Hughes v. Colbert

872 F.Supp.2d 612

Carole L. HUGHES, et al., Plaintiffs,

v.Michael B. COLBERT, etc.,¹ Defendant.

Case No. 5:10CV1781.

United States District Court,

N.D. Ohio,

Eastern Division.

May 29, 2012.

William J. Browning, Browning, Meyer & Ball, Worthington, OH, for Plaintiff.

Charity S. Robl, Office of the Attorney General–Health and Human Services State of Ohio, Columbus, OH, Mark W. Fowler, Columbus, OH, for Defendant.

MEMORANDUM OF OPINION AND ORDER [Resolving ECF Nos. 6 and 15 ]

BENITA Y. PEARSON, District Judge.

This action is before the Court upon Defendant's Motion to Dismiss ( ECF No. 6 ), filed on November 5, 2010.² Defendant moves the Court to abstain from deciding this case or, in the alternative, dismiss the Complaint ( ECF No. 1 ) pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons set forth below, Defendant's Motion is granted.

This action is also before the Court upon Plaintiffs' Motion for Injunction ( ECF No. 15 ), filed on May 3, 2012.³ Plaintiffs move the Court to enjoin Defendant from violating and continuing to violate federal law under Title XIX of the Social Security Act, including 42 U.S.C. §§ 1382a(a)(2)(B), 1396p(c)(1)(A), (F) and (G), as enacted, as interpreted by the courts, and as interpreted by the United States Department of Health and Human Services. In the alternative, Plaintiffs request that the Court issue a decision on the merits based on the stipulations of Counsel offered during the telephone conference held on June 21, 2011. See ECF No. 15 at 10.⁴ For the reasons set forth below, Plaintiffs' Motion is denied.

I. Background

Plaintiff Carole L. Hughes is a resident at Hanover House Nursing and Rehabilitation Center, a long-term care nursing facility located in Massillon, Ohio. ECF No. 15–2. Plaintiff Harry Hughes is the spouse of Carole Hughes. ECF No. 1 at ¶ 4. Plaintiff Lester J. Bardin is a resident of ManorCare–Belden Village nursing center located in Canton, Ohio. ECF No. 15–3. Plaintiff Thelma Bardin is the spouse of Lester Bardin. ECF No. 1 at ¶ 15.

In November 2005, Mrs. Hughes was admitted to the nursing facility in Massillon. ECF No. 1 at ¶ 5. The countable resources of Mr. and Mrs. Hughes at the date of institutionalization were $518,380.81. Of this amount, $471,419.35 consisted of Mr. Hughes's IRA. ECF No. 1 at ¶ 6. After Mrs. Hughes entered into the nursing home, Mr. Hughes paid for nursing home care for three years and eleven months. ECF No. 1 at ¶ 8.

On May 31, 2009, the amount in Mr. Hughes's IRA was $272,450.14. ECF No. 1 at ¶ 9. On June 9, 2009, three months before Mrs. Hughes applied for Medicaid, Mr. Hughes used $175,000 of the couple's combined resources from his IRA account to purchase an IRA annuity for himself ( ECF No. 1–2 ), being an immediate single premium annuity and guaranteed for nine years, shorter than his life expectancy. Mr. Hughes is the owner of the annuity and income recipient, Mrs. Hughes is the contingent beneficiary, and the State of Ohio is the second contingent beneficiary. ECF No. 1–2 at 2. The IRA annuity pays $1,728.42 each month to Mr. Hughes. The annuity was effective on June 28, 2009 and the guaranteed payment period expires January 28, 2019. ECF No. 1 at ¶¶ 10 and 12.

On September 5, 2009, Mr. Bardin was admitted to the nursing facility in Canton. ECF No. 1 at ¶ 16. The combined resources of Mr. and Mrs. Bardin at the date of institutionalization were $539,483.60. ECF No. 1 at ¶ 17. In January 2010, several weeks after Mr. Bardin applied for Medicaid, Mrs. Bardin used $373,583.84 of the couple's combined resources to purchase an annuity for herself ( ECF No. 1–4 ), being an immediate single premium annuity and guaranteed for five years, shorter than her life expectancy. Proceeds used to purchase the annuity were from the sale of U.S. Savings Bonds in the amount of $362,810 and the surrender value of a life insurance policy in the amount of $10,773.84. Mrs. Bardin is the owner of the annuity and recipient of the income until her death. After Mrs. Bardin's death, Mr. Bardin is the primary beneficiary, and the State of Ohio is the contingent beneficiary. ECF No. 1–4 at 9. The annuity provides Mrs. Bardin a monthly income of $3,397.17. The annuity was effective on January 4, 2010. ECF No. 1 at ¶¶ 19 and 21.

When a couple seeks Medicaid eligibility for a spouse that is in a nursing home, otherwise known as the “institutionalized spouse,” the Medicaid rules specify how much of the couple's assets the other spouse—the “community spouse”—is allowed to retain for her own use. This is called the “community spouse resource allowance” (“CSRA”). Wisconsin Dept. of Health and Family Services v. Blumer, 534 U.S. 473, 482–83, 122 S.Ct. 962, 151 L.Ed.2d 935 (2002); see also Ohio Admin. Code § 5101:1–39–36.1(C)(3). Congress enacted the CSRA provisions in order to “protect community spouses from ‘pauperization’ while preventing financially secure couples from obtaining Medicaid assistance.” 534 U.S. at 480, 122 S.Ct. 962;see also 42 U.S.C. § 1396r–5.

The CSRA maximum at the time both Mrs. Hughes and Mr. Bardin applied for Medicaid was $109,560. Ohio Admin. Code § 5101:1–39–36. The remainder of the couple's assets are to be used for the institutionalized spouse's care until that spouse has less than $1500—at which point Medicaid eligibility is possible. If the community spouse utilizes resources above the amount allocated to her as the CSRA, then it is called an “improper transfer” because resources have been transferred away from the institutionalized spouse's share.

When an individual applies for Medicaid nursing home payment, one of three conclusions is reached by the agency: (1) her resources are below the limit and she is eligible; (2) her resources are above the limit and she is not eligible (she is deemed to have “excess resources”), or (3) within the past five years she had too many resources but divested herself of enough of those resources to be below the limit now ( i.e., she made an “improper transfer” which results in Medicaid eligibility but temporary denial of nursing home coverage). SeeOhio Admin. Code §§ 5101:1–39–05 and 5101:1–39–07.⁵ An improper transfer can be found only after the applicant has been determined eligible for Medicaid (and eligibility means that she has resources at or under the individual resource limit).

As previously stated, Mr. Hughes and Mrs. Bardin (the community spouses) each bought an annuity for themselves. Plaintiffs contend that the annuities complied with federal Medicaid law. ECF No. 18 at 2. Defendant contends that the purchases were made with assets in excess of their CSRA's. According to Defendant, Mr. Hughes and Mrs. Bardin exceeded their CSRA by $65,440 and $274,797, respectively. ECF No. 6 at 6 and 7. The Stark County Department of Job and Family Services (“County”) determined these were “improper transfers” because Mr. Hughes had used $65,440 from the pool of resources that were to remain available for Mrs. Hughes's care, ECF No. 1 at ¶ 14, and Mrs. Bardin had used $274,797 from the pool of resources that were to remain available for Mr. Bardin's care, ECF No. 1 at ¶ 22. The County approved the Medicaid applications, but with “restricted coverage,” ⁶ meaning Mrs. Hughes and Mr. Bardin are eligible for medical care but must serve a waiting period before Medicaid will pay their nursing home bills. ECF Nos. 1–3 and 1–5.⁷ The County found that Mr. Hughes' and Mrs. Bardin's purchase of an annuity was an “improper transfer.” ECF Nos. 1–3 at 2 and 1–5 at 2. Contrary to assertions in the Complaint ( ECF No. 1 at ¶¶ 1.A., 22–28, 33, 34, and 36 ) and argument in the memorandum in opposition ( ECF No. 7 at 9 and 15 ), ODJFS has never contended that the annuities at issue here are still countable resources. ECF No. 6 at 13 and ECF No. 19 at 25. Mrs. Hughes and Mr. Bardin appealed the County's decisions through the administrative appeal process, which affirmed the County's decisions.

Thereafter, Mrs. Hughes and Mr. Bardin filed administrative appeals of ODJFS' decisions imposing a period of restricted Medicaid coverage pursuant to Ohio Rev.Code §§ 119.12 and 5101.35; and Ohio Admin. Code § 5101:6–9–01. See Carole L. Hughes v. ODJFS, Stark County, Ohio Common Pleas Court Case No. 2010CV01763 (filed May 5, 2010) and Lester Bardin v. ODJFS, Stark County, Ohio Common Pleas Court Case No. 2010CV03352 (filed Sept. 13, 2010). These administrative appeals directly relate to whether the purchases of the annuities were properly considered improper transfers. Mrs. Hughes and Mr. Bardin allege violations of Ohio Admin. Code §§ 5101:1–39–07, 5101:1–39–22.7, and 5101:1–39–22.8; and 42 U.S.C. §§ 1382a(a)(2)(B), 1396p(c)(1)(A), (F) and (G), and 1396p(c)(2)(B)(i). Rather than proceeding through the administrative appeal process, Mrs. Hughes and Mr. Bardin filed motions in their respective cases to stay the administrative appeals until the case at bar is decided. Though ODJFS opposed those motions, the state court granted them, and both state court cases have been stayed since 2010.

Plaintiffs bring the within action pursuant to 42 U.S.C. § 1983 against Defendant in his official capacity as Director of ODJFS. On August 12, 2010, Plaintiffs filed a four-count Complaint for Declaratory and Injunctive Relief ( ECF No. 1 ) in the case at bar. Plaintiffs allege that Defendant is violating federal and state Medicaid law through his interpretation and implementation of the annuity provisions of the Medicaid Act. Count I is for violation of Plaintiffs' rights under the Medicaid Act. It alleges that

34. Defendant, by determining that the annuities purchased by [Mr. Hughes and Mrs. Bardin]—which comply with all of the requirements in the Medicaid Act—are nevertheless countable resources rendering Plaintiffs ineligible for Medicaid, has violated and is violating the Medicaid Act, as well as the federal policies and regulations pertaining to annuities.

ECF No. 1 at 8.

Count II contends that an Ohio regulation is preempted by...