On appeal from the State Health Benefits Commission.
Pressler, R.s. Cohen and Kestin. The opinion of the court was delivered by Cohen, R.s., J.A.D.
[264 NJSuper Page 144] Mary-Ellen Heaton was an employee of the Harrington Park Board of Education, and was therefore insured under the New Jersey State Health Benefits Program. Her husband Jack was a covered dependent. The statutory Program provides major medical benefits administered on behalf of the State by Prudential Insurance Company. The statute includes lifetime major medical expense benefits of $1 million for each covered person, but limits benefits for "eligible expenses incurred because of mental illness or functional nervous disorders"*fn1 to an annual $10,000 and a lifetime $20,000. N.J.S.A. 52:14-17.29(A)(2). The handbook distributed to employees, which we understand to embody the terms of the Program as communicated to the employees, describes the $10,000/$20,000 limits as applying to "mental, psychoneurotic and personality disorders." We do not read this phrase as an attempt
to alter or explain the statutory language. The regulations adopted by the State Health Benefits Commission do not deal with the matter at all. N.J.A.C. 17:9-1.1 to -7.4.
Jack Heaton was admitted to the Carrier Foundation on July 3, 1987, suffering from advanced Alzheimer's disease. He was discharged on August 25, 1987, to the psychiatric hospital (now known as Ramapo Ridge Psychiatric Hospital) at the Christian Health Care Center (CHCC). On September 22, 1989, some twenty-five months later, he was transferred to the nursing home portion of CHCC.
Prudential and the State Health Benefits Commission determined that the expenses incurred for Mr. Heaton's care at the CHCC psychiatric hospital were subject to the $10,000/$20,000 benefits limitation, and also that the treatment there was custodial, medically unnecessary, and therefore not eligible for reimbursement. Denial of the Heaton claim was then referred as a contested case for hearing in the Office of Administrative Law. After a plenary hearing, the administrative law Judge determined that the treatment for Heaton's Alzheimer's disease was necessary and that it was not subject to the benefits limitation for mental disease. The Commission rejected that Conclusion and affirmed its original determination. Its thesis was that although Heaton's mental disorder may have been the result of a medical condition, the treatment he received was for a mental disorder. It also decided that Heaton's stay at CHCC's psychiatric hospital was custodial and therefore unnecessary. We disagree on both counts, and therefore reverse.
The Program was first established and described in the New Jersey Health Benefits Program Act in 1961. L. 1961, c. 49; N.J.S.A. 52:14-17.25 to -33. It originally enrolled only state employees, but 1964 amendments extended benefits to employees of counties, municipalities, school districts, and other public agencies on an optional basis, that is, if the public entity chose to participate in the Program. L. 1964, c. 125, § 3-14; N.J.S.A. 52:14-17.34 to -45.
The evidence before the administrative law Judge on the question whether Alzheimer's is a mental disease permitted only one Conclusion, that Alzheimer's is an organic mental disorder caused by a progressive degeneration of brain cells. It is a disturbance in behavior and thinking resulting from a known physical cause, as contrasted with schizophrenia and personality disorders, which are functional, i.e., they have no known physical cause. Alzheimer's is listed in the Diagnostic and Statistical Manual of Mental Disorders (DSM III) as a physical disorder.
Alzheimer's cannot be cured. Patient care consists of dealing with behavioral or psychological symptoms, usually with drugs. Some patients need only custodial care. Others, like Jack Heaton, develop "behavioral disturbances to the point where for his own safety and management he required a psychiatric facility because this is the only place where a situation like this could be handled safely." However, according to the Heatons' expert witness, this did not mean Alzheimer's is primarily a psychiatric condition, but rather that the physical changes in the brain gave rise to psychiatric symptoms.
Heaton's symptoms in 1987 included agitation and resulting behavior problems so severe as to make him impossible to manage in a nursing home, and to require that he receive treatment with a major tranquilizer in the setting of a psychiatric hospital. Out of necessity, custodial care is also afforded in the psychiatric hospital, but the primary focus is on treatment and security. Only after such a patient becomes manageable, usually as the result of the progress of the disease itself, can he be put in a nursing facility for predominantly custodial care. For those reasons, the care provided at the psychiatric hospital was necessary, since it was the setting in which the required medication and physical management of the patient was available.
The Program's expert witness agreed that Alzheimer's is an organic physical disease, but emphasized that patients are treated psychiatrically, just like patients who suffer from nonorganic,
functional mental illnesses. To him, the kind of treatment administered required classification of Alzheimer's as a mental disease.
The Commission took the position that the statutory limits for mental, psychoneurotic and personality disorders were intended to limit coverage where the treatment at issue addressed behavioral problems, regardless of the cause. Thus, even if the etiology of a mental disorder is ...