Houghton ex rel. Houghton v. Reinertson

• Decision Date: 24 August 2004
• Docket Number: No. 03-1074.,03-1074.
• Parties: Charles HOUGHTON, by and through his spouse, Doris HOUGHTON; Doris Houghton; Ronald E. Mathews, by and through his spouse, Claire Mathews; Claire Mathews; Eileen V. Rino, by and through her spouse, Frank H. Rino; Frank H. Rino, Plaintiffs, and Stepheny L. Sellers, by and through her spouse, R. Gene Sellers; R. Gene Sellers, Plaintiffs-Appellants, v. Karen REINERTSON, in her official capacity as Executive director of the Colorado Department of Health Care Policy and Financing, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

382 F.3d 1162

Charles HOUGHTON, by and through his spouse, Doris HOUGHTON; Doris Houghton; Ronald E. Mathews, by and through his spouse, Claire Mathews; Claire Mathews; Eileen V. Rino, by and through her spouse, Frank H. Rino; Frank H. Rino, Plaintiffs, and Stepheny L. Sellers, by and through her spouse, R. Gene Sellers; R. Gene Sellers, Plaintiffs-Appellants, v. Karen REINERTSON, in her official capacity as Executive director of the Colorado Department of Health Care Policy and Financing, Defendant-Appellee.

No. 03-1074.

United States Court of Appeals, Tenth Circuit.

August 24, 2004.

Appeal from the United States District Court for the District of Colorado, Michael J. Watanabe, United States Magistrate Judge.

COPYRIGHT MATERIAL OMITTED

R. Eric Solem, Solem, Mack & Steinhoff, P.C., Englewood, CO, for the plaintiffs-appellants.

Laurie A. Schoder, Assistant Attorney General, (Ken Salazar, Attorney General, with her on the brief), Denver, CO, for the defendant-appellee.

Before EBEL, BRISCOE, and TYMKOVICH, Circuit Judges.

BRISCOE, Circuit Judge.

A number of plaintiffs brought this action to challenge the revised Medicaid eligibility rules of the Colorado Department of Health Care Policy and Financing (Colorado), which now permit consideration of self-funded retirement accounts. Colorado has applied the new rule both to initial applications for benefits and to annual eligibility redeterminations. Plaintiffs brought this action pursuant to 42 U.S.C. § 1983, contending Colorado's new rules violated the Medicaid Catastrophic Care Act (MCCA). 42 U.S.C. § 1386r-5. Plaintiffs Stepheny L. Sellers and R. Gene Sellers appeal the district court's grant of summary judgment in favor of Colorado. While we agree in part with the district court's conclusions, we reverse and remand with directions to enter summary judgment in favor of the Sellers.

I.

Medicaid is a cooperative federal-state program authorized under Title XIX of the Social Security Act of 1965. See 42 U.S.C. § 1396 et seq. The program is "designed to afford medical assistance to persons whose income and resources are insufficient to meet the financial demands of necessary care and services." New Mexico Dep't of Human Servs. v. Dep't of Health & Human Servs. Health Care Fin. Admin., 4 F.3d 882, 883 (10th Cir. 1993). Under Medicaid, a participating state develops a written plan containing standards regarding eligibility for medical assistance. These standards must be consistent with specified federal guidelines. Schweiker v. Gray Panthers, 453 U.S. 34, 36-37, 101 S.Ct. 2633, 69 L.Ed.2d 460 (1981). Although participation in the federal Medicaid program is not mandatory, once a state elects to participate, "it must do so on the terms established by Congress." Hern v. Beye, 57 F.3d 906, 913 (10th Cir.1995). The federal Medicaid laws set various limits on an individual's income and resources (assets other than income) for purposes of determining eligibility.

"Because spouses typically possess assets and income jointly and bear financial responsibility for each other, Medicaid eligibility determinations for married applicants have resisted simple solutions." Wisconsin Dep't of Health & Family Servs. v. Blumer, 534 U.S. 473, 479, 122 S.Ct. 962, 151 L.Ed.2d 935 (2002). Prior to 1988, when a spouse was institutionalized, the married couple's jointly-held assets were combined and that total was considered in determining either spouse's Medicaid eligibility. Thus, the spouse remaining at home (community spouse) had to spend virtually all of the marital assets to trigger the institutionalized spouse's Medicaid eligibility. H.R.Rep. No. 100-105(II), 100th Cong., 2nd Sess., at 65-67, reprinted in 1988 U.S.C.C.A.N. 857, 888-92. As a result, some community spouses became prematurely institutionalized themselves due to a lack of financial self-sufficiency. Id. Conversely, any assets that were held solely by either spouse were only considered in determining that spouse's Medicaid eligibility. Id. at 879-80, 122 S.Ct. 962. Therefore, when a pension check was issued to the husband, all of that income was considered his for the purpose of determining his eligibility if he entered a nursing home. Id. at 879, 122 S.Ct. 962. However, if the wife entered a nursing home, none of the husband's pension income was considered in determining the wife's eligibility and federal law did not obligate him to contribute toward the cost of her care. Id. As a result, a wealthy community spouse was able to shelter income and resources from inclusion in the calculation of the institutionalized spouse's eligibility.

In 1988, Congress sought to eliminate some of the undesired consequences of the existing eligibility provisions by amending the MCCA provisions of the federal Medicaid Act to include the "spousal impoverishment provisions." 42 U.S.C. § 1396r-5.¹ These amendments resulted in a complex methodology for separately calculating each spouse's resources and income and then using those calculations to determine the institutionalized spouse's Medicaid eligibility. Income allocation is governed by §§ 1396r-5(b) and (d). These sections exclude the community spouse's individual income when determining whether the institutionalized spouse qualifies for Medicaid. Sections 1396r-5(c) and (f) address the allocation of resources. Under those provisions, the couple's resources are added together when institutionalization begins and one-half of the total is allocated to each spouse as the "spousal share." § 1396r-5(c)(1)(A). After the spousal share is determined, the community spouse is permitted to retain a specified maximum amount indexed to inflation, which is referred to as the community spouse resource allowance (CSRA). §§ 1396r-5(c)(2)(B), (f)(2)(A), (g). Any and all resources above the CSRA must be spent before the institutionalized spouse will be eligible for Medicaid. § 1396r-5(c)(2). Under the MCCA, a couple may obtain a "fair hearing" to challenge the state's determination of an institutionalized spouse's Medicaid eligibility, including the computation of the CSRA. § 1396r-5(e).

Colorado participates in the federal Medicaid program and accepts federal Medicaid funds. The Colorado Department of Health Care Policy and Financing is the state agency responsible for administering Colorado's Medicaid program. See Colo.Rev.Stat. § 26-4-110. In addition to covering individuals considered categorically needy as required by federal law, Colorado has elected to provide medical assistance to individuals living in nursing homes. See Colo.Rev.Stat. § 26-4-301. Pursuant to the MCCA, Colorado has enacted spousal protection provisions and authorized the Department of Health Policy to adopt rules and regulations necessary to implement these provisions, including eligibility determinations. See Colo.Rev.Stat. § 26-4-506.

In the fall of 2001, Colorado revised the eligibility guidelines used to calculate a married couple's resources when a spouse enters a nursing home and changed the way it classified self-funded retirement accounts such as IRAs, 401(k)s, or 403(b)s. Prior to that revision, Colorado did not classify self-funded retirement accounts held by the community spouse as "resources" available to support the institutionalized spouse. As a result, self-funded retirement accounts were not included as resources in calculating the CSRA and did not affect the institutionalized spouse's Medicaid eligibility. On September 1, 2001, however, Colorado began including self-funded retirement accounts held by a community spouse as countable "resources" for the purpose of determining an institutionalized spouse's Medicaid eligibility. See 10 Colo.Code Reg. 2505-10, § 8.110.51C.² Colorado has applied this new rule both to initial applications for Medicaid benefits and, as is the case here, to annual eligibility redeterminations.

The Sellers have been married since 1953. On August 20, 1996, Mrs. Sellers was admitted to Elms Haven Care Center and she applied for Medicaid benefits. On November 26, 1996, the Adams County Department of Social Services approved her application because the Sellers' total countable resources of $69,763 fell below the 1996 eligibility cap. Pursuant to the guidelines in place at that time, the Colorado Medicaid Agency did not include any of Mr. Sellers' retirement funds when determining Mrs. Sellers' Medicaid eligibility in 1996.

On February 1, 2000, Mr. Sellers retired from the Rio Grande Company, where his employer funded a pension plan and a profit-sharing plan. Mr. Sellers also had contributed to a 401(k) plan to which his employer provided matching contributions. Mr. Sellers rolled his retirement portfolio into his IRA. On December 17, 2000, when Mr. Sellers turned 70½ years of age, he received mandatory periodic payments from his IRA.

Mr. Sellers' retirement funds were not counted as resources in either 1999 or 2000 when Mrs. Sellers' Medicaid eligibility was reviewed. On October 3, 2001, Mr. Sellers submitted the necessary paperwork for Mrs. Sellers' annual eligibility redetermination. On November 1, 2001, the Adams County Department of Human Services determined that Mrs. Sellers had $212.85 in countable resources and $775.52 in monthly income. On December 18, 2001, the Adams County Department of Human Services notified Mr. Sellers that, based on new rules requiring consideration of his retirement assets in the amount of $454,000, the state had determined the Sellers had excess resources of $356,715.93 and Mrs. Sellers was no longer eligible for Medicaid benefits. Mrs. Sellers' benefits were terminated on December 31, 2001.

On March 20, 2002, the Sellers (along with three other married couples), brought this action against Karen Reinertson, in her official capacity as Executive Director of the Department of Health Policy pursuant to 42 U.S.C. § 1983.³ Plaintiffs sought declaratory and injunctive relief, claiming Colorado's new rule violated the MCCA. Both sides filed motions for...