On certification to the Superior Court, Appellate Division, whose opinion is reported at 178 N.J. Super. 104 (1981).
For affirmance and modification -- Chief Justice Wilentz and Justices Clifford, Schreiber, Handler, Pollock and O'Hern. Dissenting -- Justice Pashman. The opinion of the Court was delivered by Pollock, J. Pashman, J. dissenting.
The issue in this case is whether administrative regulations, valid when promulgated, have been rendered invalid by changing conditions. More specifically, the question concerns the effect of eighteen years of inflation on regulations of the Department of Human Services that determine income eligibility requirements for receipt of Medical Assistance for the Aged. We remand to the Commissioner to consider the matter as a petition to amend the regulation setting the income eligibility requirements.
Plaintiffs are six individuals who have been receiving home health benefits under New Jersey's Medical Assistance for the Aged program. N.J.S.A. 44:7-76 to -84 (Supp.1981) (MAA). Before July 1980, each plaintiff was a New Jersey resident, age 65 or over, not eligible for Medicaid and with insufficient income and resources to pay for health services covered by the MAA program. Each, therefore, was eligible to participate in MAA.
Plaintiffs are joined by common bonds of old age, failing health and indigency. For example, plaintiff Frank Coppola is 79 years old and lives with his wife of about the same age. He has cardiac and prostate ailments requiring care 24 hours per
day. His home health care consists of visits of 24 hours per week by a home health aide, and semi-weekly visits by a registered nurse. Plaintiff Laura Matthews lives with her daughter and son-in-law. She is nearly comatose, confined to bed and requires a urinary catheter. She receives visits of 15 hours per week from a home health aide and semi-monthly visits from a registered nurse. Plaintiff Lena Ciccone, age 84, lives with her daughter. She suffers from senility, diabetes and severe arthritis. She receives 12 hours per week of assistance from a home health aide, drug prescriptions and visits by a community nurse. Plaintiff Mary Boyd, age 95, suffers from chronic brain syndrome, osteoarthritis and incontinence. She receives 10 hours per week of assistance from a home health aide and semi-monthly visits from a registered nurse. Plaintiffs Bertha and William McNinney both suffer from various ailments, including severe diabetes, hypertension, and arteriosclerotic heart disease. Their benefits consist of 20 hours per week of care by home health aides. Plaintiff William Texter, age 70, suffers from organic brain syndrome. He receives visits of 15 hours per week from home health aides and semi-monthly visits from registered nurses.
On July 1, 1980 each plaintiff received a 14.37% increase in Social Security benefits. This increase caused each plaintiff's monthly income to exceed MAA's income eligibility standard contained in N.J.A.C. 10:83-6.5. Although the increase was intended to help beneficiaries to keep pace with inflation, it generated the opposite effect on plaintiffs. By forcing discontinuance of MAA benefits, plaintiffs were made individually responsible for their medical costs. Those costs will consume most of the income of some plaintiffs; for others, the costs will exceed their income.*fn1
The Department became aware of the increase during its regular eligibility reevaluations, which revealed that each plaintiff's income now exceeded eligibility standards. N.J.A.C. 10:83-9.1, -9.2. Accordingly, the Department notified each plaintiff that MAA benefits would terminate.
Plaintiffs exercised their right to a hearing, at which the only issue was whether their increased income made them ineligible for MAA. At the hearing, plaintiffs challenged the validity of the income eligibility standard in N.J.A.C. 10:83-6.5. They alleged that, since 1963 when the regulation was promulgated, the effect of inflation was to render the income limit so low as to be arbitrary and capricious. In effect, plaintiffs sought to raise the income standard to reflect financial need under current economic conditions.
In upholding the termination of each plaintiff's MAA benefits, the Administrative Law Judge (ALJ) did not discuss the effect of inflation on the income eligibility standard. Noting that the standards were determined at the discretion of the Commissioner, the ALJ suggested that any complaints concerning income requirements should be directed to the Commissioner. The Department adopted the ALJ's decisions as its final rulings.
Plaintiffs appealed to the Appellate Division, which reversed and remanded the matters to the ALJ to consider the merits of plaintiffs' challenge to the continuing validity of the standard. That court stated "slavish adherence" to a 17-year-old income eligibility standard "may not be in overall furtherance of [legislative] policy." 178 N.J. Super. 104, 108 (1981).
We agree with the Appellate Division that the merits of the plaintiffs' claims should be considered in an administrative proceeding. Rather than remanding the individual cases to an ALJ for adjudication, however, we believe the matter should be remanded to the Commissioner to consider amending the regulation setting the income eligibility requirements.
The second half of this century has witnessed increasing attention to health care for the needy, particularly the aged. The problem is complex and has produced overlapping and sometimes conflicting solutions from state and federal officials.
Before enacting Medicare and Medicaid, the federal government partially funded medical care to the needy aged under the Kerr-Mills program. 42 U.S.C.A. § 301 et seq. (repealed 1974). To participate in the Kerr-Mills program, New Jersey established MAA in 1962. L. 1962, c. 222. The original Act provided financial assistance to any New Jersey resident over age 65 who was not a recipient of old age assistance and whose income and resources were insufficient to meet the costs of health services. Id. at § 1. The Commissioner was given the authority to issue regulations implementing the Act, including authority to determine the need for medical assistance based on the "income and resources of the aged individual making due allowance for a minimum standard of living compatible with decency and health." Id. at § 6(c). In 1963, the Commissioner exercised that authority and issued the income eligibility standard contained in N.J.A.C. 10:83-6.5.
In 1965, Congress replaced this part of the Kerr-Mills program with Medicare, 42 U.S.C.A. § 1395 et seq. (1974 & Supp.1981), and Medicaid, 42 U.S.C.A. § 1396 et seq. (1974 & Supp.1981). To qualify for matching federal Medicaid funds, states were required to provide medical assistance for the categorically needy: those receiving old age assistance, ...