaries during the renewal process the same way they do

for first-time applicants. Thus, only after a beneficiary meets those requirements

(i.e., has a countable income at or below the categorically needy income ceiling or

           Br. for Pet’rs at 27.
           Reply Br. at 17.

spends down to the MNIL) do respondents deduct the applicable CMNA (among

other deductions) to determine the beneficiary’s contribution to their cost of care.

But petitioners argue that redetermining eligibility anew before the PETI

contribution determination violates § 9804.1’s language stating PETI must take

place “after an initial eligibility determination.”

      It is hard for us to see how petitioners’ argument squares with the federal

requirements, noted above, that eligibility for Medicaid benefits be reassessed

periodically, 57 and that a State must “make two separate determinations: (1) whether

an individual is ‘eligib[le] for’ Medicaid and, if so, (2) the ‘extent of’ benefits to

which he is entitled,” with “[b]oth determinations . . . informed by an individual’s

available ‘income’ and ‘resources.’” 58 And petitioners’ reading of § 9804.1 conflicts

with the plain language of other applicable sections of 29 D.C.M.R.: notably,

§ 9801.1, which states that in order to be eligible for HCBS, “an applicant or

beneficiary shall have gross countable income at or below the . . . [SIS],” and

          42 C.F.R § 435.916(a) mandates that Medicaid eligibility, including
“financial eligibility,” must be renewed on at least a yearly basis. Consistent with
this requirement, 29 D.C.M.R. § 9501.14 provides that “[t]he Department shall
renew eligibility every twelve (12) months for all beneficiaries, except for
beneficiaries deemed eligible for less than one (1) year.”
          Wong v. Doar, 

571 F.3d 247

, 251 (2d Cir. 2009) (citing, inter alia, 42
U.S.C. § 1396a(a)(17)).

§ 9801.6, which states that “[a]n applicant or beneficiary who has gross countable

income exceeding the SIS shall be permitted to spend down the excess income to the

MNIL . . . to become financially eligible.” (Emphases added.) It is a “basic”

interpretative principle that “each provision of the [regulation] should be construed

so as to give effect to all of the [regulation’s] provisions, not rendering any provision

superfluous.” 59

      In our view, the only reasonable interpretation of the regulations is that the

reference in § 9804.1 to an “initial eligibility determination” simply means that

determination of eligibility comes first, i.e., is the first step of a two-step process for

both applicants and existing beneficiaries when their Medicaid eligibility is subject

to periodic reassessment. The regulation does not create a means of evading

redeterminations of eligibility or enabling beneficiaries to remain eligible

indefinitely regardless of increases in their incomes. Rather, after an “initial”

         Carlson Constr. Co. v. Dupont W. Condo., Inc., 

932 A.2d 1132

, 1136 (D.C.
2007) (quoting Thomas v. District of Columbia Dep’t of Emp’t Servs., 

547 A.2d

, 1037 (D.C. 1988)). See also Rudolph v. United States ex rel Gillott, 37 App.
D.C. 455, 460 (D.C. Cir. 1911) (“In the construction of a statute [or regulation] it is
the duty of the courts to consider the whole, and, if reasonably possible, to reconcile
one part with another, so that due effect may be given to each.”); Rupsha 2007, LLC
v. Kellum, 

32 A.3d 402

, 410–11 (D.C. 2011) (choosing interpretation that is
“consistent with the regulatory scheme”); Greenbrier Hosp., LLC v. Azar, 

974 F.3d

, 550 (5th Cir. 2020) (“Ordinarily, [courts] try to reconcile potentially conflicting
provisions [in a regulation] by attempting to read the text in harmony.”).

renewal of a beneficiary’s eligibility based on whether they continue to meet the

applicable income test, their income is run through the PETI deductions that

determine their required financial contribution, if any, to their cost of care. Thus,

we agree with respondents that District regulations mandate they apply the income

test and then the PETI deductions during each renewal of an existing beneficiary’s

eligibility, and not only upon the first determination of their eligibility.

      Petitioners argue that this application of the PETI regulations cannot be

correct. They reason that with the CMNA deduction for EPD Waiver beneficiaries

equal to the SIS, applying PETI after eligibility is determined means those

beneficiaries will never have to defray the District’s payments under the program.

This, petitioners argue, violates the federal requirement that States “must reduce

[their] payment for home and community-based services” by the amount of

countable income remaining after PETI deductions. 60 However, no provision of

federal law prevents a State from setting the maintenance needs allowance at an

amount that reduces a beneficiary’s required copay to zero; the applicable federal

regulation allows the District to set the CMNA “at any level, as long as . . . [t]he

           42 C.F.R. § 435.726(a).

deduction amount is based on a reasonable assessment of need.” 61 There is no claim

that the District’s assessment of need is unreasonable. 62 And petitioners point to

nothing in federal law that would require the District to utilize PETI to do even more

and protect beneficiaries whose incomes rise above the eligibility level from losing

their coverage.

      Petitioners have represented to this court that some States have structured

valid Medicaid plans that effectuate a more favorable approach to the renewal of

HCBS benefits for beneficiaries whose incomes rise above the categorically needy

eligibility ceiling. That may be so; the Medicaid Act is designed, to some extent, to

give States “flexibility” in administering their programs, in order to incentivize both

participation in Medicaid and “innovation and experiment[ation]” in approaches to

health care for the needy. 63 But petitioners’ proposed approach is not required by

           42 C.F.R. § 435.726(c)(1)(i).
         Further to the point, CMS has acknowledged the District’s approach as
common and not improper, and has even authorized States to “increase the
maintenance needs allowance for waiver participants above [SIS]” in order to protect
income that is excluded from countable income for eligibility purposes. CMS
Guidance at 94 (emphasis added).

Skandalis, 14 F.3d at 181


(and, as formulated, appears to be inconsistent with) federal law; we have no

authority to order the District to abandon its own legally valid plan.

                                   V. Conclusion

      We conclude that petitioners’ countable incomes rendered them ineligible

under federal and local law and regulations for EPD Waiver benefits as categorically

needy recipients, and that petitioners have not established their eligibility to receive

those benefits as medically needy recipients. We therefore affirm the final order of

OAH upholding the termination of petitioners’ benefits.

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