FAIR HEARINGS

I.     HISTORY

A.     Goldberg v. Kelly.

Goldberg v. Kelly, 397 U.S. 254 (1970) markedly departed from traditional due process doctrine, which had made a rigid distinction between rights and privileges.  Unless an agency had directly affected a "right," due process had no application.  It imposed no standards for advocating procedures involving privileges such as the receipt of welfare benefits.

Goldberg v. Kelly involved New York City residents who were receiving financial aid under the federally-assisted program of Aid to Families with Dependent Children (AFDC) or under New York State's general Home Relief program.  The residents challenged the sufficiency of the notice and hearing procedures used for termination of this aid.  The U.S. Supreme Court held that procedural due process requires a predetermination evidentiary hearing to be held when public assistance payments to welfare recipients are discontinued.  It also held that procedures for terminating public assistance payments to welfare recipients are inadequate when they fail to permit the recipients to appear personally before an official who will determine continued eligibility.  Such hearings must allow the welfare recipients the option of retaining counsel, presenting evidence, and cross-examining adverse witnesses.

The Goldberg Court found that welfare benefits, unlike certain other governmental benefits, are "a matter of statutory entitlement" involving a liberty or property interest for eligible recipients and therefore, the Due Process Clause of the Fourteenth Amendment applies.  The Court partially based its finding on a view that, since its inception, the United States has aimed to "foster the dignity and well-being of all persons within its borders" and that only a predetermination hearing for welfare benefit recipients promotes this important governmental interest.  Goldberg, 397 U.S. at 264-65.

Regarding the actual hearing, the Goldberg Court stated a Fair Hearing requires only minimum procedural safeguards since it is designed only to produce an initial evaluation of the validity of the decision to terminate welfare benefits.  Therefore, a complete record and comprehensive written opinion are unnecessary.  Goldberg, 397 U.S. at 267.

Procedural Due Process ensures the opportunity to be heard at a hearing, which must be " 'at a meaningful' " time and manner.  Goldberg 397 U.S. at 267.  See also Grannis v. Ordean, 234 U.S. 385, 394 (1914); Armstrong v. Manzo, 380 U.S. 545 (1965).  Welfare recipients must have "timely and adequate notice detailing the reasons for a proposed termination, and an effective opportunity to defend by confronting any adverse witnesses and by presenting his own arguments and evidence orally."  Goldberg, 397 U.S. at 267-68.  Moreover, the decision made at the Fair Hearing must be based on "the legal rules and evidence adduced at the hearing."  Id. at 271.  The decision maker must be impartial and must state the evidence relied upon for the decision Id.

The cases that have come after Goldberg delineate which government benefits implicate liberty or property interests as to coming within the confines of the Fourteenth Amendment.  For instance, whereas social security disability payment termination is considered an entitlement protected by procedural due process (see Mathews v. Eldridge, 424 U.S. 319 (1976), loss of a public job that is held at an employer's discretion is not (see Bishop v. Wood, 426 U.S. 3341 (1976).

Goldberg's progeny further establish the procedural safeguards to be followed at Fair Hearings.  The Supreme Court in Mathews v. Eldridge, 424 U.S. 319 (1976) held that courts must balance three factors when determining the timing of and what process is due at a hearing:

1.    The private interest that will be affected by the official action, i.e. the degree of loss to the individual;

2.    The risk of an erroneous deprivation of such interest through the procedure used; and

3.    The government's interest, including the fiscal and administrative burdens that a particular procedural requirement would entail.

B.     Federal Law.

1.    Fair Hearings ultimately derive their existence from Article III of the U.S. Constitution, which states in Section 1,  "The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish."

2.    The Federal Administrative Procedures Act (APA) concerns the procedures which must be followed in certain cases where the right to a hearing has already been established by statute, contract clause, or agency rule.  See, e.g. 5 U.S.C. '554. Each state has its own version of the Administrative Procedures Act.  Under the APA, where a federal statute requires an adjudication for an agency action "on the record after opportunity for an agency hearing," a trial-type hearing is required.  In such a case:

a.    the agency has the burden of proof;

b.    the decision must be based on the whole record and be supported by and in accordance with reliable, probative, and substantial evidence;

c.    each party has the right to present oral or written evidence, to submit rebuttal evidence, and to conduct cross-examination;

d.    all or part of the evidence may be required by the agency to be submitted in written form in benefit claims or for certain other agency actions.

3.     Section 554(b) of the APA specifies the notice entitled to an individual with a right to an agency hearing.  In addition to receiving notice of the issues involved to be involved at the hearing, individuals must be informed of:

a.    the time, place and nature of the hearing.

b.    the legal authority and jurisdiction under which the hearing is to be held; and

c.    the matters of fact and law asserted.

C.     Content of the Law.     The Code of Federal Regulations contains the general body of regulatory laws governing practice and procedure before federal administrative agencies.  Title 42, Public Health, namely Chapter IV, which concerns the Health Care Financing Administration, Department of Health and Human Services, is of most concern to the Elder Law attorney.  Regulation 42 C.F.R. 431.205 provides that all state Medicaid agencies must maintain a hearing system.  That hearing system must provide individuals with either a State agency hearing or a local Fair Hearing with a right of appeal to a state agency hearing.  It also must meet the due process standards set forth in Goldberg v. Kelly, 397 U.S. 254 (1970). 

Certain Fair Hearing procedures are accorded by statute.  The Social Security Act at 42 U.S.C.A. '1396r-5(e) governs Fair Hearings regarding Medicaid eligibility.

D.     Necessity.     Under 42 C.F.R. 431.220, regarding medical assistance program administrative agencies, a hearing is required for:

1.    any applicant who requests it because his claim for services is denied or is not acted upon with reasonable promptness;

2.    any recipient who requests it because he or she believes the agency has taken an action erroneously;

3.    any resident who requests it because he or she believes a skilled nursing facility or nursing facility has erroneously determined that he or she must be transferred or discharged; and

4.    any individual who requests it because he or she believes the State has made an erroneous determination with regard to pre-admission and annual resident review requirements.

An agency need not grant a hearing; however, if the sole issue is a Federal or State law requiring an automatic change adversely affecting some or all recipients.

II.     TYPES OF FAIR HEARINGS.

A.     Medicaid.

1.     Denial of Benefits.  JO-ANNE TO DO THIS SECTION.

2.     Failure of State of Process Application in a Timely Manner.     JO-ANNE TO DO THIS SECTION.

3.     Minimum Monthly Maintenance Needs Allowance MMMNA Expansion.    42 U.S.C. '1396r-5(d) provides that a Community Spouse is entitled to a Minimum Monthly Maintenance Needs Allowance.  Since July 1, 1996, that allowance has been $1,295 per month.  In addition, in N.J. the Community Spouse is entitled to an excess shelter allowance to the extent that the Community Spouse's expenses for shelter exceed $389 per month.

In an example where Medicaid approved shelter expenses totalling approximately $511.16, there is an excess Shelter Allowance of $96.10.  The MMMNA would be computed as follows:

$ 1,295.00      MMMNA

-         92.10          Community Spouse's Pension

$ 1,202.90      Basic Allowance

   Shelter Expenses

$   215.16      Real Estate Taxes

+        220.00         Utilities, Water, and Sewer

+         82.00          Homeowner's Insurance Premium

$   517.16      Total Shelter Expense

-        389.00         Threshold    

$   128.16      Excess Shelter Allowance

$ 1,202.90      Basic Allowance

+        128.16         Excess Shelter Allowance

$ 1,331.06      Total MMMNA

Federal statutory authority authorizes an expansion of the Minimum Monthly Maintenance Needs Allowance for circumstances resulting in financial duress.

The Social Security Act provides for revision of the Minimum Monthly Maintenance Needs Allowance:

If either such spouse establishes that the community spouse needs income, above the level otherwise provided by the minimum monthly maintenance needs allowance, due to exceptional circumstances resulting in significant financial duress, there shall be substituted, for the minimum monthly maintenance needs allowance in subsection (d)(2)(A) of this section, an amount adequate to provide such additional income as is necessary.

42 U.S.C. '1396r-5(e)(2)(B).

Congress enacted the Medicaid Catastrophic Coverage Act in 1988 "to protect the elderly and disabled population from the financial disaster caused by catastrophic health care expenditures not currently reimbursed under the Medicare and Medicaid programs."  H.R. Rep. No. 105(II), 100th Cong., 2d Sess. 65-68 (1988), reprinted in  1988 U.S.C.C.A.N. 803, 858.  Prior law had required nearly all of a couple's assets to be depleted before an institutionalized spouse could become eligible for Medicaid, which often resulted in the impoverishment of the "community spouse" remaining at home.  The purpose of the Act was "to end this pauperization by assuring that the Community Spouse has a suffi­cient -- but not excessive -- amount of income and resources available to her while her spouse is in a nursing home at Medicaid expense."  Id. at 888.

4.     Expansion of the Community Spouse Resource Allowance (CSRA).  A Hearing may be requested for purposes of increasing the CSRA, if necessary to raise the community spouse's income to the level of the MMMNA.  42 U.S.C. '1396r-5(e)(2)(C).  N.J.A.C. 10:71-5.7(d).  The idea is that, if the community spouse's income is below the MMMNA, the community spouse should be given additional assets to invest to make up the deficiency in income. 

a.    No­tice.       Upon a determination of the MMMNA and/or a determina­tion of the Community Spouse Resource Allowance by the CWA, the applicant must be noti­fied of such determina­tion and of the applicant's right to a Fair Hearing.  42 U.S.C. '1396r-5(e)(1); 42 C.F.R. 431.206

b.     Hear­ing.  If either the institu­tional­ized spouse or community spouse is dissatisfied with the determi­nation, such spouse is entitled to a Fair Hearing if an applica­tion for benefits has been made on behalf of the institutional­ized spouse. 42 U.S.C. '1396r-5(e)(2)

c.     Expansion of Community Spouse Re­source Allowance.  If either spouse establishes that the Community Spouse Resource Allow­ance (in relation to the amount of the income generated by such an allowance) is inadequate to raise the community spouse's income to the MMMNA, there shall be substituted for the Community Spouse Resource Allowance an amount adequate to provide such a MMMNA.  42 U.S.C. '1396r-5(e)(2)(c)

d.    Cal­culation.  In order to determine the expanded Community Spouse Resource Allowance, we would first need to determine the MMMNA.  In a Missouri case, Thomas A. Bryant Case No. MO96-15234537, a fair bank rate of interest was used to determine the amount of money which would be required to be invested to produce sufficient income to increase the income of the Community Spouse to the minimum MMMNA.  In our example we use the fair bank rate of interest and let's assume a fair bank rate of interest for a money market account of four per­cent.

However, in the case of Ford v. Iowa De­partment of Human Services (1993 Iowa) 500 NW 2d26, 41SocSe­cRep Serv 256 held at the Iowa Department of Human Services may use the re­sources necessary to purchase a single premium life annuity that would furnish monthly payments to the community spouse in an amount sufficient to bring the spous­e's income up to the spouse's monthly maintenance needs allow­ance rather than looking at the investment of resources necessary to generate sufficient interest income for the community spouse.  This is much less advantageous to the applicant, because part of the payment is return of principal.

Let's assume that a couple has income as follows 

The total income for the couple is $1,350.

Let's assume there is no other income.

We would calculate the Minimum Monthly Mainte­nance Needs Allow­ance as follows:

$1,295          Basic MMMNA

-        350       CS Actual Income

$  945          Allowance

Sup­pose the wife lives in an apartment and the rent is $889 including all of the utilities allowed by Medicaid.

In addition, there would be an Excess Shelter Allowance as follows:

$  889     Cost of Shelter

-        389     Shelter Threshold

$  500     Allowance

The total supplement would be $1,445 calcu­lated as follows:

$  945     Basic Allowance

+        500     Excess Shelter Allowance

$1,445     Allowance

In our example, if the community spouse does look first to the income of the institutionalized spouse, our calculation would look like this:

$ 1,445.00     Allowance

-       1,000.00     Husband's Social Security & Pension

-         166.66     Income on CSRA ($50,000 @ 4%)

$   278.34     Deficit

$   278.34     MMMNA Deficit

x          12        Months

$ 3,340.08     Annual Deficit

x          25.00     100 ) 4% Annual Rate of Return

$83,502.00     Additional Resource Required

There is a question as to the validity of the "Income First" requirement pursuant to N.J.A.C. 10:71-5.7(c). 

The issue then arises as to whether the community spouse must first look to the income of the institutionalized spouse to make up the deficiency.  In some states the income first rule has been abrogated by litigation.  For a more complete treatment of expanding the Community Spouse Resource Allowance, see "What's New With Community Spouse Resource Allowances?" presented by Thomas D. Begley, Jr. and William J. Browning, NAELA Institute, 1995.

B.     Other Types of Fair Hearings.  JO-ANNE TO DO THIS SECTION.

III.     STANDARDS FOR FAIR HEARINGS.

A.     Notice.     Federal law is very specific as to the notice which must be provided Fair Hearing applicants.  The agency must issue and publicize its hearing procedures.  It must inform all applicants in writing of the right to a hearing; the method by which a hearing may be obtained; and that legal or other representation is permissible. 42 C.F.R. 431.206

The timing for this notice is likewise critical:  the agency must provide this information when the individual applies for Medicaid; at the time of any action affecting the individual's claim; at the time a skilled nursing facility or nursing facility notifies a resident that he or she will be discharged; and when the individual receives an adverse determination by the State with regard to a pre-admission screening or annual resident review.  

B.     Right to a Hearing.     Individuals have a right to a hearing regarding a medical assistance program in the event their claim for services is denied or not acted upon within a reasonable time under 42 C.F.R. 431.220.  Additionally, an individual has a right to a hearing if he believes an agency has acted erroneously or if a nursing facility has erroneously discharged him.

Not only does the Code of Federal Regulations entitle an individual to a hearing under certain circumstances, but it provides that all hearings must be conducted at a reasonable time, date, and place; after adequate written notice of the hearing; and by an impartial official.  Additionally, an individual has a right to obtain a medical assessment at agency expense if one is deemed necessary.  42 C.F.R. 431.240

Finally, under 42 C.F.R. 431.244, the applicant or recipient must have access to the record at a convenient place and time.

C.     General Procedures.     Hearing decisions must be based exclusively on evidence introduced at the hearing. See A.P.A., 5 U.S.C.A. '556(e) Federal regulations specifically list what the record itself may contain, such as the hearing officer's recommendation and all papers filed in the proceeding.  If the hearing is evidentiary, the decision must be written.  42 C.F.R. 431.244

1.     Termination of Benefits Pending Agency Hearing or Decision.  Under 42 C.F.R. 431.230 and 431.231, if the agency mails notice of the proposed reduction or termination of medical assistance benefits and the recipient has already requested a hearing or does so within 10 days of the mailing of notice of the subject action, the agency may not terminate or reduce services until a decision is rendered after the hearing.  This does not apply if the sole issue is one of federal state law or policy or the agency promptly informs the recipient in writing that services will be terminated or reduced pending the decision.

The agency must also reinstate and continue services until after the hearing decision is made if it took action without advance written notice to the recipient.

2.     After an Adverse Decision of a Fair Hearing.  If the decision of a local evidentiary hearing is adverse to the applicant, the agency must inform the individual of the decision and of his right to appeal.  Services will be discontinued after the adverse decision.  42 C.F.R. 431.232

If the applicant does not specifically request a de novo hearing, the state agency hearing on appeal may review the record of the Fair Hearing to determine whether the initial decision was supported by substantial evidence in the record.  42 C.F.R. 431.233

3.     Favorable Fair Hearing Decisions.    In the event of a favorable decision in a Fair Hearing, the agency is required to promptly make corrective payments retroactive to the date an incorrect action was taken.  Additionally, if appropriate, the agency must provide for admission or readmission of the individual to a facility.  42 C.F.R. 431.246

D.     Federal Financial Participation.  Under 42 C.F.R. 431.250, Federal financial participation is available for:

1.     payments for services continued pending a hearing decision;

2.     payments made to carry out hearing decisions;

3.     payments made for services provided within the scope of the Federal Medicaid program and made under a court order;

4.     payments made to take corrective action prior to a hearing;

5.     payments made to extend the benefit of a hearing decision or court order to individuals in the same situation as those directly affected by the decision or order;

6.     retroactive payments to take corrective action or implement a hearing decision

7.     administrative costs incurred by the agency in connection with the hearing. 

IV.     NOTICE.  JO-ANNE TO DO THIS SECTION.

V.     FILING REQUIREMENT.

A.     Time to File.  The time in which to file for a Fair Hearing will vary with each individual agency's procedural rules and statutory provisions.  For the Department of Human Services Division on Medical Assistance and Health Services, the New Jersey Administrative Code, Section 10:70-7.2 requires that written notice be filed within twenty days of the date of the agency letter denying benefits. 

Under the Code of Federal Regulations, the agency generally may not discontinue services if the applicant has filed a request for a hearing within 10 days of the mailing of the notice of agency action.  42 C.F.R. 431.230

B.     Method of Service.  Under state administrative regulations, pleadings are in the form of a petition, complaint, an order to show cause, or a notice of a proposed action. 

The first pleading shall be served in person, by certified mail, return receipt requested, by ordinary mail or in any manner designed to provide actual notice to the person being served.  Good practice, however, favors the use of certified mail.

C.     Service through Faxing.  Actual notice of a pleading will always satisfy due process.  However, where necessary, proof of service may be made by an acknowledgement of service signed by the attorney or party, by an affidavit of the person making service, or by a certificate of service appended to the paper to be filed and signed by the attorney for the party making service.  Since faxing is not specifically considered as an approved standard method of service, it is best to verify the actual receipt of the pleading or draft a proof of service.

VI.TIME TABLE.     The references herein are to timetables in federal law.  These timetables vary significantly from state to state.

A.     Time for Filing Application.   The time in which an applicant may file is limited.  Generally, filing is timely if it is within the first twenty days after the adverse agency action.  Upon the filing of an application for a Fair Hearing, a Notice of Filing is sent out to all parties and the transmitting agency.  This Notice contains the date of filing and the docket number of the matter.

A filed matter may be scheduled for mediation, a conference, proceeding on the papers, conference hearing, telephone hearing, plenary hearing, or some other proceeding. 

A Notice of Hearing is then sent to the parties and agency, containing the date, time, and location of the hearing. 

B.     Time for Filing Application - Prehearing Conference.  In certain cases where a prehearing conference has been advised, issues to discuss may include:  the scheduling, stipulations of facts and issues, any partial settlement agreements, discovery matters, proofs, exhibits, and witnesses.

C.     Discovery and Response.  Prehearing discovery is permitted upon the request of a party.  Administrative law discovery is on a much shorter time scale and is less formal than discovery in civil law cases.  When formal means of discovery are necessary, the parties must notify one another.  Exemplifying the expediency of the process, New Jersey requires that within 15 days of receiving a discovery Notice, the receiving party provide the requested information.

Relief from discovery may also be requested.

D.     Judge's Initial Decision.  The initial decision must be filed by Administrative Court within a specified number of days after the closing of the record.  For instance, the Administrative Procedures Act for New Jersey at N.J.S.A. 52:14B-10 establishes a 45-day time limit, but this period may be reduced by statute.  For good cause, the time limit may also be extended. 

E.     Exceptions.  Exceptions to contested cases are filed with the agency head, and all parties must be copied.  Although the time limit for filing exceptions may be extended for good cause,     exceptions must be filed generally within the first two weeks from the receipt of the initial decision.  See, e.g. N.J.A.C. 1:1 (affording parties 10 days from receipt of initial decision in which to file exceptions).  Federal agency law gives applicants the right to appeal the Fair Hearing decision in writing within 15 days of the mailing of the notice of the decision.  42 C.F.R. 431.232 

Because the time frame for filing an exception is short, it is recommended that attorneys alert the agency by telephone of the intent to file an exception.

F.     Final Agency Decision.  Federal Regulations mandate that for administrative disputes involving medical assistance programs, the agency must take final administrative action within 90 days from the date of the request for a hearing.  42 C.F.R. 431.244.  States may increase the procedural due process accorded in these proceedings, however, and shorten the time frame.  (E.g. N.J.A.C. 1:1 (allowing the agency head 45 days from receipt of the initial decision to adopt, reject, or modify the decision)).

VII.     PREPARATION FOR FAIR HEARING.     The key to success in a Fair Hearing is in preparation.  As in other areas of the practice, it is helpful if this aspect can be systematized into a Mini-System.       A.     Fair Hearing Request.     As soon as the cause of action for a Fair Hearing ripens, a Fair Hearing Request form must be filed with the Office of Administrative Law.  Fair Hearings are usually scheduled on a fairly rapid timetable.  Therefore, all Discovery must be made quickly.  A copy of a Fair Hearing Request is attached to the Appendix.  The Request contains the reasons why the Fair Hearing is requested and should contain citations to the appropriate law.  It is similar to a Complaint filed at the commencement of litigation. 

The form should also contain the name of the client and the name, address and telephone number of the attorney and the date on which it is completed. 

1.     Calendar Notation.     The Office Administrative law will notify the attorney of the date, time and place of the hearing.  The hearing should be placed on the attorney's calendar and the client should be notified of the date, time and place.  The sample letter is attached.

B.     Discovery and Interrogatories.     As in any litigation, it is vital to know  the facts prior to commencement of the hearing.  Standard Interrogatories should be prepared which can be modified on a case by case basis.  The Interrogatories should be served on opposing counsel in accordance with the requirements of the State Administrative Code. 

Where appropriate, a Request for Admissions should be made.  In applicable cases, Depositions should be scheduled.  If the opposing side does not respond to the Interrogatories and Request for Admissions in a timely manner, a Motion to Compel Answers must be filed.  Sample Interrogatories are attached as part of the Appendix.

C.     Brief.   The most difficult problem associated with Fair Hearings is that the Administrative Law Judges know very little about Medicaid.  These Law Judges usually have to hear cases involving a large number of areas of law.  In New Jersey, Administrative Law Judges have sixty-six areas of law for which they are responsible.  In order to educate the judge, it is very helpful to file a Brief prior to the Fair Hearing.  As soon as Discovery has been completed and the facts obtained, the issues may be narrowed and the matter can be briefed. 

It is good practice to have a Brief Bank in the office whereby Briefs on similar subjects may easily be retrieved.  The Brief should be updated or prepared from scratch and filed with the Administrative Law Judge with copies to the adversary and an information copy to the client. 

The Brief should contain a statement of facts, a listing of issues and legal argument.  The Brief should cite all appropriate federal or state statutes, regulations and any federal or state cases either within the jurisdiction or outside the jurisdiction which may pertain.  Administrative Law opinions in the jurisdiction or outside the jurisdiction should also be cited.  Although the Administrative Law opinions often are not binding as precedent, they are helpful to the Administrative Law Judge in deciding the case.

D.     Stipulation of Facts.     Very often the Fair Hearing involves only issues of law.  In order to focus the court's attention on the issue of law, it is often helpful to stipulate the facts.  A Stipulation can be prepared and furnished to opposing counsel in advance.  The Stipulation can then be presented to the court. 

E.     Proposed Findings and Order.     It is often helpful to the court and influences the result if counsel can submit proposed findings and a proposed Order to the court. 

F.     Witnesses.     Any necessary witnesses should be notified of the date, time and place of the Hearing.  If necessary, witnesses should be subpoenaed so that the Hearing can be completed as scheduled. 

G.     Confer with Client.     As part of the Hearing, the attorney should meet with the client and review the testimony which the client will give.  This is also an opportunity to prepare the client for cross examination.  Very often clients have not appeared in court before and do not know what to expect.  This session can help relax the client and make them a much more effective witness.       H.     Organize File.     The file should be organized so that materials are easily found.  The hearing is often focused on financial data.  The file should be prepared so that this data is easily obtained.       It is helpful to prepare a spread sheet on a laptop computer and print out a hard copy of the spreadsheet for the file. 

I.     Material to Bring to the Hearing.     It is helpful to take an assistant to the Hearing who is familiar with the file and who can retrieve information as required.  A laptop computer is helpful in massaging numbers as needed and a copy of the state Medicaid manual is a must.

VIII.     CONDUCT OF THE HEARING.  JO-ANNE TO DO THIS SECTION.

IX.     EXCEPTIONS.  In the event of an adverse decision by the Administrative Law Judge the parties have a right to file Exceptions with the Agency Director who will make the final decision.  The Agency Director has the right to affirm, reverse or modify the decision of the Administrative Law Judge or to remand the matter for further hearing within ninety days from the date of the request for a hearing.  42 C.F.R. 431.244  Exceptions should be filed within seven days (federal law allows fifteen days). 42 C.F.R. 431.232   The Exceptions can relate to findings of fact or conclusions at law.

X.     APPENDIX.

A.     Fair Hearing Check Plan.

B.     Sample Interrogatories.