CLS Files Class Action Lawsuit to Prevent Severe Health Benefit Cuts under Healthy Pennsylvania Initiative

On December 22, 2014, Community Legal Services (CLS), with co-counsel from the National Health Law Program (NHeLP), filed Diao v. Mackereth, a class action lawsuit to prevent significant health benefits cuts under Governor Corbett’s Medicaid overhaul, the Healthy Pennsylvania initiative.

Diao v. Mackereth alleged that adult Medicaid recipients were assigned through an opaque process and without adequate notice to health benefits packages which would provide significantly less coverage than their previous Medicaid plans. Plaintiffs sought a preliminary injunction before Healthy Pennsylvania went into effect on January 1, 2015. On December 31, the United States District Court for the Eastern District of Pennsylvania denied the motion for a preliminary injunction, finding that Plaintiffs did not meet requirements for class certification and did not demonstrate that they would suffer irreparable harm without an injunction. The case will continue to move forward in court.

Last year, Medicaid and state-funded Medical recipients were assigned to one of three benefits packages effective January 1, 2015, “Healthy Plus,” “Healthy,” and “Healthy PA Private Coverage Option (PCO).” Healthy Plus most resembles the previous Medicaid benefits package and of the three provides the most coverage. However, aside from pregnant women, seniors, and some individuals with serious and long-term disabilities, only those considered medically frail were eligible. Adults ineligible for Healthy Plus were assigned to either Healthy or Healthy PA PCO, both of which contain severe benefits cuts. Diao v. Mackereth contested that the Pennsylvania Department of Human Services (DHS), the state’s Medicaid agency, violated the Social Security Act and the Due Process Clause of the Fourteenth Amendment to the United States Constitution in the way they implemented benefits cuts. Namely, the DHS placed recipients into new benefits packages using standards that are murky at best and provided them with inadequate notice about the change in their plans.

Recipient placement was determined by three secret algorithms. The first was a “claims determination process” software algorithm through which the DHS identified medically frail adult Medicaid recipients. The DHS never informed recipients of how the algorithm would analyze claims data. Recipients who believed their new Healthy or Healthy PCO benefits package would not meet their medical needs completed a screening questionnaire which was run through another undisclosed algorithm. Those who were deemed medically frail through this step would have to undergo yet another review process (“clinical validation”) involving a third secret algorithm in order to secure Healthy Plus benefits long-term. The DHS has refused to disclose call scripts or standards involved in clinical validation.

The DHS also provided inadequate notice to recipients. Pre-transition letters were misleading and deceptive. Rather than notifying recipients that their coverage would be limited, the letters claimed that Healthy Pennsylvania would “ensure that Pennsylvanians have increased access to quality affordable healthcare.” The letters did not detail the differences between the Healthy and Healthy Plus plans, most importantly how the Healthy plans were significantly less generous than Healthy Plus. Moreover, there was a very short time frame provided for recipients to complete a screening questionnaire if they believed their new package would not sufficiently cover their medical needs. Transition notices purported to give recipients ten days to appeal but in fact gave some less; some letters were postmarked after the dates printed on them. Finally, recipients faced difficulty in understanding the letters and attaining accurate information when they inquired.

Click here to read the full complaint.

On December 31, 2014, the United States District Court for the Eastern District of Pennsylvania denied the motion for a preliminary injunction. The Court declared that the Plaintiffs 1) did not meet the requirements for class certification, which is a preliminary requirement for a class-wide injunction, and 2) failed to prove their entitlement to a mandatory injunction. The court found that the Plaintiffs have not demonstrated that their named representatives are typical of the class, citing Plaintiff Gregory McCowin who submitted a timely appeal of his assignment to the Healthy PA PCO plan and was automatically placed, pending his hearing, into the Healthy Plus program, which will cover the non-emergency transportation he needs given his medical situation. The court also borrowed the Defendants’ argument that there can be no typical class representative. Given the wide age range and disparate medical needs of the class, members would be affected in diverse ways by the benefits cuts.

While the court conceded that the DHS’s notices were inadequate, it declared that the Plaintiffs did not demonstrate that they will suffer irreparable harm without a preliminary injunction. Namely, the Plaintiffs did not show how many members of the class need transportation for their medical situations. The court also noted that emergency transportation is not covered under Healthy PA PCO “precisely because it is ‘non-emergency’ transportation.” Finally, the court said that the Plaintiffs failed to show that the balance of equities tips in their favor or that their motion is in the public interest. The court deemed that the potential costs of providing relief to Plaintiffs through state renegotiations with the federal government well outweigh the harm suffered by class members from the benefits cuts.

Kristen Dama, Staff Attorney of Community Legal Services commented, “The judge expressed concern that DHS’s notices were inadequate, but he could not issue a preliminary injunction for technical reasons at this early stage of the lawsuit. We respect the judge’s decision. But we are very disappointed that our very low-income clients with medical problems were hurt by DHS’s benefits cuts on January 1. We look forward to working to ensure that our clients’ constitutional rights are protected as the case moves forward.”