Opinion
No. 1-738 / 00-0115.
Filed March 13, 2002.
Appeal from the Iowa District Court for Polk County, LEO OXBERGER, Judge.
The Iowa Department of Human Services appeals from the district court's ruling on judicial review reversing the decision that Alma Bidler was ineligible to receive Medicaid benefits. REVERSED AND REMANDED.
Thomas J. Miller, Attorney General, Gordon E. Allen, Deputy Attorney General, and Stephen C. Robinson, Assistant Attorney General, for appellant.
Michael M. Sellers of Sellers Law Office, West Des Moines, for appellee.
Heard by HUITINK, P.J., and VOGEL and EISENHAUER, JJ.
I. Background Facts and Proceedings.
This is a proceeding under the Iowa Administrative Procedure Act, Iowa Code section 17A.19 (1997), for judicial review of final action by the Iowa Department of Human Services (DHS). At issue is Alma Bidler's eligibility for benefits under the Medicaid program. We reverse and remand.
On June 2, 1989, Bidler and her husband formed an irrevocable trust with the following terms:
The Trustee shall administer the principal and income of this Trust as follows:
A. During the lives, of the Grantors:
1. The Trustee shall pay the net income to the Grantors in convenient installments.
2. In addition to the net income, the Trustee shall pay to the Grantors such sums from the principal as the Grantors request in writing.
3. If either of the Grantors is incompetent or physically incapacitated, the Trustee shall pay to the Grantors, or for their benefit, such sums from the income or principal as the Trustee deems advisable for his or her health, education, support and maintenance.
4. We expressly preclude invasion of the principal or income hereof for the support of Grantors where funds from governmental sources would be available but for this trust; and declare that if the governmental agencies administering such funds preclude our rights to such funds because of this trust, then our interest herein shall lapse, and the trust shall terminate. . . .
(Emphasis added.)
On March 30, 1998, Bidler applied for Medicaid benefits to cover the cost of nursing home care. Her application was denied on the ground that her countable resources, which included the above trust funds, were greater than the applicable maximum. An administrative law judge and the director of the DHS affirmed this decision. On judicial review the district court reversed, ruling that, as a matter of law, the trust's funds could not be considered for purposes of determining Medicaid eligibility. The DHS appeals.
II. Standard of Review.
In judicial review proceedings, the district court functions in an appellate capacity to correct errors of law. Clark v. Iowa Dep't of Human Servs., 555 N.W.2d 472, 474 (Iowa 1996). On appeal, we determine whether the district court correctly applied the law. Id.
III. Medicaid Eligibility.
The purpose of the Medicaid program is to provide assistance to those whose resources are insufficient to meet the costs of necessary medical care. 42 U.S.C. § 1396 (1991); Anderson v. Iowa Dep't of Human Servs., 368 N.W.2d 104, 107-08 (Iowa 1985). Medicaid eligibility is determined by a needs-based analysis, and coverage is denied if the applicant exceeds a ceiling in countable resources. See Iowa Code § 249A.3; see also Torner v. State, 399 N.W.2d 381, 383-84 (Iowa 1987). Although funds in irrevocable trusts are generally not countable resources, Congress has carved out an exception for nontestamentary trusts, to the extent the trustee has the authority to distribute trust assets to the settlor-beneficiary. 42 U.S.C. § 1396a(k)(1), (2) (1987); see also Striegel v. South Dakota Dep't of Soc. Servs., 515 N.W.2d 245, 248 (S.D. 1994) (The maximum amount the beneficiary could receive from the trust is deemed available to the beneficiary regardless of the amount actually distributed.).
We note that in 1993 Congress amended this statute, deleting these subsections and providing more comprehensive criteria for the treatment of trusts at section 1396p(d). Both parties agree that this change was not retroactive and section 1396p(d) is not applicable to the Bidler trust. Contrary to Bidler's assertions, we find sections 1396a(k)(1) and (2) (1987) continue to be applicable despite the amendment. See State ex rel. Iowa Air Pollution Control Comm'n v. City of Winterset, 219 N.W.2d 549, 552-53 (Iowa 1974) (simultaneous repeal and re-enactment of substantially same statutory provision construed as continuation of original provision and rights and liabilities arising under the original statute are preserved). This conclusion is consistent with that of other jurisdictions. See Ramey v. Rizzuto, 72 F. Supp.2d 1202, 1212 (D.Colo. 1999); Cook v. Dep't of Soc. Servs., 570 N.W.2d 684, 685-86 (Mich.Ct.App. 1997).
The district court found that because under the trust's terms a denial of government funds terminated the trust, the trust assets were no longer available to Bidler and therefore the DHS could not consider these assets for purposes of determining Medicaid eligibility. We disagree with the court's conclusion as to the timing of the trust's termination. Our reading of the trust terms is that termination is triggered by the government agency's denial of funds. Thus, at the time of application and consideration by the DHS (prior to denial), the trust had not yet lapsed and the trustee still retained authority to distribute trust funds to Bidler. We accordingly find that the DHS properly considered the trust funds as countable resources in denying Bidler's Medicaid application. The district court decision is reversed and remanded for further proceedings in conformity with this opinion.