Michael ROSEN; Barbara Huskey; Emanuel Martin by his next friend, Cheryl Martin; Wanda Campbell; Connie Hoilman; Mark Hughes; Jacob B. by his next friend, Martin B.; Jackie Baggett; Brenda Clabo; Pradie Tibbs, Original Plaintiffs, and Gayle Cummings; Bach Thuy Nguyen; Di Nguyen; Sherry Justice; Sean Addison by his next friend, Lisa Addison; Lorri Griffin; Melanie Jackson; and Wilson Dale Jackson on their own behalf and on behalf of all others similarly situated; Mid-South Arc, a nonprofit Tennessee corporation; and the Tennessee Disability Coalition, a nonprofit Tennessee corporation, Additional Plaintiffs, v. TENNESSEE COMMISSIONER OF FINANCE AND ADMINISTRATION, Defendant, 280 F. Supp. 2d 743

MEMORANDUM HAYNES, District Judge. TABLE OF CONTENTS I. PROCEDURAL HISTORY.751 II. SUPPLEMENTAL CLAIMS.755 III. PLAINTIFFS’ FIFTH MOTION FOR PRELIMINARY INJUNCTION.755 IV. ISSUES TO BE DECIDED.756 Y.

SUMMARY OF RULING.757 VI. FINDINGS OF FACT.758 A. Origin of the TennCare Program.758 B. The New TennCare Waiver.759 C. Policies and Procedures for the New TennCare Program.761 1. The July 1, 2002 to December 31, 2002 Reverification Rules and Policies.762 2. TennCare’s Policies and Rules for Reverification and Enrollment after January 1, 2003.765 D. Defendant’s Administration of the New TennCare Program.767 1. TDHS’s Management Capacity as Administrator.768 2. Notice and Appeal Practices from July 1, 2002 to December, 2002.771 3. Pacific Health’s Monitoring of TDHS’s Administration.776 4. Appeals Process.778 5.

Accommodations for Enrollees with Severe and Persistent Mental Illness (“SPMI”) and Seriously Emotionally Disturbed Children (“SEDC”).780 6. Accommodations for Enrollees with Limited English Proficiency (“LEP”).789 7. The Effects of Multiple Eligibility Reverification.790 a. Waiver Eligible Redetermination Process.791 8. The Medical Care Advisory Committee (“MCAC”).792 E. Individual Plaintiffs .792 F. Other Individuals and Class Members.798 G. Organization Plaintiffs.805 H. TennCare Advocacy Groups.805 VII. CONCLUSIONS OF LAW. A. The Purposes of the Medicaid Act. B. Plaintiffs’ Standing. 1.

Individual Plaintiffs. 2. Organizational Plaintiffs. C. Plaintiffs’ Implied Right of Action to Enforce Medicaid Regulations D. Plaintiffs’ MCAC Claims. E. Plaintiffs’ Procedural Due Process Claims. 1. Plaintiffs’ Claims of Notice Violations. a. Adequacy of Notices to SPMI and SED Enrollees . b. Lack of Notice of Good Cause. c. Inadequate Notices of Appeals at the Termination Stage.. d. Inadequate Notice of Reasons of Denial. F. Plaintiffs’ Rights to Accommodations . G. Lack of LEP Accommodations. H. Arbitrary Policies and Administration. 1. The 45 Day Rule . 2.

TennCare’s Failure to Consider All Eligibility Statements. 3. A Current CRG/TPG Assessment for SPMI and SED Enrollees 4. SPMI and SED Enrollee’s Personal Signature Requirement .. I. Limiting Scope of Appeals and Coverage. oooooooooooooooooooooooooooooooooooooocooo l^l^^CCWWMWWMWWWWWtOECMMMHHM VIII.

RELIEF AWARDED . .842 INTRODUCTION: Plaintiffs, Michael Rosen, Barbara Hus-key, Emanuel Martin, by his next Mend, Cheryl Martin; Wanda Campbell, Connie Hoilman, Mark Hughes, Jacob B., by his next Mend, Martin B.; Jackie Baggett, Brenda Clabo, and Pradie Tibbs, on behalf of all others similarly situated; filed this action under 42 U.S.C. § 1983 against the Defendant, the Tennessee Commissioner of Finance Administration.

Plaintiffs assert claims that the Commissioner’s administration of Tennessee’s TennCare plan, a managed health care program established under Title XIX of the Social Security Act, 42 U.S.C. 1396 et seq., violates Plaintiffs’ procedural rights under the Due Process Clause of the Fourteenth Amendment and applicable federal regulations. This action has been an extensive and complex proceeding. I.

PROCEDURAL HISTORY In earlier proceedings, the Court granted the original Plaintiffs’ second motion for a preliminary injunction to reinstate their coverage under TennCare, citing the lack of any response by the Defendant to the merits of the motion. (Docket Entry No. 27). Plaintiffs’ first motion for preliminary injunction (Docket Entry No. 2) was denied as moot. (Docket Entry No. 27). The Court ordered reinstatement of Tenn-Care coverage to all class members who were denied coverage without the benefit of due process. Id.

In response, the Defendant temporarily suspended termination of insured and uninsured enrollees. The Defendant then filed a motion for relief (Docket Entry No. 29), citing the parties’ ongoing settlement discussions that delayed Defendant’s response to Plaintiffs’ preliminary injunction motions. (Docket Entry No. 29). On May 5, 2000, the Court granted that motion (Docket Entry No. 106) that had actually become moot. In the interim, on September 13, 1999, the Court granted a joint motion to modify the January 20, 1999 Order. (Docket Entry No. 53).

Under the September 13, 1999 Order, the Defendant used its TennCare eligibility base of insured and uninsureds to notify and allow Rosen class members to re-enroll in TennCare without an eligibility review or payment of past premiums. Id. at 2. In a word, this Order allowed the State to substitute the prior notice procedure for immediate reinstatement of those persons affected by the Court’s earlier Order. Id. at 3-4. Under this Order, 14,994 class members re-enrolled. Id. Class members who did not respond, would receive a second notice and notices of re-enrollment would be posted at public places. Id. at 5.

Re-enrollment was reopened for sixty (60) days. Id. at 6. Further, by April, 2000, the Defendant agreed that enrollees who had lost Medicaid coverage and were not enrolled as uninsured or uninsurable, would be given notice of their rights to reapply as an uninsured or uninsurable or to have an administrative appeal of their earlier losses of coverage.

On April 28, 2000, Plaintiffs renewed their motion for preliminary injunction (Docket Entry No. 87) citing continuing violations of the Court’s September 13, 1999 Order because none of the notices required by that Order had been mailed and the Defendant failed to provide due process requirements in the TennCare administrative appeal process. (Docket Entry No. 88). A state audit had documented these appellate deficiencies. Plaintiffs also cited other instances of terminations of coverage without notice or receipt of notice after termination.

Reverification notices were sent during one quarter in 2000 for 100,000 enrollees on their continued eligibility for TennCare coverage. (Docket Entry No. 144, Transcript of Proceedings, October 3, 2000, at 12-17). • On May 5, 2000, Plaintiffs filed an application for a Temporary Restraining Order (Docket Entry No. 92), citing the Defendant’s continuing violations of the Court’s injunction and Plaintiffs’ procedural due process rights.

The Court granted the Plaintiffs’ application for a temporary restraining order (Docket Entry No. 96), requiring compliance with 42 C.F.R. § 431, Subpart E before any termination or disruption of a class member’s TennCare coverage. On September 7, 2000, Plaintiffs filed a motion to hold the Defendant in contempt because the notices required by the September 19, 1999 Order still had not been mailed. (Docket Entry No. 112). A hearing was held on October 2 and 3, 2000, on whether to issue the preliminary injunction and to hold the Defendant in contempt.

Pending a decision, the prior Restraining Order was subsequently modified and extended by agreement of the parties. (Docket Entry No. 166). Before a decision, the parties engaged in negotiations and at the parties’ request, the Court reserved consideration of the Plaintiffs’ contempt motion. The parties then agreed to settle their remaining disputes and submitted an Agreed Order on March 7, 2001 that was entered on March 8th. (Docket Entry No. 171).

In the March 8th Order, the parties, in sum, agreed to allow uninsured class members the right to re-enroll in the TennCare program with revised procedures to address Plaintiffs’ due process claims. For a period of two years after the entry of the Order, the Defendant was required to file quarterly reports to document their compliance with the terms of the Order and the parties’ Settlement Agreement. Id. at 11. The particular provisions of the Agreed Order at issue are discussed infra.

On July 27, 2001, Plaintiffs’ filed a motion to enforce the March 8th Agreed Order (Docket Entry No. 184), asserting: (1) that the Defendant was imposing upon class members the financial requirement of payment of all past premiums to be reinstated with TennCare coverage and (2) that the Defendant was denying due process to class members with Serious and Persistent Mental Illness (“SPMI”) and Severely Emotional Disturbed Children (“SEDC”). The latter class members are applicants whom the Defendant referred to local community health centers to evaluate their eligibility.

Class members were told by these local agencies that they lacked any process to perform their roles as facilitators of these persons’ eligibility for TennCare coverage. These class members allegedly also did not receive adequate notice of TennCare coverage for mentally ill persons or were denied coverage with an inadequate statement of reasons for the denial and/or without citation to relevant law for the denial of coverage. The latter were cited as due process violations of federal regulations governing the Tenn-Care program.

In the earlier Agreed Order, the Defendant promised to abide by these regulatory due process requirements. After an evidentiary hearing on September 13, 2001, the Court granted the Plaintiffs’ motion to enforce the Agreed Order. (Docket Entry Nos. 200 and 201). As a matter of law, the Court concluded that under Sixth Circuit precedents, the Agreed Order and Settlement Agreement must be construed to preserve the basic relief for which the Plaintiffs bargained.

As pertinent here, the Court found that the Agreed Order was designed to provide a remedy for applicants who did not receive due process in their terminations from TennCare. Further, the Court concluded that enforcement of the past premium rule completely foreclosed any meaningful remedy to these class members. This conclusion did not bar the Defendant’s collection of past due premiums under its deferred payment policy for current TennCare enrollees.

Further, the Court concluded that the Defendant’s existing process for TennCare applicants with serious mental illnesses did not provide adequate notice of the application procedures to inform these class members of their coverage eligibility. The Defendant effectively denied these class members’ applications and failed to comply with due process requirements set forth in the Agreed Order by providing inadequate statements of reasons for the denials and failing to cite the applicable law for the denials.

At a chambers conference on September 27, 2001, the State informed the Court and counsel for the plaintiffs that the next day the Defendant would issue changes in the TennCare program that would take effect October 1, 2001. The Defendant had requested from the federal Center for Medicare and Medicaid Services (“CMS”) an amendment to the federal waiver controlling the TennCare program. The amended new TennCare plan would permit the state to close TennCare to adult uninsura-bles.

According to the state, projected spending through the end of fiscal year 2001 (June 2002) exceeded both state appropriations and the federal spending cap imposed by the federal waiver. In addition, the number of individuals enrolled in TennCare was approaching the enrollment cap set by the federal waiver. Initially, the TennCare plan had an enrollment cap of 1,300,000 enrollees that was later extended to 1,500,000. (Docket Entry No. 230, Defendant’s Memorandum, Attachment Nos. 2 and 3).

Under the original plan, as the number of enrollees reached the enrollment cap, the plan would limit the further enrollment of uninsureds. Id. The Plaintiffs sought and obtained a temporary restraining order (Docket Entry No. 217) barring implementation of the rule closing TennCare to adult unin-surables, based upon the pertinent provisions of the Agreed Order reciting the State’s agreement to reopen enrollment to uninsured adults during finite enrollment periods under stated conditions. (Docket Entry No. 171, Agreed Order at 3).

In addition, Plaintiffs’ asserted a breach of other provisions in the Settlement Agreement that was attached to the parties’ joint motion to approve the settlement. The Joint Motion to approve the Settlement Agreement, signed by both parties on March 8, 2001, also stated that the policy of reopening enrollment to uninsured adults “is consistent with Tenn-Care’s original design and the state’s longstanding goals for the program.” (Docket Entry No. 170, Joint Motion at 3) (emphasis added). The Plaintiffs also cited the Settlement Agreement that contains a

section requiring prior consultation with the Plaintiffs on future policies and procedural changes. Plaintiffs’ filed their fourth motion for a preliminary injunction this time to bar the Defendant’s implementation of his proposed October, 1, 2001 amendment to the TennCare plan to exclude adult uninsura-bles from its medical coverage. (Docket Entry No. 204).

Plaintiffs contended, in essence: (1) that the Defendant’s October 1st amendment to the TennCare plan was not reviewed by a Medical Care Advisory Committee (“MCAC”), as required by federal Medicaid regulations; (2) that the Defendant’s amendment to TennCare also breached the parties’ Settlement Agreement and Agreed Order in this action to maintain TennCare’s current program design; (3) that the Defendant’s amendment deprived the Plaintiffs of the benefits bargained for and contemplated in the parties’ Settlement Agreement; and (4) that the Defendant failed to give the requisite prior notice of this plan amendment, as required by the parties’ Settlement Agreement.

In response, the Defendant argued, in sum: (1) that Plaintiffs lacked standing to challenge its new amendment to the Tenn-Care program; (2) that the Agreed Order provided only procedural protections and did not bar unilateral substantive changes to TennCare’s plan; (3) that the notice requirements in the Agreed Order and Settlement Agreement applied only to procedural changes; (4) that the TennCare plan for uninsurables is not subject to federal regulations requiring review by a Medical Care Advisory Committee; (5) that if applicable, Plaintiffs could not enforce this regulation; (6) that the Tenn-Care program had serious financial difficulties and the State could not be limited in its policy decisions absent a clear agreement to do so; (7) that acute care remained available for uninsurables through other public and private health programs; and (8) that the Eleventh Amendment barred the relief sought.

The Court earlier granted Plaintiffs’ application for temporary restraining order on this plan amendment (Docket Entry No. 217) and after a hearing on the motion for preliminary injunction, the Court entered a provisional preliminary injunction to extend the temporary restraining order until a decision on the preliminary injunction issues. (Docket Entry No. 237). For that injunction, the Court adopted its findings in the Temporary Restraining Order that the Defendant violated the notice requirements of the parties’ Settlement Agreement. Id.

The Defendant requested expedited consideration of the preliminary injunction issues. The Court granted Plaintiffs’ fourth motion for preliminary injunction, concluding first that Plaintiffs possessed standing to challenge the Defendant’s October 1st policy, as class representatives and as parties to the Settlement Agreement and Agreed Order. (Docket Entry Nos. 258 and 259). Second, the Court concluded that Medicaid statutes and regulations can be enforced by enrollees and applicants for enrollment in a Medicaid Waiver Plan. Id.

Third, the Defendant did not honor Medicaid’s regulations’ requirement to consult a Medical Care Advisory Committee in adopting its October 1st policy, despite a prior ruling of this Court that such consultation was a “clear” and “mandatory” requirement. Id. Fourth, the Agreed Order and Settlement Agreement, when construed together, required the Defendant to provide Plaintiffs thirty (30) days prior notice of any change in TennCare’s “program design” and “policies.” Id. The Defendant did not provide such notice for its October 1st amendment.

Fifth, under the Supremacy Clause of the federal constitution, the Court’s prior Orders that awarded relief for violations of Plaintiffs’ procedural rights and substantive entitlements to TennCare coverage and those Orders cannot be superceded by the October 1st rule changes. Id. Sixth, the Eleventh Amendment did not bar in-junctive relief against a state official alleged to be violating a federal law. Id. Class members who are uninsurable were found to be irreparably injured by this October 1st policy that would result in loss of medical care and medications necessary for their serious medical conditions. Id.

In addition to a preliminary injunction, the Court appointed a Special Master. Id. On October 29, 2001, the Defendant appealed the Court’s preliminary injunction issued on October 25, 2001, and its September 14, 2001 Order. (Docket Entry No. 260). On appeal, the Sixth Circuit affirmed this Court’s ruling on the September Order, but vacated the injunction on the October 1st amendment. Rosen v. Tenn. Commissioner of Finance & Administration, 288 F.3d 918 (6th Cir.2002).

The Sixth Circuit did not reach the merits of this Court’s ruling on the October 1st amendment, finding that the original plaintiffs lacked standing as current enrollees to challenge the prospective closure of enrollment to new uninsurable applicants. Id.

In its opinion the Sixth Circuit stated that: A review of the plaintiffs’ amended complaint challenging the October 1 rule and their motion for a temporary restraining order to block implementation of the rule reveals that both focus solely on the plaintiff class members who are not presently members of TennCare; nowhere in these filings do the named plaintiffs claim that the rule will affect them. As explained above, it is the plaintiff’s burden to demonstrate the bases [sic] for standing.

Without the benefit of specific allegations as to how there is an imminent threat of injury to the named plaintiffs — i.e., an immediate threat of one or more of them being removed from the TennCare rolls such that the October 1 rule would affect them — it is impossible for this court to hold that the threat posed to the named plaintiffs by the operation of the October 1 rule is anything other than “conjectural” and “hypothetical.” 288 F.3d at 929-30. II.

SUPPLEMENTAL CLAIMS On remand, Plaintiffs filed a motion for leave to file a supplemental complaint (Docket Entry No. 337) contemporaneously with another motion for a preliminary injunction. The Court granted the motion to file the supplemental complaint. (Docket Entry No. 375). The supplemental complaint added as named Plaintiffs, Sherry Justice, Mid-South Arc, a non-profit Tennessee corporation, and the Tennessee Disability Coalition (“TDC”), a non-profit Tennessee corporation, with three additional legal claims. (Docket Entry No. 376).

Later, Plaintiffs Motion for Leave to File a Second Revised Supplemental Complaint (Docket Entry No. 382) that was granted. (Docket Entry No. 454). This latter complaint added as Plaintiffs, Gayle Cummings, Bach Thuy Nguyen and Di Nguyen who were affected by an administrative change in the eligibility determinations in the new TennCare program. (Docket Entry No. 382).

Plaintiffs then filed another motion to file a third supplemental complaint (Docket Entry No. 424), that added as Plaintiffs Wilson Dale Jackson, Melanie Jackson, Sean Addison by his mother Lisa Addison, and Lorri Griffin, who are allegedly adversely impacted by the new eligibility process. (Docket Entry No. 440). The Court granted that motion. (Docket Entry No. 439).

These latter Plaintiffs are individuals who had begun or had completed the reverification process and asserted, inter alia, denial of notices and appeals from denials of their applications in the reverification process. (Docket Entry Nos. 440 through 444). In the supplemental complaints, Plaintiffs assert that they are not receiving adequate notices, hearings and appeals as well as the loss of continued coverage pending the disposition of their appeals, in violation of 42 C.F.R.

Part 431, Subpart E. III. PLAINTIFFS’ FIFTH MOTION FOR PRELIMINARY INJUNCTION On June 26, 2002, Plaintiffs filed their fifth motion for preliminary injunction (Docket Entry No. 339), as supplemented by amended answers and declarations that, in effect, seeks to prevent the implementation of the new TennCare demonstration waiver that took effect on July 1, 2002. (Docket Entry Nos. 342 through 360, 392). The Defendant filed a response (Docket Entry No. 373), to which the Plaintiffs filed a reply (Docket Entry No. 374). The new TennCare program significantly changed the structure and scope of TennCare program, to include three distinct benefit or coverage categories:

(1) TennCare-Medicaid, that covers those persons who qualify for Medicaid eligibility;

(2) TennCare-Standard, that covers non-Medicaid eligible participants; and

(3) TennCare-Assist that assists persons without insurance to buy or maintain health insurance. This latter category element takes effect in fiscal year 2004, subject to legislative appropriation of the necessary funds. In a word, under the new Tenn-Care program, eligibility for the non-Medicaid applicants is limited to those persons: (1) whose income is below a level to be specified annually; (2) who do not currently have insurance or access to insurance; or (3) who are uninsurable or medically eligible.

In their fifth motion, Plaintiffs assert, in sum, that: (1) the State has failed and is failing to identify and reasonably accommodate class members with disabilities or limited English proficiency (“LEP”) during the notice, eligibility reverification determination and appeal processes, in violation of

Section 1(A)(7) of the Settlement Agreement, which is incorporated by reference into the Agreed Order of March 12, 2002 (Docket Entry No. 171); (2) the State’s inadequate procedures and administration will result in the denial, reduction or termination of TennCare coverage without adequate notice and opportunity to appeal, as guaranteed by Paragraph 1 of the Agreed Order (Docket Entry No. 171) and 42 C.F.R.

Part 431, Subpart E; and (8) the State’s procedures were adopted without prior consultation with a duly constituted MCAC, as required by 42 U.S.C. § 1396a (a)(4) and 42 C.F.R. § 431.12. Plaintiffs request the Court to enjoin the Defendant from denying, reducing or terminating TennCare benefits for plaintiff class members without first complying with the provisions set forth in the Agreed Order of March 12, 2001; 42 U.S.C. § 1396a (a)(4); and 42 C.F.R. § 431.12. In response, the Defendant argues, in essence that: (1) none of the individual or organizational plaintiffs has demonstrated standing to advance their claims;

(2) Section 1(A)(7) of the Settlement Agreement does not impose the obligations Plaintiffs seeks, but instead requires only review and recommendations for State policies and procedures to accommodate for persons with known disabilities or LEP; (3) this accommodation requirement has been fulfilled in accordance with the Settlement Agreement; (4) subjecting class members to the normal Medicaid eligibility process violates neither the Agreed Order nor 42 C.F.R.

Part 431, Subpart E; (5) transition period procedures and processes to enable plaintiff class members to exercise their rights to notice and opportunity for hearing before termination or denial of coverage, comply with Paragraph 1 of the Agreed Order and 42 C.F.R.

Part 431, Subpart E; (6) the MCAC regulation is inapplicable to

section 1115 waiver programs; (7) the MCAC regulations do not create a private right of action for non-Medicaid eligible individuals to enforce; and (8) the Defendant, in fact, consulted with a MCAC for its new TennCare program. An evidentiary hearing was held on July 19 and 22, 2002, and oral argument by the parties’ counsel on August 16, 2002. (Docket Entry No. 388). The parties reached an agreement on two of the issues in Plaintiffs’ motion for preliminary injunctions. (Docket Entry No. 394). At and after the evidentiary hearing, the parties submitted additional exhibits.

See Docket Entry Nos. 378, 379, 384, 397 through 405, 408 through 415, 419 through 421, 428 through 434. On October 24, 2002, the parties filed a Stipulation with several exhibits. (Docket Entry No. 437). On November 27, 2002, after a status conference, the parties filed a Stipulation on the then current statistical results of the reverification process. (Docket Entry No. 448). IV. ISSUES TO BE DECIDED As to the pending motion for preliminary injunction, the Court conducted a status conference at which the parties identified the core issues that essentially are as follows: 1.

Whether Plaintiffs have the standing to challenge the Defendant’s new Tenn-Care policies and administration of the new TennCare program and if so, whether Plaintiffs’ have an implied right of action under the Social Security Act to assert those claims under 42 U.S.C. § 1983. 2. Whether the State’s procedures will result in the denial, reduction or termination of TennCare coverage 'without adequate notice and opportunity to appeal, as guaranteed by numbered Paragraph No. 1 of the Agreed Order and 42 C.F.R.

Part 431, Subpart E of the Medicaid Act regulations. 3. Whether the Defendant has failed and is failing to identify and reasonably accommodate class members with disabilities or LEP during notice, eligibility determination and appeal processes, in violation of

Section 1(A)(7) of the Settlement Agreement, which is incorporated by reference into the Agreed Order of March 12, 2002 (Docket Entry No. 171). 4. Whether the State’s new TennCare Plan and polices were adopted without prior consultation with a duly constituted MCAC, as required by 42 U.S.C. § 1396(a)(4) and 42 C.F.R. § 431.12. 5. Whether the State’s public necessity rule to close enrollment in TennCare to new adults uninsurables is a violation of this Court’s Agreed Order of March 8, 2001, and 42 C.F.R. § 431.12, requiring the State to consult a MCAC before adopting the new rule.

See Docket Entry No. 450 and Plaintiffs’ Proposed Revised Findings of Fact and Conclusions of Law. The Court held a status conference to inquire about consolidation of the hearing on Plaintiffs’ motion for preliminary injunction with a resolution of the merits of all of Plaintiffs’ claims under Fed.R.Civ.P. 65(a)(2), and to set a deadline for submissions for all claims, defenses, and evidence. (Docket Entry No. .435). The parties agreed to the consolidation.

In addition to the issues on Plaintiffs’ motion for preliminary injunction, the remaining issues that arise from the Plaintiffs’ supplemental complaints (Docket Entry No. 382) involve claims about the Defendant’s January 1, 2003 verification and application policies. These issues, in sum, are whether the Defendant’s policies to terminate automatically TennCare coverage without an appeal; to limit the scope of an administrative appeals; and to eliminate TennCare coverage pending an appeal, violates the Medicaid Act, 42 C.F.R. § 431, Subpart E and other regulations, as well as the Agreed Order.

The parties agreed that the latter issues are purely legal questions and did not require any evidentiary submissions. (Docket Entry No. 435, Agreed Order). This Memorandum addresses all remaining issues in the Plaintiffs’ motion for preliminary injunction and Plaintiffs’ other legal claims in their supplemental complaints. Pursuant to Fed.R.Civ.P. 52(

a) and 65(d), this Memorandum sets forth the Court’s findings of fact and conclusions of law on all pending claims. V.

SUMMARY OF RULING For the reasons set forth below, the Court concludes that the State’s new re-verification procedures for July 1, 2002 to present has resulted in the termination of TennCare coverage for a substantial number of TennCare enrollees without adequate notice and opportunity to appeal, as guaranteed by applicable Medicaid regulations, 42 C.F.R.

Part 431, Subpart E and Paragraph 1 of the Agreed Order (Docket Entry No. 171). Defendant’s terminations of enrollee’s coverage, including for failure to submit a timely application, were done without adequate prior notice of the Defendant’s intended action and without a statement of the applicable federal regulation for reverification in violation of Medicaid regulations. Further, the terminations were without prior notice of the Defendant’s good cause extension rule for timely submission of reverification papers, as required by federal Medicaid regulations.

The Court also concludes that the Defendant’s January 1, 2003 policy, impermissi-bly eliminates appeals for termination of coverage and improperly restricts the scope of administrative appeals. The Court further concludes that the Defendant has failed and is failing to identify and to make reasonable accommodations for substantial numbers of class members with mental and physical disabilities during the eligibility reverification process as well as during the appeal processes. These inadequacies violate federal Medicaid policy and

Section 1(A)(7) of the Settlement Agreement, that is incorporated by reference into the Agreed Order of March 12, 2002. (Docket Entry No. 171). The Court once again concludes that the Defendant’s failure to secure prior consultation with a duly constituted MCAC in the submission of the amended TennCare waiver program violated 42 U.S.C. § 1396a (a)(4) and 42 C.F.R. § 431.12.

Accordingly, the Court requires the Defendant to reinstate those Plaintiffs and members of the Plaintiffs’ class who were enrollees and have had their TennCare coverages terminated during the reverifi-cation process from July 1, 2002 to the present. Any further termination of Tenn-Care coverage under the new TennCare policies for any class member and all en-rollees must include continued coverage pending the conclusion of the enrollee’s administrative appeal. The Defendant cannot bar an applicant’s or enrollee’s challenge to TennCare rules policies and procedures in an administrative appeal. VI.

FINDINGS OF FACT A. Origin of the TennCare Program On November 18, 1993, the Tennessee Commissioner of Public Health received approval of the State’s application for its “TennCare” waiver plan from the Administrator of the former Health Care Financing Administration (“HCFA”) in the United States Department of Health and Human Services that is now the Centers for Medicare and Medicaid Services (“CMS”). (Docket Entry No. 230, Defendant’s Memorandum, Attachment No. 2). The TennCare plan was a “waiver-only demonstration” that was subject to “special terms and conditions”.

The purpose of the TennCare plan was to provide medical benefits not only to Medicaid recipients, but also to other persons who were not covered under Title XIX of the Social Security Act. The HCFA’s Administrator’s approval provided that: Under the authority of

section 1115(a)(2) of the SSA, expenditures made by the state for the items identified below (which are not otherwise included as expenditures under

section 1903) shall, for the period of this project, be regarded as expenditures under the State’s Title XIX plan i. Expenditures which would otherwise be precluded by

section 1903(

f) For the following eligibility groups: + those who are uninsurable because of pre-existing conditions; and + those who are uninsured. Id. at Attachment, Administrator’s November 18,1993 letter at 3. The old TennCare program was administered by the TennCare Bureau with defined procedures and policies for initial eligibility and reverification determinations. As discussed earlier in the procedural history

section of this Memorandum, those policies and procedures were subject to successful legal challenges and Court Orders. As to benefits, the former TennCare provided medical services and prescription drugs to eligible persons who were covered by Medicaid; who were financially unable to secure private medical insurance; and/or who were uninsurable by private medical insurance due to their medical condition. Federal participation was, in essence, a type of block grant based upon what Medicaid would have expended in Tennessee without the TennCare program. The federal funds are supplemented with state funding.

The combined funds were expended for Medicaid enrollees and waiver eligible enrollees. B. The New TennCare Waiver On May 30, 2002, CMS, the current governing federal agency, approved Tennessee’s proposed amendment to its Tenn-Care waiver program. Under the new TennCare waiver, the federal government continues to provide a majority of the funding for TennCare, but the terms of federal financial participation have changed.

As opposed to the former block grant approach, the federal contribution is now set at a specified amount per month for each Medicaid-eligible participant, supplemented with other federal and state funds. There are supplemental federal funds to pay for non-Medicaid participants. To the extent that federal money is unavailable for these later costs, the State must bear the difference. (Docket Entry No. 380, Johnson Testimony at 149-51). Under the new program, coverage is reviewed and waiver eligible coverage is based upon the amount of state funds appropriated annually by the state legislature.

For enrollees, the principal changes in the new TennCare program are its different coverage groups and application procedures. The first coverage group is Tenn-Care Medicaid, covering those who qualify for Medicaid eligibility and that coverage is essentially the same as under the old TennCare program. (Defendant’s Exhibit No. 1, Johnson Declaration ¶ 2). The second category is TennCare-Standard, that covers non-Medicaid eligible participants with a benefit package comparable to the Health Maintenance Organization (“HMO”) option available to state employees.

Id. ¶ 2-3 The third category is Tenn-Care-Assist, that provides assistance to persons to buy or maintain private health insurance, but that coverage does not start until the fiscal year 2004, subject to state legislative appropriations. See Defendant’s Revised Proposed Findings of Fact and Conclusions of Law at 2, n. 2. TennCare Standard coverage, however, has two categories, i.e., the “uninsured” category, for individuals who have been denied Medicaid, but who are uninsured, lack access to insurance, and have income that does not exceed specified levels to be set annually by the Legislature.

This income cannot exceed 200% of the federal poverty level for children and 100% for adults. A new applicant whose income falls within the levels established by the Legislature may qualify for TennCare Standard as a uninsured person, but only during a time designated as a period of open enrollment. TennCare Standard coverage also includes the Medically Eligible (“ME”), enrollees who are comparable to the “uninsurable” group in the old Tenn-Care program.

An individual who is enrolled in TennCare as uninsured or unin-surable as of June 30, 2002, and who has been found, through the eligibility redeter-mination process, to be ineligible for Tenn-Care Standard as a qualified uninsured person due solely to excess income, may qualify under the ME component of Tenn-Care Standard, provided additional specified criteria are met. Id. ¶ 3.

As of June 30, 2002, all individuals enrolled in TennCare as waiver-eligibles, i.e., uninsured and uninsurables, are subject to a reverification process for eligibility as determined under the terms of the new waiver for TennCare Standard. An enroll-ee qualifies as an uninsured person, if applicable income levels are met and other eligibility criteria are satisfied, despite the absence of an open enrollment period. Id. ¶ 3 and Attachment A. During the reverifi-cation process, the applicable income limits will be 100% of the federal poverty level for adults and 200% of the federal poverty level for children.

Id. ¶ 7. See also Docket Entry No. 381, Smith Testimony at 274-76. In the formulation of its reverification policies, the Defendant determined that to ensure receipt of the maximum amount of federal funds, the new TennCare program required a correct determination of each enrollee’s benefit package, with an emphasis on Medicaid eligibility. (Docket Entry No. 380, Johnson Testimony at 149-51). As a waiver program under

section 1115 of the Social Security Act, TennCare is subject to the budget neutrality principles that affect the amount of federal funds available for the program. Federal funds in a waiver program still cannot exceed, over the period of the waiver, what the federal government would have expended on the Medicaid program in Tennessee in the absence of a waiver. The premise for Defendant’s reverification process for all waiver eligibles under the new waiver is the budget neutrality principle.

Under this principle, the Defendant contends that the ceiling for the total federal funds that the State can draw for TennCare, is determined by calculating the per-member-per-month rate times the number of individuals who are enrolled as Medicaid eligibles. (Docket Entry No. 33.1, Defendant’s Notice to Court of New TennCare Waiver, Attachment B at 7). In the Defendant’s calculation, enrollees who are not Medicaid eligible are not counted for the federal contribution.

Thus, in the Defendant’s view, it is vitally important to ensure that as many waiver eligibles are evaluated for Medicaid benefits to enable the State to have sufficient funds for Tenn-Care. There are deadlines set for this redetermination process.

Yet, the Plaintiffs correctly note that under the CMS waiver, aside from the per person Medicaid allocations, there is a separate appropriation of federal funds referred to as the disproportionate share of hospital payments or “DHS adjustment.” These federal funds represent the estimated payments to hospitals that provide medical services to a significant number of medically needy persons who lack the resources to pay for those services. Id. at 8. For the fiscal year 2003, this appropriation is $413,700,907. Id.

Under the new Tenn-Care program, these funds do not go to these hospitals, but instead are part of the funds available to pay services under contracts with the private insurance companies that administer the new TennCare program. (Docket Entry No. 391, Transcript at 57-58; Docket Entry No. 381, Smith Testimony at 286-88).

In Plaintiffs’ view, this separate appropriation, discounts the Defendant’s priority and insistence on Medicaid eligibility rede-terminations for all waiver eligibles and renders unnecessary the dual applications and redeterminations of eligibility as well as dual appeals for Medicaid eligibility and TennCare Standard eligibility. Plaintiffs also contend that the multiple processes will have the effect of eliminating coverage of those current enrollees who are in the greatest medical need and who also require more financial resources for their medical needs.

Plaintiffs contend that the fiscal limitations are best met by coverage of fewer Medicaid eligible enrollees who have a greater benefit package than Tenn-Care enrollees who have less benefits and must share in the costs of medical services. (Docket Entry No. 891, Transcript at 122). The premise for the Defendant’s reveri-fication policies and his requirement of massive redeterminations of TennCare eligibility is clearly debatable. The premise is that these policies are needed to maximize federal funds.

Yet, with the over $400 million in DHS payments available to pay for TennCare waiver eligibles, the co-payments by TennCare waiver eligibles and the fewer benefits available to waiver eligi-bles, the increase in Medicaid funds from reverification likely would not produce equivalent sums. Thus far, only 8% of all the reverifications have been found Medicaid eligible. (Docket Entry No. 448). Yet, as the Court noted, the policy choice is the Defendant’s, not the Court’s. As its primary focus, the new TennCare program shifts from a social services model to a private market model.

As stated in the Defendant’s application for the amendment, the new TennCare waiver is to be “consistent with our goal of making Tenn-Care Standard program mirror commercial health insurance programs.” (Docket Entry No. 436, Defendant’s Memorandum, Exhibit F, Tighe Letter of May 29, 2002, at 4). As discussed infra, the effect of this philosophical change is a set of multiple reveiafication procedures for the former uninsurables who require more costly services.

Under new TennCare rules and policy, absent Medicaid coverage, most of these uninsurables must complete a second application process to be considered eligible for coverage under the new TennCare program. As discussed infra, since the Defendant’s new reverification policy has been implemented, an effect of these rede-termination processes is a projected loss of coverage to more than 200,000 prior Tenn-Care enrollees. (Docket Entry No. 448). C. Policies and Procedures for the New TennCare Program In

summary, under the new TennCare waiver, all waiver eligible enrollees must initially complete the Medicaid eligibility reverification process. If the enrollee does not satisfy the Medicaid eligibility standards, the enrollee has an opportunity to be considered for eligibility under Tenn-Care Standard as an uninsured or medically eligible or (“ME”). Under TennCare rules, if the enrollee fails to complete the Medicaid application process, for example, due to an inability to compile all of the needed documentation within the 45-day limit, his or her TennCare coverage ends.

In some instances, if the enrollee does not submit a complete and timely application in the reverification process, the enrollee loses any right to appeal the termination of his or her coverage. There are, however, two sets of rules that govern reverification (1) for all waiver eligibles from July 1, 2002 to December 31, 2002, and (2) for reverification and new applications beginning January 1, 2003. Plaintiffs challenge both sets of rules.

The policies and rules are set forth separately to be followed by findings on the actual administration of the TennCare re-verification process with the primary focus on the July 1, 2002 to December 31, 2002 reverifications. 1.

The July 1, 2002 to December 31, 2002 Reverification Rules and Policies Defendant’s final TennCare regulations for this time period require current enroll-ees to apply for the TennCare reverification during the period from July 1, 2002 through December 31, 2002 and to submit the Medicaid reverification papers within 90 days from the date of the mailing of the initial notice. (Defendant’s Exhibit No. 1, Johnson Declaration ¶¶ 12, 13; Plaintiffs’ Exhibit No. 51, TennCare Standard Rules, Rule 1200 — 13—14.02(8)(

c) at 20). After the submission of a signed reverification, the TennCare enrollee also must arrange for an appointment to review his or her eligibility materials with Tennessee Department of Human Service (“TDHS”) worker. (Docket Entry No. 437, Exhibit E, Rule 1200-13-14-02.(7) (b)). Enrollees who do not satisfy the Medicaid requirements or uninsured under TennCare Standard, may undergo a separate reverification of medical eligibility requirements for TennCare Standard. TennCare rules impose a second 45-day deadline on the enrollee’s completion of the second ME phase of the reverification process. Id. at Rule 1200-13-14-.02(7)(

e) and (ft. During this period, an enrollee or new applicant can enroll in the program only if they qualify for TennCare Standard as medically eligible (“ME”) or uninsured. (Defendant’s Exhibit No. 1, Johnson Declaration ¶ 9).

The new TennCare regulations do not except individuals designated by the Defendant as SPMI/SED enrollees from the reverification process, but the Defendant has an accommodation policy that is contained in the TennCare rules: “Reasonable accommodation will be made for persons with disabilities who require assistance in responding to a renewal request.” (Docket Entry No. 382; Plaintiffs’ Exhibit No. 27, TennCare Rule 1200-13-14-.02(6)(a)). The text of the pertinent provisions of the reverification rules for July 1, 2002 to December 31, 2002 provide as follows: 7.

Redetermination of eligibility during the waiver transition period from July 1, 2002 to December 31, 2002 will be conducted in accordance with the following procedures: (

a) All waiver eligible (non-Medicaid) enrollees in TennCare must reapply for TennCare under the terms of the new waiver eligibility requirements which take effect on July 1, 2002 or their coverage will be terminated. * * * * * Hi (

b) The initial notice informs the en-rollee that his/her coverage will end on the ninetieth (90th) day unless s/he submits the application. The enrollees must then

schedule an interview with a Department of Human Services (DHS) caseworker. (

c) If an application is not received by DHS on or before the thirtieth (30th) day from the date of the initial notice: 1. A reminder notice is sent to the enrollee informing him/her that s/he has sixty (60) days more to submit a completed application to DHS, and 2. That s/he will be terminated on the ninetieth (90th) day unless the application is received prior to that day. (

e) Enrollees submitting an application to DHS before the ninetieth (90th) day will have forty-five (45) days additional to complete the process (from the date the application is received). This includes scheduling an appointment with the DHS office in the county in which s/he lives and completing the application process. If the en-rollee cannot come to the DHS office in person s/he must request other arrangements with DHS to accommodate his/her special needs.

During the appointment, the DHS caseworker will review the enrollee’s eligibility information, including income, social security number, address, existence of access to other insurance, household information and other information as required to determine eligibility. ‡ ‡ ‡ ‡ ‡ ‡ (

g) The DHS caseworker will review the applicant’s eligibility for Medicaid. If the enrollee meets the TennCare Medicaid eligibility requirements, s/he will be enrolled in TennCare Medicaid with the effective date being in accordance with DHS policies. (

h) If the enrollee does not meet the Medicaid criteria, s/he will be denied for TennCare Medicaid and will receive a denial notice from DHS with the appropriate appeal rights. All appeals of TennCare Medicaid applications are handled by DHS. (

i) To qualify for TennCare Standard as a qualified uninsured person, enrollees must meet the technical eligibility requirements, be uninsured, lack access to health insurance, and have income below one hundred (100%) percent of poverty (for adults) and below two hundred (200%) percent of poverty (for children). If the enrollee is eligible for TennCare Standard as a qualified uninsured person, s/he will be enrolled in the program with an effective date of coverage as of the date of approval of his/her application. Included in the approval notice is a fixed end date of coverage, before which time the enrollee must complete the renewal/reapplication process or coverage will end. % % ‡ # # (

k) Applicants not meeting the technical requirements for TennCare Standard will not be allowed to apply as a medically eligible person. Medical eligibility applications received from persons not meeting the technical eligibility requirements for TennCare Standard will be denied with a notice that includes appeal rights. (

m) If the enrollee does not qualify for TennCare Standard as an uninsured person based solely on excess income, s/he will be informed that s/he may qualify as a medically eligible person, and asked if s/he wishes to apply. Enrollees with a qualifying medical condition (i.e. a condition on the TennCare Medical Condition List) — as evidenced by the presence of the qualifying diagnosis on a claim/encounter in the Bureau’s database (from 1999 to the present) will be medically eligible for TennCare. If the enrollee has a current (within the past twelve(12) months) CRG 1, 2, 3/TRG2 assessment s/he will be medically eligible... # sfc ❖ # # (

n) Enrollees who do meet the eligibility criteria for TennCare Standard (as a qualified uninsured person) except for excess income and who do not have a current CRG 1, 2, 3/TPG 2 assessment in TCMIS or a qualifying medical condition (as evidence by encounter/claims data) may be able to qualify for TennCare Standard as a medically eligible person. If the enrollee chooses to apply as a medically eligible person, TennCare will mail a Medical Eligibility Determination packet to the enrollee including instructions on how to apply as a medically eligible person.

The packet includes instructions, forms, and a medical records release statement, which must be signed by the enrollee * * ‡ ifc * % The enrollee has forty-five (45) days from the date the Medical[ ] Eligibility Determination packet is received by the enrollee to file a completed packet with the Bureau. Incomplete applications received within forty-five (45) days will be returned by the Bureau to the enrollee. (Docket Entry No. 437, Exhibit E, New TennCare Rules 1200-13-14-02.(7)(

a) through (n)). For the reverification deadlines, there is a rule that authorizes a good cause extension of the eligibility deadlines. Packets submitted to the Bureau after the forty-five (45) day period will be denied and the enrollee will be terminated. The denial notice will include appeal rights and the “good cause” reasons for not completing the process timely. These reasons include: 1. The enrollee was sick. 2. Somebody in the enrollee’s immediate family was very sick. 3. The enrollee had a family emergency or tragedy. 4. The enrollee could not get the medical records s/he needed from a provider.

It was not his/her fault. 5. The enrollee asked for help because s/he has a disability. Neither the Bureau nor TDHS gave the help that the enrollee needed. 6. The enrollee asked for help because s/he does not speak English. Neither the Bureau nor TDHS gave the help that the enrollee needed. (Docket Entry No. 437, Exhibit E, Tenn-Care Rule 1200-13-14-02.(7)(n)). Rule 1200-13-14-.12(7)(

e) and (

f) provide for notice of an appeal for denial of coverage due to an untimely and incomplete application or failure to

schedule a TDHS interview. (

e) If the application is not submitted by the eighty-ninth (89th) day, the en-rollee will be terminated from the program effective on the ninetieth (90th) day with a notice including appropriate appeal rights. If s/he appeals within ten (10) days from receipt of the letter of termination, coverage will be continued/reinstated pending the outcome of the appeal.

Appeals received within thirty (30) days (from receipt of the notice) will be processed by the TennCare Administrative Appeals Unit and the Office of General Counsel in accordance with the appropriate policies and procedures (See TennCare Administrative Appeals Policies and Procedures). Appeals received by the Bureau after the thirtieth (30th) day (from receipt of the notice) are automatically denied as “untimely.” (

f) An enrollee who does not complete the entire application process by the forty-fifth (45th) day after his/her application was received by DHS, including the appointment process, will have his/her application denied and TennCare coverage will be terminated with appropriate appeal rights. The only exception to the forty-five (45) day limit is a good cause extension. DHS may grant a good cause extension in accordance with Bureau/DHS policies. Id.

The Defendant’s draft of the Operational Protocol for administrative appeals made unclear that appeals are available to all enrollees during the reverification process: “Except in those cases when a TennCare Standard member is disenrolled for failure to get reverified, if TennCare disen-rolls an enrollee, the TennCare enrollee may appeal.” If TennCare denies an application for non-Medicaid enrollment (or determines that an enrollee will be disenrolled), it must notify the applicant or enrollee in writing unless the disenrollment is for a TennCare Standard enrollee who has failed to get reverified. ‡ ‡ ‡ ‡ ‡ In the case of a disenrollment or proposed disenrollment, [logging an appeal] prevents the enrollee’s coverage from ending before a final decision unless the disenrollment is a TennCare Standard enrollee who has failed to get reverified. (Plaintiffs’ Exhibit No. 26, Operational Protocol New TennCare Waiver, at V-2 and V-3)(emphasis added).

Where an application is completed, but coverage is denied, an administrative appeal is clearly available. (

h) If the enrollee does not meet the Medicaid criteria, s/he will be denied for TennCare Medicaid and will receive a denial notice from DHS with the appropriate appeal rights. All appeals of TennCare Medicaid applications are handled by DHS. (Docket Entry No. 437, Exhibit E, Tenn-Care Rule 2100-13-14-.02(7)(h)).

Yet, from the Court’s review of the rules, it is unclear if notices of appeals are not given to those enrollees whose ME reverification papers are returned as incomplete packets. “Incomplete applications [received within the 45 days] will be returned by the Bureau to the enrollee with a denial notice.” Id. at Rule, 1200-13-14-.02(7)(n). As discussed infra, notice of return does not refer to any appeal. Yet, “[p]ackages submitted to the Bureau after the forty-five (45) day period will be denied and the enrollee will be terminated. The denial notice will include appeal rights...” Id. (italics added). 2.

TennCare’s Policies and Rules for Reverification and Enrollment after January 1, 2003 The new TennCare rules to govern re-verification and enrollment after January 1, 2003, provide for an automatic termination of coverage without any appeal rights, if the reverification process is not completed. Rule 1200-13-14-.02(9)(

f) states that “The enrollee’s right to appeal [a decision regarding TennCare Standard ME eligibility is set out at rule 1200-12-14-12.”]. Plaintiffs cite Rule 1200-13-14-.12(1) that provides, in pertinent part: (

a) TennCare Standard applicants and enrollees will be given an opportunity to have an administrative hearing before a Hearing Officer or an Administrative Judge regarding denial of his/her application, cost sharing disputes, and disputes regarding disenrollment from TennCare Standard. Requests for appeals must be made within thirty (30) days of receipt of the notice of the adverse decision. If the enrollee being terminated wants his/her coverage to remain in effect while the appeal is being processed, s/he must submit his/her appeal within ten (10) days of receipt of the termination notice. ‡ * sfc * * # (

c) TennCare Standard enrollees must complete the entire renewal process pri- or to the expiration date of his/her coverage. A failure to do so will result in coverage lapsing as of the expiration date. Enrollees will not be permitted to appeal the expiration of his/her coverage in this situation. However, s/he may appeal on the grounds that: 1. S/he did, in fact, complete the renewal process but an administrative error on the part of the State resulted in his/her coverage expiring, or 2. S/he was prevented from completing the renewal process by specific acts or omissions of state employees.

This ground for appeal does not include challenges to relevant TennCare rules, policies, or time-frames. An enrollee will receive a notice of the expiration of his/her coverage and the right to appeal as set out above, within 10 days. There will be no continuation or reinstatement of coverage pending appeal. (Docket Entry No. 437, Exhibit E at 85, 86) (emphasis added). In the event of an incomplete application, after January 1, 2003, the Defendant’s rules provide that in addition to automatic coverage termination, there are also no appeals.

Under the new waiver, eligibility for the non-Medicaid population will be determined initially for a period that can range from six to twelve months, to permit an even spread of re-enrollments throughout the year. Beginning January 1, 2003, re-enrollment or new enrollment will be for one-year periods... New enrollees and re-enrollees will be advised of the term of their enrollment and of the need to re-apply for another term of coverage before the end of their eligibility period.

Shortly before the expiration of the eligibility period, the en-rollee will be sent a reminder of the need to re-apply for another term of TennCare coverage. If the enrollee fails to submit a complete application to the Department of Human Services by the end of the eligibility period, coverage will automatically cease. No appeal will be provided for these cases. However, if a timely complete application is denied, or if an enrollee is terminated due to an administrative error, the regular Medicaid appeals procedures will be available ... (Docket Entry No. 331, Notice of Waiver at 15-16) (emphasis added).

The rationale of the Defendant’s policy of automatic termination of coverage without an appeal for those TennCare enrollees who do not submit timely reverification applications is that the termination is caused by the enrollee’s inaction, not state action. The only changes [in the new waiver] that could conceivably implicate any provision of the Agreed Order are the introduction of fixed eligibility periods and a reapplication requirement for non-Medicaid enrollees.

The coverage of non-Medicaid enrollees who do not submit a timely application for renewal of coverage will automatically expire at the end of their eligibility period, just as would be the case if these enrollees were covered by commercial insurance.

This program feature helps to assure that only those who continue to meet eligibility requirements will be served by the program.... if the enrollee allows his or her coverage to lapse by not submitting a timely application for renewal, the expiration of coverage at the end of the enrollment period will not have resulted from an action of the State but rather from the failure of the enrollee to take required action. (Docket Entry No. 331, Notice of Waiver at 19)(emphasis added). In addition, the Plaintiffs rely upon the Defendant’s expert’s summarization of the effect of the new policies.

Each enrollee approved for TennCare Standard [during the period between July 1 and December 31, 2001], whether as a qualified uninsured person or as a medically eligible person, will be sent an approval notice with a specified fixed end date of coverage. Each new applicant approved for TennCare Standard will also be sent such a notice with a fixed date of expiration of coverage. These TennCare Standard enrollees’ coverage will lapse on that end date in the absence of completion of a renewal/reapplication process by the end date.

The specified end dates will be spread among enrollees so that approximately one-twelfth of the TennCare Standard enrollees will have a fixed end date in each month of 2003. Expiration of coverage, and the attendant renewal/reapplication process, will not begin to occur until January 2003. TennCare Standard enrollees will be notified at the time of their redetermination or acceptance of the need to reapply before their specified end date. They will be reminded again of this obligation by means of a notice sent to them 60 days in advance of the their end date.

If the enrollee does not complete the renewal application process by the end date, coverage will lapse. No right of appeal is available to establish eligibility after coverage lapses. In other words, the appeal process cannot be used as a substitute for timely completion of the renewal/reapplication process.

However, an appeal will be permitted if the individual claims either (1) that the renewal process was, in fact, completed on a timely basis but an administrative error on the part of the state resulted in the expiration of coverage; or (2) the individual was prevented from completing the renewal process by a specific act or omission of a state employee. The individual will be sent a notice of the expiration of their coverage and of their right to appeal as set out above.

If the appeal is successful, coverage will be reinstated back to the lapse date, pending completion of the renewal application process. (Defendant’s Exhibit No. 1, Johnson Declaration ¶¶ 50-54) (emphasis added). D. Defendant’s Administration of the New TennCare Program CMS, that approved these amendments to TennCare’s waiver program, required the State to develop an Operational Protocol for the new waiver. (Docket Entry No. 381, Notice of Waiver, Exhibit A, Centers for Medicare and Medicaid Services Special Terms and Conditions ¶ 2).

The Defendant assigned the Tennessee Department of Human Services (“TDHS”) the primary responsibility for reverification and eligibility determinations that are functions previously assigned to the Tenn-Care Bureau and shared with local health departments. (Docket Entry No. 331, Notice of Waiver, Exhibit D, Affidavit of Alicia Smith ¶ 25). Plaintiffs assert that in the fall of 2001, the State decided to adopt the new eligibility process to require reverification of TennCare waiver eligible enrollees. (Plaintiffs’ Exhibit No. 1, Reynolds Deposition at 5-6).

According to Mark Reynolds, TennCare’s former director, when the Defendant decided to transfer the TennCare eligibility functions to TDHS, the Defendant was aware that it would be “nearly impossible” for people with cognitive impairments to complete the Medicaid eligibility process unaided. (Docket Entry No. 257, Reynolds Testimony at 59). See also Docket Entry No. 381, Johnson Testimony at 230-32, 235.

According to Reynolds, at that time, State officials were also well aware of the complexity of the Medicaid eligibility requirements and that substantial numbers of eligible people fail to obtain or maintain Medicaid coverage because they cannot complete that program’s complex eligibility process. (Docket Entry No. 257, Reynolds Testimony at 40-59). As discussed infra, the initial Medicaid eligibility process is described by witnesses for both parties as complex and demanding.

The overarching theme in Plaintiffs’ proof questions the capacity of TDHS and its eligibility caseworkers to implement the reverification process without effectively depriving enrollees of their rights under Subpart E of the Medicaid regulations. In Plaintiffs’ view, TDHS lacks sufficient staff to meet the increased workload from the TennCare reverification processes. Plaintiffs also cite TDHS’s history of inadequate implementation of its other Medicaid eligibility obligations under other federal regulations and guidelines.

Plaintiffs contend that the procedural rights of a substantial number of enrollees to be heard prior to termination as well as their rights to appeal a wrongful termination have been and will be violated. Further, Plaintiffs assert that the new TennCare regulations lack adequate accommodations for persons with mental disabilities and language difficulties, as required by the Agreed Order and the parties’ Settlement Agreement.

Finally, Plaintiffs challenge the new TennCare reverification programs as imposing an excessive and unnecessary burden on enroll-ees to appeal wrongful denials and to maintain coverage pending appeal. 1. TDHS’s Management Capacity as Administrator For the first six months of the new TennCare reverification program, TDHS was selected to be responsible for that process. Prior to the new TennCare program, TDHS determined Medicaid eligibility of applicants as well as eligibility for other federal assistance programs.

For its other eligibility duties, Plaintiffs presented proof that in 2000 and 2001, federal officials found that TDHS did not assess Medicaid eligibility as required by

Section 1931 of the Social Security Act, and was not properly conducting ex parte reviews of ail possible sources of eligibility before terminating Medicaid coverage. (Plaintiffs’ Exhibit No. 62, Department of Health and Human Services TANF/Medic-aid Review (4-30-01), at 7-8, 30). Only on July 1, 2002 did TDHS issue a policy to comply with

Section 1931. Id.; Defendant’s Exhibit No. 7, Rudolph Declaration ¶ 12. TDHS agreed to remedy that, but did not integrate the policy change with its computer system and TDHS workers will have to perform their new functions manually. During the first two weeks of each month, TDHS sets appointments to process only federal food stamp applications. (Defendant’s Exhibit No. 28, Rudolph Third Declaration, ¶ 4; Plaintiffs’ Exhibit No. 80, Blackburn Second Declaration, ¶ 4). Thus, any TennCare appointment for reverification has a limited time span to be scheduled and completed.

Moreover, Plaintiffs note that TDHS also administers the Families First program, now called the Temporary Assistance for Needy Families (“TANF”) and the successor to the former Aid to Families with Dependant Children (“AFDC”). (Docket Entry No. 391, Transcript at 69). The TANF is described as the “most complicated” program to administer. Id. at 69, 70. There were not any precise statistics provided for TDHS’s caseload for its TANF responsibilities, id. at 70, but TANF has an estimated 62,000 “caseload.” (Docket Entry No. 381, Ded-mon Testimony at 246).

With its new TennCare functions, TDHS estimated its eligibility counselors can determine Medicaid and TennCare eligibility for 396,895 “new” cases. (Docket Entry No. 381, Dedmon Testimony at 247-48). In Plaintiffs’ view, TDHS underestimated the number of its new cases because TDHS only counted a case as “new” if the file had not been “closed for longer than six months.” (Plaintiffs’ Exhibit No. 77, at 4).

For this estimate, TDHS also assumed that 25% or 156,000 of the approximately 625,000 TennCare enrollees as of April 22, 2000 who are subject to recertification will “choose not to participate” and thus, will not require TDHS resources. (Plaintiffs’ Exhibit No. 77, at 4; Docket Entry No. 381, Dedmon Testimony at 251). Tenn-Care earlier estimated that less than half of that number, or about 75,000, would become ineligible after the reverification process. (Plaintiffs’ Exhibit No. 1, Reynolds Deposition, at 46-47).

Prior to the addition of these “new” TennCare cases, TDHS had 1,275 eligibility counselors to handle an unduplicated caseload of 338,-844. (Defendant’s Exhibit No. 5, Dedmon Declaration ¶ 2; Plaintiffs’ Exhibit No. 78, 3rd unnumbered page). TDHS has added 252 eligibility counselors to respond to the additional workload for the TennCare reverification. (Defendant’s Exhibit No. 5, Dedmon Declaration ¶ 2). Based upon this data, the average caseload per TDHS eligibility counselor has increased to 482 cases from 265 cases.

Defendant’s TennCare reverification process requires a determination of Medicaid eligibility be followed by a determination of TennCare Standard, if the person does not qualify for Medicaid. (Defendant’s Exhibit No. 1, Johnson Declaration ¶¶ 7-8).

For this reverification process, the TDHS caseworker must interview the en-rollee and review the enrollee’s documentary proof of identity, age, citizenship or alien status, address, income, resources (including bank accounts, savings bonds, property and automobiles), cost of utilities, life insurance and health insurance. (Defendant’s Exhibit No. 1, Johnson Declaration, Attachment B, 9th-10th unnumbered pages, (“What to Bring with,You to the TDHS Office”)). An unemployed person must submit proof of unemployment benefits or a layoff notice. Id.

Persons who have a “physical or mental problem” are told that “We will need your medical records.” Id. TDHS’s preliminary test of the Tenn-Care reverification process revealed that the average interview alone required one hour. (Plaintiffs’ Exhibit No. 77, at 4). This estimate, however, did not include the assignments of eligibility determinations for TennCare Standard to TDHS that had not been developed at the time of the TDHS’s estimate. (Docket Entry No. 381, Dedmon Testimony at 256-58). Moreover, the TDHS estimate also did not account for time required to secure and review an enrollee’s medical records. Id.

Cyndy Johnson, the Defendant’s expert consultant from Pacific Health Policy Group (“Pacific Health”), conceded that TDHS’s estimate of one hour as the length of an interview for each case might not be adequate. (Plaintiffs’ Exhibit No. 50, Johnson Deposition at 86-87). Using TDHS’s assumptions, Johnson calculated that TDHS would be unable to complete the reverification of the current enrollee population by December 31, 2002. Johnson calculated that TDHS could interview about 60,000 enrollees a month with its existing staff and new hires. Id. at 85-86.

Johnson conceded that the Defendant’s actual plan is for TDHS to process 415,000 applications over a five month period, an average of 83,000 a month. Id. at 249-50. TDHS experienced difficulties before the first of the three monthly mailings of notices to enrollees. (Plaintiffs’ Exhibit No. 80, Blackburn Second Declaration, ¶ 5; Defendant’s Exhibit No. 28, Rudolph Third Declaration ¶ 5).

The first set of notices of this reverification process were mailed to at least 115,000 class members on June 28, 2002. (Docket Entry No. 342, Plaintiffs’ Notice of Filing Documents, Exhibit 28, Initial Reverification Notice and Attachment). By August 15, 2002, more than a month after the preliminary mailing to 11,700 enrollees, and two weeks after a mailing to another 134,000 households, only 13,000 enrollees had been scheduled for redetermination appointments. (Defendant’s Exhibit No. 28, Third Declaration of Mary Ann Rudolph ¶ 4).

Subsequent monthly mailings of reverification notices were sent to more than 300,000 individuals in August, September and October. (Docket Entry No. 448). 555,253 individuals have been sent reverification notices since July 30, 2002. Id. In addition to staffing, TDHS eligibility workers need training in the complex new TennCare rules and procedures that is critical to TDHS’s performance in accordance with its projected. (Docket Entry No. 381, Teasley Testimony at 168-69).

Training for the Defendant’s new policies and procedures was completed before July 1, 2002. (Docket Entry No. 380, Johnson Testimony at 221-22). Yet, in response to Plaintiffs’ criticisms, the Defendant added to the policy and procedures. These policy changes require additional time to train TDHS staff on implementation (Docket Entry No. 380, Johnson Testimony at 242-43), but there are not any formal plans to retrain them on the new policy revisions. (Docket Entry No. 381, Teasley Testimony at 171).

Given Johnson’s testimony and the Defendant’s actual number of reverifications, the Court finds that TDHS made erroneous estimates of its increased caseload and the amount of interview time required for the TennCare reverifications. These facts lead the Court to find that, in all likelihood, for this limited period of reverification TDHS lacked the administrative resources to process all enrollees so as to complete the reverification process in the 45-day periods governing the reverification decisions. 2.

Notice and Appeal Practices from July 1, 2002 to December, 2002 The initial notice to the enrollee, informs the enrollees that he or she must apply through the local TDHS office for a rede-termination of his or her coverage eligibility. This notice and its attachments are written at a 4th to 6th grade reading level, and include a flyer, “Do You Need Special Help?”, listing free telephone numbers to call for assistance. (Docket Entry No. 1, Johnson Declaration, Attachment B at 6; Docket Entry No. 380, Johnson Testimony at 141-43).

The initial step requires a signed application, two-page form with a legible name and address sent to TDHS by the end of the 89th day after the date of this notice. (Defendant’s Exhibit No. 1, Johnson Declaration ¶¶ 12-13; Docket Entry No. 381, Teasley Testimony at 82).

The initial notice of redetermination directs enrollees to bring with them to the TDHS interview those items of necessary information to establish their eligibility and income, (Defendant’s Exhibit No. 1, Johnson Declaration, Attachment B, unnumbered pages 9-10, (“What to Bring with You to the TDHS Office”)), including technical and financial eligibility requirements set forth in TennCare Standard Rule 1200-13-14-,02(2). (Plaintiffs’ Exhibit No. 51; Docket Entry No. 380, Johnson Testimony at 225). The notice also tells the enrollee: IMPORTANT TennCare has changed.

We must check to see if you are still eligible by <DATE>. Read this letter carefully. Follow all the directions. ‡ # ‡ 5k Follow the directions in this letter. If you do not, you could lose you TennCare. * % * * * Do the things in numbers 1 and 2 in the next k5 days or sooner if possible. (Defendant’s Exhibit No. 1, Johnson Declaration, Attachment B at unnumbered page 1). In addition this notice states, “If we say you cannot keep your TennCare, you can appeal. Our letter will tell you how to appeal.” Id. at unnumbered page 2.

The first letter also stated that if an enrollee needs “Special Help”, including “learning or mental health problem” or “serious need for health care or medicine” to call one of several telephone numbers. Id. at unnumbered page 6. This form letter and attachments have a Spanish language version. (Defendant’s Exhibit No. 1, Johnson Declaration, Attachment B). In addition, limited instructions are given on other languages.

If a response is not received within 30 days of the initial notice, then a reminder notice is sent and that reminder notice contains, in pertinent part, with the following language: IMPORTANT TennCare has changed. We must check to see if you are still eligible You only have until <date of 90th day> to get you application to [T]DHS. Your coverage will end on that date if you do not get your application to [T]DHS. sjs >}: % ‡ Read this letter carefully. Follow the directions as you could lose your TennCare. % :{: sfc ❖ Hs 2. Call the DHS office and make an appointment.

DHS will try to find a time that works for you. If you do not call them to set a time, they will make an appointment for you when they get your application. If you cannot come to the DHS office in person because of a medical problem or a disability, call DHS and tell them. They will help you make other arrangements. If you have problems getting the help you need, call the TennCare Information Line. Their number is 1-800-758-1688. If you or someone in your home has a mental illness, you can get help from the TennCare Partners Advocacy Line.

Do Things in Numbers 1 and 2 in the next 45 days or sooner if possible # H? sk # ^ 6. Go to DHS for your appointment. If you cannot go the, you need to call DHS to set another time. Remember, you must complete the interview process and get all of the required information to DHS within 45 days of filing your application. If you do not do this, your TennCare will end. When you go to DHS, they will check to see if you can get TennCare Medicaid or TennCare Standard. There is more information about changes to TennCare. Read the paper called “TennCare is Changing” with this letter.

You can call the TennCare Information Line if you have questions. Their number is 1-800-669-1851. This is a free call. In Nashville, call 741-4800. After DHS decides if you are still eligible, you will get a letter. It will tell you if you can keep your TennCare. It will tell you if there is a change in how much you must pay for your TennCare. If we say you cannot keep your TennCare, you can appeal. Our letter will tell you how to appeal. Id., Attachment C at 1-2.

In addition, TDHS procedures require that each applicant be informed of their appeal rights during the interview process. (Defendants’ Exhibit 26, at unnumbered page 1). Persons in the reverification process are notified to provide documentary proof of identity, age, citizenship or alien status, address, income, resources (including bank accounts, savings bonds, property and automobiles), cost of utilities, life insurance and health insurance. (Defendant’s Exhibit No. 1, Johnson Declaration, Attachment B, at unnumbered pages 9-10, (“What to Bring with You to the TDHS Office”)).

If an enrollee lacks a particular piece of documentation, the TDHS case manager possesses the discretion to accept the enrollee’s self-declaration of income “as a last resort”. (Docket Entry No. 380, Johnson Testimony at 228-82; Docket Entry No. 381, Teasley Testimony at 87-88).

The same notices are sent to the entire TennCare population, regardless of disability, including those who are mentally disabled who must self-identity as disabled. (Defendant’s Exhibit No. 1, Johnson Declaration ¶ 11 and Attachment B; ¶ 12 and Attachment C; ¶ 13 and attachment D; ¶ 17 and Attachment F; ¶ 25 and Attachment H; ¶ 26 and Attachment I; ¶ 42 and Attachment N; ¶43 and Attachment 0; ¶ 44 and Attachment P).

The notices were adopted without participation by persons knowledgeable of the need to adapt the notices to the needs of the mentally impaired. (Plaintiffs’ Exhibit No. 50, Johnson Deposition at 108-09). There was not any field testing of the notices appropriateness for that population. Id. If an enrollee who receives a reverification notice does not call for an appointment, then within a few days, the TDHS caseworker schedules an appointment that the person can reschedule. Id. at 56-59. If a person calls the designated state helpline, that employee will work with TDHS to secure necessary assistance. Id. at 61.

The notice to these enrollees instructs them to provide medical records, without providing guidance as to the type or quantity required. (Defendant’s Exhibit No. 1, Johnson Declaration, Attachment B, at unnumbered page 10; Attachment O, Part A, TennCare Application for Determination of Health Insurance Status, at 2; Docket Entry No. 380, Blackburn Testimony at 43-44; Docket Entry No. 381, Westlake Testimony at 29-30).

As stated earlier, the eligibility interview was expected to last 1 hour, but the Court finds that estimate is unreasonable given the complexity of the Medicaid eligibility rules, the numbers of documents to be reviewed and the existence of substantial number of enrollees who have a mental disability.

If an application is not submitted by the eighty-ninth (89th) day after the first notice, then the enrollee’s TennCare coverage terminates on the 90th day with a right to reinstatement of continuous coverage upon filing an appeal within 30 days after the ninety-day termination date. (Defendant’s Exhibit No. 1, Johnson Declaration ¶ 13). If an application is submitted, there is a 45-day period to complete the application. (Defendant’s Exhibit No. 1, Johnson Declaration ¶ 15).

This 45 day period begins on the date the signed application was received during which the en-rollee must have a redetermination interview with a TDHS worker. Id. Although TDHS caseworkers have the discretion to extend the 45-day deadline for good cause, the initial notices to current enrollees do not inform enrollees of the availability of such an extension to enable the enrollee to request an extension. Id., ¶ 16 and Attachment B.

The termination of coverage notices to individuals for failing to complete the eligibility process in 45 days is silent on the good cause exception. (Defendant’s Exhibit No. 1, Johnson Declaration, Attachments F and N). For the 45-day period after the signed application, there was a factual dispute between the Defendant’s expert and the TDHS Deputy Commissioner on the scope of TDHS’s eligibility review.

Cyndy Johnson, the Defendant’s consultant, explained that “[i]f they don’t get us everything that the Bureau needs to make that decision, they will get a notice that tells them at the end of the 45 days, your application has been denied because its incomplete. And it will tell them that these are a number of good cause reasons why you may appeal and ask for more time. And it lists those reasons.” (Docket Entry No. 380, Johnson Testimony at 144). Johnson further testified that: Q. The situation where the person simply fails to complete the Medicaid process, but it is documented that they are, in fact, eligibl

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