Nebraska Department of Health & Human Services v. Department of Health & Human Services

435 F.3d 326, 369 U.S. App. D.C. 214, 2006 U.S. App. LEXIS 2005, 2006 WL 196538
CourtCourt of Appeals for the D.C. Circuit
DecidedJanuary 27, 2006
DocketNo. 04-5429
StatusPublished
Cited by27 cases

This text of 435 F.3d 326 (Nebraska Department of Health & Human Services v. Department of Health & Human Services) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nebraska Department of Health & Human Services v. Department of Health & Human Services, 435 F.3d 326, 369 U.S. App. D.C. 214, 2006 U.S. App. LEXIS 2005, 2006 WL 196538 (D.C. Cir. 2006).

Opinion

Opinion for the Court filed by Chief Judge GINSBURG.

GINSBURG, Chief Judge.

The United States Department of Health and Human Services (HHS) appeals from a judgment of the district court vacating three policy announcements for lack of notice and comment rulemaking and ordering approval of a cost allocation plan (CAP) submitted by the State of Nebraska Department of Health and Human Services (Nebraska). Because Nebraska challenged only HHS’s rejection of its proposed CAP, the district court erred in vacating the announcements. The court also abused its discretion when it determined the CAP should be approved rather than remanding the matter for the Department to reconsider its decision without reference to the policy announcements.

I. Background

The Congress has enacted several statutes aimed at improving child welfare services provided by the several States. Title IV-E of the Social Security Act, 42 U.S.C. § 670 et seq., makes funds available to state programs that offer “foster care and transitional independent living programs for children” and “adoption assistance for children with special needs.” Id. § 670. Title IV-B of the Act, id. § 620 et seq., offers federal funds to “State public welfare agencies in [order to] establish[ ], extend[], and strengthen[] child welfare services.” Id. § 620(a). The amount of money a State may receive under Title IV-B is capped, see id., whereas under Title IV-E a State may obtain reimbursement without limit for 75% of the costs it incurs to train employees, see id. § 674(a)(3)(A).

In order to obtain reimbursement under Title IV-E, a State must submit to the HHS Division of Cost Allocation (DCA) a CAP detailing the State’s expenditures. See 45 C.F.R. § 95.517(a) (limiting financial assistance to that provided “in accor[216]*216dance with [a State’s] approved [CAP]”). A question that arises when a State prepares its CAP is how it should allocate expenditures that benefit more than one federal program. See id. § 95.507(a)(4) (DCA evaluates “correctness and fairness” of State procedures for “allocating all costs to each of the programs operated by the State agency”). For example, each child protection and safety worker (PSW) in Nebraska handles cases under Title IV-B and, we are told, is “expected to handle” cases under Title IV-E. Nebraska therefore must determine how to allocate the costs of training PSWs between the two programs. Title IV-E cases constitute only 21.5% of all child welfare cases the PSWs manage but, left to its own devices, Nebraska could allocate all PSW training costs to Title IV-E and thus avoid the cap on reimbursement under Title IV-B.

Not surprisingly, therefore, allocation decisions have been constrained by those who pay the piper. The federal Office of Management and Budget has instructed the States to allocate their costs so as to produce “an equitable result in consideration of relative benefits derived” by each federal program. Cost Principles for State, Local and Indian Tribal Governments, 60 Fed.Reg. 26,484, 26,492 (May 17, 1995). The Administration for Children and Families (ACF, formerly ACYF) within HHS, which oversees Title IV-E programs, adopted a similar requirement of proportional allocation in three policy announcements, Allowable Administrative Costs of the Foster Care Program Under Title IV-E of the Social Security Act, ACYF-PA-87-05 (Oct. 22, 1987); Federal Financial Participation in the Costs of Training for Employees of the State Title IV-E Agency, Foster Parents, Adoptive Parents and Employees of Private Child Placing and Child Care Agencies, ACYFPA-90-01 (June 14, 1990); and Allocation of Costs for All Training Under the Title IV-E Program, ACF-IM-91-15 (July 24, 1991), each requiring that States allocate the costs of training child welfare workers “to Title IV-E, State foster care and other State/Federal programs in such a manner as to assure that each participating program is charged its proportionate share of the costs.”

Despite the ACF’s repeated instruction to allocate costs proportionately, Nebraska submitted a CAP that allocated all the costs of training its PSWs to Title IV-E and the DCA approved it in 1993. In 1996, the DCA realized its mistake and directed Nebraska henceforth to allocate training costs among all benefitting programs. Nebraska submitted a new CAP but continued to charge all training costs for 1996 through 1999 to Title IV-E. The DCA responded in 1999, invoking the three ACF announcements and directing the State to allocate its expenditures proportionately among all benefitting programs. Instead, Nebraska challenged the DCA’s disapproval before the Departmental Appeals Board (DAB), where it argued the three ACF announcements were invalid because they had been issued without the notice and comment required for rule-making by the Administrative Procedure Act, 5 U.S.C. § 553. The Board rejected this argument and upheld the DCA’s decision, after which Nebraska sought review in the district court.

The State sought declaratory and injunctive relief from the court, to wit: (1) “a declaration that DCA’s disapproval actiop and the Board’s decision upholding DCA’s action are contrary to law,” and (2) “an injunction restraining HHS from disapproving the State’s CAP and from refusing to pay 75% of the total costs that Nebraska incurs to train its foster care workers.” Compl. ¶ 10. The court granted summary judgment in favor of Nebraska on the ground that HHS had treated the ACF announcements as “binding rule[s]” with[217]*217out having followed the requisite notice and comment procedure. Although Nebraska had not challenged the future applicability of the ACF announcements, the court said in a memorandum opinion that it would vacate the three announcements and “reinstate the agency’s previous practice of approving primary program cost allocation plans” until HHS lawfully promulgated a new regulation. In its separate order, however, the court did not vacate the announcements, which caused some confusion.

The district court also determined it could itself “fully resolvef ] the issue of the approvability of Nebraska’s disputed CAP provision.” In order to determine what HHS’s “previous practice” of approval had been, the court consulted a 1985 policy memorandum written by the Commissioner of the ACYF and a 1984 letter to New York State written by another HHS official.

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Bluebook (online)
435 F.3d 326, 369 U.S. App. D.C. 214, 2006 U.S. App. LEXIS 2005, 2006 WL 196538, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nebraska-department-of-health-human-services-v-department-of-health-cadc-2006.