Opinion
No. 04-0601.
March 31, 2005.
Appeal from the Iowa District Court for Audubon County, James M. Richardson, Judge.
Medicaid recipient's estate appeals an order affirming an adverse eligibility and overpayment decision by the Department of Human Services. AFFIRMED.
Robert Kohorst of Kohorst, Early Louis, Harlan, for appellant.
Thomas J. Miller, Attorney General, and Barbara E.B. Galloway, Assistant Attorney General, for appellee.
Considered by Vogel, P.J., and Mahan and Vaitheswaran, JJ.
The Department of Human Services (Department) provided Cordellia Steffes with $184,664.12 in Medicaid benefits for nursing home care she received from January 1995 through her death in June 2002. The Department later concluded Steffes was ineligible for these benefits based on trust resources in excess of the legal limit. Her estate now seeks further judicial review of that agency decision.
I. Background Facts and Proceedings.
The material facts are essentially undisputed. Cordellia and her husband owned two farms with assessed values of $79,320 and $285,760. They deeded these farms to their son Alden. In ensuing litigation, the district court concluded that Cordellia had beneficial ownership of the farms, with Alden serving only as trustee.
Alden later transferred the farms to third parties. These transfers are the subject of separate litigation. See In re Estate of Steffes v. Hoffman, No. 02-0248 (Iowa Ct.App. Aug. 26, 2004) (reversing and remanding summary judgment ruling in favor of estate).
On learning of this trust, the Department determined its value was a resource available to Cordellia. With the inclusion of this value, her countable resources exceeded $2,000 and disqualified her from receiving Medicaid assistance. 20 C.F.R. § 416.1205; 441 Iowa Admin. Code r. 75.13(2). The Department issued a notice of overpayment, which the estate appealed.
Following a contested case proceeding, an administrative law judge found that "[t]here was no evidence of any intent or provision for return of the income or the property to the trustors under any circumstances." The judge further found "[t]here is no evidence that [Alden] had any discretion to convey the land back to [Cordellia] or her husband or to anyone other than the other children on the deaths of both [Cordellia] and her husband." Based on these findings, the administrative law judge ruled the trust assets did not disqualify Cordellia from receiving Medicaid assistance.
On further appeal within the agency, the agency reversed the administrative law judge, finding "irrelevant" the fact that there was no obligation to pay Cordellia any funds and "irrelevant" that no funds were actually paid to her from the trust. The agency stated the only relevant inquiry was "the maximum amount that may be permitted under the terms of the trust assuming the full exercise of discretion by the trustee," citing Iowa Administrative Code rule 441-75.9. After refocusing the issue in this manner, the agency found that nothing officially established anyone other than Cordellia as a beneficiary of the trust and nothing limited the amount of trust principal that could be made available to her. The agency concluded the total value of the trust principal was available to Cordellia at the time she applied for medical assistance and this value rendered her ineligible for Medicaid.
On judicial review, the district court affirmed the final agency decision. This appeal followed.
The estate argues (1) Cordellia never received income, assets, or benefits from this trust, and (2) in any event, the property was transferred into the trust more than five years before the receipt of Medicaid benefits rendering it immaterial for purposes of Medicaid eligibility. Neither fact question is disputed. The only issue before us is whether each of these facts required the Department to exclude the trust resources in determining Medicaid eligibility. Both parties agree that, to resolve this issue, we must examine an agency rule governing the treatment of "Medicaid qualifying trusts."
Authority to resolve the issue is vested with the Department. Iowa Code § 249A.3(5)(b) (stating assistance shall not be granted to "[a]n individual or family whose resources, considered to be available to the individual or family, exceed federally prescribed limitations"); id. § 249A.4(3) (conferring upon the Department general authority to administer medical assistance chapter); id. § 249A.5(1) (authorizing recovery of medical assistance payments "incorrectly paid").
That rule states in pertinent part:
75.9 (1) A Medicaid qualifying trust is a trust or similar legal device established, on or before August 10, 1993, other than by will by a person or that person's spouse under which the person may be the beneficiary of payments from the trust and the distribution of these payments is determined by one or more trustees who are permitted to exercise any discretion with respect to the distribution to the person. . . .
75.9 (2) The amount of income and principal from a Medicaid qualifying trust that shall be considered available shall be the maximum amount that may be permitted under the terms of the trust assuming the full exercise of discretion by the trustee or trustees for the distribution of the funds.
a. Trust income considered available shall be counted as income.
b. Trust principal (including accumulated income) considered available shall be counted as a resource, except where the trust explicitly limits the amount of principal that can be made available on an annual or less frequent basis. Where the trust limits the amount, the principal considered available over any particular period of time shall be counted as income for that period of time.
Iowa Admin. Code r. 441-75.9. The estate relies on the first portion of the rule. It argues the trust was not a "Medicaid qualifying trust" because Cordellia was not "the beneficiary of payments from the trust." By its terms, however, the rule does not require that a person actually receives trust payments but only that the person "may be a beneficiary of payments from the trust."
In the original litigation concerning the transfers of the farms to Alden, the district court determined Cordellia held "the beneficial ownership to the real estate." This unappealed ruling is sufficient to establish that Cordellia "may be a beneficiary of payments from the trust." The assets were available to her had she pursued her legal rights against the trustee. This is all that matters. We have considered the estate's arguments concerning the passage of over five years between the creation of the trust and Cordellia's receipt of Medicaid assistance. The five-year look-back rules alluded to by the estate are inapplicable, as Cordellia retained a beneficial interest in the corpus of the trust.
We conclude the agency decision to consider the trust resources in determining Cordellia's Medicaid eligibility is not "[b]ased upon an irrational, illogical, or wholly unjustifiable application of law to fact that has clearly been vested by a provision of law in the discretion of the agency." See Iowa Code § 17A.19(10)(m) (2003).