New law may negate ruling against Medicaid office

staff writerJuly 1, 2011 

A disabled man and his family won a legal case that prevents the state Medicaid office from imposing new rules for a mental health program without taking the public notification steps required of other state agencies.

But any long-lasting changes may be negated by a new law that will significantly reshape local mental health services and give the state Department of Health and Human Services authority to set rules without the usual public notices.

DHHS is still considering how the court decision fits into the new mental health and regulatory landscape, according to department spokeswoman Renee McCoy. In addition to the new direction for mental health, a bill that restricts agencies' abilities to adopt new rules also passed the legislature, but Gov. Bev Perdue vetoed the rules bill Thursday.

But a lawyer who supported the lawsuit said it's already clear that the new mental health law blunted the court victory.

"The department is now free to change benefits, eligibility criteria, to change standards, basically by memorandum," said John Rittelmeyer, a lawyer with the advocacy group Disability Rights North Carolina. Rittelmeyer formally supported the lawsuit brought by the parents of Jonathan McCrann, an adult with multiple physical and mental disabilities.

They sued the state after it changed the rules for a special Medicaid program designed to keep disabled people out of institutions. McCrann received help for more than 10 years from a caregiver who helped him with the daily activities that allowed him to live in a group home.

In 2005, DHHS changed the rules of that program, with the approval of the federal Medicaid office, and said it would no longer cover outside aid for people living in group homes. McCrann's parents fought back, saying DHHS could not change the rules without adhering to a state law that requires public notice, comment and the formal review of a state commission.

The courts agreed. The state Appeals Court ruled for McCrann in January and the Supreme Court decided a few weeks ago that it would not review it. As the case was taking its final step through the courts, legislators were debating significant changes in how local mental health offices manage patient care.

Freedom from the usual rule-making standards was required for the state to pursue its plan to mold local mental health services into managed care programs, said Rep. Nelson Dollar, a Cary Republican. The McCrann suit and its implications were not a factor in crafting the new law, he said.

Dollar sees the new law with a more limited reach than does Rittelmeyer. The authority to change rules without the standard notice applies only to the state's efforts to make coordination of community mental health care operate like managed care, Dollar said.

lynn.bonner@newsobserver.com or 919-829-4821

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