Scheidecker v. Mont. Dep't of Pub. Health & Human Servs.

490 P.3d 87

2021 MT 158

ESTATE OF Marilyn SCHEIDECKER, Petitioner and Appellant,

v.MONTANA DEPARTMENT OF PUBLIC HEALTH AND HUMAN SERVICES, Respondent and Appellee.

DA 20-0534

Supreme Court of Montana.

Submitted on Briefs: April 14, 2021

Decided: June 29, 2021

For Appellant: Sol Lovas, Janna Wittenberg, Legacy Law Center, P.C., Billings, Montana

For Appellee: April Armstrong, Department of Public Health and Human Services, Great Falls, Montana

For Amicus National Academy of Elder Law Attorneys, Inc., and Montana Elder Law, Inc.: T. Thomas Singer, Amanda G. Hunter, Axilon Law, Billings, Montana

Justice Beth Baker delivered the Opinion of the Court.

¶1 The Estate of Marilyn Scheidecker ("the Estate") appeals a First Judicial District Court order affirming an Administrative Law Judge's proposed order that trust principal consisting of a jointly owned home constitutes a countable asset for the purposes of Marilyn Scheidecker's Medicaid eligibility. The dispositive issue on appeal is whether there are any circumstances under which the trust's principal could be returned to Marilyn or used for her benefit. We reverse.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 In 2006, Marilyn purchased a house in Billings, Montana, which she moved into with her sister, Glenda Martin. In early 2008, Marilyn sold a one-half interest in the house to Glenda. Soon thereafter, the two established the Scheidecker-Martin Irrevocable Trust ("SM Trust") by each transferring into the trust her half-interest in the house. The house was and currently remains the SM Trust's only asset. Per the terms of the SM Trust, both sisters continued to live in the house. In 2016, Marilyn moved into a long-term care facility.

¶3 In 2017 Marilyn applied for Medicaid. Her application was denied based on the Montana Department of Public Health and Human Services’ ("Department") conclusion that Marilyn's one-half interest in the SM Trust's principal was a countable resource placing her over Medicaid's resource limit. Marilyn requested a fair hearing and the parties submitted cross-motions for summary judgment. The Administrative Law Judge issued a Proposed Order upholding the denial. She concluded that the terms of the SM Trust rendered it a revocable trust and thus its full corpus constituted a countable resource for Medicaid eligibility purposes under 42 U.S.C. § 1396p(d)(3)(A). The Board of Public Assistance for the State of Montana affirmed the Proposed Order, and Marilyn filed a Petition for Judicial Review.

¶4 The District Court issued its Judicial Review Petition Order ("Order") in October 2020.¹ The District Court concluded that the Administrative Law Judge erred in finding the SM Trust was revocable. It reasoned that Marilyn, as the settlor, had no authority or power to amend or revoke the trust. The District Court observed that pursuant to the terms of the trust, Marilyn waived all right and power to consent to its modification. The court found no evidence that the SM Trust's beneficiaries would consent to its termination or that a court would allow any modification. Additionally, the District Court noted the SM Trust represents itself as an irrevocable trust and provides that the "Trustee has no power to invade principal for the Settlor's benefit and shall not do so under any circumstances."

¶5 The District Court nonetheless affirmed the Administrative Law Judge's ultimate conclusion that the SM Trust is a countable asset pursuant to 42 U.S.C. § 1396p(d)(3). The court held that, despite the SM Trust's specific language precluding the trustee from using the principal for Marilyn's benefit, should the trust be terminated "the beneficiaries could thereafter, individually, jointly, directly, or indirectly, give Marilyn this trust property for her benefit." (Emphasis original.) It thus concluded that under 42 U.S.C. § 1396p(d)(3)(B), circumstances exist by which payments from the SM Trust's corpus could be made to or for Marilyn's benefit. The court upheld the Administrative Law Judge's and the Montana Board of Public Assistance's denial of Marilyn's Medicaid application.

STANDARD OF REVIEW

¶6 Judicial review of the Board's denial is governed by the Montana Administrative Procedure Act. See Timm v. Mont. Dep't of Pub. HHS , 2008 MT 126, ¶ 27, 343 Mont. 11, 184 P.3d 994 (citation omitted). "In contested cases, district courts review administrative decisions to determine whether the findings of fact are clearly erroneous and whether the agency determined the law correctly; we review the district court's decision in the same way." Arlington v. Miller's Trucking, Inc. , 2015 MT 68, ¶ 10, 378 Mont. 324, 343 P.3d 1222 (citation omitted). The parties do not dispute the material facts; we therefore review only the District Court's conclusions of law, to which we apply a de novo standard. Gordon v. Kuzara , 2012 MT 206, ¶ 13, 366 Mont. 243, 286 P.3d 895 (citation omitted). We review the court's interpretation of a statute for correctness. Blanton v. Dep't of Pub. HHS , 2011 MT 110, ¶ 21, 360 Mont. 396, 255 P.3d 1229 (citation omitted).

DISCUSSION

¶7 Because the intricacies of Medicaid are complex—"almost unintelligible to the uninitiated"—we begin with an overview of Medicaid eligibility. Wos v. E.M.A. , 568 U.S. 627, 648, 133 S. Ct. 1391, 1404, 185 L.Ed.2d 471 (2013) (citations omitted; Roberts, C.J., dissenting). Medicaid is a need-based assistance program offering reduced-cost medical care; it is jointly funded and administered by the individual states and the federal government. Ark. HHS v. Ahlborn , 547 U.S. 268, 275, 126 S. Ct. 1752, 1758, 164 L.Ed.2d 459 (2006). Though states are not required to participate in the Medicaid program, all states, including Montana, do so. See § 53-6-101, MCA. In this cooperative program, the federal government pays fifty to eighty-three percent of patient care costs; the state pays the remainder and complies with federal statutory requirements regarding the program's administration, collection of information, and most relevant here, eligibility determinations. Ahlborn , 547 U.S. at 275, 126 S. Ct. at 1758. Montana, therefore, may create its own plan for eligibility but must comply with federal law "with respect to liens, adjustments and recoveries of medical assistance correctly paid[,] transfers of assets, and treatment of certain trusts." 42 U.S.C. § 1396a(a)(18) ; see Wis. Dep't of Health & Family Servs. v. Blumer , 534 U.S. 473, 479, 122 S. Ct. 962, 966, 151 L.Ed.2d 935 (2002). Also, state eligibility requirements must consider "only such income and resources as are, as determined in accordance with the standards prescribed by the Secretary, available to the applicant." Blumer , 534 U.S. at 479, 122 S. Ct. at 966 (emphasis original; quoting 42 U.S.C. § 1396a(a)(17)(B) ).

¶8 Medicaid is "designed to be the payer of last resort, available only when no other source is liable for the expense." Blanton , ¶ 49 (citing S. Rep No. 99-146 at 313 (1985)). Congress nonetheless has recognized and circumscribed the management of assets to allow individuals to qualify for Medicaid benefits. "Medicaid planning" thus has developed to secure Medicaid eligibility by preemptively disposing of assets before applying for Medicaid benefits or services. See Guilfoil v. Sec'y of the Exec. Office of Health & Human Servs. , 486 Mass. 788, 162 N.E.3d 627, 630 (2021) (citing Cohen v. Comm'r of the Div. of Med. Assistance , 423 Mass. 399, 668 N.E.2d 769, 772 (1996) ). An individual may, for example, dispose of assets by placing them into a trust constructed in such a way that the assets are not legally possessed by the individual, yet the individual still retains some amount of access to them. Recognizing the reality of this type of Medicaid planning, Congress in 42 U.S.C. § 1396p(d)(3)(A) constrained the use of such trusts by considering the assets of a revocable trust as "available" to a Medicaid applicant. Guilfoil , 162 N.E.3d at 630. Congress addressed irrevocable trusts through a separate provision found in 42 U.S.C. § 1396p(d)(3)(B). That provision reads:

(B) In the case of an irrevocable trust—

(i) if there are any circumstances under which payment from the trust could be made to or for the benefit of the individual, the portion of the corpus from which, or the income on the corpus from which, payment to the individual could be made shall be considered resources available to the individual, and payments from that portion of the corpus or income—

(I) to or for the benefit of the individual, shall be considered income of the individual, and

(II) for any other purpose, shall be considered a transfer of assets by the individual subject to subsection (c)^[2]; and

(ii) any portion of the trust from which, or any income on the corpus from which, no payment could under any circumstances be made to the individual shall be considered, as of the date of establishment of the trust (or, if later, the date on which payment to the individual was foreclosed) to be assets disposed by the individual for purposes of subsection (c), and the value of the trust shall be determined for purposes of such subsection by including the amount of any payments made from such portion of the trust after such date.

¶9 Montana's Medicaid eligibility requirements, found in § 53-6-131, MCA, allow the Department to establish income and resource limitations and rules pertaining to Medicaid eligibility, provided that they are within the amounts permitted by federal law. Section 53-6-131(3)(a), MCA ; see also § 53-6-113(6)(a), MCA. To that end, the Department has established a maximum amount of resources a person may hold to qualify for Medicaid. At the time of Marilyn's application, the value of her half-interest in the SM Trust far exceeded that eligibility threshold.

¶10 The Administrative Law Judge and the Board of Public Assistance denied Marilyn's Medicaid application after determining that the SM Trust is revocable. The District Court disagreed and concluded that the trust is not revocable. The...