APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. Civil No. 78-0331)
Before Seitz, Chief Judge, and Garth and Sloviter, Circuit Judges.
This appeal presents us with a novel question: must Pennsylvania comply with the notice provisions governing the termination of an optional medical assistance program funded under Title XIX of the Social Security Act,*fn1 even when the discriminatory operation of the program has been held to have violated federal law?*fn2 The district court, while holding that Pennsylvania had not complied with the notice provisions of the Act, nonetheless held that the illegality of the program itself, Inter alia, prevented it from enforcing compliance with the notice provisions. Thus, the district court refused to enjoin the termination of the program. We disagree with the district court's order, and therefore we reverse.
As part of its federally funded medical assistance program,*fn3 Pennsylvania provided eyeglasses only to individuals with pathological eye disorders. Those individuals suffering from ordinary refractive error were not provided with eyeglasses. In White v. Beal, 555 F.2d 1146 (3d Cir. 1977), this court affirmed a district court order which enjoined the discriminatory operation of the Pennsylvania eyeglass program because this restrictive application was found to conflict with the requirements of the Social Security Act. This injunction set the stage for the instant litigation.
After the decision in White v. Beal, appellees, officials of Pennsylvania's Department of Public Welfare (DPW), who administered the eyeglass program, decided to eliminate the program entirely, citing substantial budget deficits.*fn4 This action had been foreseen in the earlier litigation which, as noted, had enjoined the eyeglass program. The district court had there concluded its opinion with the following prediction:
I am aware that as a consequence of this decision, Pennsylvania may elect to eliminate eyeglasses as one of the optional services. As an extreme measure, it might elect to discontinue entirely its participation in the federal medical assistance program under the Social Security Act. Thus, plaintiffs may sustain a pyrrhic victory that defeats rather than accomplishes their purposes.
White v. Beal, 413 F. Supp. 1141, 1155 (E.D.Pa.1976).
On July 30, 1977 DPW published notice of proposed rulemaking which would suspend the eyeglass program. On September 30, 1977, after comments had been received, the proposed rule went into effect unaltered, and the program was terminated. At that time, no individual notices of termination were sent to medical assistance recipients.
Thereafter in April, 1978, Chief Judge Lord enjoined DPW's termination of Pennsylvania's orthopedic shoe program because DPW had failed to comply with the individual notice requirements of Title XIX. Budnicki v. Beal, 450 F. Supp. 546 (E.D.Pa.1978) (no appeal taken). In response to the holding in Budnicki, on June 15, 1978, DPW sent notices to each medical assistance recipient informing them of DPW's earlier termination of the eyeglass program. These notices stated flatly that pre-termination hearings were unavailable because the termination "is an automatic reduction in covered services and there are no circumstances in which you could be incorrectly denied services." Appendix at 14.
Following the decision in Budnicki, the appellants here, who were the plaintiffs in White v. Beal, brought this action to enjoin the termination of the eyeglass program until the notice provisions of Title XIX could be met. They claimed that because those provisions unequivocally require that each individual recipient receive ten days notice in advance of a program's termination,*fn5 DPW was precluded from terminating its program without such notice. Having failed to provide any individual advance notice whatsoever, the plaintiffs argue that Pennsylvania is now obliged to operate an eyeglass program which conforms with the dictates of White v. Beal until such time as a timely and adequate notice is given I. e., for at least a ten day period.*fn6
On cross motions for summary judgment, based upon a stipulation of facts, the district court held that DPW had "clearly" violated the notice provisions of 45 C.F.R. § 205.10(a)(4) (1978). But the court refused to enjoin the termination of the eyeglass program pending conformity with the notice requirements. Reasoning that in this case, unlike Budnicki, the underlying benefits program had been adjudged illegal, the court thought itself without power to order Pennsylvania to operate a "legal" eyeglass program in order to give effect to the notice requirements of Title XIX:
Plaintiffs seek to have the program reinstated, by means of an injunction against its termination, as in Budnicki, until it can be terminated in a manner consistent with statutory and constitutional requirements. Setting aside for the moment the patent incongruity of reinstating an unaffordable program simply to legitimize its retermination, there is one significant obstacle to this remedy that was not present in Budnicki : the program that the plaintiffs seek to have reinstated is, as the plaintiffs have correctly and successfully argued before this court and the court of appeals, illegal. It is indeed a nonsensical and illusory ...