State Medicaid Program Must Pay For Woman’s Knee Surgery


Indiana resident Petricia Day seemed to be caught in a bureaucratic Catch-22. She needed help paying for her medical treatment. Her problem: Indiana’s interpretation of federal Medicaid rules prevented her from getting the treatment because it might be successful.

Medicaid is a federal program partially paid for and administered by individual states, and so the rules vary somewhat depending on the state of residence. Indiana’s Medicaid eligibility rules at the time of Ms. Day’s problem required that the applicant suffer from a condition that is “reasonably certain to continue throughout the lifetime” of the applicant.

Ms. Day’s medical problem was not that untreatable. She needed surgery to completely replace her right knee, but physicians believed that after the surgery she would recover nicely and no longer experience medical problems with her knee.

Ms. Day could not afford to pay for her knee surgery. Because of her limited resources she met the financial qualifications for Medicaid coverage. Her application was denied, however, because the state agency determined that her condition was treatable. In other words Ms. Day could not afford medical care she needed, but Indiana’s Medicaid program would not provide the treatment precisely because it would cure Ms. Day’s condition.

Ms. Day filed a class action against the State of Indiana on behalf of all patients denied treatment under the state rules. Her case wound through the Indiana courts for several years, including one trip to the Court of Appeals and the state Supreme Court in 1997. The case was sent back to the trial court for further hearings, and the judge in the case granted a judgment in favor of Ms. Day. Although Indiana had changed its rules in the intervening years, the State appealed for the second time to the Court of Appeals.

Indiana’s argument hinged on a provision of federal law which permits states to have restrictive Medicaid eligibility rules. That law, usually referred to as “section 209(b),” allows states to utilize restrictive eligibility rules provided that they are no more restrictive than the state’s rules in 1972, when the federal Supplemental Security Income (SSI) program’s national eligibility standards were implemented.

The logical question in Ms. Day’s case might have been whether she needed medical care she could not afford to pay for. That was not, however, the question addressed by the Indiana Medicaid agency or the courts. The court had good news for Ms. Day, however: it held that Indiana law in 1972 would have covered Ms. Day’s medical needs, and so she had to be covered under current rules. Indiana Family and Social Services Administration v. Day, September 29, 2000.

Arizona does not apply the so-called “209(b)” rules, and Ms. Day’s eligibility would have been determined under federal standards had she lived in Arizona. Only a handful of states utilize Indiana’s approach to Medicaid eligibility.

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