On appeal from the Department of Human Services.
Approved for Publication July 15, 1996.
Before Judges King, Kleiner and Humphreys. The opinion of the court was delivered by King, P.j.a.d..
The opinion of the court was delivered by: King
The opinion of the court was delivered by KING, P.J.A.D.
This case involves claims by fourteen counties to a substantial portion of funds received by the State from the federal government as compensation for State and county payments to hospitals and institutions involved in the care of the medically indigent. Although the counties present attractive equitable arguments, the State Legislature has consistently appropriated the money to the General Fund in annual appropriations legislation and has refused to share it with the counties. We conclude that we cannot, consistent with law, compel the State to share the federal funds with the counties.
On February 2, 1993 the Federal Health Care Financing Administration (HCFA) approved an amendment to New Jersey's State Medicaid Plan, which resulted in payment to the State of approximately $412 million in Federal Financial Participation (FFP) Funds. The FFP funds were provided to the State pursuant to 42 C.F.R. § 447.250 to -257, and were related to disproportionate share hospital (DSH) payments made by the State between July 1, 1988 and December 31, 1991. These DSH payments were made to psychiatric hospitals and State facilities for the developmentally disabled which served a disproportionate number of indigent patients. The payments came from both the State and counties. The State placed the $412 million in the General Fund "as anticipated revenue."
Also at issue are FFP funds received in conjunction with DSH expenses incurred after December 31, 1991. The State received over $77 million for expenses incurred in the fiscal year ending June 30, 1992 and $163.3 million for each of the next two fiscal years (ending June 30, 1993 and June 30, 1994 respectively). *fn2 The amount of FFP funds in dispute is apparently in excess of $816 million.
Over a two-year period, the fourteen appellant counties (the Counties) wrote separately to William Waldman, Commissioner of the New Jersey Department of Human Services, asserting that a portion of the FFP funds should be distributed to them. The Commissioner determined that the Counties were not entitled to any of the FFP funds.
The Counties then filed complaints in lieu of prerogative writs in the Law Division, challenging the Commissioner's decision: Camden, August 11, 1993; Monmouth, December 7, 1993; Atlantic, January 13, 1994; Hudson, January 14, 1994; Middlesex, March 3, 1994; Union, March 8, 1994; Ocean, May 13, 1994; Morris, May 25, 1994; Mercer, May 26, 1994; Sussex, July 22, 1994; Essex, October 17, 1994; Passaic, February 6, 1995; Warren, August 17, 1995. Somerset County made its initial filing in the Appellate Division.
On September 16, 1993 the State moved to transfer the Camden County action to the Appellate Division. The Law Division Judge denied the motion. Leave to appeal was granted by this court and we ordered the case transferred to the Appellate Division. Similarly, the Atlantic and Monmouth County cases were transferred to the Appellate Division on February 3, 1994 and January 28, 1994, respectively. The Camden, Atlantic, and Monmouth County cases were consolidated on March 28, 1994. The remaining Counties' cases were also transferred to the Appellate Division: Union, April 20, 1994; Middlesex, May 4, 1994; Morris, May 25, 1994 (simultaneously with filing its Law Division Complaint); Hudson, July 1, 1994; Ocean, July 15, 1994; Mercer, July 26, 1994; Sussex, October 17, 1994; Essex, January 20, 1995; Warren, August 18, 1995; Passaic (date not in record).
The State Statutory Scheme
Title 30, Chapter 4, which governs the management, control and operation of State institutions, provides a system of public assistance to individuals who are mentally ill or developmentally disabled when neither they nor their legally responsible relatives (LRRs) can afford the full cost of institutional care. The Commissioner of the Department of Human Services (Commissioner) has the general authority "to determine all matters relating to the unified and continuous development of the institutions and noninstitutional agencies within his jurisdiction." N.J.S.A. 30:1-12b. The Commissioner has the power to issue rules, regulations, orders and directions in order "to assure that programs that serve eligible low-income, handicapped, elderly, abused, and disabled persons are provided in an accessible, efficient, cost-effective and high-quality manner." N.J.S.A. 30:1-12a.
Two types of institutions are within the Commissioner's jurisdiction: "psychiatric facilities" and "developmental centers." Psychiatric facilities, also known as "State hospitals for the mentally ill," and "mental hospitals," serve individuals with mental illness as defined in N.J.S.A. 30:4-27.2(r), N.J.S.A. 30:4-27.2(u), and N.J.S.A. 30:1-7. Developmental centers are residential institutions for persons with developmental disabilities as defined in N.J.S.A. 30:6D-25b (previously referred to as "mentally retarded"). Primary responsibility for maintaining an individual in a State psychiatric facility or State developmental disability center rests with that person and with LRRs. N.J.S.A. 30:4-66; N.J.S.A. 30:4-165.3. LRRs consist of "the husband, wife, father or mother of a child under 18 years of age, and the children, severally and respectively, being of sufficient ability," including spouses living separately and parents of illegitimate children who are confined. N.J.S.A. 30:4-66. If the individual and his LRRs are unable to pay, "then the cost of his care and maintenance shall be borne by [the county of legal settlement] from the beginning of his confinement...." N.J.S.A. 30:4-68. When an indigent patient is not legally settled in any county, the State is liable for the entire cost of the patient's care and maintenance. N.J.S.A. 30:4-69. County of legal settlement is defined by reference to N.J.S.A. 30:4-49.1 through -49.6. The rates charged to the Counties for the reasonable cost of maintenance and clothing for each indigent patient, whether in State or county psychiatric facilities or a State developmental-disability facility, are fixed by the State House Commission. N.J.S.A. 30:4-78. Applicable State Law Before July 1, 1991.
Prior to July 1, 1991 N.J.S.A. 30:4-78 provided that the cost of psychiatric patients' maintenance, not covered by a patient or his LRRs, be borne equally by the State and the county of legal settlement. That statute provided:
The rate to be paid by the State to the several county institutions for the mentally ill on behalf of the maintenance of patients in county hospitals for the mentally ill shall be 1/2 of the actual per capita cost of maintenance of such patients in such county institution.
The rate to be paid by the counties to the State in [sic] behalf of the maintenance of county patients in State hospitals for the mentally ill shall be 1/2 of the actual per capita cost of maintenance of such patients in such hospital. *fn3
We note that the Counties' proportional obligation was set at the same 50%, whether the patient was being maintained in a county psychiatric facility, State psychiatric hospital, or other State facility. *fn4 If the committing Judge determined, through application of certain financial-ability formulas, that a mentally ill patient with a county settlement or LRRs was able to pay a sum equal to or in excess of the share chargeable to the county, the Judge ordered the patient or LRR to pay that amount. N.J.S.A. 30:4-60. *fn5 If the amount contributed on the patient's behalf exceeded the County's 50% obligation, "no order shall be entered against the county of legal settlement for any part of such maintenance." Ibid. The State paid the remaining costs, if any. Ibid.
Applicable State Law, July 1, 1991 through September 30, 1995.
Effective July 1, 1991 N.J.S.A. 30:4-78 was twice amended *fn6 to provide, in pertinent part:
[first five paragraphs omitted]
[P1] The State share of payments to the several county psychiatric facilities on behalf of the reasonable cost of maintenance of patients shall be at the rate of 130% during the period July 1 through December 31 of each year and at the rate of 50% during the period January 1 through June 30 of each year; provided that the total amount to be paid by the State in each year shall not exceed 90% of the total reasonable per capita cost for the period January 1 through December 31 of each year.
[P2] The rate to be paid by the counties to the State on behalf of the maintenance of county patients in State psychiatric facilities and State facilities and receiving [sic] other residential functional services for the developmentally disabled shall be 50% of the actual reasonable per capita cost of maintenance of such patients.
[P3] During the period of July 1 through December 31 of each year, the State shall pay to each county an amount equal to 40% of the total per capita costs for the reasonable cost of maintenance and clothing of county patients in State psychiatric facilities for the period January 1 through December 31 of that year.
[P4] During the period of July 1 through December 31 of each year, the State shall pay to each county an amount equal to 50% of the total per capita costs for the reasonable cost of maintenance and clothing of county patients residing in State facilities for the developmentally disabled and receiving other residential functional services for the developmentally disabled for the period January 1 through December 31 of that year.
[final paragraph omitted]
Prior to these 1990 and 1991 amendments, the type of facility the non-full-paying patient lived in did not affect a county's proportional share of costs under N.J.S.A. 30:4-78. After the amendments, however, a county was effectively responsible for 10% of costs at county psychiatric facilities *fn7 and State psychiatric facilities *fn8; and none of the costs at State facilities for the developmentally disabled. *fn9
The 1991 amendments also added the following,
... If the State shall directly receive funds, other than Medicare or Medicaid funds, in support of the patient, including but not limited to federal Social Security benefits, the State shall credit the funds to the county of settlement, but no credit shall exceed the county's share of the reasonable cost of maintenance and clothing costs for the patient.
N.J.S.A. 30:4-78 (emphasis added). The emphasized language parallels our decision in County of Essex v. Waldman, 244 N.J. Super. 647, 583 A.2d 384 (App. Div. 1990), certif. denied, 126 N.J. 332 (1991), which held that the State must turn over to the counties any federal Social Security benefits it receives as representative payee *fn10 for indigent patients in State institutions (up to the amount of the County's share of such patients' costs). *fn11
How the State Acquired the FFP Funds in Issue
The Medicaid program is a joint federal-state program of medical assistance established by Title XIX of the Social Security Act, 42 U.S.C. § 1396 to - § 1396u. States are not required to participate in the Medicaid program but once they elect to enter the program they must comply with the federal Medicaid statute and regulations. Harris v. McRae, 448 U.S. 297, 301, 100 S. Ct. 2671, 65 L. Ed. 2d 784, reh. den., 448 U.S. 917, 101 S. Ct. 39, 65 L. Ed. 2d 1180 (1980).
New Jersey, as a participating state, is required by federal law to submit a Medicaid State Plan (State Plan) describing the methods and standards by which providers of Medicaid services will be reimbursed. N.J.S.A. 30:4D-7(a); 42 U.S.C.A. § 1396a(A)(5); 42 C.F.R. §§ 400.203, 431.10(b), 447.252(b). If the State Plan is approved by the Secretary of the federal Department of Health and Human Services, the State is eligible for federal matching funds for amounts spent in accordance with the plan. 42 U.S.C.A. § 1396b. These matching funds are known as federal financial participation (FFP) funds. 42 C.F.R. § 400.203.
The State Plan must "take into account the situation of hospitals which serve a disproportionate number of low income patients with special needs." 42 U.S.C.A. § 1396(a)(13)(A). Such hospitals are known as disproportionate share hospitals (DSH), if they meet certain statutory requirements concerning the volume of indigent patients and expenditures. 42 U.S.C.A. § 1396r-4(a)(4). Payments made by the State and local governmental units to these hospitals may qualify as DSH payments, eligible for FFP matching funds. All federal matching funds are known as FFP, but the cases before us involve only FFP funds provided as reimbursement for DSH payments.
The New Jersey Department of Human Services (Department) disburses Medicaid payments to hospitals and other providers who render specific services to individual Medicaid recipients. In addition, the Department provides extra funding to those facilities which serve a large percentage of indigent patients. Pursuant to N.J.S.A. 30:4-78, as discussed above, that extra funding comes from both the State and Counties.
For several years, the State government pursued federal approval for a State Plan amendment which would allow the State to classify the cost-sharing payments made pursuant to N.J.S.A. 30:4-78 as DSH payments, enabling it to obtain FFP matching funds for those amounts. The approval was granted on February 2, 1993. These funds are the subject of the claims by the Counties.
The Counties argue that County of Essex v. Waldman, 244 N.J. Super. 647, 583 A.2d 384 (App. Div. 1990), certif. denied, 126 N.J. 332 (1991) (Essex I), controls and entitles them to the lion's share of the FFP monies as a credit against their ...