S.C. Dep't of Health & Human Servs. v. AnMed Health

South Carolina Department of Health and Human Services, Appellant, v. AnMed Health, Respondent,

In Re: K.L.

No. 22-ALJ-08-0291-AP

South Carolina Administrative Law Court Decisions

January 4, 2023

ORDER GRANTING MOTION TO DISMISS

Ralph King Anderson, III Chief Administrative Law Judge

This matter is before the South Carolina Administrative Law Court (ALC or Court) pursuant to an appeal filed by the South Carolina Department of Health and Human Services (Appellant or the Department). The Department appeals the final administrative decision of the Department's Division of Appeals and Hearings (DAH), which found K.L. was entitled to Medicaid benefits. AnMed Health (AnMed or Respondent) now moves to dismiss the appeal on the ground that the Department cannot appeal its own agency's final decision. Based upon my review of the parties' filings and arguments, I grant the Motion for the reasons discussed below.

BACKGROUND

This case involves a dispute over the DAH's decision finding K.L. eligible for Medicaid. The case was previously before the Court when the Department contested the DAH's interlocutory determination that AnMed was K.L.'s authorized representative. AnMed moved to dismiss the appeal as interlocutory, and in an order dated February 1, 2022 this Court granted the motion to dismiss and remanded the case to the Department for a final decision on the merits.

Upon remand, the Department returned the matter to the DAH which issued an Order to Produce requiring the Department to provide an Appeal Summary packet to the DAH and K.L.'s representative, AnMed. Since the Department had concerns about the disclosure of protected health information (PHI) to AnMed, who it still believed was not an authorized representative of K.L., the DAH allowed the Department to submit a redacted copy of the Appeal Summary. However, the Department refused to submit the Appeal Summary even in a redacted form. As a sanction for failing to comply with its Order to Produce, the DAH assigned the burden of proof to the Department. The DAH also gave the Department one more chance to comply with the Order to Produce and advised the Department that if it did not comply again, the DAH would make a negative evidentiary inference against the Department on any missing facts or policy.

The DAH conducted a hearing on the merits on July 26, 2022. The Department chose not to participate in the hearing. On August 15, 2022, the DAH issued a final administrative decision finding the K.L. was eligible for Medicaid benefits. The Department then appealed the DAH's order to this Court arguing the DAH (1) erred in determining AnMed was K.L.'s authorized representative and (2) abused its discretion and exceeded its authority by imposing sanctions on the Department. AnMed then moved to dismiss the appeal on the ground that Appellant cannot appeal its own agency's decision.

DISCUSSION

AnMed argues this appeal should be dismissed because Appellant cannot appeal its own agency's decision.^[1] AnMed argues there are three reasons why Appellant cannot appeal its own agency decision. First, it argues federal and state authorities do not permit a state agency to appeal the decisions of its hearing officers. Second, it argues the needs of impartiality and justice prohibit Appellant from challenging its own decisions. Third, it argues it is a legal impossibility for Appellant to prevail in this appeal under the standard of review. The Court will address each argument in turn.

Federal Medicaid Statutes and Regulations

AnMed argues that allowing Appellant to appeal its own hearing officers violates the "single state agency" requirements imposed on state Medicaid agencies by Congress and the Centers for Medicare and Medicaid Services (CMS). In contrast, the Department contends AnMed's argument demonstrates a fundamental misunderstanding of administrative procedure and federal Medicaid law. I conclude the Department cannot appeal its own agency's decision in this case for several reasons.

Medicaid is an optional state program created under Title XIX of the Social Security Act. 42 U.S.C. § 1396 et seq. It enables states to receive federal financial assistance for the medical care of needy individuals. See id.; see also 42 C.F.R. § 430 (Westlaw Edge through 87 FR 78877) ("Title XIX of the Social Security Act enacted in 1965, authorizes Federal grants to States for medical assistance to low-income persons who are age 65 or over, blind, disabled, or members of families with dependent children or qualified pregnant women or children."); Doe v. S.C. Dep't of Health & Hum. Servs., 398 S.C. 62, 64, 727 S.E.2d 605, 606 (2011) ("Medicaid is a program through which the federal government, through the Social Security Administration (SSA), provides financial assistance to states so that they may furnish medical care to needy individuals.").

Each state that participates in Medicaid, including South Carolina, must submit a state plan that describes the nature and scope of its Medicaid program, which must be consistent with federal law. 42 C.F.R. § 430.10 (Westlaw Edge through 87 FR 78877) ("The State plan is a comprehensive written statement submitted by the agency describing the nature and scope of its Medicaid program and giving assurance that it will be administered in conformity with the specific requirements of title XIX, the regulations in this Chapter IV, and other applicable official issuances of the Department."); see also 42 C.F.R. § 430.0. The state plan must provide for the establishment or designation of "a single State agency to administer or to supervise the administration of the plan." 42 U.S.C.A. § 1396a(a)(5) (Westlaw Edge through P.L. 117-214); 42 C.F.R. § 431.10(b) (Westlaw Edge through 87 FR 78877) ("A State plan must-(1) Specify a single State agency established or designated to administer or supervise the administration of the plan."); Myers v. S.C. Dep't of Health & Hum. Servs., 418 S.C. 608, 612, 795 S.E.2d 301, 303 (Ct. App. 2016) ("Federal law mandates a single state agency administer a state's Medicaid plan."). The Department is the designated single state agency that administers South Carolina's Medicaid program. S.C. Code Ann. § 44-6-30 (2018).

The requirement that a single state agency administer the Medicaid program establishes that the Department is the only South Carolina agency entitled to make the Medicaid eligibility determination. Indeed, in all federal Medicaid statutes and regulations, it is the single state agency that is described to be in charge of (1) the initial vetting of a Medicaid application or dispute, (2) the arbiter of the fair hearing, and (3) the issuer of the final agency decision in a matter. 42 C.F.R. § 431.10(b)(3) ("The single State agency is responsible for determining eligibility for all individuals applying for or receiving benefits in accordance with regulations in part 435 of this chapter and for fair hearings filed in accordance with subpart E of this part."); 42 C.F.R. § 431.244(f) (Westlaw Edge through 87 FR 78877) ("The agency must take final administrative action . . . ."); 42 C.F.R. § 431.245 (Westlaw Edge through 87 FR 78877) ("The agency must notify the applicant or beneficiary in writing of-(a) The decision"). However, although the fact that the Department is the single state agency that administers the Medicaid program in South Carolina elucidates the significance of the hearing officer's decision, it does not answer the question of whether it can appeal a DAH decision. That determination requires an examination of when the final decision is issued and who is entitled to seek review of that final decision.

Many administrative agencies in this state have multiple decision hierarchies while meeting the requirement to ultimately issue a final agency decision. For example, the decision of the staff of the Department of Health and Environmental Control (DHEC) is DHEC'S final decision unless a request for final review is submitted. S.C. Code Ann. § 44-1-60 (E)(2) (2018). If the Board chooses, it can review the staff decision and issue its own final decision. § 44-1-60 (F)(2) (2018). This procedure therefore clearly delineates when a decision before DHEC's final. Moreover, even if the staff decision was different than the Board decision, DHEC does not appeal its own Board's decision because the Board's decision becomes the agency's final decision.

Even more pertinent is a process that exists before the Department of Employment and Workforce (DEW). If a party disagrees with the decision by the DEW staff (caseworker), the party can seek review before the Department's Tribunal. If no review of the Tribunal is sought, the Tribunal's decision becomes a final agency decision. S.C. Code Ann. § 41-35-680 (2021). However, a party may seek review of the Tribunal's decision by requesting the Appellate Panel to review the decision. S.C. Code Ann. § 41-35-710 (2021). In this instance, the Appellate Panel's decision becomes the final agency decision. S.C. Code Ann. § 41-29-300(C) (2021); see also S.C. Code Ann. § 41-35-690 (2021) (describing the exclusive procedure for appeals of DEW decisions). Again, the procedure before DEW clearly establishes when the agency's decision is final. Moreover, although a Tribunal and an Appellate Panel do not always agree, DEW never appeals its own Panel's decisions because the decision by the Appellate Panel is the agency's final decision.

Similarly there is a procedure for the review of Department decisions. Following a staff determination, the Department must grant an opportunity for a fair hearing to "[a]ny individual who requests it because he or she believes the agency has taken an action erroneously, denied his or her claim for eligibility or for covered benefits or services, or...