Johnson v. Guhl ( 2004 )

Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
2-6-2004
Johnson v. Guhl
Precedential or Non-Precedential: Precedential
Docket No. 01-3774
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"Johnson v. Guhl" (2004). 2004 Decisions. Paper 964.
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PRECEDENTIAL names);ROBERT GROSS;
GEORGE ALLEN; Social Services;
UNITED STATES THOMAS KOELHOFFER; FRANCES
COURT OF APPEALS KOELHOFFER;
FOR THE THIRD CIRCUIT WILLIAM KELLY; KATHRYN
KELLY;
MARCELLA FINKEL; JACK FINKEL;
No. 01-3774 EDNA ALLEN;
WILLARD NICKERSON; ETHEL
NICKERSON;
DONALD H. JOHNSON; JUANITA L. GERALDINE ANN SAHL; GEORGE J.
JOHNSON; SAHL;
EUGENE V. MARIANI; DOROTHY MARGARET BAKERIAN; VASGEN
MARIANI; BAKERIAN;
MARY LOU FLEMING; WILLIAM R. CHARLES DERROT; LOUISE
FLEMING; DERROT;
WILLIAM C. SCHAIBLE; PHYLLIS R. MIGUEL OBREGON; ONELIA
SCHAIBLE, OBREGON;
by her Court Appointed Guardian; ROY W. MCDOWELL; JUNE M.
LOIS BENEDETTO; GERALD MCDOW ELL;
BENEDETTO; JOSEPH MEZZO; CARMELLA
DONNA R. BANKS; CHARLES V. MEZZO;
BANKS, Estate of; MATHILDA GROSS
RAYM OND O. DENM AN, JR.;
FRANCES C. DENMAN; v.
CHARLES N. HICKS; MARIE L.
HICKS; MICHELLE K. GUHL, Commissioner;
ANN B. SILBERNAGEL; NORMAN V. STATE OF
SILBERNAGEL; NEW JERSEY, DEPARTMENT OF
ANNA PRYSTASCH; STANLEY HUMAN SERVICES,
PRYSTASCH; MARGARET A. MURRAY, Director,
MARY MACKRON; ANTHONY Division of
MACKRON, Estate of; Medical Assistance and Health Service;
JANET WHALON; HAROLD B. JOHN ROE, (1-5 fictitious names) their
WHALON, JR.; agents, servants, employees, and/or
BERNADINE WEISER; RICHARD C. assigns, jointly, severally or in the
WEISER; alternative; EDWARD TESTA, Director,
GRACE LAFORGE; BLACE Bergen County Board of Social Services;
LAFORGE; JOHN FILLMORE; ELIZABETH LEHMANN, Director,
MARY FILLMORE; JOHN DOE, (1-5 Morris
fictitious names); County Board of Social Services;
JANE DOE, (1-5 fictitious JAMES WILLIAM S, Director, Essex
County (Opinion filed: February 6, 2004)
Board of Social Services; JANE ROE,
Director, ABC County Board of Social
Services, (1-5 fictitious names); Donald M. McHugh, Esquire (Argued)
ESSEX COUNTY BOARD OF McHugh & Macri
CHOSEN FREEHOLDERS 49 Ridgedale Avenue
ESSEX COUNTY BOARD OF SOCIAL East Hanover, NJ 07936
SERVICES;
National Academy of Elder Law
Attorneys
Donald H. Johnson, Juanita L. Johnson, New Jersey Chapter
William C. Schaible, Phyllis R. Schaible, Eugene Rosner, Esquire
Charles N. Hicks, Marie L. Hicks, 1093 Raritan Road
Ann B. Silbernagel, Norman V. Clark, NJ 07066
Silbernagel,
Anna Prystasch, Stanley Prystasch, Attorneys for Appellants
Appellants
David Samson
Attorney General of New Jersey
On Appeal from the Michael J. Haas
United States District Court for the Assistant Attorney General
District of New Jersey M. Elizabeth Doyle (Argued)
D.C. Civil Action No. 99-cv-05403 Deputy Attorney General
(Honorable Dennis M. Cavanaugh) Office of Attorney General of New
Jersey
Division of Law, P.O. Box 112
Argued April 22, 2003 R. J. Hughes Justice Complex
25 Market Street
Before: SCIRICA*, Chief Judge, Trenton, NJ 08625
AM BRO and W EIS, Circuit Judges
Attorneys for Appellees
Commissioner and State Divisions
*Judge Scirica began his term as
Chief Judge on May 4, 2003. Edwin C. Eastwood, Jr., Esquire
Law Offices of Edwin C. Eastwood, Jr.
723 Kennedy Boulevard
North Bergen, NJ 07047
Attorney for Appellee
2
Edward Testa spouse”) and the other resides in the
community (the “community spouse”).
Daniel W. O’Mullan, Esquire Plaintiffs, New Jersey residents, sought
O’Mullan & Brady and were denied M edicaid benefits
57 Whippany Road because their assets exceed a level
Whippany, NJ 07981 qualifying them for Medicaid eligibility.
They challenge their benefits denials
Attorney for Appellee under 42 U.S.C. § 1983, and seek both
Elizabeth Lehmann injunctive relief and a declaratory
judgment. The District Court held, inter
alia, that New Jersey did not violate
federal law in denying plaintiffs benefits
OPINION OF THE COURT and thus dismissed their complaint.
Whether plaintiffs are entitled to
AM BRO, Circuit Judge Medicaid benefits depends on how we
view certain private trusts they
Medicaid is a federal assistance established for the community spouse’s
program, administered by the states, that benefit. Those trusts, known as
helps individuals with below a certain Community Spouse Annuity Trusts
level of assets pay for medical expenses.1 (“CSATs”), are designed to provide a
Because Medicaid is available only to the stream of annuity payments to the
needy, creative lawyers and financial community spouse for the duration of his
planners have devised various ways to or her life. From 1994 to 1999, New
“shield” wealthier claimants’ assets in Jersey did not consider the corpus of
determining M edicaid eligibility. In this these CSATs as “countable” assets – that
context, we decide, among other issues, is, among plaintiffs’ available resources
whether New Jersey has correctly for Medicaid eligibility purposes – so
interpreted federal law to preclude use of long as, on the community spouse’s
a private annuity trust to shield assets. death, New Jersey would be the first
beneficiary of the CSAT to the extent
I. Background that the State paid benefits on behalf of
the institutionalized spouse (“state
Plaintiffs in this case are elderly payback” or “state-payback
couples in which one spouse resides in a requirement”). Thus, New Jersey
nursing home (the “institutionalized effectively permitted Medicaid claimants
to use CSATs to shield a couple’s assets
from Medicaid eligibility determinations
1 during the community spouse’s lifetime.
The Medicaid Act is codified at 42
New Jersey would then be reimbursed
U.S.C. § 1396 et seq.
3
for benefits paid if any funds remained in Plaintiffs applied for Medicaid
the CSAT after the community spouse’s benefits during the period that New
death. If no funds remained, New Jersey Jersey was implementing its CSAT
would recover nothing. policy change. They claim that, during
this period, New Jersey delayed in
In 1999 New Jersey changed its processing their pending Medicaid
position on the countability of CSATs, applications for anywhere between eight
largely in response to an earlier and eighteen months. When New Jersey
interpretive letter from an employee of finally determined plaintiffs’ eligibility,
the Department of Health and Human applying its “new” policy, it deemed
Services (“HHS”) stating that trusts such their asset levels too high to qualify for
as CSATs should be considered Medicaid benefits because it included
countable assets. With this change New their CSATs as available assets.
Jersey considers CSATs among Plaintiffs dispute that the corpus of their
Medicaid claimants’ assets when CSATs should be counted among their
determining their total resources for assets.
eligibility purposes. Thus, CSATs can
no longer be used to shelter assets.2 New Recognizing the difficulties its
Jersey has taken a similar position with policy change caused plaintiffs (who had
respect to commercial annuities.3 established CSATs expecting pre-1999
policy to apply), New Jersey advised that
it would allow them to replace their
2 CSATs with commercial annuities. As a
In this context, state paybacks no
compromise to plaintiffs, the State would
longer were exacted.
treat these annuities as non-countable
3
Like CSATs, commercial annuities (whereas for other Medicaid claimants
provide a stream of payments (in this the State treats commercial annuities as
context, to the community spouse) for a countable), so long as plaintiffs included
fixed term of years. However, they are a state-payback provision in the
administered differently from CSATs. annuities. Plaintiffs, however, did not
Whereas the corpus of a CSAT is accept this settlement.4
administered by a trustee, who is often
related to the elderly couple, the “corpus”
4
of a commercial annuity is paid to an Plaintiffs argue that they notified
unrelated third party (typically an New Jersey that they wished to exchange
insurance company) to purchase the their CSATs for commercial annuities.
annuity. The annuity company then New Jersey responds that they instructed
makes payments to the community plaintiffs how to do so, but they declined
spouse from a combination of principal to follow these instructions and therefore
and income from that corpus. waived this offer of compromise.
4
After New Jersey held their imposes no such requirement), the Court
CSATs countable (thereby making them saw no risk of irreparable harm because
ineligible for Medicaid), plaintiffs sought New Jersey ceased to require state
to prove that New Jersey’s denial of paybacks for CSATs post-1999 when it
benefits would cause them “undue began to deem CSATs countable assets.
hardship.” Under federal law, if denial Finally, the Court confirmed that
of Medicaid benefits to a claimant causes plaintiffs must be afforded an
undue hardship, the state must provide opportunity for an undue hardship
benefits, even though the claimant would hearing (and that New Jersey had failed
otherwise not be so entitled. Federal law to promulgate procedures for such a
requires states to establish hearing hearing). However, because New Jersey
procedures by which individuals can conceded its obligation and had
present their undue hardship claims. But committed to promulgating regulations
at that time New Jersey had not for hearings, the Court held that its
promulgated these procedures, leaving failure to do so thus far posed no risk of
plaintiffs without any administrative irreparable harm. Judge Bassler left
avenue for undue hardship relief. open the possibility that plaintiffs could
return to federal court if New Jersey
As a result of these circumstances, failed to implement its promised
plaintiffs filed suit in the District Court. procedures.
They challenged, inter alia, New Jersey’s
determination that their CSATs are In the meantime, despite the
countable resources, the state-payback absence of officially promulgated
requirement for CSATs deemed not procedures, New Jersey offered plaintiffs
countable, and New Jersey’s failure to the opportunity to plead undue hardship
promulgate procedures for undue in conformity with federally mandated
hardship hearings required by federal standards. The State sent “amended”
law. The District Court (per Judge denial letters to plaintiffs in December
Bassler) denied relief and dismissed 1999 notifying them of their right to
certain of their claims (though both apply for an undue hardship exception.
actions were without prejudice in part). Plaintiffs declined to do so, however.5
First, it held plaintiffs’ CSATs countable
under federal law. Second, although the
Court believed that New Jersey’s state- 5
Plaintiffs’ counsel asked New Jersey
payback requirement violates federal law by letter on January 11, 2000 to “send . . .
by imposing M edicaid eligibility criteria the undue hardship policy provision
more stringent than those imposed by the contained in the New Jersey State
Medicaid Act (i.e., that Medicaid Medicaid Plan” that implements the
claimants with CSATs name New Jersey federal mandate to afford undue hardship
first beneficiary, when federal law hearings. He said that, “[u]pon receipt of
5
In 2001, New Jersey’s undue- determining their eligibility, it should be
hardship regulations became effective. equitably estopped from applying its new
Plaintiffs believe those regulations are CSAT countability policy to plaintiffs.
inadequate, however, because they fail to The Court reasoned that equitable
specify a time in which the State must estoppel will rarely lie against
hold a hearing, thereby violating a governmental entities. Moreover, Judge
federal Medicaid regulation requiring a Cavanaugh rejected plaintiffs’ state-
“timely process for determining whether payback argument, though for different
an undue hardship waiver will be reasons than did Judge Bassler. Judge
granted.” Health Care Financing Cavanaugh found no evidence that New
Administration (now Centers for Jersey any longer requires state paybacks
Medicare & Medicaid for CSATs. However, in disagreement
Services)(“HCFA”) Transmittal No. 64 § with Judge Bassler, Judge Cavanaugh
3259.8C. held that state paybacks are consistent
with federal policy disfavoring Medicaid
Plaintiffs returned to the District claimants’ attempts to shelter assets and
Court. This time the Court (with Judge thus do not violate federal law. Finally,
Cavanaugh now presiding) denied their the Court disagreed with plaintiffs that
motion for, inter alia, injunctive relief New Jersey’s newly promulgated undue
and dismissed their complaint. It again hardship hearing provisions were
held plaintiffs’ CSATs countable in deficient for their failure explicitly to
determining Medicaid eligibility. It also provide a time frame in which a hearing
rejected their argument that, because must be conducted. Rather, it held that
New Jersey unduly delayed in the State had “substantially complied”
with federal law’s mandate to provide for
undue hardship hearing procedures.
that information, my clients will file the
undue hardship request.” As noted, New Plaintiffs appeal Judge
Jersey had no formal procedures in place Cavanaugh’s dismissal of their
at that time, but rather was attempting to complaint. 6 They raise essentially five
accommodate plaintiffs’ complaint by issues for our review 7 : (1) whether
providing ad hoc procedures that would
comply with federal law. Thus New
Jersey had nothing to send plaintiffs. 6
The District Court had jurisdiction
Plaintiffs – presumably because they did under 28 U.S.C. § 1331. We have
not receive the then-nonexistent jurisdiction pursuant to 28 U.S.C. §
provisions – never provided New Jersey 1291.
with the information necessary to
7
determine whether they were entitled to These are questions of statutory
an undue hardship exception. interpretation, over which we exercise
6
CSATs are countable assets for M edicaid As this is a question of statutory
eligibility purposes; (2) whether in any interpretation,8 we begin (and end) our
event New Jersey should be estopped inquiry with the relevant statute, 42
from treating plaintiffs’ CSATs as U.S.C. § 1396p(d)(3)(B). That provision
countable assets because they delayed provides, in subsection (i), that “[i]n the
unduly in determining plaintiffs’ case of an irrevocable trust -- if there are
Medicaid eligibility (or alternatively any circumstances under which payment
whether the District Court should hold a from the trust could be made to or for the
hearing on plaintiffs’ estoppel claim); (3) benefit of the individual [the
whether New Jersey’s state-payback institutionalized spouse whose assets are
requirement pre-1999 for CSATs violates used to establish the trust], the portion of
federal law; (4) whether New Jersey’s the corpus from which, or the income on
state-payback requirement for the the corpus from which, payment to the
commercial annuity option offered to individual could be made shall be
plaintiffs violates federal law; and (5) considered resources available to the
whether the undue hardship regulations individual . . . .” Both parties agree that
of New Jersey violate federal law by CSATs are irrevocable trusts. They are
failing explicitly to provide a time by generally funded with marital assets
which it must hold a hearing. Plaintiffs (assets that belong to both spouses).
also seek attorneys’ fees. Moreover, CSATs are designed so that
the corpus and the income on the corpus
II. Discussion will provide the community spouse a
stream of payments. Once the
community spouse receives these
A. Countability of CSATs payments, there is nothing preventing her
or him from sharing them with the
New Jersey deemed plaintiffs institutionalized spouse as well. Section
ineligible for Medicaid benefits because, 1396p(d)(3)(B)(i) thus squarely covers
when the capital in their CSATs was
taken into account, they had assets
exceeding a level qualifying them for 8
We note that there is some question
Medicaid. Plaintiffs argue that New “whether third parties may sue to enforce
Jersey should not have considered their Spending Clause legislation [such as
CSATs as countable assets. provisions of the Medicaid Act].”
Pharmaceutical Research & Mfrs. of Am.
v. Walsh, 123 S. Ct. 1855, 1878 (2003)
(Thomas, J., concurring) (citations
plenary review. Moody v. Sec. Pac. Bus. omitted). However, as neither party
Credit, Inc., 971 F.2d 1056, 1063 (3d raises this issue on appeal, we have no
Cir. 1992). occasion to decide it.
7
CSATs – as “circumstances [exist] under we affirm the District Court ruling that
which payment from the trust could be plaintiffs’ CSAT assets are countable
made to or for the benefit of” the resources.
institutionalized spouse – and deems
them countable resources.9 Accordingly, B. Equitable Estoppel
Plaintiffs argue that New Jersey
9
Indeed, an interpretive letter from an “stalled” their Medicaid applications for
HHS employee supports our analysis. eight to eighteen months to allow the
On April 16, 1998, Robert A. Streimer, State to make a “policy change”
with the Disabled and Elderly Health regarding CSATs’ countability. As a
Programs Group of HHS’s Center for result, plaintiffs assert that we should
Medicaid and State Operations, wrote to equitably estop New Jersey from
an attorney in Virginia who inquired attempting to apply its new CSAT
about the treatment of her client’s trust. countability rule to plaintiffs or at least
According to the letter, the Virginia order the District Court to hold a hearing
Department of Social Services denied her and allow discovery on this claim.
client Medicaid benefits because, when
the trust’s corpus was counted as an We decline to do either.
eligible resource, the client had assets in “[E]quitable estoppel will not lie against
excess of a M edicaid-qualifying level. the Government as it lies against private
Streimer opined that Virginia’s litigants.” Office of Personnel Mgmt. v.
determination was correct. He reasoned Richmond, 496 U.S. 414, 419 (1990). In
that the trust “falls under the jurisdiction Richmond, even though a federal
of [§ 1396p(d)] if the trust was employee provided misinformation to the
established by either member of the plaintiff (on which he relied to his
couple, using at least some of the detriment), the Supreme Court declined
Medicaid applicant’s assets.” Second, equitably to estop the Government. Id. at
because “the trust . . . is an irrevocable
trust, the corpus of which can be paid at
some point in time to the community commercial annuities would not be
spouse[,] . . . the corpus . . . is considered countable resources. Because, as will be
as an available resource to the discussed below, the countability of
beneficiary, and thus must be included as commercial annuities is not a question
a countable resource in determining raised in plaintiffs’ complaint, we need
Medicaid eligibility for the not decide whether the Streimer letter’s
institutionalized spouse.” The Streimer position on the countability of
letter went on to draw a distinction commercial annuities – a position
between irrevocable (private) trusts and conflicting with New Jersey’s – is
commercial annuities, suggesting that correct.
8
433-34. In a case more than a century trusts, see § 1396p(d)(4)(A)-(C), 11
before, The Floyd Acceptances, the Court Congress knew how to specify state
similarly held that the Government could payback when it wanted; that it did not
not be compelled to honor bills of do so for spousal trusts indicates that it
exchange issued by a government official did not intend to permit states to seek
where there was no statutory authority payback for CSATs. New Jersey
for the issuance of the bills. 74 U.S. 666, counters that this issue is now moot
682-83 (1868). An analogous principle because it considers CSATs countable
applies here: because, as discussed, there and therefore no longer imposes this
is no statutory authority (federal or state) condition. W e agree with New Jersey.
for treating CSAT assets as not
countable, New Jersey should not be As background, § 1396p(d)(3)
estopped from treating them as instructs states how to treat trusts for
countable. While the Richmond Court Medicaid eligibility purposes.
left open the possibility that some kind of Previously, when New Jersey considered
“‘affirmative misconduct’ might give rise CSATs noncountable, it presumably
to estoppel against the Government,” believed them to be governed by §
plaintiffs allege no affirmative 1396p(d)(3)(B)(ii), which addresses
misconduct here. Richmond, 496 U.S. at irrevocable trusts when no income or
421 (citations omitted). In this context, principal from the trust “could under any
the District Court was correct in circumstances be made to the individual
eschewing the estoppel of New Jersey’s [establishing the trust].” That section
countability rule.10 provides that these trusts “shall be
considered . . . to be assets disposed by
C. State-payback requirement for the individual for purposes of subsection
CSATs (c) of this section [imposing a penalty on
transfers of assets].” The creation of a
Plaintiffs challenge New Jersey’s CSAT results in a transfer of marital
state-payback requirement for CSATs. assets to the community spouse. See §
They argue that no provision of the 1396p(c)(3). Thus, absent some
Medicaid Act allows a state to seek exception, even though a CSAT is
payback from a community spouse’s noncountable it still is subject to §
estate. Moreover, because § 1396p
requires state payback for other types of
10 11
As there is no need in this case for The trusts provided for in this
any hearing (including discovery), the section are known as special-needs,
District Court’s refusal to conduct a “Miller,” and pooled trusts, and are not
hearing is also affirmed. implicated in this case.
9
1396p(c)’s transfer penalty.12 Section payback issue plaintiffs assert is moot
1396p(c)(2)(B)(i), however, exempts with respect to CSATs.
transfers from penalty when made “for
the sole benefit of the individual’s D. Commercial annuity option offered
spouse.” In M edicaid parlance, this is to plaintiffs
known as an “SBO transfer.” New
Jersey conditioned application of the Plaintiffs argue that the
SBO exception to the § 1396p(c) transfer commercial annuity option New Jersey
penalty by defining an SBO transfer to offered them – whereby New Jersey
include when the State is named first would deem commercial annuities
beneficiary of the trust to the extent of noncountable assets so long as they
benefits paid on behalf of the provided for state payback – violates
institutionalized spouse. N.J. Admin. federal law for the same reasons
Code tit. 10, § 71-4.10(f). In layman’s discussed above. New Jersey responds
language, transfers of assets by the that because plaintiffs did not raise this
institutionalized spouse for the sole issue in their complaint (i.e., plaintiffs
benefit of the community spouse are not only raised the issue with respect to
penalized for Medicaid eligibility, CSATs), it is not properly before us.
according to New Jersey, if it has first
call on those trust assets equal to the We agree that plaintiffs take issue
Medicaid benefits it pays to the too late. Moreover, at oral argument
institutionalized spouse. New Jersey made clear that its offer to
treat any commercial annuities plaintiffs
Because New Jersey no longer might purchase as noncountable (so long
requires state paybacks for CSATs, we
have no occasion to decide whether it
had the authority to define an SBO of a commercial annuity) contrary to
transfer in this manner. 13 Thus the state- New Jersey’s view that SBO transfers
can include it as a beneficiary. See letter
dated September 26, 2002, from Thomas
12
The “transfer penalty” is a period of E. Hamilton, Director of the Disabled
ineligibility for Medicaid benefits. and Elderly Health Programs Group of
HHS’s Centers for Medicare and
13
Although § 71-4.10(f) is no longer Medicaid Services, to Donald M.
applied by New Jersey with respect to McHugh, Esq. (one of plaintiffs’ counsel
CSATs, it apparently is still in effect, and in this case). Interestingly, the Hamilton
thus presumably contemplates state letter, notwithstanding § 71-4.10(f),
paybacks in non-CSAT contexts. refers to New Jersey’s interpretation as a
We also note in this regard that “policy, rather than state statute or
HHS has taken a position (in the context regulation.”
10
as they named New Jersey as first hardship” determinations. Section
beneficiary) was intended to be a 3259.8A provides that “[u]ndue hardship
settlement available to the plaintiffs, not exists when application of the trust
a policy generally applicable to all provisions would deprive the individual
Medicaid claimants. New Jersey need of medical care such that his/her health
not have offered this compromise to or his/her life would be endangered [or]
plaintiffs, and instead could have chosen when application of the trust provisions
to treat countable assets in any annuities would deprive the individual of food,
(whether private or commercial) clothing, shelter, or other necessities of
plaintiffs purchased. Regardless, life.” While states have “considerable
plaintiffs rejected this settlement, and flexibility in deciding the circumstances
New Jersey tells us it is no longer on the under which [they] will not count funds
table. Thus, not only was this issue not in trusts . . . because of undue hardship,”
properly pled, it is moot as well. the regulation requires that states, “at a
minimum, provide for: [1] [n]otice to
E. Undue Hardship Hearing recipients that an undue hardship
exception exists; [2] [a] timely process
Section 1396p(d)(5) requires for determining whether an undue
states to afford otherwise ineligible hardship waiver will be granted; [and]
claimants Medicaid benefits if “undue [3] [a] process under which an adverse
hardship” would result from the failure determination can be appealed.” §
to provide benefits.14 The relevant 3259.8C. Moreover, a state’s “undue
Medicaid regulation, § 3259.8 of HCFA hardship provision must discuss how [the
Transmittal No. 64, sets standards for state] will meet these requirements.” Id.
states to apply in making “undue
Plaintiffs’ arguments have
necessarily shifted through the course of
14
42 U.S.C. § 1396p(d)(5) provides this case because, before seeking relief
that “[t]he State agency [responsible for initially in the District Court, New Jersey
administering Medicaid] shall establish had not promulgated procedures under
procedures (in accordance with standards which Medicaid claimants could seek
specified by the Secretary) under which undue hardship hearings in accordance
the agency waives the application of this with § 1396p(d)(5) of the Medicaid Act
subsection [relating to “[t]reatment of and § 3259.8 of Transmittal No. 64.
trust amounts”] with respect to an However, after the hearing before Judge
individual if the individual establishes Bassler, New Jersey implemented the
that such application would work an long-promised undue hardship
undue hardship on the individual as regulations. See N.J. Admin. Code tit.
determined on the basis of criteria 10, § 71:4.11(i). According to plaintiffs,
established by the Secretary.” however, New Jersey’s regulations do
11
not fully comply with federal law. They 2001, this chronology is irrelevant. 15
argued before Judge Cavanaugh – and What is important is that (the lack of
now before us – that New Jersey’s formal regulations notwithstanding) New
regulations do not specify within what Jersey offered plaintiffs the opportunity
time period the State will afford an to apply for an undue hardship hearing,
undue hardship hearing and thus do not as federal law requires. For whatever
“discuss how [New Jersey] will meet” reason, plaintiffs chose not to seek a
Transmittal No. 64's “timely process” hearing for undue hardship at that time.
requirement. This failure, plaintiffs Thus they have suffered no injury (and
argue, violates federal law. indeed have no basis to believe that New
Jersey would not have timely processed
New Jersey responds that their request). 16 As a consequence,
plaintiffs are without standing to plaintiffs are without standing.
complain about the lack of an explicit
timeliness clause in its regulation F. Attorneys’ fees
because plaintiffs have not availed
themselves of the offered undue hardship Because plaintiffs have not
remedy and thus have suffered no injury received a favorable judgment on any of
as a result of the lack of an explicit their claims – either in the District Court
timeliness provision in § 71:4.11(i). On
the merits, New Jersey also argues that
neither § 1396p(d)(5) nor § 3259.8 of 15
We recognize that plaintiffs could
Transmittal No. 64 requires states to
not receive an undue hardship hearing
include an express timeliness provision.
under § 71-4.11(i) today. This provision
requires claimants to apply for an undue
We agree with New Jersey that
hardship waiver “within 20 days of
plaintiffs lack standing because they
notification of the denial of eligibility or
have suffered no injury related to §
termination of benefits,” a period long-
71:4.11(i)’s lack of an explicit timeliness
passed. But as discussed, New Jersey
provision. Plaintiffs conceded both in
offered plaintiffs the opportunity to seek
their brief and at oral argument that New
an undue hardship hearing in December
Jersey notified them of their right to an
1999. Having done so, it followed
undue hardship hearing in December
federal law.
1999 and required them to submit “the
reasons and all documentation that you 16
Had plaintiffs sought a hearing, and
believe gives rise to an undue hardship . . had New Jersey delayed unduly in
. to the county welfare agency within 20 providing them a hearing or otherwise
day[s] of this letter.” While these notices not complied with federal standards for
were sent out before New Jersey’s undue such a hearing, they would have had
hardship regulations became effective in standing.
12
or here – they are not entitled to
attorneys’ fees. Cf. Buckhannon Bd. and
Care Home, Inc. v. West Virginia Dep’t
of Health & Human Resources, 532 U.S.
598, 600 (2001) (party that failed to win
on the merits by judgment or consent
decree, yet obtained result it sought by
defendant’s voluntary change, is not a
prevailing party entitled to attorney’s
fees and costs).
*************
We hold that CSATs are
countable resources for Medicaid
eligibility purposes and decline (a) to
estop New Jersey from treating
plaintiffs’ CSAT assets as countable or
(b) to require the District Court to hold a
hearing on the issue. Moreover, we hold
that plaintiffs’ claims with respect to
state paybacks are moot both as to
CSATs and commercial annuities, and
they are without standing to attack New
Jersey’s undue hardship regulations.
Finally, because plaintiffs do not prevail
on the merits, they have no claim for
attorneys’ fees.
13