G. v. Hawaii

676 F.Supp.2d 1046

G., Parent and Next Friend of K., A Disabled Child, et al., Plaintiffs, v. State of HAWAII, Department of Human Services, et al., Defendants.

G., Parent and Next Friend of K., A Disabled Child, et al., Plaintiffs, v. United States Department of Health and Human Services, et al., Defendants.

Civ. Nos. 08-00551 ACK-BMK, 09-00044 ACK-BMK.

United States District Court, D. Hawai'i.

December 24, 2009.

Bruce F. Sherman, Honolulu, HI, Rafael G. Del Castillo, Jouxson-Meyers & Del Castillo LLLC, Wahiawa, HI for Plaintiffs.

Charles A. Miller, Laura E. Schattschneider, Covington & Burling LLP, Michelle R. Bennett, Sheila M. Lieber, U.S. Department of Justice Washington, DC, John F. Molay, Lee-Ann N.M. Brewer, Derrick K. Watson, Office of the Attorney General, Honolulu, HI, for Defendants.

ORDER (1) GRANTING IN PART AND DENYING IN PART THE STATE DEFENDANTS' MOTION FOR SUMMARY JUDGMENT, AND THE JOINDERS THEREIN, AS TO COUNTS VI, VII, VIII, AND IX, (2) GRANTING THE STATE DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT, AND THE JOINDERS THEREIN, REGARDING THE LICENSE QUESTION, AND (3) DENYING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT ON LICENSURE AND SOLVENCY

ALAN C. KAY, Senior District Judge.

PROCEDURAL HISTORY

I. Prior Proceedings

On December 8, 2008, in Civil No. 08-00551 ACK-BMK, Plaintiffs filed a complaint against Defendants the State of Hawaii, Department of Human Services ("State DHS"), and Lillian B. Koller, in her official capacity as the Director of the State DHS (collectively, "State Defendants"). At that point, the Plaintiffs were comprised of Medicaid beneficiaries who were part of the aged, blind, and disabled ("ABD") population ("ABD Plaintiffs"). Their principal allegation is that the State Defendants have violated certain provisions of Title XIX of the Social Security Act, commonly known as the Medicaid Act, 42 U.S.C. § 1396 et seq., by requiring ABD beneficiaries to enroll with one of two healthcare entities as a condition of receiving Medicaid benefits in connection with the agency's managed care program for ABD beneficiaries, the QUEST Expanded Access ("QExA") Program.

Those two entities were the only ones awarded contracts to provide the care for ABD beneficiaries under the QExA Program ("QExA Contracts"). They are WellCare Health Insurance of Arizona, Inc. d/b/a Ohana Health Plan ("WellCare of Arizona")¹ and United Healthcare Insurance Company d/b/a Evercare ("Evercare") (collectively, "QExA Contractors"), and they have intervened in this matter.

On January 30, 2009, in Civil No. 09-00044 ACK-BMK, Plaintiffs filed a complaint against the United States Department of Health and Human Services ("Federal DHHS") and the Secretary of the Federal DHHS ("Secretary") (collectively, "Federal Defendants"). On February 4, 2009, Plaintiffs filed a first amended complaint against the Federal Defendants. "At the federal level, Congress has entrusted the Secretary of the Federal DHHS with administering Medicaid, and the Secretary, in turn, exercises that delegated authority through the Centers for Medicare and Medicaid Services (`CMS')." Wong v. Doar, 571 F.3d 247, 250 (2d Cir.2009). Plaintiffs contend that the CMS acted arbitrarily and capriciously by granting a waiver of the "freedom of choice" provision, 42 U.S.C. § 1396a(a)(23), for the QExA Program pursuant to 42 U.S.C. § 1315(a), and by thereafter approving the QExA Contracts.

On February 19, 2009, Civil Nos. 08-00551 and 09-00044 were consolidated. This is the third case brought in this Court challenging the QExA Program. See AlohaCare v. Hawaii, Dep't of Human Servs., 567 F.Supp.2d 1238 (D.Haw.2008), aff'd, 572 F.3d 740 (9th Cir.2009) (upholding the district court's decision that a disappointed bidder for a QExA Contract did not have statutory standing to enforce certain provisions of the Medicaid Act); Hawaii Coalition for Health v. Hawaii, Dep't of Human Servs., 576 F.Supp.2d 1114 (D.Haw. 2008) (dismissing a health advocacy organization's complaint because, among other things, the organization did not have statutory standing to enforce certain provisions of the Medicaid Act).

On May 11, 2009, the Court entered an order granting in part and denying in part a motion to dismiss filed by the State Defendants and joinders therein. See G. v. Hawaii, Dep't of Human Servs., Civ. Nos. 08-00551 ACK-BMK & 09-00044 ACK-BMK, 2009 WL 1322354, 2009 U.S. Dist. LEXIS 39851 (D.Haw. May 11, 2009). The Court thereafter granted Plaintiffs leave to amend their complaints in certain respects. They subsequently filed a first amended complaint against the State Defendants and a second amended complaint against the Federal Defendants.

On June 2, 2009, Plaintiffs filed a motion for a preliminary injunction against the Federal Defendants. On August 7, 2009, Plaintiffs filed a motion for a temporary restraining order against the Federal Defendants. On August 10, 2009, Plaintiffs filed a motion for a temporary restraining order and a preliminary injunction against the State Defendants. The Court denied Plaintiffs' motions for temporary restraining orders. Plaintiffs subsequently withdrew their motions for preliminary injunctions.

With leave of Court, on August 31, 2009, Plaintiffs filed a second amended sixty-seven-page complaint against the State Defendants ("State Second Amended Complaint") and, on September 1, 2009, they filed a third amended fifty-eight-page complaint against the Federal Defendants. Those complaints added claims on behalf of certain Medicaid healthcare providers ("Provider Plaintiffs") and new ABD beneficiaries. The Provider Plaintiffs are physicians pharmacists, and ancillary care providers who accepted ABD beneficiaries as patients and clients under the prior fee-for-service program and who have provided care and services to ABD beneficiaries under the QExA Program. The State Second Amended Complaint asserts the following nine counts: (I) deprivation of rights under federal law and 42 U.S.C. § 1983; (II) violations of preemptive federal law by virtue of the Supremacy Clause; (III) further specific violations of preemptive federal law and regulations; (IV) insufficient assurances of solvency and evidence of poor performance in other states; (V) insufficient range of services and provider networks; (VI) violation of the Americans with Disabilities Act ("ADA"); (VII) violation of the Rehabilitation Act of 1973; (VIII) violation of 42 U.S.C. § 1396a(a)(30)(A) and 42 C.F.R. § 447.204; and (IX) unlawful taking.

On September 8, 2009, the Federal Defendants filed the administrative record ("AR"), which is roughly 5,200 pages in length. At Plaintiffs' request, the administrative record includes documents from 2004 onwards. 7/18/09 Transcript of Proceedings ("Tr.") 28:3-22. Plaintiffs did not ask for any documents that were created prior to 2004. Id.

II. Motions for Summary Judgment in the Action Against the State Defendants

Presently before the Court are three motions for summary judgment in the action against the State Defendants.

A. The State Defendants' Multi-count Motion for Summary Judgment

On October 23, 2009, the State Defendants filed a motion for summary judgment as to Counts VI, VII, VIII, and IX of the State Second Amended Complaint ("St. Defs.' Multi-count MSJ" or "State Defendants' multi-count motion for summary judgment"). The motion was accompanied by a memorandum in support ("St. Defs.' Multi-count MSJ Mem.") and a concise statement of facts ("St. Defs.' Multi-count MSJ CSF"). On October 26, 2009, WellCare of Arizona filed a joinder in the motion. On November 3, 2009, Evercare filed a joinder in the motion.

On November 25, 2009, Plaintiffs filed an opposition ("Pls.' Opp'n to St. Defs.' Multi-count MSJ") and a concise statement of facts ("Pls.' Opp'n to St. Defs.' Multicount MSJ CSF"). The same day, they filed an errata to their opposition. On November 29, 2009, Plaintiffs filed an errata to their concise statement of facts ("Pls.' Errata to their Opp'n to St. Defs.' Multicount MSJ CSF").

On December 3, 2009, the State Defendants filed a reply ("St. Defs.' Multi-count MSJ Reply"). On December 7, 2009, Wellcare of Arizona filed a joinder in the reply.

On December 10, 2009, 2009 WL 4798144, Plaintiffs filed a declaration of counsel.

On December 11, 2009, Evercare filed a joinder in the State Defendants' reply.

B. The State Defendants' Licensure Motion for Summary Judgment

On November 13, 2009, the State Defendants filed a motion for summary judgment on the issue of whether the QExA Contractors are properly licensed to qualify as managed care organizations under the Medicaid Act ("St. Defs.' Licensure MSJ" or "State Defendants' licensure motion for summary judgment"). The motion was filed along with a memorandum in support ("St. Defs.' Licensure MSJ Mem.") and a concise statement of facts ("St. Defs.' Licensure MSJ CSF"). The licensure issue is raised in Counts I through IV of the State Second Amended Complaint. On November 13, 2009, Evercare and WellCare of Arizona filed joinders in the motion.

Plaintiffs did not file an opposition to the motion, apparently because they previously filed a cross-motion, which is discussed in the following subsection. However, on November 25, 2009, Plaintiffs did file an opposition to the State Defendants' motion for a stay ("Pls.' Opp'n to St. Defs.' Mot. for a Stay"), despite the fact that the motion for a stay was withdrawn by the State Defendants on November 13, 2009.

The State Defendants construed certain arguments in Plaintiffs' opposition to the withdrawn motion for a stay as opposing their licensure motion for summary judgment. Therefore, on December 2, 2009, the State Defendants filed a reply in support of their licensure motion for summary judgment to address those contentions ("St. Defs.' Licensure MSJ Reply"). The same day, Evercare and WellCare of Arizona filed joinders in the State Defendants' reply.

C. Plaintiffs' Solvency Motion for Summary Judgment

On ...