On certification to the Superior Court, Appellate Division, whose opinion is reported at 210 N.J. Super. 276 (1985).
For affirmance -- Chief Justice Wilentz and Justices Handler, Pollock, O'Hern and Garibaldi. For reversal -- Justices Handler and Stein. The opinion of the Court was delivered by Garibaldi, J. Stein, J., dissenting.
The New Jersey Pharmaceutical Assistance to the Aged and Disabled Act (Pharmaceutical Assistance Act or PAAD), N.J.S.A. 30:4D-20 to -35, grants benefits to financially-eligible disabled residents under the age of sixty-five who receive Social Security Title II Disability Insurance (SSDI) payments, but denies benefits to those disabled persons under the age of sixty-five who do not receive SSDI benefits. The issue in this appeal is whether this distinction -- between disabled persons who receive SSDI benefits and those who do not -- violates the equal protection clauses of the United States and New Jersey Constitutions. The Appellate Division upheld the constitutionality of the Act. 210 N.J. Super. 276 (1986). We granted certification, 104 N.J. 461 (1986), and now affirm.
The Pharmaceutical Assistance Act was originally enacted in 1975 to supplement the New Jersey Medical Assistance and Health Services Act, N.J.S.A. 30:4D-1 to -19, also known as Medicaid. Medicaid was intended to use federal appropriations to the states to provide medical assistance for the elderly, the disabled, and dependent children in need. Individuals eligible for assistance under Medicaid have their pharmaceutical costs paid through that program.
The Pharmaceutical Assistance Act was "designed to ease the burden of spiraling drug costs for senior citizens [and disabled residents] of modest incomes." N.J.S.A. 30:4D-25. As originally enacted in 1975, PAAD covered only those citizens over the age of sixty-five who were ineligible for Medicaid benefits because their incomes exceeded Medicaid requirements, but were nonetheless unable to afford prescription
drugs. Specifically, the program was open to any resident over the age of sixty-five whose annual income was less than $9,000. L. 1975, c. 194, § 2. Later in 1975, benefits were extended to any married resident whose income, combined with that of his or her spouse, was less than $12,000 annually. L. 1975, c. 312, § 1. Initially, the program reimbursed eighty percent of the cost of prescription medicine once the cost exceeded a sliding percentage of the recipient's income. L. 1975, c. 194, § 3. To simplify administration of the program, this sliding percentage was replaced by a requirement that beneficiaries pay one dollar of the cost of each prescription. L. 1977, c. 268, § 1. The program was not eligible for federal funding. Therefore, the State paid for it from the State's general revenues.
Participation in the Pharmaceutical Assistance Program increased rapidly. By 1978, there were approximately 270,000 senior citizens enrolled in the program. N.J.S.A. 30:4D-25. In 1978, the Legislature raised the co-payment requirement to two dollars, L. 1978, c. 171, § 2, explaining that "the overwhelming success of this program . . . has resulted in costs far greater than those anticipated." N.J.S.A. 30:4D-25. The Legislature said:
[A]lthough the Legislature is desirous of continuing the program as it currently exists, it recognizes that fiscal constraints and a heightened public awareness of the taxpayer's burden in this State makes it necessary to increase the share now paid by eligible senior citizens and reduce anticipated increases in the State contributions to the program in the future. . . .
A long-term legislative solution is now necessary which establishes this excellent and salutary program on a sound fiscal basis at a level within the means of the Treasury, thereby enabling it to continue without further substantial modification.
In 1981, the Pharmaceutical Assistance Act became a beneficiary of the Casino Revenue Fund. N.J. Const. 1947 Art. IV, § VII, para. 2D. This added revenue enabled the Legislature to raise the income ceiling for eligibility and to extend benefits for the first time to certain disabled citizens. N.J.S.A. 30:4D-21 was amended to provide:
Any single resident of this State who is either disabled pursuant to the Federal Social Security Act (42 U.S.C. section 416(i)) or 65 years of age and over whose annual income is less than $12,000.00, or any married resident whose annual income combined with that of his spouse is less than $15,000, shall be eligible for "Pharmaceutical Assistance to the Aged and Disabled" if he is not otherwise qualified for assistance under the act to which this act is a supplement.
[ L. 1981, c. 499, § 1 (emphasis added).]
A person is disabled under 42 U.S.C.A. § 416(i) if he or she (1) is unable to engage in "any substantial gainful activity" because of a physical or mental impairment that will result in death or can be expected to last at least twelve months; or (2) has "central visual acuity of 20/200 or less in the better eye with use of a correcting lense."
The Department of Human Services (Department) is charged with administering the Act. The Commissioner of Human Services (Commissioner) is authorized to, "by regulation[,] establish a system of payments or reimbursement and a system of determining eligibility." N.J.S.A. 30:4D-24. To implement N.J.S.A. 30:4D-21, as amended in 1981, the Commissioner promulgated N.J.A.C. 10:69A-6.2, which provided:
(a) Any single permanent resident of New Jersey who is 65 years of age and over or who is under 65 and over 18 years of age and is receiving Social Security Title II disability benefits must have an annual income of less than $12,000 to be eligible for PAAD.
(b) Any married permanent resident of New Jersey who is 65 years of age and over or who is under 65 and over 18 years of age and receiving Social Security Title II disability benefits must have a combined (applicant and spouse) annual income of less than $15,000 to be eligible for PAAD.
In 1982, several bills were introduced in the Legislature that would have expanded the Pharmaceutical Assistance Program to include persons receiving disability benefits from some program other than Social Security. See A-1268 (extending benefits to citizens receiving disability benefits from any federal source); A-1503 (extending benefits to those disabled under any federal or New Jersey law providing permanent disability benefits); S-1589 (extending benefits to persons receiving disability
payments from the Federal Railroad Retirement program, the Federal Civil Service retirement program, and those rated as "totally disabled" by the Veteran's Administration). Each of these bills would have resulted in a significant increase in program expenses*fn1 and was defeated.
In 1985 the Legislature amended N.J.S.A. 30:4D-21 to raise the income eligibility limits and to explicitly provide that a disabled person must actually be receiving SSDI benefits in order to qualify for the Pharmaceutical Assistance Program:
Any resident of this State who is either a recipient of Disability Insurance benefits under Title II of the federal Social Security Act (42 U.S.C. § 401 et seq.) or 65 years of age and over and whose annual income is less than $13,250.00 if single or, if married, whose annual income combined with that of his spouse is less than $16,250.00, shall be eligible for "Pharmaceutical Assistance to the Aged and Disabled" if he is not otherwise qualified for assistance under P.L. 1968, c. 413 (C. 30:4D-1 et seq.).
The committee statement accompanying the 1985 amendment explained: "The definition of an eligible disabled resident is clarified to mean a recipient of Social Security Disability Insurance benefits." (Emphasis added.) The Fiscal Note accompanying the amendment expressed the Legislature's continuing concern about the funding of the program:
Senate Bill No. 3000, the FY 1985-86 appropriations bill, provides $19.5 million in additional funding for an expansion of the PAAD/Lifeline programs, including added administrative expenses. The source of the increased funding is the Casino Revenue Fund. Information compiled by the Department of Human Services and the Office of Legislative Services indicates that the budgeted increases should be sufficient, or very close to sufficient, to support the
expansion of benefits resulting from higher income eligibility levels. The committee recommends that expenditures be monitored throughout the year to ascertain the need for supplemental funding at some later date.
The success of the Pharmaceutical Assistance Program in helping the needy obtain prescription drugs has created increasing fiscal strain on the program even though enrollment has actually decreased in recent years, from 289,755 in FY 1982 to 261,427 in FY 1985. 1985 PAAD Report at 11. The Department attributes this decrease to "terminations resulting primarily from increased or excess income, combined with natural attrition." 1984 PAAD Report at 1. Meanwhile, the costs of running the program have continued to escalate. Payments rose from $31,422,495 in FY 1979, to $55,739,906 in FY 1983, and $72,339,314 in FY 1985. 1985 PAAD Report, supra, at 11. The cost of the average claim, which was only $6.65 in FY 1980, was $14.29 in FY 1985. Id. at 12. Most of this increase is attributable to the rising cost of drugs. Id. at 13.
The Department's records indicate that the average disabled recipient has greater needs than the average aged recipient. In FY 1985 the average disabled beneficiary generated more claims (26.1) and collected more benefits ($417.38) than the average aged beneficiary (20.3 prescriptions amounting to $286.96). Id. at 7.
In January 1985, appellants, Ms. Lottie Adkins and Mrs. Anne Barone, filed individual eligibility applications for the Pharmaceutical Assistance Program with the Department of Human Services, Division of Medical Assistance and Health Services.
Ms. Adkins was single and fifty-nine years old at the time of her application. She worked as a licensed practical nurse for about thirty years at the Essex County Hospital at Overbrook, an employer who did not contribute to the social security program. Ms. Adkins contributed to the Essex ...