Williford v. N.C. Dep't of Health & Human Servs.

250 N.C.App. 491

792 S.E.2d 843

Phoebe WILLIFORD, Petitioner,

v.NORTH CAROLINA DEPARTMENT OF HEALTH AND HUMAN SERVICES, and North Carolina Division of Medical Assistance, Respondents.

No. COA16–393

Court of Appeals of North Carolina.

Filed: November 15, 2016

Kathleen G. Sumner, Greensboro, for petitioner-appellant.

Attorney General Roy Cooper, by Assistant Attorney General Kimberly S. Murrell, for respondents-appellees.

ZACHARY, Judge.

Phoebe Williford (petitioner) appeals from an order by the trial court that affirmed the final agency decision of the North Carolina Department of Health and Human Services ("DHHS") and DHHS’ Division of Medical Assistance ("DMA") (collectively, respondents), that terminated petitioner's entitlement to medical assistance benefits ("Medicaid"). On appeal, petitioner argues that the trial court erred by finding and concluding that the funds in petitioner's Workers Compensation Set–Aside Account were a countable resource for purposes of determining petitioner's eligibility for Medicaid. For the reasons that follow, we agree.

I. Factual and Procedural Background

Petitioner was born on 8 November 1948, and is now a 68 year old widow. On 25 November 2005, petitioner suffered a workplace injury to her left arm and right knee; plaintiff has not been employed since she was injured. Petitioner sought and obtained workers’ compensation medical and disability benefits from her employer. Petitioner became eligible for Medicare on 8 November 2009, when she reached 65 years of age. Petitioner received medical treatments for her injury, which were paid for with workers’ compensation medical benefits. After several years of medical treatment, petitioner and her employer disagreed about the degree of permanent impairment of petitioner's left arm and right knee, and about the likelihood that petitioner's workplace injuries would require further medical treatment. The parties engaged in mediation and reached an agreement resolving the contested issues related to petitioner's workers’ compensation claim.

On 19 April 2011, the Industrial Commission entered an order pursuant to N.C. Gen. Stat. § 97–17, that incorporated the parties’ settlement agreement. In its order, the Commission concluded that the settlement agreement was "fair and just" and properly addressed the interests of all parties. The terms of the settlement agreement included a provision awarding petitioner a lump sum¹ for workers’ compensation disability payments and attorney's fees. The agreement also provided that petitioner's employer would contribute $46,484.12 to fund a Workers’ Compensation Medicare Set–Aside Account (WCMSA), which represented the parties’ settlement of all future workers’ compensation medical benefits for which petitioner's employer would be liable and that would otherwise be paid by Medicare.

When petitioner reached 65 years of age, she applied for and received assistance with her medical expenses pursuant to Medicaid for the Aged. Medicaid, a state and federal program discussed in detail below, provides funds for the medical expenses of applicants who meet various requirements and whose income and financial resources are below a specified amount. The requirement that is relevant to this appeal is that an applicant who is single and is over 65 years old may have no more than $2000 in liquid assets, such as bank accounts. The dispositive issue in this case is whether respondents properly classified the funds in petitioner's WCMSA as a financial resource for purposes of determining petitioner's eligibility for Medicaid.

On 27 December 2013, a local hearing officer for the Sampson County Department of Social Services (DSS) issued a decision terminating petitioner's eligibility for Medicaid, on the grounds that the funds in petitioner's WCMSA, which were then approximately $46,630, were a countable resource. Inclusion of petitioner's WCMSA in the calculation of her liquid assets resulted in respondents’ conclusion that petitioner had more than $48,000 in countable resources. Petitioner appealed the decision of the local hearing officer to DHHS. On 10 June 2014, DHHS issued a "tentative decision" concluding that petitioner's WCMSA was a countable resource, and affirming the decision by DSS to terminate petitioner's Medicaid benefits. DHHS issued its final agency decision on 11 July 2014, in which it affirmed the tentative decision. On 30 July 2014, petitioner filed a petition for judicial review, and on 31 August 2015 the trial court conducted a hearing on this matter. On 8 February 2016, the trial court entered an order denying petitioner's petition for judicial relief and affirming DHHS's ruling that the funds in petitioner's WCMSA were a countable resource for purposes of determining her eligibility for Medicaid. Petitioner noted a timely appeal to this Court from the trial court's order.

II. Standard of Review

Respondent DHHS is a North Carolina State agency. The standard of review of an administrative agency's decision is set out in N.C. Gen. Stat. § 150B–51 (2015), which "governs both trial and appellate court review of administrative agency decisions." N.C. Dept. of Correction v. Myers , 120 N.C.App. 437, 440, 462 S.E.2d 824, 826 (1995), aff'd per curiam , 344 N.C. 626, 476 S.E.2d 364 (1996). N.C. Gen. Stat. § 150B–51 provides that:

(b) The court reviewing a final decision may affirm the decision or remand the case for further proceedings. It may also reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the findings, inferences, conclusions, or decisions are:

(1) In violation of constitutional provisions;

(2) In excess of the statutory authority or jurisdiction of the agency or administrative law judge;

(3) Made upon unlawful procedure;

(4) Affected by other error of law;

(5) Unsupported by substantial evidence admissible under G.S. 150B–29(a), 150B–30, or 150B–31 in view of the entire record as submitted; or (6) Arbitrary, capricious, or an abuse of discretion.

(c) ... With regard to asserted errors pursuant to subdivisions (1) through (4) of subsection (b) of this section, the court shall conduct its review of the final decision using the de novo standard of review. With regard to asserted errors pursuant to subdivisions (5) and (6) of subsection (b) of this section, the court shall conduct its review of the final decision using the whole record standard of review.

"Under the whole record test, the reviewing court must examine all competent evidence to determine if there is substantial evidence to support the administrative agency's findings and conclusions." Henderson v. N.C. Dep't of Human Resources , 91 N.C.App. 527, 530, 372 S.E.2d 887, 889 (1988). "Where the petitioner alleges that the agency decision was based on error of law, the reviewing court must examine the record de novo [.] ... Under a de novo review, the court considers the matter anew and freely substitutes its own judgment for that of the [trial court]." Blackburn v. N.C. Dep't of Public Safety , ––– N.C. App. ––––, ––––, 784 S.E.2d 509, 518 (internal quotations omitted), disc. review denied , ––– N.C. ––––, 786 S.E.2d 915 (2016). In the present case, the facts are largely undisputed and we will apply a de novo standard of review to the legal issues raised in this appeal.

III. Eligibility for Medicaid: Legal Principles

A. Introduction

"The Medicaid program was established by Congress in 1965 to provide federal assistance to states which chose to pay for some of the medical costs for the needy. Whether a state participates in the program is entirely optional. ‘However, once an election is made to participate, the state must comply with the requirements of federal law.’ " Correll v. Division of Social Services , 332 N.C. 141, 143, 418 S.E.2d 232, 234 (1992) (quoting Lackey v. N.C. Dept. of Human Resources , 306 N.C. 231, 235, 293 S.E.2d 171, 175 (1982) ) (other citation omitted). Accordingly, N.C. Gen. Stat. § 108A–56 (2015) states in relevant part that "[a]ll of the provisions of the federal Social Security Act providing grants to the states for medical assistance are accepted and adopted, and the provisions of this Part shall be liberally construed in relation to such act so that the intent to comply with it shall be made effectual."

B. Eligibility for Medicaid Benefits

"North Carolina's Medicaid program is supervised and administered by Respondent Division of Medical Assistance (DMA), an agency within the Department of Health and Human Services (DHHS)." Ass'n for Home & Hospice Care, Inc. v. Div. of Med. Assistance, 214 N.C.App. 522, 523, 715 S.E.2d 285, 287 (2011). DMA is "authorized to adopt ... rules to implement or define the federal laws and regulations, the North Carolina State Plan of Medical Assistance ... [and] the terms and conditions of eligibility for applicants and recipients of the Medical Assistance Program[.]" N.C. Gen. Stat. § 108A–51.1B(a) (2015). These rules are set out in the North Carolina Administrative Code (NCAC) and include, as relevant to this appeal, the following:

10A NCAC 23A .0102.

(57) "Reserve" means assets owned by members of the budget unit and that have a market value.

10A NCAC 23E .0202.

(a) North Carolina has contracted with the Social Security Administration under Section 1634 of the Social Security Act to provide Medicaid to all SSI recipients. Resource eligibility for individuals under any Aged, Blind, and Disabled coverage group shall be determined based on standards and methodologies in Title XVI of the Social Security Act[.] ...

...

(i) The limitation of resources held for reserve for the budget unit shall be as follows: ... (2) for aged, blind, and disabled cases, two thousand dollars ($2000.00) for a budget unit of one[.]

10A NCAC 23E .0207 RESERVE

(d) For all aged, blind, and disabled cases, the resource limit, financial responsibility, and countable and non-countable assets are based on standards and methodology in Title XVI of the Social Security Act[.]

...