                    United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                     ___________

                                     No. 05-2791
                                     ___________

Kelly Bowlin, on behalf of herself    *
and all others similarly situated,    *
                                      *
             Appellee,                *
                                      * Appeal From the United States
      v.                              * District Court for the
                                      * District of Nebraska.
Nancy Montanez, as the Director of    *
the Nebraska Department of Health     *
and Human Services,                   *
                                      *
            Appellant.                *
                                 ___________

                            Submitted: February 15, 2006
                               Filed: May 4, 2006
                                ___________

Before RILEY, HEANEY, and MELLOY, Circuit Judges.
                            ___________

HEANEY, Circuit Judge.

      This case involves a certified class of over 764 single, working mothers and
other caretaker relatives in Nebraska who lost their Medicaid benefits due to their
increased income from employment. The class contends that they are eligible for
temporary medical assistance (TMA) benefits described in 42 U.S.C. § 1396r-6, which
provides up to one year of transitional medical coverage to certain categories of
people who have lost Medicaid because of an increase in the amount of their earned
income. The district court1 granted the class’s motion for summary judgment in all
respects and directed the Director of the Nebraska Department of Health and Human
Services to provide TMA to the class members, pursuant to § 1396r-6. The Director
appeals, arguing that the district court erred in concluding that the class members were
entitled to TMA benefits, and in granting the plaintiffs’ motions for summary
judgment. We affirm.

       TMA is “a federally funded state program of medical care for the needy and
others.” Kai v. Ross, 336 F.3d 650, 651 (8th Cir. 2003). Title XIX of the Social
Security Act grants federal medical assistance to participating states through its
Medicaid program. Id. Although a state’s participation in the Medicaid program is
optional, participating states in compliance with the applicable federal rules and
regulations are given matching funds by the federal government. Id. The federally
funded public-assistance program, Aid to Families with Dependent Children (AFDC),
operated in conjunction with Medicaid to provide assistance to the needy and others
under 42 U.S.C. §§ 1396-1396v. Under the federal statutes, a person receiving AFDC
was also automatically eligible for Medicaid.

      In 1996, the Welfare Reform Bill, under the enactment of the Personal
Responsibility and Work Opportunity Reconciliation Act (PWORA), replaced AFDC
with Temporary Assistance to Needy Families (TANF). Under PWORA, recipients
of TANF were no longer automatically eligible for Medicare benefits. When the
AFDC program was terminated, the legislature enacted 42 U.S.C. § 1396u-1 to extend
TMA to individuals who had received AFDC and others who were similarly situated,
pursuant to 42 U.S.C. § 1396r-6.




      1
        The Honorable Laurie Smith Camp, United States District Judge for the
District of Nebraska.

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       In Nebraska, a Medicaid recipient’s countable income, and thus, eligibility for
benefits, is determined by using one of several income methodologies. Section
1396u-1 requires that the income methodology used under the state’s AFDC program
be used to determine a recipient’s countable income, unless the state has chosen to use
a less restrictive income methodology. § 1396u-1(b)(2)(C). The Director concedes
that Nebraska has used a less restrictive income methodology for the medically needy
category than was used for Nebraska’s AFDC program in 1996. According to the
income methodology used for persons considered medically needy, Kelly Bowlin’s
income fell below the AFDC income standard in place on July 16, 1996. Her monthly
countable income under the state medically needy plan was determined to be $270.55,
which was less than the $492.00 limit. In September of 2003, Bowlin received a
$0.50 per hour raise from her employer. That December her countable income was
determined to be $569.22, or $77.22 over the medically needy income limit. As a
result, the Department of Health and Human Services determined that Bowlin was
ineligible for Medicaid coverage on January 1, 2005, and she was denied TMA.

        Bowlin asserts that she is entitled to TMA. In response to the Director’s
termination of her medical benefits, Bowlin filed a complaint on behalf of herself and
a class of needy Nebraska caretaker relatives who were certified as follows:

      All caretaker relatives in Nebraska with earned income: a) who have
      received Medicaid under the medically needy category without a spend
      down for at least three of the six months prior to having their Medicaid
      benefits terminated due to their earned income; b) who, but for their
      earned income would continue to receive Medicaid under the medically
      needy category without a spend down; and c) who have not been or will
      not be afforded the transitional Medicaid benefits provided for in 42
      U.S.C. § 1396r-6.

(J.A. at 241.)




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       The Director does not dispute that the plaintiffs are caretaker relatives who
received Medicaid in at least three of the last six months immediately preceding aid
ineligibility, and whose benefits were terminated because of hours of or income from
employment. Bowlin argues on behalf of the class that as a medically needy person
she is covered by the language of 42 U.S.C. § 1396u-1, and is entitled to receive TMA
pursuant to 42 U.S.C. § 1396r-6. The Department of Health and Human Services
argues in response that only those persons who received AFDC are entitled to TMA
benefits.

      “We review the grant of summary judgment de novo, applying the same
standard as the district court.” Ahlborn v. Arkansas Dep’t of Human Servs., 397 F.3d
620, 622 (8th Cir. 2005). “We will affirm the grant of summary judgment if there is
no genuine issue as to any material fact and the moving party is entitled to judgment
as a matter of law. Id.

      An individual is eligible for TMA if she or he:

             was receiving aid pursuant to a plan of the State approved under
             part A of subchapter IV of this chapter in at least 3 of the 6
             months immediately preceding the month in which such family
             becomes ineligible for such aid, because of hours of, or income
             from, employment of the caretaker relative (as defined in
             subsection (e) of this section) or because of section
             602(a)(8)(B)(ii)(II) of this title (providing for a time-limited
             earned income disregard), shall, subject to paragraph (3) and
             without any reapplication for benefits under the plan, remain
             eligible for assistance under the plan approved under this
             subchapter during the immediately succeeding 6-month period in
             accordance with this subsection.

42 U.S.C. § 1396r-6(a)(1). This section is applicable to Bowlin if § 1396u-1 applies
to the medically needy who received Medicaid benefits. See Kai, 336 F.3d at 653
(“[B]y virtue of Section 1925, 42 U.S.C. § 1396r-6, persons who were part of the

                                         -4-
group covered by [§ 1396u-1] are entitled to Temporary Medical Assistance if their
eligibility is lost by reason of a state’s amending its laws.”). Section 1396u-1 reads
in relevant part:

      (a) References to subchapter IV-A are references to pre-welfare-reform
      provisions

      Subject to the succeeding provisions of this section, with respect to a
      State any reference in this subchapter (or any other provision of law in
      relation to the operation of this subchapter) to a provision of part A of
      subchapter IV of this chapter, or a State plan under such part (or a
      provision of such a plan), including income and resource standards and
      income and resource methodologies under such part or plan, shall be
      considered a reference to such a provision or plan as in effect as of
      July 16, 1996, with respect to the State.

      (b) Application of pre-welfare reform eligibility criteria

             (1) In general

             For purposes of this subchapter, subject to paragraphs (2) and (3),
             in determining eligibility for medical assistance –

                   (A) an individual shall be treated as receiving aid or assistance
                   under a State plan approved under part A of subchapter IV of this
                   chapter only if the individual meets –

                          (i) the income and resource standards for determining
                          eligibility under such plan, . . .as in effect as of July 16,
                          1996 . . . .

             (2) State option

             For the purposes of applying this section, a State –




                                         -5-
                    (A) may lower its income standards applicable with respect
                    to part A of subchapter IV of this chapter, but not below the
                    income standards applicable under its State plan under such
                    part on May 1, 1988;

                    (B) may increase income or resource standards under the
                    State plan referred to in paragraph (1) over a period
                    (beginning after July 16, 1996) by a percentage that does
                    not exceed the percentage increase in the Consumer Price
                    Index for all urban consumers (all items; United States city
                    average) over such period; and

                    (C) may use income and resource methodologies that are
                    less restrictive than the methodologies used under the State
                    plan under such part as of July 16, 1996.

(Emphasis added).

      In Kai, this court considered the plain meaning of § 1396u-1 and explained that:

      the effect of [§ 1396u-1] is clearly to make eligible for medical
      assistance not only persons who were receiving AFDC . . . but also
      certain other persons. . . . [T]he provision is expressly made “subject to
      paragraphs (2) and (3).” The phrase “subject to” must mean that, in the
      event of any conflict between (2) or (3) and (1), the former two
      paragraphs will prevail, or, in the present context, that (2) and (3) add
      persons to the group that is already eligible under (1) by virtue of being
      AFDC recipients. It appears to us that plaintiffs are members of a group
      that was added in this way.

336 F.3d at 654. The plaintiffs in that case were beneficiaries of an income
methodology that was less restrictive than Nebraska’s AFDC methodologies. The
court held that when the less restrictive methodology was removed by statute, the state
was required to extend TMA benefits to them, pursuant to § 1396r-6. Id. Similarly,



                                          -6-
in analyzing § 1396u-1(b)(1), the district court concluded that Bowlin is equally
entitled to TMA:

      The final sub-category under the State option plan, (C), addresses
      income and resource methodologies. Unlike the two previous categories,
      the language of this last section does not limit itself only to an AFDC or
      AFDC replacement program. Instead, the plain language illustrates that
      a State may use less restrictive methodologies than those used “under the
      State plan under such part [AFDC] as of July 16, 1996.”

Bowlin v. Montanez, No. 4:04CV3218, slip op. at 9-10 (D. Neb. Apr. 5, 2005)
(quoting § 1396u-1(b)(1)(c)). We hold that under the plain meaning of the statute,
Bowlin and the class members are persons that Congress intended to be treated as
having received AFDC benefits under § 1396u-1, and that they are entitled to TMA
benefits. We therefore affirm the district court.
                      ______________________________




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