Full opinion text
MEMORANDUM NIXON, Senior District Judge. This case is pending before the Court on Defendants’ Motion to Modify and/or Clarify the Consent Decree (Doc. Nos.1086, 1087), and the responses thereto (Doc. Nos.1106, 1111, 1141, 1148, 1236). A hearing was held between June 29, 2005 and July 19, 2005, and on July 28, 2005. Due to the time-sensitive nature of this matter, the Court issued four Orders between July 28, 2005 and August 9, 2005 (Doc. Nos. 1246, 1248, 1256, 1261) adjudicating Defendants’ Motion to Modify and/or Clarify the Consent Decree. The Court hereby explains the reasons underlying its previously issued Orders. I. BACKGROUND This case was filed in 1979 as a class action under 42 U.S.C. § 1983 on behalf of present and future Medicaid recipients, and alleged that Tennessee’s Medicaid program violated the requirements of the Medicaid Act, 42 U.S.C. §§ 1396, et seq., and the Due Process Clause of the Fourteenth Amendment,. Specifically, the original Plaintiffs asserted that Tennessee’s Medicaid program failed to provide them with adequate notice and procedural protection upon denial of their claims. These issues were resolved in 1986 through a consent decree. A second consent decree also dealing with notice and hearing requirements was entered in 1992. In January 1994, Tennessee converted its traditional Medicaid fee-for-service program to a managed care model known as TennCare. TennCare, which expanded the scope of eligibility beyond Tennessee’s previous Medicaid program, is a special demonstration project authorized by the United States Secretary of Health and Human Services (the “Secretary”) pursuant to the waiver authority conferred by section 1115 of the Social Security Act, 42 U.S.C. § 1315. Instead of directly purchasing medical services for eligible individuals, TennCare contracts with private managed care contractors (“MCCs”) to provide healthcare to TennCare recipients. From TennCare’s inception, the MCCs were required by their contracts to comply with the rules developed by Defendants (or the “State”) to implement the federal notice and hearing requirements of 42 C.F.R. § 431, Subpart E. In 1995, Plaintiffs moved to modify the second consent decree alleging that the TennCare program was being administered in a manner inconsistent with the decree, as well as federal law. This Court agreed and held that the State’s TennCare notice and hearing procedures violated the Medicaid Act and the Due Process Clause of the Fourteenth Amendment. See Daniels v. Wadley, 926 F.Supp. 1305 (M.D.Tenn.1996). Consistent with the Court’s ruling, the parties negotiated, and this Court entered, an agreed order establishing policies and procedures through which the federal Medicaid due process requirements would be implemented in the context of the new managed care program (“1996 Agreed Order”). In 1999, Plaintiffs filed another motion alleging that the State failed to comply with the 1996 Agreed Order. A settlement conference followed and culminated in this Court’s approval and entry of the October 26, 1999 Revised Consent Decree Governing TennCare Appeals. Shortly thereafter, six TennCare managed care organizations and their trade association, the Tennessee Association of Health Maintenance Organizations, as well as trade associations representing hospitals and pharmacists, successfully moved to intervene in order to challenge this latest decree. Subsequently, on July 31, 2000, the Court entered a Revised Consent Decree to clarify terms and correct technical errors, which became effective immediately (“2000 Consent Decree”). The intervenors challenged the 2000 Consent Decree in an appeal to the Sixth Circuit. Although the Sixth Circuit remanded the case for a fairness hearing in order to determine whether the 2000 Consent Decree was adequate, reasonable and fair to the intervenors, the Sixth Circuit rejected the intervenors other challenges to the 2000 Consent Decree. See Tenn. Ass’n of Health Maint. Orgs. (“TAHMO”) v. Grier, 262 F.3d 559 (6th Cir.2001). After a fairness hearing was held in late 2002, the State filed a motion to modify the 2000 Consent Decree. On February 14, 2003, the Court approved the 2000 Consent Decree in its entirety, but held the State’s motion to modify in abeyance while a Magistrate Judge oversaw discovery and negotiations for possible modifications to the 2000 Consent Decree. In March 2003, Governor Philip N. Bre-desen’s administration entered negotiations to modify the 2000 Consent Decree, and to discuss three other class actions involving different aspects of TennCare’s administration. In August 2003, after six months of negotiations, the parties to the four class actions entered into a global settlement. On October 1, 2003, following a fairness hearing, the Court approved and entered the Revised Consent Decree (Modified) (“2003 Consent Decree,” “Consent Decree” or “Decree”). On June 15, 2005, the State filed its present motion to modify and/or clarify the 2003 Consent Decree. The State’s motion contains twenty separate requests for modification and/or clarification of the 2003 Consent Decree, a number of which contain several distinct subparts. Altogether, the motion contains thirty-four separate requests for modification and/or clarification relating primarily to prescription drugs, benefit limits, and the TennCare appeals process. For the reasons discussed below, the Court has granted in part and denied in part the State’s Motion to Modify and/or Clarify the 2003 Consent Decree. (See Doc. Nos. 1256,1261.) II. ANALYSIS A. Legal Standard For Modification Of Consent Decrees: The Two-Step Rufo Framework A consent decree is an agreement between the parties that is enforceable and subject to the rules applicable to other judgments. Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367, 378, 112 S.Ct. 748, 116 L.Ed.2d 867 (1992). Accordingly, consent decrees are subject to modification pursuant to Federal Rule of Civil Procedure 60(b), which provides in relevant part: On motion and upon such terms as are just, the court may relieve a party ... from a final judgment, order, or proceeding for the following reasons: ... (5) ... it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment .... The Supreme Court has noted that because consent decrees often remain in place for extended periods of time, a court may, pursuant to Rule 60(b)(5) of the Federal Rules of Civil Procedure, use its equitable powers to modify consent decrees to address significant changes in circumstances that have occurred during the life of a decree. Rufo, 502 U.S. at 380-81, 112 S.Ct. 748; see also Heath v. De Courcy, 888 F.2d 1105, 1109 (6th Cir.1989) (advocating broader judicial discretion to modify consent decrees “so that the agreed upon solution to the problem giving rise to the litigation may be fine-tuned to accomplish its goal.”); N.Y. State Ass’n for Retarded Children, Inc. v. Carey, 706 F.2d 956, 969 (2d Cir.1983) (recognizing the need to adapt consent decrees “when unforeseen obstacles present themselves, to improvement when a better understanding of the problem emerges, and to accommodation of a wider constellation of interests than is represented in the adversarial courtroom.”). Even if there is no significant change in circumstances, public interest also supports modification of consent decrees because such decrees “'reach beyond the parties involved directly in the suit and impact on the public’s right to the sound and efficient operation of its institutions.’ ” Rufo, 502 U.S. at 381, 112 S.Ct. 748 (quoting Heath, 888 F.2d at 1109). 1. Step 1: Significant Change In Circumstances The Supreme Court has instructed district courts to “exercise flexibility in considering requests for modification of an institutional reform consent decree .... ” Rufo, 502 U.S. at 383, 112 S.Ct. 748. Notwithstanding this flexible approach, modification will not be warranted in all circumstances. Id. Equity is the key, and “a party may obtain relief from a court order when ‘it is no longer equitable that the judgment should have prospective application,’ not when it is no longer convenient to live with the terms of a consent decree.” Id. (citing Fed. R. Civ. Proc. 60(b)(5)). Thus, modification of a consent decree is appropriate when the party seeking modification meets its initial burden of establishing a significant change in factual or legal circumstances, which cause the consent decree to be “onerous,” “unworkable,” or “detrimental to the public interest.” Id. at 383-85, 112 S.Ct. 748; see also Vanguards of Cleveland v. City of Cleveland, 23 F.3d 1013, 1018-19 (6th Cir.1994) (approving modification to fine-tune decree in order to further purpose of decree). This initial burden is heightened if the changed circumstances were anticipated at the time the decree was entered and, notwithstanding the knowledge that performance of the decree would be more onerous under the changing conditions, the moving party agreed to the decree. Id. at 385, 112 S.Ct. 748. Under this heightened standard, the movant must show that it agreed to the decree in good faith, and made a reasonable effort to comply with the decree before it may be modified. Id. 2. Step 2: Are The Proposed Modifications Suitably Tailored To The Changed Circumstances? Once the party seeking modification has met its initial burden of showing changed circumstances, a court must “determine whether the proposed modification is suitably tailored to the changed circumstance.” Id. at 391. Accordingly: In evaluating a proposed modification, three matters should be clear. Of course, a modification must not create or perpetuate a constitutional violation.... A proposed modification should not strive to rewrite a consent decree so that it conforms to the constitutional floor. Once a court has determined that changed circumstances warrant a modification in a consent decree, the focus should be on whether the proposed modification is tailored to resolve the problems created by the change in circumstances. A court should do no more, for a consent decree is a final judgment that may be reopened only to the extent that equity requires. Id. at 391-92, 112 S.Ct. 748. Accordingly, the Court must first review the legality of the State’s proposed modifications to the 2003 Consent Decree. In this case, the State’s proposed modifications must comply with federal Medicaid requirements. Schweiker v. Gray Panthers, 453 U.S. 34, 37, 101 S.Ct. 2633, 69 L.Ed.2d 460 (1981) (noting that states participating in the Medicaid program must comply fully with the dictates of the federal statutes and regulations thereunder). At this stage of the analysis the Court must be mindful of the Sixth Circuit’s recent ruling in Rosen v. Goetz, 410 F.3d 919 (6th Cir.2005). Rosen teaches that when analyzing whether the State’s policies comply with federal law, this Court owes “substantial deference” to the Centers for Medicare and Medicaid Services (“CMS”), “the agency that authored and promulgated the regulations, [and which] has approved the State’s polices as fully compliant with [such] regulations.” Id. at 926-27. This deference is especially high where, as here, the subject matter of the regulations is highly technical and complex. See Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994); see also PhRMA v. Thompson, 362 F.3d 817, 821-23 (D.C.Cir.2004) (holding that the Secretary’s approval of states’ initiatives pursuant to Medicaid statutes will be upheld unless “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.”). Accordingly, where CMS has specifically approved the State’s proposed modifications as compliant with the underlying federal regulations, this Court must grant “substantial deference” to CMS’ approval. Rosen, 410 F.3d at 927. After considering the legality of the proposed modifications, the Court’s focus turns to the suitability of the proposed modifications in light of the circumstances. Although “[financial constraints may not be used to justify the creation or perpetuation of constitutional violations, ... they are a legitimate concern of government defendants in institutional reform litigation and therefore are appropriately considered in tailoring a consent decree modification.” Rufo, 502 U.S. at 392-93, 112 S.Ct. 748. Further, the principles of federalism and public interest warrant deference to local administrators who have the “ ‘primary responsibility for elucidating, assessing, and solving’ the problems of institutional reform ...” Id. at 392, 112 S.Ct. 748. The Supreme Court recently reaffirmed the requirement of granting deference to local administrators in Frew ex. rel. Frew v. Hawkins, 540 U.S. 431, 442, 124 S.Ct. 899, 157 L.Ed.2d 855 (2004), stating: As public servants, the officials of the State must be presumed to have a high degree of competence in deciding how best to discharge their governmental responsibilities. A State, in the ordinary course, depends upon successor officials, both appointed and elected, to bring new insights and solutions to problems of allocating revenues and resources. As such, while a state is afforded no deference when striving to meet its initial burden of showing changed circumstances, a district court is required to give significant weight to the views of state officials in determining whether the proposed modifications are suitably tailored to the changed circumstances. Consequently, once a court finds modification is warranted, the principles of federalism favor the state’s methods of modification. B. Significant Change In Circumstances Warrants Modification Of The 2003 Consent Decree The Court finds that the changes in legal circumstances do not warrant modification of the entire 2003 Consent Decree. However, modification is warranted due to the serious fiscal crisis in the TennCare program. In addition, certain provisions of the 2003 Consent Decree are unnecessarily burdensome and contrary to the public interest, thereby requiring modification. 1. Factual Background TennCare has always faced financial difficulties due to a variety of reasons, but the traditional generosity of the program, high pharmacy and medical services utilization rates, prescription drug costs, and mismanagement have been cited as the primary causes. Aware that TennCare’s precarious financial situation was systemic in nature, Governor Bredesen ran for office on a promise to save the program through reform. When Governor Brede-sen’s new administration took office in January 2003, it faced a budget shortfall in TennCare of between $200-300 million for fiscal year 2003. (See Rosen Tr. (3/28/05) at 50-51; see also Doc. No. 897 at 2 (wherein Commissioner Goetz stated that in January 2003, the new administration determined that “the state budget for fiscal year 2002-2003 was as much as $478 million out of balance, almost all of which was due to an underestimation of spending necessary to continue the operation of the TennCare program .... ”).) This budget shortfall resulted in a 9% budget cut in almost all of the State’s programs. (Id.) In light of this shortfall and the administration’s campaign to reform TennCare, the State entered negotiations in March 2003 to revise the 2000 Consent Decree, and to discuss the three other class actions involving TennCare. The administration successfully obtained modifications to the 2000 Consent Decree that resulted in savings of about $150-200 million, primarily due to changes in the pharmacy provisions of the Decree. (Doc. No. 1172, Tr. at 715-16.) The severity of TennCare’s fiscal crisis, however, remained unknown until late 2003, a few months after the 2003 Consent Decree was entered and approved by the Court. (Rosen Tr. (3/28/05) at 63-64.) In mid-2003 during the negotiations of the TennCare class actions, a consortium of stakeholders of TennCare retained McKinsey & Company, a consulting firm, to conduct an assessment of, and identify options to ensure, TennCare’s financial viability for the next five years. In December 2003, McKinsey released the first of two reports. (See Def. Ex. 38.) The first report concluded that “even with current and planned improvement efforts and solid program management, TennCare as it is constructed today will not be financially viable.” (Id. at 3.) The report predicted that, depending on the economy and other factors, TennCare’s total cost could be expected to rise to $12.2 billion by fiscal year 2008, with state spending growing to $3.8 billion. (Id.) This amount represented approximately 36% of state tax revenue and consumption of 91% of new state revenue. (Id.) This report explained that the “threat to the program’s financial viability, is largely the result of expected spending for pharmaceuticals, professional services, and outpatient services and of the demands placed on all parts of the program by growing enrollment.” (Id. at 19.) Although identifying the four main factors that increased TennCare’s costs, pharmacy costs were predicted to be the “single most significant source of future cost increases ..., driving nearly 60 percent of total growth through fiscal year 2008 and contributing nearly $2.6 billion in total cost growth during that period.” (Id. at 29.) The State was surprised by this indictment of TennCare, especially after having negotiated cost-savings provisions in the pharmacy sections of the 2003 Consent Decree. (See Rosen Tr. (3/28/05) at 63-64.) In February 2004, McKinsey completed its second report, identifying a variety of reform options designed to solve the long-term problems identified in the earlier report. (See Def. Ex. 39.) Following these reports, Governor Bre-desen proposed a reform package to a joint session of the House of Representatives and Senate of the State of Tennessee. See 2004 Tenn. Pub. Acts, Ch. 673, § 1. The reform package empowered the Tenn-Care Bureau to develop and implement initiatives — subject to compliance with federal law and the federally-issued TennCare waiver — to reduce TennCare costs. Governor Bredesen’s administration developed these cost-saving initiatives, which primarily dealt with benefit reductions, and submitted them for approval to CMS on September 24, 2004. Shortly after the September submission to CMS, the State learned of two new developments that deepened TennCare’s precarious financial situation. First, the State learned in early October 2004 that it would be losing approximately $140 million in federal funding for its Medicaid program. (See Rosen Tr. (3/28/05) at 89-90; Rosen Tr. (3/29/05) at 23-24.) Second, in closing out TennCare’s budget for fiscal year 2004, the State learned that there had been unexpectedly high growth in pharmacy and medical utilization rates of 24% and 11%, respectively. (See Rosen Tr. (3/28/05) at 90-91; Rosen Tr. (3/29/05) at 93-96.) These growth rates exceeded even the upper range of the McKinsey estimates. (Rosen Tr. (3/29/05) at 93-96.) At this time, it became clear that the State was facing a budgetary shortfall for fiscal year 2006 of approximately $650 million in new revenue if TennCare’s enrollment and benefits remained unchanged. (Rosen Tr. (3/28/05) at 102-04; Def. Ex. 27); see also Rosen v. Goetz, 410 F.3d 919, 922 (6th Cir.2005). This shortfall was expected to exceed projections of new revenue for fiscal year 2006, which were estimated to be approximately $465 million. (See Rosen Tr. (3/29/05) at 99; Doc. No. 1150, Tr. at 217; Def. Ex. 221.) In an attempt to resolve the shortfall, the State pursued an even more aggressive reform initiative than the one envisioned in September 2004. Thus, the supplemental reform plan submitted to CMS for approval on February 18, 2005 sought to eliminate certain categories of non-mandatory Medicaid coverage. (See Def. Ex. 111.) As part of this plan, the State sought to disen-roll approximately 323,000 of TennCare’s optional beneficiaries, including those eligible for both TennCare and Medicare, those with medical conditions that make them uninsurable, the uninsureds and the Medically Needy Spend Down patients. CMS approved the State’s disenrollment plan and procedures on March 24, 2005. (See Def. Ex. 83.) Plaintiffs challenged the State’s disenrollment and appeals procedures in Rosen v. Goetz, No. 3:98-627 (M.D.Tenn.) (Haynes, J.), but on appeal, the Sixth Circuit upheld the State’s procedures, see Rosen, 410 F.3d 919, and the State began the process of disenrolling 323,000 TennCare enrollees. Subsequently, on April 26, 2005 Defendants entered into a Memorandum of Understanding with Plaintiffs-Intervenors, Defendant-Intervenors, Tennessee Hospital Association and Hospital Alliance of Tennessee, and Provider Amici, Regional Medical Center at Memphis, and a eoalition of safety net providers. (Def.Ex. 225.) The Memorandum of Understanding (“MOU”) requires the State to initiate a “Waiver-Based Spend Down program designed to provide coverage for the [Medically Needy] who will be losing TennCare coverage under the State’s TennCare reform plan.” (Id.) Numerous conditions must be fulfilled prior to the implementation of this program, including successful modification of the 2003 Consent Decree, approval of the State’s disenrollment procedures in Rosen v. Goetz, No. 3:98-627 (M.D.Tenn.) (Haynes, J.), approval from CMS of the State’s September 24, 2004 and February 18, 2005 proposed reform plans, as well as CMS’ approval of the Waiver-Based Spend Down program, and the State Legislature’s appropriation of necessary funds. (Def. Ex. 225 ¶¶ 1, 3-6.) The Waiver-Based Spend Down program aims to provide coverage to Medically Needy individuals whose incomes are too high to qualify for Medicaid. (Doc. No. 1150, Tr. at 225-27.) These individuals can qualify for coverage by demonstrating that they have medical bills that bring their income down to a certain threshold. (Id.) On June 8, 2005, CMS approved some, but not all, of the State’s remaining reforms relating to benefit limits and prior authorization of prescription drugs, among others. (See Def. Ex. 339.) In order for the State to implement certain of these reforms, the 2003 Consent Decree must be modified and/or clarified. In addition to the CMS-approved reforms, the State seeks other modifications to the Decree. The State contends that its proposed modifications to the 2003 Consent Decree are the key to controlling costs and operating an effective managed care system. 2. Change In Legal Circumstances To begin with, the State asserts that modification is warranted due to the change in federal law through CMS’ approval of the State’s proposed modifications, and the passage of State legislation aimed at reforming TennCare. Similarly, the State contends that “the democratically-elected government of the State cannot be inflexibly constrained by the positions of its predecessors.” (Doc. No. 1241 at 119.) The Court finds these changes do not provide sufficient basis to modify the entire 2003 Consent Decree. i. CMS’Approval As TennCare is a special demonstration project, the State must obtain approval from CMS to implement its reforms. Accordingly, the State submitted its proposed reforms to CMS on September 24, 2004, and again on February 18, 2005. (Def.Exs.81, 111.) CMS responded on March 24, 2005 and June 8, 2005, approving many, but not all, of the State’s reforms. (Def.Exs.83, 339.) CMS’ approval is two-fold. First, pursuant to section 1115 of the Social Security Act, 42 U.S.C. § 1315, CMS has waived compliance with some sections of the Social Security Act to permit Tennessee to implement its reforms. (See Def. Ex. 339.) Second, CMS has specifically approved and appended special terms and conditions to certain of the State’s reforms. (See id., Special Terms and Conditions.) CMS’ approval of the State’s reforms contains CMS’ implicit interpretation that these reforms comply with the sections of the Social Security Act and federal regulations that have not been waived. (See id.); see also supra p. 8 note 2. Defendants contend that CMS’ waiver/approval constitutes a change in law requiring modification of the Consent Decree. CMS’ waiver of certain sections of the Social Security Act does constitute a change in law because the State is no longer required to follow federal requirements that it was previously required to follow. See System Federation No. 91 Ry. Employees’ Dep’t v. Wright, 364 U.S. 642, 648-51, 81 S.Ct. 368, 5 L.Ed.2d 349 (1961) (holding that it was an abuse of discretion not to modify the consent decree to align it with federal law because underlying federal law was amended to permit what was previously prohibited). To the extent the State’s proposed modifications rely on CMS’ waiver, then modification of the 2003 Consent Decree would be warranted. That is not the case, however, and the State’s reliance on System Federation is inapposite. Defendants do not rely on CMS’ waiver of particular sections of the Social Security Act to demonstrate a change in law. Rather, the State contends that it “seeks leave to do no more than that which CMS ... has permitted as consistent with the Medicaid laivs ...,” and that “it has now been authoritatively determined by CMS that the underlying statute and regulations permit what the State proposes to do.” (Doc. No. 1241 at 119-21) (emphasis added). CMS’ interpretation that the State’s proposed modifications comply with existing federal Medicaid requirements that have not been waived does not constitute a change in law because the underlying federal requirements have not changed. Unlike System Federation where the parties agreed to follow the requirements of federal law, which requirements subsequently changed, the parties in this case agreed to enact measures that went beyond minimum federal Medicaid requirements and these requirements have not changed. ■ Authority from a federal agency to return to the minimum requirements of federal law or to do what federal law already allows does not constitute a change in law that warrants modification of a consent decree. Rather, CMS’ interpretation of federal Medicaid regulations is akin to a Court decision interpreting or clarifying statutory law. On this point, the Supreme Court could not have been clearer: To hold that a clarification in the law automatically opens the door for reliti-gation of the merits of every affected consent decree would undermine the finality of such agreements .... While a decision that clarifies the law will not, in and of itself, provide a basis for modifying a decree, it could constitute a change in circumstances that would support modification if the parties had based their agreement on a misunderstanding of the governing law. Rufo, 502 U.S. at 390, 112 S.Ct. 748 (emphasis added). The State asserts that because “CMS has also explained to the State that some of the procedures currently required by [the 2003 Consent Decree] would violate federal law, as now interpreted by CMS,” the entire decree should be modified. (Doc. No. 1241 at 121) (emphasis added). The State does not contend that the entire 2003 Consent Decree is based on a misunderstanding of the governing law, but simply points to a single provision in the Decree, Paragraph C(13), which binds the State to a decision in favor of the enrollee at any stage of the appeals process. (See Doc. No. 908 ¶ C(13), at 22.) The State alleges that this provision violates federal law because a single state agency such as the TennCare Bureau must retain authority to review and overturn decisions made by hearing officers that are not officials of the single state agency. (See Def. Ex. 353.) There has been no change in the federal law governing single state agencies; interpretation of existing law has simply been clarified by CMS in a July 6, 2005 letter to the State. (See id.) Nevertheless, this is the type of change that the Supreme Court has held could constitute a change in circumstances warranting modification because Paragraph C(13) appears to be based on a misunderstanding of governing law. See Rufo, 502 U.S. at 390, 112 S.Ct. 748. Indeed, even if the clarification did not constitute a change in circumstances, the authority to modify a provision that violates federal law would also stem from this Court’s inherent equitable powers to rectify that which is contrary to the public interest. To be clear, however, modification would be limited to Paragraph C(13) because that is the provision that violates federal law. As the other provisions of the 2003 Consent Decree are not based on a misunderstanding of governing law, CMS’ recent interpretation cannot provide the justification for modifying the entire 2003 Consent Decree. ii. Changes In State Law Similarly, Defendants contend that changes in State law provide grounds for modifying the 2003 Consent Decree. Defendants first rely on the passage by the Tennessee Legislature of the Tenn-Care Reform Act of 2004 to demonstrate a change in law. See 2004 Tenn. Pub. Acts, Ch. 673, § 1. Certain of the provisions of the TennCare Reform Act, however, are inapplicable to the 2003 Consent Decree. Furthermore, most of the provisions of the TennCare Reform Act become law only to the extent they are permitted under federal law. See id. As discussed, federal law has not changed, and the fact that state law now permits what federal law always permitted is inconsequential for purposes of modification of the 2003 Consent Decree. See United States v. Wayne County Mich., 95 Fed.Appx. 809, 815-16 (6th Cir.2004) (“These changes in [state] law ... do not make obligations under the consent decree ‘impermissible under federal law.’ ” (citing Rufo, 502 U.S. at 388, 112 S.Ct. 748)). The provision that arguably acts as a change in law affecting the 2003 Consent Decree is the State Legislature’s enactment of a new definition of “medical necessity” because federal law does not define medical necessity. See Tenn.Code Ann. § 71-5-144 (2004). Yet, even the enactment of this new definition falls short of a true change in law for purposes of modification. In this case, the 2003 Consent Decree does not define medical necessity, nor is it inconsistent with the new medical necessity statute for the reasons explained in Part II.C.2.iii., infra. As the Decree does not rely on the definition of medical necessity, a change in that definition is irrelevant for purposes of modification. Lastly, the Defendants point to the appropriations of additional funds by the Legislature to preserve coverage for the Medically Needy population through the MOU as a change in law favoring modification. Such funds, however, are contingent on this Court’s ruling in favor of the State. A change in law that is contingent on a specific ruling by this Court cannot be considered as a change in circumstance for purposes of modification because, by its very nature, it does not exist. iii. Change In State Government The State argues that an electoral change in the State government in and of itself may also be sufficient to warrant modification of a consent decree. See Rufo, 502 U.S. at 392, 112 S.Ct. 748 (“To refuse modification of a decree is to bind all future officers of the state, regardless of their view of the necessity of relief from one or more provisions of a decree that might not have been entered had the matter been litigated to its conclusion.”). An electoral change in the State government standing alone, however, does not warrant modification if the consent decree is limited to reasonable and necessary implementations of federal law. Frew, 540 U.S. at 441-42, 124 S.Ct. 899 (advocating the restriction of consent decrees “to reasonable and necessary implementations of federal law, [to avoid] improperly depriv[ing] future officials of their designated legislative and executive powers ... [, because a state] ... depends upon successor officials, both appointed and elected, to bring new insights and solutions to problems of allocating revenues and resources.”). Although the 2003 Consent Decree generally hews closely to federal due process requirements, it does expand certain requirements. The expansions, however, were reasonable and necessary implementations of federal law aimed at increasing the State’s compliance with federal law. (See Doc. Nos. 868, 908.) The electoral change in State government in and of itself did not cure the State’s non-compliance and, therefore, cannot be the source of modification. Defendants’ remaining arguments underlying this theory also fail. Defendants state that “Governor Bredesen took office in January 2003, after the Consent Decree in its current form was entered in 1999, and well after the original consent decree in this litigation was entered in 1996.” (Doc. No. 1241 at 124) (emphasis added). Defendants are correct in pointing out that the 2003 Consent Decree has its roots in the 1996 Agreed Order. The 1996 Agreed Order was significantly revised and expanded in 1999, and further clarified in 2000 resulting in the 2000 Consent Decree. While this occurred before the current administration took office, Defendants omit a crucial fact: the 2003 Consent Decree in its current form was agreed to and entered eight months after the current administration took office. The Defendants, however, assert that “[a]ny contention that the relevant provisions of the [2003 Consent Decree] ... were agreed to in the fall of 2003, when the parties entered the ‘global settlement’ resolving specific issues associated with various consent decrees governing Tenn-Care, including one narrow aspect of the pharmacy provision in the [2003 Consent Decree] ... is untenable.” (Id. at 125.) The fact that all provisions of the 2003 Consent Decree were not agreed to specifically by this administration is of no avail. It is undisputed that upon taking office, the Governor was concerned that his administration was bound by consent decrees signed by a previous administration, and that these decrees were preventing his administration’s effective management of the TennCare program. (Doc. No. 1172, Tr. at 698; Doc. No. 1170, Tr. at 805-08.) This concern drove the administration to open negotiations with Plaintiffs to revise the 2000 Consent Decree, in addition to discussing the three other class actions involving different aspects of the Tenn-Care program. (Doc. No. 1170, Tr. at 812.) A six-month, detailed negotiation ensued in which the administration successfully renegotiated pharmacy and other provisions of the 2000 Consent Decree, and entered into a “global settlement” relating to all four of.the class actions involving TennCare. With respect to this case, although the administration focused on revising the pharmacy provisions, primarily sought changes that would reap larger cost savings, and did not obtain all the changes it desired (Id. at 812-15), it had sufficient time and opportunity to raise all the issues with which it was concerned (Doc. No. 1172, Tr. at 709-11). In light of the comprehensive nature, length and purpose of the negotiations, this Court does not accept that the administration only sought to revise “one narrow aspect of the pharmacy provision.” (Doc, No. 1241 at 125.) Tellingly, the Joint Motion to Approve Modification of the [2003] Revised Consent Decree includes revisions to other aspects of the 2000 Consent Decree, indicating that the parties did discuss and modify other provisions. (See Doc. No. 887.) Finally, nothing prevented this administration from filing a motion to modify the 2000 Consent Decree in the fall of 2003 to obtain the remaining modifications it desired. Indeed, such a motion was already pending before this Court. (See Doc. Nos. 858, 859.) These facts undermine the Defendants’ theory that the 2003 Consent Decree is the type of longstanding agreement binding future state officials that is frowned upon by Rufo and Frew. Here the State had the opportunity to, and did, revise significant portions of the 2000 Consent Decree. That the administration did not obtain all the revisions it sought, and yet declined to seek relief from this Court, demonstrates a strategic choice and a legitimate exercise of its executive powers. After making this choice, however, thé administration cannot now be' heard to complain that agreements made by past administrations are improperly depriving it of its executive powers. Those past agreements were superceded when this administration accepted all the provisions — modified to the administration’s satisfaction or not — of the 2003 Consent Decree. Finally, Defendants and Defendants-In-tervenors point out that in their Joint Motion to Approve Modification of the [2003] Revised Consent Decree, the parties did not waive “any rights ... to seek or oppose further modifications of the [2003] Revised Consent Decree ... [or] to challenge the Decree.” (Doc. No. 887 at 2.) Defendants and Defendants-Intervenors assert that this language makes it clear that the State did not agree to waive its right to challenge provisions of the 2000 Consent Decree that it was unable or unwilling to revise after six months of comprehensive negotiations in 2003. This Court disagrees. For the reasons explained above, once the State accepted the 2003 Consent Decree, it accepted all of its provisions. As a result, the reservation of rights applies to the 2003 Consent Decree, not the 2000 Consent Decree. The Court’s interpretation of the reservation of rights is supported by the preamble to the 2003 Consent Decree, which states: “the Court has approved the requested changes to the revised consent decree that was entered July 31, 2000 (Doc. 630). This order incorporates the [2003] approved modifications into [the 2000 Consent Decree], which this order supersedes.” (Doc. No. 908 at 1) (emphasis added). Moreover, Mr. Manual Martins, the former TennCare Director who participated in and was intimately familiar with the 2003 negotiations, stated: [T]here would be two extremes that would be troublesome to me in the process of the negotiations. One extreme would be that the State went in there and operated under bad faith in thinking we are just going to do this to get through. The other extreme would be that whatever we do here is forever more and no one can reopen it or challenge it. Both of those would be, I think, not my understanding of what occurred nor would they be something I would feel comfortable with .... [I]n the negotiations I think I raised ... on several different times that with the changes in the financial situation of TennCare and the unpredictability of it that there needed to be some reservation made to deal with those kind of issues. (Doc. No. 1170, Tr. at 818-19) (emphasis added). Defendants’ and Defendants-In-tervenors’ current interpretation of the reservation of rights is what Mr. Martins rejected as an extreme position that could only be taken in bad faith. Mr. Martins was clear that the State must be permitted to modify the 2003 Consent Decree not because it did not get everything it wanted in the 2003 negotiations, but in recognition of the need to adapt in light of the volatility of TennCare’s financial situation. Indeed, the testimony of those involved in the negotiations implies that the reservation was made for purposes of preserving further challenges to the pharmacy provisions that this administration had already heavily negotiated, rather than modifying other provisions that were negotiated by previous administrations. (Rosen Tr. (3/28/05) at 60-61; Doc. No. 1172, Tr. at 711-12; Doc. No. 1170, .Tr. at 816-18.) In sum, the change in administration in and of itself does not warrant modification of the 2003 Consent Decree. As a whole, the changes in the legal circumstances do not warrant modification of the entire 2003 Consent Decree. 3. Change In Factual Circumstances The State further urges the Court to find that modification is warranted due to the fiscal crisis that the State learned of in late 2004. Plaintiffs do not quibble with the fact that in the fall of 2004 the State learned that TennCare would face a serious financial crisis by fiscal year 2006. Instead, Plaintiffs assert that the financial crisis was not unprecedented and was foreseen by the State. The key to modification of the 2003 Consent Decree is whether the fiscal crisis that the State learned of in late 2004 is different from TennCare’s general financial malaise, thereby constituting a significant change in circumstances. If it is different, the Court must determine whether the fiscal crisis was foreseeable in mid to late 2003, at the time the parties agreed to the Decree. For the following reasons, the Court finds that there has been a significant change in the factual circumstances, namely the worsening of Tenn-Care’s fiscal crisis, to warrant modification of the 2003 Consent Decree. Notwithstanding the fiscal crisis, the public interest in long-term reform to systematic problems in TennCare also supports modification. i. Fiscal Crisis Warrants Modification Although TennCare has always faced financial difficulties, and the State was aware of TennCare’s financial problems, it was not cognizant of the severity of these fiscal, problems at the time it negotiated and agreed to the 2003 Consent Decree. The McKinsey reports, which were published after the 2003 Consent Decree was entered, brought into sharp focus the long-term financial viability of TennCare. Indeed, Commissioner Goetz testified that having just instituted pharmacy reforms that would garner significant savings, the State was taken off-guard by McKinsey’s dire prognosis. Most importantly, however, the enormity of the fiscal crisis was not discovered until the fall of 2004 after the State learned both that it would be losing approximately $140 million in federal Medicaid funding and that pharmacy and medical utilization rates had increased sharply. Not only were these events unpredicted and unforeseeable, but they also created an unprecedented fiscal shortfall. In fact, TennCare faced, under conservative estimates, a shortfall of $650 million in fiscal year 2006, compared to a shortfall of approximately $130 million in fiscal year 2005, and a shortfall of $200-300 million in fiscal year 2003. Accordingly, the Court finds that the worsening in TennCare’s financial circumstances was not entirely understood at the time the 2003 Consent Decree was entered and approved, and did not truly culminate until a year after the Decree’s entry. Simply put, the fiscal crisis was unpredictable, unforeseeable, and unprecedented. This change in TennCare’s finances represents a significant change in the factual circumstances warranting modification of the 2003 Consent Decree. ii. Fiscal Crisis Averted? Plaintiffs dispute the notion that Tenn-Care faces a fiscal crisis. Instead, Plaintiffs contend that the trends in the State’s overall financial condition do not support modification. Plaintiffs argue that the State’s overall fiscal health is better now than it was in 2003 due to numerous factors. First, the State expects to close out the fiscal year that ended June 30, 2005 with a surplus of about $140 million of nonrecurring funds. Second, the State’s Rainy Day Fund is at the highest levels in history. Third, the TennCare program is carrying reserves of approximately $200 million in fiscal year 2006, the highest it has been in recent history. Fourth, disenrollments of 323,000 of the sickest and most expensive adult beneficiaries of TennCare have reduced the acute nature of TennCare’s fiscal crisis. Finally, the State has acknowledged that it settled a lawsuit with the federal government, gaining approximately $50 million in nonrecurring funds previously earmarked to cover this contingent liability. However, the disenrollments, and the increase in the State’s Rainy Day Fund and TennCare’s reserves are all steps that the State has had to take in order to combat the severe deficit that TennCare is facing. It would have been grossly irresponsible for the State not to have taken any action to set aside funds to deal with the predicted $650 million deficit. In addition, the fact that the State now has approximately $190 million in nonrecurring funds is also of no avail, as these funds have been allocated to the Health Care Safety Net Funding and the Medically Needy population, both of which represent the State’s efforts to respond to potential downstream costs of the State’s disenrollment policy. These actions are therefore a part of the State’s overall reform plan to alleviate the fiscal crisis, and are akin to the State’s proposed modifications to the 2003 Consent Decree. Accordingly, they cannot be considered “changed circumstances” for purposes of modification. Furthermore, the proposed modifications to the 2003 Consent Decree are long-term reforms, whereas the increase in the Rainy Day Fund, the increase in Tenn-Care’s reserves, the creation of the Health Care Safety Net Funding, and funding for the Medically Needy population are short-term financial patches that will have to be recalculated each year. Most importantly, the underlying factors that led to the crisis — systemic problems in TennCare coupled with a reduction in federal funding, higher than expected pharmacy and medical utilization rates — are not resolved by the State’s monetary fixes to date. Plaintiffs agree with Defendants that the underlying factors must be addressed and TennCare must be reformed; they simply disagree about the method of reform. It would be contrary to the public interest to ignore the fact that TennCare requires long-term reform simply because the State has possibly averted the financial crisis for fiscal year 2006. iii. Alternative Reforms Plaintiffs further argue that modification is not warranted because when the parties entered negotiations in March 2003, the State was well aware that TennCare faced financial challenges and required reform, especially with respect to pharmaceutical benefits. According to Plaintiffs, the McKinsey reports simply confirmed what was already known: that TennCare could not be sustained without significant reform. Thus, Plaintiffs agree that reform of TennCare is necessary for the program to remain viable, but fault the State for failing to enact reforms that do not require modification of the 2003 Consent Decree, claiming that such reforms would have stabilized TennCare’s financial situation. Plaintiffs’ argument that the fiscal crisis was avoidable through alternative reforms is unpersuasive. To begin with, the State did consider and institute alternative reforms, such as retrospective drug utilization review, reduction of administrative rate reductions for MCOs, returning the MCOs to financial risk, joining a multi-state drug pooling arrangement, reducing provider rates, and increasing fraud and abuse prevention efforts, among others. Defendants contend that none of these reform measures could be implemented, individually or collectively, in time to achieve the savings necessary to address the $650 million budget shortfall. Plaintiffs also appear to have conceded that their proposed reforms would not “dramatically alter the TennCare budget situation, but they are worthy of consideration in their own right.” (Def. Ex. 73 at 1.) Importantly, it appears to this Court that these alternative reform measures could not effectively tackle the crux of the State’s problem: that of sustaining one of the nation’s most progressive and generous Medicaid programs in a state that has one of the nation’s lowest tax burdens per person. As the Defendants correctly point out, however, the Governor was elected on the basis of a pledge not to raise taxes. Similarly, the administration and the Legislature are opposed to solving TennCare’s financial problems with new taxes, resulting in a lack of support for bills that could have generated additional revenue for TennCare through taxes. In short, it appears that elected state officials believe that it is politically feasible to limit Tenn-Care eligibility and benefits rather than impose a nominal state income tax, increase cigarette taxes or impose other taxes. Even if this Court may disagree with that policy, it is a policy choice that “must be left to the elected representatives of the residents of the State.” Rosen, 410 F.3d at 933. Therefore, it is not this Court’s role to question the State’s choice of reform, as long as such choice complies with the law. The Court will address the legality of the proposed modifications in Part II.C., infra. In addition, the evidence demonstrates that the State acted responsibly and in good faith in choosing its reform measures. It took TennCare reform seriously, performed a comprehensive study of its failures and proposed reforms to address such failures. The State included numerous healthcare stakeholders and the public in its decision-making process. (See Def. Ex. 83 (stating that the State’s reforms were “done with broad consultation and input from key constituency groups as well as elected and appointed officials over a period of time that are well informed of the options available to the state as it faces great budgetary challenges.”).) Notably, the State actively engaged the Plaintiffs in its reform process. Finally, the Court heard from Commissioner of Finance and Administration for the State of Tennessee, Mr. Merritt Davis Goetz, Jr.; Deputy Commissioner of Finance and Administration and the Director of the TennCare Bureau, Dr. Jason David Hickey; Chief Medical Officer of the TennCare Bureau, Dr. Wendy Long; Assistant Commissioner and Chief Administrative Officer for the TennCare Bureau, Ms. Patti Killingsworth; Chief Financial Officer of the TennCare Bureau, Mr. Darin Gordon; and Budget Director for the TennCare Bureau, Mr. Scott Pierce. The Court found these witnesses to be credible, thoughtful, knowledgeable, and cognizant of their duty of balancing the State’s finite resources against the welfare of TennCare enrollees. As a result, the State’s choice of reform is not a bar to modification. To the contrary, the overall change in factual circumstances and the public interest warrant modification of the 2003 Consent Decree. Ip. Costs Associated With The 2003 Consent Decree Warrant Modification Defendants contend that separate and apart from the fiscal crisis, modification of the 2003 Consent Decree is warranted because the Decree is unworkable and unnecessarily burdensome. Defendants claim that the “heightened restrictions on appeal rights for both pharmacy and medical services have given rise to abuse, unnecessary costs, poor medical outcomes in many cases, and general dysfunction.” (Doc. No. 1087 at 18.) In addition, Defendants claim that their current “efforts to control costs are greatly hampered, if not doomed, to the extent” the 2003 Consent Decree remains unchanged. (Id.) To that end, Defendants conservatively estimate that the Consent Decree will save approximately $93 million in state dollars in fiscal year 2006, and similar amounts in the future. Plaintiffs disagree that modification of the Consent Decree will reap the savings required to alter TennCare’s fiscal situation. Plaintiffs contend that Defendants have unfairly blamed the TennCare consent decrees, and principally the 2003 Consent Decree, for creating the budget crisis of $650 million dollars. In support, Plaintiffs argue that Defendants have not performed a comprehensive analysis of the costs associated with the 2003 Consent Decree, and Defendants’ claim to save $93 million per year from their proposed modifications is speculative and far short of the monies required to make TennCare financially stable. The Court agrees that the $93 million savings estimate is somewhat speculative. While the Court accepts Darin Gordon’s testimony that a comprehensive review of the costs associated with the Decree would improperly divert scarce state resources (Doc. No. 1168, Tr. at 298-300), the Court notes that in the absence of such a review, the State has improperly blamed the 2003 Consent Decree for all of TennCare’s fiscal woes. This is reflected in the fact that the estimated savings of $93 million from the proposed modifications to the Consent Decree barely impacts the $650 million shortfall the State faces; negating the State’s argument that the 2003 Consent Decree is one of the main causes for the current TennCare fiscal crisis, the disenrollments and the State’s inability to control costs and operate an effective managed care system. In addition to the State’s speculative calculations, the McKinsey reports undermine the State’s theory that the Consent Decree is a key cost driver. The McKin-sey reports cite pharmacy, professional services, outpatient services and growing enrollment as TennCare’s key cost drivers. (See Def. Ex. 38.) The Consent Decree, however, primarily deals with appeals procedures and, to a lesser extent, prior authorization requirements for prescription drugs. Thus, the Consent Decree only deals with one of the four primary cost factors cited by McKinsey. Further, the McKinsey report itself lists the consent decrees as only one out of fourteen “root causes of TennCare’s cost growth.” (Id. at 28.) The other “root causes” include unlimited benefits, broad enrollment aspirations, carve-out programs, a history of subscale MCOs with inadequate medical management, general medical cost inflation, misaligned provider/consumer incentives, lack of transparency into provider outcomes, poor data availability and IT systems, difficult eligibility determination, light management care and Tennessee-specific issues such as lack of experience with managed care, high drug and services utilization, and entrepreneurial spirit within the provider community. (Id.) In light of the myriad problems facing TennCare, the Court finds the State’s attempt to paint the 2003 Consent Decree as the primary factor increasing TennCare’s costs to be disingenuous. Nevertheless, there is no denying that the 2003 Consent Decree has led to some increased costs in the pharmacy area. Furthermore, the State has demonstrated that certain provisions in both the pharmacy and appeals areas are unduly burdensome or require fine-tuning, thereby warranting modification. i. Pharmacy Costs Tennesseans have historically been high users of pharmacy services compared to other states. For example, Tennessee has a per capita annual prescription average of 16.5 prescriptions per person whereas the national average is 10.7 prescriptions per person. (Def. Ex. 201 at 8.) Indeed, it is undisputed that drug use for the Tennessee population as a whole is the highest in the nation. Correspondingly, Tennessee’s physicians write 54% more prescriptions per capita than the national average for all physicians, and 50% more than the average for the states bordering Tennessee. (Id.) For financial reasons, these statistics are problematic for TennCare. Specifically, the rate of growth in TennCare’s prescription drug costs increased steadily from 30% in 1999 to a peak of 44.7% in 2001, and then declined to 26.2% by 2004. (See Def. Ex. 373.) In comparison, the rate of growth in prescription drug costs for Blue Cross Blue Shield’s commercial plans in Tennessee have decreased steadily from 17.8% in 2000 to 8% in 2004. (Id.) Similarly, growth rates in CMS’ prescription drug costs, which include, among others, Medicaid and Medicare prescription drug spending, was approximately 20% in 1999 and 2000, and has remained relatively steady at approximately 17% from 2001 to 2003. (Id.) Nationally, the growth rate in prescription drug costs for both public and private health plans has declined from 19.7% in 1999 to about 10.7% in 2003. (Id.) Accordingly, the growth rate in prescription drug costs in TennCare have not only fluctuated considerably, but prescription drug costs are still increasing at high rates. Both phenomena are unparalleled in Blue Cross Blue Shield commercial plans in Tennessee, CMS and national prescription drug growth rates. Significantly, while TennCare’s pharmacy growth rate may have slowed to about 26.2%, the actual dollar amount spent on pharmacy has increased from $567,000,000 in 1999 to an astonishing $2,161,700,000 in 2004. (See Def. Ex. 374.) Thus, while the growth rate appears smaller, the amount of money spent on pharmacy continues to increase. Indeed, the fust McKinsey report cited pharmacy costs as “the single most significant source of future cost increases ..., driving nearly 60 percent of total growth through fiscal year 2008 .... ” (Def. Ex. 38 at 29.) While Defendants blame this growth entirely on the various consent decrees in this case, the chart Defendants rely on in support of their argument is bare-boned and conclusory, and simply looks at the compound annual rate of growth in pharmacy costs without considering the factors that could be fueling the growth. (Compare Def. Ex. 355A, with Def. Ex. 382 (listing a variety of factors explaining increase of costs for prescription drugs in Tennessee).) Indeed, it is possible that private insurers in Tennessee are able to control costs through strategies that are not appropriate in the TennCare setting such as consumer cost sharing strategies, restrictions on the pharmacies from which prescription drugs may be bought, and exclusion of other drugs entirely. Nevertheless, the evidence taken as a whole shows that the 2000 Consent Decree was at least one of the factors that led to an increase in TennCare’s prescription drug costs from 2000 to 2003. {See Def. Ex. 338 at 20 (estimating the impact of the 2000 Consent Decree for fiscal year 2004 to be approximately $130 million to $190 million); Def. Ex. 382 at 2 (stating that the increase in prescription drug cost is “partially attributable” to the 2000 Consent Decree); Doc. No. 860 at 21 (study by Applied Health Outcomes estimating that the 2000 Consent Decree increased pharmacy costs by $41 million).) Indeed, in recognition of this fact, Plaintiffs agreed to revise the provision dealing with prior authorization, which resulted in the 2003 Consent Decree. Notably, the State and Plaintiffs agree that the State garnered savings of approximately $150-200 million from this revision. (Doc. No. 1172, Tr. at 715-16.) Notwithstanding the changes to the 2000 Consent Decree and the concomitant savings, the fact remains that TennCare’s prescription drug costs continue to increase, and are the key costs behind TennCare’s ever burgeoning budget. Defendants estimate that their proposed modifications to the pharmacy provisions of the 2003 Consent Decree will result in savings of at least $7.4 million. (Def.Ex. 213.) Further, Defendants’ prescription drug limit reforms are expected to save in excess of $46 million. {Id.) In light of the fiscal crisis, rising prescription drug costs, and the fact that certain aspects of the pharmacy provisions of the 2003 Consent Decree contribute to rising drug costs, see infra Part II.C.l.i.a., the Court finds that modification is warranted. ii. Appeals Finally, Defendants assert that the Consent Decree’s myriad restrictions on the medical appeals process also block needed savings. Specifically, Defendants argue that the Consent Decree increases costs by 1) requiring the State to accept a provider’s medical necessity decision; 2) requiring the State to grant appeals for services when the enrollee never requested the item or service from the MCC or when the requested service was never prescribed by a provider; 3) requiring the'State to establish that a service is not supported by substantial and material evidence in the enrollee’s medical records; 4) precluding the State from dismissing appeals raising no disputed issues of fact; 5) requiring the State to abide by a “prudent lay person” standard for expedited appeals; 6) prohibiting the State from appealing adverse determinations by an Administrative Law Judge; and 7) providing coverage in the event of defective n