Opinion
Case No. 03-121-KI.
May 20, 2004
Lorey H. Freeman, Spencer M. Neal, Oregon Law Center, Portland, Oregon, Attorneys for Plaintiffs.
Andrea Marie Gacki, U.S. Department of Justice, Civil Division/Federal Programs Branch Washington, D.C., Karin J. Immergut, Craig J. Casey, United States Attorney's Office, Portland, Oregon, Hardy Myers, Katrina M. Lonborg, Charles Edward Fletcher, Stephen K. Bushong, Salem, Oregon, Attorneys for Defendants.
OPINION
Plaintiffs, on behalf of themselves and approximately 80,000 other similarly situated participants in the low-income Oregon Health Plan ("OHP"), filed this action against defendants challenging the imposition of monthly premiums and co-payments included in a revised version of OHP adopted in 2001 known as the Oregon Health Plan 2 ("OHP2"). Before the court are issues related to the scope of injunctive relief in this matter and plaintiffs' Motion for Class Certification (#46).
BACKGROUND
OHP2 contains two different benefit packages provided to different categories of Medicaid recipients. What was formerly known as OHP became known as "Oregon Health Plan Plus" ("OHP Plus"), which continued to provide the same benefit package (based upon the prioritized list) to the mandatory populations and some optional populations as before, without cost-sharing other than nominal co-payments on prescription drugs and outpatient services. Certain other optional populations not previously covered under OHP were included in OHP Plus. A handful of expansion populations were also included in OHP Plus, such as pregnant women with incomes from 170% to 185% of the federal poverty line ("FPL").The second benefit package included in OHP2, which did not exist at all in OHP, is known as "Oregon Health Plan Standard" ("OHP Standard"). OHP Standard expands care to two expansion populations who would not be eligible for Medicaid without a 42 U.S.C. § 1315 waiver: (1) uninsured parents of children eligible under Medicaid and State Children's Health Insurance Program ("SCHIP") with family incomes below 185% of the FPL and who are not eligible for Medicare; and (2) uninsured childless adults with incomes below 185% of the FPL who are not covered under Medicare. Plaintiffs are covered under OHP Standard because they fall in the latter category. The cost of this OHP Standard expansion was offset by reducing the benefit package offered under OHP Standard compared with OHP Plus and imposing monthly premiums and co-payments beginning February 1, 2003, regardless of the individual's ability to pay these costs. Those beneficiaries who fail to pay the required premiums for OHP Standard are disqualified from OHP2 for a minimum of six months regardless of the reason for nonpayment. An OHP Standard recipient's failure to pay co-payments will not lead to disenrollment, but can result in a provider refusing to provide a service (except in the case of an emergency).
OHP Standard also covers several optional groups not previously covered by OHP.
On the cross motions for summary judgment, this court ruled that OHP Standard violates 42 U.S.C. § 1396o(f) by imposing co-payments pursuant to a section 1315 waiver without the Secretary first finding, after public notice and opportunity for comment, that the five criteria in section 1396o(f)(1)-(5) have been met. It also ruled that OHP Standard violates section 1396o(e) by permitting health care providers to deny care to an individual who cannot meet the scheduled co-payment. Accordingly, the court granted summary judgment to plaintiffs on these two issues.
In addition, this court ruled that defendants were entitled to summary judgment with regard to five matters. First, the premiums charged recipients of OHP Standard do not violate the provisions of the Medicaid Act, specifically section 1396o. Second, OHP Standard does not violate section 1396o(b)(1) and (3) with respect to co-payments. Third, OHP2 is a legitimate demonstration project that meets the basic requirements in section 1315 for a waiver to be granted. Fourth, OHP2 does not violate federal limits on human experimentation in section 3515b. Finally, OHP2 does not violate the Equal Protection Clause of the Fourteenth Amendment.
DISCUSSION
I. Injunctive Relief
Based on the supplemental briefing submitted by the parties, it appears that the parties disagree as to two issues related to injunctive relief: (1) whether the injunction should limit the imposition of all co-payments or only non-nominal co-payments; and (2) the timeline for implementation of the court's order.
A. Whether to Limit the Injunction to Only Non-Nominal Co-Payments
The state defendant seeks to limit the injunction to bar only non-nominal co-payments in OHP Standard's expansion population. Plaintiffs seek an injunction barring all co-payments until they can be calculated in accordance with 42 C.F.R. § 447.54, which defines a "nominal" co-payment allowed for optional beneficiaries under section 1396o(b)(3).
In resolving the cross motions for summary judgment, this court found that in order to apply co-payment restrictions to plaintiffs under section 1396o(f), HHS must first satisfy the five criteria set forth in that subsection. The court concluded that OHP Standard did not satisfy at least one of the five criteria at issue. The state defendant has stated that the state will not be seeking section 1396o(f) review and revision.
The state defendant argues, and plaintiffs appeared to assume in their briefing, that the state can still charge nominal co-payments under section 1396o(b)(3). However, this court concluded that section 1396o(b)(1) and (3) apply only to optional beneficiaries and not to expansion populations such as plaintiffs. Since section 1396o(b)(1) and (3) do not apply to plaintiffs, the statute provides no authority for the state to charge any co-payments to plaintiffs. The state defendant argues that this is an unfair result since it can charge nominal co-payments to optional beneficiaries. But, the state defendant misses the point that optional beneficiaries are people who would normally qualify for Medicaid as mandatory beneficiaries but they make too much money, whereas, expansion populations like plaintiffs are often far poorer than optional beneficiaries.
As plaintiffs ultimately asserted at the May 13, 2004, hearing, an injunction barring all co-payments is consistent with the court's prior ruling and the statute. Accordingly, the state defendant shall not impose any co-payments inconsistent with section 1396o(f) on expansion populations covered by OHP Standard, nor shall the state defendant authorize providers to deny care when co-payments are not made.
B. Timeline for Implementation of the Injunction
The state defendant seeks to delay implementation of the injunction until August 1, 2004. The plaintiffs seek an earlier implementation date, no later than thirty days.
The state defendant wishes to delay the changes so as to enable the state to implement the changes in conjunction with other changes to be made to OHP Standard in early August. The state defendant also argues that it would be impossible to implement changes before August 1 because DHS must first recalculate capitation rates, the reimbursement rates for the managed care organizations participating in OHP Standard, which involves complicated actuarial calculations and a federal approval process.
I acknowledge that this may be a difficult position for the state defendant, but this court has ruled that the relevant co-payments are illegal, and all parties have been on notice of this conclusion since December 2003. Moreover, there is overwhelming evidence in the record that plaintiffs and others similarly situated have suffered and continue to suffer serious adverse consequences as a result of the defendants' actions. Accordingly, the injunction against charging co-payments and denying care when co-payments are not made is effective thirty days from the date of this Opinion and Order. The state defendant shall give notice of this ruling to all former members of OHP Standard whose coverage has been terminated because of a failure to meet the plan's cost sharing requirements.
II. Plaintiffs' Motion for Class Certification
Pursuant to FRCP 23(a) and (b)(2), plaintiffs filed a motion on July 30, 2003, to certify the following class and sub-class for declaratory and injunctive relief:
Class: All current and future Oregon Health Plan ("OHP") participants who have been or will be:
(a) required to pay monthly premiums and co-payments in excess of those authorized by 42 U.S.C. § 1396o and/or
(b) all past participants terminated or suspended from receiving OHP assistance because of their failure to meet the cost sharing requirements imposed under the OHP.
Subclass: All past, current, and future OHP participants who have been or who will be terminated or suspended from receiving OHP benefits without a determination of ability to pay and the opportunity to contest that determination in an administrative hearing.
The federal defendants filed a motion to stay plaintiffs' motion for class certification, which this court granted until a final ruling on the state defendant's motion to dismiss and the parties' cross motions for summary judgment. The court has now entered a final ruling on the pending dispositive motions and addresses the issue of class certification.
Based on the court's rulings on the dispositive motions, plaintiffs have conferred with the state defendant and have agreed to the following class definition: "All current, past, and future OHP Standard members." However, federal defendants oppose class certification because: (1) plaintiffs have failed to demonstrate that they can serve as adequate representatives of the proposed class; and (2) the relief sought by plaintiffs will produce the same result as formal class-wide certification, rendering certification unnecessary.
The state defendant initially argued that the proposed class and sub-class were not sufficiently specific to be comprehensible or manageable, but has now reached agreement with plaintiffs as to a workable class definition.
In order for a class action to be certified, the plaintiffs must establish the four prerequisites of FRCP23(a) and at least one of the alternative requirements of FRCP 23(b). The four prerequisites of FRCP 23(a) are typicality, commonality, numerosity, and adequacy. Plaintiffs bear the burden of showing that each of these criteria is satisfied. Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992). Because plaintiffs seek only declaratory and injunctive relief, they request class certification under FRCP 23(b)(2), which requires that "the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole."
A. FRCP 23(a) Prerequisites
Defendants do not contest plaintiffs' assertions regarding typicality, commonality, or numerosity, and this court finds that those criteria under FRCP 23(a) are met. Plaintiffs allege more than 80,000 persons are being or will be required to make excessive monthly premiums or co-payments or who have been or will be terminated or suspended from participation in OHP because of their failure to meet the cost sharing requirements. Such numbers make it impractical to join each plaintiff, satisfying the numerosity requirement. Issues of fact or law are common to each class member. The claims and defenses of the named plaintiffs stem from the same practice that forms the basis of the class claims and are based on the same legal theory, which satisfies the typicality requirement.
However, the federal defendants challenge the remaining prerequisite that the named plaintiffs "will fairly and adequately protect the interests of the class." FRCP 23(a)(4). "A class representative must be part of the class and possess the same interest and suffer the same injury as the class members."Amehem Products, Inc. v. Windsor, 521 U.S. 591, 625 (1997). Adequate representation "depends on the qualifications of counsel for the representatives, an absence of antagonism, a sharing of interests between representatives and absentees, and the unlikelihood that the suit is collusive." In re N. Dist. of Cal. Dalkon Shield IUD Prods. Liab. Litig., 693 F.2d 847, 855 (9th Cir. 1982), cert. denied, 459 U.S. 1171 (1983). Ensuring adequate representation is particularly important when absent class members will not be permitted to opt-out, as with FRCP 23(b)(2) certification. See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1021 (9th Cir. 1998) (noting that potential inadequacy of class representative is mitigated when "any class member who wished to do so could opt out of the settlement class").
The federal defendants contend that the class representatives have interests antagonistic to the members of the putative class. If Oregon cannot collect the challenged co-payments, the federal defendants point out that Oregon may decide not to cover certain medical services or tighten eligibility requirements for the expansion populations, causing some potential class members to lose coverage entirely. Alternatively, Oregon may decide to restrict the duration or frequency of covered services. Members of the putative class have varying incomes. Therefore, they might make different decisions about continuing to challenge increased co-payments when faced with the possibility of other, more severe, cuts in services they receive. Plaintiffs contend such concerns are speculative.
Although the state defendant does not oppose class certification, it is clear to me from the state defendant's arguments at the injunctive relief hearing that OHP2 will be revamped and that its inability to collect non-nominal co-payments from expansion populations will exacerbate the cuts it must make. For these reasons, I disagree with plaintiffs' conclusion that such conflicts are merely speculative.
B. Necessity of Certification
Plaintiffs are suing government officials for declaratory and injunctive relief, claiming that the state procedure is defective under the applicable statutes. The federal defendants claim that any injunctive relief would benefit the putative class, rendering class certification unnecessary.
When the relief sought by individual plaintiffs will produce the same result as formal class-wide relief, the Ninth Circuit has upheld the denial of class certification. In James v. Ball, 613 F.2d 180 (9th Cir. 1979), rev'd on other grounds, 451 U.S. 355 (1981), the plaintiff challenged the way in which directors of irrigation districts in Arizona were elected by weighting each elector's vote according to the number of acres owned in the district. The Ninth Circuit affirmed the district court's denial of plaintiffs' class certification motion under FRCP 23(b)(2), noting that "the relief sought will, as a practical matter, produce the same result as formal class-wide relief." Id. at 186. In LaMadrid v. Hegstrom, 599 F. Supp. 1450 (D. Or. 1984),aff'd in part and rev'd in part on other grounds, 830 F.2d 124 (9th Cir. 1987), plaintiffs were Aid to Dependent Children recipients who complained that the State of Oregon impermissibly considered certain income in its benefit calculations. Judge Owen Panner denied class certification under FRCP 23(b)(2). Because plaintiffs sought only declaratory and injunctive relief, "any order that defendants be enjoined from applying these policies will apply to and benefit the entire class." Id. at 1453.
"While injunctive relief generally should be limited to apply only to named plaintiffs where there is no class certification, `an injunction is not necessarily made overbroad by extending benefit or protection to persons other than prevailing parties in the lawsuit — even if it is not a class action — if such breadth is necessary to give prevailing parties the relief to which they are entitled.'" Easy Riders Freedom F.I.G.H.T. v. Hannigan, 92 F.3d 1486, 1501-02 (9th Cir. 1996). In contrast, in Zepeda v. INS, 753 F.2d 719, 729 n. 1 (9th Cir. 1985), the court suggested that class certification should only be denied when class-wide relief would be an "inevitable" result, not merely the "practical effect," of injunctive or declaratory relief. In that case, plaintiffs were Hispanics who sought to enjoin the INS from searching Hispanics' residences without consent, detaining and questioning Hispanics about their immigration status without good cause, and engaging in other demeaning practices. Without certifying a class, the district court issued a preliminary injunction which affected all Hispanics. The Ninth Circuit held that the scope of the injunction was overly broad because it benefitted non-parties and must be limited only to the individual plaintiffs in the absence of class certification.
However, the precedential value of Zepeda has been limited to cases involving preliminary injunctions. In Bresgal v. Brock, 843 F.2d 1163 (9th Cir. 1987), the court rejected the argument that nationwide relief is inappropriate or overly broad where no class has been certified. Upholding an injunction requiring enforcement of the Migrant and Seasonal Agricultural Worker Protection Act as to forestry-related activities on a nationwide basis, the court distinguishedZepeda: "The import of the rule underlying Zepeda is that an injunction cannot issue against an entity that is not a party to the suit. The injunction here was issued only against the Secretary, who is a party." Id. at 1170.
Here, the court is issuing an injunction prohibiting certain practices by the state and federal defendants. As a practical matter, that injunctive relief will benefit not only the named plaintiffs but also the putative class if Oregon stops charging co-payments to OHP Standard members. I also conclude that the benefit to other similarly situated persons in this case will be "inevitable." The court has ordered the state defendant in this action to stop a practice which it has found to be contrary to federal law. On the record, the state defendant has committed to applying the court's ruling not just to the named plaintiffs but on a class-wide basis. See e.g., Wells v. Malloy, 510 F.2d 74, 76 n. 3 (2nd Cir. 1975) (noting that explicit assurances may be considered as a condition for denying class certification). Additionally, the practical benefit of notice that would accompany class certification, particularly with respect to former OHP Standard members, has been achieved as a part of the court's order on injunctive relief. Because I have concerns regarding the adequacy of representation and because I find that class-wide relief in this case is inevitable, I deny plaintiffs' request for class certification.
CONCLUSION
For the foregoing reasons, plaintiffs' Motion for Class Certification (#46) is denied. Effective thirty days from the date of this Opinion and Order, the state defendant shall not impose any co-payments inconsistent with section 1396o(f) on expansion populations covered by OHP Standard, nor shall the state defendant authorize providers to deny care when co-payments are not made. The state defendant shall give notice of this ruling to all former members of OHP Standard whose coverage has been terminated because of a failure to meet the plan's cost sharing requirements.