On appeal from the Department of Human Services, Division of Medical Assistance and Health Services.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Fuentes, Graves, and J. N. Harris.
The opinion of the court was delivered by JONATHAN N. HARRIS, J.A.D.
We view these back-to-back appeals upon the esoteric regulatory landscape of state-administered medical assistance programs funded by Title XIX (Grants to States for Medical Assistance Programs) and Title XXI (State Children's Health Insurance Program) of the Social Security Act. 42 U.S.C.A. § 1396; 42 U.S.C.A. § 1397aa. Appellants S.J., R.H., and C.B. were precluded from receiving healthcare benefits by the Division of Medical Assistance and Health Services's (the Division) closure (to new applicants) of the State Children's Health Insurance Program (SCHIP), which operated under the NJ FamilyCare rubric.*fn1 Although once eligible for NJ FamilyCare benefits as part of a program funded and administered by AFDC-related Medicaid, appellants lost their eligibility due to their increased income. They appeal the Division's individualized determinations that after losing their AFDC-related Medicaid eligibility, they became new applicants for purposes of the SCHIP, which barred new enrollees after February 28, 2010. They contend that the Division was obliged to transfer their entitlement and continue their healthcare benefits under the auspices of the SCHIP within the NJ FamilyCare program. We consolidate the appeals for purposes of this opinion and affirm.
We derive the factual background of these appeals from three separate administrative proceedings. There do not appear to be many, if any, genuine factual disputes.
In October 2008, S.J. (and her minor grandson) began receiving healthcare benefits through NJ FamilyCare. S.J.'s particular benefits, referred to as AFDC-related Medicaid, were provided under the program's Title XIX segment. N.J.A.C. 10:69-1.1 to -12.10. Pursuant to the Division's rules, S.J. was subject to regular redeterminations to assess her continuing eligibility for AFDC-related Medicaid. N.J.A.C. 10:69-5.2 ("Redetermination is a review of factors affecting AFDC-related Medicaid eligibility, including, but not limited to, continued parental deprivation, or changes in income.").
On November 22, 2010, S.J. was approved to begin receiving federal Social Security disability benefits in the amount of $1011 per month on December 22, 2010. As a result of this unearned income, the Hudson County Division of Social Services terminated S.J. (but not her grandson) from the NJ FamilyCare program, effective January 1, 2011. The termination notice explained that "[a]s part of State Regulations effective [March 1, 2010,] [a]dults with unearned income . . . are no longer eligible to receive [NJ] Family[C]are."
The putative authority for this termination was based upon the March 2, 2010 directive, contained in Medicaid Communication No. 10-01 issued by John Guhl, Director of the Department of Human Services (DHS). The directive stated that because of New Jersey's "unprecedented financial crisis," the Commissioner of the DHS intended to "modify enrollment levels in the NJ FamilyCare program as deemed necessary to ensure that monies expended for that program do not exceed the amount appropriated." To reduce enrollment, the directive stated that "[n]ew applications received on or after March 1, 2010[,] for NJ FamilyCare [would] no longer be processed for enrollment for higher income parents." On July 6, 2010, the directive was adopted by the Commissioner of the DHS, and incorporated into the DHS's regulatory framework. 42 N.J.R. 1404(a)(Jul. 6, 2010).*fn2
S.J.'s newly-increased income triggered her ineligibility to receive AFDC-related Medicaid benefits, but did not arithmetically disqualify her from the higher-income-qualifying SCHIP-related healthcare benefits. However, because this occurred after February 29, 2010, S.J. was deemed a new applicant for benefits excluded from enrollment under N.J.A.C. 10:78-3.4(b), which states:
For all enrollment applications received after February 28, 2010, all programs under this chapter are closed to any enrollments of, or benefits for, parents and caretakers whose benefits are not funded or payable under Title XIX of the Social Security Act, except as described in (b)1 below. Therefore, such applications for such persons will not be processed for enrollment. This exclusion from enrollment and benefits additionally applies to parents or caretakers who are applying to enroll after being terminated from enrollment in the NJ FamilyCare Program, including, but not limited to, individuals who have been terminated due to non-payment of premiums or other amounts due.
S.J. requested a "fair hearing" to (1) contest her expulsion from NJ FamilyCare, (2) challenge her new applicant classification, and (3) reverse the determination not to process her application for SCHIP-related healthcare benefits.
On May 3, 2011, an Administrative Law Judge (ALJ) reversed the termination of benefits and restored S.J. to the NJ FamilyCare program. The ALJ found that the language of the amended DHS regulations unambiguously closed applications only to new applicants, rather than to existing beneficiaries of NJ FamilyCare.
On June 6, 2011, Valerie J. Harr, Director of the Division, reversed the ALJ's decision. Director Harr explained, "although the NJ FamilyCare Program is often characterized as an 'umbrella' which includes AFDC-related Medicaid, there are actually two distinct provisions of the Social Security Act that address eligibility for the NJ FamilyCare Program." Those two segments have different eligibility requirements. Under the AFDC-related Medicaid segment, the income requirements set forth in N.J.A.C. 10:69-10.3(b) must be satisfied. Under the SCHIP segment, ...