Stinemetz v. Kansas Health Policy Authority

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No. 105,366

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

MARY D. STINEMETZ,
Appellant,

v.

KANSAS HEALTH POLICY AUTHORITY,
Appellee.


SYLLABUS BY THE COURT

1.
In an appeal from a decision by an administrative agency, generally a party is
limited to the issues raised at the administrative hearing. But because administrative
agencies cannot rule on constitutional questions, the issue of constitutionality can be
raised for the first time before a court of law.

2.
The scope of judicial review of a state administrative agency action is defined by
the Kansas Judicial Review Act, K.S.A. 77-601 et seq. An appellate court exercises the
same limited review of the agency's action as does the district court; it is as though the
appeal had been made directly to the appellate court.

3.
Whether a statute or regulation is constitutional as applied is a question of law
over which an appellate court has unlimited review.



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4.
In analyzing a claim under the Free Exercise Clause of the First Amendment to the
United States Constitution, a law that is neutral and of general applicability need not be
justified by a compelling governmental interest even if the law has the incidental effect of
burdening a particular religious practice or belief.

5.
In analyzing a claim under the Free Exercise Clause of the First Amendment to the
United States Constitution, where the State has in place a system of individual
exemptions to a statute or regulation, it may not refuse to extend that system to cases of
religious hardship without a compelling reason.

6.
Section 7 of the Kansas Constitution Bill of Rights provides greater protections
concerning the free exercise of religious beliefs than does the First Amendment to the
United States Constitution.

7.
To determine whether government action violates an individual's right to the free
exercise of religious beliefs under the Kansas Constitution, a court must determine: (1)
whether the individual's religious beliefs are sincerely held; (2) whether the state action
burdens the individual's free exercise of religious beliefs; (3) whether the state interest is
overriding or compelling; and (4) whether the State uses the least restrictive means of
achieving its interest. The individual bears the burden of proof to show that the first two
steps have been satisfied, and then the burden shifts to the State to prove that the last two
steps are met.

Appeal from Graham District Court; WILLIAM B. ELLIOTT, judge. Opinion filed May 4, 2011.
Reversed and remanded with directions.
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Corinne Petrik, of Kansas Legal Services, of Hays, and Lowell C. Paul, of Kansas Legal
Services, of Topeka, for appellant.

Brian M. Vazquez, of Kansas Health Policy Authority, for appellee.

Keturah A. Dunne, associate general counsel, of Watchtower Bible and Tract Society of New
York, Inc., of Patterson, New York, and Tony A. Potter, of Potter Law Office, P.A., of Hill City, for
amicus curiae Watchtower Bible and Tract Society of New York, Inc.

Before HILL, P.J., MALONE and BUSER, JJ.

MALONE, J.: Mary D. Stinemetz, a Kansas citizen and a practicing Jehovah's
Witness, needs a liver transplant, yet her religious beliefs prohibit blood transfusions.
There is a medically accepted technique, known as a bloodless liver transplant, in which
liver transplant surgery can be performed without a blood transfusion, although many
medical facilities do not consider this technique to be the safest procedure. Cost is not the
issue. The available evidence indicates that the bloodless technique is less expensive than
a procedure involving blood transfusions. There is no medical facility in Kansas that
performs bloodless liver transplants, but the Nebraska Medical Center in Omaha is
willing to perform the surgery.

Because Stinemetz is a beneficiary of the Kansas Medical Assistance Program
(Medicaid), she requested prior authorization from the Kansas Health Policy Authority
(KHPA) for an out-of-state liver transplant. There is no question that the KHPA would
authorize a liver transplant for Stinemetz in Kansas, including a bloodless liver transplant
if a medical facility was available in Kansas to perform the technique. However, the
KHPA denied Stinemetz' request for prior authorization for out-of-state services on the
ground that her religious preference did not constitute a medical necessity. The district
court affirmed the KHPA's denial of prior authorization. Stinemetz appeals, asserting that
the denial violated her rights under the Free Exercise Clause of the First Amendment to
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the United States Constitution and § 7 of the Kansas Constitution Bill of Rights. For the
reasons set forth herein, we agree with Stinemetz' claims under both the federal and
Kansas Constitutions, and we reverse and remand with directions that the KHPA grant
Stinemetz' request for prior authorization for an out-of-state liver transplant.

FACTUAL AND PROCEDURAL BACKGROUND

Stinemetz was initially diagnosed with primary biliary cirrhosis in 1989; since
then, her liver function has deteriorated. By 2009, it became apparent that Stinemetz
needed a liver transplant. At that point, she had been a devout practicing Jehovah's
Witness for over 35 years. Due to her religious beliefs, she refuses to accept whole blood
transfusions. She also refuses any procedure whereby her own blood is removed from her
body and stored for later use in a surgical procedure.

On June 3, 2009, a committee at the University of Kansas Medical Center
(KUMC) met to review and discuss Stinemetz' case and the possibility of performing a
liver transplant on Stinemetz at KUMC. The committee decided it could not safely
perform a bloodless liver transplant at KUMC; therefore, it declined to evaluate her for
the procedure. Dr. Ryan Taylor at KUMC recommended that Stinemetz be referred to
another center with experience in bloodless transplants, such as the University of
Oklahoma.

In November 2009, Stinemetz was hospitalized for 5 days at St. Luke's Hospital in
Kansas City, Missouri, for treatment of a left pleural effusion. By this point, Stinemetz
had been diagnosed with end-stage liver disease. Her doctors believed that her only
recourse was a liver transplant. Dr. Richard Gilroy at KUMC suggested Nebraska
Medical Center in Omaha as a facility that could perform a bloodless liver transplant.

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Stinemetz is a recipient of Medicaid, and the KHPA is the state agency responsible
for supervising and administering Medicaid assistance in Kansas. K.S.A. 2010 Supp. 75-
7409. Under K.A.R. 30-5-70(c)(2), any out-of-state services that occur farther than 50
miles from the Kansas border will only be reimbursed by Medicaid if the service is an
emergency service, prior authorization has been issued, or the service is provided by an
independent laboratory. Because Nebraska Medical Center is more than 50 miles from
the Kansas border, Stinemetz requested prior authorization from the KHPA for the out-
of-state facility to perform the transplant.

On January 11, 2010, the KHPA notified Stinemetz that it was denying her request
for prior authorization for the out-of-state liver transplant. Specifically, the KHPA
informed Stinemetz that her request for prior authorization was "reviewed and denied for
out of state services, relegious [sic] preference does not meet medical necessity, through
the Kansas Health Policy Authority Medical Work Group." On January 28, 2010, Dr.
Gary A. Thompson wrote a letter for Stinemetz asking for an expedited appeal of the
denial, stating that Stinemetz' "risk of death is high, due to liver failure."

On February 2, 2010, Stinemetz filed her request for an administrative hearing.
Christy Escobar, the fair hearings analyst for HP Enterprise Services, Kansas' fiscal agent
for Medicaid, prepared an agency summary of the case and filed the summary on
February 10, 2010. The agency summary stated:

"The beneficiary has requested to have a bloodless liver transplant because of her
religious beliefs. The prior authorization request was denied because there is no medical
necessity for the beneficiary to have a bloodless transplant — a regular liver transplant is
available in Kansas and would be considered medically necessary. The beneficiary's
religious preference to have a bloodless liver transplant does not meet medical necessity,
through the Kansas Health Policy Authority Medical Work Group."

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An administrative hearing was held on March 1, 2010. At the hearing, Escobar
testified about her agency summary. Dr. Wayne Oren Wallace, Jr., clinical consultant for
the KHPA, also testified at the hearing. Wallace testified that the medical work group
reviewed Stinemetz' request for prior authorization and ultimately decided that the KHPA
would pay for the liver transplant at KUMC, but the KHPA would not authorize a
bloodless procedure because it required Stinemetz to go to a different facility out-of-state.
Wallace acknowledged that if KUMC would perform a bloodless liver transplant,
Medicaid would pay for the procedure. Wallace also acknowledged that there are certain
negative effects associated with blood transfusions.

Scott Bears, a program manager with the KHPA, also testified at the hearing.
Bears oversees coverage issues involving transplants. Bears testified that he worked with
the medical work group in discussing and resolving Stinemetz' request for prior
authorization. According to Bears, when determining coverage, the first step is to
determine whether the requested service is a covered service. Bears testified that
Stinemetz' liver transplant at the Nebraska Medical Center was not a covered service
because a hospital in Kansas could perform the procedure, but without using the
bloodless technique.

Finally, Stinemetz testified at the hearing. At the time of the hearing, she was 63
years old, and she testified she had liver problems for many years. Stinemetz testified that
she had been a practicing Jehovah's Witness since she was 28 years old. Stinemetz further
testified that she would refuse a blood transfusion even in a life-threatening situation
because she is a Jehovah's Witness, and she read passages from the Bible on which she
based her belief that blood transfusions are prohibited. She also testified that her religious
beliefs would not allow her own blood to be removed from her body and stored for later
use in a surgical procedure.

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Stinemetz further testified that she would be happy to schedule her surgery in
Kansas if there was an available facility within the state that provided bloodless liver
transplants. Because there is no such medical facility in Kansas, Stinemetz testified she
was requesting Medicaid to honor her religious principles and pay for the procedure out-
of-state. Stinemetz acknowledged that if she received a blood transfusion against her
religious beliefs, she would still be allowed to be a member of her congregation if she
was truly repentant for what she had done.

As part of the agency record, Stinemetz presented written material including
several articles from scientific journals about bloodless surgery techniques. The articles
described how bloodless surgical procedures have become widespread and some medical
providers consider the technique to be safer than using blood transfusions. According to
one article submitted by Stinemetz, Englewood Hospital's New Jersey Institute for the
Advancement of Bloodless Medicine and Surgery has successfully performed more than
1,500 bloodless procedures since 1994, and many patients other than Jehovah's Witnesses
preferred the bloodless technique to avoid the risks associated with blood transfusions.
The articles also described that the bloodless technique is less expensive than a procedure
involving blood transfusions. Stinemetz' written material was admitted into evidence
without objection at the administrative hearing. In closing argument, Stinemetz' counsel
stated, "We do believe that denying Mary Stinemetz coverage for a bloodless liver
transplant evaluation, and by extension the surgery itself, constitutes a burden on her free
exercise of religion without a compelling state interest to justify that burden."

On March 25, 2010, the presiding officer issued an initial order which affirmed the
agency's decision. The presiding officer found that Stinemetz' desire for a bloodless
transplant "is a personal request, which exceeds medical necessity pursuant to the
respondent's regulations. A liver transplant, which is medically necessary for the
appellant, can be provided within the state and out-of-state authorization was properly
denied." The presiding officer did not address Stinemetz' constitutional claim.
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Stinemetz filed her appeal with the KHPA State Appeals Committee (Appeals
Committee) on April 2, 2010, claiming that the denial of the prior authorization violated
"the provisions of the Free Exercise Clause of the First Amendment to the Constitution of
the United States and Section 7 of the Bill of Rights of the Kansas Constitution." Both
parties submitted written briefs to the Appeals Committee addressing the constitutional
claims. On June 15, 2010, the Appeals Committee issued its final order and adopted the
presiding officer's findings of fact and conclusions of law. Specifically, the Appeals
Committee found that "[t]he basis of the denial is that out-of-state services are not
required because religious preference does not meet medical necessity criteria. A liver
transplant can be provided to the appellant in the State of Kansas."

On June 28, 2010, Stinemetz filed her petition for judicial review in Graham
County. The petition for judicial review specifically alleged that the KHPA's decision,
which conditioned the provision of a life-saving public benefit on Stinemetz agreeing to
engage in conduct which violated her deeply held religious beliefs, violated her rights
under the First Amendment to the United States Constitution and § 7 of the Kansas
Constitution Bill of Rights. The agency record was submitted to the district court for de
novo review, and neither party requested to submit additional evidence. Both parties
submitted written briefs to the district court, but the district court did not hear oral
argument in the case.

The district court filed its memorandum decision and order on December 1, 2010.
The district court specifically found that "[t]here is nothing to indicate that [Stinemetz']
request for a bloodless liver transplant is based on anything other than her sincere and
deeply held religious belief." Nevertheless, the district court affirmed the KHPA's
decision, finding it was supported by substantial evidence. The district court dedicated
less than one paragraph to the constitutional issues, stating:

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"It has not been shown that KHPA's refusal to grant the University of Nebraska's request
for prior authorization to perform a bloodless liver transplant on Ms. Stinemetz is
unconstitutional. State courts may not interfere in matters concerning religious doctrine
or organization. Matters of redemption are best left to others. It is not appropriate for
secular authorities, including courts, to investigate or decide matters that are almost
entirely ecclesiastical in nature."

Stinemetz timely filed her notice of appeal on December 9, 2010, and the appeal
was docketed on December 15, 2010. This court ordered the appeal to be expedited. The
record was received from district court on March 14, 2011, and oral argument was held
on April 20, 2011.

Stinemetz raises two issues on appeal. First, Stinemetz claims that the KHPA's
denial of her request for prior authorization for an out-of-state transplant violated her
rights under the Free Exercise Clause of the First Amendment to the United States
Constitution. Second, Stinemetz claims that the KHPA's denial of her request for prior
authorization for an out-of-state transplant violated her rights under § 7 of the Kansas
Constitution Bill of Rights. The KHPA raises a preliminary issue claiming that Stinemetz
failed to properly preserve the constitutional issues for judicial review.

WERE THE CONSTITUTIONAL ISSUES PROPERLY PRESERVED?


The KHPA argues that Stinemetz failed to properly preserve for judicial review
the issues regarding the constitutionality of the KHPA's actions. Essentially, the KHPA
contends that Stinemetz failed to raise the legal issue of constitutionality before the
administrative agency, thereby failing to preserve it for review by the district court or this
court on appeal. The KHPA further argues that Stinemetz failed to substantiate her
constitutional claims with sufficient evidence at the administrative hearing, and that this
failure precluded the district court from properly considering the constitutional claims.

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Stinemetz responds by pointing out that the district court rejected the KHPA's
argument that the constitutional issues were not properly preserved for judicial review,
and the KHPA did not appeal from that ruling. Additionally, Stinemetz contends that she
clearly met her burden of proof and presented evidence on her constitutional claims
before the administrative agency.

Although the KHPA, Stinemetz, and the district court all referred to this issue as
jurisdictional, the Kansas Supreme Court has noted a distinction between a lack of
jurisdiction and a failure to preserve issues for judicial review. See Kingsley v. Kansas
Dept. of Revenue, 288 Kan. 390, 408-13, 204 P.3d 562 (2009) (discussing a failure to
exhaust administrative remedies as distinct from a failure to properly preserve issues for
judicial review). We agree with the KHPA that in an appeal from a decision by an
administrative agency, generally a party is limited to the issues raised at the
administrative hearing. K.S.A. 2010 Supp. 77-618; Kingsley 288 Kan. at 411.

In district court, the KHPA argued that Stinemetz had failed to properly preserve
the constitutional issues for judicial review, but the district court rejected the KHPA's
argument. In its memorandum decision, the district court specifically found that "the
[constitutional] issue was raised by the parties and counsel at the administrative level."
As Stinemetz points out, the KHPA did not appeal this finding or file a cross-appeal in
this action. Our Supreme Court has held "that before an appellee may present adverse
rulings to the appellate court it must file a cross-appeal. If the appellee does not, we have
held that the issue is not properly preserved before the court and may not be considered.
[Citations omitted.]" Cooke v. Gillespie, 285 Kan. 748, 755, 176 P.3d 144 (2008).
Because the KHPA did not appeal the district court's finding that Stinemetz properly
raised the constitutional issue at the administrative level and thereby preserved the issue
for judicial review, the KHPA may not now argue the issue before this court.

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Also, even if the KHPA is correct in arguing that Stinemetz failed to properly raise
the constitutional issue at the administrative level, such a failure does not preclude her
from raising the issue for the first time in district court. Our Supreme Court has held that
"because administrative agencies cannot rule on constitutional questions, the issue of
constitutionality can be raised for the first time before a court of law. [Citation omitted.]"
Solis v. Brookover Ranch Feedyard, Inc., 268 Kan. 750, 757, 999 P.2d 921 (2000).

The KHPA also argues that Stinemetz failed to substantiate her constitutional
claims with sufficient evidence at the administrative hearing. However, this argument is
not supported by the record. When Stinemetz filed her request for an administrative
hearing, Escobar prepared an agency summary of the case and filed the summary on
February 10, 2010, before the administrative hearing was held. The agency summary
outlined all the steps that had taken place concerning Stinemetz' request for prior
authorization. The agency summary further stated: "The beneficiary has requested to
have a bloodless liver transplant because of her religious beliefs. . . . The beneficiary's
religious preference to have a bloodless liver transplant does not meet medical necessity,
through the Kansas Health Policy Authority Medical Work Group." The agency summary
was admitted into evidence by the KHPA at the administrative hearing. Thus, through the
agency summary, the KHPA was aware even before the administrative hearing was
commenced that Stinemetz' religious preference was the key issue between the parties.

At the administrative hearing, Stinemetz testified that she would refuse a blood
transfusion even in a life-threatening situation because she is a Jehovah's Witness, and
she read passages from the Bible on which she based her belief that blood transfusions
are prohibited. Stinemetz further testified that because there was no available medical
facility in Kansas that provided bloodless transplants, she was requesting Medicaid to
honor her religious principles and pay for the procedure out of state. As part of the
agency record, Stinemetz presented written material including several articles from
scientific journals about bloodless surgery techniques. Stinemetz' written material was
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admitted into evidence without objection at the administrative hearing. In closing
argument, Stinemetz' counsel stated, "We do believe that denying Mary Stinemetz
coverage for a bloodless liver transplant evaluation, and by extension the surgery itself,
constitutes a burden on her free exercise of religion without a compelling state interest to
justify that burden."

After the presiding officer affirmed the KHPA's denial of her request for prior
authorization, Stinemetz filed her appeal with the Appeals Committee, claiming that the
denial of the prior authorization violated "the provisions of the Free Exercise Clause of
the First Amendment to the Constitution of the United States and Section 7 of the Bill of
Rights of the Kansas Constitution." Both parties submitted written briefs to the Appeals
Committee addressing the constitutional claims. The Appeals Committee affirmed the
presiding officer's initial order and specifically found that "[t]he basis of the denial is that
out of state services are not required because religious preference does not meet medical
necessity criteria."

Stinemetz substantiated her constitutional claims with sufficient evidence at the
administrative hearing. The KHPA provided no evidence at the administrative hearing to
support a compelling state interest to justify its denial of Stinemetz' request for prior
authorization. However, the KHPA had the opportunity to present such evidence at the
administrative hearing because the KHPA knew from the agency summary filed prior to
the hearing that Stinemetz' religious preference was the key issue between the parties. We
conclude that Stinemetz raised the constitutional issues at the administrative level and,
more necessarily, she substantiated her constitutional claims with sufficient evidence at
the administrative hearing which was submitted to the district court for de novo review.
The fact that the KHPA chose to not present any evidence on the constitutional issues
either at the administrative level or before the district court is to no avail. Accordingly,
we will now proceed to address the constitutional claims Stinemetz has raised on appeal.

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STINEMETZ' FIRST AMENDMENT CLAIM

Stinemetz first claims that the KHPA's denial of her request for prior authorization
for an out-of-state transplant violated her rights under the Free Exercise Clause of the
First Amendment to the United States Constitution. Stinemetz argues in her brief that
"conditioning receipt of an important public benefit upon conduct prohibited by religious
faith is presumptively unconstitutional and must be justified by a compelling state
interest." Stinemetz asks this court to find that the KHPA's actions have substantially
infringed upon her right to the free exercise of her religion and that those actions are not
the least restrictive means of serving a compelling state interest.

The scope of judicial review of a state administrative agency action is defined by
the Kansas Judicial Review Act (KJRA), K.S.A. 77-601 et seq. An appellate court
exercises the same limited review as does the district court; it is as though the appeal had
been made directly to the appellate court. Kansas Dept. of Revenue v. Powell, 290 Kan.
564, 567, 232 P.3d 856 (2010). As the party asserting the agency's action was invalid,
Stinemetz bears the burden of proving its invalidity. K.S.A. 2010 Supp. 77-621(a)(1).
K.S.A. 2010 Supp. 77-621(c) provides eight instances in which a court shall grant relief
from an agency action. Stinemetz relies on subsection (1): "The agency action, or the
statute or rule and regulation on which the agency action is based, is unconstitutional on
its face or as applied."

Here, the administrative agency did not rule on the constitutionality of its action.
Administrative agencies cannot decide constitutional questions; only the courts can
decide constitutional questions. Martin v. Kansas Dept. of Revenue, 285 Kan. 625, 632,
176 P.3d 938 (2008). The district court also declined to rule on the constitutionality of the
agency's action. However, whether a statute or regulation is constitutional as applied is a
question of law over which an appellate court has unlimited review. State v. Laturner,
289 Kan. 727, 735, 218 P.3d 23 (2009).
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The First Amendment to the United States Constitution mandates that "Congress
shall make no law respecting an establishment of religion, or prohibiting the free exercise
thereof; or abridging the freedom of speech, or of the press; or the right of the people
peaceably to assemble, and to petition the Government for a redress of grievances."
Stinemetz asserts that the KHPA's denial of her request for prior authorization violated
her rights under the Free Exercise Clause of the First Amendment. There are two primary
lines of cases that are relevant to Stinemetz' First Amendment claim: Sherbert v. Verner,
374 U.S. 398, 83 S. Ct. 1790, 10 L. Ed. 2d 965 (1963), and its progeny, and Employment
Div., Ore. Dept. of Human Res. v. Smith, 494 U.S. 872, 110 S. Ct. 1595, 108 L. Ed. 2d
876 (1990), superseded in part by 42 U.S.C.A. § 2000bb (1993), and its progeny.

In Sherbert, a member of the Seventh-day Adventist Church was discharged by
her employer because she would not work on Saturday, which was the Sabbath Day of
her faith. After her termination, the employee applied for state-sponsored unemployment
compensation. Under the South Carolina statute, an employee was ineligible for
unemployment benefits if he or she had failed without good cause to accept suitable work
offered by the employer. The South Carolina Employment Security Commission
(Commission) found that the employee's refusal to work on Saturday constituted failure
without good cause to accept suitable work when offered; therefore, it denied her
unemployment benefits. The South Carolina Supreme Court eventually rejected the
employee's contention that the disqualifying provisions of the statute, as applied, violated
her right to the free exercise of her religion under the First Amendment and made
applicable to the states through the Fourteenth Amendment to the United States
Constitution.

On appeal, the United States Supreme Court first considered whether the
disqualification of unemployment benefits imposed a burden on the free exercise of the
employee's religion and found that it did. The Court stated:

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"Here not only is it apparent that appellant's declared ineligibility for benefits derives
solely from the practice of her religion, but the pressure upon her to forego that practice
is unmistakable. The ruling forces her to choose between following the precepts of her
religion and forfeiting benefits, on the one hand, and abandoning one of the precepts of
her religion, in order to accept work, on the other hand. Governmental imposition of such
a choice puts the same kind of burden upon the free exercise of religion as would a fine
imposed against appellant for her Saturday worship." 374 U.S. at 404.

Finding that there was a burden on the employee's free exercise of religion, the
Supreme Court next considered whether the burden was justified by a compelling state
interest. 374 U.S. at 406. The Commission suggested a possibility that the filing of
fraudulent claims by unscrupulous claimants feigning religious objections to Saturday
work might not only dilute the unemployment compensation fund but also hinder the
scheduling by employers of necessary Saturday work. However, the Supreme Court
noted that the Commission did not raise this objection in state court and, in any event, the
contention was not supported by the record. 374 U.S. at 407. The Supreme Court also
concluded that even if the possibility of spurious claims did threaten to dilute the fund
and disrupt the scheduling of work, the Commission would also need to demonstrate that
no alternative forms of regulation would combat such abuses without infringing First
Amendment rights. 374 U.S. at 407. Because the Commission failed to meet these tests,
the Supreme Court held that the State could not constitutionally apply the unemployment
eligibility provisions so as to constrain the employee to abandon her religious convictions
respecting the day of rest. 374 U.S. at 410.

Stinemetz also cites Thomas v. Review Bd. of Ind. Emp. Sec. Div., 450 U.S. 707,
717-18, 101 S. Ct. 1425, 67 L. Ed 2d 724 (1981), another unemployment benefits case,
for the proposition that when the state's action conditions the receipt of an important
public benefit upon action proscribed by a person's religious beliefs, nothing less than a
compelling interest "of the highest order" will suffice. Applying the Sherbert test,
Stinemetz asks this court to find that a state policy infringing on the free exercise of
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religion can only be upheld if there is a compelling state interest of the highest order, and
then only if the State's position is the least restrictive means of achieving that interest.

Stinemetz argues that Kansas appellate courts have "repeatedly" acknowledged
and applied the Sherbert test in analyzing claims under the Free Exercise Clause of the
First Amendment. In Powers v. State Department of Social Welfare, 208 Kan. 605, 493
P.2d 590 (1972), the plaintiff refused to undergo a medical examination to qualify for
welfare benefits under the state Aid to Disabled Program, claiming that her religious
beliefs did not permit such an examination. The Kansas Supreme Court cited Sherbert
and stated that the State may provide public services upon a condition which is contrary
to the religious scruples of some of its citizens, but only if the condition is justified by a
compelling state interest. 208 Kan. at 614. In Wright v. Raines, 1 Kan. App. 2d 494, 571
P.2d 26 (1977), two Kansas prisoners challenged a regulation prohibiting the wearing of
beards by an inmate on the ground that the regulation violated the free exercise of their
Sikh religion. In weighing the state's interests in enforcing the regulation, the Kansas
Court of Appeals noted that "only those interests of the highest order and those not
otherwise served can overbalance legitimate claims to the free exercise of religion." 1
Kan. App. 2d at 501.

In its amicus brief, Watchtower Bible and Tract Society of New York, Inc.
(Watchtower) cited State ex rel. Pringle v. Heritage Baptist Temple, Inc., 236 Kan. 544,
693 P.2d 1163 (1985). In Pringle, the State attempted to enjoin Heritage Baptist Temple,
Inc. (Temple) from operating a day-care center without a license. The Temple asserted a
defense under the Free Exercise Clause of the First Amendment. In analyzing the claim,
the Kansas Supreme Court held that where governmental regulations come into conflict
with the freedom to practice religion, the justification for the regulation is dependent on
three factors: (1) does a genuine religious liberty claim exist and, if so, does the State
burden violate that liberty; (2) if the State violates the liberty right, is it justified by a
compelling state interest; and (3) does the State use the least restrictive means of
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regulation. Although the Supreme Court ultimately ruled against the Temple, Watchtower
asserts that this case stands for the proposition that Kansas follows the Sherbert
compelling state interest test in analyzing claims under the Free Exercise Clause of the
First Amendment.

The KHPA argues that the Sherbert test no longer applies to First Amendment
claims, and instead points to Employment v. Smith. In that case, two employees were fired
from their jobs because they ingested peyote for sacramental purposes during a ceremony
of the Native American Church, of which they were both members. Under Oregon law,
knowingly or intentionally possessing a Schedule I controlled substance, including
peyote, was a class B felony, unless the substance has been prescribed by a medical
practitioner. The employees were later determined ineligible for unemployment benefits
because they had been fired due to work-related misconduct. After a protracted
procedural history that included a remand from the United States Supreme Court, the
Oregon Supreme Court held that the employee's peyote use was prohibited by the Oregon
criminal statute but that the statute was invalid under the Free Exercise Clause of the First
Amendment. Thus, the Oregon Supreme Court reaffirmed its previous ruling that the
State could not deny unemployment benefits to the employees for having engaged in the
sacramental use of peyote.

On appeal, the United States Supreme Court distinguished the Sherbert line of
cases by pointing out that "the conduct at issue in those cases was not prohibited by law."
494 U.S. at 876. Further, the Supreme Court stated that the Sherbert test had never been
used to invalidate any governmental action except the denial of unemployment
compensation, and that "[i]n recent years we have abstained from applying the Sherbert
test (outside the unemployment compensation field) at all." 494 U.S. at 883. Instead, the
Supreme Court found the correct interpretation of the Free Exercise Clause to be: "[I]f
prohibiting the exercise of religion . . . is not the object of the [regulation] but merely the
incidental effect of a generally applicable and otherwise valid provision, the First
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Amendment has not been offended. [Citations omitted.]" 494 U.S. at 878. Under this test,
the Supreme Court found the Oregon criminal statute to be constitutional. Because the
employees' ingestion of peyote was prohibited under Oregon law, and because that
prohibition was constitutional, the Supreme Court held that Oregon may, consistent with
the Free Exercise Clause, deny the employees unemployment compensation when their
dismissal resulted from the use of the drug. 494 U.S. at 890.

In response to Employment v. Smith, Congress passed the Religious Freedom
Restoration Act (RFRA), which restored the compelling interest test from Sherbert. 42
U.S.C.A. § 2000bb(b)(1); City of Boerne v. Flores, 521 U.S. 507, 515, 117 S. Ct. 2157,
138 L. Ed. 2d 624 (1997). The United States Supreme Court struck down part of the
RFRA in City of Boerne, finding that Congress exceeded its enforcement power under the
Fourteenth Amendment and that the RFRA was therefore inapplicable to state law. 521
U.S. at 529-36. Although arguably the RFRA still applies to federal laws that burden the
free exercise of religion, Stinemetz' case involves a state regulation; therefore, the rule
enunciated by the Court in Employment v. Smith applies.

Employment v. Smith essentially removed the strict scrutiny or compelling interest
test from the Free Exercise Clause analysis. However, the Court also indicated that the
"only decisions in which [the Court has] held that the First Amendment bars application
of a neutral, generally applicable law to a religiously motivated action involved not the
Free Exercise Clause alone, but the Free Exercise Clause in conjunction with other
constitutional protections." 494 U.S. at 881. This has become known as the "hybrid
exception." The Court further stated that "our decisions in the unemployment cases stand
for the proposition that where the State has in place a system of individual exemptions, it
may not refuse to extend that system to cases of 'religious hardship' without compelling
reason. [Citation omitted.]" 494 U.S. at 884. This has become known as the "individual
exemption exception."

19

The hybrid exception and the individual exemption exception are regarded today
as the only two situations in which strict scrutiny is still the appropriate test for a state
law challenged under the federal Constitution's Free Exercise Clause. Graff, Free
Exercise and Hybrid Rights; An Alternative Perspective on the Constitutionality of Same-
Sex Marriage Bans, 29 U. Haw. L. Rev. 23, 29 (2006). In other scenarios, a generally
applicable and neutral regulation that incidentally burdens religious exercise does not
violate the First Amendment. See Church of the Lukumi Babalu Aye, Inc. v Hialeah, 508
U.S. 520, 531, 113 S. Ct. 2217, 124 L. Ed. 2d 472 (1993) (law that is neutral and of
general applicability need not be justified by compelling governmental interest even if
law has the incidental effect of burdening a particular religious practice).

The KHPA contends that this court should follow Employment v. Smith and find
that the Kansas regulation prohibiting Medicaid assistance for out-of-state services is a
generally applicable, valid, and neutral law that only incidentally burdens the free
exercise of religion. As a result, the regulation does not violate the Free Exercise Clause
of the First Amendment. The KHPA points to Lower v. Board of Dir. of Haskell County
Cemetery Dist., 274 Kan. 735, 56 P.3d 235 (2002), for the proposition that Kansas has
adopted the Employment v. Smith test in analyzing claims under the First Amendment. In
Lower, the Haskell County Cemetery District board of directors requested the plaintiffs to
remove a monument to unborn children from the plaintiff's cemetery. The plaintiffs filed
a lawsuit against the board of directors under 42 U.S.C. § 1983. In analyzing the
plaintiffs' claims under the Free Exercise Clause of the First Amendment, the Kansas
Supreme Court cited with approval the test enunciated by the United States Supreme
Court in Employment v. Smith. 274 Kan. at 748.

Under Employment v. Smith, if the Kansas Medicaid regulations at issue are
neutral and generally applicable, the regulations do not violate the First Amendment even
if the regulations have the incidental effect of burdening Stinemetz' free exercise of her
religious beliefs. Stinemetz does not assert that the Kansas regulations in question are
20

facially discriminatory, nor does she argue that the Medicaid regulations were enacted or
are enforced in such a way as to target Jehovah's Witnesses. The Kansas Medicaid
regulations appear to be neutral and generally applicable. If this case presented only a
straightforward Employment v. Smith analysis, the KHPA would prevail against
Stinemetz' First Amendment claim.

Individual exemption exception

However, Stinemetz additionally argues that the individual exemption exception
articulated in Employment v. Smith applies here and triggers strict scrutiny. As stated
above, the Court in Employment v. Smith recognized that "where the State has in place a
system of individual exemptions, it may not refuse to extend that system to cases of
'religious hardship' without compelling reason. [Citation omitted.]" 494 U.S. at 884.
Stinemetz argues that Kansas regulations create a system of individual exemptions and
therefore the KHPA could not refuse to allow her an individual exemption without a
compelling reason. Specifically, Stinemetz points to K.A.R. 30-5-58(ooo)(1)(E), which
defines part of the criteria for determining whether a health intervention is a "medical
necessity." To fully understand Stinemetz' argument, a review of the applicable
administrative regulations and history of Medicaid in Kansas is necessary.

At one time, the Kansas Department of Social and Rehabilitation Services (SRS)
was the state agency responsible for Medicaid in Kansas. See K.S.A. 39-708c(s). On July
1, 2005, all of the powers, duties, and functions of SRS and the Secretary of SRS related
to Medicaid were transferred to the Division of Health Policy and Finance within the
Department of Administration and to the Director of Health Policy and Finance. K.S.A.
2006 Supp. 75-7413(a). In turn, on July 1, 2006, the KHPA became solely responsible for
supervising and administering the Kansas plan for Medicaid. K.S.A. 2010 Supp. 75-7409.

21

Essentially, the transfers of authority meant that all of the power and authority
SRS had over the Medicaid program is now held by the KHPA. Further, under K.S.A.
2010 Supp. 75-7414(b):

"On and after July 1, 2006, whenever the division of health police and finance
within the department of administration or the director of health policy and finance, or
words of like effect, are referred to or designated by a statute, contract, memorandum of
understanding, plan, grant, waiver or other document and such reference is in regard to
any of the powers, duties or functions transferred to [KHPA] pursuant to K.S.A. 2010
Supp. 75-7413, and amendments thereto, such reference or designation shall be deemed
to apply to [KHPA]."

There are numerous Kansas Administrative Regulations that govern the complex
structure of Kansas' Medicaid program. See K.A.R. 30-5-58 through 30-5-310, 129-5-1
through 129-6-152. K.A.R. 129-5-1(a) allows the KHPA to require prior authorization or
precertification for a medical service "for any of the following reasons: (1) To ensure that
provision of the service is medically necessary; (2) to ensure that services that could be
subject to overuse are monitored for appropriateness in each case; and (3) to ensure that
services are delivered in a cost-effective manner." Further, under K.A.R. 30-5-63, which
is entitled "Medical necessity," "[e]xcept as specifically set forth in program policy, the
agency shall not reimburse a provider for the provision of a covered service to a program
recipient unless the provision of the service was medically necessary." Both Stinemetz
and the KHPA agree that "medically necessary" as used in K.A.R. 30-5-63 is defined by
K.A.R. 30-5-58(ooo).

The KHPA maintains that Stinemetz' request for prior authorization for the out-of-
state liver transplant was denied because it was not medically necessary and therefore
was not a covered service under the applicable regulations. Stinemetz argues, on the other
hand, that even if this assertion is correct, K.A.R. 30-5-58(ooo)(1)(E) provides the
Director of the KHPA with the discretion to cover a service that otherwise would not be
22

covered, even when the service does not meet the definition of medical necessity. In
order to determine whether this provision creates a "system of individual exemptions"
sufficient to require a compelling state interest under Employment v. Smith, we must
examine K.A.R. 30-5-58(ooo)(1) in its entirety.

K.A.R. 30-5-58(ooo) states:

"(1) 'Medical necessity' means that a health intervention is an otherwise covered
category of service, is not specifically excluded from coverage, and is medically
necessary, according to all of the following criteria:

(A) 'Authority.' The health intervention is recommended by the treating physician
and is determined to be necessary by the secretary or the secretary's designee.

(B) 'Purpose.' The health intervention has the purpose of treating a medical
condition.

(C) 'Scope.' The health intervention provides the most appropriate supply or level
of service, considering potential benefits and harms to the patient.

(D) 'Evidence.' The health intervention is known to be effective in improving
health outcomes. For new interventions, effectiveness shall be determined by scientific
evidence as provided in paragraph (ooo)(3). For existing interventions, effectiveness shall
be determined as provided in paragraph (ooo)(4).

(E) 'Value.' The health intervention is cost-effective for this condition compared
to alternative interventions, including no intervention. 'Cost-effective' shall not
necessarily be construed to mean lowest price. An intervention may be medically
indicated and yet not be a covered benefit or meet this regulation's definition of medical
necessity. Interventions that do not meet this regulation's definition of medical necessity
may be covered at the choice of the secretary or the secretary's designee. An intervention
shall be considered cost effective if the benefits and harms relative to cost represent an
economically efficient use of resources for patients with this condition. In the application
23

of this criterion to an individual case, the characteristics of the individual patient shall be
determinative." (Emphasis added.)

Stinemetz argues that the italicized language in K.A.R. 30-5-58(ooo)(1)(E)
establishes that there is an individual exemption at the choice of the Secretary or the
Secretary's designee, thus bringing the regulation under the exception recognized in
Employment v. Smith. Because of this individual exemption, Stinemetz argues that the
KHPA is required to provide a compelling interest to support its denial of the request for
prior authorization.

The district court determined that the KHPA did not have the authority under the
regulation to grant Stinemetz an exemption to the definition of medical necessity because
the regulation confers this authority on the "secretary," and the KHPA has a director, not
a secretary. However, it is clear that all the powers, duties, and functions of the Secretary
of SRS related to Medicaid were transferred to the Director of the KHPA on July 1, 2006.
K.S.A. 2006 Supp. 75-7413(a).

The KHPA's response to Stinemetz' argument concerning the individual
exemption exception is somewhat unclear. Essentially, the KHPA states that there are
three steps to determining "medical necessity": KHPA must determine (1) whether the
medical procedure is a covered service; (2) if it is a covered service, is it specifically
excluded from coverage; and (3) if the procedure is medically necessary. The KHPA
argues that its analysis of medical necessity did not progress beyond the first step because
the medical procedure was not a covered service.

The KHPA argues that the bloodless aspect of the transplant was not the reason for
the denial of the request for prior authorization, stating that the reason for the denial was
simply because the facility was more than 50 miles outside the Kansas border. The
KHPA cites K.A.R. 30-5-70(c)(2)(A) as standing for the proposition that if a facility is
24

outside the 50-mile limit, the requested medical service is not compensable. As Stinemetz
argues, however, this is not what the regulation states, if it is read in its entirety. Contrary
to the KHPA's contention, the regulation does not appear to place a blanket prohibition
on services outside the 50-mile limit. K.A.R. 30-5-70(c)(2) discusses limitations on
payment for out-of-state services and states such payments are limited to the following:

"(A) Payment on behalf of recipients if medical services are normally provided
by medical vendors that are located in the bordering state and within 50 miles of the state
border, except for community mental health center services, alcohol and drug abuse
services, or partial hospitalization services;

"(B) emergency services rendered outside the state;

"(C) nonemergency services for which prior approval by the agency has been
given. Authorization from the agency shall be obtained before making arrangements for
the individual to obtain the out-of-state services;

"(D) services provided by independent laboratories; and

"(E) medical services provided to foster care recipients and medical services in
excess of the limitations of the state of residence, when approved by the Kansas
department of social and rehabilitation services and within the scope of the adoption
agreement for those for whom Kansas was initiated adoption support agreements."
(Emphasis added.)

The KHPA concedes that Employment v. Smith provides for an exception under a
system of individual exemptions. However, the KHPA argues that the strict scrutiny that
may be triggered by such a system is designed to expose hidden religious animus. To
support this argument, the KHPA directs this court to Grace United Methodist v. City of
Cheyenne, 451 F.3d 643 (10th Cir. 2006). Grace United Methodist concerned a church
that applied for a variance from zoning restrictions so that it could operate a 100-child
day care in a zone that prohibited operating a day care for more than 12 children. When
25

the city denied the variance, the church filed suit, arguing, among other things, that the
zoning ordinances were not neutral laws of general applicability, and there was a system
of exceptions in place that triggered strict scrutiny.

The Tenth Circuit Court of Appeals disagreed, describing the church's argument as
"asking us to adopt a per se rule requiring that any land use regulation which permits any
secular exception satisfy a strict scrutiny test to survive a free exercise challenge." 451
F.3d at 651. In declining to do so, the Tenth Circuit focused on the fact that the record did
not show any evidence that the zoning regulations were enacted for the purpose of
restricting free exercise of religion. 451 F.3d at 653. Further, the church did not
controvert the city's assertion that the city had no authority to grant a variance for anyone
or any group, secular or religious, to operate a day care in the desired zone. 451 F.3d at
653-54. Thus, the Tenth Circuit characterized the denial of the variance as "mandatory"
and "very different from the government employee's discretionary denial of [plaintiff's]
unemployment benefits in Sherbert [citation omitted]." 451 F.3d at 654.

The KHPA focuses on the Tenth Circuit's examination of religious animus behind
the ordinances, stating that here there is no evidence that shows religious animus behind
the regulations governing Medicaid or a deliberate intent to oppress Stinemetz' free
exercise of her religion. The KHPA is correct in stating that Stinemetz has not produced
evidence that the Medicaid regulations were enacted with the intent to target specific
religious groups or suppress the free exercise of religion.

As Stinemetz argues, however, religious animus is not a prerequisite for applying
the heightened scrutiny triggered by systems of individualized exemptions. Rather, if
religious animus in the enacting of the law or regulation is shown, that goes to whether
the law is a neutral law of general applicability. See Grace United Methodist, 451 F.3d at
649-50. Additionally, Stinemetz distinguishes her case from Grace United Methodist by
noting that there are no limits on the KHPA's discretion to find medical necessity and
26

grant prior authorization, unlike in Grace United Methodist, where the church asked for
an exemption that would not exist for a secular organization. In the case at hand, the
exemption articulated in K.A.R. 30-5-58(ooo)(1)(E) simply places discretion wholly in
the hands of the Secretary or his or her designee.

The United States Supreme Court has yet to explain specifically what constitutes a
"system of individual exemptions" for purposes of heightening scrutiny on a claim under
the Free Exercise Clause of the First Amendment. However, the Tenth Circuit has limited
the exception to "systems that are designed to make case-by-case determinations." Axson-
Flynn v. Johnson, 356 F.3d 1277, 1298 (10th Cir. 2004). See also Mount St. Scholastica,
Inc. v. City of Atchison, Kansas, 482 F. Supp. 2d 1281 (D. Kan. 2007) (because City had
discretion to make case-by-case determinations concerning building demolition, City's
decision prohibiting plaintiff from demolishing administration building was subject to
strict scrutiny).

Returning to our facts, there is nothing in the language of K.A.R. 30-5-70(c)(2) or
any of the Kansas Medicaid regulations to indicate that the regulations either were
enacted or are enforced in such a way as to target Jehovah's Witnesses. The regulations
are neutral and of general applicability, but the regulations have the incidental effect of
burdening Stinemetz' particular religious beliefs. Under the Employment v. Smith test,
enforcement of the Kansas Medicaid regulations need not be justified by a compelling
governmental interest to avoid violating Stinemetz' rights under the Free Exercise Clause
of the First Amendment. See 494 U.S. at 878. The Employment v. Smith test is the
primary test followed today in evaluating claims under the Free Exercise Clause, and
under this test, Stinemetz' assertion of her rights under the First Amendment fails.

But even the Employment v. Smith test carves out an "individual exemption
exception." Under this exception, "where the State has in place a system of individual
exemptions, it may not refuse to extend that system to cases of 'religious hardship'
27

without compelling reason." 494 U.S. at 884. The Kansas Medicaid regulations provide
for an individual exemption exception under K.A.R. 30-5-58(ooo)(1)(E), which provides
that medical services that do not otherwise meet the definition of medical necessity may
still be covered "at the choice of the secretary or the secretary's designee." It appears from
the regulations that the Director of the KHPA, who now stands in the shoes of the SRS
Secretary, has the absolute discretion on a case-by-case basis to provide coverage for
medical services that do not otherwise meet the definition of medical necessity.

Because the Kansas Medicaid regulations allow for an individual exemption on a
case-by-case basis in defining medical necessity, the KHPA cannot refuse to extend that
exemption to cover Stinemetz' religious hardship without providing a compelling reason.
Here, the KHPA has failed to suggest any state interest, much less a compelling interest,
for denying Stinemetz' request for prior authorization for the out-of-state liver transplant.
Based on the evidence presented by Stinemetz, it appears that the bloodless technique for
a liver transplant is less expensive than a procedure involving blood transfusions, which
the KHPA is willing to fund. Thus, the KHPA is unable to argue that the agency is being
fiscally responsible as the steward of Kansas tax dollars by denying Stinemetz' request
for prior authorization for the bloodless liver transplant.

Moreover, according to the evidence submitted by Stinemetz, bloodless
transplants are gaining widespread medical acceptance. Dr. Wallace, clinical consultant
for the KHPA, testified that if a Kansas medical facility was available to perform a
bloodless liver transplant, Kansas Medicaid would pay for the surgery. In fact, under the
regulations, Kansas Medicaid would pay for the surgery if there was a medical facility
within 50 miles of the Kansas border that could perform the bloodless technique. For
instance, Stinemetz would have no difficulty obtaining Kansas Medicaid benefits for a
bloodless liver transplant if a medical facility in Kansas City, Missouri, was available to
perform the technique. But because the nearest medical facility able to perform
Stinemetz' bloodless liver transplant is located in Omaha, the KHPA chooses to strictly
28

follow its regulations and deny the surgery, even though the regulations allow for an
exemption on a case-by-case basis at the discretion of the Director of the KHPA.

Considering all the evidence, the KHPA's decision to deny Stinemetz' request for
prior authorization for an out-of-state liver transplant seems arbitrary, even without
considering Stinemetz' rights under the Free Exercise Clause of the First Amendment.
When Stinemetz' rights under the First Amendment are considered, the result is clear.
Based on our review of the record, we conclude that the KHPA's denial of Stinemetz'
request for prior authorization for the out-of-state liver transplant violated her rights
under the Free Exercise Clause of the First Amendment to the United States Constitution.
Although we could end our analysis here, we will also address Stinemetz' claim under § 7
of the Kansas Constitution Bill of Rights.

STINEMETZ' RIGHTS UNDER THE KANSAS CONSTITUTION

Stinemetz argues that, in addition to violating the Free Exercise Clause of the First
Amendment to the United States Constitution, the KHPA's denial of her request for prior
authorization violated § 7 of the Kansas Constitution Bill of Rights. Stinemetz argues that
under the Kansas Constitution Bill of Rights, this court should apply strict scrutiny to the
KHPA's actions, requiring a compelling state interest to uphold the denial of her request
for prior authorization for the out-of-state liver transplant.

As we previously stated, the scope of judicial review of a state administrative
agency action is defined by the KJRA, K.S.A. 77-601 et seq. An appellate court exercises
the same limited review as does the district court; it is as though the appeal were made
directly to the appellate court. Powell, 290 Kan. at 567. As the party asserting the
agency's action was invalid, Stinemetz bears the burden of proving its invalidity. K.S.A.
2010 Supp. 77-621(a)(1). Whether a statute or regulation is constitutional as applied is a
29

question of law over which an appellate court has unlimited review. Laturner, 289 Kan.
at 735

Section 7 of the Bill of Rights of the Kansas Constitution states, in pertinent part:

"The right to worship God according to the dictates of conscience shall never be
infringed; nor shall any person be compelled to attend or support any form of worship;
nor shall any control of or interference with the rights of conscience be permitted, nor any
preference be given by law to any religious establishment or mode of worship."

In State v. Smith, 155 Kan. 588, 127 P.2d 518 (1942), our Supreme Court
addressed the religious exercise rights protected by § 7 of the Kansas Constitution Bill of
Rights. We will review the facts of this case in detail. In 1907, the Kansas Legislature
passed an act mandating that school authorities at public schools purchase a United States
flag and display the flag upon, near, or in the school building during school hours and at
times specified by the authorities. In 1919, the legislation was amended to include public,
private, and parochial schools. Further, the amendment added a section requiring the
county superintendent to notify school authorities of the statute and making it a
misdemeanor for school authorities to fail to comply with the statute within 30 days of
such notice. 155 Kan. at 589.

The state superintendent subsequently prepared and published a "Manual of
Patriotic Instruction," with several pages devoted to the flag code. Specifically, the
manual gave instructions on how to properly perform the pledge of allegiance and the
salute to the flag. The manual called attention to a recent United States Supreme Court
decision that upheld a Nebraska statute identical to one in Kansas, providing penalties for
unlawful acts involving the United States flag. 155 Kan. at 590.

30

At the beginning of the 1941 school year, members of the school board of
Cherokee County informed a teacher to exclude any children from school who failed to
salute the flag. As a result of this directive, the children of two families in Cherokee
County were excluded from school for refusing to salute the flag. The two families were
Jehovah's Witnesses and believed that "the flag is a graven image; to worship it is a
violation of the command of God and would condemn them." 155 Kan. at 591. Because
the children were not permitted to attend school, they were ultimately found guilty of
violating the truancy laws. 155 Kan. at 588-89.

The case reached the Kansas Supreme Court at the height of World War II. During
that time, patriotism and respect for the American flag enjoyed widespread support
among the general public. In arguing that the truancy convictions should be affirmed, the
State cited Minersville District v. Gobitis, 310 U.S. 586, 60 S. Ct. 1010, 84 L. Ed. 1575
(1940), overruled by Board of Education v. Barnette, 319 U.S. 624, 642, 63 S. Ct. 1178,
87 L. Ed. 1628 (1943), which held that expulsion of children from school because they
would not salute the flag was constitutionally permissible under the federal Constitution.
Likewise, the Smith court interpreted the case before it as turning not on whether the
expulsion was permissible under the federal Constitution, but whether the statutes and
regulations were valid under the Kansas Constitution. 155 Kan. at 594.

In analyzing the constitutional claims, our Supreme Court compared the relative
religious exercise rights protected by § 7 of the Kansas Constitution Bill of Rights to
those protected by the First Amendment to United States Constitution and observed "that
the wording of this section of our Bill of Rights is much more in detail respecting
religious freedom than is the First Amendment to the federal constitution." 155 Kan. at
594. After construing § 7 of the Kansas Constitution Bill of Rights in conjunction with
Article 6, § 2 of the Kansas Constitution, which ordered the establishment of a uniform
system of common schools, the Smith court found that it was unconstitutional under § 7
of the Kansas Constitution Bill of Rights to enforce the applicable Kansas statutes to
31

exclude the children from school for failure to salute the flag. 155 Kan. at 596-97. Thus,
the Supreme Court reversed the truancy convictions. 155 Kan. at 597. In addressing the
State's argument that the family's religious beliefs were unreasonable, the Supreme Court
stated:

"We are not impressed with the suggestion that the religious beliefs of appellants
and their children are unreasonable. Perhaps the tenets of many religious sects or
denominations would be called reasonable, or unreasonable, depending on who is
speaking. It is enough to know that in fact their beliefs are sincerely religious, and that is
conceded by appellee." 155 Kan. at 597.

Based on Smith, Stinemetz argues that even if the compelling state interest test no
longer applies to the Free Exercise Clause of the First Amendment, this court should still
apply strict scrutiny to the KHPA's actions under the Kansas Constitution Bill of Rights.
To support this contention, Stinemetz cites State v. Evans, 14 Kan. App. 2d 591, 796 P.2d
178 (1990). Evans concerned a challenge by a probationer to the conditions of his
probation that required church attendance and 1,000 hours of maintenance work at a
specific church. Finding that the conditions were an unconstitutional restriction on
religious freedom, this court stated:

"The Kansas Constitution contains a strong prohibition against religious
coercion. We are persuaded that the standards set in the Wright case ought to be applied
in Evans' case and that 'only those interests of the highest order' ought to override the free
exercise of religion. Lacking a showing of an interest of the highest order, we reverse and
remand for resentencing before another judge." 14 Kan. App. 2d at 593.

Our Supreme Court has also read Evans to require a compelling state interest to
justify imposition of terms that violate a probationer's constitutional rights. See State v.
Bennett, 288 Kan. 86, 91, 200 P.3d 455 (2009) (citing Evans and stating that "Kansas
courts have consistently recognized, however, that a district court does not have
32

discretion to impose probationary conditions that violate a probationer's constitutional
rights, absent a compelling state interest"). It is important to note that the opinion in
Evans was issued after the United States Supreme Court's opinion in Employment
Division v. Smith, so the court in Evans could have followed the more permissible
analysis in Employment v. Smith had it wanted to do so.

Stinemetz also argues that the Kansas and Ohio Constitutions are very similar,
and therefore this court should follow Ohio's interpretation of the free exercise
protections secured by its constitution. Article I, § 7 of the Ohio Constitution states, in
pertinent part:

"All men have a natural and indefeasible right to worship Almighty God
according to the dictates of their own conscience. No person shall be compelled to attend,
erect, or support any place of worship, or maintain any form of worship, against his
consent; and no preference shall be given, by law, to any religious society; nor shall any
interference with the rights of conscience be permitted."

The similarities between the Ohio Constitution and the language of § 7 of the
Kansas Constitution Bill of Rights are not coincidental. In 1859, a constitutional
convention met in Wyandotte, Kansas, to frame and adopt a constitution for Kansas.
Wyandotte Constitutional Convention 676 (1920). After voting, the members of the
convention made the Ohio Constitution the basis for the Kansas Constitution, and copies
of the Ohio Constitution were distributed to the drafting committees for the Kansas
Constitution. Wyandotte Constitutional Convention, at 677. Other than § 1 and § 6, the
Kansas Constitution Bill of Rights is modeled, section by section, upon the Ohio
Constitution. Wyandotte Constitutional Convention, at 678.

While there is little Kansas precedent, especially recent precedent, interpreting § 7
of the Kansas Constitution Bill of Rights, the Ohio Supreme Court examined its
constitution's free exercise protections post-Employment v. Smith in Humphrey v. Lane,
33

89 Ohio St. 3d 62, 728 N.E.2d 1039 (2000). Humphrey concerned a prison grooming
policy that required short hair length in order "'to create a unified appearance among
uniformed personnel.'" 89 Ohio St. 3d at 69. A guard subscribing to Native American
Spirituality, of which a central tenet is that "a man's hair should not be cut unless he is in
mourning," challenged the policy as unconstitutionally infringing on the free exercise of
his religion. 89 Ohio St. 3d at 68-69. The Ohio Supreme Court quoted the language of
Article I, § 7 of the Ohio Constitution and stated that the phrase "'nor shall any
interference with the rights of conscience be permitted'" provided broader religious
exercise protection than the language in the federal Constitution. 89 Ohio St. 3d at 67.

Noting that in Employment v. Smith, the United States Supreme Court held that if
the challenged regulation is a neutral and generally applicable law, the regulation does
not violate the Free Exercise Clause of the First Amendment, the Ohio Supreme Court
stated that the Employment v. Smith decision "marked the divergence of federal and Ohio
protection of religious freedom." 89 Ohio St. 3d at 67. The Ohio Supreme Court
concluded:

"[T]he Ohio Constitution's free exercise protection is broader, and we therefore vary from
the federal test for religiously neutral, evenly applied government actions. We apply a
different standard to a different constitutional protection. We adhere to the standard long
held in Ohio regarding free exercise claims—that the state enactment must serve a
compelling state interest and must be the least restrictive means of furthering that interest.
That protection applies to direct and indirect encroachments upon religious freedom." 89
Ohio St. 3d at 68.

Stinemetz urges this court to follow the reasoning of the Ohio Supreme Court in
Humphrey and apply a strict scrutiny test to the KHPA's actions under the Kansas
Constitution. Under this test, the KHPA's actions must serve a compelling state interest
and must be the least restrictive means of furthering that interest in order to avoid
infringing upon Stinemetz' rights under the Kansas Constitution.
34


The KHPA, on the other hand, points out the similarities between the Kansas and
Minnesota Constitutions. Article I, § 16 of the Minnesota Constitution Bill of Rights
states, in pertinent part:

"The right of every man to worship God according to the dictates of his own conscience
shall never be infringed; nor shall any man be compelled to attend, erect or support any
place of worship, or to maintain any religious or ecclesiastical ministry, against his
consent; nor shall any control of or interference with the rights of conscience be
permitted, or any preference be given by law to any religious establishment or mode of
worship; but the liberty of conscience hereby secured shall not be so construed as to
excuse acts of licentiousness or justify practices inconsistent with the peace or safety of
the state, nor shall any money be drawn from the treasury for the benefit of any religious
societies or religious or theological seminaries."

The KHPA cites Shagalow v. State, Dept. of Human Services, 725 N.W.2d 380
(Minn. App. 2006), rev. denied February 28, 2007, as an example of a free exercise
challenge to a state Medicaid determination. In Shagalow, the plaintiff was a Jewish
Orthodox woman who was diagnosed with a developmental cognitive disorder and
attention deficit hyperactivity disorder, leaving her dependent on others to make legal and
medical decisions, and to assist her with grooming and other everyday tasks. As the
plaintiff approached her high school graduation, her family began searching for a
habilitation program in which she could learn and develop living skills but that was also
compatible with her Jewish Orthodox faith. No such program existed in Minnesota or
elsewhere in the United States, and the only program the plaintiff's family could locate
was in Jerusalem, Israel.

The plaintiff requested, through the appropriate administrative agency, that she
receive financial support for habilitation services in Israel as part of Minnesota's
Medicaid program. The State denied her request, and that denial was upheld at the
35

appropriate levels of review. After addressing the propriety of the denial under applicable
state law, the Minnesota Court of Appeals addressed the constitutional claims.
Addressing the claims under the federal Constitution, the court noted:

"Federal cases interpreting the religion clauses establish that neutral laws of
general applicability do not run afoul of the First Amendment, even if they incidentally
burden an individual's religious conduct. [Citation omitted.] Such neutral, generally
applicable laws 'need not be justified by a compelling governmental interest.' [Citation
omitted.] But a law that is not neutral or generally applicable 'must be justified by a
compelling governmental interest and must be narrowly tailored to advance that interest,'
even if it only incidentally burdens an individual's free exercise. [Citation omitted.]" 725
N.W.2d at 388.

The Minnesota court recognized that Employment v. Smith did not expressly
overrule the strict scrutiny analysis of Sherbert and other unemployment compensation
cases and that federal courts continue to use an individualized exemption exception to the
rule in that case. 725 N.W.2d at 389. Nevertheless, the court found that the denial of
financial support for the services in Israel "was religiously neutral," that the agency's
action was "not motivated by a desire to harm, restrict, or burden appellant's exercise of
her religious faith," that the denial "was neither related to nor did it proscribe appellant's
practice of her Orthodox Jewish faith," and that the basis for the denial was to permit
effective monitoring of the quality, health, and financial integrity of medical services.
725 N.W.2d at 389. Therefore, the Minnesota Court of Appeals found that the "decision
was neutral and generally applicable and does not violate the United States Constitution."
725 N.W.2d at 389.

The KHPA argues that Minnesota law—presumably that in Shagalow—is better
developed on constitutional free exercise protections than Kansas law, and therefore this
court should follow the Minnesota Court of Appeals' interpretation of the constitutional
protections. The KHPA argues that Shagalow adopts the United States Supreme Court's
36

test in Employment v. Smith, examining whether the challenged law is a neutral and
generally applicable law designed without religious animus.

Although the result in Shagalow supports the KHPA's position, the court's analysis
in that case favors Stinemetz' position. The Shagalow court applied the Employment v.
Smith test in addressing the plaintiff's claims under the federal Constitution, but the court
did not use this same test for its analysis under the Minnesota Constitution. Rather, the
Shagalow court applied a four-step test in analyzing the plaintiff's rights under the
Minnesota Constitution, including examining whether the State had a compelling interest
to deny the plaintiff's request for benefits and whether the State used the least restrictive
means to serve that interest. 725 N.W.2d at 390-92.

Essentially, the Humphrey and Shagalow courts both used the same analysis in
interpreting the religious protections guaranteed by their respective state constitutions. In
Shagalow, the court stated:

"To determine whether government action violates an individual's right to religious
freedom we ask: (1) whether the belief is sincerely held; (2) whether the state action
burdens the exercise of religious beliefs; (3) whether the state interest is overriding or
compelling; and (4) whether the state uses the least restrictive means. [Citations omitted.]
Appellant has the burden under the second prong of this test to show that the
government's actions burdens her exercise of religious beliefs, and then the burden shifts
to the state to justify its interest as compelling and show that it has chosen the least
restrictive means by which to achieve its goal. [Citation omitted.]" Shagalow, 725
N.W.2d at 390.

We agree with both Stinemetz and the KHPA that we should look to the Ohio and
Minnesota courts for guidance because the provisions of their respective state
constitutions on religious liberties are similar to § 7 of the Kansas Constitution Bill of
Rights. We find the Shagalow decision championed by the KHPA to be the most
37

instructive case, and we adopt its four-step test to determine whether state action
unconstitutionally infringes on the free exercise of religion under § 7 of the Kansas
Constitution Bill of Rights. We will now apply this four-step test to Stinemetz' request for
prior authorization for the out-of-state liver transplant.

The burden is on Stinemetz to satisfy the first two steps. The first step is whether
Stinemetz' religious beliefs are sincere. Stinemetz testified at length at the administrative
hearing that she had been a Jehovah's Witness for over 35 years and was refusing the
blood transfusion because of her religious beliefs. She quoted numerous passages from
the Bible on which she based her belief that blood transfusions are prohibited. The
district court expressly found that Stinemetz' request for a bloodless liver transplant was
based on her sincere and deeply held religious belief. This finding is supported by
substantial and overwhelming evidence in the record. On appeal, the KHPA makes no
attempt to challenge this finding. Thus, Stinemetz has satisfied the first step of the test.

The second step is whether the KHPA's action burdens Stinemetz' free exercise of
her religious beliefs. The KHPA attempts to challenge this step by pointing to Stinemetz'
own testimony that if she received a blood transfusion against her religious beliefs, she
would still be allowed to be a member of her congregation if she was truly repentant for
what she had done. Based on this testimony, the KHPA's brief argues that Stinemetz
presented "no evidence that [KHPA's] decision concerning the prior authorization for a
bloodless liver transplant caused an infringement on Jehovah's Witnesses as a church or
on [Stinemetz'] practice or understanding of her religion."

The KHPA's reliance upon these factors is misplaced. Under this step of the
analysis, Stinemetz need not show that she altered her faith because of the KHPA's
actions or that receiving a blood transfusion would be an unforgiveable sin. Here,
Stinemetz was offered the choice of undergoing a financially reimbursable liver
transplant with blood transfusions, which are prohibited by her religion, or paying out-of-
38

pocket for a bloodless liver transplant that would comport with her religious beliefs.
Conditioning the provision of a life-saving public benefit on Stinemetz agreeing to
engage in conduct which violates her deeply held religious beliefs constitutes a heavy
burden on her free exercise of religion. Thus, Stinemetz has satisfied the second step of
the test.

The third step of the test shifts the burden to the KHPA to show a compelling or
overriding state interest to support its decision. The KHPA has failed to show any state
interest, much less a compelling interest, for denying Stinemetz' request for prior
authorization for the out-of-state liver transplant. As discussed earlier in this opinion,
there is no question that the KHPA would authorize a liver transplant for Stinemetz in
Kansas, including a bloodless liver transplant if a medical facility was available in
Kansas to perform the technique. Because there is no such medical facility in Kansas,
Stinemetz is requesting Medicaid to honor her religious principles and pay for the
procedure out-of-state. Cost is not the issue. The available evidence indicates that the
bloodless technique is less expensive than a procedure involving blood transfusions. The
available evidence indicates that a bloodless liver transplant is a medically accepted
technique offered by several medical facilities in other states, including the Nebraska
Medical Center in Omaha and at the University of Oklahoma. Thus, the KHPA has failed
to satisfy the third step of the test.

Because the KHPA has offered no evidence of a compelling state interest to
support its decision, it follows that the KHPA has not proposed the least restrictive means
of achieving its interest. Thus, the KHPA has failed to satisfy the fourth step of the test.

As a Kansas citizen, Stinemetz is protected by the provisions of the Kansas
Constitution, which provides even greater protection of the free exercise of her religious
beliefs than the First Amendment to the United States Constitution. Applying the four-
step test to the evidence presented in this case, we conclude that the KHPA's denial of
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Stinemetz' request for prior authorization for the out-of-state liver transplant violated her
rights under § 7 of the Kansas Constitution Bill of Rights.

CONCLUSION

There is nothing in the language of K.A.R. 30-5-70(c)(2) or any of the Kansas
Medicaid regulations to indicate that the regulations either were enacted or are enforced
in such a way as to target Jehovah's Witnesses. The regulations are neutral and of general
applicability, but the regulations have the incidental effect of burdening Stinemetz'
particular religious beliefs. Under the Employment v. Smith test, enforcement of the
Kansas Medicaid regulations need not be justified by a compelling governmental interest
to avoid violating Stinemetz' rights under the Free Exercise Clause of the First
Amendment.

But even the Employment v. Smith test carves out an "individual exemption
exception." Under this exception, "where the State has in place a system of individual
exemptions, it may not refuse to extend that system to cases of 'religious hardship'
without a compelling reason." 494 U.S. at 884. Because the Kansas Medicaid regulations
allow for an individual exemption on a case-by-case basis in defining medical necessity,
the KHPA cannot refuse to extend that exemption to cover Stinemetz' religious hardship
without providing a compelling reason. Here, the KHPA has failed to suggest any state
interest, much less a compelling interest, for denying Stinemetz' request for prior
authorization for the out-of-state liver transplant. For this reason, the KHPA's decision
violated Stinemetz' rights under the Free Exercise Clause of the First Amendment to the
United States Constitution.

Stinemetz has even greater protections concerning the free exercise of religious
beliefs under § 7 of the Kansas Constitution Bill of Rights than under the federal
Constitution. To determine whether government action violates an individual's right to
40

the free exercise of religious beliefs under the Kansas Constitution, a court must
determine: (1) whether the individual's religious beliefs are sincerely held; (2) whether
the state action burdens the individual's free exercise of religious beliefs; (3) whether the
state interest is overriding or compelling; and (4) whether the State uses the least
restrictive means of achieving its interest. Under this four-step test, the KHPA's denial of
Stinemetz' request for prior authorization for the out-of-state liver transplant violated her
rights under § 7 of the Kansas Constitution Bill of Rights.

We conclude that the KHPA's denial of Stinemetz' request for prior authorization
for the out-of-state liver transplant violated her rights under the Free Exercise Clause of
the First Amendment to the United States Constitution as well as her rights under § 7 of
the Kansas Constitution Bill of Rights. The judgment of the district court is reversed and
the case is remanded with directions that the KHPA grant Stinemetz' request for prior
authorization for the out-of-state liver transplant.

Reversed and remanded with directions.