Alexander v. Choate

469 U.S. 287 (1985)

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Nature of the Case

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Facts

Faced in 1980-1981 with projected state Medicaid costs of $42 million more than the State's Medicaid budget of $388 million, the directors decided to institute a variety of cost-saving measures. They made a reduction from 20 to 14 in the number of inpatient hospital days per fiscal year that Tennessee Medicaid would pay hospitals on behalf of a Medicaid recipient. Ps brought a class action for declaratory and injunctive relief in which they alleged that the proposed 14-day limitation on inpatient coverage would have a discriminatory effect on the handicapped. In the 1979-1980 fiscal year, 27.4% of all handicapped users of hospital services who received Medicaid required more than 14 days of care, while only 7.8% of nonhandicapped users required more than 14 days of inpatient care. Ps asserted that the reduction would violate §504 of the Rehabilitation Act of 1973 and its implementing regulations. Section 504 provides: 'No otherwise qualified handicapped individual . . . shall, solely by reason of his handicap, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance. . . .' 29 U. S. C. § 794. Ps argued that the change would have a disproportionate effect on the handicapped and hence was discriminatory. Ps also alleged that Ds knew that, given the special needs of the handicapped for medical care, any such limitation was likely to disadvantage the handicapped disproportionately. Ps argued that Ds could limit the number of days of hospital coverage on a per-stay basis, with the number of covered days to vary depending on the recipient's illness. Ds’ refusal to adopt this plan was said to result in the imposition of gratuitous costs on the handicapped and thus to constitute discrimination under § 504. The court held that any action by a federal grantee that disparately affects the handicapped states a cause of action under § 504 and its implementing regulations. Ds appealed. D argues that §504 reaches only purposeful discrimination against the handicapped and disparate impact is irrelevant.