expressed its intent to affect child support with the enactment of section 602(a)(38) and include such support in determining AFDC eligibility and benefits. See Gorrie, 809 F.2d at 521.
Having satisfied the first prong of the test, I next consider whether a substantial federal interest is harmed by allowing the state law to prevail. The DEFRA is aimed at substantially reducing the deficit of the federal budget. Reduction of the deficit was of particular importance to Congress in passing the Act. See, Gorrie, 809 F.2d at 521. Moreover, given the possible economic consequences and savings resulting from DEFRA, there would indeed be "major damage" to substantial federal interests if state law were held to limit the DEFRA amendment. Thus, plaintiffs' state law challenge fails.
Given the plain language of the statute, as well as its legislative history, plaintiffs' construction of the amendment is misplaced. The interpretation of DEFRA by the Secretary was correct in allowing Social Security benefits and child support to be included in the AFDC filing unit.
C. Termination of Medicaid Benefits
In addition to their claims regarding the deeming of child support and Social Security payments, plaintiffs challenge New Jersey's automatic termination of Medicaid benefits when a recipient is declared ineligible for AFDC as a result of the deeming of a sibling's income. Plaintiffs contend such deeming is specifically prohibited by the Medicaid regulations, and the DEFRA amendment, 602(a)(38), was not intended to affect the determination of Medicaid eligibility. There is merit in this claim; summary judgment will be granted in favor of the plaintiffs as to this issue.
The Medicaid program is a cooperative effort in which the national government and the participating states jointly "reimburse certain costs of medical treatment for needy persons." Harris v. McRae, 448 U.S. 297, 301, 65 L. Ed. 2d 784, 100 S. Ct. 2671 (1980). The program was established in 1965 to provide payments for medical services to certain needy individuals. 42 U.S.C. § 1396; Schweiker v. Gray Panthers, 453 U.S. 34, 37, 69 L. Ed. 2d 460, 101 S. Ct. 2633 (1981). Participation in the Medicaid program is not mandatory, but states choosing to participate must comply with requirements of the Act and regulations thereunder. 42 U.S.C. § 1396b. Schweiker, 453 U.S. at 37.
States participating in the Medicaid program must provide assistance to the "categorically needy", which group includes parents and children receiving support under the AFDC program. "Categorically needy" individuals are those persons receiving ADFC or those "who would be eligible for ADFC except for an eligibility requirement used in that program that is specifically prohibited under [Medicaid]." 42 U.S.C. § 1396a(a)(10)(A)(i)(I); 42 C.F.R. § 435.100 et seq.; Vance v. Hegstrom, 793 F.2d 1018, 1020 (9th Cir. 1986).
Prior to the passage of DEFRA, certain plaintiffs qualified as categorically needy and accordingly received Medicaid benefits automatically. Since DEFRA, however, the State of New Jersey has terminated or denied eligibility for Medicaid when AFDC benefits are terminated as a result of the DEFRA deeming requirements.
Defendants contend Congress intended that the filing unit provision apply to Medicaid eligibility determinations as well as AFDC eligibility. Defendants cite the legislative history of 602(a)(38) as support for their argument. However, the legislative history of the amendment is not so clear as to establish the applicability of the DEFRA statute to determining Medicaid eligibility. While some of the reports cited by the Secretary indicate Congress' expectation that the AFDC changes would result in Medicaid savings, there is no provision which illustrates the DEFRA amendment was intended to modify the Medicaid Act. As one court has noted in this context: "Congressional silence on an AFDC statute cannot modify an express provision of the Medicaid statute." Reid v. Blinzinger, 639 F. Supp. 130, 134 (S.D. Ind. 1986), aff'd, 816 F.2d 296 (7th Cir. 1987).
The Medicaid statute, 42 U.S.C. § 1396a(a)(17)(D),
and regulations implementing the statute specifically prohibit the deeming of sibling income as is currently required by DEFRA. The only income deeming permitted in the Medicaid program is from spouse to spouse or from parent to child under age 21. In addition, the regulations implementing section 17(D) state: "Except for a spouse of an individual or a parent for a child who is under age 21 or blind or disabled, the [state] agency must not consider income and resources of any relative available to an individual. . . ." 42 C.F.R. § 435.602(a)(1) (emphasis added).
Defendants attempt to circumvent this prohibition by distinguishing between income which is "deemed" and that which is "actually available" to a Medicaid claimant. Defendants argue the inclusion of an individual within the filing unit is not "deeming", and suggest the sibling income is available because that individual is a member of the filing unit. Defendants seek to buttress this claim by showing that the income of any sibling voluntarily included in the AFDC unit has been considered in assessing Medicaid eligibility, and therefore, involuntary inclusion of sibling income must be permitted as well.
I am unpersuaded by these arguments. As was recently noted by the Eighth Circuit considering the Secretary's analogy to voluntary inclusion: "The instant dispute has nothing to do with those who voluntarily include otherwise excludable persons in their filing unit. The issue here is whether the Secretary can deny Medicaid benefits to children based on the income of siblings who are involuntarily included in the filing unit." Olson v. Norman, 830 F.2d 811, 817 (8th Cir. 1987).
The Secretary's argument that the inclusion of a child's Social Security benefits or support payments within the filing unit is not deeming is "a distinction without a difference." Id. at 817 (quoting Sundberg v. Mansour, 627 F. Supp. 616, 621 (W.D. Mich. 1986), reversed, 831 F.2d 610 (6th Cir. 1987) (see comment on the Sixth Circuit decision, supra n. 15.) "Whether resources of one family member are actually available to another is an inherently individual inquiry. If the Secretary assumes that such income is available, without considering the situation of the particular family, he is 'deeming'." Id. 830 F.2d at 818. By assuming a sibling's income is available, the Secretary is deeming, regardless of whether the individual is included in the filing unit. "The [Medicaid] statute does not distinguish between members of the filing unit and those outside the unit." Id. at 817. The unambiguous language of § 1396a(a)(17)(D) specifically prohibits deeming a sibling's income for determining Medicaid benefits. Given these factors, the impropriety of the Secretary's interpretation is apparent. A state may not deem a sibling's income for purposes of Medicaid eligibility.
In Malloy v. Eichler, 628 F. Supp. 582 (D. Del. 1986), the court considered this issue and concluded, "at no time has the Court allowed the Secretary or any State agency to count income belonging to someone other than a spouse or parent as 'available' to an applicant." Id. at 595 (citing Lewis v. Martin, 397 U.S. 552, 25 L. Ed. 2d 561, 90 S. Ct. 1282 (1970)). Thus, defendants' argument that including all income of AFDC filing members is permitted under the Medicaid Act fails.
Defendants' last contention seeks judicial deference from this court to the administrative interpretation of the statute. While it is true an administrative interpretation is deserving of substantial deference, one which is inconsistent with Congressional purpose or arbitrary and capricious will be rejected and overturned. Herweg v. Ray, 455 U.S. 265, 275, 71 L. Ed. 2d 137, 102 S. Ct. 1059 (1982); Morton v. Ruiz, 415 U.S. 199, 237, 39 L. Ed. 2d 270, 94 S. Ct. 1055 (1974). As I previously noted, 42 U.S.C. § 1396a(a)(17)(D) specifically and unambiguously prohibits deeming of income, unless from a spouse or parent. By allowing New Jersey to consider a sibling's income as available for determining Medicaid, the Secretary's interpretation is in direct contradiction with the plain language of this statute. Accordingly, the Secretary's interpretation exceeds his statutory authority.
I note this holding is consistent with an overwhelming majority of those jurisdictions which have already considered this issue. See Childress v. Bowen, 833 F.2d 231 (10th Cir. 1987); Olson v. Norman, 830 F.2d 811 (8th Cir. 1987); Vance v. Hegstrom, 793 F.2d 1018 (9th Cir. 1986); Mitchell v. Lipscomb, 689 F. Supp. 1439 (S.D. W. Va. 1987); Ward v. Wallace, 652 F. Supp. 301 (M.D. Ala. 1987), modified, 658 F. Supp. 441 (1987); Reed v. Blinzinger, 639 F. Supp. 130 (S.D. Ind. 1986), aff'd, 816 F.2d 296 (7th Cir. 1987); Malloy v. Eichler, 628 F. Supp. 582 (D. Del. 1986); Gibson v. Puett, 630 F. Supp. 542 (M.D. Tenn. 1985).
Given the absence of any indication that § 602(a)(38) was intended to apply to Medicaid, in addition to the clear and specific language of the Medicaid statute, as well as the relevant case law and legislative history, I find that the State of New Jersey may not automatically terminate Medicaid benefits as a result of AFDC denial due to the deeming of child support or Social Security.
Based upon the foregoing, I deny summary judgment for the plaintiffs with respect to their challenges to the deeming of child support and Social Security for purposes of determining AFDC eligibility and grant amount, as set forth in causes of action one, two, three, four, five and seven of the Complaint. Defendants' cross-motion for summary judgment is granted as to these causes of action. Plaintiffs are granted summary judgment on the issue of the automatic termination of Medicaid benefits raised in their sixth cause of action. Defendants are directed to immediately review their files and to provide Medicaid coverage to all class members whose Medicaid coverage was terminated or denied as a result of the deeming of half-sibling income pursuant to 42 U.S.C. § 602(a)(38). The above relief is dispositive of all issues. Plaintiffs' request for costs and attorneys' fees is denied. Each side is to pay its own costs and attorneys' fees.
SO ORDERED, this 22nd day of December, 1987.