A federal judge overstepped his authority by ordering that qualified recipients of home health assistance under Medicaid get services within 90 days of requesting an eligibility hearing, an appeals court ruled yesterday.

While a three-judge panel of the U.S. Court of Appeals for the Second Circuit unanimously affirmed Southern District Judge Richard Holwell’s (See Profile) determination that Medicaid recipients are entitled to a fair hearing over their entitlement to home health care, it rejected his injunction stipulating that services must start within 90 days of a hearing request.

Instead, the circuit ruled in Shakhnes v. Berlin, 11-2003-cv, that the 90-day limit laid out in the regulation providing for home services sets a limit for the “issuance of hearing decisions”—not to the actual delivery of those services.

The circuit remanded the case to the Southern District with instructions to remove Holwell’s “impermissibly broad” directive. A new judge will consider the issue as Holwell resigned in February.

“The injunction here at issue is…overbroad because it compels Defendants to implement the relief ordered in a fair hearing decision within the regulation’s 90-day time frame, despite the fact that the regulation imposes on Defendants no such obligations,” Judge Chester Straub (See Profile) wrote for the circuit panel. He was joined by Judges Ralph Winter (See Profile) and Denny Chin (See Profile).

In his 2011 order in the case, Shakhnes ex rel. Shakhnes v. Eggleston, 06 Civ. 4778, Holwell discussed the meaning of the federal regulatory language that a “final administrative action” must be undertaken by Medicaid administrators within 90 days of a client’s request for a hearing.

According to Holwell, “final administrative action” means that Medicaid administrators must have “taken all actions necessary to implement the relief ordered” within 90 days of a hearing request.

“We do not agree with the District Court’s construction of ‘final administrative action,’” the circuit ruled. “That phrase is not defined in the Medicaid Act or in the applicable regulations. But the structure, text and drafting history of the applicable regulations, together with a review of administrative law principles and other statutory and regulatory provisions, convince us that ‘final administrative action’ does not include the implementation of relief ordered in fair hearing decisions.”

The circuit upheld Holwell’s finding that the regulations implementing Medicaid’s home health care law, 41 C.F.R. §431.244(f), require that potential recipients receive both hearings and eligibility decisions within 90 days of a hearing request.

The circuit also upheld Holwell’s interpretation that Medicaid’s law providing for home services, 42 U.S.C. §1396a(a)(3), applies to all clients, including those inside and outside a Medicaid HMO billing system.

Holwell had granted the plaintiffs class-action status in 2010.

Under New York’s Medicaid system, the state Office of Temporary and Disability Assistance has been designated as the agency to conduct hearings, with the state Department of Health having the power to make a final eligibility determination.

The suit decided yesterday named the two state agencies as defendants, along with Elizabeth Berlin, executive deputy commissioner of the Office of Temporary and Disability Assistance and Dr. Nirav Shah, the state’s health commissioner.

The suit also named Verna Eggleston, New York City Human Resources Administration commissioner as a defendant. The state Health Department is responsible for coordinating home health services for eligible recipients outside New York City and the Human Resources Administration arranges for home health care aid for city residents.

Assistant state solicitor general Simon Heller argued for the state agencies.

Sandra Hauser of SNR Denton and Yisroel Schulman and Jane Greengold Stevens of the New York Legal Assistance Group represented the plaintiffs.

Stevens, director of litigation, applauded the circuit’s upholding of Holwell’s recognition of the right to a fair hearing. But she said her group is “unhappy” the panel did not recognize the 90-day time frame for the commencement of services.

“What good does it do you to get a decision if it does not get implemented in a timely fashion?” she asked.

Schulman said the state not only has failed to begin offering services within 90 days of a hearing, but it also fails more than one-third of the time to render decisions within 90 days.

Hauser said the state has a requirement to provide services within 90 days of a hearing, and the plaintiffs lawyers could shift focus to put the onus on the state to comply with its rule.