BOUCHARD v. SECRETARY OF HHS

583 F. Supp. 944 (1984) | Cited 1 time | D. Massachusetts | April 2, 1984

MEMORANDUM

FREEDMAN, D.J.

I. INTRODUCTION

The plaintiffs, in two cases 1" consolidated for a hearing, challenge the methods used by the Secretary to compute the optional state supplementary payment distributed under Title XVI of the Social Security Act, 42 U.S.C. §§ 1381 et seq., when income is "deemed" from an ineligible spouse to a categorically eligible 2" individual. The plaintiffs to the class action seek an order reversing the final decision of the Secretary in each of their administrative appeals and a similar order running to the entire class. They also seek declaratory and injunctive relief. For the reasons stated herein, the Court concludes the Secretary incorrectly calculated the amount of the state optional supplementary payment due the plaintiffs and the class which they represent. Accordingly, the motion of the plaintiff class for summary judgment must be granted on the merits of the action and on the requests for prospective declaratory and injunctive relief. However, the prayer for an order to remand all applications to the Secretary for recalculation in accordance with this Memorandum must be denied in part.

II. FACTS

The relevant facts of this case are undisputed. The plaintiffs are all categorically eligible for SSI benefits on the basis of age, blindness or disability. They have all, for various periods of time, lived in the same household with a spouse who did not meet the standards for categorical eligibility of the SSI program. Each had spousal income deemed to them for purposes of determining plaintiffs' financial eligibility for SSI and the amount of benefits. 42 U.S.C. § 1382c(f)(1). Plaintiffs are either ineligible for or receive a smaller state supplementary benefit than they would if their state benefits were calculated in the same manner as is done for purposes of computing their federal benefits.

The eight named plaintiffs all filed timely appeals alleging that the Social Security Administration ("SSA") had improperly calculated the Massachusetts optional state supplement. Because of the similarity of the cases in light of the issue presented, it is unnecessary to recount the details of all the consolidated actions; however, for purposes of illustration, I will set forth the factual and procedural background of two of the plaintiffs represented today.

Katherine Bouchard resides in Pittsfield, Massachusetts. She is categorically eligible for SSI on the basis of disability. Between March 1977 and July 1979, she resided in the same household with her spouse, who was not eligible for SSI. His income was deemed to be available to her in order to determine financial eligibility for SSI. On July 2, 1979, her spouse became eligible for SSI, and she was no longer subject to the provision of the Act. Her administrative appeal was denied by an Administrative Law Judge ("ALJ"). On January 18, 1978, the Appeals Council denied her request for review thereby affirming the ALJ's decision as the final decision of the Secretary.

Plaintiff John Svoboda resides in Northampton, Massachusetts. He is categorically eligible for SSI on the basis of age. Between April 1978 and May 1980, he resided in the same household with his ineligible spouse, whose income was deemed to be available to plaintiff. On May 1980, his spouse became eligible for SSI, and he was no longer subject to the provision of the Act. Svoboda was denied benefits but following a timely appeal, an ALJ entered a decision in his favor. Tr. at 148. The Appeals Council then ruled, in a consolidated case, 3" that the method used by the SSA in determining the amount of optional state supplementary benefits payable fully complied with the requirements of the Social Security Act and the implementing regulations.

In sum, therefore, plaintiffs are all eligible for SSI on the basis of age, blindness or disability. All are or have been sharing a household with a spouse who is or was ineligible for SSI benefits. All have been denied benefits, received a reduced amount, or were terminated from coverage under the SSI program. All have timely appealed the rulings through the Appeals Council and received adverse rulings. All are therefore now final decisions of the Secretary, subject to judicial review. 42 U.S.C. § 1383.

On January 11, 1982, the Court certified a class of plaintiffs consisting of all Massachusetts residents who:

1) Have applied to the Secretary for or have received SSI benefits and have been found categorically eligible for SSI benefits;

2) Have resided in the same household with an ineligible spouse whose income is subject to the statutory deeming requirements set out in 42 U.S.C. § 1382c(f)(1);

3) Have Countable Income below the Massachusetts SSI standard for an eligible individual; and

4) Have Countable Income, together with Countable Income of their ineligible spouses, lower than the Massachusetts SSI standard for an eligible couple.

The named plaintiffs, therefore, adequately represent the interests of the class of persons similarly situated.

III. THE SUPPLEMENTAL SECURITY PROGRAM

Supplemental Security Income, Title XVI of the Social Security Act, 42 U.S.C. §§ 1381 et seq., is a federal program of monthly payments to aged, blind or disabled persons who have little or no income and resources. The SSI program was passed on October 30, 1972 and became effective on January 1, 1974. P.L. 92-603. The program replaced the previous state administered Social Security Act income maintenance programs of Aid to the Permanently and Totally Disabled ("APTD"), Old Age Assistance ("OAA"), and Aid to the Blind ("AB"). Id., Title III, § 303(a), Oct. 30, 1972; 86 Stat. 1484, repealing Titles I, X and XVI of the Social Security Act.

Under the previous programs, each state had been free to determine both the level of need and the level of benefits due to applicants. This freedom, plus the fact that each state administered its own program, led to considerable variation among the states as to financial eligibility and degree of disability or blindness required in order to qualify for assistance. Title XVI was enacted, in part, to remedy these variations in eligibility requirements. The federal benefit payment level was to provide a nationally uniform minimum benefit.

The legislature recognized that this national minimum would be higher than the benefit level provided under the old program in some states, but lower than the benefit level which had been in place in other states. Congress therefore authorized states to supplement the federal payment to reflect the varying costs of living among the several states. 42 U.S.C. § 1382e. 4" States who elected to offer this optional state supplementary payment were permitted to administer the distribution of the payment separately or enter into an agreement with the federal government under which the Secretary would make supplementary payments on behalf of the state. 42 U.S.C. § 1382e(a). These payments would be subject to any rules, regulations and provisions which the Secretary found necessary to achieve the efficient and effective administration of both programs. 42 U.S.C. § 1382e(b)(2). 5" The Secretary's regulations pertinent to state supplementary payments are set forth in 20 C.F.R., Subpart T §§ 416.2001 et seq. The federal government, therefore, assumed complete control of the administration of optional supplementary payments offered by states who entered into appropriate federal-state agreements. 42 U.S.C. § 1382e(a).

Congress wished to encourage the administration of state supplementary payments by the federal government. Uniform administration would "avoid unnecessary duplication of administrative costs, would permit the states to take advantage of the improved methods and procedures . . . and would tend to foster national uniformity in the operation of assistance programs." H. Rep. P.L. 92-603, 92d Cong., 2d Sess., reprinted in 1972 U.S. Code Cong. & Ad. News, 4996, 5185. Federal-state agreements, therefore, were made attractive by incorporating several provisions into the statutory scheme.

First, the amount of the optional state supplement was specifically excluded from the definition of income for the purpose of computing eligibility and amount of federal benefit payment. 42 U.S.C. § 1382e(a). Secondly, the federal government assumed the entire financial burden of administrating the distribution of federal and state payments, requiring states to reimburse the government only the amount actually distributed in the form of payments to needy individuals. 42 U.S.C. § 1382e(d). Finally, the government agreed to a "hold harmless" provision. Congress recognized that:

by entering into agreements for federal administration of their supplemental payments, states will be losing all administrative control over the operation of those benefits. It must be recognized, however, that states may not fully share this confidence and also that patterns of state-to-state migration could result in increased caseloads for a given state even if national caseloads remain stable or decrease . . . . [The statute], therefore, includes a "hold harmless" provision designed to assure the states that their welfare expenditures will not be increased because of the effects of the provisions of this bill . . . .

H. Rep. P.L. 92-603, 92d Cong., 2d Sess., reprinted in 1972 U.S. Code Cong. & Ad. News, 4996, 5185.

The "hold harmless" provision, P.L. 92-603 § 401(a)(1), provided that if the annual aggregate amount of optional payments exceeded the state's total outlay under its old programs for calendar year 1972, that excess amount would be paid by the federal government. To prevent states from setting high levels for optional payments and then merely passing on the cost to the federal government, a state could receive hold harmless "credit" only for that portion of the optional supplement which exceeds the "Annual Payment Level," that is, the highest amount an individual would have received in January of 1972. The federal "hold harmless" provision, therefore, had both "a ceiling and a floor." Irizarry v. Weinberger, 381 F. Supp. 1146, 1149-50 (S.D.N.Y. 1974).

Massachusetts elected to provide an optional state supplementary payment, and to have the payment administered by the federal government. M.G.L. c. 118A, §§ 1 and 3. Accordingly, the Commonwealth entered into a requisite Federal-State Agreement, Tr. at 484, and qualified for hold harmless protection. Social Security Report at 1 (1981). In accordance with the statute, Massachusetts agreed to provide state supplementary benefits to all individuals residing in the state who receive, or who would but for their income receive federal benefits. 42 U.S.C. § 1382e(b). Further, in accordance with federal regulations, 42 C.F.R. § 416.2020(d), Massachusetts designated nine payment levels. Three categories designate payments to individuals who are aged, blind or disabled, and three other categories designate payments for couples in which both are aged, both are blind, or both are disabled. 42 C.F.R. § 416.2020(d)(2). In addition, Massachusetts assigned three additional "couple categories" in which both members of the couple were categorically eligible. 6" These nine designations are the maximum number of categories allowed under federal-state agreements. 42 C.F.R. § 416.2020(d).

Federal regulations further allow a state to elect a maximum of five variations, called "living arrangements" in recognition of the different needs which result from various life-styles. These variations could include arrangements such as living alone, living with an ineligible spouse, or congregate care. 20 C.F.R. § 2030(a)(1). Massachusetts has designated four types of living arrangements. An eligible individual, whether living alone or with an ineligible spouse or child, or with an eligible spouse, is assigned to Living Arrangement A, Full Cost of Living, so long as the applicant does not reside in a group care facility, commercial boarding house, halfway house, or rest home. Agreement, Tr. at 533. All other living arrangements provide payment levels at a lower rate than the full cost of living. The need for assistance is therefore not reduced because of the presence of a spouse or child in the household.

The Commonwealth, therefore, has complied with the statutory and regulatory provisions governing the federal administration of the state optional supplementary payment. With this background in mind, it is now necessary to consider the method by which the Secretary administers both the federal and state components of Title XVI of the Social Security Act.

IV. THE CALCULATION OF BENEFITS

When a claim is received, the Secretary first calculates the eligibility for and the amount due an applicant under the federal component of the SSI program. The method of calculation is governed by regulation, 20 C.F.R. Subparts K and L, §§ 416.1100-416.1266. In essence, the Secretary initially computes the Countable Income. Countable Income is the amount of the applicant's earned and unearned income, less certain exclusions and disregards. This figure is then compared with the appropriate Standard Payment Level ("SPL"). The federal benefit is, therefore, the amount by which the SPL exceeds the applicant's Countable Income. This basic pattern is used to compute federal benefit payments for all applicants. However, if the applicant is married, and the spouse is not categorically eligible for benefits, the Secretary uses an important modification when computing the applicant's Countable Income. This modification is commonly referred to as "deeming."

Income maintenance programs assume that persons who are legally responsible for the applicant, such as parents or spouses, make their income available to the applicant. This income is deemed to be available to the applicant for purposes of determining his or her income eligibility. Each income maintenance program 7" develops a method of calculating that portion of a parent's or spouse's income which is deemed available to the applicant.

Under Title XVI of the Social Security Act, an individual applicant's "income shall be deemed to include any income and resources of [a] spouse, whether or not available to such individual, except as determined by the Secretary to be inequitable under the circumstances." 42 U.S.C. § 1382(f)(1). The Secretary is empowered to promulgate reasonable regulations in accordance with this broad statutory guideline, cf. Kollett v. Harris, 619 F.2d 134 (1st Cir. 1980). Under these regulations, effective in their present form on January 1, 1977, 20 C.F.R. §§ 416.1160 et seq., the ineligible spouse's earned and unearned income minus certain exclusions, 42 C.F.R. § 416.1161(a), and allocations, 20 C.F.R. 416.1163(b), is calculated, 20 C.F.R. § 416.1163(a). If the amount of the ineligible spouse's income is more than the federal benefit rate for an eligible individual, the ineligible spouse's income is combined with the applicant's income for purposes of computing the Countable Income, 20 C.F.R. § 416.1163(c)(2).

Finally, the Secretary compares the Countable Income of the applicant to the SPL for an eligible couple, 20 C.F.R. § 416.1163(c)(2)(iii). The federal benefit due the individual claimant is therefore the amount the federal SPL for a couple exceeds the individual's Countable Income which now includes deemed spousal income.

There are two important conditions attached to these regulations. Deeming will not take place:

1) if the income of the ineligible spouse is less than one half of the federal SPL for an individual, 20 C.F.R. § 416.1163(c)(1), or

2) if deeming would increase the federal benefits above the amount the individual would receive without deeming, 20 C.F.R. § 416.1163(c)(1). This latter "windfall provisio" insures that an SSI benefit will be no higher under the deeming rules than it would be if deeming did not apply. Therefore, an applicant receives either the amount computed by deeming spousal income and comparing the aggregate Countable Income to the SPL for a couple or the amount computed with reference to only the individual's Countable Income as compared to the SPL for an individual. The applicant will receive the lower of the two resulting figures and therefore can never benefit from the requirement to deem spousal income.

The foregoing applies to the calculations for the federal component of the SSI program. If a state has executed an agreement, the Secretary then continues computation to incorporate the optional state supplementary payment. 20 C.F.R. Subpart T, §§ 416.2001 et seq. As a condition of the administration agreement:

The regulations in effect for the supplementary security income program shall be applicable in the federal administration of state supplementary payments except as may otherwise be provided in this subpart as found by the Secretary to be necessary for the effective administration of both the basic federal benefit and the state supplementary payment.

20 C.F.R. § 416.2005(d). The regulations further provide:

Where not inconsistent with the provisions of this subpart, eligibility for and the amount of the state supplementary payment will be determined pursuant to the provisions of Subparts A through Q of this part.

20 C.F.R. § 416.2015(c). The regulation governing the calculation of state supplementary payments emphasized the role of deeming of spousal income:

In the case of an eligible individual living with an ineligible spouse with income . . . the federal benefit rate from which Countable Income will be deducted is the federal benefit rate applicable to a couple.8

20 C.F.R. § 416.2025(b)(1) (emphasis supplied). The regulations then set forth the balance of the mathematical formula:

(2) If Countable Income is equal to or less than the amount of the federal benefit rate, the full amount of the state supplementary payment as specified in the federal agreement will be made.

(3) If Countable Income exceeds the amount of the federal benefit rate, the state supplementary payment will be reduced by the amount of such excess.

(4) No state supplementary payment shall be made where Countable Income is equal to or exceeds the sum of the federal benefit rate and the state supplementary payment rate.

20 C.F.R. § 416.2025(b) (emphasis supplied). In other words, the Countable Income of the applicant minus the federal benefit is compared to the state supplementary payment level "as specified in the federal agreement." 20 C.F.R. § 416.2025(b)(2).

The Secretary has clarified this directive, not in the regulations, but in the Social Security Manual:

The fact that a couple computation is used to determine the federal payment should not affect the appropriate state standard. For example, if a state has one standard for an individual in a deeming situation and another for a couple, it would still be appropriate to use the individual standard even though a couple standard is used for the federal portion of the benefit.

Program Operations Manual System ("Manual"), § SI 99850.220. Therefore, after deeming spousal income to an eligible individual's Countable Income and comparing this total Countable Income to the federal SPL for a couple, the Secretary nonetheless applies the state supplementary payment level for an individual. An attenuated version of the Secretary's own example, id., best illustrates this approach: $600.00 Eligible individual's income 360.00 Ineligible spouse's income $960.00 Total income attributed to eligible individual - 60.00 Income exclusion $900.00 Countable Income -800.10 Federal SPL for couple $ 99.90 Excess Countable Income $261.60 State SPL for individual - 99.90 Excess Countable Income $161.70 State supplement payable

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