Reversing rulings for quadriplegic, 7th Circuit asks ‘how much’ court may order state to pay

A quadriplegic woman requiring nearly around-the-clock care was stripped of a federal court ruling permitting her to dictate the terms of her own home health care at the state’s expense. In so ruling, the 7th Circuit Court of Appeals asked, “How much state expenditure outside the scope of the Medicaid program may a court command?”

The case involves Hoosier Karen D. Vaughn, who was awarded summary judgment by Chief Judge Jane Magnus Stinson after she sued the Indiana Family and Social Services Administration over its failure to provide her with in-home care.

After she became sick with pneumonia in 2016, Vaughn was cleared for discharge from the hospital after about a week, but the state could not find suitable home health providers, so she was placed in a nursing home against her wishes. Vaughn sought permission to self-direct her care, a request supported by her doctor and the hospital’s social worker. In some cases, she would permit trained non-nurse attendants to handle routine tasks.

Magnus-Stinson ultimately issued a permanent injunction requiring the state to “‘do whatever is necessary to achieve the result’ that Vaughn wanted: round‐the‐clock home‐based care, fully paid for by the state,” The state complied, spending funds outside those it was reimbursed for under Medicaid, but also appealed summary judgment in Vaughn’s favor and the injunction.

The 7th Circuit Court of Appeals reversed and vacated both rulings Wednesday in Karen Vaughn v. Jennifer Walthall, et al., 19-1244, and remanded for proceedings.

“The district court, apparently thinking that some reshuffling of Medicaid funds was possible, thought that it was reasonable for Indiana to direct the FSSA to provide whatever care Vaughn needs. We do not read the law and regulations that way,” Judge Diane Wood wrote for the panel. “Indiana contends, and we agree, that only if the accommodations comport with federal requirements for Medicaid service approval and funding must it offer them. If, on the other hand, federal requirements preclude the changes Vaughn wants, Indiana need not go outside its approved programs and relinquish federal reimbursement.”

The panel noted that an Indiana pilot program that began in May 2020 and permits self-directed skilled medical care may meet Vaughn’s medical needs at home. However, the panel remanded decisions of the district court it deemed too broad.

“This case is about Indiana’s Medicaid program, not its general social‐welfare regime. It is thus troublesome for the court to issue an injunction requiring Indiana to furnish Vaughn’s care entirely out of its own funds, unreimbursed and unsupplemented by Medicaid. Today it is Vaughn, but it easily could be someone else tomorrow. How much state expenditure outside the scope of the Medicaid program may a court command? We could understand this kind of order if one of the conditions of the Medicaid program itself required this action, but we cannot find any such provision in the federal statute or regulations,” Wood wrote.

“We say this with great sympathy for people who find themselves in Vaughn’s situation. Indeed, never have we seen a time when the advantages of home‐based, community‐integrated provision of services to the disabled have taken on greater importance,” the panel noted, citing the COVID-19 pandemic, during which 44% of deaths in Indiana have occurred in nursing homes.

“It is entirely understandable that people strongly prefer to avoid institutional living arrangements,” Wood wrote. “Nonetheless, our task is only to determine whether Vaughn is entitled to the services she has requested under Indiana’s version of the Medicaid program. We have concluded that, as the program was structured before the state adopted its new pilot program, the answer is no. That means that the permanent injunction entered by the district court must be vacated.

“Vaughn is entitled to receive at‐home care by providers of her choosing only to the extent that, working with the state, she can craft a program that complies with federal and state law and does not deprive Indiana of the ability to receive its share of federal reimbursement through the Medicaid program for services provided. The state is not obligated to reimburse Vaughn’s providers at rates above the approved Medicaid caps, nor must it use funds outside the Medicaid program to comply with a rule about accommodation within the program,” the panel concluded.