Ninth Circuit Rejects Olmstead, Medicaid Act Deinstitutionalization Claims

Yesterday, the Ninth Circuit issued its opinion in Sanchez v. Johnson. The plaintiffs (individuals with developmental disabilities and providers of services to individuals with developmental disabilities) claimed that California provides inadequate funding for community-based services for people with disabilities. They contended that the inadequate funding violates a provision of the Medicaid Act, 42 U.S.C. 1396a(a)(30)(A), which requires that:

A State plan for medical assistance--[must] provide such methods and procedures relating to the utilization of, and the payment for, care and services available under the plan . . . as may be necessary to . . . assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area[.]

They also contended that the inadequate funding violated Title II of the ADA and Section 504 of the Rehabilitation Act, pursuant to the Supreme Court's ruling in Olmstead v. L.C. that unnecessary institutionalization of individuals with disabilities can violate the disability discrimination laws.

The plaintiffs contended that 42 U.S.C. 1983 gave them a right of action to enforce the Medicaid Act, but the Ninth Circuit (in an opinion by Judge O'Scannlain) disagreed. The court ruled that, under the test set forth in Gonzaga University v. Doe, the relevant provision of the Medicaid Act did not create individual rights (a prerequisite to enforcement under Section 1983). The court reasoned that the provision did not focus on the individual beneficiaries of the statute but intsead had an aggregate, institutional focus: "A statutory provision that refers to the individual only in the context of describing the necessity of developing state-wide policies and procedures does not reflect a clear Congressional intent to create a private right of action."

On the Title II/Section 504 claim, the court upheld the district court's ruling, which granted summary judgment to the state, that the state had established the Olmstead defense of having "a comprehensive, effectively working plan for placing qualified persons with mental disabilities in less restrictive settings, and a waiting list that moved at a reasonable pace not controlled by the State's endeavors to keep its institutions fully populated." The Ninth Circuit's crucial analysis was this:

The district court concluded that California's commitment to the deinstitutionalization of those Developmental Center residents for whom community integration is desirable, achievable and unopposed, is genuine, comprehensive and reasonable. This conclusion was based on evidence from the record, which showed that "[o]verall, California's expenditures for individuals in community settings increased 196% [between 1991 and 2001], while caseload . . . increased fifty-five percent in the same period," that California has applied for increased places under the HCBS waiver program, and that, "[between 1996 and 2000], California reduced its institution population by twenty percent." DDS has also budgeted to develop 42 new Community Care Facilities and ten new Intermediate Care Facilities, and anticipates a reduction in institutionalization that would allow it to close at least one Developmental Center by 2007. We are satisfied, therefore, that the district court's conclusion that California's "plan is comprehensive, effective, and moving at a reasonable pace," is supported by the record.

This opinion is clearly a setback for advocates of deinstitutionalization in the Ninth Circuit, but it's more than that. The opinion is full of troubling language: It states that the Section 1983 remedy "should be applied sparingly" in enforcement of federal statutes. It states that the Supreme Court's ruling in Wilder v. Virginia Hospital Association, which held that a provision of the Medicaid Act could be enforced through Section 1983, was a "rare case" and all but endorses Justice Stevens's argument that Gonzaga effectively overruled Wilder. It also states that a state may invoke the Olmstead defense even if its deinstitutionalization plan is not "always and in all cases successful" -- language that will surely be used by states to rationalize failed deinstitutionalization plans. Moreover, by resolving the state's Olmstead defense on summary judgment despite dispute about how successful the state's deinstitutionalization plan had been, the court took some of the teeth out of Olmstead.