On appeal from New Jersey Division of Public Welfare.
Bischoff, Petrella and Brody. The opinion of the court was delivered by Brody, J.A.D.
Appellant's average weekly gross wages in September 1982 were $100.40. She and her daughter then comprised an "eligible unit" entitled to receive Aid to Families With Dependent Children (AFDC) so long as her monthly wages did not exceed $410. A unit must establish its eligibility every month based, among other things, on income received in that month (the budget month). Because appellant had five weekly paydays that September, her unit was rendered ineligible for an AFDC payment in November (the payment month).
An eligible unit is also eligible for Medicaid benefits in each month that an AFDC payment is made. If AFDC assistance is "terminated," the unit remains eligible for four additional months of Medicaid.*fn1 In November 1982 appellant's daughter was stricken with meningitis. During that month she incurred $3,722.56 medical expenses for the child's hospitalization and treatment. The Monmouth County Board of Social Services (the Board) denied her Medicaid assistance in paying these bills by ruling that the unit's AFDC eligibility was only "suspended" in November and not "terminated." An administrative law judge recommended reversal but the Board determination was affirmed by the Director of the Division of Public Welfare (the Director). We reverse.
A state that participates in an AFDC program must comply with federal statutes and federal regulations. A state regulation that conflicts with a federal standard is invalid under the supremacy clause. Carleson v. Remillard, 406 U.S. 598, 92 S. Ct. 1932, 32 L. Ed. 2d 352 (1972). Our legislature authorized the Commissioner of the New Jersey Department of Human Services (the Commissioner) to issue whatever regulations may be necessary "to secure for the State of New Jersey the maximum Federal financial participation that is available with
respect to a program of aid to families with dependent children. . . ." N.J.S.A. 44:10-3.
We must therefore begin with the pertinent federal statutes and regulations. The present problem originated when Congress adopted the Omnibus Budget Reconciliation Act of 1981, Pub.L. No. 97-35, 95 Stat. 357, in August 1981. One of the purposes of that Act was to compel states to keep a closer tab on the eligibility of AFDC recipients. To accomplish this, the Act amended 42 U.S.C. § 602 to require for the first time that a monthly report be made updating each unit's status with respect to eligibility criteria. In response to the data in the report, the state must "take prompt action to adjust the amount of assistance payable, as may be appropriate. . . ." 42 U.S.C. § 602(a)(14)(B).
Because this new procedure also calls for the eligible unit's income to be measured on a monthly cash basis, the income in a five-payday month will be more than that of the previous month. This increase in monthly income can render the unit ineligible for a month even though there has been no increase in weekly pay. These periodic reductions in assistance tend to be offset over time by the higher level of assistance rendered in four-payday months.
To avoid the administrative burden of terminating a unit every five-payday month and then processing the same unit as a new applicant a month later, the federal Department of Health & Human Services (the federal Department) revised one of its regulations effective October 1, 1981 to give states the option to "suspend" rather than "terminate" assistance in those instances where it is reasonably certain that the income rendering the unit ineligible will not recur the following month. That regulation, 45 C.F.R. § 233.34(d), reads as follows:
(d) A State may suspend, rather than terminate, assistance when:
(1) the agency has knowledge of, or reason to believe that ineligibility would be only for one payment month; and
(2) ineligibility for that one payment month was caused by income or other circumstances in the ...