Schweiker v. Hogan

The Respondents brought this suit challenging the constitutional validity of § 1903(f) of the Social Security Act (the Act); they claimed it violated the equal protection component of the Fifth Amendment.

Under the Medicaid program, States were required to provide Medicaid coverage to certain individuals described as the “categorically needy” and, at their discretion, could also provide coverage to other individuals described as the “medically needy.” States also established the income limits and eligibility standards of recipients. Massachusetts was one State that had elected to provide Medicaid coverage to the “medically needy.”

Section 1903(f) of the Act required States to impose certain criteria for Medicaid eligibility or federal reimbursement would be restricted. It specifically provided that:

• Federal reimbursement to States electing to provide Medicaid benefits to the “medically needy” was available only if the income of those persons, after deduction of incurred medical expenses, was less than 133 1/3% of the state Aid to Families With Dependent Children (AFDC) payment level; and
• The “categorically needy” were exempted from this rule. These were persons receiving Supplemental Security Income (SSI) because they constituted a class of aged, blind, or disabled persons lacking sufficient income to meet their basic needs.

In Massachusetts, the implementation of § 1903(f) resulted in a distribution of Medicaid benefits to the “categorically needy” that was more generous than the distribution of such benefits to the “medically needy” Respondent class. The Respondent class of “medically needy” was comprised of aged, blind or disabled persons receiving Social Security benefits (Federal Old-Age, Survivors, or Disability Insurance) in an amount rendering them ineligible for SSI benefits. They received these benefits because either they or their spouse had previously been employed and had paid Social Security taxes. For the purposes of medical expenses, the respondents were essentially self-supporting.

The Respondents brought this claim challenging the fact that, since 133 1/3 percent of the Massachusetts AFDC payment level was lower than the SSI payment level, they were ineligible for Medicaid until their income, after deduction of incurred medical expenses, was less than that of the “categorically needy.” The Respondents thus claimed that they had less income available for nonmedical expenses than individuals who, “possibly because they never worked and received no Social Security benefits,” were dependent upon State support.

The District Court ruled in favor of the Respondents, holding that the Massachusetts Medicaid program was unconstitutional in forcing Social Security recipients to incur medical expenses that reduced their remaining income to an amount below SSI payment levels. This appeal followed.

The Court held that the optional character of the Medicaid program for the “medically needy” did not violate constitutional principles of equal protection. The Court declared that a “decision to allocate medical assistance benefits only to the poor [did] not itself violate constitutional principles of equality.” It explained that the poor were the “most needy” and that “in terms of their ability to provide for essential medical services, the wealthy and the poor [were] not similarly situated and [did not need to be] treated the same.” It was therefore “rational to distribute public assistance benefits on the basis of the income and resources available to potential recipients.”

The Court held that § 1903(f) was constitutionally valid as applied in Massachusetts, as it did not violate constitutional principles of equal protection by denying the “medically needy” Medicaid benefits if their income was lower than that of a “categorically needy” individual. The Court stated that while “powerful equities support[ed] the Respondent’s claim of unfair treatment,” “a decision to allocate scarce assistance benefits on the basis of an assumption that persons with greater incomes generally [were] better able to prepare for future medical needs [was] not inconsistent with constitutional principles of equal treatment.”

The Court explained that just as a State may deny all benefits to the medically needy while providing benefits to the categorically needy, a State may also “narrow the gap between the two classes by providing partial benefits to the medically needy, even though certain members of that class may remain in a position less fortunate than those on public assistance.” The Court held that just because a State has chosen to provide benefits to the medically needy, medical need did not have to be the sole standard of a State’s entire Medicaid program.

The Court further held that the discrimination allowed by § 1903(f) was consistent with the intention of the Act and that such discrimination was in fact required by the Act. It explained that the legislative history of the Medicaid provisions of the Act did not justify a departure from the literal language of § 1903(f); that § 1903(f)'s literal and clear language did not conflict with any other provision of the Act; and that adherence to that section's language was consistent with its interpretation by the Secretary of Health and Human Services.

“It is clear that a decision to allocate scarce assistance benefits on the basis of an assumption that persons with greater incomes generally are better able to prepare for future medical needs is not inconsistent with constitutional principles of equal treatment. In other words, it is rational to define need on the basis of income, even though some persons with greater income — who have been unable or unwilling to save enough of their earnings to prepare for future medical needs — may actually be in greater need of assistance than those with less gross income. Although some ‘medically needy’ persons have less income available for nonmedical expenses than those who receive categorical assistance, the broad legislative classification does not involve the type of arbitrariness that is constitutionally offensive.” 457 U.S., p. 591.