NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
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                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-4675-18T1






                   Submitted September 14, 2020 – Decided November 16, 2020

                   Before Judges Messano and Smith.

                   On appeal from the New Jersey Division of Medical
                   Assistance and Health Services, Department of Human

                   Legal Services of Northwest Jersey, attorneys for
                   appellant (Shefali Saxena, on the briefs).

                   Gurbir S. Grewal, Attorney General, attorney for
                   respondent Division of Medical Assistance and Health
                   Services (Melissa H. Raksa, Assistant Attorney
            General, of counsel; Jacqueline R. D'Alessandro,
            Deputy Attorney General, on the brief).


      On August 30, 2018, respondent, the Hunterdon County Welfare Agency

(the agency), issued appellant, G.S., a notice of overpayment of ACA1 Medicaid

benefits. The agency sought $25,692.35. G.S. requested a hearing, which

occurred February 19, 2019. On March 11, 2019, the administrative law judge

(ALJ) issued an initial decision waiving the overpayment. In her decision, the

ALJ made witness credibility findings as well as detailed findings of fact.


      G.S. is a twenty-four-year-old woman diagnosed with bipolar disorder,

post-traumatic stress disorder, and depression. G.S. took medication for her

   Affordable Care Act (ACA) Medicaid differs from traditional Medicaid and
uses different qualifying criteria than traditional Medicaid. Persons not eligible
to enroll in a state's traditional Medicaid plan may qualify for the ACA Medicaid
plan if they fall within a certain income range, are not eligible for minimum
essential health coverage or cannot afford employer-sponsored health coverage,
and have not attained the age of sixty-five at the beginning of the plan year.
42 U.S.C. § 18051(e)(1).

mental health issues, attended therapy, and lived in a group home for people

diagnosed with mental illness. In 2015, G.S. applied for and was granted ACA

Medicaid. G.S. did not include in her application that she suffered from mental

health disabilities.   In March 2016, G.S. obtained a part-time job at the

Hunterdon Medical Center. She was promoted to full-time status later in 2016.

      In July 2016, the agency sent G.S. its eligibility redetermination 2 form by

mail. G.S. testified that she did not recall receiving the form. The purpose of

the form was to ascertain any change in the recipient's "income base" under

which the recipient first qualified for benefits, and to confirm that the recipient

remained eligible for ACA Medicaid benefits. In 2017, the agency admitted that

it failed to send G.S. the annual redetermination form, nor did it take any other

steps to determine G.S.'s eligibility on its own. While working at the medical

center in 2017, G.S. took a leave of absence from work due to mental and

physical health issues. In April 2018, the agency performed an "administrative

   Eligibility of ACA Medicaid beneficiaries must be renewed "once every
[twelve] months[.]" A renewing agency must consider a beneficiary's income,
amongst other factors, in the eligibility renewal process. See 42 U.S.C. §
18051(e)(1)(B). The renewing agency making this eligibility determination
"must do so without requiring information from the beneficiary if able to do so."
42 C.F.R. § 435.916(a) (1)-(2).

renewal" of G.S.'s ACA Medicaid eligibility and discovered G.S.’s medical

center job. As a result, the agency determined that G.S. no longer qualified for

ACA Medicaid. Due to unreported employment income, G.S. did not qualify for

ACA Medicaid benefits for calendar year 2017 and part of 2018. 3

       The agency terminated G.S. from the program and sought the recovery of

$25,692.35 in benefits it paid to her during the time she had unreported income.

When the agency terminated G.S.'s ACA Medicaid eligibility in April 2018, it

did not undertake a determination to see if G.S. was eligible for another

Medicaid program.4 After terminating G.S. from ACA Medicaid, the agency

    See 42 U.S.C.S. § 18051(e)(1)(B).
  42 C.F.R. 453.916 (f) (1) - (2) addresses the obligation of a county board of
social services to search for other Medicaid programs for an ACA Medicaid
beneficiary prior to determining that beneficiary ineligible. The section reads
as follows:
             (1) Prior to making a determination of ineligibility, the
             agency must consider all bases of eligibility, consistent
             with § 435.911 of this part.

             (2) For individuals determined ineligible for Medicaid,
             the agency must determine potential eligibility for other
             insurance affordability programs and comply with the
             procedures set forth in § 435.1200(e) of this part.

eventually determined G.S. eligible for another Medicaid program, called

Medicaid Workability 5, in June 2018.

      After the hearing, the ALJ's initial decision recommended waiving

collection of the overpayment, finding that G.S.'s mental health disability, her

lack of intent to commit fraud,      the agency's failure to perform a timely

redetermination of eligibility, and her eligibility for Medicaid Workability,

taken together, supported an exercise of the Commissioner's discretion under

N.J.S.A. 30:4D-7(l).6 The Director rejected the ALJ's initial decision. The

Director gave two reasons: (1) she found it "implausible" that G.S. would not

know to report her income; and (2) she found that since G.S. was not determined

disabled until July 2018, there could be no finding by the ALJ that G.S. would

have received Workability benefits before that. The Director did not conclude

   "The purpose of the New Jersey Workability program is to provide an
opportunity for disabled individuals who are employed to purchase Medicaid
coverage when their earnings would otherwise disqualify them for Medicaid."
N.J.A.C. 10:72-9.1. This program applies "to employed, permanently-disabled
individuals residing in New Jersey who are between the ages of 16 and 64 whose
countable earned incomes are below 250%, and countable unearned incomes
below 100% of the Federal poverty level for an individual or a couple."

Ibid. 6

     N.J.S.A. 30:4D-7(l) reads in pertinent part, "the commissioner is further
authorized and empowered, at such times as he [or she] may determine feasible,
. . . [t]o compromise, waive, or settle and execute a release of any claim arising
under this act . . . . "
that the ALJ's findings were arbitrary, capricious, or unreasonable or that the

ALJ's findings were unsupported by sufficient, competent or credible evidence

in the record.

       G.S. raises the following issues on appeal:

                  ARBITRARY,     CAPRICIOUS,       AND
                  PROVIDE A CLEAR REASON FOR
                  AND    WAS   NOT     SUPPORTED    BY
                  THE RECORD.

                  A. DMAHS Failed to Consider HCDSS'
                     Affirmative Obligations in the Medicaid
                     Renewal Process Pursuant to the Federal ACA
                     Medicaid Regulations, 42 § C.F.R.

                  B. By Failing to Comply with 42 CFR § 435.916,
                     HCDSS Retroactively Terminated Medicaid
                     Benefits Without Evaluating G.S.’ Eligibility
                     for Another Medicaid Program in Violation of
                     42 C.F.R. § 435.916(f)(1).

                        i.     HCDSS has a duty to evaluate a
                               beneficiary’s eligibility for all other
                               Medicaid     programs       prior    to
                               termination of Medicaid benefits.

                        ii.    DMAHS acted unreasonably in
                               failing    to  acknowledge   the
                               substantial,  credible  evidence

                                 supporting       G.S.'    retroactive
                                 eligibility for Medicaid Workability
                                 in 2017.

                    C. DMAHS Improperly Rejected the ALJ's
                       Credibility Determinations of Lay Witnesses
                       in Violation of the New Jersey Administrative
                       Procedure Act, N.J.S.A. 52:14B-10(C).


      Our role in reviewing an agency decision is limited. R.S. v. Div. of Med.

Assistance & Health Servs., 

434 N.J. Super. 250

, 260-61 (App. Div. 2014) (citing

Karins v. City of Atl. City, 

152 N.J. 532

, 540 (1998)). We "defer to the specialized

or technical expertise of the agency charged with administration of a regulatory

system." In re Virtua-W. Jersey Hosp. Voorhees for Certificate of Need, 

194 N.J. 413

, 422 (2008) (citing In re Freshwater Wetlands Prot. Act Rules, 

180 N.J. 478


488-89 (2004)).      "[A]n appellate court ordinarily should not disturb an

administrative agency's determinations or findings unless there is a clear showing

that (1) the agency did not follow the law; (2) the decision was arbitrary, capricious,

or unreasonable; or (3) the decision was not supported by substantial evidence."

Ibid. (citing In re


192 N.J. 19

, 28 (2007)).

      A presumption of validity attaches to the agency's decision. Brady v. Bd. of


152 N.J. 197

, 210 (1997); In re Tax Credit in re Pennrose Props., Inc., 

346 N.J. Super. 479

, 486 (App. Div. 2002). The party challenging the validity of the

agency's decision has the burden of showing that it was arbitrary, capricious, or

unreasonable. J.B. v. N.J. State Parole Bd., 

444 N.J. Super. 115

, 149, (App. Div.

2016) (quoting In re Arenas, 

385 N.J. Super. 440

, 443-44 (App. Div. 2006)).

      Nevertheless, "an appellate court is 'in no way bound by the agency's

interpretation of a statute or its determination of a strictly legal issue.'" R.S. v. Div.

of Med. Assistance & Health Servs., 

434 N.J. Super. 250

, 261 (App. Div. 2014)

(quoting Mayflower Sec. Co. v. Bureau of Sec. in Div. of Consumer Affairs of Dep't

of Law & Pub. Safety, 

64 N.J. 85

, 93 (1973)).

      The New Jersey Administrative Procedure Act, N.J.S.A. 52:14B-1 to

52:14B-31, establishes an agency head's standard of review when considering

an ALJ's initial decision.

      N.J.S.A. 52:14B-10(c) reads in pertinent part:

             In reviewing the decision of an administrative law
             judge, the agency head may reject or modify findings
             of fact, conclusions of law or interpretations of agency
             policy in the decision, but shall state clearly the reasons
             for doing so. The agency head may not reject or modify
             any findings of fact as to issues of credibility of lay
             witness testimony unless it is first determined from a
             review of the record that the findings are arbitrary,
             capricious or unreasonable or are not supported by
             sufficient, competent, and credible evidence in the
             record. In rejecting or modifying any findings of fact,
             the agency head shall state with particularity the
             reasons for rejecting the findings and shall make new

            or modified findings supported by sufficient,
            competent, and credible evidence in the record.


      When an agency head rejects or modifies an ALJ's "findings of facts,

conclusions of law[,] or interpretations of agency policy in the decision . . ." the

agency head "shall state clearly the reasons for doing so." N.J.S.A. 52:14B-10(c).

Nevertheless, when rejecting or modifying an ALJ's findings of fact, "the agency

head must explain why the ALJ's decision was not supported by sufficient credible

evidence or was otherwise arbitrary." Cavalieri v. Bd. of Trs. of Pub. Emps. Ret.


368 N.J. Super. 527

, 534 (App. Div. 2004) (first citing N.J.S.A. 52:14B-10(c);

then citing S.D. v. Div. of Med. Assistance & Health Servs., 

349 N.J. Super. 480


485 (App. Div. 2002)).

      Medicaid is a federally created, state-implemented program that provides

"medical assistance to the poor at the expense of the public." Estate of DeMartino

v. Div. of Med. Assistance & Health Servs., 

373 N.J. Super. 210

, 217 (App. Div.

2004) (quoting Mistrick v. Div. of Med. Assistance & Health Servs., 

154 N.J. 158


165 (1998)); see also 42 U.S.C. § 1396-1. Once a state elects to participate and has

been accepted into the Medicaid program, it must comply with the Medicaid statutes

and federal regulations. Harris v. McRae, 

448 U.S. 297

, 301 (1980); United Hosps.

Med. Ctr. v. State, 

349 N.J. Super. 1

, 4 (App. Div. 2002); see also 42 U.S.C. §§

1396a, 1396b (2019).

      New Jersey participates in the federal Medicaid program pursuant to the

New Jersey Medical Assistance and Health Services Act, N.J.S.A. 30:4D-1 to

4D-19.5. Eligibility for Medicaid in New Jersey is governed by regulations

adopted in accordance with the authority granted by N.J.S.A. 30:4D-7 to the

Commissioner of the Department of Human Services (DHS).            The New Jersey

Division of Medical Assistance and Health Services is a unit within DHS that

administers the Medicaid program. N.J.S.A. 30:4D-5, -7; N.J.A.C. 10:49-1.1.

Consequently, the Division is responsible for protecting the interests of the New

Jersey Medicaid program and its beneficiaries. N.J.A.C. 10:49-11.1(b).

      As opposed to standard Medicaid, eligibility for ACA Medicaid is

governed by federal statute, 42 U.S.C. § 180510(e)(1). That same statute

establishes guidelines designed to ensure that states: meet eligibility verification

requirements for program participation; meet the requirements for use of Federal

funds received by the program; and also meet quality and performance standards

established under this section.

Ibid. ACA Medicaid beneficiaries

and the state

agencies that administer them are guided by federal regulations 42 C.F.R

453.900 through 453.965, authorized by section 1102 of the Social Security Act,

42 U.S.C. § 1302. These regulations establish guidelines for beneficiaries and

the agencies that serve them on a variety of ACA Medicaid implementation

issues, including but not limited to, applications for benefits, eligibility

determinations, and eligibility redeterminations among other issues.


         The Director issued a final decision rejecting the ALJ's recommendation.

That decision did not include a "review of the record" and a conclusion that the

ALJ's findings are "arbitrary, capricious or unreasonable or are not supported by

sufficient, competent, and credible evidence in the record." N.J.S.A. 52:14B-


         The Director failed to consider the facts related to G.S.'s mental health

diagnosis and any impact that diagnosis may have had on G.S.'s ability to

comprehend and comply with ACA Medicaid eligibility renewal requirements.

The Director failed to consider the agency's missed 2017 eligibility

determination for G.S., a violation of its affirmative duty under 42 C.F.R. §

435.948 to conduct annual ACA Medicaid eligibility determinations. The

Director did not consider the agency's failure to comply with 42 C.F.R. §

435.916 (f)(1), which requires an agency to determine a recipient's potential

eligibility for other insurance programs before "making a determination of

ineligibility." The Director found "that there is nothing in the record to suggest

[G.S.] was eligible for the Workability Program [prior to 2018]." This finding

by the Director contradicts the record that was before the ALJ. At the hearing,

G.S. introduced testimony and medical records documenting G.S.'s mental

health diagnoses in 2017 which were at least identical to, if not more severe

than, the diagnoses that resulted in her Medicaid Workability eligibility

determination in June 2018. After considering G.S.'s significant 2017 medical

history, along with the agency's failure to issue a redetermination form to G.S.

that year, the ALJ inferred that G.S. would have been eligible for Medicaid

Workability in 2017 had the agency carried out its duty to perform an annual

redetermination under § 435.916(a) (1)-(2). This finding, along with the others

listed above, was weighed by the ALJ in balancing the considerations for and

against waiver. In rejecting this finding, the Director failed to "state with

particularity the reasons for rejecting the [ALJ's] findings[,]"nor did she "make

new or modified findings supported by sufficient, competent, and credible

evidence in the record." 52:14B-10(c). Finally, the Director failed to consider

the ALJ's witness credibility findings with respect to G.S. or the agency's

representative. By failing to consider credibility findings of the ALJ, as well

not considering the other facts cited by the ALJ in her decision, the Director

effectively rejected them without giving reasons for doing so. She made no

findings to support her decision as required by the Act.

Ibid. We find that

the Director, in rejecting the ALJ's decision, did not state

clearly the reasons for doing so. She did not review the record and conclude that

the ALJ's credibility and fact finding was arbitrary, capricious, or unreasonable.

With one exception, the Medicaid Workability eligibility issue, she did not find

that the ALJ's findings were unsupported by sufficient, competent, or cred ible

evidence in the record. Lastly, the Director failed to make new or modified

findings supported by competent evidence in the record in her final decision.

These steps are mandated by the Administrative Procedure Act. The Director's

failure to apply the appropriate standard of review in reaching her final decision

was arbitrary and capricious.     

S.D., 349 N.J. Super. at 485

(citing Lefelt,

Miragliotta & Prunty, Administrative Law & Practice, New Jersey Practice

Series, § 6.16 at Supp. 23 (2001 ed. Supp.)).

      We remand to the Director of the Division of Medical Assistance and

Health Services for review of the ALJ's initial decision in a manner consistent

with the standards outlined in this opinion.

      Reversed and remanded. We do not retain jurisdiction.


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