Opinion
5871-07.
Decided on January 9, 2008.
Pierro Law Group, LLC, Attorney for Petitioner, (Louis W. Pierro, of counsel), Albany, New York.
Attorney General of the State of New York, Attorneys for Respondent Commissioner of Health, (Jeffrey M. Dvorin and Shoshanah V. Asnis, of counsel), Albany, New York.
Petitioner Robert Lynch brings this application to overturn a fair hearing decision regarding the Medicaid eligibility of his spouse, June Lynch, rendered by respondent Commissioner of the New York State Department of Health ("Commissioner" or "DOH"). The Commissioner opposes the petition through an answer.
In December 2004, June Lynch was admitted to a residential nursing home. After paying privately for care for approximately 16 months, she filed an application for medical assistance with respondent Commissioner of the Saratoga County Department of Social Services ("SCDSS"). By notice dated July 7, 2006, SCDSS denied Mrs. Lynch's application due to excess resources in the amount of $204,363.79 held by her spouse.
On August 17, 2006, Mrs. Lynch requested a fair hearing to obtain an increased resource allowance for her spouse. The hearing was held on September 25, 2006. By decision dated March 27, 2007, DOH determined that SCDSS's denial was correct when made, but agreed that petitioner was entitled to an increased resource allowance. DOH remanded the matter to SCDSS for a determination of the amount of additional resources required to purchase a single premium immediate life annuity that would generate sufficient monthly income to raise Mr. Lynch to the minimum monthly maintenance needs allowance level. Petitioner objects to the manner by which respondent established such additional allowance, and this petition followed.
BACKGROUND
"Medicaid, a joint federal-state program established pursuant to Title XIX of the Social Security Act ( 42 USC § 1396 et seq.), pays for medical care for those unable to afford it, including nursing home care for medically needy older people who become eligible by incurring medical expenses that reduce their monthly income and assets below prescribed levels" ( Matter of Tomeck , 8 NY3d 724, 727-728). Thus, as part of evaluating Medicaid eligibility, the state Medicaid agency must calculate an applicant's income and assets, and determine the amount that must be reduced or "spent down" for the applicant to meet the prescribed financial criteria ( see 42 USC § 1396r-5 [c] [1] [B]; Social Services Law § 366-c; 18 NYCRR 360-4.8 [c]).
The Medicare Catastrophic Coverage Act of 1988 ( 42 USC § 1396r-5 et seq.) includes spousal impoverishment provisions rules governing the allocation of resources between the spouse residing in a nursing home (the institutionalized spouse) and the spouse residing in the community (the community spouse). "In general, these provisions are designed to insure that the community spouse retains necessary, but not excessive, income and assets . . ." ( Tomeck, supra, at 728). "In the MCCA, Congress sought to protect community spouses from 'pauperization' while preventing financially secure couples from obtaining Medicaid assistance" ( id., quoting Wisconsin Dept. of Health and Family Servs. v Blumer, 534 US 473, 480).
The spousal impoverishment provisions include rules for determining the community spouse's minimum monthly maintenance needs allowance ("MMMNA"), "an amount deemed sufficient for the community spouse to live at a modest level after the institutionalized spouse becomes eligible for Medicaid, subject to a statutory floor and ceiling" ( Tomeck, supra, at 728, citing 42 USC §§ 1396r- 5 [b], [d] [3] and Social Services Law §§ 366-c [h], [j], [3]). There also are rules for computing and apportioning the resources of a married couple and allowing the community spouse to retain a portion of such resources, known as the "community spouse resource allowance" ("CSRA") ( Tomeck, supra, at 728, citing 42 USC § 1396r-5 [f] [2] and Social Services Law § 366-c [d]). "All of the institutionalized spouse's countable resources and the community spouse's countable resources exceeding the CSRA may be used to pay for nursing home care, and must be spent down in order for the institutionalized spouse to qualify for Medicaid" ( Tomeck, supra, at 728).
Either spouse has the right to a fair hearing to challenge the adequacy of the MMMNA or the CSRA calculated by the local services district ( see 42 USC § 1396r-5 [e]; Social Services Law § 366-c). A hearing examiner is authorized to establish a increased CSRA for the purpose of closing an MMMNA shortfall ( see 42 USC §§ 1396r- 5 [e] [2] [B], [C]; Social Services Law §§ 366-c [b], [c]).
FAIR HEARING DETERMINATION
In its fair hearing decision, respondent DOH determined that Mr. Lynch's resources exceeded the CSRA by $204,363.79 and that his monthly income of $992 was below the MMMNA level of $2,489. These findings are not in dispute. Rather, the instant petition arises out of the manner by which respondent DOH computed the amount of the additional CSRA necessary to close petitioner's MMMNA shortfall of $1,497 per month.
With respect to this issue, the hearing officer wrote as follows:
In cases such as this, State Regulatory authority directs that [DOH] establish a resource allowance adequate to generate sufficient income to raise the community spouse to the MMMNA. Federal guidelines as found in "The State Medicaid Directors" letter of July 27, 2006, provide that "States may use any reasonable method for determining the amount of resources necessary to generate income, including adjusting the CSRA to the amount a person would have to invest in a single premium annuity to generate the needed income, attributing a rate of return based on a presumed available rate of interest, or other methods". It is clear that reference need not be limited to the current rate of return which excess resources may be generating. A preferable investment in this case would be to determine the extent of resources required to purchase a single premium immediate life annuity that would generate sufficient monthly income to raise the Community Spouse to the MMMNA. It should be remembered that the decision is not requiring that the Community spouse actually purchase such an annuity, but rather, that such investment vehicle is simply being used as a reasonable benchmark to establish the amount of excess resources needed to generate sufficient monthly income.On that basis, DOH awarded Mr. Lynch "an additional resource allowance in the amount necessary for [him] to purchase a single premium immediate life annuity which will generate monthly income in an amount sufficient to raise [his] total monthly income to the MMMNA." DOH remanded the matter to SCDSS to provide petitioner "with a written notice of its new eligibility determination after taking action in accordance with the aforementioned directive."
THE PETITION
The petition raises a number of challenges to respondent's determination. First, petitioner objects to the calculation of his increased CSRA by reference to the purchase of a single premium immediate life annuity, arguing that his additional CSRA should have instead been computed by applying the average bank interest rate to his resources. Thus, petitioner alleges that the manner by which DOH computed the increased CSRA was arbitrary, capricious and without a rational basis in the law. Second, petitioner argues that the "annuity method" used by respondent is a rule that must be promulgated pursuant to the State Administrative Procedure Act. Third, petitioner alleges that DOH improperly delegated to SCDSS the task of computing the amount of the additional CSRA. Finally, petitioner seeks an award of attorney's fees as a prevailing party. The Court will consider each of these arguments in turn.
METHOD OF COMPUTING ADDITIONAL CSRA
Petitioner has the burden of demonstrating that the use of the annuity method to compute his additional CSRA is arbitrary, capricious, an abuse of discretion or affected by an error of law (CPLR 7803). Further, petitioner bears the burden of demonstrating an entitlement to Medicaid ( Matter of Lopez v. Commissioner of N.Y.S. Dept. of Health , 42 AD3d 638, 640 [3rd Dept 2007]).
The Court begins, as it must, with the pertinent statutory language. Under federal law, authorization for a community spouse to retain additional resources to close a shortfall in the MMMNA is authorized by 42 USC §§ 1396r- 5 (e) (2) (C), which provides as follows:
If either such spouse establishes that the community spouse resource allowance (in relation to the amount of income generated by such an allowance) is inadequate to raise the community spouse's income to the minimum monthly maintenance needs allowance, there shall be substituted, for the community spouse resource allowance under subsection (f)(2), an amount adequate to provide such a minimum monthly maintenance needs allowance. (emphasis added).
Substantively identical provisions are codified in state law ( see Social Services Law §§ 366-c [c]).
Since Mr. Lynch's monthly income, including income generated from his base CSRA, is inadequate for him to meet the MMMNA level, it is undisputed that he is entitled to an additional CSRA allowance in "an amount adequate to provide such a minimum monthly maintenance needs allowance." The statutory language does not, however, prescribe any particular method for computing this amount, thus supporting respondent's argument that it has broad discretion to select a reasonable methodology for making this determination.
Petitioner, however, argues that the use of the term "income" in quoted statutory language manifests an intent on the part of Congress to require that community spouses be able to meet the MMMNA from interest only, without touching the principal portion of the additional resource allowance. The Court disagrees. The statute uses the term "income" only in reference to the base CSRA level, which is the amount of assets and other financial resources that a community spouse may retain during his lifetime and, ultimately, pass along to his heirs. Accordingly, in this context, the parenthetical language relied upon by petitioner ensures that a community spouse will be able to meet his basic maintenance needs without spending down the lifetime assets that Congress permitted him to retain through the basic CSRA.
In situations where there are excess assets but a shortfall in the MMMNA, as here, the statute goes on to authorize an additional resource allowance for the purpose of closing the MMNA gap. The pertinent language makes no reference to the generation of income from the additional resources, and it requires only that such additional resources be "adequate" to "provide" the community spouse with the MMMNA. Petitioner does not dispute that the single premium immediate life annuity contemplated by DOH in this case would in fact be adequate to provide him with the MMMNA during his lifetime.
Rather, petitioner's primary objection to the annuity method is its return of principal. Petitioner understandably would prefer to be able to meet the MMMNA through interest earnings on a substantially greater additional resource allowance that could be preserved during his lifetime (and ultimately disposed of upon his death). Unlike the base CSRA, which reflects a legislative judgment as to the level of "necessary, but not excessive, . . . assets" that a community spouse should be permitted to retain ( Tomeck, at 728), the additional resource allowance at issue here represents assets that are only "necessary" for the limited purpose of providing the community spouse with the MMMNA. Nothing in the statute forecloses a State Medicaid agency from determining that these additional resources are available to the community spouse to assist him in closing an MMMNA shortfall over his lifetime, precisely the purpose for which such additional resources are allowed.
In this particular context, the return of principal from the annuity is indistinguishable from interest earnings and should in any event be considered "income" for MMMNA purposes ( see Ford v. Iowa Dep't of Human Servs., 500 NW2d 26, 31-32 [Iowa 1993]).
Respondent's construction of the statute is confirmed by guidance issued by the Centers for Medicare and Medicaid Services ("CMS") to State Medicaid directors on July 27, 2006. As the federal agency charged with administration of the Medicaid program, CMS's interpretation of the spousal impoverishment provisions is entitled to significant deference ( Rabin v. Wilson-Coker, 362 F3d 190, 196 [2nd Cir 2004]; see also Blumer, supra, 534 US at 497).
In its guidance, CMS advises that in determining the amount of increased resources needed to bring the community spouse's income up to the MMMNA level,
States may use any reasonable method for determining the amount of resources necessary to generate adequate income, including adjusting the CSRA to the amount a person would have to invest in a single premium annuity to generate the needed income, attributing a rate of return based on a presumed available rate of interest, or other methods. (emphasis added).
Thus, CMS interprets federal law as permitting states to use "any reasonable method" for computing the additional CSRA. Further, CMS's guidance expressly recognizes that "adjusting the CSRA to the amount a person would have to invest in a single premium annuity to generate the needed income," the annuity method applied here, represents one such reasonable method.
Petitioner, however, disagrees with this interpretation of the guidance document. Under petitioner's construction, the clause "attributing a rate of return based on a presumed available rate of interest" would be read to modify the preceding language regarding a single premium annuity. Thus, petitioner reads the CMS guidance document as conflating the "annuity method" with the "bank interest method", thereby resulting in the endorsement of a single hybrid method of calculating an increased CSRA for community spouses a single premium annuity that does not provide for the return of principal.
Viewing the text and structure of CMS's guidance as a whole, it is apparent that it sets forth a general principle States have broad discretion to use any reasonable method to compute the additional CSRA and then provides a series of examples, including both the annuity method and the bank interest rate method. Indeed, under petitioner's construction, the guidance document would not speak to either of the competing methods for determining the additional CSRA: the annuity method applied by DOH in this case or the bank interest rate method advocated by petitioner. Accordingly, the Court rejects petitioner's construction of the guidance document.
Having concluded that the annuity method is authorized by statute, the Court turns to petitioner's argument that the use of such method is inconsistent with a prior fair hearing decision issued by respondent DOH. In Matter of the Appeal of Charles C. (August 15, 2003, FH case No. 3909199P), the hearing officer rejected application of the annuity method based on the following rationale:
While the argument [in support of the annuity method] is novel, there is absolutely no legal support in the statute or regulation that would direct a community or institutionalized spouse to pursue a particular type of investment vehicle in order to maximize his or her return on investment. Accordingly, until such time as the legislature acts, the Agency argument must be dismissed as without merit.
It is clear from the quoted language that the hearing officer in Charles C. believed that using the price of an annuity as a benchmark for determining the additional CSRA carried with it the command that the applicant actually purchase such an annuity. That is not the case. Indeed, the fair hearing decision issued in this case expressly notes: "It should be remembered that the decision is not requiring that the Community spouse actually purchase such an annuity, but rather, that such investment vehicle is simply being used as a reasonable benchmark to establish the amount of excess resources needed to generate sufficient monthly income." The ultimate decision as to the use and/or investment of the additional CSRA is that of petitioner, and he may invest, use or dispose of the additional resource allowance ordered at the fair hearing in any manner that he chooses.
Nonetheless, petitioner contends that respondent's determination to base the additional CSRA allowance on a single premium immediate life annuity carries with it, at the very least, an implicit requirement to purchase such an investment product. As the U.S. Supreme Court explained in a slightly different context, petitioner's complaint in this regard is not with the annuity method, but rather with the friction between Congress' decision to guarantee a minimum level of income for the community spouse and its unwillingness to mandate the investments necessary to realize that guarantee ( see Blumer, supra, 534 US at 494 n 12). Indeed, even under the bank interest method advocated by petitioner, computation of the additional CSRA assumes a particular manner of investment and a particular rate of return, but does not mandate such an investment, guarantee such a return or otherwise restrict the use of the additional allowance.
Petitioner also directs the Court's attention to a number of State Supreme Court decisions rejecting DOH's application of the annuity method in particular cases. In all but one of these cases, the courts found that DOH had failed to adequately explain its departure from the Charles C. fair hearing determination, thereby running afoul of the principle that when an agency alters its prior policy and interpretation of law, it must explain its reasons for doing so ( see Berg, at 4-5; Parks, at 4; Giaquinto, at 5). The hearing officer in this matter, however, clearly explained respondent's current policy, its interpretation of the law and the rationale for using the annuity method. Nothing more is required. Further, the hearing officer's decision expressly noted that petitioner was not required to invest the increased resource allowance in any particular manner the aspect of the annuity method held objectionable in Charles C. Moreover, each of these cases predated CMS's guidance document of July 27, 2006, which must be given significant deference by this Court.
See Hoffman v. Commissioner of the Erie County Dept. of Social Services (Sup Ct, Albany County, Dec. 2, 2005); Parks v. Commissioner of Delaware County Dept. of Social Services (Sup Ct, Sullivan County, February 14, 2006); Berg v. Commissioner of Department of Health (Sup Ct, Sullivan County, March 1, 2006); Gianquinto v. Commissioner of the Department of Health (Sup Ct, Albany County, April 27, 2006).
Respondent DOH also issued an informational letter to local Commissioners of Social Services on September 24, 2007, which provides detailed guidance regarding appropriate methods to be used to calculate the amount of additional resources needed to raise a community spouse's income to the MMMNA level.
Finally, the Court rejects petitioner's contention that respondent's application of the annuity method in this case was unfairly retroactive. The fair hearing in this case, which is the vehicle by which a community spouse may seek an additional resource allowance to meet the MMMNA level ( see 42 USC §§ 1396r- 5 [e] [2] [B], [C]; Social Services Law §§ 366-c [b], [c]), was requested on August 17, 2006 and a final decision was issued on March 27, 2007. It was not unlawful, arbitrary or capricious to apply the guidance provided by the federal Medicaid agency to fair hearings requested and conducted following its issuance.
Thus, the Court concludes that respondent's determination to use the annuity method in this case was consistent with federal and state law and was not arbitrary or capricious. While the Court recognizes that petitioner raises legitimate policy issues in opposition to the use of the annuity method, those arguments are more appropriately directed at State policymakers.
STATE ADMINISTRATIVE PROCEDURE ACT
Petitioner also contends that the annuity method applied by the hearing officer constitutes a "rule" within the meaning of the State Administrative Procedure Act ("SAPA"). More specifically, petitioner asserts that the annuity method is "fixed, general principle" that is applied uniformly to all cases involving a request for an increased CSRA and, therefore, a "rule" that must be promulgated pursuant to SAPA.
Pursuant to SAPA, a "rule" includes "the whole or part of each agency statement, regulation or code of general applicability that implements or applies law," but does not include "forms and instructions, interpretive statements and statements of general policy which in themselves have no legal effect but are merely explanatory" (SAPA § 102 [2] [a], [2] [b] [4]). Thus, it is well established that "only a fixed, general principle to be applied by an administrative agency without regard to other facts and circumstances relevant to the regulatory scheme of the statute it administers constitutes a rule or regulation . . ." ( Matter of Roman Catholic Diocese of Albany v. New York State Dept. of Health, 66 NY2d 948, 951).
Petitioner has failed to meet his burden of demonstrating that the use of the annuity method constitutes a fixed, general principle to be applied without regard to other relevant facts and circumstances. The fair hearing decision at issue here does not announce such a rule; rather, it recognizes the broad discretion that States have to compute the additional CSRA allowance and determined that "[a] preferable investment in this case would be the purchase of a single premium immediate life annuity" (emphasis added). Further, DOH's informational letter of September 24, 2007 makes clear that local social services district have a variety of options for computing the additional CSRA, and should consider factors such as the prevailing interest rate and cost effectiveness in determining which option to apply in a particular case. While the Court cannot foreclose the possibility that application of the factors relied upon by respondent ultimately may result in a de facto rule utilizing the annuity method in all cases, petitioner has not demonstrated that such an outcome will necessarily come to pass.
COMPUTATION OF ANNUITY PRICE
Petitioner also contends that the hearing officer erred in remanding the matter to the local social services district to compute the purchase price of a single premium immediate life annuity adequate to provide petitioner with the MMMNA. Petitioner argues that state law and regulations provide that " the department shall establish a resource allowance [for the community spouse] adequate to provide such minimum monthly maintenance needs allowance" (Social Services Law §§ 366-c [c] [emphasis added]; see also 18 NYCRR § 360-4.10 [c] [7]). The Social Services Law defines "the department" as DOH for such purposes ( see Social Services Law § 2). Accordingly, petitioner argues that DOH has a statutory duty that cannot be delegated.
While petitioner's argument is not without some force, the Court is not persuaded that DOH lacks discretion to delegate to local social services districts the task of pricing a prescribed annuity. In arguing improper delegation, the bulk of petitioner's objections relate to the use of annuities that return principal to the community spouse over his lifetime, objections that have been disposed of supra. Petitioner also alleges that "employees at the county level have asked for help from the state" with regard to this issue, but that complaint is one that must be raised, if at all, by an aggrieved county, not petitioner. Notably, respondent SCDSS does not join petitioner in making this improper delegation argument.
ATTORNEY'S FEES
In view of the foregoing, petitioner's application for attorney's fees under 42 USC 1988 as a prevailing party must be denied as academic. In any event, the Court would be constrained to deny such an application on the authority of Matter of Giaquinto v. Commissioner of N.Y.S. Dept. of Health (39 AD3d 922, 924 [3rd Dept 2007]).
CONCLUSION
Based on the foregoing, the Court concludes that the petition must be dismissed.
The Court has considered petitioner's remaining arguments and contentions and finds them to be without merit.
All papers, including this Decision and Judgment are being returned to the counsel for DOH. The signing of this Decision and Judgment shall not constitute entry or filing underCPLR § 2220. Counsel are not relieved from the applicable provisions of that section respecting filing, entry and notice of entry.