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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us) STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 6052 April 12, 1982 COUNTIES: Administrative authority of county departments of social services County departments of social services to reimburse state department of social services 'Hospital cost index' provision of 1979 PA 216 CONSTITUTIONAL LAW: Const 1963, art 9, Sec. 29, (Headlee amendment) SOCIAL SERVICES, DEPARTMENT OF: County department of social services to reimburse state department of social services WORDS AND PHRASES: 'Hospital cost index' 1939 PA 280; Sec. 66i requires county departments of social services to reimburse the state for expenditures at a rate not less than that which they would have reimbursed hospitals for the same services in the last full fiscal year which preceded the effective date of 1979 PA 216, October 1, 1980; county departments are required to increase or decrease such rate of reimbursement annually thereafter consistent with changes in the 'hospital cost index' utilized in adjusting 'title 19' Medicaid reimbursement. Assuming that there is no decrease in the number of eligible persons seeking hospitalization services, the county department of social services board must provide the same funding in 1980 and 1981 as in 1979, plus the amount attributable to the hospital cost index adjustment, if any. Where the billings resulting from hospitalization of eligible persons are more than the amount budgeted therefor, the county must provide additional funds to cover such billings. The hospital cost index provision of amendatory 1979 PA 216 is not violative of Const 1963, art 9, Sec. 29. County departments of social services boards have authority to adopt administrative measures to achieve cost savings in addition to making eligibility requirements more restrictive. Honorable David C. Hollister State Representative The Capitol Lansing, Michigan You have asked four questions with respect to 1979 PA 216, which amended the Social Welfare Act, 1939 PA 280; MCLA 400.1 et seq; MSA 16.401 et seq. 1979 PA 216 amended 1939 PA 280, supra, Secs. 66 and 66a and added Sec. 66i. Your questions are: 1. Must the county department of social services board provide the same amount of funding in 1980 and 1981 as in 1979 according to 1979 PA 216? 2. If the county department of social services board has billings resulting from hospitalization of eligible citizens that totals more than the amount budgeted for this purpose, is the board required to provide additional monies for their billings? 3. Does the requirement to spend at the rate in effect for 1979 plus the hospital cost index adjustment violate Const 1963, art 9, Sec. 29, as amended? 4. If the county desires that the total contribution for adult hospitalization must remain the same as in 1979, then is it true that the only alternative available under 1979 PA 216 is to make the eligibility criteria more restrictive, which by definition screens out persons previously eligible? 1979 PA provides, in pertinent part: 'Sec. 66. As to those forms of relief which are in no part financed by state or federal funds, the decision of the county or district department of social services as to the denial, granting, form, and amount of that relief shall be final, except as provided in section 66i. This section does not prevent the state department from making investigations, collecting statistics, and otherwise gaining information concerning the administration of welfare in any county or district as the state department considers advisable. 'Sec. 66a. The county social welfare boards shall make provision for hospitalization which is necessary and not more advantageously provided to the recipient under other law or provided under other sections of this act for every person found in their respective counties under rules of financial eligibility established by the boards and shall be reimbursed 100% by the state for the monthly net cost of the hospitalization for nonresidents of the state. The county department, in its discretion, may direct that the patient be conveyed to the university hospital at Ann Arbor or any other hospital for hospitalization. As used in this act, 'hospitalization' means medical, surgical, or obstetrical care in the university hospital or in a hospital licensed under article 17 of Act No. 368 of the Public Acts of 1978, as amended, being sections 333.20101 to 333.22190 of the Michigan Compiled Laws, together with necessary drugs, x-rays, physical therapy, prosthesis, transportation, and nursing care incidental to the medical, surgical, or obstetrical care, but shall not include medical care as defined in section 55. Before a patient shall be admitted except in an emergency, to any hospital other than the university hospital, a definite agreement, statement, or schedule of charges, expenses, and fees to be received by the hospital and physicians or surgeons performing necessary services under this act shall be filed with the county department of the county in which the hospital is located and approved by the county department, except as provided for in section 66i. The hospital shall, at the conclusion of the treatment, make a report of the treatment and an itemized statement of the expenses of the treatment to the county department which issued the order, but charges for special nurses shall not be made without the consent of the county social welfare director. The expenses for sending the patient home or to other institutions after being discharged from the hospital may be paid by the hospital and charged in the regular bill for maintenance unless different instructions have been received from the county department which issued the order for admission. 'Sec. 66i. (1) The state department shall reimburse the hospital in accordance with established hospital reimbursement principles under title 19 of the social security act, 42 U.S.C. 1396 to 1396k. Reimbursement will be based on eligibility information provided to the state department by the county department. '(2) A county department of social services shall reimburse the state for payments made under this section for hospitalization of persons determined by the county department to be eligible for hospitalization under section 66a at a rate not less than the county department reimbursed hospitals during the county department's full fiscal year immediately before the effective date of this section. A county reimbursement rate shall be adjusted annually and consistent with the changes in the hospital cost index utilized in reimbursement under title 19 of the social security act, 42 U.S.C. 1396 to 1396k in relationship to the full year immediately before the effective date of this section. However, this subsection does not require the county department to reimburse the state for the cost of the hospitalization for nonresidents of this state. '(3) The rules of financial eligibility established pursuant to section 66a in a county required to make reimbursements under this section shall not be made less restrictive than the rules in effect in the county during the county department's full fiscal year immediately before the effective date of this section.' Your questions concern the effect of the new section 66i, which requires that the reimbursement of hospitals for services provided under the county department of social services' county hospitalization, (1) shall now be made by the Michigan Department of Social Services in accordance with the state's hospital reimbursement principles under 'title 19 of the social security act.' (2) Responding to your first question, it is my opinion that 1939 PA 280, Sec. 66i, supra requires county departments of social services to reimburse the state for such expenditures at a rate not less than than which they would have reimbursed hospitals for the same services in the last full fiscal year which preceded the effective date of 1979 PA 216, October 1, 1980. Furthermore. the county departments are required to increase or decrease such rate of reimbursement annually thereafter consistent with changes in the 'hospital cost index' (3) utilized in adjusting 'title 19' Medicaid reimbursement. Presuming that there is no decrease in the number of eligible persons seeking hospitalization services, the county department of social services board must provide the same funding in 1980 and 1981 as in 1979, plus the amount attributable to the hospital cost index adjustment, if any. In your second question, you ask whether a county department of social services board is required to provide additional monies for county hospitalization where the billings under the program exceed the amount budget therefor. In this connection, the Social Welfare Act, supra, Sec. 70, provides in pertinent part: 'The county board of supervisors shall, within its discretion, make such appropriations as are necessary to maintain the various welfare services within the county, as provided in this act, and to defray the cost of administration of these services.' This provision was interpreted by the Michigan Court of Appeals in King, v Director of the Midland County Department of Social Services, 73 Mich App 253,259; 251 NW2d 270 (1977), wherein the issue addressed was whether the county may suspend the general assistance program when its appropriations therefor run out. The court noted that the language of the foregoing section is mandatory in that the county board of supervisors 'shall . . . make such appropriations as are necessary' to maintain the welfare services required under the Social Welfare Act, supra. (Emphasis added.) This mandatory section, when read in pari materia with the language which provides that the county 'shall' administer a program of general relief, Social Welfare Act, supra, Sec. 55, caused the court to conclude that the county board of supervisors was required by law to appropriate such funds as are necessary to operate a general relief program. The words 'within its discretion,' in the Social Wefare Act, Sec. 70, supra, were found by the court to accord discretion only with respect to those welfare services which the county was not mandated to provide. Inasmuch as the Social Welfare Act, supra, Sec. 66a provides that the county social services boards shall make provision for hospitalization, (4) it is my opinion, in response to your second question, that where the billings resulting from hospitalization of eligible persons are more than the amount budgeted therefor, the county must provide additional funds to cover such billings. In your third question, you ask whether the requirement that the county reimburse the state at the rate in effect for 1979, plus the 'hospital cost index,' violates the 'Headlee Amendment,' Const 1963, art 9, Sec. 29, which provides: 'The state is hereby prohibited from reducing the state financed proportion of the necessary costs of any existing activity or service required of units of Local Government by state law. A new activity or service or an increase in the level of any activity or service beyond that required by existing law shall not be required by the legislature or any state agency of units of Local Government, unless a state appropriation is made and disbursed to pay the unit of Local Government for any necessary increased costs. The provision of this section shall not apply to costs incurred pursuant to Article VI, Section 18.' (5) As noted in OAG, 1977-1978, No 5417, p 740 (December 20, 1978), in interpreting constitutional amendments, it is necessary to consider the circumstances surrounding their adoption and the purposes which they were intended to accomplish. City of Jackson v Commissioner of Revenue, 316 Mich 694; 26 NW2d 569 (1947). In that regard, the following ballot description was provided to the voters and they presumably relied thereon in adopting the Headlee Amendment: 'PROPOSAL FOR TAX LIMITATION. 'The proposed amendment would: '1. Limit all state taxes and revenues, excepting federal aid, to its current proportion of total state personal income and to provide for exception for a declared emergency. 2. Prohibit local government from adding new or increasing existing taxes without voter approval. 3. Prohibit the state from adopting new or expanding present local programs without full state funding. 4. Prohibit the state from reducing existing level of aid to local governments, taken as a group. 5. Require voter approval of certain bonded indebtedness.' (Emphasis added.) Thus, the circumstances surrounding the adoption of Const 1963, art 9, Sec. 29 indicate that when the people approved the constitutional language in question, they understood and intended such language to prevent increases in local taxes and, to prohibit the state from requiring local governments to expand existing programs or initiate new programs without full state funding. 1979 PA 216, supra, does not require the counties to adopt a new program, nor does it expand the scope of the existing county hospitalization program. Rather, it merely changes the county hospitalization payment system from direct county payment to direct state payment with county reimbursement. No additional types of services are called for, nor are new categories of individuals mandated to be covered. The mere requirement that the counties reimburse the state at their previous payment levels, plus the hospital cost index, does not amount to an expansion of the program itself. The counties would, due to inflation, presumably have had to increase their hospitalization reimbursement even absent amendatory 1979 PA 216. Moreover, counties may, at their discretion, maintain program expenditures at current levels by making more restrictive individual financial eligibility requirements. Thus, the state has not mandated an increase in overall program spending. Any increased cost resulting from increased payment rates would thus not be a state mandated 'necessary' increased cost, as that term is used by the people in Const 1963, art 9, Sec. 29. In response to your third question, it is my opinion that the hospital cost index provision of amendatory 1979 PA 216 is not violative of Const 1963, art 9, Sec. 29. In your last question, you inquire whether the only alternative available under amendatory 1979 PA 216 for a county desiring to maintain its 1979 spending level for county hospitalization is to make its eligibility criteria more restrictive. Such an alternative is authorized under the Social Welfare Act, supra, and is not prohibited by amendatory 1979 PA 216. The question of what other administrative measures may be available to achieve cost savings is one to be addressed by the county department of social services board. The Social Welfare Act, supra, Sec. 55(m) accords general authority to the county departments of social services, of which the county social services board is a part, to administer the county hospitalization program. The Social Welfare Act, supra, Sec. 66(3), as added by 1979 PA 216, only prohibits counties from making eligibility requirements for the program less restrictive, indicating that the Legislature considered the question of changes in eligibility requirements and presumably recognizes that the counties may change such requirements. In response to your fourth question, it is my opinion that the county department of social services board has the authority to adopt administrative measures to achieve cost savings in addition to making eligibility requirements more restrictive. In summary, it is my opinion that, pursuant to amendatory 1979 PA 216, supra, a county department of social services board must provide the same amount of funding in 1980 and 1981 as in 1979, plus the amount calculated under the hospital cost index, if any. Such board is required to provide sufficient monies to cover all billings for eligible persons under the county hospitalization program. A county may make its eligibility criteria for the hospitalization program more restrictive for the purpose of maintaining local expenditures for the program at their current levels. The requirement that a county reimburse the state is not violative of Const 1963, art 9, Sec. 29. Frank J. Kelley Attorney General (1)
(2)
Title XIX of the Social Security Act, Sec. 1901 et seq, 79 Stat 343 et seq (1965), 42 USC 1396 et seq, is the federal statute which governs the joint state-federally funded 'Medicaid' program which provides for the payment of the medical expenses of individuals who are financially otherwise unable to obtain necessary medical services.(3)
The 'hospital cost index' is a composite of an inflation factor, a volume factor and an intensity factor which is established in accordance with the provisions of Attachment 4.19-A of the Michigan State Medicaid Plan approved by the United States Department of Health and Human Services. I am advised by the Michigan Department of Social Services that such index is compiled quarterly by the department and, for the period October through December, 1980 and January through September, 1981, has been calculated as requiring increases in hospital reimbursement at respective annual rates of 9.7 percent and 11.3 percent.(4)
It should be noted that the Legislature amended 1939 PA 280, Sec. 46, by means of 1967 PA 60 to change the name of the county social welfare board to county social services board. See OAG, 1979-1980, No 5693, p 740 (April 24, 1980).(5)
Although there is also similar provision made in Const 1963, art 9, Sec. 25, prohibiting state mandated increases in local program activity, Const 1963, art 9, Sec. 29 is at least as restrictive in such regard, if not more restrictive.
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