Needham v. Director of the Office of Medicaid , 88 Mass. App. Ct. 558 ( 2015 )

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14-P-182 Appeals Court
MAURICE NEEDHAM1 vs. DIRECTOR OF THE OFFICE OF MEDICAID.
No. 14-P-182.
Essex. January 14, 2015. - October 20, 2015.
Present: Katzmann, Sullivan, & Blake, JJ.
Medicaid. Administrative Law, Regulations, Agency's
interpretation of statute, Agency's interpretation of
regulation. Probate Court, Judgment, Trust. Trust,
Reformation.
Civil action commenced in the Superior Court Department on
December 28, 2012.
The case was heard by Maynard M. Kirpalani, J., on a motion
for judgment on the pleadings.
Elizabeth N. Dewar, Assistant State Solicitor, for the
defendant.
Peter J. Caruso for the plaintiff.
SULLIVAN, J. This is an appeal pursuant to G. L. c. 30A
from a judgment of the Superior Court reversing the denial of
long-term care benefits under the Commonwealth's Medicaid
1
Also known as Maurice E. Needham.
2
program. A judge of the Superior Court concluded that the
Director of the Office of Medicaid (MassHealth)2 was bound by an
order of a judge of the Probate and Family Court reforming a
trust, and was obligated to consider the reformed trust when
determining countable assets for purposes of Medicaid
eligibility for long-term care benefits. We conclude that
MassHealth is bound by Federal law in making eligibility
determinations, that Federal law prohibits recognition of the
reformation of the trust within the statutory look-back period,
and that MassHealth therefore could not be compelled to consider
the reformed trust in evaluating eligibility. Accordingly, we
reverse the judgment and remand for entry of judgment in favor
of MassHealth.
Background. The facts of the case are undisputed. In his
February 11, 2011, application for MassHealth long-term care
benefits, the plaintiff Maurice Needham3 disclosed two trusts,
one revocable and one irrevocable. The revocable trust held
only the family home valued at $412,400, and named the
irrevocable trust, of which Needham was also the settlor, as the
2
The Office of Medicaid, also known as MassHealth for the
Massachusetts Medicaid program it administers, see G. L.
c. 118E, § 9A, falls under the authority of the Secretary of the
Executive Office of Health and Human Services. See G. L. c. 6A,
§§ 16, 16B.
3
At the time Needham was over sixty-four and resided in a
nursing home.
3
sole beneficiary.4 MassHealth reviewed this and other financial
information for purposes of determining whether Needham met the
financial eligibility requirements for long-term care under the
Medicaid program. See 130 Code Mass. Regs. § 520.003(A)(1)
(2009) (setting an eligibility ceiling of $2,000 in countable
assets). The irrevocable trust, also valued at $412,400, was
deemed countable by MassHealth because a provision of the trust
instructed the trustee to accumulate principal and to use it for
the settlor's future needs without regard to the interest of the
remaindermen, his children.5 MassHealth concluded that Needham
was financially ineligible for services because he had countable
assets in excess of the $2,000 limit.
Pursuant to G. L. c. 118E, §§ 47, 48, a hearing officer
held an evidentiary hearing on Needham's subsequent
administrative appeal to the MassHealth board of hearings. At
Needham's request, the hearing was suspended in 2012 in order to
permit the filing of a complaint in the Probate and Family Court
to approve a stipulation between Needham, as beneficiary of the
4
The revocable trust was created in 1996, but the
designation of the irrevocable trust as beneficiary occurred in
1999, on the same day the irrevocable trust was created.
Needham's wife was also a settlor of each trust, but she passed
away in 2007. We refer to Needham as the settlor.
5
In MassHealth's view, this made the assets available to
the settlor. In addition, the settlor retained control over the
real estate held in trust because any sale of the real estate
required the settlor's consent.
4
irrevocable trust, and his children, the co-trustees of the
trust.6 The stipulation was meant to remove the provisions of
the irrevocable trust that rendered Needham ineligible for
MassHealth long-term care benefits. At the parties' request, a
judge of the Probate and Family Court approved the stipulation,
which stated that the reformation was effective ab initio.7 The
administrative hearing resumed and the judgment of May 25, 2012,
incorporating the approved stipulation was offered into
evidence.
The hearing officer, applying 42 U.S.C. § 1396p(d)(3)(B)(i)
(2012), and 130 Code Mass. Regs. § 520.023(C)(1)(a) (2009),8
concluded in his decision of December 5, 2012, that under the
original 1999 irrevocable trust, the assets remained available
to Needham, thus rendering him ineligible for benefits. The
hearing officer then applied the Federal and State statutes and
regulations that treat certain transfers of assets for less than
6
One of Needham's daughters, a remainderman and a plaintiff
in the case, signed the stipulation on Needham's behalf acting
under a power of attorney.
7
The complaint for declaratory relief and reformation
alleged that the reformation was a matter of form only, and that
reformation was requested to correct a scrivener's error and to
better effectuate the settlor's intent. The complaint did not
refer to the statutory or regulatory provisions governing
disqualifying transfers. MassHealth was not named as a party,
although Needham represents that it was notified.
8
All citations in this opinion to the United States Code
and the Massachusetts regulations are to the versions just
indicated.
5
fair market value made after February 8, 2006, as disqualifying
transfers if they occur within a sixty-month look-back period.
See Shelales v. Director of the Office of Medicaid, 75 Mass.
App. Ct. 636, 637-638 (2009); 42 U.S.C. § 1396p(c)(1)(A), (B);
130 Code Mass. Regs. §§ 520.019(B), 520.023(A)(1)(b)(3). He
assumed that the 2012 reformation would have rendered the assets
of the irrevocable trust noncountable, but concluded that the
reformation was itself a disqualifying transfer of assets into a
trust under 130 Code Mass. Regs. § 520.019(C), (F), because the
reformation was sought for purposes of qualifying for benefits
and the reformation fell within the prescribed look-back period.9
An appeal pursuant to G. L. c. 30A ensued. Ruling on
Needham's motion for judgment on the pleadings, a judge of the
Superior Court concluded that MassHealth, "as an arm of the
Commonwealth, is bound by [the Probate and Family] [C]ourt's
order," and that because the judgment of the Probate and Family
Court approved a stipulation reforming the trust ab initio, the
original trust had never existed. A Superior Court judgment
entered for Needham, ordering MassHealth to consider the issue
of his eligibility by reference to the trust "in its current
9
Under the applicable regulations, the look-back period
begins on the first date the individual is both in a nursing
facility and has applied for benefits. 130 Code Mass. Regs.
§ 520.019(B). There are also provisions for "cure," which are
not at issue in this appeal. See, e.g., 130 Code Mass. Regs.
§ 520.024(C).
6
form." Now before us is MassHealth's further appeal pursuant to
G. L. c. 30A.10
Discussion. Our review reduces to whether the hearing
officer's decision was based on an error of law. See G. L.
c. 30A, § 14(7)(c). On appeal, Needham does not contest that
the irrevocable trust, in its original form, contained countable
assets that would render him ineligible for Medicaid benefits.
See Doherty v. Director of the Office of Medicaid, 74 Mass. App.
Ct. 439, 442-443 (2009) (discussing similar trust). Rather,
Needham contends that MassHealth was required to consider the
reformed trust, and that the State regulations governing
disqualifying transfers are inapplicable because the original
trust ceased to exist upon reformation. We disagree.
Medicaid is a cooperative State and Federal program,
intended to provide medical assistance to certain persons "whose
income and resources are insufficient to meet the cost of
necessary medical services." 42 U.S.C. 1396-1. See Tarin v.
Commissioner of the Div. of Med. Assistance, 424 Mass. 743, 746
(1997); Lebow v. Commissioner of the Div. of Med. Assistance,
433 Mass. 171, 172 (2001). "The Medicaid Act, Title XIX of the
10
Although nominally a remand, the judgment was final in
all material ways with respect to the agency, and the judgment
is therefore a final, appealable disposition as to the agency.
See Cliff House Nursing Home, Inc. v. Rate Setting Commn., 378
Mass. 189, 191 (1979).
7
Social Security Act of 1965, operates to enable participating
states, through the use of federal funds, to provide medical
services to welfare recipients (the 'categorically needy') and
if the state chooses, to other needy recipients (the 'medically
needy'). See Beal v. Doe, 432 U.S. 438, 440 n.1 (1977); 42
U.S.C. 1396a(a)(10)(A), (C). Although a state's participation
in Medicaid is voluntary, if it chooses to adopt a plan it must
do so consonant with the requirements imposed by the Medicaid
Act. See Beal v. Doe, supra [] at 441." Preterm, Inc. v.
Dukakis, 591 F.2d 121, 124, cert. denied, 441 U.S. 952 (1979).
"In order to receive Federal funding, the State program
must be approved and meet all of the requirements of Title XIX
and the implementing regulations." Haley v. Commissioner of
Pub. Welfare, 394 Mass. 466, 467 (1985), citing Harris v. McRae,
448 U.S. 297, 301 (1980). Specifically, "a State is required to
base its assessment of financial need only on 'such income and
resources as are, as determined in accordance with standards
prescribed by the [United States] Secretary [of Health and Human
Services], available to the applicant or recipient'" (emphasis
omitted). Tarin v. Commissioner of the Div. of Med. Assistance,
supra at 746-747, quoting from 42 U.S.C. § 1396a(a)(17)(B). A
State is also required to comply with the disqualifying transfer
provisions of the Federal law. See 42 U.S.C. § 1396a(a)(18).
8
The Commonwealth has elected to provide long-term care
benefits to the medically needy, but must provide those benefits
in a manner consistent with Federal Medicaid requirements. See
G. L. c. 118E, § 9; id. § 15, inserted by St. 1993, c. 161, § 17
("The amount, duration and scope of the aforesaid care and
services shall be determined by the rules and regulations of the
[D]ivision [of Medical Assistance within the Executive Office of
Health and Human Services], provided such rules and regulations
are consistent with the provisions of this chapter and Title
XIX").11 The judgment of the Probate and Family Court represents
the judge's application of Massachusetts probate law, but it
does not constitute an interpretation or application of Federal
and State laws governing Medicaid eligibility, a matter over
which the Probate and Family Court has no jurisdiction. See
Young v. Department of Pub. Welfare, 416 Mass. 629, 633-634
(1993); G. L. c. 30A, § 14(1); G. L. c. 118E, § 48; G. L.
c. 215, §§ 3, 6.
Under the law governing financial eligibility for Medicaid
benefits, it is the fact of the reformation itself that
11
A statute or regulation violative of Title XIX would be
preempted under the Supremacy Clause of the United States
Constitution. See Boston Med. Center Corp. v. Secretary of
Exec. Office of Health and Human Servs., 463 Mass. 447, 461
(2012) ("The purpose of the Supremacy Clause is . . . to ensure
that, in a conflict with state law, whatever Congress says goes"
[citation omitted]).
9
constitutes the disqualifying event. Federal law requires that
individuals of means who apply for long-term care benefits, and
transfer assets for less than fair market value within the
sixty-month look-back period, face a period of ineligibility.
See 42 U.S.C. § 1396p(c)(1)(A), (B). The State statute and
regulations implement the Federal mandate. See G. L. c. 118E,
§ 28; 130 Code Mass. Regs. § 520.023(A)(1)(b)(3). The hearing
officer found that Needham had obtained the judgment of the
Probate and Family Court in an effort to satisfy Medicaid
eligibility requirements, thus placing this reformation squarely
within the ambit of the regulations governing disqualifying
transfers. See Gauthier v. Director of the Office of Medicaid,
80 Mass. App. Ct. 777, 786 (2011).
The issue before us is not whether the trust was reformed
as a matter of State law. The issue is whether MassHealth is
required to recognize a reformation as a matter of Federal law
when determining whether there has been a disqualifying
transfer. The answer to that question in this case is no. Were
the answer different, persons of means would be permitted to
enjoy otherwise countable assets held in trust throughout their
lives, transfer those assets for less than fair market value by
reforming the trust ab initio when their health declines, and
thereby obtain Medicaid payment for long-term nursing home care
without complying with the waiting period imposed by Federal
10
law.12 Needham's assertion that the Probate and Family Court
judgment renders the original trust nonexistent for purposes of
Medicaid eligibility does not withstand scrutiny when assessed
against the mandates of applicable State and Federal statutes
and regulations.13 "Congress has declared a contrary intent,
that Medicaid benefits be made available only to those who
genuinely lack sufficient resources to provide for themselves."
Doherty v. Director of the Office of Medicaid, 74 Mass. App. Ct.
at 443. See Cohen v. Commissioner of the Div. of Med.
Assistance, 423 Mass. 399, 403-404 (1996) (discussing
legislative history of Medicaid qualifying trust statute). In
this context, what "Congress says goes." Boston Med. Center
Corp. v. Secretary of Exec. Office of Health and Human Servs.,
463 Mass. 447, 461 (2012) (citation omitted).
We therefore conclude that the hearing officer committed no
error of law in determining Needham was ineligible for
MassHealth long-term care benefits. The judgment is reversed
12
The period of ineligibility is calculated in accordance
with 130 Code Mass. Regs. § 520.019(G).
13
Needham's reliance on the procedure employed in Bosch
litigation cases is inapt. See generally O'Connell v. Houser,
470 Mass. 1004, 1006 (2014). In Commissioner of Internal Rev.
v. Estate of Bosch, 387 U.S. 456, 465 (1967), the United States
Supreme Court held that the determination of a State's highest
court would be considered binding on matters of State law in
related Federal tax proceedings. Here we deal not with a
question of State law, but a question of eligibility governed by
Federal law, as supplemented by State statutes and regulations
that follow the Federal mandate.
11
and the case is remanded for entry of judgment affirming the
decision of the MassHealth board of hearings.
So ordered.