Soskin v. Reinertson

Plaintiffs represent a class of legal aliens who will lose their Medicaid benefits when last year’s Colorado Senate Bill OS-176 (SB 03-176) takes effect. They contend that the eligibility requirements of SB 03-176 violate the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution, and that the state’s procedures for terminating benefits violate Medicaid law and the Due Process Clause of the Fourteenth Amendment. The district court denied Plaintiffs’ motion for a preliminary injunction against implementation of SB 03-176. We granted an injunction pending resolution of this appeal. We now reject Plaintiffs’ contentions except that we agree that the state’s procedures violate the Medicaid Act in denying some members of the class a right to a hearing. Accordingly, we vacate our injunction, and we affirm in part and reverse in part the district court’s denial of a preliminary injunction.

I. BACKGROUND

A. Medicaid

Prior to the enactment of SB 03-176, which was signed into law on March 5, 2003, and scheduled to take effect on April 1, 2003, Colorado provided optional Medicaid coverage to all legal aliens eligible under federal law to receive such coverage. The new statute would repeal optional Medicaid coverage, terminating Medicaid benefits to approximately 3,500 aliens residing in Colorado.

Medicaid is a joint state and federal medical assistance program for the poor, disabled, and others in need. 42 U.S.C. § 1396 et seq. It provides coverage for such medical services as inpatient and outpatient hospital care, physicians’ services, prescriptions, home health care services, and nursing home care. Id. §§ 1396a(a)(10)(A), 1396d(a)(l)-(5), (17) & (20). Although states are not required to participate in Medicaid, if a state does elect to participate, it must comply with the minimum requirements of the federal Medicaid Act in order to receive federal matching funds. See Wilder v. Va. Hosp. Ass’n, 496 U.S. 498, 502, 110 S.Ct. 2510, 110 L.Ed.2d 455 (1990). States implement their Medicaid programs in accordance with comprehensive written plans that must be submitted to and approved by the Secretary of the United States Department of Health and Human Services. See 42 U.S.C. § 1396. Colorado has opted to participate in the Medicaid program, and has designated the Department of Health Care Policy and Financing (the Colorado Department), currently headed by Defendant Karen Reinertson (sued here in her official capacity), as the single state agency responsible for administering Medicaid. See Colo.Rev.Stat. § 26-4-104(1).

Federal law requires participating states to provide full Medicaid services to all individuals designated as categorically *1245needy. 42 U.S.C. § 1396a(a)(10)(A)(i). States have discretion to provide full Medicaid coverage to additional “optional” segments of the population. Id. § 1396a(a)(10)(A)(ii). Emergency care must be provided to all individuals in need of such services. 8 U.S.C. § 1611(b)(1)(A).

In 1996 Medicaid law changed significantly. The federal Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), Pub.L. No. 104-193, 110 Stat. 2105 (1996) (often referred to as the Welfare Reform Act), was enacted. Explaining the purpose of the provisions with respect to aliens, the Act states:

The Congress makes the following statements concerning national policy with respect to welfare and immigration:

(1) Self-sufficiency has been a basic principle of United States immigration law since this country’s earliest immigration statutes.

(2) It continues to be the immigration policy of the United States that — •

(A) aliens within the Nation’s borders not depend on public resources to meet their needs, but rather rely on their own capabilities and the resources of their families, their sponsors, and private organizations, and

(B) the availability of public benefits not constitute an incentive for immigration to the United States.

(3) Despite the principle of self-sufficiency, aliens have been applying for and receiving public benefits from Federal, State, and local governments at increasing rates.

(4) Current eligibility rules for public assistance and unenforceable financial support agreements have proved wholly incapable of assuring that individual aliens not burden the public benefits system.

(5) It is a compelling government interest to enact new rules for eligibility and sponsorship agreements in order to assure that aliens be self-reliant in accordance with national immigration policy.

(6) It is a compelling government interest to remove the incentive for illegal immigration provided by the availability of public benefits.

(7) With respect to the State authority to make determinations concerning the eligibility of qualified aliens for public benefits in this chapter, a State that chooses to follow the Federal classification in determining the eligibility of such aliens for public assistance shall be considered to have chosen the least restrictive means available for achieving the compelling governmental interest of assuring that aliens be self-reliant in accordance with national immigration policy.

8 U.S.C. § 1601QM7).

The PRWORA imposes several limitations on the availability of Medicaid benefits to aliens. 8 U.S.C. § 1601 et seq; id. § 1612(b)(3)(C). Prior to the PRWORA, Medicaid benefits were mandated for otherwise qualified aliens who were lawfully admitted for permanent residence or otherwise permanently residing in the United States. See 42 C.F.R. § 435.406(a) (1990). Now, the PRWORA requires states to provide Medicaid coverage only to “qualified aliens,” which it defines as lawful permanent residents, refugees, aliens granted asylum, and certain other specified categories of lawfully present aliens. 8 U.S.C. § 1612(b); id. § 1641(b). The PRWORA also provides that most of these qualified aliens are ineligible for Medicaid benefits until they have lived in the United States for at least five years. Id. § 1613. But the five-year requirement does not apply to certain qualified aliens, such as lawful permanent residents who have worked in the United States for 40 qualifying quarters, veterans, and active-duty members of the military. Id. § 1612(b)(2). Nor does *1246the requirement apply to qualified aliens who entered the United States prior to August 22,1996. Id. § 1613(a).

The PRWORA does, however, allow states to provide optional Medicaid coverage to legal aliens not included within Congress’s definition of “qualified aliens.” Id. § 1612(b). In essence, states may redefine “qualified aliens” to cover additional legal aliens, so long as they do not cover those aliens explicitly excluded by the PRWORA (e.g., most aliens who have not lived in the United States for five years). Id.

Initially Colorado opted to provide coverage beyond that mandated by the PRWORA. In 1997 Colorado responded to the PRWORA by enacting legislation that maintained the optional Medicaid coverage it had previously provided to all lawfully present aliens who were otherwise eligible. See 1997 Colo. Sess. Laws 1257-58. But Colorado policy changed in March of 2003. Faced with an enormous budget shortfall, the state looked to its Medicaid program for savings. The Colorado legislature passed and the governor signed SB 03-176, which removed the optional Medicaid coverage Colorado had been providing to legal aliens. SB 03-176 § 1. After SB 03-176 takes effect, only those aliens that Congress defined in the PRWORA as “qualified aliens” will be eligible for Medicaid in Colorado. SB 03-176 § 2; Colo. Rev.Stat. § 26-4-201(2)(a)-(b). The state estimates that it will save $5.9 million annually by eliminating optional alien coverage.

B. Coverage Termination Procedures

In Colorado the county departments of social services make the initial Medicaid eligibility determinations. Colo.Rev.Stat. § 26-4-106(l)(a). Accordingly, in anticipation of enactment of SB 03-176, the Colorado Department notified the state’s 64 counties of the impending Medicaid eligibility changes and instructed them on procedures to use in effectuating those changes.

First, the Department sent the counties two letters, informing them that SB OS-176 was moving through the legislative process and that the Department would keep them informed as the legislation progressed. Then, after the legislation was passed by the legislature but before it was signed by the Governor, the Department sent a third, more-detailed letter. The letter, labeled HCFP 03-001, set forth an eligibility redetermination process providing for county officials to ascertain whether individuals whose Medicaid eligibility was eliminated by SB 03-176 could qualify under a different eligibility category.

Five days after the HCFP 03-001 letter was sent to the counties, a statewide conference call was conducted to discuss the letter. Forty counties participated in the conference call. Once the governor signed the bill, the Colorado Department notified the counties and instructed them to provide notice to affected recipients. The counties were directed to provide at least 10 days’ notice prior to termination of benefits for all individuals losing coverage as a result of SB 03-176.

C. Procedural History

On March 27, 2003, Plaintiffs filed this class-action lawsuit to enjoin the implementation of SB 03-176. Class members include legal aliens who rely on Medicaid to cover important medical services, including chemotherapy, nursing home care, home health care, surgical care, and life-sustaining prescription drug coverage. Without Medicaid, Plaintiffs claim, they will be unable to afford these necessary services and will suffer serious injuries and irreparable harm. Plaintiffs contend that in some cases the loss of medical care could be life threatening.

*1247Plaintiffs’ suit seeks a judgment declaring that SB 03-176’s eligibility requirements violate the Equal Protection Clause of the Fourteenth Amendment because they discriminate against legal aliens, and that Defendant’s procedures for terminating benefits are inadequate under Medicaid law and the Due Process Clause of the Fourteenth Amendment. Plaintiffs also seek an injunction permanently enjoining termination of benefits under SB 03-176.

The district court granted Plaintiffs’ request for a temporary restraining order, but it later denied their motion for a preliminary injunction and lifted the temporary restraining order. Plaintiffs then moved this court for an injunction pending appeal. We granted that motion and expedited the appeal. See Soskin v. Reinertson, No. 03-1162 (10th Cir. Apr. 25, 2003) (order granting injunction pending appeal). After oral argument we notified the Attorney General of the United States, in accordance with Fed. R.App. P. 44, that this case called into question the constitutionality of an Act of Congress, 8 U.S.C. § 1612(b) (which authorizes states to reduce Medicaid coverage to aliens). The United States filed a brief in support of the constitutionality of the statute.

II. DISCUSSION

We have jurisdiction under 28 U.S.C. § 1292. We

review[ ] a district court’s grant or denial of a preliminary injunction for an abuse of discretion. A district court abuses its discretion where it commits a legal error or relies on clearly erroneous factual findings, or where there is no rational basis in the evidence for its ruling. We examine the district court’s underlying factual findings for clear error, and its legal determinations de novo.

Davis v. Mineta, 302 F.3d 1104, 1110-11 (10th Cir.2002) (internal citations and quotation marks omitted). For Plaintiffs to be entitled to a preliminary injunction, they must show:

(1) a substantial likelihood of prevailing on the merits; (2) irreparable harm unless the injunction is issued; (3) [that] the threatened injury outweighs the harm that the preliminary injunction may cause the opposing party; and (4) [that] the injunction, if issued, will not adversely affect the public interest. If [Plaintiffs] can establish that the latter three requirements tip strongly in [their] favor, the test is modified, and [Plaintiffs] may meet the requirement for showing success on the merits by showing that questions going to the merits are so serious, substantial, difficult, and doubtful as to make the issue ripe for litigation and deserving of more deliberate investigation.

Id. at 1111 (internal citations and quotation marks omitted).

A. Equal Protection Claim

The Fourteenth Amendment to the United States Constitution declares that “[n]o State shall ... deny to any person within its jurisdiction the equal protection of the laws.” The Equal Protection Clause “keeps governmental decision makers from treating differently persons who are in all relevant respects alike.” Nordlinger v. Hahn, 505 U.S. 1, 10, 112 S.Ct. 2326, 120 L.Ed.2d 1 (1992). Plaintiffs allege that SB 03-176 violates the Equal Protection Clause because it improperly discriminates between citizens and legal aliens. They argue that such discrimination is subject to strict scrutiny, so the statute can be upheld only if it “advanee[s] a compelling state interest by the least restrictive means available.” Bernal v. Fainter, 467 U.S. 216, 219, 104 S.Ct. 2312, 81 L.Ed.2d 175 (1984).

*1248Defendant disputes that strict scrutiny is the appropriate standard for reviewing the statute. She contends that Congress used its plenary immigration powers to enact the PRWORA, and because Colorado was acting in accordance with the PRWORA when it enacted SB 03-176, the more deferential rational-basis test applies. The statute satisfies that test, she argues, because it is rationally related to a legitimate state interest. See Cleburne v. Cleburne Living Ctr., 473 U.S. 432, 440, 105 S.Ct. 3249, 87 L.Ed.2d 313 (1985) (under rational-basis standard of review, “legislation is presumed to be valid and will be sustained if the classification drawn by the statute is rationally related to a legitimate state interest.”).

The parties appear to agree that SB OS-176 would not survive strict scrutiny but would satisfy the rational-basis test. Thus, the constitutionality of SB 03-176 depends on the level of scrutiny to which the law is subject. We turn to Supreme Court precedent for guidance.

1. Graham v. Richardson

Plaintiffs rely heavily on Graham v. Richardson, 403 U.S. 365, 91 S.Ct. 1848, 29 L.Ed.2d 534 (1971), which resolved a consolidated appeal involving two cases arising out of different statutory schemes: one from Arizona and one from Pennsylvania. Id. at 366-70, 91 S.Ct. 1848. The Arizona statute limited alien eligibility for benefits under federally funded programs for persons who were disabled, in need of old-age assistance, or blind. Id. at 367, 91 S.Ct. 1848. The state limitation on eligibility for the programs provided: “No person shall be entitled to general assistance who does not meet and maintain the following requirements: 1. Is a citizen of the United States, or has resided in the United States a total of fifteen years.” Id. (internal quotation marks omitted). The Pennsylvania statute concerned a welfare program that was not federally funded. It limited state benefits to those Pennsylvania residents who either were citizens of the United States or had filed a declaration of intention to become a citizen. Id. at 368, 91 S.Ct. 1848.

The Court observed that “the Arizona and Pennsylvania statutes in question create two classes of needy persons, indistinguishable except with respect to whether they are or are not citizens of this country.” Id. at 371, 91 S.Ct. 1848. Regarding the Arizona statute, the Court wrote that “[otherwise qualified United States citizens living in Arizona are entitled to federally funded categorical assistance benefits without regard to length of national residency, but aliens must have lived in this country for 15 years in order to qualify for aid.” Id. As for Pennsylvania, the Court said, “United States citizens living in Pennsylvania, unable to meet the requirements for federally funded benefits, may be eligible for state-supported general assistance, but resident aliens as a class are precluded from that assistance.” Id.

The Court first rejected the states’ argument that they could favor United States citizens over aliens in the distribution of welfare benefits. While the Court recognized that “[u]nder traditional equal protection principles, a State retains broad discretion to classify so long as its classification has a reasonable basis,” id., it was well established “that classifications based on alienage, like those based on nationality or race, are inherently suspect and subject to close judicial scrutiny.” Id. at 372, 91 S.Ct. 1848 (footnotes omitted). “Aliens as a class,” the Court wrote, “are a prime example of a discrete and insular minority for whom such heightened judicial solicitude is appropriate.” Id. (internal quotation marks and citation omitted).

The Court then concluded that the Arizona and Pennsylvania laws could not withstand strict scrutiny. Id. at 376, 91 *1249S.Ct. 1848. It rejected the states’ fiscal motive: “[J]ustification of limiting expenses is particularly inappropriate and unreasonable when the discriminated class consists of aliens. Aliens like citizens pay taxes and may be called into the armed forces.... [Ajliens may live within a state for many years, work in the state and contribute to the economic growth of the state.” Id. (internal quotation marks omitted). Thus, the Court concluded, “a state statute that denies welfare benefits to resident aliens and one that denies them to aliens who have not resided in the United States for a specified number of years violate the Equal Protection Clause.” Id.

In addition, and significantly for present purposes, the Court rejected Arizona’s argument that its durational residency requirement for aliens was authorized by a federal statute. Id. at 380-82, 91 S.Ct. 1848. The statute, 42 U.S.C. § 1352(b) (1971), stated: “The Secretary shall approve any plan which fulfills the conditions specified in subsection (a) of this section, except that he shall not approve any plan which imposes, as a condition of eligibility for aid to the permanently and totally disabled under the plan — ... (2) Any citizenship requirement which excludes any citizen of the United States.” Id. at 380, 91 S.Ct. 1848 (internal quotation marks omitted). Arizona argued that the statutory language implicitly authorized citizenship requirements that excluded non-citizens.

The Court observed that “[o]n its face, the statute does not affirmatively authorize, much less command, the States to adopt durational residency requirements or other eligibility restrictions applicable to aliens.” Id. at 381, 91 S.Ct. 1848. It then traced the language in question to the Social Security Act of 1935, when the language apparently was included to prevent treating naturalized citizens differently from native-born citizens. Id. at 381, 91 S.Ct. 1848. The Court noted that the statute may have reflected Congressional understanding of the law as it stood in 1935, before Takahashi v. Fish & Game Comm’n, 334 U.S. 410, 68 S.Ct. 1138, 92 L.Ed. 1478 (1948), had established the equal-protection rights of aliens. Graham, 403 U.S. at 382, 91 S.Ct; 1848. Now, however, significant constitutional concerns would' be raised by discrimination against aliéns. The Court wrote:

[WJere [the federal statute] to be read so as to authorize discriminatory treatment of aliens at the option of the States, Takahashi demonstrates that serious constitutional questions are presented. Although the Federal Government admittedly has broad constitutional power to determine what aliens shall be admitted to the United States, the period they may remain, and the terms and conditions of their naturalization, Congress does not have the power to authorize the individual States to violate the Equal Protection Clause.

Id. Moreover, the Court said that “[u]nder Art. I, § 8, cl. 4, of the Constitution, Congress’ power is to ‘establish an uniform Rule of Naturalization,’ ” id. (emphasis added), and that a “congressional enacfi ment construed so as to permit state legislatures to adopt divergent laws on the subject of citizenship requirements for federally supported welfare programs would appear to contravene this explicit constitutional requirement of uniformity.” Id. These constitutional concerns, the Court declared, argued against interpreting the statutory language to authorize state discrimination against aliens. . “Since statutes should be construed whenever possible so as to uphold their constitutionality, we conclude that [the statute] does not authorize the Arizona 15-year national residency requirement.” Id. at 382-83, 91 S.Ct. 1848 (internal quotation marks and citation omitted).

*1250A footnote to the quoted passage noted that the Court had “no occasion to decide whether Congress, in the exercise of the immigration and naturalization power, could itself enact a statute imposing on aliens a uniform nationwide residency requirement as a condition of federally funded welfare benefits.” Id. at 382 n. 14, 91 S.Ct. 1848. As we will discuss below, that issue was resolved in Mathews v. Diaz, 426 U.S. 67, 96 S.Ct. 1883, 48 L.Ed.2d 478 (1976).

In the years immediately following Graham, the Supreme Court reemphasized the central holding of the case: that state laws creating citizen-alien classifications must meet strict scrutiny. See, e.g., Bernal, 467 U.S. at 219-20, 104 S.Ct. 2312 (citizenship requirement for state notaries public is subject to strict scrutiny); Examining Bd. v. Flores de Otero, 426 U.S. 572, 601-02, 96 S.Ct. 2264, 49 L.Ed.2d 65 (1976) (same for state civil engineering licenses); In re Griffiths, 413 U.S. 717, 721, 93 S.Ct. 2851, 37 L.Ed.2d 910 (1973) (same for admission to state bar); Sugarman v. Dougall, 413 U.S. 634, 642, 93 S.Ct. 2842, 37 L.Ed.2d 853 (1973) (same for state civil service jobs). In particular, in Nyquist v. Mauclet, 432 U.S. 1, 97 S.Ct. 2120, 53 L.Ed.2d 63 (1977), the Court held that a state could not circumvent Graham by contending that it was merely distinguishing among aliens, as opposed to discriminating against aliens vis-a-vis citizens. Reviewing a statute restricting certain aliens’ access to state-funded tuition assistance, the Court rejected the state’s argument that strict scrutiny should not apply because the classification “distinguishe[d] only within the heterogeneous class of aliens and d[id] not distinguish between citizens and aliens vel non.” Id. at 8, 97 S.Ct. 2120 (internal quotation marks omitted). The Court wrote:

Graham v. Richardson ... undermines [the state’s] position. In that ease, the Court considered an Arizona statute that imposed a durational residency requirement for welfare benefits on aliens but not on citizens. Like the New York statute challenged here, the Arizona statute served to discriminate only within the class of aliens: Aliens who met the durational residency requirement were entitled to welfare benefits. The Court nonetheless subjected the statute to strict scrutiny and held it unconstitutional. The important points are that [the tuition assistance restriction] is directed at aliens and that only aliens are harmed by it. The fact that the statute is not an absolute bar does not mean that it does not discriminate against the class.

Id. at 8-9, 97 S.Ct. 2120.

2. Mathews v. Diaz

In Mathews v. Diaz, 426 U.S. 67, 96 S.Ct. 1883, 48 L.Ed.2d 478 (1976), the Court answered the question left open in Graham, holding that the federal government could impose a uniform residency requirement as a condition of receiving federal benefits. Mathews considered a federal law granting Medicare benefits to certain resident citizens 65 years of age and older, but denying eligibility to comparable aliens unless they had been admitted for permanent residence and had resided in the United States for at least five years. Id. at 70, 96 S.Ct. 1883.

The Court explained why Congress’s broad constitutional powers over naturalization and immigration give it authority to treat aliens differently from citizens:

The fact that all persons, aliens and citizens alike, are protected by the Due Process Clause does not lead to the further conclusion that all aliens are entitled to enjoy all the advantages of citizenship or, indeed, to the conclusion that all aliens must be placed in a single homogeneous legal classification. For a *1251host of constitutional and statutory provisions rest on the premise that a legitimate distinction beüueen citizens and aliens may justify attributes and benefits for one class not accorded to the other; and the class of aliens is itself a heterogeneous multitude of persons with a wide-ranging variety of ties to this country.

In the exercise of its broad power over naturalization and immigration, Congress regularly makes rules that would be unacceptable if applied to citizens. The exclusion of aliens and the reservation of the power to deport have no permissible counterpart in the Federal Government’s power to regulate the conduct of its own citizenry. The fact that an Act of Congress treats aliens differently from citizens does not in itself imply that such disparate treatment is “invidious.”

In particular, the fact that Congress has provided some welfare benefits for citizens does not require it to provide like benefits for all aliens. ...

For reasons long recognized as valid, the responsibility for regulating the relationship between the United States and our alien visitors has been committed to the political branches of the Federal Government. Since decisions in these matters may implicate our relations with foreign powers, and since a wide variety of classifications must be defined in the light of changing political and economic circumstances, such decisions are frequently of a character more appropriate to either the Legislature or the Executive than to the Judiciary. ...

... In short, it is unquestionably reasonable for• Congress to make an alien’s eligibility depend on both the character and the duration of his residence. Since neither requirement is wholly irrational, this case essentially involves nothing more than a claim that it would have been more reasonable for Congress to select somewhat different requirements of the same kind.

Id. at 78-83, 96 S.Ct. 1883 (footnotes omitted) (emphasis added).

Matheius also distinguished Graham, recognizing that its “equal protection analysis ... involves significantly different considerations because it concerns the relationship between aliens and the States rather than between aliens and the Federal Government.” Id. at 84-85, 96 S.Ct. 1883. It explained that

[ijnsofar as state welfare policy is concerned, there is little, if any, basis for treating persons who are citizens of another State differently from persons who are citizens of another country. Both groups are noncitizens as far as the State’s interests in administering its welfare programs are concerned. Thus, a division by a State of the category of persons who are not citizens of that State into subcategories of United States citizens and aliens has no apparent justification, whereas, a comparable classification by the Federal Government is a routine and normally legitimate part of its business.

Id. at 85, 96 S.Ct. 1883.

3. Lower Courts

Neither Graham nor Mathews determines the result in this case. Unlike Graham, here we have specific Congressional authorization for the state’s action, the PRWORA. Unlike Mathews, here we have a state-administered program, and the potential for states to adopt coverage restrictions with respect to aliens that are not mandated by federal law.

The fact of state administration in itself is not a distinction from Mathews that has impressed the circuits that have addressed the matter. Following Mathews, several circuits have applied rational-basis review *1252to uphold federal statutes restricting state-administered welfare benefits to legal aliens. See, e.g., Lewis v. Thompson, 252 F.3d 567, 582 (2d Cir.2001) (upholding under rational-basis review PRWORA restrictions on alien eligibility for state-administered pre-natal Medicaid benefits); City of Chicago v. Shalala, 189 F.3d 598, 603-05 (7th Cir.1999) (same for supplemental security income (SSI) and food stamps); Aleman v. Glickman, 217 F.3d 1191, 1197 (9th Cir.2000) (same for food stamps); Rodriguez v. United States, 169 F.3d 1342, 1346-50 (11th Cir.1999) (same for SSI and food stamps).

The potential for states to adopt coverage restrictions for aliens that are not federally mandated is, however, more problematic. The difficulty is illustrated by opinions addressing non-mandated state restrictions — one each from the high courts of New York and Massachusetts. We discuss each in turn.

In Aliessa v. Novello, 96 N.Y.2d 418, 730 N.Y.S.2d 1, 754 N.E.2d 1085 (2001), the New York Court of Appeals reviewed state alien classifications that were authorized by the PRWORA. Relying on Graham, it concluded that the classification scheme must be subjected to strict scrutiny. New York’s Medicaid system had two components — one was funded jointly by the state and federal governments, and one was solely state-funded. Id., 730 N.Y.S.2d 1, 754 N.E.2d at 1089.