99-002060RX Willard Bell And Justin Powell, By And Through His Next Friend And Parent, Barbara Powell vs. Agency For Health Care Administration Status: Closed DOAH Final Order on Tuesday, August 3, 1999.

Summary: Florida Administrative Code Rule 59G-4.070 was challenged for not meeting federal Medicaid requirements, but there was statutory authority for the rule. If additional rules are required under federal law, then the remedy is a petition for rulemaking.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

WILLARD BELL and JUSTIN POWELL, )

by and through his next friend and )

parent, BARBARA POWELL, )

)

Petitioners, )

)

vs. ) Case No. 99- 2060RX

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

________________________________________)

FINAL ORDER

On June 7, 1999, a formal administrative hearing was held in

this case in Tallahassee, Florida, before J. Lawrence Johnston,

Administrative Law Judge ( ALJ), Division of Administrative

Hearings ( DOAH).

APPEARANCES

For Petitioners: Paulette Ettachild, Esquire

Legal Services of the Florida Keys

600 White Street

Key West, Florida 33040

Miriam Harmatz, Esquire

Florida Legal Services, Inc.

3000 Biscayne Boulevard, Suite 450

Miami, Florida 33137

Anne Swerlick, Esquire

Florida Legal Services, Inc.

2121 Delta Boulevard

Tallahassee, Florida 32303

For Respondent: Madeline McGuckin, Esquire

William H. Roberts, Esquire

Agency for Health Care Administration

Fort Knox Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308

STATEMENT OF THE ISSUE

The issue in this case is whether Florida Administrative

Code Rule 59G-4.070--including pages 2-2 and 3-3 and Appendices B

and C of the Florida Medicaid Provider Handbook, Durable Medical

Equipment/Medical Supply Services, which is incorporated in the

rule by reference--is an invalid exercise of delegated

legislative authority.

PRELIMINARY STATEMENT

On May 5, 1999, Willard Bell and Justin Powell, by and

through his next friend and parent, Barbara Powell, filed a

Petition to Determine Invalidity of Rule 59G-4.070 and Portions

of the Florida Medicaid Provider Handbook, Durable Medical

Equipment ( DME)/Medical Supplies. After assignment of the ALJ,

final hearing was scheduled for June 7, 1999. An Order of Pre-

Hearing Instructions also was entered requiring the parties to

file a prehearing stipulation.

Several subsequent prehearing motions were considered and

rulings made on the record of a hearing held on June 1, 1999.

Initially, the Agency for Health Care Administration ( AHCA)

stipulated to the filing of the Petitioners' Amended Petition to

Determine Invalidity of Rule 59G-4.070 and Portions of the

Florida Medicaid Provider Handbook, Durable Medical Equipment

( DME)/Medical Supplies; the Petitioners agreed that AHCA's Motion

to Dismiss or for Summary Final Order should be deemed to address

the amended petition. After oral argument (in addition to the

written arguments), AHCA's Motion to Dismiss or for Summary Final

Order and the Petitioners' Motion for Summary Final Order

Declaring Rule Invalid were denied. AHCA's Motion to Exclude

Evidence at Final Hearing also was denied. AHCA stipulated to

the Petitioner's [sic] Motion to Take [Allen] Deposition by

Telephone, which was granted. The Petitioners' Motion for Leave

to Take Telephone Testimony or Alternatively for a Change in

Venue for the Final Hearing was granted to the extent that the

Petitioners' testimony would be taken by videoconference, by

video deposition, or by telephone. (Ultimately, arrangements

were made for their testimony, as well as the testimony of Rhonda

Allen, DS Waiver Support Coordinator, to be taken by

videoconference.) The Petitioners also made several requests to

compel discovery, which were denied. Finally, the Petitioners

requested that AHCA be ordered to negotiate settlement and the

required prehearing stipulation in good faith; during the

hearing, the Petitioners withdrew the request regarding

settlement, and the parties were ordered to try again to reach

the required prehearing stipulation. Nevertheless, the parties

were unable to reach a prehearing stipulation; instead, they each

filed a unilateral proposed prehearing statement.

On June 3, 1999, the Petitioners filed a Motion for

Administrative Notice. No ruling on the motion was made

prehearing; ultimately, the subjects of the motion came into

evidence as exhibits during the course of final hearing, and the

motion became moot.

At final hearing, the parties made the rule in issue Joint

Exhibit 1. The Petitioners called four witnesses and had Bell

Exhibits 1 through 5 and Petitioners' Exhibits 1 through 5

admitted in evidence. ( AHCA initially objected to Petitioners'

Exhibits 2 and 5 but withdrew the objections posthearing.) AHCA

also objected to Petitioners' Exhibit 6. Ruling was reserved,

but the objection is now overruled, and Petitioners' Exhibit 6 is

admitted in evidence. AHCA called five witnesses and had AHCA

Exhibits 1 through 4 admitted in evidence.

At the close of evidence, AHCA ordered a transcript of the

final hearing, and the parties requested and were given 20 days

from the filing of the transcript in which to file proposed final

orders. The transcript was filed on June 21, 1999, making

proposed final orders due on July 11, 1999. The proposed final

orders filed by the parties have been considered.

FINDINGS OF FACT

I. AHCA’S RULE ON MEDICAID COVERAGE FOR

DME/MEDICAL SUPPLIES AND ITS IMPLEMENTATION

1. Florida Administrative Code Rule 59G-4.070 "applies to

all durable medical equipment and supply providers enrolled in

the Medicaid program." It requires the providers to "comply with

the Florida Medicaid Durable Medical Equipment and Supply

Services Coverage and Limitations Handbook, April 1998,

incorporated by reference, and the Florida Medicaid Provider

Reimbursement Handbook, HCFA 1500 and EPSDT 221, incorporated by

reference in 59G-5.020." (Joint Exhibit 1)

2. The DME Handbook "explains covered services, their

limits and who is eligible to receive them." The Billing

Handbook "describes how to complete and file claims for

reimbursement by Medicaid." ( DME Handbook, p. i).

3. DME is "medically necessary equipment that can withstand

repeated use, serves a medical purpose, and is appropriate for

use in the recipient’s home"; medical supplies are "medically

necessary medical or surgical items that are consumable,

expendable, disposable or non-durable and appropriate for use in

the recipient’s home." ( DME Handbook, pp. 1-2).

4. The DME Handbook specifies that "[m]any DME services are

available only to recipients under 21 years of age. To determine

if a service is available to all recipients or just a specific

range of recipients see the DME Fee Schedule in Chapter 3 of this

handbook, Appendix B: For All Medicaid Recipients and Appendix C:

For Recipients Under Age 21." ( DME Handbook, p. 2-2).

5. The DME fee schedule is a table of columns listing

procedure codes, a description of the service or procedure

associated with the procedure code, maximum reimbursement amounts

and other information pertinent to each code. ( DME Handbook,

pp. 3-3 to 3-7).

6. The DME Handbook states that "[t]he DME/medical supplies

fee schedule is divided into 2 sections, Appendix B and C.

Appendix B is a listing of covered DME/medical supplies for all

Medicaid recipients, regardless of age. Appendix C is a listing

of covered DME/medical supplies for Medicaid recipients under 21

years of age." ( DME Handbook, p. 3-3).

7. The DME fee schedule includes a column identified as

"BR" (an abbreviation for "by report") and a column identified as

"PA" (an abbreviation for "prior authorization"). ( DME Handbook,

p. 3-5).

8. The DME Handbook states that the "BR" designation

"identifies a 'non-classified' procedure code that requires a

medical review to approve and price a procedure correctly." ( DME

Handbook, p. 3-5). "Non-classified" procedure codes "allow the

provider to request reimbursement from Medicaid when a

reimbursable item does not have an established fee identified."

( DME Handbook, p. 3-5).

9. The DME Handbook states that the "PA" designation

"identifies the procedure codes that require prior authorization

before the service is performed." ( DME Handbook, p. 3-5). The

DME Handbook specifies which DME/medical supply procedure codes

listed in Appendices B and C of the DME Fee Schedule require

prior authorization. ( DME Handbook, p. 2-5, Appendices B and C).

10. The Billing Handbook includes a Prior Authorization

Request Form which providers must submit to the Medicaid office

in order to obtain prior authorization for DME and medical

supplies. The prior authorization form requires submission of a

procedure code. (Billing Handbook, pp. 7-8 to 7-13; DME

Handbook, p. 3-5).

11. Neither the DME Handbook or the Billing Handbook

includes any prior authorization procedure that providers can

follow to obtain Medicaid coverage for DME or medical supplies

that do not have a procedure code listed in Appendices B or C of

the DME Handbook.

12. In Appendix C of the DME Handbook, for Medicaid

recipients under age 21, there is a miscellaneous code, "E1399",

for durable medical equipment which requires prior authorization.

No comparable code exists in Appendix B of the DME Handbook for

Medicaid recipients age 21 and older. ( DME Handbook, pp. 2-5 and

C-14).

13. A Medicaid recipient who needs durable medical

equipment or medical supplies will present the request in the

form of a prescription or certificate of medical necessity from a

physician to a DME provider. The provider then uses the DME

Handbook to determine if an item is covered by the Medicaid

program. If an adult presents a doctor's prescription for an

item of DME which is not listed in Appendix B of the DME

Handbook, the provider will most likely decline to provide the

services unless other arrangements are made to pay for the

services. There is nothing in the DME Handbook which informs

providers of any means by which adult Medicaid recipients can

request coverage of items not listed in Appendix B. DME

providers have not received any memo or directive from AHCA

advising how DME providers could request coverage of items for

adults not listed in Appendix B.

II. ALTERNATIVES FOR RECIPIENTS NEEDING

DME/MEDICAL SUPPLIES NOT LISTED IN THE DME HANDBOOK

14. There are alternatives for Medicaid recipients to

obtain DME/medical supplies which are not listed in the DME

Handbook. They include the Medicaid Waiver Program, coverage

through other Medicaid programs, an "exception authorization"

process, and the fair hearing process.

A. The Medicaid Waiver Program

15. Section 1915(c) of the Social Security Act authorizes

states to provide Medicaid home and community-based waiver

programs. 42 U.S.C. Section 1396n(c). Under Medicaid waiver

programs, states can provide services in addition to those

authorized under their regular Medicaid program through the

Medicaid state plan. Home and community-based waiver programs

are targeted towards populations at risk of institutionalization.

See 42 U.S.C. Section 1396n(c)(1).

16. The federal Health Care Financing Administration ( HCFA)

has authorized Florida to administer a home and community-based

waiver program for persons with developmental disabilities ("DS

waiver program"). HCFA places a cap on the number of individuals

who may participate in the waiver.

17. The DS waiver program offers specialized medical

equipment and supplies. However, before any service can be

funded under the DS waiver program, it must be approved by the

Developmental Services district office. Whether the services are

approved or not is based, in part, on available funding. Both

state and federal funding are capped under the DS waiver program.

18. The DS Waiver program Services Directory states on

pp. 3 -4 that "the waiver endorses the supports already provided

by family, friends and neighbors, and discourages the replacement

of such natural and free supports with government-funded

services[,]" and "[w]hen a service must be purchased, those

available under the Medicaid State Plan must be accessed before

purchasing services through the waiver."

B. Coverage Through Other Medicaid Programs

19. AHCA administers about 35 different programs within the

regular Medicaid program. Some medical equipment is covered by

programs other than the DME/Medical Supplies program. Hearing

aides are covered by the hearing program; saline used with

medical equipment is covered by the pharmacy program; and

cochlear implants are covered under the physician services

program. However, there was no evidence that any other Medicaid

programs covered any of the medical equipment or supplies needed

by Bell or Powell.

C. Exception Authorization/Prior Authorization Process

20. The "exception authorization" process is the same as

the prior authorization process described in the DME Handbook and

Billing Handbook. See Findings 7-12, supra . As found, AHCA’s

form for requesting prior authorization requires submission of a

procedure code; there is no general DME miscellaneous code listed

in the rule for Medicaid recipients over age 21; and there are no

instructions included in the DME or Billing Handbook which

authorize providers to bill for DME on behalf of adult recipients

under code E1399. ( DME Handbook, Appendix B). Nonetheless, it

is technically possible for AHCA administrators to override the

Agency’s computer (by "forcing the age edit") to provide for

payment of items for adults which are not listed in Appendix B of

the DME Handbook. Although the Florida Legislature has declined

AHCA's requests to appropriate funds for DME for adult Medicaid

recipients for the past four legislative sessions, AHCA

administrators have overridden the computer to get coverage of

durable medical equipment and supplies that are not listed in the

DME Handbook for three Medicaid recipients. However, this

procedure is not described in Rule 59G-4.070.

D. Fair Hearing Process

21. Another alternative for Medicaid recipients who need

coverage of DME/medical supplies not included in the DME Handbook

is through the fair hearing process. Recipients are informed

about their fair hearing rights when they are enrolled in the

Medicaid program and also when a prior authorization request is

denied.

22. There are no form AHCA notices included in the DME

Handbook or Billing Handbook advising recipients about their fair

hearing rights when prior authorization for DME is denied. AHCA

placed in evidence a form used by AHCA to advise recipients of

their fair hearing rights when prior authorization for

DME/medical supplies is denied. The form notice is out-of-date.

It states that it is from the Department of Health and

Rehabilitative Services (HRS) and refers to Consultec as the

fiscal agent. It is the fiscal agent for AHCA, not HRS, which

generates this notice; and Unisys, not Consultec, has been AHCA’s

fiscal agent for about the past five years. The form notice

states that if individuals want a fair hearing they should write

to the Office of Public Assistance, Appeal Hearing, in

Jacksonville, Florida. At least one other Appeal Hearing office

is located in Tallahassee.

23. If no prior authorization request is made because no

procedure code is listed in the DME Handbook, there would be no

notice of denial of a prior authorization request.

III. HCFA LETTER

24. HCFA sent a letter to State Medicaid Directors on

September 4, 1998, setting out federal Medicaid requirements

regarding DME coverage.

25. The HCFA letter of interpretive guidance reminded state

Medicaid directors that the mandatory home health services

benefit under Medicaid includes medical supplies, equipment, and

appliances suitable for use in the home and summarized the

applicable federal law. It also stated:

An [ i.e. , DME] ME policy that provides no

reasonable and meaningful procedure for

requesting items that do not appear on a

State's pre-approved list, is inconsistent

with the federal law discussed above. In

evaluating a request for an item of [D]ME, a

State may not use a "Medicaid population as a

whole" test, which requires a beneficiary to

demonstrate that, absent coverage of the item

requested, the needs of "most" Medicaid

recipients will not be met. This test, in

the [D]ME context, establishes a standard

that virtually no individual item of [D]ME

can meet. Requiring a beneficiary to meet

this test as a criterion for determining

whether an item is covered, therefore, fails

to provide a meaningful opportunity for

seeking modifications of or exceptions to a

State's pre-approved list. Finally, the

process for seeking modifications or

exceptions must be made available to all

beneficiaries and may not be limited to sub-

classes of the population (e.g.,

beneficiaries under the age of 21).

In light of this interpretation of the

applicable statute and regulations, a State

will be in compliance with federal Medicaid

requirements only if, with respect to an

individual applicant’s request for an item of

[D]ME, the following conditions are met:

The process is timely and employs

reasonable and specific criteria by

which an individual item of DME

will be judged for coverage under

the State’s home health services

benefit. These criteria must be

sufficiently specific to permit a

determination of whether an item of

[D]ME that does not appear on a

State’s pre-approved list has been

arbitrarily excluded from coverage

based solely on a diagnosis, type

of illness, or condition.

The State's process and criteria,

as well as the State's list of pre-

approved items are made available

to beneficiaries and the public.

Beneficiaries are informed of their

right, under 42 C.F.R. part 431

Subpart E, to a fair hearing to

determine whether an adverse

decision is contrary to the law

cited above.

IV. PETITIONER WILLARD BELL

26. Willard Bell is a Medicaid recipient who is over age

21. Since 1992, he has been in a Medicaid health maintenance

organization (HMO).

27. Bell is an insulin-dependent diabetic and has undergone

numerous operations and hospitalizations as a result of his

diabetes.

28. In 1996, Mr. Bell's doctor prescribed an insulin pump

and supplies. AHCA district personnel did not know how to obtain

coverage for Mr. Bell's insulin pump, since it is not covered by

the regular Medicaid program for adults. They needed technical

guidance on how to do so.

29. In February 1999, after over two years of requests and

grievance proceedings, AHCA provided Bell an insulin pump under a

settlement agreement with AHCA attorney Gordon Scott. In order

to make payment for this insulin pump, AHCA used code E1399--the

miscellaneous durable medical equipment code that is designated

only for recipients under 21--and "forced the age edit" on the

computer.

30. Rule 59G-4.070 also does not provide Medicaid coverage

for supplies necessary for the operation of an insulin pump (code

E0781 applies to Medicaid recipients under 21 years of age).

Bell's HMO now pays for the supplies for the insulin pump; but

due to numerous problems with his HMO, Bell wants to switch from

his HMO to the regular Medicaid program.

31. Bell did not want to switch until he was assured that

he will be able to get his insulin pump supplies through

Medicaid. Shortly after obtaining the insulin pump through the

Gordon Scott settlement agreement, Bell and his attorney, Robert

Bencivenga, requested Medicaid coverage for supplies necessary

for the operation of his insulin pump. Bencivenga made several

calls to Stephanie Perry, an AHCA employee at the AHCA

Jacksonville office; he also faxed Perry a letter on March 15,

1999, requesting confirmation that the Agency would pay for

Bell’s pump supplies and indicating some urgency to this request.

Bencivenga also left several messages with Gordon Scott.

Bencivenga did not receive any response to his fax and never got

to speak with Scott.

32. After receiving no response from AHCA, Bencivenga

contacted Miriam Harmatz of Florida Legal Services to see what

could be done next. Harmatz then wrote to Scott stating that

Bell wanted to switch from his HMO to the regular Medicaid

program but that he first needed assurances from AHCA that the

supplies necessary to continue utilization of the pump would be

available from Medicaid. Moses Williams, another attorney for

AHCA, wrote Harmatz a letter dated April 7, 1999, suggesting that

Bell be patient with his HMO; the letter did not state whether or

not AHCA would pay for the pump supplies should Bell leave his

HMO.

V. PETITIONER JUSTIN POWELL

AND HIS MOTHER BARBARA POWELL

33. Justin Powell is a 21 year-old Medicaid recipient.

Justin has multiple severe disabilities, including mental

retardation and cerebral palsy. He breathes through a

tracheotomy and is tube-fed by means of a feeding pump. Justin’s

doctors have prescribed a number of items of specialized medical

equipment and supplies for him, including: a tracheotomy mask or

collar; inner cannula; enteral feeding supply kit, both pump fed

and gravity fed; compressor; and nebulizer. Justin will need

this equipment and supplies for the rest of his life.

34. Justin Powell has lived with his parents, Barbara and

Phillip Powell, along with his brother, sister-in-law, and their

children, for his entire life. Justin's mother is his primary

caretaker. Justin is dependent on her for all of his activities

of daily living, as well as for administering various health care

treatments, including breathing treatments.

35. Until Justin turned 21, Medicaid provided him coverage

for the following equipment and supplies he needs in order to

breathe and eat: a tracheotomy mask or collar (code A4621);

tracheostomy inner cannula (code A4623); enteral feeding supply

kit, either pump fed or gravity fed (code B 4035, B 4036);

nebulizer (code E 0575); and a compressor (code E 0570) that

powers the nebulizer. ( DME Handbook, Appendix B). In order to

obtain necessary equipment and supplies, Mrs. Powell simply had

to contact Lincare, a DME provider. If any of the equipment

Justin needed broke down, Medicaid provided for immediate

replacement.

36. When Justin turned 21, Lincare declined to provide

further coverage for the DME and supplies because the Rule does

not provide Medicaid coverage for Medicaid recipients 21 or

older. In response to the information from Lincare, Barbara

Powell made numerous calls to AHCA officials to request Medicaid

coverage for the items. Eventually she was directed to the DS

Waiver Program, which assigned Justin to DS Waiver Support

Coordinator Rhonda Allen in July 1998.

37. When Mrs. Powell asked Allen about obtaining durable

medical equipment and supplies through the DS Waiver Program, she

was told that Allen has to submit requests to Developmental

Services, which refers it to a budget committee. Allen then

waits for a decision from the budget committee as to whether the

item requested will be funded or not. Just because the support

coordinator requests an item does not necessarily mean it will

get funded. The support coordinator does not make the decision

as to whether or not a requested item is funded by the DS waiver.

Therefore, Allen could not say whether or not additional items of

durable medical equipment and supplies for Justin Powell would be

approved for coverage under the DS Waiver program if she were to

request them. The DS waiver provider has no role in determining

what items get funded under the DS Waiver program.

38. Allen and Barbara Powell discussed Justin Powell’s need

for a G-tube, a trach, diapers, and the trach mask. Since the

family was paying for a trach mask and a doctor was donating a G-

tube, the DS waiver program would not cover these items. If

there are resources in the community that will pay for items, the

waiver program will not provide coverage.

39. The only supplies funded through the DS waiver to date

have been Justin's feeding bags. The only piece of equipment

funded through the waiver to date is Justin's suction machine.

40. Over the past year, Allen advised Barbara Powell that

the DS waiver program could not cover all of the medical

equipment and supplies Justin's needs because funds were low and

the DS waiver program was waiting for additional funding.

41. If some of Justin’s equipment ceases to operate,

Barbara Powell will have to take Justin to the hospital while she

waits for a decision from the DS Waiver program as to whether it

will fund replacement equipment.

42. Justin’s only income is $500 per month SSI. Barbara

Powell now spends family money to purchase DME and supplies for

Justin which are no longer covered by Medicaid. The Powells are

re-using some equipment and supplies that should be replaced if

money were no object. Due at least in part to the cost of

providing Justin's equipment and supplies since he turned 21, the

Powell family is under financial stress. Currently, the family

is behind in its electricity bill.

43. There was no evidence that AHCA gave the Powells

specific written notice after Justin turned 21 that they could

pursue a fair hearing to contest the termination of coverage of

DME and medical supplies under the regular Medicaid program.

CONCLUSIONS OF LAW

44. Section 120.56(1)(a), Florida Statutes (1997),

provides: "Any person substantially affected by a rule or a

proposed rule may seek an administrative determination of the

invalidity of the rule on the ground that the rule is an invalid

exercise of delegated legislative authority." Section 120.52(8),

Florida Statutes ( Supp. 1998), provides in pertinent part:

"Invalid exercise of delegated legislative

authority" means action which goes beyond the

powers, functions, and duties delegated by

the Legislature. A proposed or existing rule

is an invalid exercise of delegated

legislative authority if any one of the

following applies:

* * *

(b) The agency has exceeded its grant of

rulemaking authority, citation to which is

required by s. 120.54(3)(a)1. . . ..

Both Section 120.52(8) and Section 120.536(1), Florida Statutes

( Supp. 1998), as amended by CS/ HB 107, also provide:

A grant of rulemaking authority is necessary

but not sufficient to allow an agency to

adopt a rule; a specific law to be

implemented is also required. An agency may

adopt only rules that implement or , interpret

the , or make specific the particular powers

and duties granted by the enabling statute.

No agency shall have authority to adopt a

rule only because it is reasonably related to

the purpose of the enabling legislation and

is not arbitrary and capricious or is within

the agency's class of powers and duties , nor

shall an agency have the authority to

implement statutory provisions setting forth

general legislative intent or policy.

Statutory language granting rulemaking

authority or generally describing the powers

and functions of an agency shall be construed

to extend no further than implementing or

interpreting the specific the particular

powers and duties conferred by the same

statute.

(The additions and deletions of CS/ HB 107--designated in the

quoted language by underlining and striking-through,

respectively--were the Legislature's response to the decision in

St. Johns River Water Management Dist. v. Consolidated- Tomoka

Land Co. , 717 So. 2d 72 (Fla. 1st DCA 1998).) Bell and Powell

challenge the validity of Florida Administrative Code Rule 59G-

4.070 under these statutes.

45. Rule 59G-4.070 was promulgated under the authority of

Section 409.919, Florida Statutes (1997), which provides: "The

department shall adopt any rules necessary to comply with or

administer ss. 409.901-409.920 and all rules necessary to comply

with federal requirements." Bell and Powell contend that Rule

59G-4.070 exceeds its rulemaking authority because it does not

comply with federal Medicaid law, as explained in the HCFA

interpretative letter. (See Finding 25, supra .)

46. The HCFA interpretive letter was sent to all state

Medicaid directors after Desario v. Thomas , 139 F.3d 80 (2d Cir.

1998), held that states can use exclusive lists of covered items

of DME. After the HCFA letter, the Supreme Court vacated the

Second Circuit’s judgment and remanded for further consideration

in light of HCFA's letter of interpretive guidance . See Slekis

v. Thomas , 119 S. Ct. 864, 142 L. Ed. 2d 767, 67 USLW 3457

(Jan. 14, 1999).

47. A Florida federal court recently reconsidered a

previous order regarding coverage of DME in light of HCFA's

letter of interpretative guidance, which the court viewed as "an

intervening change in controlling law." See Esteban v. Cook ,

Case No. 97-2830- Civ-Graham (slip op., S.D. Fla., May 20, 1999 ,

at page 2, and Final Summary Judgment entered June 14, 1999.) It

is concluded that the HCFA letter is controlling as to the

requirements of federal Medicaid law.

48. AHCA argues that the HCFA letter was aimed at

precluding a state from using the "Medicaid as a whole test" and

does not address age-based exclusions. To the contrary, the HCFA

letter specifically states that "the process for seeking

modifications or exceptions must be made available to all

beneficiaries and may not be limited to sub-classes of the

population (e.g., beneficiaries under the age of 21)"; similarly,

the letter's reference to arbitrary exclusions from coverage

"based solely on a . . . condition" could well refer to age. In

addition, Esteban v. Cook , supra , clearly addressed age-based

exclusions. Besides, the issue raised in this case is not the

exclusions from the pre-approved list but compliance with the

federal requirements set out in the HCFA letter in the event such

lists are used.

49. Rule 59G-4.070 itself does not comply with the HCFA

letter in all respects. While it does make the list of pre-

approved items available to the beneficiaries and public, it does

not itself make Florida's process for seeking modifications or

exceptions available to all beneficiaries, employ and make

available reasonable and specific criteria by which an individual

item of DME will be judged for coverage, or inform beneficiaries

of their right to a fair hearing. But the HCFA letter does not

require that states comply with all federal requirements the

letter sets out in the same official utterance (in this case,

Rule 59G-4.070) creating the list of pre-approved items of

coverage.

50. There are other Florida Administrative Code rules

meeting most of the federal requirements set out in the letter.

Rule 59G-1.010(85) defines "fair hearing," and Rule 65A-1.204(4)

provides for fair hearings conducted in accordance with Florida

Administrative Code Rules Chapter 65-2. Rules Chapter 65-2

describes a timely process for resolving coverage disputes, and

there is no contention in this case that the provisions of Rules

Chapter 65-2 do not meet the requirements of federal law, as

interpreted by the HCFA letter. In addition, Section 408.7056,

Florida Statutes (1997), created a grievance procedure for

Medicaid recipients in an HMO (like Bell); under this cost-free

grievance procedure, a subscriber assistance panel can recommend

that either AHCA or the Department of Insurance require an HMO to

provide medical equipment and supplies requested by a Medicaid

recipient and refused by the HMO. The only federal requirement

set out in the HCFA letter not addressed in Rules Chapter 65-2 is

the requirement for specific criteria for judging items for

coverage.

51. It is not clear what kind of criteria the HCFA letter

has in mind. It would appear from the HCFA letter that the

criteria need only prohibit arbitrary exclusions from coverage

based solely on a diagnosis, type of illness, or condition. To

the extent that more is needed, the HCFA letter does not require

states to use rulemaking to comply with the federal requirements

set out in the letter. The HCFA letter does not prevent Florida

from developing these criteria on a case-by-case basis and making

them available to the beneficiaries and public in the form of

final orders under Section 120.52(7), Florida Statutes ( Supp.

1998), and Section 120.53(1), Florida Statutes (1997), until such

time that rulemaking is required under Section 120.54(1), Florida

Statutes ( Supp. 1998).

52. Even if additional rules are necessary to comply with

federal requirements, it still would not follow that Rule 59G-

4.070 exceeds its rulemaking authority. Section 409.919, Florida

Statutes (1997), clearly authorizes "any rules necessary to

comply with or administer ss. 409.901-409.920," and Rule 59G-

4.070 clearly was promulgated for that purpose. If additional

rules are necessary to comply with federal requirements, they

also would be authorized by Section 409.919. If Willard Bell and

Justin Powell want the criteria for judging items for coverage to

be in rule form, the proper remedy would be to petition to

initiate rulemaking under Section 120.54(7), Florida Statutes

( Supp. 1998).

53. AHCA contends that neither Bell nor Powell had standing

to bring this rule challenge. Section 120.56(1)(a), Florida

Statutes (1997), authorizes challenges by "[a] ny person

substantially affected by a rule . . . ." To be "substantially

affected," a person must show "a substantial injury in fact that

is within the 'zone of interest to be protected or regulated'

. . . ." Cole Vision Corp. and Visionworks, Inc. v. Dept. of

Business and Prof. Reg. , 688 So. 2d 404, 407 (Fla. 1st DCA 1997).

54. As adult Medicaid recipients, both Bell and Powell are

subject to Rule 59G-4.070. The rule governs their benefits under

Medicaid. Both were denied benefits under the rule because DME

and medical supplies are not available to recipients over age 21

under the rule. As such, Bell and Powell were "substantially

affected" by the rule and had standing to challenge the rule's

validity under Section 120.56(1)(a), Florida Statutes (1997).

55. AHCA contends that Justin Powell is not substantially

affected by the rule because he is in the DS waiver program. But

it was the effect of the rule on Powell that compelled him to

enter the DS waiver program. The evidence was that there are

significant differences in the ways in which DME and medical

supplies are available to recipients under age 21 under the rule

and under the DS waiver program. Those differences are having a

significant impact on Powell at this time.

56. Powell moved to further amend his petition to permit

Justin Powell and Barbara Powell to petition in his and her own

right. But Justin Powell already has petitioned in his own

right, albeit through his mother; and it is too late to add

Barbara Powell as another party petitioner.

57. AHCA contended that Bell is not substantially affected

by the rule because he has gotten an insulin pump under the

Medicaid program and is getting the supplies for the pump through

his HMO. But the impact of the rule on him necessitated a

lengthy administrative and fair hearing process before he got the

pump through Medicaid. It also forced him to remain in his HMO

against his wishes to be sure he would continue to obtain pump

supplies since the rule did not seem to include those benefits in

the Medicaid program. Meanwhile, the rule governs his attempt to

ascertain whether Medicaid will cover the pump supplies. For

these reasons, the rule is having a significant impact on Bell at

this time.

DISPOSITION

Based on the foregoing Findings of Fact and Conclusions of

Law, the Petitioners' Amended Petition to Determine Invalidity of

Rule 59G-4.070 and Portions of the Florida Medicaid Provider

Handbook, Durable Medical Equipment ( DME)/Medical Supplies is

denied.

DONE AND ORDERED this 3rd day of August, 1999, in

Tallahassee, Leon County, Florida.

___________________________________

J. LAWRENCE JOHNSTON

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 3rd day of August, 1999.

COPIES FURNISHED:

Paulette Ettachild, Esquire

Legal Services of the Florida Keys

600 White Street

Key West, Florida 33040

Miriam Harmatz, Esquire

Florida Legal Services, Inc.

3000 Biscayne Boulevard, Suite 450

Miami, Florida 33137

Anne Swerlick, Esquire

Florida Legal Services, Inc.

2121 Delta Boulevard

Tallahassee, Florida 32303

Madeline McGuckin, Esquire

William H. Roberts, Esquire

Agency for Health Care Administration

Fort Knox Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308

Sam Power, Agency Clerk

Agency for Health Care Administration

Fort Knox Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308

Julie Gallagher, General Counsel

Agency for Health Care Administration

Fort Knox Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308

Carroll Webb, Executive Director

Administrative Procedures Committee

120 Holland Building

Tallahassee, Florida 32399-1300

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled

to judicial review pursuant to Section 120.68, Florida Statutes.

Review proceedings are governed by the Florida Rules of Appellate

Procedure. Such proceedings are commenced by filing one copy of

a notice of appeal with the Clerk of the Division of

Administrative Hearings and a second copy, accompanied by filing

fees prescribed by law, with the District Court of Appeal, First

District, or with the District Court of Appeal in the Appellate

District where the party resides. The notice of appeal must be

filed within 30 days of rendition of the order to be reviewed.