GAB Decision 260

February 26, 1982 Joint Consideration - Abortion Funding

Illinois Department of Public Aid;

Docket Nos. 80-135-IL-HC, 80-138-IL-HC, 80-136-IL-HC, 80-143-IL-HC,

Virginia Department of Health;

Docket No. 80-125-VA-HC;

Massachusetts Department of Public Welfare;

Docket No. 81-14-MA-HC Ford, Cecilia; Garrett, Donald Settle, Norval

The States of Illinois, Massachusetts, and Virginia appealed
disallowances by the Health Care Financing Administration (Agency) of
federal financial participation (FFP) claimed under Title XIX of the
Social Security Act (Medicaid) for the costs of medically necessary
abortions which did not meet the requirements of the "Hyde Amendment."
/1/ The States argued that the Agency should participate in payments for
the non-Hyde abortions because the States were directed to make those
payments by federal court orders.

Based on our analysis of the record, which includes the written
submissions of the parties and the information presented at a
conference, as recorded in the transcript (Tr.), these appeals must be
denied. The (2) Board concludes that the clear language of the Hyde
Amendment restricted the Agency's authority to expend federal funds for
abortions and that this restriction was not overcome by court orders
which did not direct the Agency to make payments. /2/

I. The Disallowances

The disallowance letters alleged that the States failed to document
that the abortions for which FFP was claimed were within the limitations
of the Hyde Amendment, as required by the implementing regulations at 42
CFR 449.100-109 (later amended and recodified as 42 CFR 441.200-208).

Illinois appealed disallowances totalling $965,399 in FFP for the
period from August 5, 1977 to September 30, 1979; Virginia appealed
$30,240 in FFP disallowed for the period from April 21 to May 25, 1978
and Massachusetts appealed $16,947 disallowed for the period from
December 1, 1977 to December 31, 1978. /4/

(3) II. Background: The Federal Court Injunctions

Illinois, Virginia, and Massachusetts were, for most of the time
periods involved in these disallowances, under federal court orders to
pay for certain abortions sought by Medicaid-eligible women. /5/ The
legal basis under which the orders were issued varied, as did their
scope and duration. The extent of the federal government's involvement
in the cases also varied, though none of the court orders directed HHS
or the federal government to take any action. Some procedural
background of the litigation which led to the court orders is helpful in
understanding the States' arguments.

(4) A. Illinois

Illinois was enjoined from enforcing a State statute which paralleled
the Hyde Amendment as a result of a suit filed in the U.S. District
Court for the Northern District of Illinois, in December 1977. The
District Court ordered the State to pay for all "therapeutic" (medically
necessary) abortions sought by indigent women based on its determination
that Title XIX of the Social Security Act (Act) required such payment.
The U.S. Court of Appeals for the Seventh Circuit reversed the District
Court, holding that the Hyde Amendment amended Title XIX, and that under
the Act, as amended, the State could limit Medicaid funding to the
categories covered by the Hyde Amendment. The Court of Appeals directed
the District Court to consider the constitutionality of the Hyde
Amendment and ordered it to modify its injunction so as to require the
State to pay only for abortions "fundable under the Hyde Amendment." The
federal government intervened at this stage to defend the
constitutionality of the federal statute. On remand the District Court
held that both the Illinois statute and the Hyde Amendment were
unconstitutional in permitting the State to deny funding for medically
necessary abortions performed prior to fetal viability; and on April
30, 1979, entered a Final Order which required the State to pay for
those abortions. The State (and the federal government) took a direct
appeal to the Supreme Court. In June 1980, the Supreme Court held that
the Hyde Amendment and the State statute were constitutional, and said
that States participating in the Medicaid program were not required to
pay for medically necessary abortions for which federal reimbursement
was unavailable under the Hyde Amendment. Williams v. Zbaraz, 448 U.S.
358 (1980). Illinois was under court orders to pay for non-Hyde
abortions for the periods from January 11 to March 15, 1978, May 15,
1978 to February 15, 1979 and April 30, 1979 to June 30, 1980.

B. Virginia

Medicaid recipients filed suit in the U.S. District Court for the
Eastern District of Virginia to enjoin the State from amending its State
Plan for Medicaid Assistance to restrict payments on a basis similar to
the Hyde Amendment. Based on the plaintiffs' claim that the State's
policy denied Medicaid coverage for all but a narrow class of
therapeutic abortions and was therefore unconstitutional and contrary to
the federal Medicaid program, the Court issued a temporary restraining
order on April 21, 1978. The Order enjoined the State from refusing to
expend Medicaid funds to pay for all therapeutic abortions sought by
Medicaid recipients. The injunction was vacated on May 25, 1978 when
the District Court dismissed the suit. The Court said that the State
Plan amendment limiting funding to abortions where the life of the
mother was endangered did not exclude (5) medically necessary
therapeutic abortions, but eliminated "only reimbursement for abortions
for which there are no good medical reasons." (Doe v. Kenley, Civ. No.
78 218 A (E.D. Va. May 25, 1978), p. 3) Virginia was therefore under
court order to pay for non-Hyde abortions for the period from April 21
to May 25, 1978.

C. Massachusetts

Two groups of plaintiffs filed suit in the U.S. District Court for
the District of Massachusetts in July 1978, claiming that State
statutory limitations on abortion funding, which were more restrictive
than the Hyde Amendment, were unconstitutional and conflicted with
provisions of the federal Medicaid program. The District Court ordered
Massachusetts to pay for the costs of abortions in which FFP was
available under the Hyde Amendment. It was not until the Court of
Appeals for the First Circuit expanded that preliminary injunction in
August, that the State was ordered to pay for all medically necessary
abortions provided to Medicaid-eligible women. Later, the District
Court entered the Court of Appeals version of the injunction as its
Final Order. On appeal, the Court of Appeals affirmed only that portion
of the District Court's order which directed the State to pay for
abortions allowable under the Hyde Amendment. (See, Preterm, Inv. v.
Dukakis, 591 F.2d 121 (1st Cir. 1979), cert. denied, 441 U.S. 952,
rehearing denied, 444 U.S. 888 (1979))

In December 1979, the State filed a third party complaint in District
Court against the Secretary of HHS, which claimed in part that Title XIX
required federal reimbursement for the Medicaid funded abortions
performed during the period of the District and Circuit Court
injunctions or, alternatively, that the Hyde Amendment was
unconstitutional. The District Court dismissed the case as moot when,
on June 30, 1980, the Supreme Court declared in McCrae v. Harris, supra,
that the Hyde Amendment was constitutional and that states need not make
Medicaid expenditures for abortions for which federal reimbursement is
unavailable. The State appealed to the U.S. Court of Appeals in July
1980. The Court originally delayed consideration of the appeal until
the State's Supreme Judicial Court issued a decision in a case
challenging the State statute which limited payments for abortions. The
State court decided its case in February 1981, finding that
Massachusetts should fund all medically necessary abortions, based on
the guarantee of due process in the State's constitution. (See, Mary
Moe et al. v. Secretary of Administration and Finance, Mass. Adv. Sh.
(1981) 464) The State's appeal of the District Court's dismissal of its
suit is still pending before the First Circuit Court of Appeals.
Massachusetts was under court orders to pay for non-Hyde abortions for
the period from August 7, 1978 to June 30, 1980.

(6) III. FFP in Payments Made Pursuant to Federal Court Orders

We start from the premise that, but for the Hyde Amendment, FFP could
be available under Medicaid for the type of abortions involved in these
cases. It is also generally undisputed that, but for the federal court
orders, the States would not be entitled to FFP for the costs of
non-Hyde abortions. Further, the parties agreed that if the courts had
instructed the Agency to participate in the payments for abortions, the
Agency would have made payments regardless of the restrictions of the
Hyde Amendment.

The unresolved issue is the effect of the federal court orders
enjoining the States from enforcing the limitations on payments for
abortions, which did not also order the Agency to take any action.

The States maintained that the Agency was obligated to provide FFP in
payments pursuant to those orders because Congress never intended FFP to
be unavailable where a State was required to provide a medical service;
the injunctions did not have to be directed against the federal
government in order to obligate the Agency; and an Agency regulation
provided for participation in court ordered payments. /6/ We discuss
these three interrelated issues separately below.

A. Medicaid and Co-operative Federalism

The States argued that when a federal court compelled a State to make
Medicaid expenditures, the Agency as a partner in this program of
"cooperative federalism," was obliged to provide the corresponding FFP.
They cited the following language from the Supreme Court's decision in
McCrae v. Harris as support for that proposition: /7/

(7) The Medicaid program created by Title XIX is a cooperative
endeavor in which the Federal Government provides financial assistance
to participating States to aid them in furnishing health care to needy
persons. Under this system of "cooperative federalism," . . . if a
State agrees to establish a Medicaid plan that satisfies the
requirements of Title XIX, which include several mandatory categories of
health services, the Federal Government agrees to pay a specified
percentage of "the total amount expended . . . as medical assistance
under the State plan. . . . " The cornerstone of Medicaid is financial
contribution by both the Federal Government and the participating State.
Nothing in Title XIX as originally enacted, or in its legislative
history, suggests that Congress intended to require a participating
State to assume the full costs of providing any health services in its
Medicaid plan. Quite the contrary, the purpose of Congress in enacting
Title XIX was to provide federal financial assistance for all legitimate
state expenditures under an approved Medicaid plan. . . .

. . . Title XIX was designed as a cooperative program of shared
financial responsibility, not as a device for the Federal Government to
compel a State to provide services that Congress itself is unwilling to

(McCrae at pp. 308-09)

(8) The States argued that regardless of the legal basis for the
court orders in the appeals before us (whether failure to pay for the
therapeutic abortions violated the plaintiffs' constitutional rights or
because the Hyde Amendment violated the substantive requirements of
Title XIX), the States were mandated to pay for all medically necessary
abortions and reasonably anticipated that they would receive FFP for the
expenditures under Medicaid. They said that payment for all medically
necessary abortions under a court order was a legitimate Medicaid
expenditure since the State had no choice but to comply.

The Agency admitted that there is a federal - state partnership in
the Medicaid program but contended that "(not) every aspect of the
program will hinge on facilitating that partnership. . ." (Tr., p. 24)
The Agency maintained that "the courts can order the States to make
payments, even within what the court would consider the general scope of
the Medicaid program, without it necessarily following that the federal
government is considered a partner financially." (Tr., p. 25) In support
of that claim the Agency referred to Moe v. Secretary of Administration
and Finance, the Massachusetts State Court decision discussed above, and

In Moe . . . the Massachusetts Supreme Judicial Court expressly
recognized that federal law precluded FFP for many kinds of abortion.
In spite of that, the court ordered the state government to pay for
abortions for otherwise Medicaid-eligible individuals. Here was an
instance in which a court ordered state payments knowing that the
medical procedures were outside the scope of the federal program. . . .
The Moe decision is one illustration of why it would be untenable for
the federal government to follow a policy of allowing FFP solely because
of the existence of a court order against a state. A court might
readily order medical assistance payments for reasons having little or
nothing to do with federal law or the scope of a federal program.

(Agency Response, July 8, 1981, pp. 2-3)

The Agency said further that although there was a general Agency
policy of reimbursing states for court ordered services under Medicaid,
that policy was clearly subject to specific congressional requirements,
and modified by the limitations imposed by the Hyde Amendment. /8/ The
Agency (9) argued that as part of the appropriations legislation, the
Hyde Amendment:

(was) the kind of limitation that the Agency could not overcome no
matter what its policy was, no matter what the nature of the Social
Security Act scheme was, because it is a specific limitation on the
ability of the Agency to expend funds.

(Tr., pp. 28-29)

There is an apparent logic in the States' claim that, as a partner in
the Medicaid program, the Agency should share in Medicaid payments the
States made pursuant to court order. But while the logic may support
the States, the law does not. The States' reliance on the language in
the McCrae v. Harris decision is understandable but misplaced. The
Court did determine that Congress did not intend, and Title XIX did not
require, the States to pay for medically necessary abortions for which
federal reimbursement is unavailable. But the Court did not take the
next step and find that the Agency should therefore participate in
payments the States had already made. The Supreme Court again had an
opportunity to reach that conclusion in Williams v. Zbaraz, supra, which
on that same day decided the issue in the Illinois litigation. The
Court in Zbaraz also stated that the States did not have to pay for
services if federal reimbursement was unavailable, but did not make any
holding regarding FFP in the payments Illinois made at the direction of
the lower federal courts.

That Congress may not have intended the States would have to pay for
non-Hyde abortions, and may not have anticipated that courts would order
the States to make payments under the circumstances that transpired in
these cases, is not the issue here. The issue is whether Congress
intended that there be FFP in payments for abortions. There is no
indication in McCrae or Zbaraz that the concept of cooperative
federalism could bind the Agency to expend funds for abortions for which
funding was prohibited by the Hyde Amendment. Those cases adjudicated
the obligation of the States to make payments under Medicaid, not the
Agency's obligation to participate in those payments. Congress clearly
expressed its intent that the Agency could not expend funds for
abortions except as specified in the Hyde Amendment. Given that the
abortions for which FFP was claimed were admittedly not within the scope
of the Amendment, the only remaining question is whether any force
existed which would supercede or overcome the specific statutory

The Board concludes that the Agency clearly was not unreasonable in
determining that the general concept of cooperative federalism
underlying Medicaid was insufficient to overcome the specific stricture
of the limitation on appropriations. We are not dealing in this case
with (10) a question of Agency interpretation of a substantive provision
of the Medicaid statute; rather, we are dealing with a specific
limitation in appropriation acts on how the Agency may spend money
appropriated by those acts. It is clear that sums appropriated:

shall be applied solely to the objects for which they are
respectively made, and for no others.

(31 U.S.C. 628) However equitably compelling the circumstances may
be, a federal officer cannot pay funds except in accordance with the
limitations on the use of those funds in the law appropriating them.
(Cf., Greene County Planning Board v. F.P.C., 559 F.2d 1227, 1239 (2d
Cir. 1977), cert. denied, 434 U.S. 1086 (1978))

B. Legal Effects of an Injunction

The States contended that the injunctions under which they made
payments also bound the Agency to participate and therefore superceded
the Hyde Amendment's limitations on expenditures.

The States argued that the injunction did not have to be specifically
directed to or specifically name the federal government in order to
operate against it. They claimed that there was no statute or
regulation which required injunctions to run against the federal
government to be enforceable against it. The States further argued that
it would not make sense for the Agency to be obligated to participate in
payments only when an order was directed against it. They maintained
that orders of the courts would always be directed at the States as the
administrators of the Medicaid program. The States argued, as an
example, that in Illinois, the Agency was a party to the proceedings at
the time that the constitutionality of the Hyde Amendment was
adjudicated, but still the court ordered action by the State.

Illinois maintained that the order against the State in effect
nullified the enforceability of the Hyde Amendment, and therefore, the
Agency could not rely on the Amendment to deny FFP for the costs of

During the period the Hyde Amendment was enjoined it was not the law
of the land in Illinois. That's what an injunction in Illinois means.
The Hyde Amendment was unenforceable. It did not exist according to an
order of the court. It wasn't there.

(Tr., p. 41)

(11) According to the States, the courts would not have had reason to
enter an injunction against the Agency because it never ceased supplying
the States with funds for use in court ordered payments for abortions.
The States maintained that since the Agency continued funding, there was
no action or irreparable injury to the States to be enjoined.
(Post-hearing Brief, pp. 1-2) The States also claimed that under the
concept of exhaustion of administrative remedies, the courts would not
have issued an injunction prior to an administrative determination of
the issues.

The Agency rejected the States' contentions that an injunction does
not have to be directed at the federal government to be enforceable, and
stated that a party "would (not), as a matter of course, participate in
an injunction except to the extent that it wanted to and except to the
extent that it was required to do so by a court." (Tr., p. 26) The
Agency asserted that "an order of the court is binding on parties to
whom it is addressed, and not necessarily upon others." (Id.)

The Agency maintained simply that if the States wanted to insure that
they would receive FFP for the payments they made pursuant to court
orders, they should have brought the federal government in as a party:

There is a correct way to bind the federal government in court --
that is, to name the federal government as a party and to convince the
court that an injunction should be issued against the federal

(Tr., p. 27)

The Agency dismissed the argument that an injunction could not have
been issued against the federal government because Medicaid funding did
not cease. The Agency countered this claim by explaining that payments
to states under the Medicaid program are made through an advanced
funding scheme based on quarterly estimates by the states of sums to be
expended in that quarter. The Agency explained that those estimates are
later revised to reflect funds actually spent, and that under this
method of funding, the Agency enforces funding limitations by means of a
disallowances against expenditures. The Agency argued that the
disallowance action was the Agency's first opportunity to enforce the
Hyde Amendment, "since the Agency has no control over state expenditures
other than to examine such expenditures after the fact." (Post-hearing
Brief, pp. 2-3)

(12) We agree with the States that it may have resulted in a fairer
distribution of the costs if the injunctions requiring them to pay for
abortions also operated against the Agency, and therefore overcame the
prohibitions in the Hyde Amendment, but the States have not shown that
the injunctions ordering the States to take action were legally binding
against the Agency.

An injunction is a judicial order whereby someone is required to do,
or refrain from doing certain acts. (See, United Bonding Insurance Co.
v. Stein, 410 F.2d 483 (1969)) The court orders at issue directed the
States to reimburse providers of health care for abortions; they did
not specify that the States should be reimbursed from federal funds.
The injunctions did not address the matter of federal funding of
abortions, or federal reimbursement of State payments for abortions.
Even the District Court in Illinois, which specifically considered the
constitutionality of the Hyde Amendment, did not direct any federal
action. The Court in Zbaraz addressed the Hyde Amendment only as it
affected the State's ability to make payments. It did not rule that the
Hyde Amendment's limitation on federal funding of abortions was
unconstitutional, just that the Amendment could not constitutionally
permit the State to deny funding. The Order said:

The Hyde Amendment . . . as construed . . . to permit Illinois to
deny funding under its Medical Assistance (Medicaid) Program . . . for
any medically necessary abortion performed prior to viability, violates
the Fifth Amendment to the United States Constitution.

The relief ordered by the Court was to permanently enjoin the State's
Director of Public Welfare from:

enforcing Illinois' restrictive funding policy . . . to deny payments
under the Illinois medical assistance programs for medically necessary

When the Supreme Court ruled in this case, the Court specifically
noted that when the District Court enjoined Illinois from enforcing the
State statute denying payment, "the District Court did not, however,
enjoin any action by the United States." (Williams v. Zbaraz, supra, at
366) Even if we were to read the Order as directed at the federal
government, the Order could only be read as restraining the federal
government from preventing the State payments for the abortions.

(13) Even if the States are correct -- that the courts had no reason
to refer to reimbursement by the Agency in their orders -- this would
not support their claim for FFP in costs for which Congress denied
funds. The courts did not order the Agency to take action, and the fact
that the States did not request it has to be at least a contributing
factor. In Illinois, the federal government was present in the suit and
the State could have requested the court to consider the State's right
to be reimbursed for the payments the Court ordered it to make.
Massachusetts apparently realized that FFP could be denied in the court
ordered payments because it filed suit against the Agency' and requested
the Court to find that the Agency was obligated to participate in those
payments. It is still possible that Massachusetts will be granted
relief in that forum. The States could have sought to implead the
Agency as a third party defendant and petitioned the courts to enjoin
the Agency from denying FFP, or could have taken any other step which
would have resulted in an order requiring the Agency to participate in
those payments. The States argued that it seemed unnecessary and was
impractical to take such action at the time. However, because their
claims are based not on what the courts ordered, but on a speculation of
what the courts would have intended had the issue been raised, we cannot
agree with the State's view of the effect the Agency must give the

C. The Effect of Section 205.10(b)(3)

The States argued that the Agency's own regulations required federal
participation in payments made pursuant to the federal court orders
regardless of whether an injunction also ran against the Agency. The
States' position was based on a regulation which stated that FFP was
available for:

Payments of assistance within the scope of Federally aided public
assistance programs made in accordance with a court order.

(45 CFR 205.10(b)(3) (1978), recodified at 42 CFR 431.250(b)(2)

The States also argued that this Board has interpreted the regulation
to require FFP for court ordered payments if the payments were made in
accordance with regulatory requirements other than those which are the
subject of the court order, citing Ohio Department of Public Welfare,
Decision No. 173, April 30, 1981.

The Agency initially argued that the States' payments in accordance
with the injunctions did not meet the regulatory certification and
documentation requirements, and therefore did not come within the "scope
of federally aided public assistance programs." The Agency later argued,
however, that regardless of the interpretation given section (14)
205.10(b)(3), that section is superceded by the specific restrictions of
the Hyde Amendment. The Agency elaborated:

In the Ohio case, the Board was able to rule an apparent conflicts
between regulatory provisions and guidelines. In that context, it is
possible for the Board to act as final administrative authority in
granting FFP through a construction of 45 C.F.R. 205.10(b)(3) favorable
to the state. In the instant case, however, . . . regulatory
construction cannot be the basis for awarding FFP where it has been
forbidden by statute. In short, whatever interpretation might be given
to 45 C.F.R. 205.10(b)(3), it must be considered as subject to any
limitations Congress enacts, such as the Hyde Amendment.

(Agency Response, July 8, 1981, p. 5)

The States correctly asserted that the Board has interpreted the
provision to require FFP in certain court ordered payments, and the
Agency admitted that under other circumstances its policy is to
participate in payments states make pursuant to court orders. But the
distinguishing factor here, which makes section 205.10(b)(3) and the
general policy inapplicable, is the existence of a superceding federal
appropriation restriction which specifically prohibited the expenditures
by the Agency. No interpretation of the Agency regulation or policy can
overcome that specific funding prohibition of the Hyde Amendment.

IV. Conclusion

Based on the foregoing analysis, the Board concludes that the Agency
disallowances must be sustained. The fundamental difficulty with the
States' position is that its compelling attributes constitute an
equitable plea confronting an explicit statutory restriction. The
Agency argued, simply and persuasively, that it was without authority to
provide relief because of the explicit strictures of a statutory
limitation of the use of appropriated funds. While the kind of
equitable relief the States seek may be available in another forum, we
find that neither the Agency, not this Board, has the power to overcome
the Hyde Amendment's unequivocal restriction on the use of appropriated
funds. /1/ The Hyde Amendment restricted the availability of funding
for medically necessary abortions and has been a rider to appropriations
acts for the Department of Health, Education, and Welfare (now HHS)
since 1977. When first enacted as a rider to the FY 1977 appropriation
it read: "None of the funds contained in this Act shall be used to
perform abortions except where the life of the mother would be
endangered if the fetus were carried to term." Pub. L. 94-439, section
209, September 30, 1976. A later version extended funding for abortions
in cases of rape and incest where appropriately reported, or where two
physicians determined that severe and long -lasting physical health
damage to the mother would result if the pregnancy were carried to term.
Pub. L. 95-205, section 101, December 9, 1977; Pub. L. 95-480, section
210, October 18, 1978. Other versions omitted the third category of
severe and long-lasting physical health damage. Pub. L. 96-86, section
118, October 12, 1979; Pub. L. 96-123, section 109, November 20, 1979.
There is no dispute in these cases regarding the various differences;
therefore, we use the term Hyde Amendment, as the parties did, in a
generic sense. /2/ The Ohio Department of Public Welfare
recently filed several appeals which raised similar factual and legal
issues, but those cases are not decided here. Although Ohio
participated in the informal conference, it has not yet had full
opportunity to present its arguments to the Board. /3/
Massachusetts argued that since the regulations implementing the Hyde
Amendment were not published until February, and not in final form until
July 1978 (effective August), FFP could not be denied for any period
prior to August because the State had to give Medicaid recipients and
providers notice of abortion funding restrictions. We do not agree. In
West Virginia Department of Welfare, Decision No. 228, November 30,
1981, the Board ruled that the delay in promulgating these regulations
did not prevent the enforcement of the Hyde Amendment. The regulations
added nothing substantial to the requirements of the Hyde Amendment;
they merely specified the kind of documentation that was needed if the
States claimed for abortions allowable under Hyde. Even though the
disallowances here were framed around the regulatory requirements, it is
undisputed that the abortions at issue were non-Hyde abortions, and
there is no issue here of the sufficiency of any State's documentation
under the regulations. Further, the Agency said that it would accept
any reasonable documentation for abortions performed prior to the
effective date of the regulations. (See, e.g., 43 Fed. Reg. 4580,
February 2, 1978; Tr. p. 87) Therefore, the date that the regulations
were issued did not affect the State's ability to give notice prior to
the December 1977 disallowance date. /4/ The Agency initially
disallowed $1,202,476 in FFP claimed by Illinois but modified the
disallowances when the State showed that certain medical procedures for
which FFP was claimed were not abortions subject to the Hyde Amendment.
See, Notice of Modification of Disallowances, October 29, 1981.
/5/ Illinois and Massachusetts also claimed FFP for time periods when
they were not under court orders to pay for non-Hyde abortions. Virginia
did not. (See, letter to the Board from Virginia, dated September 29,
1980) We addressed Massachusetts' claim for FFP for such periods in
footnote 3, on p. 2. Illinois argued that FFP should be available
during the time it took to give Medicaid providers and recipients
"notice of the reduction in the program's coverage" after the
injunctions requiring payments for non-Hyde abortions were lifted.(Tr.,
p. 16) Illinois claimed that it was bound by its contracts with
providers, and that Agency regulations at 45 CFR 205.10(a)(4)(1)(A) and
Goldberg v. Kelly, 397 U.S. 254 (1970), required notice to recipients.
Illinois maintained that, pursuant to McCrae v. Harris, 448 U.S. 297
(1980), if the State made payments during the notice period, the Agency
had to participate in those payments. The Board is not persuaded by
this argument. First, even if Illinois was required to give notice,
that does not necessarily mean that the Agency had authority to
participate in those payments. See, Part III.B. of this decision for a
discussion of the Agency's authority to expend funds when an
appropriations statute prohibits that because of the decisions in
Goldberg and McCrae, it would be unconstitutional to read the Hyde
Amendment as not permitting FFP during the time that it took for
Illinois to send recipients a general notice of the change in Medicaid
coverage for abortions. The Court in Goldberg held that due process
required states to give a recipient timely notice and an opportunity to
be heard prior to terminating public assistance payments to the
recipient.Illinois did not show that that notice requirement applied in
this situation where the notice would not be of the termination of
payments to a particular recipient but the implementation of laws
reducing the scope of Medicaid coverage. Finally, Illinois did not argue
that any additional notice requirements were imposed by the court orders
vacating the injunctions. /6/ The States agreed that at the
conference and in post-conference briefs Illinois would present the
arguments common to all States. In dealing with those arguments, or
arguments the States raised individually, we will specify the source
only where relevant. /7/ Although HHS was not named in any of
the injunctions issued by the courts in Illinois, Massachusetts, or
Virginia, the federal government was twice ordered "to cease to give
effect to the Hyde Amendment" in a suit filed in the District Court for
the Eastern District of New York. McCrae v. Mathews, 421 F. Supp. 533
(E.D.N.Y. 1976); McCrae v. Secretary of U.S. Department of Health,
Education, and Welfare, Civ. No. 76 C 1804 (E.D.N.Y. January 15, 1980).
The final outcome of the New York case was the Supreme Court's decision
in McCrae v. Harris, supra, which declared that the Hyde Amendment was
constitutional and that states were not required by the Medicaid program
to fund services which the federal government would not fund. For the
time periods that those orders were in effect (October 1976 to August 4,
1977 and February to September, 1980), the federal government provided
all states with FFP in payments for medically necessary abortions. The
disallowances disputed here are not for any of those time periods. The
States argued, however, that the fact of the Agency's compliance with
the federal court orders showed that the States acted reasonably in
making their payments pursuant to court orders, and having justified the
payments as reasonable, they were entitled to FFP. We are unpersuaded
by the States' rationale. It is undisputed that the States were
obligated to obey the court orders, and that the Agency obeyed the
injunctions ordering the Agency to make payments. But that the Agency
participated in payments for non-Hyde abortions when a court ordered it
to do so, does not necessarily mean that the Agency had the authority to
expend funds for non-Hyde abortions when the States made court ordered
payments. See, Section B. of this Part for further discussion of the
legal effects of the various injunctions. /8/ See, 42 CFR
205.10(b)(3) (1978), discussed further on pp. 13-14. But for the Hyde
Amendment, section 205.10(b)(3) might have required payment of the costs
in question here. (Cf., Ohio Department of Public Welfare, Decision No.
173, April 30, 1981)

OCTOBER 22, 1983