In the Matter of the Estate of Arnold Melby, Iowa

IN THE SUPREME COURT OF IOWA
No. 12–1593
Filed January 10, 2014
IN THE MATTER OF THE ESTATE OF ARNOLD MELBY, Deceased
IOWA DEPARTMENT OF HUMAN SERVICES,
Appellant,
vs.
JAMES D. LOHMAN,
Appellee.
Appeal from the Iowa District Court for Monona County, Steven J.
Andreasen, Judge.
The Iowa Department of Human Services appeals a district court
ruling on the department’s claim in probate for recovery of Medicaid
payments made for services provided to an elderly married couple.
REVERSED AND REMANDED.
Thomas J. Miller, Attorney General, and Barbara E.B. Galloway
and Timothy L. Vavricek, Assistant Attorneys General, for appellant.
Bradley J. Nelson of Norelius Nelson PC, Denison, for appellee.
2
HECHT, Justice.
The Iowa Department of Human Services appeals from a district
court ruling on the department’s claim in probate for recovery of
Medicaid payments made for services provided to an elderly married
couple. The recipients of the services were trustors of separate
irrevocable trusts. The district court’s ruling concluded the trustors’
interests in the trusts were limited to their right to receive the net income
from the trusts’ assets, and the department’s statutory right to recover
the Medicaid payments could be enforced against such income, but not
against the corpus of the trusts. We conclude the department’s right to
recover Medicaid payments under the facts of this case extends beyond
the trustors’ net income interests. We further conclude the district court
erred in its determination of the scope of medical assistance for which
recovery has been authorized by the general assembly. Accordingly, we
reverse and remand for further proceedings.
I. Background Facts and Proceedings.
Arnold and Vesta Melby (the Melbys) owned a farm in Monona
County. In 1991, Arnold and Vesta created substantially identical
irrevocable trusts and funded the trusts with their respective one-half
interests in the farm. The trusts named the Melbys’ son Duane as
trustee.
The trusts contained several terms addressing administration. The
trusts were to pay net income to their respective trustors while the
trustors were living.1 Upon the death of a trustor, in the event the
trustor had no other resources available, each trust was to pay “all
1The record reveals the trusts never reported any substantial annual income and
rarely reported any income at all.
3
expenses of” its respective trustor’s “last illness and funeral,” “any
indebtedness owed by the Trustor,” and “any estate tax, gift tax,
inheritance tax or income tax owed by the Trustor.”2 Each trust also
provided the surviving spouse net income from the decedent spouse’s
trust upon the decedent’s death. Then, following the deaths of both
trustors, each trust directed any remaining assets be distributed in equal
shares to the Melbys’ three children.
In November 2000, Vesta was deemed eligible for and began
receiving Medicaid benefits. She passed away in December 2002. The
Iowa Department of Human Services (the department) later advanced
evidence it had made Medicaid payments totaling $53,118.62 on Vesta’s
behalf. Vesta’s assets at the time of her death, excluding any interest in
the corpus of her trust, totaled $661.97, and her estate was probated
without present administration.
After Vesta’s death, Duane submitted a Medicaid Debt Response
Claim Form and information about Vesta’s trust for the department’s
review. The director of the department concluded there were no assets in
Vesta’s estate from which the department could recover the Medicaid
payments it had made on her behalf. The department advised Duane to
dispose of the trust assets as he deemed appropriate. Because Arnold
2This provision stated in its entirety:
The Trustee, if there are no other resources owned by the Trustor
available, shall pay from the trust all expenses of the last illness and
funeral of the Trustor, any indebtedness owed by the Trustor, and any
estate tax, gift tax, inheritance tax or income tax owed by the Trustor. If
there are other funds available in Trustor’s estate for the payment of the
above-noted expenses, then the Trustee shall pay these expenses from
the trust only after the other resources in the estate of the Trustor have
been exhausted.
4
was still living, Vesta’s trust was administered to provide him with net
income in accordance with the surviving spouse provision.
In January 2002, Arnold was deemed eligible for and began
receiving Medicaid benefits. Arnold continued to receive Medicaid
benefits for several years, until he passed away in November 2009. The
department later advanced evidence it had made Medicaid payments
totaling $251,254.14 on Arnold’s behalf. Arnold’s assets at the time of
his death, excluding any interest in the corpus of his trust or Vesta’s
trust, totaled $2529.25.3
Following Arnold’s death, Duane and the Melbys’ daughter Sharon
were appointed coexecutors of Arnold’s estate (the estate). Duane
submitted a new Medicaid Debt Response Claim Form to the
department’s Estate Recovery Program, detailing Arnold’s assets and
expenses and his trust information. Reviewing Arnold’s trust
documentation, the department concluded Arnold had an interest in his
trust beyond the net income interest from which the department could
recover the Medicaid payments it had made on his behalf.
The department’s review of Arnold’s file also prompted a new
review of Vesta’s file. After this second review, the department concluded
it had mistakenly determined Vesta held no interest in her trust beyond
her net income interest from which the department could recover the
Medicaid payments made on her behalf. The department therefore
notified the estate it would seek reimbursement for all Medicaid expenses
it had paid on behalf of Arnold and Vesta, in the total amount of
$321,263.96.
3As noted above, the farm had produced very little income while held in the
Melby trusts.
5
Duane and Sharon filed a petition for probate of Arnold’s estate as
a small estate. The department filed its Medicaid recovery claim, but the
claim was denied. In December 2010, the farm was sold for $904,024
and proceeds were set aside in an amount sufficient for repayment of the
Medicaid claim if required by an order of the court. In January 2011,
Duane passed away, and Sharon was appointed as successor trustee of
both trusts. Sharon transferred the sale proceeds from Iowa to Oregon,
where she resides.4
The department filed an application in the estate seeking a
judgment declaring the Melbys had interests in the corpus of their
trusts—in addition to the income interests—that should be counted as
assets available for repayment of the department’s Medicaid claim. The
estate filed its resistance again denying the department’s claim. The
trustee of the Melby trusts filed a general appearance and answer joining
in the defenses asserted by the estate.
After a bench trial on the department’s contested claim and
application in September 2011, the district court concluded the Melbys’
interests in the trusts at the time of their deaths were limited to net
income from the trusts, and thus the department’s right to recover was
limited to $3191.22. Both the department and the estate then moved to
enlarge and amend the district court’s ruling. After considering these
motions, the district court amended its order, ruling: (1) the Medicaid
payments made on behalf of the Melbys did not constitute debts of the
Melbys under Iowa’s Medicaid recovery statute—instead, the payments
constituted debts of the Melbys’ estates; (2) the department was entitled
4Although she continued to serve as trustee, Sharon was succeeded by James
Lohman as executor of Arnold’s estate.
6
to recover from the income interests available to the Melbys at the time of
their deaths but was not entitled to recovery from the corpus of the
trusts; (3) any right of recovery for Medicaid expenses established under
the recovery statute was limited to “medical assistance” as defined in
section 249A.2(7) of the statute; (4) the department had provided
sufficient evidence to establish the amounts it paid on behalf of the
Melbys; (5) the department had failed to demonstrate its Medicaid
payments constituted “expenses of last illness” as contemplated by the
language of the trusts given the structure of the probate debt
classification provision in Iowa Code section 633.425; (6) the court had
jurisdiction to decide the department’s claims notwithstanding the
location of the trust assets in Oregon.
On appeal, the department asserts the district court erred in
limiting the department to recovery from the Melbys’ income interests in
the trusts. The department contends caselaw and the language and
structure of the Medicaid recovery statute instead establish the
department’s right to recover from both the Melbys’ income interests and
the corpus of the trusts. The department also contends the district court
erred in concluding the department was limited to recovery of expenses
incurred for provision of the narrowly drawn categories of services listed
within the definition of “medical assistance” in section 249A.2(7) of the
recovery statute. The plain language of the recovery provision at issue,
the department argues, allows for a broader recovery. The estate cross-
appeals, contending the district court erred in determining the
department produced substantial evidence it had paid medical
assistance under Iowa Code section 249A.5(2), and therefore, the district
court should have denied any recovery.
7
II. Scope of Review.
The department’s claims in this case were tried in a probate
proceeding. Contested claims in probate are tried and reviewed at law.
Iowa Code § 633.33 (2011); see also In re Barkema Trust, 690 N.W.2d 50,
53 (Iowa 2004) (citing Iowa Code § 633.33). We review the district court’s
interpretation of statutory provisions for errors at law. In re Estate of
Whalen, 827 N.W.2d 184, 187 (Iowa 2013).
III. Discussion.
A. Recovery of Medicaid Payments Under Section 249A.5. We
have previously undertaken a three-part analysis in determining whether
certain trust assets may be subject to Medicaid recovery under our
Medicaid recovery statute’s provisions. See Barkema, 690 N.W.2d at 53,
55–56; see also In re Estate of Gist, 763 N.W.2d 561, 565 (Iowa 2009).
That analysis has typically required a classification of the trust at issue,
a determination of whether the beneficiary’s interest in the trust is a type
included in the recovery statute’s definition of the recipient’s estate, and
a determination of whether that interest existed at the time of the
medical assistance recipient’s death. See Gist, 763 N.W.2d at 565.5
1. Trust classification. The Medicaid recovery statute defines a
Medicaid assistance recipient’s estate, for purposes of Medicaid recovery,
as including any asset “in which the recipient . . . had any legal title or
interest . . . including . . . interests in trusts.” Iowa Code § 249A.5(2)(c).
In both Barkema and Gist, we were tasked with determining the nature
5While we have previously characterized these inquiries as constituting an
analytical framework proceeding in discrete steps and in a specific order, see In re
Estate of Gist, 763 N.W.2d 561, 565 (Iowa 2009), we think it prudent to note that,
depending on the circumstances, whether trust assets are available under the statute
for satisfaction of the department’s claim may be resolved by any of the three inquiries,
and thus the analysis need not follow the same sequence in every case.
8
of a decedent Medicaid recipient’s interest in a trust. See Gist, 763
N.W.2d at 564–65; Barkema, 690 N.W.2d at 53–55. In each case, the
decedent’s estate disputed the extent of the recipient’s interest, aiming to
prevent Medicaid recovery from the corpus of the trust. Gist, 763 N.W.2d
at 563; Barkema, 690 N.W.2d at 53. In each case, precise classification
of the trust at issue was instructive, because classification allowed us to
determine the extent to which the assets from the trusts would have
been available for the support of the beneficiaries.6 Gist, 763 N.W.2d at
565–66; Barkema, 690 N.W.2d at 55–56. Those determinations then
allowed us to decide whether, given the specific trust at issue, the
Medicaid recipient’s interest extended to the trust corpus for purposes of
the definition of “estate” in section 249A.5(2)(c). Id.
The parties’ respective characterizations of the Melbys’ trusts are
not identical. The department describes the devices as “self-settled,
irrevocable inter vivos trusts” with “spendthrift clause[s]” and “mandatory
obligation[s] to use the net income for the benefit of the respective
trustors during their lifetimes, to pay the expenses of the trustors’ last
illnesses, their funeral expenses, their debts, and certain taxes.” The
estate characterizes the trusts as discretionary support trusts with
standards.7 We conclude, however, neither party’s proposed
6We concluded the trust instrument at issue in Barkema established a
discretionary support trust with standards. In re Barkema Trust, 690 N.W.2d 50, 55–56
(Iowa 2004). We concluded the same for the trust in Gist. Gist, 763 N.W.2d at 566.
7The Melbys were entitled without limitation to the net income of their trusts
during their lifetime. The trusts further provided if a beneficiary had not attained the
age of twenty-five when both of the trustors had died, the trusts would continue for
such beneficiary until he or she attained the age of twenty-five. In the interim, the
trustee was granted sole discretion to determine the distribution of income or principal,
and principal could be disbursed “only to provide for the education, health, support and
maintenance of the beneficiary.”
9
classification has much bearing on our determination of whether the
recovery statute allows the department’s recovery in this case.
In deciding whether a Medicaid recipient has an interest in a trust
extending to the trust corpus for purposes of recovery, we must
determine the extent to which the “assets of a trust are actually available
to a trust beneficiary.” Barkema, 690 N.W.2d at 55. Because the parties
agree here that regardless how the trust is classified, the Melbys had an
interest in payment of any debts they owed from the assets of the trusts,
our determination of whether the department can recover from the
corpus of the trusts will turn on whether the provision of Medicaid
assistance creates a debt owed by the recipient of the assistance under
the recovery statute. We turn to that question now.
2. The Melbys’ interests in the trusts and section 249A.5(2)(c). As
previously noted, after reviewing the language of the recovery statute and
the language of the Melby trusts, the district court concluded the
department could recover only from the Melbys’ income interests in their
trusts. The district court acknowledged the Melbys had an interest in
the trusts for payment from both the trust income and corpus of any
“indebtedness owed,” but determined the language of section 249A.5(2)
forecloses the possibility Medicaid payments may constitute debts of
individual recipients. In particular, the district court concluded the
statute creates a debt due the department not from the recipient of the
services, but “from the individual’s estate.” See Iowa Code § 249A.5(2)
(emphasis added).
The parties agree the Melbys had an interest in payment of their
debts from the trusts; they dispute instead the district court’s conclusion
that the language of the recovery provision does not allow for
characterization of the medical assistance paid on behalf of the Melbys
10
as debts of the Melbys as individuals. The estate contends the district
court correctly concluded the general assembly’s directive that the
provision of medical assistance “creates a debt due from the individual’s
estate” forecloses a determination that the assistance may create a
personal debt of the recipient. The estate emphasizes the general
assembly used different language in section 249A.5(1) in making
incorrectly paid Medicaid assistance “recoverable from the provider, or
from the recipient, while living, as a debt due the state.” See id.
§ 249A.5(1). That language, the estate suggests, clearly makes
incorrectly paid assistance a personal debt due from an individual. The
contrasting language in section 249A.5(2), the estate argues, indicates a
clear distinction between the statutory treatment of improperly paid
assistance and properly paid assistance and indicates only the former
may constitute the debt of a recipient.
The department dismisses the estate’s argument as unavailing
because we previously rejected a related argument in In re Estate of
Nagel, 580 N.W.2d 810 (Iowa 1998). In Nagel, we considered whether an
automobile accident victim’s estate could reach the corpus of a
decedent’s trust for payment of a wrongful death claim. Id. at 811. The
language of the trust created an interest for the decedent trustor similar
to the interest created here—namely, it required that “any indebtedness
owed by the Trustor” be paid from the assets of the trust. Id. The
decedent’s trustee argued the trust’s corpus could not be reached for
payment of the wrongful death claim, because the claim was not a debt
owed by the trustor—the claim arose only after the trustor’s death. Id. at
812. We rejected that argument, reasoning that even if the tort claim
had not been reduced to judgment until after the trustor’s death, the
11
facts precipitating the claim had arisen during the trustor’s lifetime, and
thus the claim could constitute a debt owed by the trustor. Id.
The department suggests our reasoning in Nagel should apply here
because the department’s payments of the Melbys’ Medicaid expenses
occurred during their lifetimes. Such payments, the department argues,
created a debt owed by the Melbys payable from the trust assets, just as
the accident in Nagel created a debt owed by the trustor. In Nagel,
however, we were not required to consider the effect of our Medicaid
recovery statute, because there we confronted solely the interaction of a
wrongful death claim and a decedent’s interest in a living revocable trust.
Here, by contrast, the general assembly’s enactment of the recovery
statute requires we look to the statute in determining the nature and
genesis of the debt created by the department’s payment of the Melbys’
Medicaid expenses.
Iowa’s Medicaid recovery statute establishes that
[t]he provision of medical assistance to an individual who is
fifty-five years of age or older . . . creates a debt due the
department from the individual’s estate for all medical
assistance provided on the individual’s behalf, upon the
individual’s death.
Iowa Code § 249A.5(2).8 The statute adds “[t]he department shall waive
the collection of the debt created under this subsection from the estate of
8We note at common law, a recipient of public assistance was not obligated to
reimburse the state for payments made on the recipient’s behalf. See State ex rel. Dep’t
of Human Servs. v. Brooks, 412 N.W.2d 613, 614 (Iowa 1987). The common law rule
was modified with respect to Medicaid benefits in 1994 when Iowa adopted its recovery
statute. See 1994 Iowa Acts ch. 1120, § 10 (codified at Iowa Code § 249A.5(2) (1995)).
The estate contends the statute nevertheless maintains a presumption against recovery,
relying on the first paragraph of section 249A.5, which provides “[m]edical assistance
paid to, or on behalf of, a recipient or paid to a provider of services is not recoverable,
except as provided in subsection 2, unless the assistance was incorrectly paid.” Iowa
Code § 249A.5(1) (2011). But as that language itself suggests, the language informs,
but cannot answer directly, the question of what recovery section 249A.5(2) authorizes,
which is the inquiry we must address here.
12
a recipient of medical assistance” to the extent collection “would result in
. . . [r]eduction in the amount received from the recipient’s estate by a
surviving spouse . . . .” Id. § 249A.5(2)(a)(1). In the event collection of a
debt is waived under that subsection, the statute provides “the amount
waived shall be a debt due from . . . [t]he estate of the medical assistance
recipient’s surviving spouse . . . upon the death of such spouse,” to the
extent “the medical assistance recipient’s estate was received by” the
surviving spouse. Id. § 249A.5(2)(b)(1).
At first glance, section 249A.5(2) may be read to suggest the
department’s medical assistance payments are strictly debts of the
recipient’s estate and foreclose the possibility payments create debts
owed by the recipients themselves, consistent with the interpretation of
the estate and the district court. We note, however, the statutory
language says nothing about the timing of the creation of the debt—
instead, the language merely makes clear that medical assistance
payments will create a debt and that the debt will be due the department
from the recipient’s estate upon the recipient’s death. See id. (“The
provision of medical assistance . . . creates a debt due the department
from the individual’s estate for all medical assistance provided on the
individual’s behalf, upon the individual’s death.”). In other words, the
statute leaves room for the possibility that either: (1) the department’s
provision of medical assistance creates a debt upon the recipient’s death,
at which point the debt is payable from the recipient’s estate; or (2) the
department’s provision of medical assistance creates a debt immediately,
and that debt will be due from the recipient’s estate upon the recipient’s
death.
Given this ambiguity, the legislature’s use of specific language to
distinguish debt recoverable from a living recipient in section 249A.5(1)
13
from debt recoverable from an estate upon a recipient’s death in section
249A.5(2) does not dispose of our inquiry here. Section 249A.5(1) merely
provides incorrectly paid assistance may be recovered from a recipient
while living or, upon the recipient’s death, recovered “as a claim
classified with taxes having preference under the laws of this state.” Id.
§ 249A.5(1). That language suggests the general assembly distinguished
the timing of recovery of incorrectly paid assistance from the timing of
recovery of correctly paid assistance, but like the language of section
249A.5(2), the language of section of 249A.5(1) makes no reference to
when, precisely, the debt for incorrectly paid medical assistance is
created.
In previously examining section 249A.5 language having multiple
possible meanings, we have considered the language itself in the context
of the subject matter of the statute, the statute’s purpose and underlying
policies, and any consequences of adopting the dueling interpretations.
See Barkema, 690 N.W.2d at 55. The Medicaid program was designed to
serve individuals and families lacking adequate funds for basic health
services, and it was designed to be a payer of last resort. Id. In Medicaid
eligibility-determination cases, we have said the program contemplates
that families will spend available resources first, and when those
resources are completely depleted, Medicaid may provide payment. See
Strand v. Rasmussen, 648 N.W.2d 95, 106 (Iowa 2002). In Medicaid
recovery cases, we have permitted the department’s recapture of the
value of a medical assistance recipient’s life estate after the death of the
recipient, concluding the Iowa legislature has chosen to define “estate”
for purposes of the Medicaid recovery statute more broadly than required
by federal law. See In re Estate of Laughead, 696 N.W.2d 312, 316–17
(Iowa 2005); see also In re Estate of Serovy, 711 N.W.2d 290, 294 (Iowa
14
2006) (“The purpose of this legislation was to capture and make available
for payment of Medicaid-reimbursement claims certain interests in
property that are not ordinarily subject to the payment of a decedent’s
debts.”). We have also allowed recovery from a Medicaid recipient’s
interest in a discretionary support trust following the death of the
recipient, despite the fact that any interest in the trust was to pass to a
named beneficiary upon the recipient’s death. Barkema, 690 N.W.2d at
54–56. Recovery in these scenarios, we have explained, is consistent
with the Medicaid program’s broad purpose of providing for care for those
in need, and allowing for recovery by the state in these instances frees
more funds for provision of future services. See id. at 55 (citing Estate of
DeMartino v. Div. of Med. Assistance & Health Servs., 861 A.2d 138, 144
(N.J. Super. Ct. App. Div. 2004)); cf. Iowa Code § 249A.4(1) (requiring
director to “[d]etermine the greatest amount, duration, and scope of
assistance which may be provided . . . under this chapter within the
limitations of available funds”).
With this broad purpose in mind, we think it prudent to resolve the
ambiguity regarding the timing of creation of medical assistance debt in
section 249A.5(2) in favor of the department’s recovery here. Our
interpretation creating the debt immediately upon provision of assistance
rather than at the death of the recipient, and allowing recovery from the
corpus of the trust, is consistent with the Medicaid program’s goal of
recovering from those with an ability to pay so as to make future funds
available for those having the most need.9 Cf. Laughead, 696 N.W.2d at
9We note several other jurisdictions dealing with estate recovery have taken a
similar approach and characterized Medicaid debt as created during the lifetime of the
recipient. See, e.g., Estate of Wood v. Ark. Dep’t of Human Servs., 894 S.W.2d 573, 576
(Ark. 1995) (explaining relationship created after enactment of Arkansas’s estate
recovery statute “was as if [the recipient] had a loan from [the department] to be repaid
15
315 (“[I]t is the receipt of benefits that gives rise to the repayment
obligation.”). This reading, providing for creation of a debt when the
medical assistance is provided, dovetails appropriately with our
legislature’s very clear deviation from federal law in defining “estate”
under the recovery statute to broadly include interests available to the
recipient only during the recipient’s lifetime. See id. at 317; see also
Iowa Code § 249A.5(2)(c) (defining “estate” for purposes of the recovery
statute as “including but not limited to interests in jointly held property,
retained life estates, and interests in trusts”).
Moreover, immediate debt creation is consistent with the operation
of section 249A.6, which establishes that when the department makes
payment “for medical care . . . on behalf of a recipient, the department
shall have a lien, to the extent of those payments, upon all monetary
claims which the recipient may have against third parties.” Iowa Code
§ 249A.6(2). Setting forth the mechanics for the operation of this section,
section 249A.6(3) requires recipients to “notify the department of any
possible [monetary] claims when those claims arise,” suggesting the
department may have an interest in immediate pursuit of those claims.
Id. § 249A.6(3). Section 249A.6(1) requires the recipient to both “[a]ssign
to the department any rights to payments of medical care from any third
party,” and “[c]ooperate with the department in identifying and providing
________________________
from the assets of her estate”); In re Estate of Reimers, 746 N.W.2d 724, 728 (Neb. Ct.
App. 2008) (“While the debt arising under [the estate recovery] statute accrues during
the recipient’s lifetime, it is held in abeyance for payment until the recipient’s death.”);
In re Estate of Hooey, 521 N.W.2d 85, 87 (N.D. 1994) (“Although the [d]epartment’s
ability to enforce the claim was tolled until [the recipient]’s death, the obligation [to
repay] was incurred by [the recipient] during her lifetime.”); In re Estate of Burns, 928
P.2d 1094, 1099 (Wash. 1997) (“The precipitating event is, therefore, the receipt of the
benefits giving rise to the contingent indebtedness, and not the creation of the
decedent’s estate.”).
16
information to assist the department in pursuing any third party who
may be liable to pay for medical care . . . ,” again suggesting immediate
debt creation. See id. § 249A.6(1)(a). And in scenarios where a recipient
incurs court costs or attorney fees for the purpose of enforcing a
monetary claim upon which the department has a section 249A.6 lien,
section 249A.6(5) provides upon receipt of the settlement or judgment,
the court costs and reasonable attorney fees shall first be deducted from
the total judgment, the recipient shall receive one-third of the remaining
total, and the department’s lien is then to be repaid from the remaining
balance. Id. § 249A.6(5). Although these provisions make no specific
reference to the timing of the creation of medical assistance debts, a
plain reading of each suggests the debt for provision of medical services
is created during a recipient’s lifetime, and thus section 249A.6 guides
our conclusion here.
Two additional features of the statutory language and structure
inform our conclusion here. Section 249A.5(2) includes a comma late in
its directive, separating the clause “creates a debt due the department
from the individual’s estate for all medical assistance provided on the
individual’s behalf,” from the clause “upon the individual’s death.” Id.
§ 249A.5(2). In the absence of the comma, we might conclude the
provision envisioned only those services provided on behalf of a recipient
in close temporal proximity to the recipient’s death would create a debt,
because the statute would then direct that provision of medical
assistance “creates a debt due the department . . . for all medical
assistance provided on the individual’s behalf upon the individual’s
death.” That result would clearly be at odds with the purpose of the
statute—broad recovery so as to make funds available for future
provision of services—and at odds with our interpretation of the
17
provision in prior caselaw. See, e.g., Laughead, 696 N.W.2d at 314, 315
(concluding decedent’s estate was liable for all Medicaid benefits paid on
decedent’s behalf over seven years, including nursing home care). The
inclusion of the comma suggests a distinction between the timing of the
provision of services and the timing of the recipient’s death, thereby
making all medical assistance provided on a recipient’s behalf—including
but not limited to those services provided at death—recoverable. We
think it reasonable to conclude, based on the use of the comma to
distinguish the timing of the provision of services from the timing of the
recipient’s death and the inclusion of the debt creation principle in the
clause making reference to the provision of services, the statutory
language indicates the timing of the debt creation matches the timing of
the provision of services, as opposed to the timing of the recipient’s
death.
Our interpretation of the section 249A.5(2) recovery language is
also supported, indirectly, by the mechanics of the waiver and
substitute-recovery provisions of sections 249A.5(2)(a) and 249A.5(2)(b),
mentioned above. Section 249A.5(2)(a) provides for the department’s
temporary waiver of collection of debt from a recipient’s estate in the
event collection would result in reduction in the amount received from
the estate by a surviving spouse or a surviving child under age twenty-
one with a disability, or in the event collection would otherwise work an
undue hardship as determined on the basis of federally established
criteria. See Iowa Code § 249A.5(2)(a)(1) (allowing for waiver of collection
if collection would result in reduction of amount received by surviving
spouse or child); id. § 249A.5(2)(a)(2) (allowing for waiver of collection if
collection would work undue hardship). In the event collection is waived
under section 249A.5(2)(a), however, section 249A.5(2)(b) provides for
18
reciprocal recovery from the estate of the surviving spouse upon the
spouse’s death, or from the surviving child when the child reaches age
twenty-one, or from the recipient of a hardship waiver when the hardship
no longer exists. See id. § 249A.5(2)(b)(1)–(3). Although these provisions
cannot tell us much explicitly about the genesis of the medical assistance
debt, they lend support to the conclusion the statute requires the
department regard medical assistance debts as immediately established
but also directs the department defer collection of these debts, out of
respect for the recipient and the recipient’s vulnerable kin, until a time at
which collection would work less hardship. See, e.g., id. § 249A.5(2)(b)(3)
(allowing for recovery from a hardship waiver recipient when the
hardship no longer exists); cf. Gist, 763 N.W.2d at 568 (noting our
legislature took “a more humanitarian approach” in “allowing recipients
to keep certain assets to pay for items not covered by Medicaid” and
explaining “[t]o the extent such assets are not exhausted at the time of
the recipient’s death, however, the legislature allows the State to recoup
its payments from those assets”).
Based on the language of the recovery provision, the structure and
purpose of the statute, and our prior caselaw, we conclude section
249A.5(2) establishes a debt owed by the recipient of medical services
when the services are provided, while mandating the department will
refrain from collecting that debt until the death of the recipient.
Therefore, we conclude section 249A.5(2)(c)’s broad definition of the
estate assets from which the department may recover Medicaid payments
encompasses the Melbys’ interests in payment of their debts from the
corpus of their trusts.
3. The Melbys’ interests at the time of their deaths. In Barkema, we
explained the department may recover its debt under the recovery statute
19
from any interest in trust the recipient had at the time of the recipient’s
death. See Barkema, 690 N.W.2d at 56; see also Iowa Code
§ 249A.5(2)(c). We concluded the statutory requirement the interest be
available “at the time of the recipient’s . . . death” meant the interest
must be available at the time immediately preceding the recipient’s
death, reasoning that any definition contemplating some later time would
render portions of the recovery statute meaningless. See Barkema, 690
N.W.2d at 56.
Here, although the district court concluded the Melbys’ interest in
the trusts at the time of their deaths was limited to the net income of the
trust, we note the parties agree the plain language of the trust dictates
that at the time immediately preceding the deaths, the Melbys had an
interest in payment from the trusts of “any indebtedness owed by the
Trustor.” Because we have determined the recovery statute creates a
debt immediately upon provision of services to a Medicaid recipient, we
conclude the Melbys had interests in the corpus of their trusts at the
time of their deaths from which the department may recover. Cf. Iowa
Code § 633A.2304 (“If a settlor is a beneficiary of a trust created by the
settlor, a transferee or creditor of the settlor may reach the maximum
amount that the trustee could pay to or for the settlor’s benefit.”); Gist,
763 N.W.2d at 566–67 (concluding department could recover from trust
to the extent creditors could have reached decedent’s interest in the
trust).
B. The Meaning of “Medical Assistance” in Section 249A.5(2)
and the Sufficiency of the State’s Evidence.
1. The meaning of “medical assistance” in section 249A.5(2). As
noted, the district court concluded the department’s right to recover
under section 249A.5(2) was limited to recovery of expenses paid in
20
providing services constituting medical assistance as defined in section
249A.2(7). Recognizing the general assembly defined “medical
assistance,” “additional medical assistance,” and “discretionary medical
assistance” separately in section 249A.2, and observing section 249A.5(2)
refers only to recovery of “medical assistance” and “all medical
assistance,” the district court reasoned the general assembly would have
included references to additional and discretionary medical assistance in
section 249A.5(2) had the statute been designed to allow for recovery of
payment for those categories of services.
The estate contends the district court’s reasoning was sound and
adds that “medical assistance” and “additional medical assistance” are
used elsewhere in the statute to signify that provision of certain services
would be mandatory while provision of others would be within the
discretion of the department as costs and available funds might allow.
Any reading failing to maintain the general assembly’s classification
scheme for provision of these services, the estate insists, would bankrupt
our Medicaid system.
The department counters that the general assembly’s use of the
phrase “all medical assistance” in section 249A.5(2) signifies a departure
from the narrower meaning of “medical assistance” in section 249A.2(7)
and allows for broader recovery, including assistance provided as
“additional medical assistance” and “discretionary medical assistance.”
Further, the department argues, an evaluation of the entirety of chapter
249A reveals the general assembly rarely used the phrases “additional
medical assistance” and “discretionary medical assistance,” and instead
freely used the phrases “medical assistance” and “medical assistance
program” in contexts where their meanings might encompass provision
of “additional medical assistance” and “discretionary medical assistance.”
21
The department contends the use of the phrase “all medical assistance”
in section 249A.5(2) constitutes an instance where the statute
incorporates this broader meaning.
When construing statutes, we assess not just isolated words and
phrases, but statutes in their entirety, and we avoid constructions
rendering parts of a statute redundant, irrelevant, or absurd. See Iowa
Beta Chapter of Phi Delta Theta Fraternity v. State, 763 N.W.2d 250, 260
(Iowa 2009). Absent a statutory definition or meaning established by
law, “we give words their ordinary and common meaning by considering
the context in which they are used.” Id. We construe statutory
provisions in ways that best achieve a statute’s purpose. Id.
We have previously explained Congress gave states wide latitude in
seeking Medicaid recovery and allowing recovery from the estates of
those who have received assistance furthers Medicaid’s broad purpose of
providing for medical care of the needy. See Barkema, 690 N.W.2d at 55.
We have also noted the general assembly used broad language in chapter
249A, enabling broad recovery and promoting as much care as possible
for those in need. Id. at 55–56; cf. Gist, 763 N.W.2d at 565 (noting
section 249A.5 includes an “expansive” definition of “estate” for recovery
purposes); Serovy, 711 N.W.2d at 293 (observing the legislature’s 1994
amendment of section 249A.5 “expanded the category of assets”
reachable by the department for recovery of assistance provided to
Medicaid recipients).
Here, the general assembly has not defined the phrase “all medical
assistance,” but it previously defined the phrase “medical assistance” to
mean “payment of all or part of the costs of the care and services
required to be provided by Tit. XIX of the federal Social Security Act
. . . .” Iowa Code § 249A.2(7) (2011). An isolated reading of that
22
definition in conjunction with the more discretionary definition of
“additional medical assistance” might suggest, as the estate contends,
our statute duplicates without deviation the mandatory–additional–
discretionary classification scheme of the federal act in each instance a
concept involving the provision of medical services appears in our own
statute. A closer reading of section 249A.5(2) in the context of chapter
249A, however, reveals the phrase “all medical assistance” in section
249A.5(2) cannot be read as narrowly as the definition of “medical
assistance” in section 249A.2(7).10
In examining this question, we observe chapter 249A, entitled the
“Medical Assistance Act,” id. § 249A.1, establishes the framework for the
department’s administration of Iowa’s Medicaid program—a program that
by the terms of the statute encompasses the provision of mandatory,
additional, and discretionary services and care as defined by both our
statute and the federal statute. We think it instructive the general
assembly used the phrase “medical assistance” and not some different
phrase in titling the statute for this broad-reaching program. More
importantly, we note for purposes of the recovery portion of the statute, a
10The general assembly has recently amended the definition of “medical
assistance” in subsection 249A.2(7), largely eliminating this confusion for cases
involving provision of services going forward. The definition now provides that medical
assistance “means payment of all or part of the costs of the care and services made in
accordance with Tit. XIX of the federal Social Security Act and authorized pursuant to
this chapter.” 2013 Iowa Acts ch. 138, § 63 (to be codified at Iowa Code § 249A.2(7)
(Supp. 2013)). The definition no longer makes reference to services required under the
federal act—instead, the definition more clearly contemplates medical assistance might
encompass any services provided in accordance with the federal act, whether
mandatory or discretionary. While this new definition provides support for a broad
meaning for medical assistance in various instances in the statute including the
recovery provision, we focus our inquiry here on the previous version of the statute, as
the parties have founded their arguments on the previous version, and the previous
version was in effect both when the Medicaid services were provided and the debt was
created, and when the department attempted to recover upon Arnold’s death.
23
reading of “all medical assistance” allowing for recovery of costs
expended for the provision of both mandatory and additional services is
consistent with the statutory purpose we have identified here and in our
previous cases—namely, broad recovery so as to promote the future
provision of services. See, e.g., Barkema, 690 N.W.2d at 55; cf. Iowa
Code § 249A.4(1) (instructing director to “[d]etermine the greatest
amount, duration, and scope of assistance which may be provided, and
the broadest range of eligible individuals to whom assistance may
effectively be provided . . . within the limitations of available funds”). A
narrower reading of section 249A.5(2), allowing for recovery of only
expenses incurred in providing mandatory services, particularly in cases
where substantial additional services have also been provided, could
quickly drain the funds of the program and thereby thwart its purpose.
Absent some other indication, we do not believe the statute allows the
recovery provision to operate in that way.
In determining the phrase “all medical assistance” encompasses
additional and discretionary assistance for recovery purposes, we are
also guided by the legislature’s use of the concepts of “assistance” and
“medical assistance” broadly, synonymously, and interchangeably in
certain contexts in chapter 249A.11 We need not catalog all those
examples here, but a few are instructive. For example, section 249A.4,
11We note the general assembly very clearly contrasts “medical assistance” with
“additional assistance” and “discretionary assistance” in section 249A.3, in directing the
department’s provision and allocation of services in accordance with the Federal Social
Security Act. Compare Iowa Code § 249A.3(1) (directing that “[m]edical assistance shall
be provided to” certain enumerated groups in need), with id. § 249A.3(3) (allowing the
provision of additional medical assistance “within the limits of available funds and in
accordance” with section 249A.4(1)). Despite the clear distinction in that context,
however, we must also consider the less clearly contoured use of the phrase “medical
assistance” in numerous other instances in chapter 249A.
24
in establishing the duties of the department director, requires the
director consider “[t]he level of state and federal appropriations for
medical assistance,” to determine “the method and level of
reimbursement for all medical and health services referred to in section
249A.2, subsection 1 or 7.” Iowa Code § 249A.4(9). Because we believe
the statute instructs the director to consider appropriations for both
“medical assistance” and “additional medical assistance” in determining
reimbursement rates for “medical assistance” (in section 249A.2,
subsection 7) and “additional medical assistance” (in section 249A.2,
subsection 1), we conclude the statute adopts a broader meaning for
“medical assistance” in this particular provision. Accordingly, the linking
of the phrase “all medical and health services”—and the subsequent
specification that it includes both “medical assistance” and “additional
medical assistance” as defined in section 249A.2, subsections 1 and 7—
with the reference to “medical assistance” in section 249A.4(9)(c) provides
further evidence the statute in certain contexts incorporates a broader
meaning for “medical assistance” than the meaning set forth in the
narrow definition in section 249A.2(7).
We have also observed the apparent interchangeability and broad
usage of “assistance” and “medical assistance” in section 249A.3, which
establishes Medicaid eligibility standards. Compare id. § 249A.3(5)
(instructing that “[a]ssistance shall not be granted under this chapter to”
certain groups whose income exceeds federally prescribed limitations),
with id. § 249A.3(6) (instructing that in “determining the eligibility of an
individual for medical assistance under this chapter,” the department
should consider certain resources an individual sold or transferred for
the purpose of establishing “eligibility for medical assistance under this
25
chapter”).12 The general assembly’s somewhat indiscriminate use of
“assistance” and “medical assistance” is even apparent in the language of
the recovery provision itself, as section 249A.5(1)—allowing for recovery
of incorrectly paid assistance—uses “medical assistance,” and then
simply “assistance,” in making reference to services provided to a
recipient, and in reference to those services for which recovery might be
available. See id. § 249A.5(1).
Given the purpose of the statute, as identified in our caselaw and
in the statute itself, the structure of the statute and its often broad use
of the language at issue, and the specific context of the use of this
language in the recovery provision, we cannot conclude the phrase “all
medical assistance” should be read narrowly in section 249A.5(2) to
preclude recovery of expenses incurred for the provision of additional and
discretionary medical assistance. We therefore conclude the district
court erred in concluding the department’s right of recovery established
in section 249A.5 was limited to recovery of medical assistance as
defined in section 249A.2(7). Instead, we conclude the use of the phrase
“all medical assistance” in this context establishes the department’s right
to recover costs incurred for all medical assistance, including additional
medical assistance, and discretionary medical assistance provided to the
Melbys during their lifetimes.
2. The sufficiency of the department’s evidence. In its original
ruling declaring the department’s right to recover, the district court
12The broad language of “under this chapter” in section 249A.3(6) by itself
suggests “medical assistance” might encompass additional assistance in this context.
See Iowa Code § 249A.3(6). That broader reading is bolstered by the unlikelihood the
statute requires the department consider certain prior resource transfers in determining
an individual’s eligibility for mandatory services but refrain from considering those
transfers in determining eligibility for additional services.
26
found the department had incurred expenses for medical assistance for
the Melbys “in the amounts claimed” and had “proven the full value of its
claims under” the recovery provision. The estate then moved for
amendment of that ruling under rule 1.904(2), raising hearsay and
foundation objections to certain exhibits admitted at trial, and arguing
that if the exhibits were deemed inadmissible, the department had failed
to produce sufficient evidence establishing the amounts paid on behalf of
the Melbys for medical assistance. The district court enlarged its ruling
in response, noting it was overruling the evidentiary objections as it had
done at trial and concluding again the exhibits taken together
established sufficient evidence of the expenses incurred by the
department for provision of medical services to the Melbys. As noted, the
estate now argues the district court erred in finding substantial evidence
in support of any part of the department’s claims. The department
maintains it presented the same quantum and quality of evidence it has
presented in other Medicaid estate recovery cases. Further, the
department argues, the estate apparently does not dispute the amounts
expended by the department, as the estate instead focuses on whether
the department’s evidence adequately identified provision of “medical
assistance” as defined in section 249A.2(7).13
As we have concluded the district court erred in limiting the
department’s recovery to the trustors’ net income interests and in
13We note the estate’s brief does not precisely state whether its challenge is
based on a contention that (1) the department’s evidence failed to distinguish between
medical assistance it paid as defined in Iowa Code section 249A.2(7) and other medical
assistance it paid not fitting within that definition, or (2) the department’s evidence
failed to establish the department’s claimed costs for provision of medical services to the
Melbys. Because we have concluded the recovery provision mandates the department’s
recovery of all medical assistance, including additional and discretionary assistance, we
conclude only the second contention is germane to the dispute here.
27
concluding the department’s recovery is limited to the cost of medical
assistance as defined in Iowa Code section 249A.2(7), we must reverse
and remand this case. Our scope of review of this appeal is at law,
dictating that findings of fact regarding the appropriate amount of the
recovery here should be made by the district court consistent with this
opinion.
IV. Conclusion.
For the foregoing reasons, we conclude the Melbys had interests in
the corpus of their trusts from which the department may recover
payments made for the provision of medical assistance on their behalf.
Accordingly, we reverse and remand for further proceedings consistent
with this opinion.
REVERSED AND REMANDED.