ATTORNEYS FOR APPELLANT: ATTORNEYS FOR APPELLEE:
MILO G. GRAY, JR. KAREN M. FREEMAN-WILSON
GARY W. RICKS Attorney General of Indiana
Indiana Protection and Advocacy Services EILEEN EUZEN
Deputy Attorney General
COURT OF APPEALS OF INDIANA
ROBERTA NOLAND, )
vs. ) No. 49A02-0004-CV-245
INDIANA FAMILY AND SOCIAL SERVICES )
ADMINISTRATION, DIVISION OF )
DISABILITY, AGING, AND )
REHABILITATIVE SERVICES, )
VENITA MOORE, in her official )
Capacity as Secretary of the Family and )
Social Services Administration, and )
KATHLEEN M. WILSON, in her official )
Capacity as Assistant Secretary of the )
Division of Disability, Aging, and )
Rehabilitative Services, )
APPEAL FROM THE MARION SUPERIOR COURT
The Honorable Richard H. Huston, Judge
Cause No. 49D10-9811-MI-1539
February 28, 2001
OPINION - FOR PUBLICATION
Roberta Noland appeals the revocation of her Intermediate Care Facility for the Mentally
Retarded (ICF/MR) Medicaid community based waiver services. Because we find that the
Administrative Law Judge (ALJ) and Family and Social Services Administration (FSSA) adjudicated her
eligibility using the wrong standard, we reverse and remand.
Facts and Procedural History
Noland was born on May 17, 1947. Record at 192. She
is diagnosed as having spinabifida with myelomeningocele, paraplegia, mental retardation, and hiatal hernia.
She also has a suprapubic catheter due to a bladder condition.
In 1988, Nolands full scale IQ was 51 on the Stanford Binet Intelligence
Scale and in 1997 she tested 74 on the Wechsler Adult Intelligence Scale-Revised
Test. Record at 434. She is non-ambulatory and uses a wheelchair.
She is unable to transfer out of her wheelchair without assistance.
In 1996, the Family and Social Services Administration (FSSA) qualified Noland for placement
in an Intermediate Care Facility for the Mentally Retarded (ICF/MR). As allowed
under the Medicaid act, once Noland qualified for placement in an intermediate care
facility, the FSSA waived her placement and funded her for community based services.
Put differently, her funding for community based services was contingent upon qualifying
for placement in an ICF/MR. On October 3, 1997, the FSSAs Office
of Medicaid Policy and Planning (OMPP) found that Noland no longer qualified for
ICF/MR placement and, thus, she was deemed ineligible for Medicaid based waiver services.
OMPP denied Noland an ICF/MR waiver because she did not require twenty-four
hour care. Noland appealed the OMPPs decision. Following an evidentiary hearing,
the Administrative Law Judge (ALJ) affirmed the denial. In deciding that Noland
no longer qualified for ICF/MR placement, the ALJ found that Based on her
level of independent functioning . . . Ms. Noland does not require 24
hour supervision, direct or indirect. Record at 438. The FSSA affirmed
the ALJs decision. Noland filed a petition for judicial review. The
trial court entered findings of fact, conclusions of law and judgment denying Nolands
petition on March 27, 2000. In doing so, the trial court stated:
While the ALJ and agency focused on a 24-hour care requirement, the law
as identified in Partlow and applied to the facts found by the ALJ
in this case demonstrate that the ALJ correctly concluded that Ms. Noland did
not require the active treatment essential to a ICF/MR placement.
Record at 160. This appeal followed.
Discussion and Decision
Standard of Review
Our review of an administrative decision is limited to determining whether the administrative
agency possessed jurisdiction over the matter, and whether the agencys decision was made
upon substantial evidence, was not arbitrary or capricious, and was not in violation
of any constitutional, statutory or legal principles. Ind. Code § 4-21.5-5-14; Shoot
v. FSSA, 691 N.E.2d 1290, 1292 (Ind. Ct. App. 1998). The burden
of proving that the agencys action was an abuse of discretion or arbitrary
and capricious rests with the party attempting to upset the administrative order.
Partlow v. FSSA, 717 N.E.2d 1212, 1214 (Ind. Ct. App. 1999).
Courts that review administrative determinations, at both the trial and appellate level, are
prohibited from reweighing the evidence and judging the credibility of witnesses and must
accept the facts as found by the administrative body. Shoot, 691 N.E.2d
at 1292. An interpretation given a statute by an administrative agency charged
with the duty of enforcing the statute is entitled to great weight.
Ind. Dept. of Natural Res. v. United Minerals, Inc., 686 N.E.2d 851, 854
(Ind. Ct. App. 1997), trans. denied. However, an agencys interpretation which is
incorrect is entitled to no weight. Id. While evidence before an
administrative agency will not be reweighed by the reviewing court, where the agencys
finding is contrary to law, it shall be reversed. Id. If
an agency misconstrues a statute, there is no reasonable basis for the agencys
ultimate action. Id. Therefore, the trial court is required to reverse
the agencys action as being arbitrary and capricious. Id. In construing
a statute or administrative regulation, courts must begin with the language of the
statute or regulation itself. See Partlow, 717 N.E.2d at 1214. Words
must be given their plain and ordinary meaning and the statute or regulation
must be construed as a whole looking to its object and policy.
Upon appeal, Noland contends that she has been erroneously denied an ICF/MR waiver.
Specifically, she argues that the FSSA and the ALJ improperly required her
to need twenty-four hour supervision in order to qualify for the ICF/MR waiver,
which is wrong as a matter of law. She also argues that
if the law in fact requires twenty-four hour care, the trial court abused
its discretion because the evidence supports that she does require twenty-four hour supervision.
Finally, she claims that the trial court abused its discretion by upholding
the denial of waiver services on the grounds she did not require active
care when neither the FSSA nor the ALJ made any findings and neither
party had presented argument previously on the issue of active care. We
address each argument in turn.
A. Twenty-Four Hour Supervision
First, Noland argues that she was erroneously denied ICF/MR waiver services because the
ALJ and FSSA applied the wrong standard. In finding her ineligible for
ICF/MR waiver services, the ALJ and FSSA held that Noland was required to
show she needed twenty-four hour supervision. She contends that applying that standard
to an individual was wrong as a matter of law. The State
counters that a recipient must require twenty-four hour supervision in order to qualify
for ICF/MR waiver services and, thus, no error occurred.
We agree with
In order to determine whether an error occurred, we must examine
the statute and regulations at issue. To be eligible for Medicaid waiver
services, an individual must first meet the eligibility requirements for admission into an
ICF/MR. 42 C.F.R. § 441.301(b)(iii)(C). Once eligibility in such a facility is
determined, participating states can provide funding for Home and Community waiver services to
eligible individuals. 42 U.S.C. § 1396 et. seq.
An ICF/MR is defined as:
[A]n institution (or distinct part thereof) for the mentally retarded or persons
with related conditions if
(1) the primary purpose of such institution (or distinct part thereof) is to
provide health or rehabilitative services for mentally retarded individuals and the institution meets
such standards as may be prescribed by the Secretary;
(2) the mentally retarded individual with respect to whom a request is made
under a plan approved under this subchapter is receiving active treatment under such
42 U.S.C. § 1396(d). An institution for the mentally retarded or person
with related conditions means an institution that:
(a) is primarily for the diagnosis, treatment, or rehabilitation of the mentally retarded
or persons with related conditions; and
(b) provides, in a protected residential setting, ongoing evaluation, planning, 24-hour supervision, coordination,
and integration of health or rehabilitative services to help each individual function at
his greatest ability.
42 C.F.R. § 435.1009 (emphasis added). When determining whether an individual qualifies
for placement in an ICF/MR, a State must:
[M]ake a qualitative judgment on the extent to which the persons status reflects,
singly and collectively, the characteristics commonly associated with the need for specialized services,
Take care of most personal care needs;
Understand simple commands;
Communicate basic needs and wants;
Be employed at a productive level without systematic long term supervision or support;
Learn new skills without aggressive and consistent training;
Apply skills learned in a training situation to other environments or settings without
aggressive and consistent training;
Demonstrate behavior appropriate to the time, situation or place without direct supervision; and
Make decisions requiring informed consent without extreme difficulty;
Demonstration of severe maladaptive behavior(s) that place the person or others in jeopardy
to health and safety; and
Presence of other skill deficits or specialized training needs that necessitate the availability
of training MR personnel, 24 hours per day, to teach the person functional
42 C.F.R. § 483.136(c)(2) (emphasis added). We examine each regulation in turn.
B. Active Care
Under 42 C.F.R. § 435.1009 an institution for the mentally retarded is one
that provides . . . twenty-four hour supervision . . . to help
each individual function at his greatest ability. This places the burden of
providing twenty-four hour supervision on the institution. However, the regulation does not
state that individuals must require twenty-four hour supervision in order to qualify for
the services. Thus, the twenty-four hour standard is a facility-based requirement, not
a patient-based requirement.
The language of 42 C.F.R. § 483.136(c)(2) directs a State to make a
qualitative judgment regarding the characteristics associated with the need for specialized services.
Specifically, this regulation mandates the examination of many characteristics of the mentally retarded
individual. Among the characteristics it directs a State to examine is whether
an individual possesses other skill deficits or specialized training needs that necessitate the
availability of training MR personnel, 24 hours per day, to teach the person
functional skills. 42 C.F.R. § 483.136(c)(2). However, the regulation does not
indicate that any one characteristic is dispositiveincluding a need for twenty-four hour supervision.
Further, the regulation does not require that a recipient possess every characteristic
listed in order to qualify for ICF/MR care. This is clear because
the language of the regulation focuses on judging the extent to which the
persons status reflects, singly and collectively, the characteristics commonly associated with the need
for specialized services, including . . . . 42 C.F.R. § 483.136(c)(2)
(emphasis added). The use of the word including implies a non-exhaustive list
of characteristics that an individual may possess rather than characteristics that an individual
must possess. Thus, the language of the regulation does not necessitate finding
that an individual requires twenty-four hour supervision in order to receive ICF/MR placement.
To the contrary, it supports using a broader and more inclusive examination
of an individuals situation and abilities which may include, but is not limited
to, a need for access to twenty-four hour supervision.
Furthermore, requiring the recipient to need twenty-four hour supervision defeats the structure and
purposes of the waiver program. States may qualify to provide Home and
Community Based Waivers under the Medicaid Act, 42 U.S.C. § 1396 et seq.
Waiver services are intended to provide home and community based care to
individuals who would otherwise be institutionalized. See 42 U.S.C. § 1396a(a)(10)(A)(ii)(VI); 42
U.S.C. § 1396n(c). If the law required an individual like Noland to
need twenty-four hour supervision in order to qualify for waiver services, she would
be better served in an institution. Instead, the waiver program allows
an individual who needs active care, but not care twenty-four hours a day
the opportunity to receive the needed care in a less restricted setting.
Therefore, requiring Noland to need twenty-four hour care would defeat the purpose of
the waiver program.
In addition, waiver services are intended for particular groups of people for whom
such care would be cheaper than the institutionalization care they would otherwise need.
Skandalis v. Rowe, 14 F.3d 173, 174 (2d Cir. 1994) citing 42
U.S.C. § 1396 a(a)(10)(A)(ii)(VI) and 1396n(c). Thus, waiver services are intended to
provide less expensive non-institutional care to individuals who would otherwise be institutionalized in
a more expensive situation. Under the waiver program, the costs must not
exceed the costs of services absent a waiver. 42 C.F.R.§ 441.303(f)(1).
If waiver services were only available to persons who needed twenty-four hour care,
no one would ever qualify for waiver services. The cost of providing
twenty-four hour care in a non-institutionalized setting would always exceed the cost of
providing twenty-four hour care in an institutionalized setting.
Based on the language of the applicable regulations and the structure and purpose
of the waiver system, we find that requiring a recipient to need twenty-four
hour supervision in order to qualify for the Medicaid waiver is wrong as
a matter of law. As we have determined that the ALJ applied
the erroneous twenty-four hour supervision standard, we need not reach Nolands argument regarding
whether the evidence supported finding that she required twenty-four hour supervision.
Next, Noland asserts that the trial court erred by affirming her denial using
the active care standard when the ALJ had relied on the twenty-four hour
supervision standard. Specifically, she contends that the trial court substituted its judgment
for that of the FSSA, violating the Administrative Orders and Procedures Act (AOPA)
when its findings went beyond the record before it. The State argues
that under Partlow v. FSSA, 717 N.E.2d 1212 (Ind. Ct. App. 1999), the
trial courts decision denying Noland ICF/MR waiver services because she does not require
active treatment is appropriate and correct as a matter of law.
Turning to Partlow, we are unconvinced by the States argument. In Partlow,
Carl Partlow, who had been diagnosed with slight mental retardation, appealed the denial
of his placement in an ICF/MR. On appeal, he argued that the
denial of his placement in an ICF/MR was contrary to law because it
was undisputed that he was mentally retarded. The State argued that eligibility
for ICF/MR placement is conditioned not upon mental retardation, but upon an individuals
need for active treatment in an ICF/MR. This court agreed with the
State. Id. at 1216.
As we found in Partlow, an ICF/MR must provide active treatment in order
to receive Medicaid funding. Id. In order to provide active treatment
services as defined by federal regulations:
(1) Each client must receive a continuous active treatment program, which includes aggressive,
consistent implementation of a program of specialized and generic training, treatment, health services
and related services described in this subpart, that is directed toward
The acquisition of the behaviors necessary for the client to function with as
much self determination and independence as possible; and
The prevention or deceleration of regression or loss of current optimal functional status.
(2) Active treatment does not include services to maintain generally
independent clients who are able to function with little supervision or in the
absence of a continuous active treatment program.
42 C.F.R. § 483.440(a). Furthermore, 42 CFR § 483.440(b)(1) provides that [c]lients
who are admitted by the facility must be in need of and receiving
active treatment services.
Partlow can be distinguished from this case. In reaching our decision that
Partlow was not eligible for ICF/MR placement, this court noted that both the
ALJ and the trial court specifically concluded in their decisions that Partlow was
not in need of active treatment. Partlow at 1216.
Here, the issue of active care was not adjudicated at the administrative level
whereas, in Partlow, active care had been an issue in the case before
it reached the trial court. Therefore, while Partlow provides the proper standard
to be used when determining whether an individual qualifies for ICF/MR placement, it
does not change the outcome in the instant case because here the trial
court tried the cause de novo and substituted its judgment for that of
the administrative agency.
Active treatment is the standard under which the FSSA and the ALJ should
have examined Nolands case. Because the FSSA and the ALJ failed to
apply the proper standard and the trial court went beyond the scope of
the record, we reverse and remand for the ALJ to determine whether Noland
qualifies for a Medicaid based waiver using the active treatment standard.
Reversed and remanded.
KIRSCH, J., and NAJAM, J., concur.
The State also contends that Noland waived this argument by relying
on an unpublished circuit court opinion. It is inappropriate to cite trial
See Ind. Dept. of Natural Res. v. United Minerals, Inc.,
686 N.E.2d 851, 857 (Ind. Ct. App. 1997). However, we prefer to
decide appeals on the merits rather than a procedural technicality. See Wright
v. Elston, 701 N.E.2d 1227, 1231 (Ind. Ct. App. 1998), trans. denied.
Thus, we address the merits of Nolands argument.