Estate v. Ohio Dep't of Job & Family Servs.

144 Ohio St.3d 70

40 N.E.3d 1121

2015 Ohio 3397

ESTATE OF ATKINSON, Appellant,

v.OHIO DEPARTMENT OF JOB AND FAMILY SERVICES, Appellee.

No. 2013–1773.

Supreme Court of Ohio.

Submitted Aug. 20, 2014.

Decided Aug. 26, 2015.

Calfee, Halter & Griswold, L.L.P., Maura L. Hughes, and Alexander B. Reich, Cleveland; and Cooper, Adel & Associates, L.P.A., Thom L. Cooper, Centerburg, Mitchell J. Adel, Monroe, and Nathan T. Simpson, for appellant.

Michael DeWine, Attorney General, Eric E. Murphy, State Solicitor, Stephen P. Carney, Deputy Solicitor, and Amy R. Goldstein and Rebecca L. Thomas, Assistant Attorneys General, for appellee.

KENNEDY, J.

{¶ 1} In this discretionary appeal from a judgment of the Fifth District Court of Appeals, we determine whether the court of appeals erred in upholding the decision of the Ohio Department of Job and Family Services that the transfer of a home from an institutionalized spouse to a community spouse after a Medicaid application but before the eligibility determination was improper under Medicaid law.

{¶ 2} We accepted appellant's two propositions of law:

I. Federal Medicaid law permits the unlimited transfer of assets from an institutionalized spouse to a community spouse prior to Medicaid eligibility and such transfer does not constitute an improper transfer of assets that would result in a period of restricted eligibility for Medicaid.

II. Ohio Admin. Code 5101:1–39–07 (nka 5160:1–3–07) permits the unlimited transfer of assets from an institutionalized spouse to the community spouse prior to Medicaid eligibility and such transfer does not constitute an improper transfer of assets that would result in a period of restricted eligibility for Medicaid.

{¶ 3} We reject appellant's propositions of law. We agree with the state that during the period between an application for Medicaid benefits and the notice of Medicaid approval, federal and state Medicaid law allows an institutionalized spouse to transfer a home or equivalent assets to a spouse living in the community, but only up to the community-spouse resource allowance ("CSRA"). Under 42 U.S.C. 1396r–5(c)(2)(B) and Ohio Adm.Code 5160:1–3–36.1(E), the community spouse must make any amount above his or her CSRA available to the institutionalized spouse. Otherwise, the state may take legal action. In this case, however, the state may have imposed a penalty on the community spouse that is not authorized by law. We therefore remand the case to the trial court to apply 42 U.S.C. 1396r–5(c)(2)(B) and Ohio Adm.Code 5160:1–3–36.1(E) and make adjustments accordingly if any are needed.

Historical Background of Medicaid

{¶ 4} Congress established the Medicaid program in 1965 to provide federal funds to states to help them provide medical services to the poor. Schweiker v. Gray Panthers, 453 U.S. 34, 36, 101 S.Ct. 2633, 69 L.Ed.2d 460 (1981). In 1972, the program was amended to include assistance to the elderly in long-term institutionalized care. Id . at 38, 101 S.Ct. 2633. The 1972 Medicaid statute allowed states to consider the resources of the spouse not institutionalized ("the community spouse") in determining whether the institutionalized spouse met the low-asset threshold for Medicaid assistance. Wisconsin Dept. of Health & Family Servs. v. Blumer, 534 U.S. 473, 479–480, 122 S.Ct. 962, 151 L.Ed.2d 935 (2002). However, the required spend-down limits imposed on couples in order to qualify for long-term care under Medicaid nearly bankrupted some who held their assets jointly: "Many community spouses were left destitute by the drain on the couple's assets necessary to qualify the institutionalized spouse for Medicaid and by the diminution of the couple's income posteligibility to reduce the amount payable by Medicaid for institutional care." Id . at 480, 122 S.Ct. 962. Affluent couples, by contrast, could title their assets so as to impoverish the institutional spouse, thereby both qualifying the institutionalized spouse for Medicaid and preserving family wealth. Id .

{¶ 5} In response, Congress enacted the Medicare Catastrophic Coverage Act of 1988 ("MCCA"), which added 42 U.S.C. 1396r–5, introducing the CSRA calculation. Congress also amended 42 U.S.C. 1396p to address agency treatment of annuity purchases. Hughes v. McCarthy, 734 F.3d 473, 476 (6th Cir.2013).

{¶ 6} The MCCA permitted the community spouse to "reserve certain income and assets to meet the minimum monthly needs" of that spouse when the institutionalized spouse became eligible for Medicaid. Blumer at 477–478, 122 S.Ct. 962. Congress "installed a set of intricate and interlocking requirements with which States must comply in allocating a couple's income and resources." Id. at 480, 122 S.Ct. 962. Ohio's regulations that interlock with 42 U.S.C. 1396r–5 are delineated in Ohio Adm.Code 5160:1–3 (Medicaid resource budgeting for institutionalized individuals with community spouse), formerly numbered Ohio Adm.Code 5101:1–39 and identified by the old number in most of the relevant caselaw. Now, under both current federal and Ohio law, "a portion of the couple's assets is reserved for the benefit of the community spouse." Blumer at 482, 122 S.Ct. 962 ; 42 U.S.C. 1396r–5(f)(2)(A) ; Ohio Adm.Code 5160:1–3–36.1(A)(2). That portion of the couple's assets is the CSRA.

{¶ 7} In anticipation of Medicaid eligibility, a couple may ask that its resources, however titled, be calculated on the day a spouse is institutionalized. Blumer, 534 U.S. at 482, 122 S.Ct. 962, 151 L.Ed.2d 935. Half that total is allocated to the community spouse. Id . All resources above the CSRA "must be spent before eligibility [for Medicaid] can be achieved." Id . at 483, 122 S.Ct. 962. The question here is whether the regulatory framework allows an exception in the law so that the institutionalized spouse may transfer unlimited resources to the community spouse without regard to the CSRA after one spouse is institutionalized but before the couple knows that it is Medicaid-eligible.

Facts and Procedural History

{¶ 8} The facts are not in dispute. Marcella, now deceased, and Raymond Atkinson put their house in a revocable trust in 2000, naming themselves as trustees. On April 25, 2011, Marcella entered a long-term care facility. On the first day of Marcella's institutionalization, Medicaid took a "snapshot" of the couple's financial assets pursuant to 42 U.S.C. 1396r–5(c)(1)(A) and (B) ; see also Ohio Adm.Code 5160:1–3–36.1(C)(1). Because the house was in the trust and not in the name of either spouse, the house was counted as part of the couple's assets for Medicaid purposes. The Atkinsons' assets totaled $98,320, including $53,750 as the value of the house. Under 42 U.S.C. 1396r–5(c)(1), Raymond's CSRA was half of $98,320, or $49,160. Since this figure, which fluctuates with the consumer price index, see 42 U.S.C. 1396r–5(g), did not surpass the Medicaid statutory maximum under 42 U.S.C. 1396r–5(f)(2)(A)(ii), Raymond was entitled to keep this entire sum for his own needs without using it to support Marcella during her institutionalization. 42 U.S.C. 1396r–5(c)(2)(B).

{¶ 9} On June 16, 2011, the couple submitted a Medicaid application for Marcella's care. As a result of the Atkinsons' application, pursuant to Ohio Adm.Code 5160:1–3–36.1(C)(2), the state again examined the couple's resources. The state found the couple's resources to be $89,478.03 at the time of their Medicaid application.

{¶ 10} On August 8, 2011, as trustees of the revocable trust, Marcella and Raymond transferred title to the house to Marcella. The next day, August 9, 2011, Marcella transferred the title to Raymond, which means that she transferred $53,750 in value to him. That amount by itself is $4,590 greater than Raymond's CSRA and was in addition to any resources he already possessed.

{¶ 11} On September 28, 2011, the Knox County Department of Job and Family Services ("the agency"), which administers the state program, approved Marcella for Medicaid, effective August 1, 2011. The agency identified Raymond's CSRA as $49,160. As of August 1, the agency identified the couple's "current combined countable resources" as $36,168.58. Subtracting Raymond's $49,160 CSRA from the couple's then remaining assets of $36,168.58 pursuant to what is now Ohio Adm.Code 5160:1–3–36.1(C), the agency declared that the institutionalized spouse had no countable resources. An institutionalized spouse is Medicaid-eligible if he or she has no more than $1,500 in assets. Ohio Adm.Code 5160:1–3–05(B)(11).

{¶ 12} Notwithstanding approval of Marcella for Medicaid benefits, the agency delayed these benefits until April 2012. The agency asserted that the entire $53,750 transfer to Raymond in August had been an "improper transfer of assets" because it exceeded the CSRA and was for less than fair market value. The agency calculated the penalty by applying 42 U.S.C. 1396p(c)(1)(A) through (E) and dividing the amount of the allegedly improperly transferred asset, $53,750, by $6,023, the average monthly cost of a nursing facility to a private-pay patient.

{¶ 13} The Atkinsons maintained that the transfer from Marcella to Raymond was authorized by 42 U.S.C. 1396p(c)(2)(A)(i) (a spouse is not ineligible for Medicaid for transferring a home to the other spouse) and sought recovery of the $53,750 in benefits that Medicaid refused to pay for Marcella's care. They administratively appealed to defendant-appellee, the Ohio Department of Job and Family Services, claiming first that the transfer of the house to Raymond should be considered a transfer of unearned income and not property and, second, that because the transfer was of the family home, its value was exempt from Medicaid-eligibility consideration. The county agency's determination was upheld.

{¶ 14} Marcella died, and the estate then appealed to the Court of Common Pleas of Knox County. The estate argued that the transfers were authorized under what is now Ohio Adm.Code 5160:1–3–07(E)(1), as well as under 42 U.S.C. 1396p(c)(2)(A) and 1396p(d)(3...