CONNECTICUT DEPT. OF INCOME MAINT. v. HECKLER
Legal provision: Medicaid--provisions of the Social Security Act
ORAL ARGUMENT OF CHARLES ALVIN MILLER, ESQ., ON BEHALF OF THE PETITIONER
Chief Justice Warren E. Burger: Mr. Miller, you may proceed whenever you're ready.
Charles Alvin Miller: Thank you, Mr. Chief Justice, and may it please the Court:
This case presents questions as to the meaning of terms in the Medicaid law, and the State of Connecticut is grateful for the Court for hearing its case today.
The outcome of this case is unusually important because of its bearing on the future care of needy mentally ill in the United States, and because of its impact on the states and their position as partners with the federal government in carrying out the Medicaid program.
Two statutory terms must be construed in this case.
The first is the term IMD.
That is an exception in the statute that limits the coverage that otherwise would be extended for certain medical services.
The second term is ICF.
This is one category of facility that is covered by the Medicaid program, and it is defined in the statute to mean a facility that provides a specified level of service to persons requiring it because of their mental or physical condition.
And the ultimate question presented is the extent to which, if at all, the IMD exception limits Medicaid coverage for ICFs.
The briefs of the parties have treated that question exhaustively, and in so doing have exposed the complexity of the Medicaid laws and the subtlety of many of its standards and distinctions.
Unidentified Justice: May I inquire about the consequences of a ruling adverse to your position?
If the Government is correct in its view of this statute, would it be possible for states to simply scatter mental patients around among the intermediate care facilities and just not put as many of them in a single facility, as existed here, and succeed in having reimbursement by that device?
Charles Alvin Miller: Yes, Justice O'Connor, from the point of view of the mentally ill that would be the principal consequence.
Unidentified Justice: Yeah.
And so we're not really talking about the money so much as the inconvenience perhaps of having to scatter them?
Charles Alvin Miller: I wouldn't call it inconvenience.
The principal impact is on the care that would be given to mentally ill people.
As the record shows in this case, because Middletown Haven was recognized by everyone involved as being a very fine facility, a facility that specializes in the care of people with mental conditions, it does a much better job for them, even at this intermediate level, than a facility which is treating people for a broad range of conditions, including the many physical conditions associated with those who need some sort of residential care, albeit not the intensive care of hospitals.
So that is a major distinction, and the evidence has shown that in this facility and others like it that specialize in the care of the mentally ill, those people get the kind of care they need and they cannot get elsewhere.
Unidentified Justice: What do you know about the practical application of the Government's test?
Do they look to see whether 50 percent or more of the patients are mental cases, or 30 percent, or how is that being applied in your experience?
Charles Alvin Miller: Well, we have the experience of the present case and the three companion cases that started out with them at the administrative level.
And there are some other cases that are working their way through the system now.
The answer is that, to begin with, the Government has applied a 50 percent litmus test.
It has a number of other standards as well that it seeks to apply.
All of those standards are designed to find out whether the facility in question is functioning as an alternative to the care of persons in mental hospitals.
And that's one of the points I wanted to make in the argument this morning, that that set of criteria is fundamentally flawed in the sense that it looks to apply a distinction contrary to what the statute applies.
And as I will try to say later, the whole point of the statute here which I am going to refer to, specifically the Long amendment, was designed to encourage the development of alternatives to mental hospitals and to provide funding for the care of people who are placed in these alternatives to the extent the alternative types of facilities are covered by the statute.
Not all alternatives to mental hospitals are covered by the Medicaid program.
The most common alternative is send someone home and have care in the home or in a community-type facility.
But some alternatives are covered by Medicaid, and nursing homes, either at the skilled level or the intermediate care level, are two that are covered.
And we believe the statute makes fairly evident that that is exactly the way Congress wanted people who are mentally ill to be treated where appropriate.
I said at the outset that the statute was complex, and it is.
It has been described as Byzantine and as an aggravated assault on the English language.
All that is true.
But those sorts of descriptions ought not be allowed to obscure what is the intended meaning and purpose of the provisions that are under consideration in this case.
And in that connection there are two general propositions that have a central bearing on the case that I would like to make.
The first is that contrary to the position taken by the court below and by the Department of Health and Human Services in its briefs here, Congress has not broadly excluded the mentally ill from the benefits of public assistance under the Social Security Act programs, by which I refer to Medicaid and the financial assistance programs that preceded it in the statute.
It is not true that the mentally ill as a class were left solely to the states for aid in meeting their basic subsistence and health needs.
The mentally ill, if they satisfy the tests for financial eligibility categorical membership, have always qualified for the financial assistance provided by the act.
That includes not only the elderly mentally ill, but also the mentally impaired when the statute was amended in 1950 to provide assistance for those who were disabled.
And when the separate Medical Assistance Program for the Aged was adopted in 1960... that's the immediate precursor to Medicaid... the elderly mentally ill, like others who qualified as needy, were eligible for payment of their services such as doctors, hospital services, and clinic services, and drugs and all the other items listed in the statute, and that carried over into the Medicaid law which was enacted in 1965.
Now, there was an exemption... an exception, I should say, to this eligibility for federally-supported assistance.
Beginning in 1950, a resident in an institution for mental disease, IMD, was not eligible for any of the services that I described.
The scope of that exception is the issue to be decided here.
But this brief review that I have just given of the other forms of assistance that are available under the law, including medical assistance available to the mentally ill, should show that the scope of the IMD exception cannot be decided by an assumption that Congress intended to treat the mentally ill as solely a state responsibility.
The Social Security Act is animated by no such assumption.
And the contrary premise of the court below and of the Department here cannot substitute for an objective analysis of the intended scope of the IMD exception.
And so the absence of a broad policy to exclude the mentally ill from the benefits of the public assistance program leads me to my second general proposition, which is that the IMD exception is a facility specific limitation predicated not only on cost concerns, but also upon a deep hostility to state mental hospitals.
By mid-century these enormous and remote and often demeaning institutions were broadly perceived as the antithesis of how the mentally ill should be treated in this country, and the animus towards these facilities was reflected in the... many ways, including the seminal report of the Joint Commission on Mental Illness and Health that we've referred to in our brief.
That's the study that was commissioned by the Congress, and which was reported in 1960, and which was followed by the principal legislation that is before the Court today.
So by the time the Medicaid law was enacted in 1965, there was a clear consensus, not only in the Congress but also in the profession and the best thinking around the country that state mental hospitals as they then existed were outmoded, and that successful care of the mentally ill depended upon the development of more suitable facilities and treatment techniques.
And that's the setting in which the IMD provisions of the Medicaid law were adopted.
Now, with those two general propositions as background, let me turn to the specifics of the task at hand today, starting with the words of the statute.
All acknowledge that the IMD exception is not expressly defined in the statute, but the statutory terms do tell us enough to resolve this case, because the IMD exception was part of a group of provisions that have become known as the Long amendment.
That amendment includes the exception to the exception that permits coverage in IMDs, in mental hospitals for the elderly, those over 65 years of age.
That was a change made when Medicaid was adopted in 1965.
But the Long amendment also includes certain conditions that attach to that new coverage, and most specifically, there is the requirement that the states who opt for such coverage adopt comprehensive plans for the care of the mentally ill, and the statute specifically lists nursing homes as one of the alternatives to IMDs that are to be considered and encouraged.
This is, using the U.S. Code designation, it's Section 1396(a)(A)(21).
Any statute with numbers like that is necessarily complex.
And it is... but that statute is strong proof that on its face, the Congress did not intend the term IMD to include nursing homes.
Now, the Department in its briefs points to parenthetical clauses in the listing of covered services in the statute to support its claim that the IMD exception goes beyond mental hospitals and embraces other types of facilities, specifically skilled nursing homes and intermediate care facilities, and it's the latter that's involved in this case.
We've shown in our brief that these parenthetical clauses are to skilled nursing or intermediate care levels of service, and that distinction is very critical.
It refers, those clauses do, to that type of service when offered in a mental hospital setting, as frequently those services are.
Unidentified Justice: Mr. Miller, do you think you should win the case if you can show that your reading is the better reading, or is the only reading that is possible?
Charles Alvin Miller: Justice White, I'm familiar with the doctrine of deference, to which I think you're alluding, and I suppose if this were a 51-49 case we'd have some deference on the scales for the Government which would made our case more difficult.
But I don't think this is just a case of the better reading.
When one looks not only at the words of the statute, including the section that distinguishes IMDs from nursing homes, but also the broad setting in which this whole context arose, it's not difficult to conclude what Congress meant when it used the term IMD.
At least it's not difficult to conclude what it didn't mean to include.
Unidentified Justice: Well, apparently the Government has great difficulty concluding that it means what you say it does.
Charles Alvin Miller: Yes.
I guess that causes disputes.
Unidentified Justice: Yes.
Charles Alvin Miller: This Court has never taken the view that just because the Government takes one side of an issue that this is enough reason to--
Unidentified Justice: Are you saying there is just no room in this language for the Government's construction?
Charles Alvin Miller: --I wouldn't say that, Mr. Justice, because as I said before, this statute is so complex and the language of it in many respects to obtuse that there's room for any kind of interpretation of it, depending on how you read it.
What we've tried to do is not only analyze the specific language of the wording of the statute here, but also try to understand what was the Congress getting at here, what were the concepts and the purposes and the meaning behind this collection of words, three or four pages of one that consists of one sentence in the statute.
And when you conclude that analysis, we think it's not a close case, even just on the meaning of the term IMD, which is all I'm focusing on right now.
Unidentified Justice: So you think the Court should just make its own independent... take its own independent look at the statute and figure out what it means without regard to what the agency says.
Charles Alvin Miller: I don't think the Court would ever construe the statute without regard to what the agency says.
In fact, much of our argument--
Unidentified Justice: Well, you asked certainly--
Charles Alvin Miller: --lies in this--
Unidentified Justice: --disregard it.
Charles Alvin Miller: --I'm asking you in the end not to accept it.
I'm saying that, as in a moment I'll come to the regulations and will show, I believe, that when the statute was first passed that the agency adopted the interpretation we now espouse.
It is only the later administrative interpretation that we ask you to reject.
I hesitate to say disregard it.
Not disregard it initially but disregard it ultimately.
And we in a sense are asking you to do what this Court last term in the Security Industry case said it does when it approaches statutes of this kind, and a reviewing court must reject administrative constructions of a statute--
Unidentified Justice: Well, when were--
Charles Alvin Miller: --if inconsistent with the statutory mandate or that frustrate the purpose.
Unidentified Justice: --When were the intermediate care facilities covered?
Charles Alvin Miller: They were added to the statute in 1967.
Unidentified Justice: '67.
Charles Alvin Miller: But not the Medicaid provisions.
They were added to Medicaid in 1971.
Unidentified Justice: '71.
Charles Alvin Miller: Yes.
In both cases after Medicaid's original enactment of 1965.
I wanted to complete the point I was making about the parenthetical clauses in the definitions of hospital, skilled nursing and intermediate care services of the statute, because that's what the Government relies upon most.
The Department says that our view of the statute, Connecticut's view, doesn't give effect to all the words of the statute, and particularly those words.
We think it's the Department's view that is subject to that criticism, because its reading of these parenthetical clauses makes them redundant of the IMD exception that appears at the end of the listing of all these services.
According to the Department's view, those parenthetical clauses mean the same thing as the general IMD exception that comes at the end.
That's not what was meant by the Congress, and it's relatively clear when one reads the legislative record what was meant by those parenthetical clauses.
They were not in the lists of services in the original Medical Assistance for the Aged Program, the precursor to Medicaid, that was adopted in 1960, nor were they in the House version of the Medicaid law that was enacted in 1965.
That, by the way, is the version that President Johnson referred to as the great breakthrough in the establishment of national health programs in this country.
Unidentified Justice: Mr. Miller, may I just interrupt, because I think you'll be coming to this right now.
It would be helpful to me if you would tell me at what stage in the chronology the people that you now say are covered became covered.
They were clearly not covered before 1967, I guess.
Charles Alvin Miller: --That's correct.
Unidentified Justice: And I guess they weren't covered by the '67 amendment or the '71 amendment.
Just when did they become covered?
Charles Alvin Miller: The '67 amendment provided that financial assistance could be provided to residents of intermediate care facilities, so that if a person qualified for financial aid under the elderly or disabled line program--
Unidentified Justice: That was the aged, blind and disabled, wasn't it?
Charles Alvin Miller: --Yeah.
Then they would be covered even though they were resident in those facilities.
In 1971 those facilities were brought under Medicaid in a category of service, a category of medical service described as intermediate care facility services, was brought under the statute which wasn't there before.
Unidentified Justice: But are you contending that the coverage here was created in 1971?
Charles Alvin Miller: Yes, sir, Justice Stevens.
It was 1971, because the coverage that's at issue here is the medical care--
Unidentified Justice: I understand.
Charles Alvin Miller: --given to these people.
Unidentified Justice: So the... you don't have to rely on the '72 amendment then.
Charles Alvin Miller: No.
The '72 amendment?
Unidentified Justice: Well, maybe I'm--
Charles Alvin Miller: There was a '72 amendment, but we're not relying upon it, and it's not pertinent here.
The clauses in question... and I'll try to finish up on these clauses... they were added by the Senate Finance Committee the same place where the proposal to cut back on the IMD exception was initiated, and the Senate report explains those clauses.
It says that they were put in to make clear that the new type of service that was being authorized for people over 65 in IMDs was not mandatory.
A state didn't have to do it.
It was only optional.
That was an important addition, because otherwise, under the statute, hospital and skilled nursing services are mandatory.
So this was... and they remain mandatory except for those over 65 in IMDs.
Now, the statute... the Department's brief just ignored that evidence.
It's in our brief at page 67.
And I think it not only explains what Congress meant, it supports our reading of the statute, and it invalidates the Department's reading.
I'd like to turn now to the regulations that were adopted.
Justice White, you referred to them, I think, when you asked me a question.
After Medicaid was enacted in 1965, the Department set about to put out regulations in the form of a handbook, as that's the form that regulations took at that time.
Since the law did now permit coverage in IMDs for people over 65, it became necessary for the Department to define just what an IMD was, and it did so.
And in the 1966 regulation it defined an IMD, and it said to be an IMD you had to qualify as a psychiatric hospital, and it recited the Medicare definitions of psychiatric hospital, and if you qualified for that, you were an IMD.
That seemed to us to be pretty strong evidence that the contemporaneous understanding was that an IMD meant a mental hospital and not a nursing facility.
Now, the Department's answer to this is that the regulation confining IMDs to qualifying psychiatric hospitals was eventually changed.
I don't think, however, that this detracts from the showing of the original understanding of the scope of the term IMD.
Now I'd like to make one sort of a side comment.
In our reply brief at page 28 we went further, and we said that the Department was in error because the original regulation remained on the books.
I have reviewed that regulation again in its present form, and I'd like to modify that comment slightly.
The format of the regulation has been altered.
The provision in question is still on the books.
But there's a semantic argument that could be made now that it is not an exclusive definition of IMD.
And so I do want to correct an impression to the contrary that our reply brief most likely created.
I don't think it's--
Unidentified Justice: --I want to be sure about the page.
Twenty-eight did you say?
Charles Alvin Miller: --I think it's page 28 of the reply brief, yes.
And I was answering the point that the Government made that that original definition was no longer on the books.
It is on the books.
But as I say, I don't want to leave the impression that it remains an exclusive definition.
The regulations are sufficiently complex.
As I looked at it, Justice White, again, I could see that you could construe it as being nonexclusive.
Unidentified Justice: Well, you have to... you certainly are making this argument, though, to say that this definition seems to foreclose or tends to foreclose defining this kind of facility that you represent as an IMD.
Charles Alvin Miller: That's correct.
Unidentified Justice: They say that... in effect they say that because this facility serves such a high percentage of mental patients, it is, in effect, an IMD.
Charles Alvin Miller: That's what the Government is saying.
Unidentified Justice: Yes.
Charles Alvin Miller: All that this regulation does on the books today--
Unidentified Justice: But they certainly don't claim it's a psychiatric hospital.
Charles Alvin Miller: --They do not claim it's a psychiatric hospital, but they treat it like a psychiatric hospital for purposes of coverage.
Unidentified Justice: Yes.
Charles Alvin Miller: The Government does rely also on the regulation that says a facility's... whether a facility is an IMD is to be determined by its "overall character", which are the words I put in quotes.
I just don't think that that general phrase can be used to save a position that's otherwise not defensible.
This not very helpful standard was in the original regulation and undoubtedly designed to give some flexibility in applying the IMD exception, and is of some help particularly where it's being applied to private mental hospitals which might not have been as easily identifiable as the traditional state mental hospital.
But flexibility in applying a definition is not a justification for applying the definition to a class of facilities which were not intended to be embraced by it and which were not covered by the affirmative definition of the term IMD that was included in the regulations at the very same time.
Just to summarize on this aspect of our argument on the meaning of the IMD exception, the wording of the statute and the regulations, the legislative record which we've tried to spell out in our briefs, the evident statutory purpose, the history of the exception to the Social Security Act, and the widely perceived experience with state mental hospitals over the past century all combine to demonstrate beyond any real doubt that the IMD exception was meant to cover mental hospitals and only mental hospitals and certainly not the kinds of alternative facilities like nursing homes which have been developed as alternatives.
These considerations in our view alone would establish the error of the court below in applying the IMD exception to Middletown Haven in Connecticut.
But to this we add the other side of the story: the provisions of the Medicaid Act relating to intermediate care facilities, ICFs, the category into which Middletown Haven falls and which was added to Medicaid, as I said, Justice Stevens in 1971.
On both occasions that the ICFs were recognized... in 1967 and then when they were brought under Medicaid in 1971... they were defined to mean places that provide a specified level of treatment for persons whose mental or physical conditions requires that degree of care.
There's no qualification in this law to the definition, no suggestion that it applies only to the elderly, or only to some mental conditions, or only if mental conditions are an incidental function of the facility in question.
These were speculative possibilities on limiting the statute that were advanced by the court below and by the Department's brief here.
And the court and the Department said maybe it means this; these are plausible, possible interpretations.
But these are not valid speculations.
They're the product really of the mistaken assumption I referred to at the outset, that the mentally ill were carved out as a class for coverage under the Medicaid law, and that's just not so.
There's no reason not to give full scope to the statutory definition of ICFs, for that was the intent of Congres.
The Senate Finance Committee, which initiated the Medicaid amendment to cover ICFs, made clear the intent.
Its report states that the ICF provision was for people who would otherwise have to be cared for in the higher cost and higher level skilled nursing homes or in mental hospitals.
That was the clear statement that means that Medicaid was intended to cover people in ICFs who otherwise would be in IMDs.
Mental hospitals are clearly IMDs.
And I just don't think it's sensible that Congress meant that ICFs were to be used to cover people with mental conditions, but only if they don't specialize in that type of care.
Middletown Haven did care for these people and did so well.
It specialized in the treatment of mental conditions, but it wasn't a psychiatric facility, and when the conditions of the residents became sufficiently severe, they had to be returned to the mental hospitals, and they were in substantial number whenever that was called for.
But Middletown Haven is exactly the kind of facility that was contemplated by Congress when the Medicaid program was expanded to take in ICFs in 1971.
I spoke of the severe negative impact that the Department's... acceptance of the Department's position would have in this case on the proper care of the mentally ill.
I'd like to add just one word, and that is the impact it has on the states that finance these programs.
This is not a case where vast new federal outlays will occur if the Court sustains the state's position.
We're dealing here with funds that have been received under the Medicaid program and expended by the states in the care of people who are mentally ill in intermediate care facilities.
If the Department's position prevails, the states involved will have to figure out how to raise and return to the federal government tens, if not hundreds of millions of dollars of funds already received and already expended, and that's going to have a severe negative impact on the states, as well as on their future ability to provide care not just for the mentally ill but all objects of Social Security Act programs.
Chief Justice Warren E. Burger: Ms. Oberly.
ORAL ARGUMENT OF MS. KATHRYN ANNE OBERLY, ESQ., ON BEHALF OF THE RESPONDENT
Ms Kathryn Anne Oberly: Thank you, Mr. Chief Justice, and may it please the Court:
There is only one narrow question before this Court today, in response to Justice O'Connor's questions to my colleague at the beginning of his argument.
The single question before this Court is whether ICFs and IMDs are mutually exclusive types of facilities in any and all circumstances.
The Court does not have before it, because Connecticut has not presented as a question for the Court to decide how the Secretary should determine whether any particular ICF is also an IMD.
The 50 percent rule--
Unidentified Justice: That's true, but I think it's of general interest to know whether the states can just scatter the mentally ill around in more facilities that presumably will have less specialized staff to take care of them, and if that satisfies the law in your view.
Ms Kathryn Anne Oberly: --In theory, Your Honor, they could.
What Connecticut has done in this case is a good example actually of responsible state behavior in response to the Department's action.
Instead of scattering the patients at Middletown Haven once the disallowance issue came up at this facility, Connecticut took all of the non-mental patients out of Middletown Haven, the people... the stroke patients, the physically disabled... put them in general ICFs or skilled nursing facilities, and converted Middletown Haven to a 100 percent mental facility for which it is now claiming no reimbursement whatsoever.
And we don't think that the Court ought to decide the case on the assumption of bad faith by the states in shifting their patients to places that may not be suited for their needs simply to maximize federal funding.
And the way Connecticut has responded demonstrates that states aren't going to act that way if they in fact have the best interests of their mentally ill citizens--
Unidentified Justice: Perhaps.
Ms Kathryn Anne Oberly: --at heart.
Unidentified Justice: Ms. Oberly, is it correct that the Government would be seeking to recoup vast sums of money from the states if your position is sustained here?
Ms Kathryn Anne Oberly: As far as recoupment is concerned, all we know is the $18 million involved in the four consolidated cases, of which Connecticut's is one, which is a substantial amount of money.
But the greater--
Unidentified Justice: Well, was the interpretation of Connecticut widespread among the states?
Ms Kathryn Anne Oberly: --Pardon?
Unidentified Justice: Was the interpretation placed on the statute--
Ms Kathryn Anne Oberly: Yes, yes.
Unidentified Justice: --by Connecticut the same interpretation most states placed on it?
Ms Kathryn Anne Oberly: Some states have no facilities like this.
California, on the other hand, I think has probably about 26, so it varies widely from state to state.
They haven't all been audited yet.
But in a general answer to your question, yes, most states thought that... there's uncontroverted testimony in the record in this case that Connecticut was shifting patients from its state mental hospitals to Middletown Haven in order to maximize federal funding; and I think that was common among a number of states.
I mean that was the purpose, to get Medicaid coverage that they knew they couldn't get if the patients remained in a mental hospital.
I don't think that was unique to Connecticut.
But not enough of the states went through the audit process for me to be able to tell you if that was a nationwide phenomenon.
I would... I do think it's important, though, although the criteria, the 50 percent rule, that sort of thing is of some interest, it is not before the Court.
Unidentified Justice: Has the Department, the Government, HHS, ever taken a different view of the proper meaning of the statute?
Ms Kathryn Anne Oberly: No, Your Honor, we have not, and we disagree with Mr. Miller's characterization of our early regulations.
There was, beginning in 1966, which was the year after Medicaid was passed, and continuing to the present one regulation which defined an IMD as a psychiatric hospital.
But as Mr. Miller has just conceded in his argument, the interpretation he gives to that regulation in his brief is really probably not the correct interpretation.
It appears at page 27 of his reply brief, not page 28.
And in fact, the purpose of that regulation is to make sure that the elderly, as to which all parties agree do get coverage in mental hospitals, are not placed in substandard psychiatric hospitals.
So there is a need for a regulation defining an IMD in terms of a psychiatric hospital that's been accredited as a psychiatric hospital by the Joint Commission on the Accreditation of Hospitals.
But there is also side by side with that regulation and has been since 1966 the overall character regulation, which is the one we rely on for skilled nursing facilities and intermediate care facilities, that provides that when you're not talking about a hospital, when you're talking about a different type of facility, the relevant criteria is the overall character of the facility, whether the facility was established and maintained primarily to care and treat the mentally ill.
And that regulation has been HHS's position since 1966, since the first chance it had to enact any regulations after Medicaid.
It has never changed.
And it stands side by side with the psychiatric hospital regulation, but they each serve and cover different facilities.
So we see no inconsistency and no change in the Department's position for the entire applicable time period.
Unidentified Justice: Was the Government ever asked by states for an interpretation of this regulation?
I mean are there letters that have been sent out giving different interpretations?
Ms Kathryn Anne Oberly: I would suggest that the states should have sought advice.
In 1976 Connecticut acknowledges that it was aware of the federal government's position, but it wasn't until some time in 1979 that it wrote a letter asking for clarification of that position.
The answer it got back covered a multitude of different possible factual possibilities.
But as to a facility like Middletown Haven, the answer it got back was crystal clear, that the Department would treat that sort of facility as an institution for mental diseases.
Connecticut says it knew in 1976 what the Department's position was, or at least that there was some question that it differed from the state's position.
It certified Middletown Haven to open in 1977, claimed reimbursement for two years without in that two-year period going back to the Department and saying will we really get to keep our reimbursement for this facility.
But it was always open to the state to seek clarification, and in fact, it didn't do it until it had expended substantial funds at this facility, and then raised the question of clarification somewhat late, in our view.
We do agree with petitioner on one thing, and that is that this statute is incredibly complex.
In fact, petitioner has said it far more often than I would have felt I could have said it, but under these circumstances, we think that the Court's rules of deference are at their highest.
The Court has recognized that the Medicaid statute of the Social Security Act is one of the most complicated Congress ever enacted.
The Secretary's position doesn't have to be right, although we contend that it is right.
It doesn't even have to satisfy a 50 percent rule of probably right.
When the Court is faced with a statute that's as complex as this one, if the Secretary's interpretation is reasonable, even if it's not the interpretation that Connecticut or this Court might initially have adopted, then the Court is bound to defer to that interpretation unless and until Congress says that that's not what it meant to enact.
Connecticut's arguments really are quite simple.
Connecticut says that these two facilities can never cross.
An intermediate care facility, no matter what it's factual characteristics, can never be an institution for mental diseases.
The Secretary, on the other hand, looks, under her regulation, to the overall character of the facility.
The facts of this case show how reasonable the Secretary's position is.
Middletown Haven during the time of the audit in question, which covered two years of patient population at the facility, had 77 percent of its patients there suffering from major mental illnesses.
It had psychiatrists as its medical staff.
Its nonmedical staff, including its cafeteria workers, its janitors were trained to care for the mentally ill.
They were told as a condition of being hired that you will be dealing with the mentally ill and given in-service training.
Many of the patients could not live, could not continue to live at Middletown Haven Hospital... excuse me... Rest Home, and had to be returned rather quickly, one in the case of one day, to the mental hospital from which they had originally been discharged, which suggests to us not that Middletown Haven was a desirable substitute for a mental hospital, but that these patients didn't and weren't able to leave a mental hospital in the first place, that the state was doing exactly what the testimony shows, which was using Middletown Haven as a way to get federal funding for the coverage of patients that it knew belonged it mental hospitals, but that it also knew if it kept in mental hospitals, Medicaid would not pay for.
Unidentified Justice: But I take it you certainly concede that Middletown was not a mental hospital.
Ms Kathryn Anne Oberly: It was not a mental hospital, but--
Unidentified Justice: It was an intermediate care facility.
Ms Kathryn Anne Oberly: --That's correct.
Unidentified Justice: But also an IMD, is that it?
Ms Kathryn Anne Oberly: That's correct.
But some intermediate care facilities are not IMDs.
Unidentified Justice: Right.
Ms Kathryn Anne Oberly: But that's not the issue before the Court.
And I want to stress again the only issue is whether an ICF can ever be an IMD.
And we would point out that the facts of this case show that it would be quite unreasonable to say that the two are always mutually exclusive no matter what the facts are.
Unidentified Justice: Is the name we give it or the function the controlling factor?
Ms Kathryn Anne Oberly: We think the labels are not material at all.
I mean a state should not be able to get around the restrictions by just changing the label of its facilities.
The patients that are there, the treatment they're receiving, the staff, where they come from, where the patients go when they leave... all of those factors are relevant in determining what is an institution for mental diseases, not the label.
But again, we don't have to decide in this case how to apply the factors.
We only decide whether looking at factors as opposed to labels is an appropriate way for the Secretary to proceed.
Unidentified Justice: Would you clarify something for me I thought I understood, but I'm not sure I do.
In this particular facility, say there were 75 percent of the people were mental patients and 25 percent were nonmental or tuberculosis patients, if it is an IMD, as you contend, and if they continued to have the 25 nonmental patients there, they would not be reimbursed for them, would they?
Ms Kathryn Anne Oberly: That's correct, Your Honor, and that's why it's facilities.
I mean Medicaid pays for services in facilities; that this by virtue of its characterization as an IMD becomes an ineligible facility.
Now, those patients who are not suffering from mental disabilities can get Medicaid coverage in a different facility, and in fact Connecticut moved them to facilities that are called general ICFs or general skilled nursing facilities, and they're getting coverage there presumably.
They could not get coverage had they remained at Middletown Haven.
Unidentified Justice: Does that suggest they are mutually exclusive categories then?
I mean you can't... if you are--
Ms Kathryn Anne Oberly: No.
It just suggests that there's a limitation, as the Court recognized in general terms in O'Bannon v. Town Court Nursing Home, that there are general limitations on the types of facilities the Medicaid patients have access to.
They will get coverage.
Mentally ill Medicaid patients can get coverage in the psychiatric word of a general hospital.
The statute does not exclude all treatment for the mentally ill, even those under 65, but it does limit the types of facilities that Medicaid will pay for, and that's all that's involved in this case is whether they put in... these patients have been put in a facility where Congress expressed an intent not to pay for that type of facility.
The statutory language we think clearly supports the Secretary as well as the common sense aspect of the facts of this case.
The IMD exclusion, as Mr. Miller has pointed out, is repeated in several parenthetical phrases in Section 1396(a)... excuse me... 1396(d)(A) in about five different places in that section.
The exclusion appears not just after the provision relating to inpatient hospital services, which is where you would expect it to appear and only where you would expect it to appear if we were talking simply about mental hospitals, but it also appears in the section following the definition of skilled nursing facility services.
It appears in the definition... in the section defining intermediate care facility services.
It appears in two other places in the statute where it authorizes these services for the elderly and where it prohibits the services for those under 65.
In fact, it appears in five different sections, subsections of the same part of the statute.
Connecticut's answer to this parenthetical clause on which the Government does indeed rely quite heavily doesn't make sense to us, and we think it leads to absurd results.
Connecticut's position is that if ICF services are provided in a mental hospital, what we all would agree is a mental hospital, then those services cannot be paid for or covered under Medicaid.
On the other hand, Connecticut contends that if ICF services are provided in a freestanding ICF, a separate building, then Medicaid should pay for them.
Unidentified Justice: --Ms. Oberly, what year was it that the Department of Health and Human Services adopted its criteria, including the 50 percent figure?
Ms Kathryn Anne Oberly: The 50 percent figure, which I stress again is not before the Court--
Unidentified Justice: Yes, I know.
Ms Kathryn Anne Oberly: --and is not determinative, was first adopted--
Unidentified Justice: I asked what year it was--
Ms Kathryn Anne Oberly: --It was first adopted I believe in either 1975 or 1976, again before Middletown Haven opened, as one of eight to ten criteria that HHS auditors should look at when they went to examine particular facilities.
Unidentified Justice: --May I ask again about the subparagraph 15 of the section we were talking about?
Why wouldn't their reading make sense if the regulation read the way they thought it did; in other words, that IMDs were defined as psychiatric hospitals.
Wouldn't it make perfectly good sense that that was the... because you could conceivably have--
Ms Kathryn Anne Oberly: If you assume the answer to the case in their favor, it makes sense.
Unidentified Justice: --Well, then what I'm suggesting is one can read it either way.
That's all I... it makes sense.
Ms Kathryn Anne Oberly: But what I would like to point out is the anomalous results that flow from their reading that we don't think Congress could have intended.
First of all, under their reading, you could have a mental hospital take... let's say it's seven stories high, and it decides to convert the fourth floor of its hospital into an ICF ward.
Connecticut would agree without any hesitation at all that the patients on that fourth floor receiving ICF services are not eligible for Medicaid coverage.
Now, let's say the mental hospital decides to take the whole fourth floor and move it to a different building, a new facility that they called Middletown Haven Rest Home.
It provides the same care and services to the patients that they were previously getting on the fourth floor of the mental hospital.
All of a sudden, under Connecticut's interpretation of the statute, those people become eligible for Medicaid coverage.
To us and to the court of appeals that's an irrational, artificial distinction that finds absolutely no support in the legislative history.
Unidentified Justice: I'm puzzled by the first example, because the end of the section... there's one definition of... I don't know what it is... intermediate care facility, the last part of it says,
"any public institution or distinct part thereof for mental diseases or mental defects. "
I thought you could divide up institutions by floors.
Ms Kathryn Anne Oberly: You can if you get separate certification for them.
Unidentified Justice: Oh, I see.
Ms Kathryn Anne Oberly: But that doesn't mean you'll get Medicaid compensation for them if they're still in a mental hospital.
Another problem we think with Connecticut's reading... pardon?
Unidentified Justice: This is incredible.
Ms Kathryn Anne Oberly: I hope it's not anything I said.
But another problem we think with Connecticut's interpretation of the statute, of the parenthetical clauses is that if you will look at all of those provisions in 1396(d), they deal with covered Medicaid services.
They deal with eyeglasses, they deal with physician services.
They also deal with residential services such as in skilled nursing facilities, hospitals or intermediate care facility services.
The parenthetical we're concerned about only appears following the definition of residential services.
It doesn't appear following physician services or following eyeglasses services.
To us it seems only logical that the place you're going to look for ICF services is in an ICF.
If you're looking for doctor services, you go to a doctor's office.
You might find those services somewhere else, and it's possible you'll find ICF services in a mental hospital.
But we don't think that it's logical to assume that Congress would have written a statute that focuses on the quite unique and unusual situation of when someone is looking for services that is not normally set up to provide that type of service.
And that is another effect of reading the parenthetical the way Connecticut reads it is that Congress has taken great pains to repeat this parenthetical to cover a situation that will hardly ever arise.
And at the same time it's found it unnecessary to include the parenthetical in the situation of services that have nothing to do with residence, residential facilities, such as eyeglasses, therapy, x-rays.
So that the structure of that whole Section 1396(d) suggests to us that this parenthetical does mean that an ICF or a skilled nursing facility can be an IMD if the facts of the particular case warrant that conclusion.
Unidentified Justice: On the practical level do you know how it works, Ms. Oberly?
In order to be eligible for reimbursement of Medicaid funding, does an ICF apply to some office of HHS and ask for certification with that status as an ICF?
Ms Kathryn Anne Oberly: My understanding is the certification comes from the state.
It's a cooperative state-federal program.
The state does--
Unidentified Justice: They'd apply through the state who acts for the federal government, in other words, in making a certification?
Ms Kathryn Anne Oberly: --The state does the certifying.
I think that HHS retains power to say we disagree with the certification.
But basically it's a state certification.
The money goes to the state, which in turn pays it to the vendor, which in this case would be Middletown Haven.
Unidentified Justice: And, of course, no application is ever made to be certified as an IMD.
That's a category that--
Ms Kathryn Anne Oberly: That's correct.
Unidentified Justice: --would be determined by the federal government following an audit, presumably?
Ms Kathryn Anne Oberly: That's correct.
Unless you're dealing with what we all concede is a psychiatric hospital where there is no dispute from the beginning that that's an IMD.
But in the case of these sort of hybrid facilities, it couldn't be until after the facility had opened and had some patients, and you could tell what went on at the facility.
Unidentified Justice: And the listed criteria are imposed flexibly by the federal government?
It could be any combination of the listed eight or nine criteria?
Ms Kathryn Anne Oberly: No single criteria is determinative.
The 50 percent criteria is not determinative.
No single one carries ultimate weight.
Unidentified Justice: So an ICF would certainly have no very comfortable basis for knowing whether a later audit would be--
Ms Kathryn Anne Oberly: That we would disagree with, Your Honor.
Certainly in the case that you have before you and in the case of all the audits that were before the grant appeals board in this case, because they weren't even borderline cases.
We're talking about facilities that had patient populations ranging from 77 to 90 percent mental illness patients, patients that... facilities that by their own admission... Connecticut doesn't dispute that Middletown Haven was a facility specializing in the care of the mentally ill.
Unidentified Justice: --Might there be other facilities around the country where it would be quite an uncertain question?
Chief Justice Warren E. Burger: We will resume there at 1:00.
Ms. Oberly, you may resume.
You have eight minutes remaining.
ORAL ARGUMENT OF MS. KATHRYN ANNE OBERLY, ESQ., ON BEHALF OF THE RESPONDENT-- RESUMED
Ms Kathryn Anne Oberly: Thank you.
I'd like to use my remaining time to address some of Connecticut's policy arguments.
Connecticut doesn't really rely on the statute.
Instead, what they're relying on is extensive legislative history that shows a quite sincere and detailed concern on the part of Congress for the elderly and for the health costs, both mental and nonmental, of the elderly.
We find it somewhat hard to believe that Congress would have devoted as much time as it did... and it was a lot... to discussing the health problems and costs of the elderly and then, without uttering a single word, extend virtually the same coverage to the patients in the age group we're talking about here, between the ages of 21 and 64.
We also, I might mention as an aside, find it somewhat ironic that for Connecticut to rely on this legislative history relating to the elderly, because Congress made coverage in mental institutions optional with the states, even for those over 65.
Connecticut has chosen as a part of its state plan in exercising that option not to provide ICF or skilled nursing facility services for the elderly under Medicaid.
And so here we have a state that has not done what Congress was most anxious to encourage.
It was not required to do it.
That was its choice.
But at the same time it's here asking this Court to have the federal government reimburse it for coverage for a different age group of patients on whom Congress has not focused attention.
In the end we think that the issue before the Court is one for Congress.
We think our interpretation of the statute is correct, but if there's any doubt about the matter, it's quite clear that Congress has approached the entire subject of increased federal funding for the mentally ill on a step-by-step basis.
It started off with basically no federal funding for residential services.
It did provide cash assistance, but in 1935, which is what Connecticut talks about in its reply brief, it was $15 a month, which is clearly not enough to support anyone in a residential facility.
And instead, Congress has gone step by step, first removing the exclusion for the elderly; then removing the exclusion for children under 21; adding the mentally retarded after reaching the conclusion that they're in a different medical category than the mentally ill.
But Congress hasn't taken the step that Connecticut is asking this Court to take for it, and we think that that decision is one that properly belongs to Congress.
And in light of the cost we're talking about... and we are not in this case talking about the $1 1/2 million disallowance at issue for Connecticut; we're talking about the future cost of all states who might seek reimbursement under this program in the future.
And I can't give a dollar amount on that, but it's clearly quite substantial.
Unidentified Justice: Do you suppose... I take it, then, you don't think there's room in this statute for the Department to take a different view, to take Connecticut's view?
Ms Kathryn Anne Oberly: No, Your Honor, I don't.
I think that when faced with the facts that it has before it that the only fiscally responsible position for the Department to take in order to carry out Congress' intent is the position it's taken, because Congress has been throughout, it repeatedly said that it viewed the cost of long-term care for the mentally ill as a state responsibility.
And it's chipped away at that step by step, but it hasn't taken the step that Connecticut is asking the Court to take.
So that I think the agency would be running contrary to years of congressional intent of assuming that this was a state fiscal responsibility if it were to take Connecticut's position.
Also, I think it's quite significant that just last summer, the summer of 1984, Congress looked at the very provisions of the statute we're looking at today.
Every place that the parenthetical exclusion for institutions for mental diseases appears in the statute there previously also appeared an exclusion for institutions for tuberculosis.
In 1984 Congress removed the TB exclusion.
That wasn't any great act of generosity on Congress' part.
Congress knew that tuberculosis is simply not much of a problem in the United States any more.
It doesn't require long-term care.
It responds to antibiotics.
The patients are ambulatory.
And so to bring TB coverage within the scope of Medicaid was not saddling the federal government with a large fiscal responsibility.
But when Congress examined that very same parenthetical and left the IMD exclusion untouched, we think again that that's another strong indication that unless and until Congress says something different about the Secretary's interpretation, the Court should uphold it.
One final point is that extending coverage to the group we're talking about here, the mentally ill between 21 and 64 in ICFs and skilled nursing facilities, would be particularly inappropriate because when Congress has extended mental health coverage, it's done so with strict cost and therapeutic efficiency controls.
For the elderly and for the children and for the mentally retarded it's written into the statutes provisions that require that those patients be getting effective treatment, that those patients be getting treatment that's designed to lead to their eventual release and return to community living.
There are no such standards for the patients that Connecticut seeks to bring within the scope of Medicaid coverage.
There are general standards for patients in ICFs and in skilled nursing facilities, but none that pertain specifically to mental illness.
And with Congress' unquestioned concern for cost effectiveness, it seems to us highly unlikely that it would have intended this sort of open-ended coverage for the group Connecticut is talking about without also providing the same cost effective and treatment-oriented standards that it's provided for the other groups that we all agree are covered by the statute.
Chief Justice Warren E. Burger: Thank you, counsel.
The case is submitted.