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STATE OF NEW HAMPSHIRE
SUPREME COURT
No. 2010-0436
New Hampshire Health Care Association, Genesis Pleasant View, et al.
v.
Governor John H. Lynch and the Commissioner of the New Hampshire Department of Health and Human Services
APPEAL PURSUANT TO RULE 7 FROM A JUDGMENT OF THE MERRIMACK COUNTY SUPERIOR COURT
BRIEF FOR GOVERNOR JOHN H. LYNCH AND THE COMMISSIONER OF THE NEW HAMPSHIRE DEPARTMENT OF HEALTH AND HUMAN SERVICES
MICHAEL A. DELANEY ATTORNEY GENERAL Laura E. B. Lombardi (Bar No. 12821) Assistant Attorney General Karen A. Schlitzer (Bar No. 15169) Assistant Attorney General Civil Bureau NH Department of Justice 33 Capitol Street Concord, NH 03301-6397 (603) 271-3650 (15 minutes)
10/12/2010
TABLE OF CONTENTS
Page TABLE OF AUTHORITIES .......................................................................................................... ii
ISSUE PRESENTED...................................................................................................................... 1
STATEMENT OF CASE AND FACTS ........................................................................................ 2
SUMMARY OF THE ARGUMENT ............................................................................................. 7
ARGUMENT.................................................................................................................................. 9
I. THE TRIAL COURT PROPERLY GRANTED SUMMARY JUDGMENT IN FAVOR OF RESPONDENTS WHERE THE EXPENDITURE CLASS FROM WHICH PETITIONERS SOUGHT PAYMENT HAD BEEN LAWFULLY REDUCED BY EXECUTIVE ORDER OF THE GOVERNOR PURSUANT TO RSA 9:16-b............................................................................................. 9
A. Summary Judgment Standard ............................................................................................. 9
B. Chapter 129 Is Not A Legal Obligation On The State To Pay A Sum Certain ................ 10
C. RSA 9:16-b Is Constitutional............................................................................................ 12
1. RSA 9:16-b Is Constitutional On Its Face ................................................................. 13
2. RSA 9:16-b Is Constitutional As Applied To The FY 2007 Surplus Funds ............. 22
D. The Governor’s Executive Order Does Not Effectuate An Unconstitutional Taking ...... 23
E. The Governor’s Executive Order Does Not Violate The Supremacy Clause................... 25
F. Petitioners Are Not Entitled To Mandamus Relief........................................................... 29
CONCLUSION............................................................................................................................. 31
ORAL ARGUMENT.................................................................................................................... 31
i
TABLE OF AUTHORITIES
Page Cases
Appeal of Astro Spectacular, 138 N.H. 298 (1994)...................................................................... 11
Bois v. Manchester, 104 N.H. 5 (1962) ........................................................................................ 30
Chiles v. Children A, B, C, D, E and F, 589 So. 2d 260 (Fla. 1991) .......................... 14, 17, 18, 19
Cloutier v. State Milk Control Board, 92 N.H. 199 (1942) .......................................................... 14
Evergreen Presbyterian Ministries, Inc. v. Hood, 235 F.3d 908 (5th Cir. 2000) .......................... 24
Formula Dev. Corp. v. Town of Chester, 156 N.H. 177 (2007) ................................................... 11
Goss v. City of Manchester, 140 N.H. 449 (1995).......................................................................... 9
Gould v. George Brox, Inc., 137 N.H. 85 (1993) ......................................................................... 10
Guarracino v. Beaudry, 118 N.H. 435 (1978)........................................................................ 29, 30
Hunter v. State, 865 A.2d 381 (Vt. 2004)..................................................................................... 16
Independent Living Ctr. of Southern California v. Shrewry, 543 F.3d 1050 (9th Cir. 2008)........ 28
Independent Living Ctr. v. Maxwell-Jolly, 572 F.3d 644 (9th Cir. 2009) ..................................... 28
Koor Communication v. City of Lebanon, 148 N.H. 618 (2002).................................................. 26
Long Term Care Pharmacy Alliance v. Ferguson, 362 F.3d 50 (1st Cir. 2004) ..................... 27, 28
Minnesota Ass’n of Health Care Facilities, Inc. [MAHCF] v. Minnesota Dept. of Pub. Welfare, 742 F.2d 442 (8th Cir. 1984), cert denied, 469 U.S. 1215 (1985).................................................................................................................... 25
Mission Hospital Regional Med. Ctr. v. Shrewry, 168 Cal. App. 4th 460 (Cal. App. 2008) .. 26, 28
New England Div. of the American Cancer Society v. Commissioner of Administration, 769 N.E.2d 1248 (Mass. 2002) ............................................................................................................ 16
North Dakota Council of School Administrators v. Sinner, 458 N.W.2d 280 (N.D. 1990) ......... 16
O’Neil v. Thomson, 114 N.H. 155 (1974)............................................................................... 15, 19
Oberlander v. Perales, 740 F.2d 116 (2d Cir. 1984).................................................................... 24
Opinion of the Justices, 110 N.H. 359 (1970) ............................................................ 13, 14, 16, 19
ii
Opinion of the Justices, 116 N.H. 406 (1976) .............................................................................. 15
Petition of Strandell, 132 N.H. 110 (1989)................................................................................... 10
Progressive N. Ins. Co. v. Concord Gen. Mut. Ins. Co., 151 N.H. 649 (2005) ............................ 10
Rockhouse Mt. Property Owners Assoc. v. Town of Conway, 127 N.H. 593 (1986) ................... 30
State ex rel. Schwartz v. Johnson, 907 P.2d 1001 (N.M. 1995) ............................................. 17, 18
State v. Balliro, 158 N.H. 1 (2008) ............................................................................................... 11
State v. Fairbank North Star Borough, 736 P.2d 1140 (Alaska 1987)......................................... 17
State v. Gifford, 148 N.H. 215 (2002)........................................................................................... 11
Town of Amherst v. Gilroy, 157 N.H. 275 (2008)......................................................................... 11
Tuttle v. New Hampshire Medical Malpractice Joint Underwriting Assoc., 159 N.H. 627 (2010) ..................................................................................................................... 12
United Cerebral Palsy Ass’n v. Cuomo, 783 F. Supp. 43 (N.D.N.Y. 1992) .......................... 23, 24
University of Connecticut Chapter AAUP v. Governor, 512 A.2d 152 (Conn. 1986).................. 17
Whitney v. Heckler, 780 F.2d 963 (11th Cir. 1986)....................................................................... 25
Wilder v. Virginia Hospital Assoc., 496 U.S. 498 (1990)............................................................. 24
Statutes
42 U.S.C. §1396a(a)(13)(A) ............................................................................................. 26, 27, 29
42 U.S.C. §1396a(a)(30)(A) ............................................................................................. 26, 27, 29
42 U.S.C. § 1983........................................................................................................................... 24
Laws 2007, Ch. 129 ............................................................................................................... passim
Laws 2007, Ch. 129:1 ......................................................................................................... 2, 26, 28
Laws 2007, Ch. 262 .................................................................................................................. 5, 22
Laws 2008, 296:18.................................................................................................................... 3, 11
RSA chapter 9 ............................................................................................................................... 15
RSA 9:1..................................................................................................................................... 4, 15
iii
RSA 9:2......................................................................................................................................... 14
RSA 9:3, I ..................................................................................................................................... 15
RSA 9:3, I(c)................................................................................................................................. 20
RSA 9:4-a...................................................................................................................................... 14
RSA 9:8-b ............................................................................................................................... 12, 15
RSA 9:11..................................................................................................................... 12, 15, 19, 20
RSA 9:12....................................................................................................................................... 21
RSA 9:13-d ................................................................................................................................... 21
RSA 9:13-e, III.............................................................................................................................. 21
RSA 9:13-e, IV ............................................................................................................................. 21
RSA 9:15....................................................................................................................................... 15
RSA 9:16........................................................................................................................... 12, 15, 21
RSA 9:16-a.................................................................................................................................... 21
RSA 9:16-b ............................................................................................................................ passim
RSA 9:17................................................................................................................................. 19, 20
RSA 9:17(a) .................................................................................................................................. 20
RSA 9:17-a.................................................................................................................................... 21
RSA 9:17-b ................................................................................................................................... 21
RSA 9:17-c.............................................................................................................................. 20, 21
RSA 9:17-d ................................................................................................................................... 20
RSA 9:17-f .................................................................................................................................... 20
RSA 9:19................................................................................................................................. 12, 15
RSA 491:8-a.................................................................................................................................... 9
iv
Regulations
42 CFR § 447.201(b) .................................................................................................................... 28
42 CFR § 447.205 ......................................................................................................................... 27
42 CFR § 447.205(a)..................................................................................................................... 27
42 CFR § 447.252(b) .................................................................................................................... 28
Constitutional Provisions
Florida Constitution, Article II, section 3 ............................................................................... 14, 18
N.H. CONST., pt. I, art. 12 ............................................................................................................. 23
N.H. CONST., pt. I, art. 37 ................................................................................................. 13, 14, 19
N.H. CONST. pt. II, art. 2............................................................................................................... 15
N.H. CONST., pt. II, art. 41............................................................................................................ 15
N.H. CONST., pt. II, art. 44............................................................................................................ 13
v
ISSUE PRESENTED
1. Whether the trial court properly granted summary judgment in favor of
Respondents where the expenditure class from which Petitioners sought payment
had been lawfully reduced by Executive Order of the Governor pursuant to RSA
9:16-b.
1
STATEMENT OF CASE AND FACTS
Petitioners are nursing homes in New Hampshire that provide services to private
payors and Medicare and Medicaid recipients, and one Petitioner is the trade association
that represents New Hampshire’s private nursing homes. See App.1 at 2-3 ¶¶ 3-6. The
New Hampshire Department of Health and Human Services (“DHHS”) provides funding
for nursing homes through the federal Medicaid program. App. at 3 ¶ 10. The legislature
appropriates money in each biennial state budget for the State portion of the Medicaid
nursing home reimbursement. App. at 4 ¶ 11. The nursing homes receive payments for
Medicaid services in accordance with Medicaid rates which DHHS sets twice a year, on a
prospective basis. App. at 4 ¶ 11. When there is a surplus of appropriated funds at the
end of the fiscal year, unless otherwise provided, the funds lapse, and revert to the
general fund. App. at 4 ¶ 14. Consequently, historically, any surplus in the nursing home
appropriation has lapsed, meaning those surplus funds were not paid to the nursing
homes.
In 2007, the legislature enacted HB 721 as Laws 2007, Ch. 129, which provided: The appropriation in class 90 for the fiscal year ending June 30, 2007 shall be non-lapsing. Any balance remaining at the end of June 30, 2007 shall be paid to nursing homes as supplemental rates no later than October 1, 2007. The supplemental rates shall be based on the current rate setting methodology. The commissioner shall file a report with the legislative fiscal committee by October 1, 2007 which details the balance carried forward from fiscal year 2007 and the amounts to be paid as supplemental rates.
Laws 2007, 129:1 (“Chapter 129”); App. at 536. The Center for Medicare and Medicaid
Services (“CMS”) advised DHHS that a Medicaid state plan amendment was necessary to
make the supplemental payments to nursing homes. App. at 430, ¶ 5; App. at 435-41.
1 “App.” designates the two volume Appendix to Brief for the Petitioners-Appellants.
2
In response to the advice received from CMS, DHHS submitted a proposed state
plan amendment on June 29, 2007, seeking federal authorization to pay remaining
appropriated funds to nursing homes as supplemental rates. App. at 430, ¶ 6; App. at
442-64. However, CMS indicated that it would deny the proposed amendment, so DHHS
withdrew the proposed amendment in September 2007. App. at 431, ¶ 8; App. at 474-75.
DHHS submitted a second proposed state plan amendment on March 21, 2008,
seeking federal authorization to pay a “…One-time Payment for Individuals in Nursing
Homes.” App. at 431, ¶ 11; App. at 484-510. CMS twice sought additional information
on the proposed supplemental payments to nursing homes, leading DHHS to believe that
this second proposed Medicaid state plan amendment would also not be approved. App.
at 431, ¶ 12; App. at 512-15.
On June 27, 2008, Chapter 129 was amended, and the following sentence was
added at the end: “If such funds are not expended by June 30, 2009, they shall lapse to
the appropriate funds.” Laws 2008, 296:18 (eff. June 27, 2008); App. at 537.
In October 2008, due to a projected state government budget deficit, DHHS was
instructed by the Governor’s Office to develop a plan to address the projected deficit.
App. at 432, ¶ 13. In response, DHHS developed a budget reduction plan, which
included eliminating the $2,217,141 surplus funds2 for the fiscal year 2007 nursing home
appropriation. App. at 432, ¶ 13; App. at 520, line #71 (nursing home supplemental
distribution). As of November 21, 2008, DHHS still had not received a response from
CMS on the proposed state plan amendment. Eight months had passed since DHHS had
submitted the proposed amendment to CMS, and approval was not expected. See App. at
2 Petitioners’ claim of an $8.8 million surplus is due to their inclusion of the county and federal matching funds. App. at 2, ¶ 2.
3
554 (Testimony of Hodgdon before the Joint Fiscal Committee on Nov. 21, 2008, stating
“my understanding is if we don’t have an answer from CMS, we’re close to having an
answer from CMS and that’s not something that they were going to support.”). Without
CMS approval, the supplemental payments of the surplus appropriation could not be
made.3 App. at 430, ¶ 5; App. at 435-41.
Governor Lynch issued Executive Orders 2008-10 and 2008-11, both effective
with Legislative Fiscal Committee approval, effective November 21, 2008. App. at 432,
¶ 14. Executive Order 2008-10 included budget reductions for DHHS in the amount of
$25,361,511, which included eliminating the nursing home surplus appropriation from
fiscal year 2007 in the amount of $2,217,141 General Funds ($8,868,563 total funds).
App. at 432, ¶ 14; App. at 548, line 75.
In issuing the Executive Orders, the Governor relied on RSA 9:16-b which
provides in pertinent part:
I. Notwithstanding any other provision of law, the Governor may, with the prior approval of the fiscal committee, order reductions in any or all expenditure classes within any or all departments, as defined in RSA 9:1, if he determines at any time during the fiscal year that:
(a) Projected state revenues will be insufficient to maintain
a balanced budget and that the likelihood of a serious deficit exists; or
(b) The actual lapse for each fiscal year is not going to equal the level estimated in the forecast of funds, unappropriated surplus, as issued by the legislative budget assistant.
3 Petitioners claim DHHS has refused to make payment and has frustrated the mandate of Chapter 129. However, since CMS required a state plan amendment and did not appear disposed to approving one, DHHS could not make payment without risking the loss of federal matching funds. By the time DHHS received approval of the amendment, the surplus funds in the expenditure class had been eliminated. DHHS did not receive approval from CMS to make the Chapter 129 supplemental payments until November 24, 2008, three days after the effective date of the Governor’s Executive Order eliminating the surplus funds in the expenditure class. App. at 432, ¶ 15.
4
RSA 9:16-b; App. at 556 (Executive Order 2008-10). The Executive Order states that
“the Governor has determined that the budgeted state revenues are insufficient to fund the
state budgeted expenditures as authorized by Chapter 262, N.H. Laws of 2007[,]” and
that the Governor and the legislature are committed to achieving a balanced budget by the
end of the biennium. App. at 556. The Executive Order further states that “the Governor
has met with the presiding officers of the House and Senate and has thus determined that
it is in the public interest to meet with the legislative fiscal committee, which has, in turn,
responded to the Governor’s initiative by consenting to certain actions to reduce
executive branch expenditures.” App. at 556.
Petitioners filed a petition for writ of mandamus, declaratory judgment and
injunctive relief, seeking to: (1) compel the Governor and the Commissioner of DHHS to
pay to Petitioners the unexpended funds remaining in the FY 2007 nursing home
appropriation; (2) declare that the Governor may not eliminate those surplus funds
through executive order and enjoin any such effort; and (3) prevent the Governor from
reducing the legislature’s appropriation for nursing homes for fiscal year 2009. App. at
1-10.4 Following a preliminary injunction hearing, the Merrimack County Superior
Court (Nicolosi, J.) denied preliminary injunctive relief to Petitioners as it related to the
FY 2009 appropriation, and granted preliminary injunctive relief as it related to the FY
2007 unexpended funds. App. at 313. The court ordered that the unexpended FY 2007
funds “not be allowed to lapse into the general fund, but shall be held by the respondents
until the issue of payment is finally resolved.” App. at 313.
4 Petitioners subsequently amended their Petition to add a breach of contract claim, see App. at 21-40, but that claim was later nonsuited without prejudice in order to pursue this appeal, see 689-90, and it is not at issue in this appeal.
5
The parties filed cross-motions for summary judgment on Petitioners’ claim that
Chapter 129 entitles them to an $8.8 million payment from the State. App. at 331-675.
The court (Smukler, J.) denied Petitioners’ motion for summary judgment and granted
Respondents’ motion for summary judgment. App. at 677-87. This appeal followed.
6
SUMMARY OF THE ARGUMENT
Petitioners were fully reimbursed under the duly promulgated reimbursement rate
for services provided to Medicaid patients in fiscal year 2007. The unexpended balance
remaining in the expenditure class at the end of the fiscal year was the result of
underutilization, namely, services that were expected to be provided but which were not
provided because nursing facility utilization ended up being below the estimated amount.
Rather than allowing the surplus funds to lapse to the general fund as they had in the past,
the legislature in Chapter 129 carried the unexpended funds forward from fiscal year
2007 to fiscal year 2008 as a non-lapsing appropriation to be paid as supplemental rates
to nursing homes. Chapter 129 was later amended, however, so that the funds would
lapse if not expended by June 30, 2009.
Facing a budget crisis, the Governor met with the presiding officers of the House
and Senate, and then obtained fiscal committee approval to reduce executive branch
expenditures. Pursuant to RSA 9:16-b, the Governor lawfully reduced by Executive
Order the expenditure class from which Petitioners now seek payment. RSA 9:16-b is a
constitutionally valid delegation of legislative authority to the executive branch in order
to effectively carry out the budget. It does not grant the Governor line item veto
authority, nor does it violate separation of powers.
Nor does Executive Order 2008-10 effectuate an unconstitutional taking or violate
the supremacy clause. The unexpended money remaining in the expenditure class at the
end of FY 2007 is not money due to Petitioners for services already rendered. Chapter
129 provided a supplemental payment above and beyond what nursing homes expected to
receive when performing services in reliance on FY 2007 rates. Because nursing
facilities were fully reimbursed under FY 2007 rates for services actually performed,
7
Petitioners’ expectation of payment under Chapter 129 does not amount to a property
interest protected by the constitution. Moreover, because the Executive Order did not
modify the FY 2007 reimbursement rates, the portions of the federal Medicaid Act on
which Petitioners rely do not apply, and no violation of the supremacy clause has
occurred.
8
ARGUMENT
I. THE TRIAL COURT PROPERLY GRANTED SUMMARY JUDGMENT IN FAVOR OF RESPONDENTS WHERE THE EXPENDITURE CLASS FROM WHICH PETITIONERS SOUGHT PAYMENT HAD BEEN LAWFULLY REDUCED BY EXECUTIVE ORDER OF THE GOVERNOR PURSUANT TO RSA 9:16-b.
Petitioners claim that Chapter 129 gives them a clear right to payment of the
unexpended funds remaining in the FY 2007 nursing home appropriation. In support of
this claim Petitioners argue that the Governor’s Executive Order eliminating expenditure
of those surplus funds unconstitutionally infringed on the legislative power of the General
Court. Petitioners’ claim conflicts with the longstanding principle that the doctrine of
separation of powers must be construed practically. The New Hampshire Supreme Court
has recognized that overlapping and duality are necessary in the context of separation of
power, and RSA 9:16-b is an example of such an overlap between the legislative and
executive branches of government. Petitioners’ claim for payment under Chapter 129 is
dependent on there being a surplus of funds remaining in the FY 2007 appropriation for
nursing home reimbursements. Because that expenditure class was lawfully reduced by
Executive Order of the Governor pursuant to RSA 9:16-b, Petitioners are not entitled to
receive anything under Chapter 129.
A. Summary Judgment Standard
A motion for summary judgment must be granted where no genuine issue of
material fact is present, and the moving party is entitled to judgment as a matter of law.
RSA 491:8-a; Goss v. City of Manchester, 140 N.H. 449, 450-51 (1995). In determining
whether summary judgment is appropriate, the court must consider the affidavits and
other evidence submitted, and any reasonable inferences to be drawn from them, in the
light most favorable to the non-moving party. Gould v. George Brox, Inc., 137 N.H. 85,
9
87-88 (1993). This Court reviews the trial court’s application of the law to the facts de
novo. Progressive N. Ins. Co. v. Concord Gen. Mut. Ins. Co., 151 N.H. 649, 652 (2005).
B. Chapter 129 Is Not A Legal Obligation On The State To Pay A Sum Certain
Contrary to Petitioners’ assertions, Chapter 129 does not entitle them to payment
of $8.8 million.5 Rather than creating a legal obligation on the part of the State to pay a
certain amount of money to nursing homes, the plain language of Chapter 129 shows the
legislature’s intent to treat the unexpended surplus funds as a continuing appropriation to
be carried forward from FY 2007 into FY 2008. Chapter 129 provides:
The appropriation in class 90 for the fiscal year ending June 30, 2007 shall be non-lapsing. Any balance remaining at the end of June 30, 2007 shall be paid to nursing homes as supplemental rates no later than October 1, 2007. The supplemental rates shall be based on the current rate setting methodology. The commissioner shall file a report with the legislative fiscal committee by October 1, 2007 which details the balance carried forward from fiscal year 2007 and the amounts to be paid as supplemental rates. (Emphasis added).
While Chapter 129 requires that the balance remaining in the appropriation be
paid to nursing homes as supplemental rates, it treats those surplus funds as a non-lapsing
appropriation, not a legal obligation of money due and owing to the nursing homes. See
Petition of Strandell, 132 N.H. 110, 115 (1989) (“An appropriation bill is not a law in its
ordinary sense. It is not a rule of action. It has no moral or divine sanction. It defines no
rights and punishes no wrongs…. It is a means only to the enforcement of law, the
maintenance of good order, and the life of the state government.”).
When construing Chapter 129’s meaning, the Court must
first examine its language, and where possible, ascribe the plain and ordinary meanings to words used. If the language used is clear and unambiguous, [the Court] will not look beyond the language of the statute
5 Again, the amount of general funds at issue in the appropriation is only $2.2 million, not $8.8 million.
10
to discern legislative intent. [It] will, however, construe all parts of the statute together to effectuate its overall purpose and to avoid an absurd or unjust result.
Formula Dev. Corp. v. Town of Chester, 156 N.H. 177, 178-79 (2007) (citations
omitted). “The legislature is not presumed to waste words or enact redundant provisions
and whenever possible, every word of a statute should be given effect.” Town of
Amherst v. Gilroy, 157 N.H. 275, 279 (2008). The Court also “presume[s] that the
legislature does not enact unnecessary and duplicative provisions.” State v. Gifford, 148
N.H. 215, 217 (2002). Finally, the Court “interpret[s] statutes in the context of the
overall statutory scheme and not in isolation.” State v. Balliro, 158 N.H. 1, 4 (2008)
(quotation omitted).
Under the plain language of Chapter 129, the balance of funds remaining in the
FY 2007 nursing home appropriation was carried forward into FY 2008 rather than
lapsing to the general fund at the close of FY 2007. The interpretation most consistent
with the language of the statute is to treat the surplus funds as a continuing appropriation,
not a legal obligation for payment for services rendered. If the legislature intended
Chapter 129 to create a legal obligation for payment of money due and owing, it could
have easily drafted Chapter 129 to do so. See Appeal of Astro Spectacular, 138 N.H.
298, 300 (1994).
Moreover, the legislature’s intent to treat the surplus funds as a continuing
appropriation, not a legal obligation for payment, is further demonstrated by the
legislature’s June 2008 amendment to Chapter 129 which added the following sentence to
the end: “If such funds are not expended by June 30, 2009, they shall lapse to the
appropriate funds.” Ch. 296:18 (eff. June 27, 2008) (emphasis added); App. at 537. Had
11
the legislature intended Chapter 129 to create a legal obligation of money due and owing
to nursing homes, it would not have provided for the funds to lapse after a date certain.
To the extent there is any ambiguity in the original language of Chapter 129, the June
2008 amendment makes clear the legislature’s intent to treat the funds like any other
appropriation, not a legal obligation to pay a certain sum of money to nursing homes.
Finally, the plain words of RSA 9:16-b expressly and unequivocally allowed for
the Governor to order reductions relative to the Chapter 129 funds: “Notwithstanding
any other provision of law, the governor may…order reductions in any or all expenditure
classes within any or all departments….” RSA 9:16-b (emphasis added). Chapter 129
was not exempt from the application of RSA 9:16-b; and this is especially clear when
construing Chapter 129 harmoniously with RSA 9:16-b and the other statutes pertaining
to the Governor’s duty to carry out a balanced budget. See RSA 9:8-b; RSA 9:11; RSA
9:16; RSA 9:16-b; RSA 9:19.
C. RSA 9:16-b Is Constitutional
Petitioners argue that 9:16-b is unconstitutional both on its face and as applied to
the unexpended funds carried forward from FY 2007. See Petitioners’ Brief at 12-24.
Whether or not a statute is constitutional is a question of law, which [this Court] review[s] de novo. The party challenging a statute’s constitutionality bears the burden of proof. The constitutionality of an act passed by the coordinate branch of the government is to be presumed. It will not be declared to be invalid except upon inescapable grounds; and the operation under it of another department of the state government will not be interfered with until the matter has received full and deliberate consideration.
Tuttle v. New Hampshire Medical Malpractice Joint Underwriting Assoc., 159 N.H. 627,
634 (2010) (citations and quotation marks omitted).
12
1. RSA 9:16-b Is Constitutional On Its Face
Petitioners argue that RSA 9:16-b is unconstitutional on its face because (1) it
grants the Governor a line item veto in violation of Part I, Article 37 (separation of
powers) and Part II, Article 44 (the presentment clause) of the State Constitution, and (2)
it delegates legislative authority to the executive branch in violation of separation of
powers. Appellants’ Brief at 12-19; 21-24. These arguments fail because RSA 9:16-b is
a proper delegation of legislative authority to the executive branch in order to effectively
carry out the budget, and not the grant of a line item veto.
The doctrine of separation of powers was designed to protect people from tyranny
by preventing one branch from becoming superior in all areas of the government.
Opinion of the Justices, 110 N.H. 359, 362 (1970). Separation of powers, as stated in the
New Hampshire Constitution, provides that the State government has a legislative,
executive, and judicial branch, and that they “ought to be kept as separate from, and
independent of, each other, as the nature of a free government will admit, or as is
consistent with that chain of connection that binds the whole fabric of the constitution in
one indissoluble bond of union and amity.” N.H. CONST. pt. I, art. 37. The separation of
powers doctrine is violated when the constitutional duties of one branch of government
are improperly imposed upon another branch, or when one branch of government
encroaches upon a constitutional function of another branch. Opinion of the Justices, 110
N.H. at 363.
At the outset, Part I, Article 37 enjoys a practical construction. This Court has
recognized that complete separation of powers among the three branches of government
is impractical and unwarranted. Opinion of the Justices, 110 N.H. at 363. The legislature
has the supreme legislative power; the Governor has the executive power; and the judicial
13
power is vested in the courts; but it is difficult for government operations to be easily
compartmentalized. Opinion of the Justices, 110 N.H. at 363. Further, the New
Hampshire Constitution is unlike most state constitutions in that it recognizes that for a
government to be workable, there cannot be an absolute separation of powers.6 Id. at
362-63 (citing N.H. CONST. pt. 1, art. 37).
In light of its practical construction, Part 1, Article 37 does not require that
“impenetrable barriers” be erected between the branches of government because “there
are governmental powers of doubtful classification which may be held properly to belong
to either of more than one department of government.” Id. at 363 (citation omitted). The
three branches of government cannot be totally divided because there is naturally some
overlapping, and some “overlapping and duality in the division” is necessary in terms of
practicality and expediency. Id. at 363 (quoting Cloutier v. State Milk Control Board, 92
N.H. 199 (1942)).
The budget, for example, is not exclusively controlled by the legislature. To the
contrary, its creation, monitoring, and execution entails overlapping government
functions between the legislative and executive branches. Initially, the Governor
provides a budget for the executive branch to the legislature. RSA 9:2.7 The Governor’s
budget must meet the expenditure needs of the government, indicate the class of funds
from which appropriations should be made, and how expenditures will be financed. RSA
6 For instance the state of Florida, which Petitioners turn to in support their argument, has a very different separation of powers provision in its state constitution: “the powers of the state government shall be divided into legislative, executive and judicial branches. No person belonging to one branch shall exercise any powers appertaining to either of the other branches unless expressly provided herein.” Article II, section 3 of the Florida Constitution (as quoted in Chiles v. Children A, B, C, D, E and F, 589 So. 2d 260, 263-64 (Fla. 1991)). 7 The judicial branch creates its own budget and provides it to the legislature, but the documents and additional information are included in the Governor’s budget and subject to the Governor’s comments. RSA 9:4-a.
14
9:3, I. The legislature has the authority to make appropriations. N.H. CONST. pt. II, art.
2; O’Neil v. Thomson, 114 N.H. 155, 160 (1974); RSA 9:1. Further, the legislature must
adopt a balanced budget. RSA 9:8-b.
The executive power of the State is vested in the Governor who is responsible for
the faithful execution of the law. N.H. CONST., pt. II, art. 41. Executing the budget,
therefore, is an executive function. Id.; RSA 9:8-b; RSA 9:15; RSA 9:16; RSA 9:16-b.
Further, the legislature requires the Governor to carry out a balanced budget. See, e.g.,
RSA 9:8-b; RSA 9:11; RSA 9:16; RSA 9:16-b; RSA 9:19.
The Governor’s authority must be exercised “within the dictates of the
Constitution and the lawful enactments of the legislative branch.” Opinion of the
Justices, 116 N.H. 406, 412 (1976). Carrying out the budget after the legislature has
appropriated funds is an intersection between the executive and legislative branches of
government. See generally RSA chapter 9. The legislature recognizes that carrying out
the budget is a process based on projections made the year and two years earlier, and that
the actual spending and revenue estimates may not come to fruition. Accordingly, in
RSA 9:16-b, the legislature has delegated some of its authority to the Governor to make
reductions in expenditure classes in limited situations in order to effectively carry out the
budget. RSA 9:16-b. The statute provides, in pertinent part:
I. Notwithstanding any other provision of law, the Governor may, with the prior approval of the fiscal committee, order reductions in any or all expenditure classes within any or all departments, as defined in RSA 9:1, if he determines at any time during the fiscal year that:
(a) Projected state revenues will be insufficient to maintain a
balanced budget and that the likelihood of a serious deficit exists; or
(b) The actual lapse for each fiscal year is not going to equal the
15
level estimated in the forecast of funds, unappropriated surplus, as issued by the legislative budget assistant.
….
RSA 9:16-b (emphasis added). The legislature can delegate that authority with conditions to the Governor. Cf.
Opinion of the Justices, 110 N.H. 359, 364 (1970) (holding that in the absence of express
legislative authority, Governor and Council may not fix salaries of personnel the
Governor is empowered to appoint, but Governor and Council may be delegated such
authority). Because the legislature may delegate its authority, it may impose conditions
on exercising that delegated authority. Cf. Opinion of the Justices, 110 N.H. at 364. The
legislature has done so in RSA 9:16-b by only permitting the Governor to order
reductions when necessary to balance the budget, and requiring prior approval of the
fiscal committee. See RSA 9:16-b.
Other states have upheld the constitutionality of similar statutes. See Hunter v.
State, 865 A.2d 381, 395-96 (Vt. 2004) (statute empowering the Secretary of
Administration to cut spending below appropriated amounts to prevent deficit, and
delegating power to legislature’s joint fiscal committee to approve spending reductions
prepared by the Secretary of Administration, was not an unconstitutional encroachment
on or improper delegation of legislative branch’s power of appropriation”); New England
Div. of the American Cancer Society v. Commissioner of Administration, 769 N.E.2d
1248, 1256 (Mass. 2002) (statute allowing Governor to reduce allotments where revenues
will be insufficient to meet expenditures was not an unconstitutional delegation of
legislative authority); North Dakota Council of School Administrators v. Sinner, 458
N.W.2d 280, 285-86 (N.D. 1990) (statute allowing director of budget to make an
16
allotment reducing an appropriation if estimated revenues are insufficient to meet
legislative appropriation was not unconstitutional delegation of legislative authority;
legislature had “not given the director of the budget power to make a law, but only the
authority to execute the law within the parameters established by the Legislature”);
University of Connecticut Chapter AAUP v. Governor, 512 A.2d 152, 156-58 (Conn.
1986) (statute permitting governor to reduce budgetary allotments did not
unconstitutionally confer veto power on the governor and did not delegate a strictly
legislative power on governor in violation of separation of powers).
The out-of-state cases relied upon by Petitioners are distinguishable. First, the
statutes at issue in those cases grant broader discretionary power on the governor than
RSA 9:16-b, and they do not require prior approval from a legislative committee as does
RSA 9:16-b. See State ex rel. Schwartz v. Johnson, 907 P.2d 1001 (N.M. 1995) (New
Mexico governor reduced monthly allotments to departments and agencies based on his
own fiscal policy and without seeking the approval of any legislative committee); Chiles
v. Children A, B, C, D, E, and F, 589 So.2d 260, 263 (Fla. 1991) (statute assigned to the
executive branch “the broad discretionary authority to reapportion the state budget”
without requiring any advance approval from any committee of the legislature); State v.
Fairbank North Star Borough, 736 P.2d 1140 (Alaska 1987) (statute allowed Governor to
withhold or reduce appropriations without requiring any advance approval from a
legislative committee). In contrast, RSA 9:16-b allows the Governor to make reductions
in expenditure classes only with the “prior approval of the fiscal committee” if the
Governor determines during the fiscal year that revenues will be insufficient to maintain
a balanced budget. Before issuing Executive Order 2008-10, Governor Lynch “met with
17
the presiding officers of the House and Senate” and the legislative fiscal committee,
which “responded to the Governor’s initiative by consenting to certain actions to reduce
executive branch expenditures.” App. at 556.
Second, the New Mexico case Petitioners rely on did not involve reductions
necessary to avoid a budget deficit. The New Mexico Supreme Court held that the
governor lacked statutory authority to reduce monthly allotments where “account
balances sufficient to cover appropriations [did] exist and that projected revenues
together with unrestricted reserve balances in the general fund [were] sufficient to pay
monthly one-twelfth allotments of monies appropriated by the legislature.” See Johnson
907 P.2d at 1005; see also id. at 1002, n.1 (noting that the Governor did not anticipate a
deficit, therefore the court did “not consider or decide what constitutional or statutory
authority resides in the executive to avoid a deficit”); id. at 1002 and 1008 (court did not
“go beyond consideration of the purported delegation of authority to the Governor to
direct across-the-board reductions in appropriation allotments based on fiscal policies of
the executive branch,” which were “to encourage spending patterns that anticipate
appropriation reductions by the legislature”).
Finally, this Court should decline to follow the Supreme Court of Florida’s strict
view of the separation of powers doctrine. Florida has a very different separation of
powers provision in its state constitution than does New Hampshire. Compare article II,
section 3 of the Florida Constitution, as quoted in Chiles v. Children A, B, C, D, E and F,
589 So. 2d 260, 263-64 (Fla. 1991) (“The powers of the state government shall be
divided into legislative, executive and judicial branches. No person belonging to one
branch shall exercise any powers appertaining to either of the other branches unless
18
expressly provided herein.”) with part I, article 37 of the New Hampshire Constitution
(The three branches of government “ought to be kept as separate from, and independent
of, each other, as the nature of a free government will admit, or as is consistent with that
chain of connection that binds the whole fabric of the constitution in one indissoluble
bond of union and amity.”). Unlike the New Hampshire Supreme Court, which has
recognized that complete separation of powers among the three branches of government
is impractical and unwarranted, see Opinion of the Justices, 110 N.H. at 363, the Florida
court’s decision in Chiles does not contain any of the language typically found in New
Hampshire cases recognizing that for a government to be workable, there cannot be an
absolute separation of powers between the branches.
Moreover, RSA 9:16-b is not the only place the New Hampshire legislature has
delegated authority, which further demonstrates the need for some natural “overlapping
and duality in the division” of powers for government to function practically and
expediently. See Opinion of the Justices, 110 N.H. at 363. This Court recognized that
the legislature has authorized the Governor’s intervention in the process of the
expenditure of appropriations by state departments in certain instances. O’Neil v.
Thomson, 114 N.H. at 164. See RSA 9:11, RSA 9:17. Pursuant to RSA 9:11, if it
appears that a department is spending at a rate which will deplete its appropriation before
June 30, the Director of the Division of Accounting Services “shall immediately report
the fact to the Governor who shall thereupon investigate and may, if necessary, order the
department head to reduce expenditures in proportion to the balance available and the
remaining time in the fiscal year.” RSA 9:11. If the Governor has made such an order,
then the Director of the Division of Accounting Services must “establish a limit of
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expenditures . . . and shall not allow any expenditure by said department in excess of said
limit unless and until said order has been modified by the Governor.” RSA 9:11. See
also RSA 9:3, I(c).
In addition, the Governor and Council, with the prior approval of the fiscal
committee, may authorize the Commissioner of Administrative Services to transfer
appropriations items and change the allocation of funds available for operational
purposes within any division or functional unit of a department or institution “as may be
necessary or desirable to best carryout the purpose of such division or functional unit of
such department or institution.” RSA 9:17. See also RSA 9:17(a) (setting forth
limitations on such authority); RSA 9:17-c (allowing the Department of Administrative
Services to transfer amounts for specific purpose, subject to Governor and Council
approval and certification by the Commissioner of Administrative Services). Cf. RSA
9:17-d (allowing the Supreme Court, with the fiscal committee’s approval, to transfer
funds for any specific purposes to funds for other purposes in general appropriations for
the Supreme Court and probate court, and to transfer funds within any functional unit of
the courts, and requiring certification to the Commissioner of Administrative Services
that such transfers are necessary to efficiently carry out the courts’ functions); RSA 9:17-
f (allowing the chief justice of the superior court, after consulting with chief justice of
supreme court and with the superior court budget committee’s approval and fiscal
committee’s approval, to transfer funds for any specific purposes to funds for other
purposes in the general appropriations for the superior court, and requiring certification to
the Commissioner of Administrative Services that such transfers are necessary to
efficiently carry out court functions). Moreover, in a general fund operating budget
20
deficit, the comptroller must notify the fiscal committee and the Governor of the deficit
and request sufficient funds be transferred from the revenue stabilization reserve account
to eliminate the deficit. RSA 9:13-e, III (requiring transfer of approved sums from the
surplus account to the general fund when stated criteria are met and upon “approval from
both the fiscal committee and the Governor”). See also RSA 9:13-e, IV.
Other statutes illustrate the overlapping functions between the two branches in
carrying out a balanced budget. For example, if the amount appropriated for any state
department for a specific purpose is insufficient for any fiscal year, then the
Commissioner of Administrative Services with the Governor and Council’s approval may
transfer the appropriations for other purposes in the department. RSA 9:16. Executive
departments are granted authority to transfer funds within and among program
appropriation units within a department, unless the transfer is $2,500.00 or more in which
case it requires approval of the fiscal committee and the Governor and Council. RSA
9:16-a (subjecting transfers to limitations set forth in RSA 9:17-a, RSA 9:17-b, and RSA
9:17-c).
Accordingly, RSA 9:16-b, at issue in this case, is only one of several statutes
illustrating the legislature’s delegation of authority to the executive branch with respect to
making reductions in certain situations in order to effectively carry out the budget. See
also RSA 9:12, RSA 9:13-d. It does not grant the Governor a line item veto in violation
of the presentment clause, nor does it delegate legislative authority to the executive
branch in violation of separation of powers. RSA 9:16-b is a constitutionally valid
delegation of legislative authority to the executive branch in order to effectively carry out
the budget.
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2. RSA 9:16-b Is Constitutional As Applied To The FY 2007 Surplus Funds
Petitioners also argue that RSA 9:16-b is unconstitutional as applied to the
unexpended FY 2007 surplus funds. See Petitioners’ Brief at 19-21. Specifically,
Petitioners assert that Chapter 129 “set out a fixed and specific payment obligation for
services rendered separate and unrelated to a standard, current year appropriation.” Id. at
19. This argument is based on the incorrect notion that the surplus funds constitute
money due and owing to Petitioners for services already performed under their Medicaid
provider agreements.
As discussed in section B, supra, Chapter 129 did not create a legal obligation on
the State to pay a sum certain. Nor is the unexpended balance remaining in the
expenditure class money due to Petitioners for services already rendered. Petitioners
were fully reimbursed under the FY 2007 reimbursement rate for the services they
provided to Medicaid patients; the unexpended balance remaining in the expenditure
class at the end of fiscal year 2007 was the result of underutilization. See Section D,
infra.
Furthermore, Chapter 129 does not prohibit the Governor from issuing Executive
Order 2008-10. This is clear by the plain words of RSA 9:16-b which states,
“Notwithstanding any other provision of law, the governor may…order reductions in any
or all expenditure classes within any or all departments….” RSA 9:16-b (emphasis
added). Payment under Chapter 129 is dependent on there being a surplus of funds
remaining in the FY 2007 nursing home appropriation. The legislature’s intent to treat
the surplus funds as a continuing appropriation, not a legal obligation for payment of
money due and owing, is demonstrated by the clear language of Chapter 129 and the
legislature’s June 2008 amendment to Chapter 129 providing for the funds to lapse after a
22
date certain. Nothing in Chapter 129 supports Petitioners’ position that the Governor was
precluded from ordering reductions relative to FY 2007 nursing home expenditures
pursuant to RSA 9:16-b.
D. The Governor’s Executive Order Does Not Effectuate An Unconstitutional Taking
Petitioners assert that the Governor and DHHS committed a taking in violation of
Part I, Article 12 of the New Hampshire Constitution. Appellants’ Brief at 24-28. The
relevant portion of this constitutional provision states as follows: “no part of a man’s
property shall be taken from him, or applied to public uses, without his consent, or that of
the representative body of the people.” N.H. CONST., part I, art. 12. In short, Petitioners
assert that Chapter 129 required DHHS to pay certain sums to the nursing facilities, and
to the extent that payments fall short of that amount, an unconstitutional taking has
occurred. This claim fails because, as discussed in section B, supra, Chapter 129 did not
create a legal obligation on the State to pay a sum certain. Further, Petitioners ignore the
fact that Chapter 129 was amended to require the funds to lapse if they weren’t expended
by June 30, 2009.
Nevertheless, Petitioners argue that they have a property interest in money paid
for services already performed under their Medicaid provider agreement. Petitioners rely
on United Cerebral Palsy Ass’n v. Cuomo, 783 F. Supp. 43 (N.D.N.Y. 1992) for the
proposition that Medicaid providers have “a property interest in money paid for services
already performed.” Appellants’ Brief at 25-26 (quoting United Cerebral Palsy Ass’n,
783 F. Supp. at 51). Petitioners, however, selectively quote from a passage in that case,
leaving out the remainder of the sentence, which states in full, “New York acknowledges
a property interest in money paid for services already performed in reliance on a duly
23
promulgated reimbursement rate.” United Cerebral Palsy Ass’n, 783 F. Supp. at 51
(quoting Oberlander v. Perales, 740 F.2d 116, 120 (2d Cir. 1984)) (emphasis added).8
Petitioners in this case were fully reimbursed under the duly promulgated
reimbursement rate that they relied on in providing services to Medicaid patients in fiscal
year 2007. The unexpended balance remaining in the expenditure class at the end of
fiscal year 2007 was surplus resulting from underutilization, namely, services that were
expected to be performed but which were not performed because nursing facility
utilization ended up being below the estimated amount. Chapter 129 did not modify the
FY 2007 rates, see Section E, infra; rather, Chapter 129 provided a supplemental
payment above and beyond what nursing homes had expected to receive when
performing services in reliance on FY 2007 rates. Because nursing facilities were fully
reimbursed under FY 2007 rates for services actually performed, Petitioners’ expectation
of payment under Chapter 129 does not amount to a property interest protected by the
constitution.
Moreover, Petitioners voluntarily chose to participate and continue to participate
in the Medicaid program despite knowing that DHHS could not guarantee future
payments at a certain level. Where Petitioners’ decision to remain in the program was
entirely voluntary, there has been no taking. “It is well established that government price
regulation does not constitute a taking of property where the regulated group is not
required to participate in the regulated industry.” Whitney v. Heckler, 780 F.2d 963, 972
8 United Cerebral Palsy Ass’n v. Cuomo, 783 F. Supp. 43 (N.D.N.Y. 1992), was also decided prior to the repeal of the Boren Amendment. Prior to the repeal of the Boren Amendment, a provider could bring an action under 42 U.S.C. § 1983 to challenge the method by which a State reimbursed health care providers. See Wilder v. Virginia Hospital Assoc., 496 U.S. 498, 523 (1990). Congress repealed the Boren Amendment in 1997 in an attempt to end provider suits challenging reimbursement rates. See Evergreen Presbyterian Ministries, Inc. v. Hood, 235 F.3d 908, 919, n.12 (5th Cir. 2000).
24
(11th Cir. 1986), (holding that temporary freeze on fees physicians could charge Medicare
Part B patients did not constitute a taking of their property without just compensation),
cert. denied, 479 U.S. 813.
In Minnesota Ass’n of Health Care Facilities, Inc. [MAHCF] v. Minnesota Dept.
of Pub. Welfare, 742 F.2d 442 (8th Cir. 1984), cert denied, 469 U.S. 1215 (1985), the
court ruled that the Minnesota state statute limiting fees nursing homes participating in
Medicaid Program may charge to non-Medicaid patients is not a taking within the
meaning of the Fifth Amendment because “the state does not require that nursing homes
admit medical assistance residents and participate in the Medicaid Program.” Id. at 446.
To the extent that Petitioners argue that the financial realities of providing residential
services to the elderly necessitate their involvement in the program, MAHCF addresses
this argument: “MAHCF contends that business realities prevent nursing homes from
leaving the Medicaid program voluntarily. Despite the strong financial inducement to
participate in Medicaid, a nursing home’s decision to do so is nonetheless voluntary.” Id.
at 446. Accordingly, there is no unconstitutional taking.
E. The Governor’s Executive Order Does Not Violate The Supremacy Clause
Petitioners argue that the Governor violated the Supremacy Clause of the United
States Constitution by failing to comply with substantive and procedural requirements of
the Medicaid Act when issuing his Executive Order. This claim relies, fatally, on the
premise that the Governor’s Executive Order ordering reductions in executive branch
expenditures constitutes a modification of nursing home reimbursement rates, which is
incorrect.
25
“Under the Supremacy Clause of the Federal Constitution, state law is preempted
where: (1) Congress expresses an intent to displace state law; (2) Congress implicitly
supplants state law by granting exclusive regulatory power in a particular field to the
federal government; or (3) state and federal law actually conflict.” Koor Communication
v. City of Lebanon, 148 N.H. 618, 620 (2002) (quotations omitted). “An actual conflict
exists when it is impossible for a private party to comply with both state and federal
requirements or where state law stands as an obstacle to the accomplishments and
execution of the full purpose and objective of Congress.” Id. at 621 (quotations omitted).
Petitioners contend that the Governor’s Executive Order conflicts with portions of the
federal Medicaid Act, particularly 42 U.S.C. §1396a(a)(13)(A) and 42 U.S.C.
§1396a(a)(30)(A) (hereinafter “sections (13)(A) and (30)(A)”), which impose substantive
and procedural requirements the state must follow when establishing Medicaid
reimbursement rates.
The substantive and procedural requirements of sections (13)(A) and (30)(A) do
not apply to the Governor’s Executive Order because neither the Executive Order, nor
Chapter 129, modified reimbursement rates. Sections (13)(A) and (30)(A) apply to the
methods and standards used by a State to set reimbursement rates. “In general, Section
(13)(A) imposes procedural requirements the state must follow when establishing
reimbursement rates, and section (30)(A) imposes substantive findings the state must
make when establishing rates.” Mission Hospital Regional Med. Ctr. v. Shrewry, 168
Cal. App. 4th 460, 470 (Cal. App. 2008) (emphasis added). Chapter 129 expressly states
that the FY 2007 supplemental payment “shall be based on the current rate setting
methodology.” Laws 2007, Ch. 129:1 (emphasis added). Chapter 129 did not modify the
26
reimbursement rate, but rather provided for a supplemental payment to providers out of
the unexpended balance remaining in the expenditure class at the end of fiscal year 2007.
The payment was to be based on the current rate setting methodology. The Governor’s
Executive Order reduced the expenditure class out of which the supplemental payment
was to be made; it did not modify the reimbursement rate.
The language of section (13)(A)’s corresponding regulation supports
Respondents’ position that the statute’s requirements apply only to changes in the rate
setting methodology. “Broadly speaking, subsection (13)(A) requires something on the
order of notice and comment rule-making for states in their setting of rates for
reimbursement of ‘hospital services, nursing facility services, and services of
intermediate care facilities for the mentally retarded’ provided under the Medicaid Act.”
Long Term Care Pharmacy Alliance v. Ferguson, 362 F.3d 50, 54 (1st Cir. 2004). The
corresponding regulation, 42 CFR § 447.205, imposes notice requirements the State must
follow in setting reimbursement rates. Under this regulation, the State must provide
public notice of “any significant proposed change in its methods and standards for
setting payment rates for services.” 42 CFR § 447.205(a) (emphasis added).
Similarly, Section (30)(A) requires that a State plan for medical assistance:
provide such methods and procedures relating to the utilization of, and the payment for, care and services available under the plan (including but not limited to utilization review plans as provided for in section 1396b(i)(4) of this title) as may be necessary to safeguard against unnecessary utilization of such care and services and to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area . . . .
42 U.S.C. §1396a(a)(30)(A) (emphasis added). The corresponding regulation, 42 CFR §
27
447.201(b), provides that a State plan “must describe the policy and the methods to be
used in setting payment rates for each type of service included in the State’s Medicaid
program.” With regard to payment for inpatient hospital and long-term care facility
services specifically, 42 CFR § 447.252(b) provides that a State plan “must specify
comprehensively the methods and standards” the state will use to set reimbursement
rates. Id. (emphasis added).
Chapter 129 expressly states that the FY 2007 supplemental payment “shall be
based on the current rate setting methodology.” Chapter 129 provides in pertinent part:
The appropriation in class 90 for the fiscal year ending June 30, 2007 shall be non-lapsing. Any balance remaining at the end of June 30, 2007 shall be paid to nursing homes as supplemental rates no later than October 1, 2007. The supplemental rates shall be based on the current rate setting methodology. The commissioner shall file a report with the legislative fiscal committee by October 1, 2007 which details the balance carried forward from fiscal year 2007 and the amounts to be paid as supplemental rates.
Laws 2007, Ch. 129:1 (emphasis added). Just as Chapter 129 did not modify the FY
2007 rates, neither did the Governor’s Executive Order.
The facts of this case are distinguishable from the facts of the cases cited by
Petitioners, which involved modification of reimbursement rates. In Independent Living
Ctr. of Southern California v. Shrewry, 543 F.3d 1050, 1053 (9th Cir. 2008), the
petitioners challenged legislation that modified Medicaid reimbursement rates with a ten-
percent rate reduction. Similarly, the petitioners in Long Term Care Pharmacy Alliance,
362 F.3d at 51, challenged an emergency regulation reducing Medicaid reimbursement
rates, and the petitioners in Independent Living Ctr. v. Maxwell-Jolly, 572 F.3d 644, 648
(9th Cir. 2009), challenged legislation imposing a rate reduction. Finally, in Mission
Hospital, 168 Cal. App. 4th at 476, petitioners challenged legislation which imposed a
28
freeze on reimbursement rates by modifying the methodology used for determining final
reimbursement. In contrast, no modification to the FY 2007 reimbursement rates has
occurred here. The procedural and substantive requirements of sections (13)(A) and
(30)(A), therefore, do not apply.9
F. Petitioners Are Not Entitled To Mandamus Relief
Mandamus is “an extraordinary writ that should be restricted to the amelioration
of exigent circumstances, the correction of a plain legal error by the government.”
Guarracino v. Beaudry, 118 N.H. 435, 437 (1978). A mandamus will lie against any
officer of the government only to enforce a ministerial duty, or mandamus may be issued
to “overturn the result of the discretionary performance of an official function when an
official exercises his discretion arbitrarily or in bad faith.” Id. In this case, Petitioners do
not seek enforcement of a simple ministerial duty of the Commissioner of DHHS, nor
have they shown that the Governor acted arbitrarily or in bad faith by issuing Executive
Order 2008-10.
Medicaid is a joint federal-state program administered at the state level by DHHS
and at the federal level by CMS. The state must comply with federal requirements in
order to obtain the federal matching funds that amount to half of the rates paid to nursing
homes. Here, CMS required a state plan amendment as a condition of the state receiving 9 Petitioners argue that if Respondents take the position that a state plan amendment was needed to make the Chapter 129 payment, then such an amendment was necessary before the Governor could issue his Executive Order. Petitioners misstate Respondents’ position. Medicaid is a joint federal-state program administered at the state level by DHHS and at the federal level by CMS. The state must comply with federal requirements in order to obtain the federal matching funds that amount to half of the rates paid to nursing homes. Here, CMS required a state plan amendment as a condition of the state receiving the matching funds needed to make the supplement payments under Chapter 129. The Governor’s Executive Order eliminated a surplus of State funds remaining at the end of FY 2007. Because the Executive Order did not seek to obtain federal funds, CMS approval was not necessary. It should be noted that if this Court orders that the Chapter 129 payments must be paid to Petitioners, DHHS would need to submit and obtain federal approval of a further state plan amendment to make payments in the new fiscal year and in accord with State and Federal law. See App. at 535, ¶12a (state plan amendment approved by CMS allowed supplemental payment in FY 2009).
29
the matching funds needed to make the supplemental payments under Chapter 129. If the
Commissioner at any time had the ministerial duty to make the supplemental payments to
Petitioners, that duty did not arise until he received CMS approval of the payments. By
the time that duty arose, there was no longer any money in the expenditure class as a
result of the Governor’s Executive Order. Mandamus cannot lie against the
Commissioner of DHHS who has no duty, or ability, to pay funds that have been
eliminated by Executive Order.
Nor can mandamus lie against the Governor who issued Executive Order 2008-10
pursuant to RSA 9:16-b, with the approval of the fiscal committee, after determining that
the budgeted state revenues were insufficient to fund the state budgeted expenditures. If
“an official is given discretion to decide how to resolve an issue before him, a mandamus
order may require him to address the issue, but it cannot require a particular result.”
Rockhouse Mt. Property Owners Assoc. v. Town of Conway, 127 N.H. 593, 602 (1986)
(citations omitted). When the official has addressed the issue, mandamus will lie only to
vacate the result of action taken arbitrarily or in bad faith. See Guarracino, 118 N.H. at
437; Bois v. Manchester, 104 N.H. 5, 9 (1962). There is no evidence that the Governor
acted arbitrarily or in bad faith in eliminating the unexpended funds as part of his overall
plan to address the budget deficit.
Moreover, mandamus will not issue unless Petitioners have “an apparent right to
the relief requested, and no other remedy will afford full and adequate relief[.]” Id. at
437-38 (citations omitted). Petitioners are not entitled to a writ of mandamus because
they have not demonstrated that they have an apparent right to the relief requested, i.e., a
mandamus compelling the Governor and DHHS to pay $8,868,563 to Petitioners. As
30
discussed in detail above, the Governor’s Executive Order eliminating the surplus funds
was a lawful reduction of expenditures pursuant to RSA 9:16-b.
In any event, the Court need not consider whether Petitioners have an apparent
right to the relief requested, because the remedy sought by Petitioners is only the
payment of money. Petitioners asserted a breach of contract claim below. Although they
nonsuited that claim, without prejudice, in order to pursue this appeal, their contract
claim could afford full and adequate relief. Because another remedy exists which can
afford full and adequate relief, no mandamus should issue against the Governor or
DHHS.
CONCLUSION
For the foregoing reasons, the State respectfully requests that this Honorable
Court affirm the judgment below.
ORAL ARGUMENT
The State requests a 15-minute oral argument. Attorney Karen A. Schlitzer will
present oral argument in this case.
31
Respectfully submitted, GOVERNOR JOHN H. LYNCH AND COMMISSIONER OF NEW HAMPSHIRE DEPARTMENT OF HEALTH AND HUMAN SERVICES By their attorney, MICHAEL A. DELANEY ATTORNEY GENERAL
Date: October 12, 2010 /s/ Laura E. B. Lombardi Laura E. B. Lombardi (Bar No. 12821) Assistant Attorney General Karen A. Schlitzer (Bar No. 15169) Assistant Attorney General Civil Bureau NH Department of Justice 33 Capitol Street Concord, NH 03301-6397 (603) 271-3650
CERTIFICATION
I hereby certify that two (2) copies of the foregoing were mailed this day, postage
prepaid, to, Daniel E. Will, Esq., Devine, Millimet & Branch, PA, 111 Amherst Street, Manchester, NH 03101, counsel of record. Date: October 12, 2010 /s/ Laura E. B. Lombardi
Laura E. B. Lombardi (Bar No. 12821) #514356
32
