Fabula v. Solomon

• Decision Date: 15 November 1978
• Docket Number: Civ. No. B-77-1849.
• Citation: 463 F. Supp. 830
• Parties: Julia FABULA Individually and on behalf of all others similarly situated, Plaintiff, and Anna Arnold, by her guardian, Mami Younger, and Mary M. Bruns, and Laura J. Maggitti, Intervening Plaintiffs, v. Dr. Neil SOLOMON, Individually and in his capacity as Secretary of the Department of Health and Mental Hygiene, State of Maryland.
• Court: U.S. District Court — District of Maryland

463 F. Supp. 830

Julia FABULA Individually and on behalf of all others similarly situated, Plaintiff, and Anna Arnold, by her guardian, Mami Younger, and Mary M. Bruns, and Laura J. Maggitti, Intervening Plaintiffs, v. Dr. Neil SOLOMON, Individually and in his capacity as Secretary of the Department of Health and Mental Hygiene, State of Maryland.

Civ. No. B-77-1849.

United States District Court, D. Maryland.

November 15, 1978.

Anne K. Pecora, Legal Services to the Elderly, and James J. Lyko, Administrative Law Center, Legal Aid Bureau, Inc., Baltimore, Md., for plaintiffs.

Francis B. Burch, Atty. Gen. of Maryland, and Louise T. Keelty, Asst. Atty. Gen., Baltimore, Md., for defendant.

BLAIR, District Judge.

This action challenges the validity of a Maryland state regulation concerning transfers of assets held by individuals applying for or receiving medical assistance benefits. Plaintiffs assert that the regulation in question conflicts with federal statutes and regulations governing medical assistance, thus violating the supremacy clause of the Constitution, and further assert that the regulation denies them equal protection and due process. The parties have agreed to submit the issue to the court on the pleadings heretofore filed. No material facts are in dispute.

Title XIX of the Social Security Act, 42 U.S.C. §§ 1396-1396k establishes the federal medical assistance, or Medicaid, program. Medicaid is a cooperative federal-state program, operated under state direction, which provides medical assistance benefits to eligible persons. Although a state is not required to participate in the program, if it does choose to participate, it must submit a plan that complies with federal law. 42 U.S.C. § 1396a. Such a plan must provide for medical assistance to individuals receiving or eligible for receipt of federally funded public assistance benefits, who are referred to as the "categorically needy." 42 U.S.C. § 1396a(a)(10)(A); 42 C.F.R. § 448.1(a)(1)(i). Included in this group are aged, blind, and disabled individuals receiving Supplemental Security Income (SSI) benefits under Title XVI of the Social Security Act, 42 U.S.C. §§ 1381-1383c. If a state chooses to adopt a Medicaid program, it has the further option of including within the plan any group of individuals considered "medically needy" but whose incomes and assets exceed the eligibility limits applicable to the categorically needy.¹ If the state exercises its option to provide benefits to this group, it must adhere to certain federal requirements applicable to the group. 42 U.S.C. § 1396a(a)(10)(C). In summary, a state plan must provide Medicaid benefits to aged, blind, and disabled persons who receive or are eligible for SSI benefits. Additionally, it may provide such benefits to aged, blind, and disabled persons whose incomes and assets are too low to meet their medical expenses but too high to qualify them for SSI benefits. In either case, the state plan must conform to federal requirements. See generally Friedman v. Berger, 547 F.2d 724, 726 (2d Cir. 1976), cert. denied, 430 U.S. 984, 97 S.Ct. 1681, 52 L.Ed.2d 378 (1977); Aitchison v. Berger, 404 F.Supp. 1137, 1141 (S.D.N.Y.1975), aff'd, 538 F.2d 307 (2d Cir.), cert. denied, 429 U.S. 890, 97 S.Ct. 246, 50 L.Ed.2d 172 (1976); Wilczynski v. Harder, 323 F.Supp. 509, 514-15 (D.Conn. 1971).

The State of Maryland has elected to adopt a state medical assistance plan, administered by the Secretary of Health and Mental Hygiene. Annotated Code of Maryland, art. 43, § 42 (Cum.Supp.1977). As implemented by regulations promulgated by the Secretary, Code of Maryland Regulations (COMAR), Title 10, Subtitle 09, the Maryland program provides benefits to a class of medically needy persons who meet certain eligibility requirements, COMAR 10.09.01.06. Among those requirements are ones concerning income, COMAR 10.09.01.06, and assets, COMAR 10.09.01.10. The latter provision is the regulation at issue in this case.²

Under the Maryland regulation governing assets, a single person may retain assets of $2500 and remain eligible for benefits under the program for the medically needy. COMAR 10.09.01.10(F). Excluded from the computation of assets are the individual's home and income-producing real property, as well as other items. COMAR 10.09.01.10(B). A further subsection of the regulation, COMAR 10.09.01.10(D), containing the provision that plaintiffs challenge, provides that a transfer of assets will, under certain conditions, render an applicant or recipient ineligible for medical assistance. This section denies eligibility to an applicant for benefits who has within three years of application transferred an asset that would have been available to meet medical expenses or serve as a source of future recovery by the state of benefits paid,³ provided the transfer was made with the intent of becoming eligible for benefits or circumventing recovery procedures. A number of factors are to be considered in determining the purpose of the transfer. A similar provision denies continued eligibility to recipients of medical assistance benefits who transfer assets with the proscribed intent. In either case the period of ineligibility extends for at most three years. Administrative hearing procedures are established by COMAR 10.09.01.16.

Defendant in this action, Dr. Neil Solomon, is Secretary of the Department of Health and Mental Hygiene of the State of Maryland. Plaintiffs Julia Fabula, Anna Arnold, and Mary Bruns are all over the age of 65 years. Each would be eligible for SSI benefits but for their incomes and because of their incomes, they are not eligible for Medicaid for the categorically needy. Each of these plaintiffs transferred all or part of her interest in her home within three years of the date she applied for Medicaid under Maryland's program for the medically needy. The homes, had they been retained by the owners, would have been excluded from consideration in determining eligibility. COMAR 10.09.01.10(B)(1). However, each plaintiff was denied assistance on the basis of COMAR 10.09.01.10(D)(1). Plaintiff Laura Maggitti, also over 65 years of age, would also be eligible for SSI, and hence Medicaid for the categorically needy, were her income not in excess of SSI eligibility requirements. Mrs. Maggitti was already receiving Medicaid benefits for the medically needy when she transferred part of her interest in an income-producing rental property, which had been excluded from consideration as an asset under COMAR 10.09.01.10(B)(2). Following that transfer, plaintiff was denied continued eligibility for Medicaid benefits, based on COMAR 10.09.01.10(D)(2). The parties have stipulated that, assuming the plaintiffs were competent at the time of transfer, the transfers were made with the intent of becoming eligible for benefits or to circumvent the recovery procedures of the medical assistance program.⁴ Thus, for purposes of this memorandum, the court will assume that plaintiffs were covered by the terms of the regulation and that plaintiffs' attack is squarely upon those terms.

Although persons in the position of the plaintiffs, i. e., the medically needy, are subject to the requirements of COMAR 10.09.01.10(D), persons receiving SSI benefits, thus included within the categorically needy, are not subject to the regulation. Compare COMAR 10.09.01.06(A) with COMAR 10.09.01.02(A)(3). Plaintiffs assert that this distinction between the categorically needy and the medically needy violates federal law, in a manner discussed in detail below, and also violates equal protection. The court finds the equal protection claim sufficiently substantial to confer jurisdiction over both the constitutional claims and the pendent statutory claims. See Hagans v. Lavine, 415 U.S. 528, 537-43, 94 S.Ct. 1372, 39 L.Ed.2d 577 (1974); Greklek v. Toia, 565 F.2d 1259, 1260-61 (2d Cir. 1977), cert. denied, 435 U.S. 949, 98 S.Ct. 1574, 55 L.Ed.2d 799 (1978). Thus, jurisdiction exists under 28 U.S.C. § 1343(3).⁵ Plaintiffs are not required to have exhausted state administrative remedies prior to bringing this action. King v. Smith, 392 U.S. 309, 312 n. 4, 88 S.Ct. 2128, 20 L.Ed.2d 1118 (1968).

Plaintiffs Fabula, Arnold, and Bruns seek to represent a class of medical assistance applicants, and plaintiff Maggitti has moved to represent a class of medical assistance recipients. The court will certify the following two classes under Fed.R.Civ.P. 23(b)(2):

1. All aged, blind, or disabled Maryland residents who have been denied Maryland medical assistance or will be denied Maryland medical assistance solely on the basis that they transferred or assigned assets, excluded from consideration in determining eligibility by COMAR 10.09.01.10(B), in a manner proscribed by COMAR 10.09.01.10(D)(1). This class is represented by plaintiffs Fabula, Arnold, and Bruns.

2. All aged, blind, or disabled Maryland residents who have been denied Maryland medical assistance or will be denied Maryland medical assistance solely on the basis that they transferred or assigned assets, excluded from consideration in determining eligibility by COMAR 10.09.01.10(B), in a manner proscribed by COMAR 10.09.01.10(D)(2).

This class is represented by plaintiff Maggitti. The court finds adequate evidence to support the numerosity requirement of Rule 23(a); common questions of law and fact exist; the named plaintiffs' challenges are typical of all class members; and plaintiffs are adequate class representatives. Finally, the defendant has acted in a manner generally applicable to the class.

Plaintiffs' primary contention is that the Maryland transfer of assets provision embodied in COMAR 10.09.01.10(D) violates federal statutes and regulations. Although the Medicaid program is adopted at a state's option, once implemented it must, of course, comply with federal requirements. See, e. g., King v. Smith, 392 U.S. 309, 333 & n. 34, 88 S.Ct. 2128, 20 L.Ed.2d 1118 (1968).

Plaintiffs argue...