T.S. VS. DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES (DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0030-18T1
T.S.,
Petitioner-Appellant,
v.
DIVISION OF MEDICAL
ASSISTANCE AND HEALTH
SERVICES,
Respondent-Respondent,
and
CAMDEN COUNTY BOARD
OF SOCIAL SERVICES,
Respondent.
Argued August 27, 2019 – Decided September 12, 2019
Before Judges Gilson and Mawla.
On appeal from the New Jersey Department of Human
Services, Division of Medical Assistance and Health
Services.
Sandra Schick Passaro argued the cause for appellant
(South Jersey Legal Services, Inc., attorneys; Sandra
Schick Passaro, on the brief).
Stephen J. Slocum, Deputy Attorney General, argued
the cause for respondent Division of Medical
Assistance and Health Services (Gurbir S. Grewal,
Attorney General, attorney; Melissa H. Raksa,
Assistant Attorney General, of counsel; Stephen J.
Slocum, on the brief).
PER CURIAM
Petitioner T.S. appeals from a July 20, 2018 final agency decision issued
by the Director of the New Jersey Division of Medical Assistance and Health
Services (Division), which terminated the New Jersey FamilyCare (NJFC)
Medicaid benefits of T.S. and her two dependent daughters. 1 T.S. argues that
the Division acted arbitrarily and capriciously by including annualized income
from her then-nineteen-year-old daughter, who was a full-time college student
working part-time and earning less than the amount required for filing a federal
tax return. We agree and reverse.
I.
T.S. is a single mother. In 2017, she had two dependent daughters: T.H.,
a then-nineteen-year-old college student, and U.P., a then-six-year-old child.
1
We use initials to protect the privacy interests of petitioner and her family
members.
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2
In July 2017, T.S. applied to renew her Medicaid benefits being provided
to her and her two daughters. In making her application, T.S. spoke with
representatives of the County Welfare Agency (CWA) and submitted a written
application and supporting documents. T.S. reported that her daughter T.H. was
a college student, who worked part-time, and T.S. expected to claim T.H. as a
dependent on her 2017 tax return.
In response to a request from the CWA, T.S. also provided paystubs
showing four weeks of earnings she received from her job in June and July 2017,
and four weeks of earnings her daughter received from her summer job in June
and July 2017. The paystubs show that T.S. earned $12 per hour and during a
forty-hour week was paid $480 in gross income. T.H. was being paid $8.38 per
hour. During one two-week period, she worked just over twenty-six hours and
earned $294.47 in gross income, and during the second two-week period she
worked just under thirty-five hours and earned $399.81 in gross income.
On August 9, 2017, the CWA informed T.S. that her household's monthly
income exceeded the maximum eligibility limit for Medicaid benefits under the
NJFC Program. The notice did not state the amount of T.S.'s household's income
that the CWA had calculated or how the CWA calculated the household's
income. The notice went on to inform T.S. that her and T.H.'s benefits would
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be terminated effective August 31, 2017, and U.P.'s benefits would be
terminated effective December 31, 2017.
T.S. requested a fair hearing and the matter was transmitted to the Office
of Administrative Law (OAL) for a hearing before an Administrative Law Judge
(ALJ). Two witnesses testified at the hearing: a Human Services Specialist for
the Division and T.S. The parties also submitted documents, which included
T.S.'s July 2017 application, the paystubs, a letter from T.H.'s employer , and
T.H.'s 2017 W-2 forms. The letter from T.H.'s employer stated that T.H. only
worked on a "limited basis, . . . primarily during the summer and occasional
weekends while in school." The W-2 forms for T.H. reflected that in 2017, she
earned a gross income of $6286.
At the OAL hearing, the Division took the position that the household's
income included both T.S.'s income and T.H.'s income. T.S.'s monthly income
was calculated to be $2162. Based on the four weeks of earnings from T.H.,
reflected in her paystubs from June and July 2017, the Division calculated T.H.'s
monthly income to be $752 and her annual income to be $9024. Adding T.H.'s
income to T.S.'s income, the Division took the position that the household's
monthly income was $2914, which exceeded the NJFC eligibility limit of $2349
for a family of three.
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In April 2018, the ALJ issued her initial decision. The ALJ accepted the
Division's position, finding that T.H.'s household monthly income exceeded the
eligibility limit. In that regard, the ALJ found that T.H.'s income should be
included because she had a monthly income of $752 and an annual income of
$9024. Consequently, the ALJ found that T.S.'s household income was $2914
per month, which exceeded the NJFC eligibility amount of $2349 per month for
a household of three. Accordingly, the ALJ upheld the Agency's decision to
terminate the family's Medicaid benefits effective August 31, 2017.
Meanwhile, in January 2018, T.S. had provided the CWA with additional
information, which included the letter from T.H.'s employer and information on
T.H.'s actual 2017 income. Based on that information, in early April 2018, the
CWA reevaluated the household's income and found that the family was eligible
for Medicaid benefits effective January 1, 2018.
On July 20, 2018, the Director of the Division issued a final agency
decision, adopting the ALJ's initial decision in its entirety. 2 The Division
accepted the ALJ's finding that T.H.'s income for 2017 was $9024, which was
2
The parties dispute whether T.S. filed exceptions to the ALJ's initial decision.
T.S. included in her appendix a copy of a written exception dated May 2, 2018.
The Division, however, claims it never received that exception. We need not
resolve this dispute because both parties agree that the Division issued a final
agency decision and that decision is the subject of our review.
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above the exemption from filing a tax return. The Division, therefore, found
that the household income included T.H.'s income and the total monthly income
was $2914, "which exceeded the $2349 maximum gross monthly household
income for a family of three."
II.
T.S. appeals from the Division's July 20, 2018 final agency decision. She
makes two primary arguments, contending that (1) the Division erred in
including T.H.'s income, and (2) she was denied due process because the CWA
did not give her adequate notice of the basis for terminating her family's
Medicaid benefits. We need not reach the second argument, because we agree
with T.H. that the Division erred as a matter of law in including T.H.'s income
as part of the family's household income.
Initially, we identify our limited role in reviewing a decision of an
administrative agency. See In re Stallworth, 208 N.J. 182, 194 (2011) (citing
Henry v. Rahway State Prison, 81 N.J. 571, 579 (1980)). We accord a strong
presumption of reasonableness to an agency's exercise of its statutorily
delegated responsibility, City of Newark v. Nat'l Res. Council, Dep't of Envtl.
Prot., 82 N.J. 530, 539 (1980), and defer to its factual findings, Utley v. Bd. of
Review, Dep't of Labor, 194 N.J. 534, 551 (2008) (citing Jackson v. Concord
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Co., 54 N.J. 133, 117-18 (1969)). We will not upset the determination of an
administrative agency absent a showing "that it was arbitrary, capricious or
unreasonable, that it lacked fair support in the evidence, or that it violated
legislative policies[.]" Parascandolo v. Dep't of Labor, Bd. of Review, 435 N.J.
Super. 617, 631 (App. Div. 2014) (quoting Campbell v. Dep't of Civil Serv., 39
N.J. 556, 562 (1963)).
In general, "[w]e give deference 'to the interpretation of statutory language
by the agency charged with the expertise and responsibility to administer the
scheme[.]'" Zimmerman v. Sussex Cty. Educ. Servs. Comm'n, 237 N.J. 465,
475-76 (2019) (quoting Acoli v. State Parole Bd., 224 N.J. 213, 229 (2016)).
Nevertheless, we are "in no way bound by the agency's interpretation of a statute
or its determination of a strictly legal issue." Univ. Cottage Club of Princeton
N.J. Corp. v. N.J. Dep't of Envtl. Prot., 191 N.J. 38, 48 (2007) (quoting In re
Taylor, 158 N.J. 644, 658 (1999)).
"Medicaid was created by Congress in 1965 to 'provide medical services
to families and individuals who would otherwise not be able to afford necessary
care.'" S. Jersey Family Med. Ctrs., Inc. v. City of Pleasantville, 351 N.J. Super.
262, 274 (App. Div. 2002) (quoting Barney v. Holzer Clinic Ltd., 110 F.3d 1207,
1210 (6th Cir. 1997)). "The Medicaid program is fairly characterized as a
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'cooperative federal-state endeavor' where, in return for federal monies, states
must comply with federal requirements." A.B. v. Div. of Med. Assistance &
Health Servs., 407 N.J. Super. 330, 342 (App. Div. 2009) (quoting L.M. v. State,
Div. of Med. Assistance & Health Servs., 140 N.J. 480, 484 (1995)).
In 2014, New Jersey expanded its existing Medicaid program in
accordance with the Patient Protection and Affordable Care Act (ACA), Pub. L.
No. 111-148, 124 Stat. 119 (2010) (codified as amended in scattered sections of
26 U.S.C. & 42 U.S.C.). See N.J. Dep't of Human Servs., Div. of Med.
Assistance & Health Servs., Medicaid Commc'n No. 14-12, Affordable Care Act
Eligibility Information (Nov. 17, 2014) https://www.state.nj.us/humanservices/
dmahs/info/resources/medicaid/2014/14-12_Affordable_Care_Act.pdf. Using
federal funds, New Jersey expanded NJFC to provide health insurance to
previously ineligible adults with income up to 138 percent of the poverty level.
Id. at 3, 4 (expanding eligibility to include parents with income under 133
percent of the federal poverty level, and defining household based on federal tax
filing concepts, i.e., whether a child is a "tax dependent, regardless of age or
student status"). See also N.J.A.C. 10:78-4.1(f)(3) (setting the income limit for
applicants who are parents at "133 percent of the Federal Poverty Level"); 42
C.F.R. §§ 435.603(a)(2), (d)(4) (requiring states as of January 1, 2014, to
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calculate financial eligibility in accordance with the modified adjusted gross
income (MAGI) method and to "subtract an amount equivalent to 5 percentage
points of the Federal Poverty Level for the applicable family size only to
determine the eligibility of an individual for medical assistance under the
eligibility group with the highest income standard using MAGI-based
methodologies in the applicable Title of the Act, but not to determine eligibility
for a particular eligibility group[]"). In other words, New Jersey must disregard
up to five percent of an individual's income solely for the purposes of
determining that individual's eligibility for benefits under the NJFC even if that
individual's income exceeds 133% of the Federal Poverty Level. 42 C.F.R. §
435.603(d)(4).
In New Jersey, the NJFC program is administered by the Division in
accordance with the Family Health Care Coverage Act, N.J.S.A. 30:4J-8 to -19.
See N.J.S.A. 30:4J-10; N.J.A.C. 10:49-1.1(a); N.J.A.C. 10:78-1.3. The Division
establishes policy and procedures for the application process. See generally
N.J.A.C. 10:78-1.1 to -11.5. Local CWAs evaluate NJFC eligibility. N.J.A.C.
10:49-1.3; N.J.A.C. 10:78-2.1(b). CWAs must "[a]ssist program applicants in
exploring their eligibility for program benefits" and "[a]ssure the prompt and
accurate submission of eligibility data[.]" N.J.A.C. 10:78-2.1(b)(3), (5). An
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applicant must "[c]omplete, with the assistance of the [CWA], as needed, any
forms required as part of the application process; and . . . [a]ssist the [CWA] in
securing evidence that verifies his or her statements regarding eligibility."
N.J.A.C. 10:78-2.1(c). The CWA then reviews the application "for
completeness, consistency, and reasonableness[.]" N.J.A.C. 10:78-2.1(b)(2).
NJFC regulations require that income include "the income of all members
of the household unit." N.J.A.C. 10:78-4.3(a). The regulations go on to provide
that "natural or adoptive children under the age of 21" are members of the
household unit. N.J.A.C. 10:78-3.5(a)(1)(iii). Nevertheless, income eligibility
determinations for the expanded Medicaid program under the ACA are required
to be made pursuant to the federal income counting methodology known as
MAGI. 42 C.F.R. § 435.603(a)(2). Under federal regulations, income of a
dependent is not included in the household income when the dependent is not
required to file a federal tax return. 42 C.F.R. § 435.603(d)(2)(i). In that regard,
the applicable federal regulation states:
The MAGI-based income of an individual who is
included in the household of his or her natural, adopted
or step parent and is not expected to be required to file
a tax return under section 6012(a)(1) of the Code for
the taxable year in which eligibility for Medicaid is
being determined, is not included in household income
whether or not the individual files a tax return.
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[Ibid.]
Federal law requires that a tax return be filed for every individual having
taxable yearly gross income that equals or exceeds the exempt amount. 26
U.S.C. § 6012(a)(1). In 2017, the exempt amount for filing a federal income tax
return for a single dependent was $6350. Dep't of the Treasury, Internal
Revenue Serv., Publication 501, Exemptions, Standard Deduction, and Filing
Information for Use in Preparing 2017 Returns 4 (Jan. 2, 2018).
Here, the Division adopted the ALJ's fact findings concerning T.S.'s
household gross monthly income. As already noted, the ALJ, relying on four
weeks of paystubs from June and July 2017, found that T.H.'s monthly income
was $752 and her annual income was $9024. Thus, the Division found that T.H.
had income that was above the exempt amount, and which required T.H. to file
a tax return. The Division then went on to find that T.H.'s income should be
included with T.S.'s household income.
The Division's fact findings, however, are not supported by the evidence
in the record submitted during the OAL hearing. The ALJ and the Division
focused solely on the four weeks of paystubs submitted for T.H. At the OAL
hearing, however, T.S. also submitted a letter from T.H.'s employer and T.H.'s
W-2 forms for 2017. The letter and W-2 forms established that T.H. was not
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working on a full-time or consistent basis. Thus, using the paystubs to project
monthly and yearly income was not reasonable or consistent with federal law
and regulations. Instead, the material, undisputed facts, which were included as
part of the OAL record, established that T.H.'s income for 2017 was $6286 , as
reflected in her W-2 forms. Accordingly, under federal regulations, T.H. did
not have to file a federal tax return and her income should not have been included
in T.S.'s household income.
In making their determinations, both the ALJ and the Division focused on
the information that T.S. provided with her application filed in July 2017. In
particular, the ALJ and the Division relied on the four weeks of paystubs
provided for T.H. Looking only at the application and paystubs, there may have
been some confusion concerning the scope and nature of T.H.'s work. At the
OAL hearing, however, T.S. clarified that T.H. was a full-time student and only
worked part time. Significantly, as we have noted, T.S. then submitted a letter
from T.H.'s employer and T.H.'s W-2 forms for 2017. The ALJ and the Division
ignored that supplemental information. Under the circumstances of this case,
we find that it was arbitrary and capricious for the Division not to consider that
supplemental information.
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NJFC regulations make it clear that CWAs, which assist the Division in
making eligibility determinations, are charged with reviewing applications for
completeness, consistency, and reasonableness. N.J.A.C. 10:78-2.1(b)(2). The
CWAs are also directed to assist applicants in exploring their eligibility for
assistance. N.J.A.C. 10:78-2.1(b)(3). Consequently, had the CWA made
reasonable inquiries with T.S., it would have learned that T.H. was only working
part time, was unlikely to have income requiring her to file a federal tax return,
and, therefore, her income should not have been included in the household
income. Indeed, in January 2018, the CWA made exactly that determination.
We further note that this appeal is focused on the loss of Medicaid benefits
for T.S. and T.H. between September 1, 2017 and December 31, 2017. Based
on T.S.'s 2017 application, her benefits and T.H.'s benefits were terminated
effective August 31, 2017. Those benefits were later reinstated effective
January 1, 2018. On this appeal, we reverse the July 20, 2018 final agency
decision upholding the termination of the benefits effective as of August 31,
2017.
Reversed. We do not retain jurisdiction.
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