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Planned Parenthood Arizona, Inc. v. Betlach
Citations: 899 F. Supp. 2d 868; 2012 WL 5188009; 2012 U.S. Dist. LEXIS 150596Docket: No. CV-12-01533-PHX-NVW
Court: District Court, D. Arizona; October 19, 2012; Federal District Court
The court order addresses a legal challenge to Arizona's HB 2800, which prohibits Medicaid funding for healthcare providers performing elective abortions, defined as those not eligible for federal reimbursement under Title XIX. The plaintiffs argue that the Arizona Act violates the Medicaid program's Freedom of Choice provision, asserting their right to sue under 42 U.S.C. § 1983. The court finds the plaintiffs likely to succeed on the merits of their claims, noting that the term "qualified to perform the service" pertains specifically to providers' ability to deliver Medicaid services. It concludes that states lack the authority to disqualify providers for reasons unrelated to Medicaid's objectives and that agency interpretations of relevant statutes warrant deference. The court also determines that plaintiffs face irreparable harm if the injunction is not granted, and the balance of equities favors them. Furthermore, the public interest supports temporarily enjoining the enforcement of the Arizona Act. Consequently, the court grants the plaintiffs' Motion for Preliminary Injunction while denying the defendants' Motion to Dismiss Counts I and II. The order includes the court's findings of fact and conclusions of law as required by Federal Rule of Civil Procedure 52(a). States have the option to participate in the federal Medicaid program but must adhere to federal laws and regulations upon choosing to do so, as mandated by 42 U.S.C. 1396a(a)(1). Participating states are required to develop a service provision plan that receives approval from the Secretary of Health and Human Services, with the Secretary delegating this review authority to Regional Administrators of the Centers for Medicare and Medicaid Services (CMS). The CMS assesses the state plan's alignment with federal policy and can approve or disapprove it in consultation with the Secretary. Central to the case at hand is the "freedom of choice" provision, which stipulates that state plans must allow eligible individuals to receive medical assistance from any qualified provider. This includes provisions for family planning services, ensuring individuals can choose their providers even within managed care systems. While the Secretary can waive certain provider choice rules under specific circumstances, waivers must not restrict access to family planning services. Participating states are required to comply with Title XIX provisions, including the freedom of choice clause, but also maintain some autonomy in establishing reasonable standards for provider qualifications and can exclude providers under certain conditions. States are permitted to exclude any individual or entity for reasons that would also justify exclusion by the Secretary. Waivers for demonstration projects under 42 U.S.C. 1315 allow the Secretary to approve experimental initiatives that encourage states to innovate within Medicaid. Such projects may receive waivers from certain Medicaid mandates to facilitate state participation. Arizona operates its Medicaid program under both an approved state plan and a demonstration project, bound by the requirements of 42 U.S.C. 1396a unless waived. The Arizona Health Care Cost Containment System (AHCCCS) manages this program, utilizing a managed care model with waivers that restrict provider choice through mandatory enrollment, though the right to choose family planning providers remains protected. The plaintiffs seek a preliminary injunction against the implementation of A.R.S. 35-196.05(B), arguing that it violates Medicaid patients' right to choose their providers under 1396a(a)(23). To obtain the injunction, plaintiffs must demonstrate likely success on the merits, irreparable harm, a favorable balance of equities, and public interest alignment. The plaintiffs assert a right to sue under 42 U.S.C. 1983, which permits enforcement of federal statutory rights but does not guarantee relief for every violation of federal law. Defendants counter that plaintiffs lack a right of action under 1983 and contend that Medicaid is a voluntary program. To bring a lawsuit under Section 1983, a plaintiff must assert a violation of an individual right rather than a mere breach of federal law, as established in Blessing v. Freestone. The plaintiff carries the burden to demonstrate that Congress intended the relevant statute to create an enforceable right, as clarified in Gonzaga Univ. v. Doe. The Supreme Court articulated a three-factor test in Blessing to ascertain whether a federal statute confers such a right: 1) whether Congress intended to benefit the plaintiff; 2) whether the asserted right is sufficiently clear to avoid vagueness; and 3) whether the statute imposes a binding obligation on states in mandatory terms. If these criteria are met, the right is presumptively enforceable under Section 1983 unless the state proves Congress explicitly barred such a remedy. In Gonzaga, the Court emphasized the need for 'rights-creating' language in statutes. Title VI of the Civil Rights Act and Title IX of the Education Amendments exemplify this through their use of the phrase "No person shall be subjected to discrimination." The Medicaid freedom of choice provision, under Section 1396a(a)(23), demonstrates congressional intent to establish individualized rights by explicitly stating an individual's right to choose among qualified providers. The statute mandates that state plans for medical assistance must allow eligible individuals to access services and must not restrict their choice of qualified providers. This language is clear and focused on individual rights rather than aggregate services, reinforcing that eligible individuals possess the right to select providers without state interference. The freedom of choice provision in the Medicaid Act creates enforceable individual rights for patients, as established by the language and structure of the statute. While Defendants argue that Title XIX does not grant individual rights, citing 42 U.S.C. 1396c, which allows the Secretary to suspend payments for substantial non-compliance, this interpretation has been countered by Congress. In response to the Supreme Court's ruling in Suter v. Artist M., which deemed certain provisions unenforceable under 1983, Congress enacted 42 U.S.C. 1320a-2, clarifying that the Medicaid Act's structure does not negate its rights-creating language. Various circuit courts have upheld that provisions like 1396a(a)(23) create enforceable rights that beneficiaries can assert under 1983. Consequently, the Court concludes that 1396a(a)(23) clearly reflects Congress's intent to confer individual rights, satisfying the initial prong of the Blessing test. To satisfy the second prong of the Blessing test, a plaintiff must show that the right in question is not so vague that enforcing it would be challenging for courts. While the scope of medical care covered by 1396a(a)(23) may be debated, the provision itself is clear and enforceable, granting eligible individuals the right to choose from qualified providers without government interference. Courts can evaluate state compliance using available evidence such as state Medicaid plans and testimonies from recipients and providers. The third prong requires the statute to impose a binding obligation on states, which is evident in the mandatory language of the provision. Defendants argue that states voluntarily participating in Medicaid cannot be bound by mandatory provisions; however, this argument has been rejected by the Supreme Court, which maintains that states must comply with Medicaid requirements once they choose to participate. As such, the mandatory terms of the freedom of choice provision create a binding obligation, satisfying the third prong. All three prongs of the Blessing test are met, indicating that 1396a(a)(23) confers an individual right presumptively enforceable under Section 1983. Furthermore, Title XIX does not explicitly prohibit individual actions, and most circuits recognize Medicaid Act provisions as enforceable under Section 1983. The remedial framework allowing for federal funding cuts does not imply an intent to eliminate private remedies. Consequently, Medicaid beneficiaries possess enforceable individual rights under 1396a(a)(23) through a Section 1983 cause of action. Plaintiffs assert that the Arizona Act (A.R.S. 35-196.05) infringes upon the freedom of choice provision under 42 U.S.C. 1396a(a)(23), which guarantees Medicaid patients the right to select from qualified medical providers without government interference. Plaintiffs argue that the Act disqualifies qualified providers based solely on the services they offer, particularly those providing abortions, thus violating patients' rights. Defendants counter that the Medicaid Act permits Arizona to set provider qualifications and that the Act reflects the state’s authority to determine which providers are qualified. They maintain that the term "qualified" allows states to restrict access to providers deemed unqualified for any lawful reason. The Court emphasizes that the freedom of choice provision is intended to ensure patients can select qualified providers based on their ability to deliver Medicaid services, not on arbitrary state determinations. The Court's interpretation of the statutory language indicates that the term "qualified" should relate specifically to a provider's capability to perform required services, rejecting the Defendants' broader interpretation that allows exclusion based on state policy. The Court's conclusion is grounded in a careful analysis of the statutory text, the exceptions outlined by Congress, principles of statutory construction, and deference to agency interpretations. A 'qualified' medical service provider possesses the necessary capabilities and qualifications, such as a qualified medical examiner. The phrase 'providers that are qualified to perform the service or services required' restricts choice to competent providers. States have the authority to impose reasonable standards on provider qualifications under 42 C.F.R. 431.51(c)(2), but these must be related to the provider's ability to deliver Medicaid services. Defendants do not dispute the Plaintiff providers' qualifications to perform family planning services under Arizona’s Medicaid plan but suggest they could continue if they ceased performing abortions or established a separate entity. Therefore, the Plaintiff providers are deemed 'qualified' under the plain meaning of the relevant statutes, supporting their argument that Medicaid recipients can select these providers unless exceptions apply. Additionally, Section 1396a(p)(l) does not grant states broad authority to disqualify providers for unrelated reasons. Other provisions of Title XIX outline specific exceptions to the general rule of free choice among qualified providers. For instance, 1396a(a)(23) specifies that states are not required to provide assistance for services from individuals convicted of felonies inconsistent with the beneficiaries' best interests, and the Secretary can restrict choices to providers who meet set standards. Section 1396a(p)(l) allows states to exclude providers for certain enumerated reasons, but Defendants' interpretation suggests a broader authority than intended. Plaintiffs contend that this section provides limited exceptions focused on fraud and illegal activities. Both parties reference legislative history to support their interpretations, with Defendants citing that states can establish additional exclusion bases, while Plaintiffs emphasize the intention to protect Medicaid programs and beneficiaries from fraud, abuse, and inadequate care. The United States contends that the phrase "in addition to any other authority" serves as a savings clause, specifically authorizing states to exclude Medicaid providers only in limited circumstances related to fraud and abuse. The determination of whether the Arizona Act infringes the freedom of choice provision hinges on the interpretation of the 1396a(p)(1) exception. The Court argues against the idea that Congress intended for 1396a(p)(1) to grant broad authority for states to disqualify providers for various reasons unrelated to Medicaid's objectives. It distinguishes the term "qualified" in 1396a(a)(23) from "exclude" in 1396a(p)(1), noting that "exclude" means to refuse or terminate a participation agreement and requires states to provide notice and an opportunity to appeal before exclusion. The Court emphasizes that a state's exclusion authority pertains to individual providers on a case-by-case basis, not to setting general qualifications for all providers. The Defendants' argument conflates exclusion with the broader ability to define qualifications, which is not supported by the statutory language. The Court points out that if 1396a(p)(1) permitted states to exclude providers for any reason, it would render the other exceptions to the freedom of choice provision unnecessary, violating the principle that statutes should avoid redundancy. Thus, the interpretation that allows for broad exclusion undermines the specific and narrow nature of the exceptions outlined in the statute. Congress has limited the Secretary's authority under 42 U.S.C. § 1396n(b)(4) to waive Medicaid's general requirements, stipulating that any state-imposed restrictions on beneficiaries' choice of providers must align with access, quality, and economic efficiency of services. Such restrictions cannot discriminate among providers based on factors unrelated to their demonstrated effectiveness. If states were granted unrestricted authority to limit provider choice under § 1396a(p)(1), it would undermine the Secretary's waiver authority and the specific conditions outlined in § 1396n(b)(4). Additionally, allowing states to exclude entire classes of providers for any reason would weaken the freedom of choice guarantee established in § 1396a(a)(23), potentially subjecting it to arbitrary state policies. Legislative history emphasizes that § 1396a(p)(1) is intended to allow exclusions based on quality of services, not for reasons unrelated to Medicaid. While the court does not need to delineate the exact parameters of a state's authority to establish reasonable provider qualifications, it asserts that such authority cannot be as expansive as the defendants claim. It concludes that a state’s qualifications for Medicaid providers must be relevant to their ability to deliver Medicaid services, indicating that a provider's legal provision of abortion services does not disqualify them from offering family planning services under Medicaid. Therefore, Arizona is not authorized to disqualify providers from Medicaid solely based on their provision of lawful abortion services. The Arizona Act is likely to violate the freedom of choice provision under 42 U.S.C. § 1396a(a)(23) by disqualifying providers for reasons unrelated to Medicaid services. Agency interpretations of this provision are entitled to deference, and any ambiguity surrounding it is clarified by the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS). HHS has interpreted that states can only set "reasonable standards relating to the qualifications of providers" that are relevant to their ability to deliver Medicaid services. CMS previously rejected Indiana's similar Medicaid plan which aimed to disqualify providers performing abortions, affirming that it violated the freedom of choice provision. Following this, CMS issued a bulletin emphasizing that states cannot exclude qualified providers based solely on the services they provide, including abortion. In a related case, Planned Parenthood of Indiana successfully argued against Indiana's defunding law, with the court acknowledging that some deference to CMS's interpretation is appropriate. The court noted that this deference is justified given the complexity of Medicaid regulations and the expertise of CMS. Subsequent administrative actions have reinforced the need for deference to CMS’s interpretations, as seen in Indiana’s unsuccessful request for reconsideration of CMS’s disapproval of its Medicaid plan. CMS denied Indiana's proposed restriction on family planning providers, highlighting its violation of beneficiary choice protections under Medicaid provisions. Following the denial, Indiana requested an administrative hearing, which involved comprehensive briefing and oral arguments, leading to a proposed decision from the CMS Presiding Officer. The Officer found Indiana's restriction contrary to the freedom of choice provision and clarified that a specific statute did not apply as it pertained to exclusionary powers rather than provider qualifications. Defendants contended that the Court should not defer to CMS's interpretation, arguing there was no interpretative gap and no formal adjudicatory process had occurred. However, the Court disagreed, asserting that the proposed decision was entitled to some deference due to its thorough reasoning and consistency with agency pronouncements. The Court noted that the agency’s interpretation carried persuasive authority and aligned with established case law supporting deference to CMS decisions regarding state Medicaid plans. Consequently, the Court concluded that the Plaintiffs were likely to succeed on their claim that the Arizona Act infringes on the Medicaid Act's freedom of choice provision. Furthermore, the Court determined that Plaintiffs would suffer irreparable harm without injunctive relief, as the implementation of the Arizona Act would prevent Planned Parenthood of Arizona and Dr. Reuss from providing essential healthcare services to Medicaid beneficiaries, resulting in lost revenue. PPAZ patients who are Medicare beneficiaries, including the three Doe Plaintiffs, face a loss of choice in qualified health care providers for family planning services if a preliminary injunction is not granted. Without such an injunction, PPAZ may have to discontinue its Medicaid services, leading to irreparable harm by restricting the plaintiffs' ability to seek care from their chosen providers. This situation contradicts the freedom of choice provision intended by Congress to allow Medicaid recipients equivalent access to provider choices as the general population. Additionally, PPAZ and Dr. Reuss would incur a significant financial loss, approximately $350,000 annually, from Medicaid funding, which cannot be recovered as damages due to the Eleventh Amendment. Therefore, the plaintiffs have sufficiently demonstrated the likelihood of suffering irreparable harm without a temporary injunction. In weighing the equities, the defendants assert that barring Medicaid funding for providers performing elective abortions serves the state's interests by preventing public funding of such procedures. However, evidence indicates that PPAZ adheres to all relevant federal and state regulations, ensuring no public funds are used for abortions. PPAZ's participation in Arizona's Medicaid program has been without issue for over two decades, and it bills Medicaid only for specific services provided. The defendants' claim that Medicaid funds indirectly subsidize abortions lacks merit, as PPAZ’s Medicaid reimbursements cover only about half the cost of the services provided, leaving no surplus to fund abortion services. Furthermore, if the goal was to prevent indirect funding of abortions, the state could simply reduce the Medicaid funding to PPAZ rather than restrict the funding altogether. Defendants’ counsel argued that even a minimal reimbursement rate for Medicaid services to PPAZ would result in harm to the State by subsidizing abortions. However, this argument was deemed untenable, as such a low rate would lead to substantial financial losses for PPAZ, making the claim of Medicaid funds being used to subsidize abortions absurd. The primary basis of Defendants' argument rests on the concept that money is fungible, suggesting any amount could indirectly support abortion services. This claim was considered too abstract and lacked substantial weight in the context of balancing equities. If any merit existed in Defendants' argument of abstract harm to the State from indirect support of abortion services, it would be outweighed by the direct harm to Plaintiffs if the Arizona Act is enforced. Granting the injunction would allow PPAZ to continue receiving Medicaid funds, as it has since 1991. The public interest is served by ensuring Medicaid beneficiaries can choose their family planning service providers. PPAZ serves approximately 3,000 Medicaid patients annually, and enforcing the Arizona Act would limit their choice, violating congressional intent under 42 U.S.C. 1396a(a)(23)(B). Maintaining the status quo through a preliminary injunction protects patient choice and continuity of care, especially in underserved areas. A preliminary injunction requires the plaintiff to post a security bond, determined at the court's discretion. In this case, the Defendants would not incur monetary damages from the injunction, necessitating only a nominal bond of $100. Additionally, Defendants filed a motion to dismiss Counts I and II of the Plaintiffs' complaint, which asserts that the Arizona Act violates 42 U.S.C. 1396a(a)(23) and the Supremacy Clause of the U.S. Constitution. A complaint under Rule 12(b)(6) must present well-pled factual allegations that are accepted as true and viewed favorably for the nonmoving party. For the complaint to survive dismissal, it must contain sufficient facts to establish a plausible claim for relief, as determined by the standard set in Bell Atlantic Corp. v. Twombly. This standard requires more than mere possibility; it necessitates a showing that unlawful action is plausible. Dismissal is warranted if the complaint lacks a valid legal theory or sufficient factual support under such a theory. In relation to Rule 12(b)(1), a motion to dismiss for lack of subject-matter jurisdiction can be evaluated based on the complaint's face or additional evidence. In a facial attack, the court accepts the complaint's factual allegations as true, with the burden of proof resting on the party claiming jurisdiction. Regarding the specific counts, the defendants argue that there is no enforceable right under the Medicaid Act via Section 1983, but the plaintiffs do possess a private right of action. Consequently, the motion to dismiss Count I is denied. For Count II, the defendants assert that the plaintiffs cannot claim preemption due to the absence of conflicting state law with the Medicaid Act, arguing that violations do not equate to conflicts since state participation in Medicaid is voluntary. They further contend that the plaintiffs lack a private right of action for challenging Medicaid disqualification through federal preemption claims, citing that such claims cannot be raised under the Supremacy Clause for legislation enacted under the Spending Clause. However, the court finds the defendants' arguments unpersuasive, noting that once a state opts into the Medicaid program, it must adhere to the Medicaid Act's requirements, as supported by precedents. The federal government can impose terms on financial allocations to states, and any state law that contradicts these federal terms is invalid. Recent Supreme Court rulings indicate that plaintiffs can bring preemption claims under federal Spending Clause legislation. The Ninth Circuit affirmed the principle that a private party can sue under the Supremacy Clause to block state laws that may conflict with the Medicaid Act, as established in *Indep. Living Ctr. of S. Cal. Inc. v. Shewry*. The court acknowledged that the Supreme Court had previously granted certiorari to determine whether Medicaid providers and recipients could assert a claim under the Supremacy Clause against state Medicaid laws that diminish payments to providers, but the case was remanded without a definitive ruling. Other district courts have also explored the Supremacy Clause in this context, suggesting that such claims are permissible under the Spending Clause. The Ninth Circuit’s ruling in *Shewry* remains binding, allowing plaintiffs to pursue a preemption claim under the Supremacy Clause, which falls under federal question jurisdiction. The plaintiffs sufficiently established their claim, leading to the denial of the defendants’ motion to dismiss Count II. Consequently, the plaintiffs’ motion for a preliminary injunction was granted, contingent on posting a $100 bond, and the defendants’ motion to dismiss Counts I and II was denied.