DAB Decision 85
February 28, 1980 Maryland Department of Health and Mental Hygiene;
Docket No. 78-45-MD-HC; Decision No. 85 Mason, Malcolm S.
SUMMARY
The following summary is prepared on the responsibility of the Executive
Secretary of the Board as a convenience to the interested public. It is
not an official part of the decision and has not been reviewed by the
Board Chairman. Similar official summaries of earlier cases appear in
45 CFR Part 16, Appendix.)
Maryland requested reconsideration by the Board Chairman under 45 CFR
201.14, as amended March 6, 1978, of a determination by the
Administrator, Health Care Financing Administration, disallowing $70,022
in Federal financial participation (FFP) in the cost of Medicaid
sterilization services provided to individuals who had given informed
consent, legally effective under State law, but who were between the
ages of 18 and , 21 years. The sterilizations met the requirements of
the applicable regulation, 45 CFR 205.35(a)(1)(ii), requiring "legally
effective" consent, age 18 being the age of majority in Maryland, but
were disallowed on the basis that a "moratorium regulation" prohibited
FFP in all sterilizations of individuals under age 21. In reversing the
disallowance, the Board Chairman concluded that a notice published in
1973 was not a regulation binding on the State with respect to the costs
in question; that court cases which viewed the 1973 notice as a
"moratorium regulation" did not reach the issue of whether the
"moratorium" was, in fact, binding on the States; and that an ambiguous
statement in the preamble to the applicable regulation should not be
read as a rule establishing a minimum age of 21 for FFP in
sterilizations during a time period when there was no clear Departmental
policy with respect to such a minimum age. Considerations weighing in
favor of the State included the nature of the grantor/grantee
relationship in the Medicaid program and the fact that the agency heads
had been directed to promulgate sterilization policy through regulations
developed in notice and comment rulemaking proceedings. Moreover,
establishing a minimum age for consent for purposes of Federal funding,
while within the Secretary's authority, nevertheless influences an area
traditionally reserved for the States, and ambiguous provisions should
not be read as having that effect.
Stephen T. Sfekas, Assistant Attorney General, and Henry E. Schwartz,
Special Attorney, for the Maryland Department of Health and Mental
Hygiene. Robert A. Dublin, Attorney, and Jo Ann Abramson, Legal Intern,
HEW Office of the General Counsel, Health Care Financing, and Human
Development Services Division, for the Health Care Financing
Administrator
DECISION
This is the final step in the reconsideration process provided in
Section 201.14 a Title 45 of the Code of Federal Regulations,
implementing Section 1116(d) or the Social Security Act, with the
Chairman of the Departmental Grant Appeals Board substituted for the
Administrator, Social and Rehabilitation Service (SRS) pursuant to the
transfer of functions of March 6, 1978 (43 FR 9266-7). A new Chairman,
was appointed February 25, 1980, just prior to the issuance of this it
decision. To remove any doubt as to decide this matter, the new
Chairman, as authorized in the transfer of functions, has made a
confirmatory delegation to me of that responsibility.
The State, rather than electing review under 45 CFR Part 16, chose to
continue to proceed under the Section 201.14 procedures, as modified,
for purposes of reconsideration of a decision issued May 4, 1978), by
the Administrator of the Health Care Financing Administration (HCFA),
disallowing $70,022 in Federal financial participation (FFP) in
expenditures claimed under Title XIX of the Social Security Act
(Medicaid) for the period October 1, 1975 to December 31, 1976 for
sterilization services provided to individuals between the ages of 18
and 21 years. It is not challenged that the individuals in question had
in fact given informed consent to the sterilizations performed and were
legally capable under State law to give such consent.
Under the transfer of functions, the State was entitled to a conference
with the Board Chairman, and, after appropriate notice and the filing of
preconference briefs, a conference was held on August 7, 1979. An
opportunity to submit post-conference briefing, was afforded to both
parties, but only HCFA chose to file such a brief.
This case presents an example of the all too frequent situation where
Departmental policy which has evolved over a period of time become so
established in the minds of agency officials that they rely on it as a
basis for disallowance of costs incurred during a period when the
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Department was considering various options and had not yet clearly
committed itself to that policy as a program requirement. The officials
here were apparently under impression that guidelines published in 1973
had imposed a policy of denial of Federal funding for sterilizations of
individuals between the ages of 18 and 21 (even where those in
individuals have given and are legally capable of giving consent under
State law). These guidelines, while they did direct agency heads to
withhold FFP in sterilization, of individuals under age 21 pending,
publication of final regulations aimed at insuring voluntary consent,
were not a rule binding on the states. Following publication of the
guidelines, HEW, fluctuated between using 18 or 21 as the critical age
for Federal funding, of sterilizations, and, even then, did not seek to
deny funding, below the cutoff age where certain safeguards were met.
HCFA now claims that the Department did adopt a binding policy of
outright denial, using age 21, by publishing a preamble statement issued
in 1974. Although the text of the final regulation which this statement
accompanied merely require's consent legally effective under state law,
HCFA contends that this position is modified by the preamble, which it
construes as a rule prohibiting funding. This takes a strained reading,
but HCFA argued in the conference before me that any ambiguities should
be excused as a mere failure in draftsmanship. There are reasons for
not accepting HCFA position, however.
HCFA has not explained the policy as one which is required by the
relevant statute or case law, but as one relating to the Secretary's
authority to provide for the efficient administration of the program by
establishing a uniform minimum age for purposes of Federal funding.
Establishing a minimum age for such purposes, while within the
Secretary's authority, nevertheless means influencing, through the
Federal pursestrings an area traditionally reserved for the states.
Given this context and the further consideration that the agency heads
were specifically directed to promulgate sterilization policy through
notice of proposed rulemaking leading to final regulations, costs
allowable under the terms of a final regulation should not be disallowed
solely on the basis of an ambiguous preamble statement when they were
incurred during a period when Departmental policy was in flux.
Background
Congress has provided in Title XIX (Medicaid) that a State is entitled
to FFP in the costs of family planning services meeting certain
requirements. Additional requirements may be imposed by the Secretary,
consistent with his authority under the Social Security Act, providing
for the efficient administration of the Act. Section 1102. In the
Medicaid program, recognition is given to the State as an autonomous
grantee with the right "within broad limits, to determine the scope of
the program in which it chooses to participate." Voe v. Califano, 434 F.
Supp. 1058, 1062 (D. Conn. 1977).
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The Secretary has interpreted the family planning section of Title XIX
to include sterilization services. There were initially no specific
rule or regulations governing the circumstances under which there could
be Federal funding of sterilizations although Congress had provided that
all family planning should be on a voluntary basis. After national
attention was drawn to the problem of improper coercion of needy persons
to submit to sterilization upon threat of loss of welfare benefits,
published a notice in August 1973, 38 FR 20930, that it was adopting
guidelines to be used in issuance of regulations to insure informed
consent and voluntariness in Federally funded sterilizations. The
actual guidelines were termed General Guidelines Limiting Federal
Financial Assistance for Sterilization of Minors and Other Legally
Incompetent Individual" (Guidelines). Accompanying the Guidelines was a
direction to heads of affected HEW agencies to withhold FFP in
sterilization of individuals under age 21 or legally incapable of giving
consent, pending publication of final regulations. This provision came
to be known by agency officials as a "moratorium." The Regional
Commissioner of SRS and later the Administrator, HCFA, based the instant
disallowance on the 1973 Guidelines notice.
Effect of the 1973 Guidelines
The State's argument that the Guidelines were not properly promulgated
as a substantive regulation in 1973 is persuasive for several reasons.
First, the Guidelines are expressly addressed to agency officials and
not to grantees. Second, the Guidelines specifically state that the
agency officials should "promulgate regulations," so the guidelines
themselves are clearly not the regulations. Third, as HCFA conceded at
the conference, the Guidelines were not published in accordance with the
notice and comment provisions of the Administrative procedure Act (APA)
voluntarily adopted for HEW grant programs by a Federal Register notice
dated February 5, 1971, 36 FR 2532, and binding on the agency. See
National Welfare Rights Organization v. Mathews, 533 F. 2d 636, 646
(D.C. Cir. 1976).
In this decision upholding the disallowance here, the Administrator,
HCFA, cited two court cases, Voe v Califano, 434 F. Supp. 1058 (D.
Conn. 1977), and Peck v. Califano, 454 F. Supp. 434 (D. Utah 1977), for
the proposition that "Federal District Courts have upheld the
Department's Moratorium on FFP for sterilizations of individuals under
age 21" (Administrator's Decision, p. 2), but this reliance appears to
have been misplaced.
As pointed out in the Notice of Conference issued May 29, 1979, the
plaintiffs in the Voe and Peck cases unsuccessfully challenged on an
equal protection basis the constitutionality of the "moratorium,"
viewed
by the parties and the Court as a regulation prohibiting Federal funding
in the sterilization of individuals under age 21. The Notice suggested
that, on preliminary reading, the cases did not
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appear to address the issue of whether the Guidelines were, as the here
contended, merely administrative guidelines not binding on the State.
In Voe, the matter was not at issue because the State of Connecticut
there itself took the position that its State regulation denying such
funding was required by the Federal "moratorium." 434 F. Supp. at
1060.
In Peck there appeared to be a similar assumption that the notice
published in 1973 was a regulation restricting FFP.
In a preconference brief here, filed by a legal intern, HCFA
acknowledged. "In Voe and Peck, the courts "held the validity of the
moratorium without ever addressing, the issue compliance with the APA."
(p. 8) This brief argued, however, that in the case of Doe v. Califano,
Civ. No. 4-78 Civ. 311 (D. Minn. filed September 25, 1978), the issue of
APA compliance was specifically addressed and "the court upheld the
moratorium, reasoning that the 'emergency circumstances under moratorium
was promulgated justified whatever failure to comply might have
existed." (p. 9.) No copy of the Doe opinion attached to HCFA's
preconference brief, but, upon request, copies were supplied to the
Board and to the State. A reading of this decision supports the State's
position (Supplemental brief of Appellant, p. 2) that HCFA's statement
in the preconference brief is a "distortion of the meaning and legal
effect of Doe v. Califano." The issue before the Court in the cited Doe
opinion was the propriety of granting a preliminary injunction and the
Court did not rule on the merits. Further, while the Court denied the
preliminary injunction, the basis for the decision was that "(a)lthough
plaintiff may present sufficiently serious questions on the merits
and/or a probability of success on the merits, the court finds that she
has not demonstrated a balancing of hardships tipping decidedly in her
favor or possible irreparable injury." (Doe Order, p. 4.) Title
quotation in HCFA's brief referring to emergency circumstances is
preceded in the decision by the phrase "the Secretary argues and does
not constitute a determination by the court. (Doe Order, p. 3.)
At the conference, HCFA was asked whether there was further litigation
in the Doe case which resulted in a decision on the merits. HCfA replied
that the issuance of revised sterilization regulations on November 8,
1978, had resulted in termination of the litigation. Clearly, then, the
Doe decision does not compel the conclusion that the State was bound by
the 1973 Guidelines and may even be some support for the opposite
result. Further, HCFA was afforded the opportunity to show that in the
Voe and Peck cases the courts had reached the issue of the effect of the
Guidelines on the states but has failed to do so, although surely HCFA
has access to the briefs filed in those cases and knowledge of whether
the issue was considered.
The Voe and Peck cases were not decided until 1977. By that time the
agency had taken a position of treating the 1973 Notice of Guidelines as
a "moratorium regulation. " As discussed below, Departmental policy
was
much less clear at the time the disallowed costs were incurred.
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The Rulemaking Proceedings
Following the publication of the Guidelines, the SRS, then responsible
for the Medicaid program, published a notice of proposed rulemaking with
provisions, paralleling the Guidelines, which would require that, for
sterilization of individuals under 21, FFP was available so long as
there was committee review and compliance with other informed consent
requirements 38 FR 26459, September 21, 1973. This resulted in a final
regulation published on February 6, 1974. With respect to State plans
under Title XIX, the February 6 rules required that such plans provide
that there be no FFP in nontherapeutic sterilizations performed "on an
individual who is under the age of eighteen or who is legally incapable
of giving, informed consent" unless certain procedures had been
followed. 39 FR 4733. For purposes of this rule, the term "legally
incapable of giving informed consent" was defined to include any person
who "(u)nder State law is a minor whose consent to the sterilization
would not be legally effective." 39 FR 4734. A basis and purpose
statement in the preamble to the February 6 regulation explained in
response to comments why the age limit for committee review was set at
18 and stated that "absolute denial of sterilizations to persons under
eighteen regardless of the circumstances is unacceptable to the
Department." 39 FR at 4731.
The effective date of the February 6 regulations was delayed pending the
outcome of several cases filed in Federal district court challenging the
rules. 39 FR 5315, February 12, 1974; 39 FR March 8, 1974. These
district court actions (one filed by five individual plaintiffs
including Katie Relf and one filed by the National Welfare Rights
Organization) were consolidated for purposes of a decision issued on
March 15, 1974, in Relf v. Weinberger, 372 F. Supp. 1196 (D. D.C.
1974). The District Court permanently enjoined the use of Federal funds
"for the sterilization of any person who ... is in fact legally
incompetent under the applicable state laws to give informed and binding
consent to the performance of such an operation because of age or mental
capacity...." 372 F. Supp. at 1204. (The February 6, 1974 rules were
also found to be arbitrary and unreasonable in that they did not require
that legally competent persons be properly advised that their Federal
benefits could not be terminated by reason of a decision not to be
sterilized.)
On March 20, 1974, a notice was published in the Federal Reister further
delaying the effective date of the challenged regulations. This notice
stated that "the previous notice of the Department on Sterilization
Guidelines - Departmental Policy, 36 FR 20930), is continued in effect"
until April 17, 1974. New regulations were then published on April 18,
1974, to "replace" the February 6 regulations struck down in Relf.
39 FR
13672, 13887.
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The Applicable Regulation
The April 18 replacement regulations contained the following provision
at section 205.35 of 45 CFR with respect to FFP under Titles XIX, IV-A
and VI of the Social Security Act:
No nonemergency sterilization may be performed unless legally
effective informed consent is obtained from the individual on who
the sterilization is to be performed. 45 CFR 205.35(a)(1)(ii)
This regulation, using a "legally effective" consent test an, not
specifying a minimum age, was in effect during the relevant time period.
The history of the regulation and the related court case clearly
indicate that the relevant law for determining the effectiveness of
consent is State law. The District Court in Relf measured legal
competency by the "applicable state laws." 372 F. Supp. at 1204. The
replaced (February 6) regulation specified state law as determinative of
legal effectiveness of consent. See 39 FR 4734, Sec.
205.35(a)(2)(iii)(A).
In the state of Maryland age 18 is the age of majority. Article I,
Maryland Annotated Code, Section 24, effective July 1, 1973. Thus,
under the applicable regulation, Federal funding was available for the
sterilizations in question unless some other rule prohibited it.
The Preamble Statement
The Administrator of HCFA relied on the 1973 Guidelines and the Voe and
Peck cases for his disallowance decision. As we have seen, this does
not afford a valid basis for the decision. HCFA argued for the first
time at the conference that a preamble statement to the April 18
regulation acted as a rule prohibiting sterilizations of individuals
under age 21. This preamble statement referred to the August 1973
notice of Guidelines, stating, that it
provided that pending the effective date of the final regulations
Federal financial participation should be withheld from any
sterilization procedure performed on an individual who is under
the age of 21 or who is himself legally incapable of consenting to
the sterilization.
The preamble further stated:
The purpose of this document is to adopt regulations in accordance
with the Court Order (in Relf) with respect to persons legally
capable of consenting to a sterilization while continuing in
effect the moratorium set forth
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in the previous notice of the Department with respect to
sterilization of individuals under the age of 21 or legally
incapable of consenting to the sterilization. 39 FR 13873.
The language here, providing for "continuing in effect the moratorium"
so that FFP should be "withheld" pending final regulations, does not
suggest the adoption of a rule nor otherwise give clear notice of an
intent to never provide such FFP. Moreover, the term "moratorium"
implies, generally, a period of delay in the performance of a legal
obligation or the payment of a debt, not a denial of an obligation.
There is another consideration weighing, against HFCA's interpretation
here. To read this preamble as a binding requirement would be to assume
that the agency had violated the policy, expressed in the Guidelines, of
establishing sterilization requirements through adoption of final
regulations issued as a result of notice and comment proceedings. HCFA
argues that it is possible to view the preamble as a product of the same
notice and comment proceedings which resulted in the February 6
regulations struck down in Relf. Those proceedings were directed,
however, at adopting regulations in format for incorporation into the
Code of Federal Regulations, which normally does not include the
preamble. The preamble is in principle an explanatory not a regulatory
part of the instrument. "Moreover, there is a conspicuous absence of
any statement in the preamble describing any basis or purpose for
adopting age 21 as a limit less than three months after age 18 was
chosen in response to the comment process. See 39 FR at 4731.
Furthermore, an alternative reading of the preamble statement is
possible. There were programs other than those covered by the April 18
final regulations which provided family planning services. (For
instance, Titles I, X, and XIV, applicable to Guam, Puerto Rico, and the
Virgin Islands, had provisions for FFP in social services.) Adoption of
the April 18 regulations would bring the Department into compliance with
the Court Order only with respect to the covered programs, so there may
have been a need for continued withholding of FFP in uncovered programs
until final regulations with respect to those programs were promulgated.
This consideration may not have, in fact, been behind the preamble
statement but does nevertheless weigh against HCFA's contention that the
State should have known that the preamble statement was intended as a
rule applying to the Medicaid program. What I consider a more realistic
explanation of the preamble is that the draftsman, conscious of
regulatory ambivalence, simply preferred to be less than clear. That
speculation is not, however, necessary to the result.
Lack of a Clear Policy
During the time period in question, policy statements issued by the
Department indicate that there was considerable vacillation on the issue
of establishing a minimum age limit for FFP in sterilizations. The
position
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in the Guidelines was that FFP was available in sterilization of
individuals who were legally incapable of giving consent solely by
reason of age, providing there was review by an appropriate committee.
The Guidelines and the September 1973 notice of proposed rulemaking used
age 21 as the determinative factor in whether committee review was
necessary, but, in recognition of the trend of adoption by states of age
18 as the age of majority, the regulations published February 6, 1974,
used age 18 age the cutoff point. These were the regulation found to be
invalid by the District Court in the Relf case, in part because the
Court disagreed that committee review was sufficient where a person was
legally incapable of giving consent due to lack of majority under the
applicable State law. During later proceedings in the Relf case, the
Department proposed a regulation, modified in other respects, but which
continued to use 18 as the critical age. Moreover, the Department
continued in its position that, if certain safeguards were met,
sterilization of persons legally incapable of giving consent was
permissible.
HEW has ultimately settled on a minimum age of 21 in regulations
published November 8, 1979, roughly two years after the period here
involved, but even then declared itself open to reconsideration of the
question. 43 FR 52151-3. The stated purpose for adoption of the 1978
rule was to provide for efficiency in administration by establishing a
uniform standard for all the States and to eliminate those instances
where substantial questions of informed consent might arise.
Clearly the state had some notice that the Department intended to
withhold FFP in at least some sterilizations of individuals under age 21
while it considered its options for appealing the Relf decision and
while it examined the underlying questions of the effectiveness of
various forms of consent. There was no clear Department policy at the
time the disputed costs were consent was informed and legally effective
under state law and otherwise met Federal requirements.
Viewing the Guidelines or the accompanying "moratorium,' by themselves
or in conjunction with the preamble to be April 1974 final regulation,
as imposing a prohibition of FFP without asking how they would be
binding on the State fails to give consideration to the grantor/grantee
relationship in the Medicaid program. Where the Federal government is
influencing, through its pursestrings, an area traditionally reserved
for the State, such as when consent is to be effective (See Broad,
Federal Common Law; Protecting State Interests, 35 Fed. Bar J.27, 21
(1978)), it should not do so without notice to the State of an explicit
requirement intended to be binding in a permanent fashion, and an
ambiguous document should not be construed as having that effect.
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Conclusion
Accordingly, the disallowance is reversed on the around that the consent
given for the sterilizations performed by the state was legally
effective under State law and there was at the time no binding policy
prohibiting FFP in such sterilizations, only a temporary moratorium on
such funding which is no longer necessary. HCFA has not shown that the
cases of Peck v. Califano, 454 F. Supp. 484 (D. Ut. 1977); Voe v.
Califano, 434 F. Supp. 1058 (D. Conn. 1977) and Doe v. Califano, D.
Minn., Civ. No. 4-78 Civ. 311, September 25, 1978, require a different
result.
This decision is not a determination that an agency regulation is
invalid. The questioned costs were in fact allowable under the plain
terms of the final regulation then in effect, and HCFA has not shown
that either the Guidelines, originally cited as a basis for the
disallowance, or the preamble statement later relied on by HCFA, are
regulations properly applied to those costs. Accordingly, the issue
raised by HCFA with respect to Board authority or, more properly the
authority of the board Chairman as successor to the Administrator, SRS,
to invalidate a regulation need not be reached.
Furthermore, this decision applies only to the time period in question,
during which Departmental policy with respect to minimum age was
unsettled, and to sterilizations of individuals between ages 18 and 21
where 18 was the State age of majority. It is possible that, after
agency officials began to treat the "moratorium" as a regulation,
the
State was at some point sufficiently put on notice as to a policy to
prohibit FFP in such sterilizations, but it is not necessary for
purposes of this decision to reach that issue.
Finally, it should be noted that this decision in no way questions the
Department's authority to establish a minimum age for purposes of
Federal funding, see Peck, 454 F. Supp. at 486, but merely decides that
there was no policy applicable to the costs in question establishing 21
as a minimum age. D11 June 5, 1992