Under the Department of Social and Health Services rule, workers who cared for low-income, severely disabled people automatically had their pay reduced by 15 percent if they lived with the person they cared for. The department reasoned that if the caregivers lived at the home, then some amount of the work the caregivers performed -- cooking, for example -- would benefit the caregiver, who shouldn't be paid for it.
The state Supreme Court struck down the policy in 2007, saying it was inconsistent with federal Medicaid rules. The workers sued to get the money they said they were owed, and the recipients of the care sued as well. After tortuous litigation that included a detour into federal court, the recipients were not awarded any money, but a Thurston County Superior Court jury sided with the workers in 2011 and awarded $57 million.
A judge tacked on interest, bringing the total award to more than $100 million. The state appealed, and the justices heard arguments Tuesday.
"DSHS reversed over two decades of practice ... under which it paid providers for all services they worked," John White, an attorney for the workers, told the court. "DSHS eliminated payment for a portion of the hours that it required live-in providers to work."
The state relies on in-home caregivers as a cheaper, more humane alternative to institutionalized care for poor, disabled people. While the disabled people themselves are considered the employers of the caregivers for legal reasons, the state writes the contracts for the caregivers, letting them know how many hours of care the disabled people are entitled to under Medicaid.
A lawyer for the state, Deputy Solicitor General Jay Geck, asked the justices to reverse the verdict on several grounds. He noted that the lower court's jury found that the state did not breach its contracts with the caregivers; instead, it found that the state's decision to reduce the workers' pay violated a duty of "good faith or fair dealing" that the state owed to them.
The state insists that although it is required to act in good faith, it satisfied that obligation by following the terms of its contracts with providers.
"The contracts were utterly clear," Geck said. "The providers would be paid only the amount awarded to the individual clients under Medicaid. They said they would accept that amount."
Geck also said that if the justices don't reverse the verdict, they should at the very least reduce it. He argued that the lower court should never have awarded interest, because under the law, interest can only be tacked on to damages that are totaled specifically, rather than estimated -- a point contested by the workers' lawyer.
A summary of the case produced by DSHS and the state attorney general's office highlights the financial concerns posed by the verdict.
"The judgment in this case is unprecedented and undermines the fiscal planning needed for all DSHS programs," it said. "This is detrimental to the people who rely on funding for DSHS services, the taxpayers, and the continued viability of public assistance programs."
But in an interview, White argued that DSHS expected workers to perform the work and they should be paid for it. Many of them were making close to minimum wage, and the 15 percent reduction put many below minimum wage, he said.
"The state wouldn't need to come up with the judgment if the Department of Social and Health Services had done what it was supposed to do in the first place," White said.
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