Randall v. Lukhard, s. 82-1773

• Decision Date: 08 June 1983
• Docket Number: 82-1774,Nos. 82-1773,s. 82-1773
• Citation: 709 F.2d 257
• Parties: Evelyn RANDALL, Emma Matthews, Archie Morse, Minnie Miller, by her next friend, Viola Liskey, on behalf of themselves and all others similarly situated, and Maggie Lamb, Pompey Wingo, Rachel Wingo and William E. Smith, Appellees, v. William L. LUKHARD, Comm. of the Commonwealth of VA Dept. of Welfare, Dr. James B. Kenley, Comm. of Health for the Commonwealth of VA, and Dr. Freeman C. Hays, Dir. of VA Medical Assistance Program, Appellants, and Richard Schweiker, Sec. H & H Services, Amicus Curiae. Evelyn RANDALL, Emma Matthews, Archie Morse, Minnie Miller, by her next friend, Viola Liskey, on behalf of themselves and all others similarly situated, and Maggie Lamb, Pompey Wingo, Rachel Wingo and William E. Smith, Appellants, v. William L. LUKHARD, Comm. of the Commonwealth of VA Dept. of Welfare, Dr. James B. Kenley, Comm. of Health for the Commonwealth of VA and Dr. Freeman C. Hays, Dir. of VA Medical Assistance Program, Appellees, and Richard Schweiker, Sec. H & H Services, Defendant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 257

709 F.2d 257

2 Soc.Sec.Rep.Ser. 170

Evelyn RANDALL, Emma Matthews, Archie Morse, Minnie Miller,

by her next friend, Viola Liskey, on behalf of themselves

and all others similarly situated, and Maggie Lamb, Pompey

Wingo, Rachel Wingo and William E. Smith, Appellees, v. William L. LUKHARD, Comm. of the Commonwealth of VA Dept. of

Welfare, Dr. James B. Kenley, Comm. of Health for the

Commonwealth of VA, and Dr. Freeman C. Hays, Dir. of VA

Medical Assistance Program, Appellants,

and

Richard Schweiker, Sec. H & H Services, Amicus Curiae.

Evelyn RANDALL, Emma Matthews, Archie Morse, Minnie Miller,

by her next friend, Viola Liskey, on behalf of themselves

and all others similarly situated, and Maggie Lamb, Pompey

Wingo, Rachel Wingo and William E. Smith, Appellants, v. William L. LUKHARD, Comm. of the Commonwealth of VA Dept. of

Welfare, Dr. James B. Kenley, Comm. of Health for the

Commonwealth of VA and Dr. Freeman C. Hays, Dir. of VA

Medical Assistance Program, Appellees,

and

Richard Schweiker, Sec. H & H Services, Defendant.

Nos. 82-1773, 82-1774.

United States Court of Appeals Fourth Circuit.

Argued Feb. 7, 1983.

Decided June 8, 1983.

Herbert L. Beskin, Charlottesville-Albemarle Legal Aid Society, Charlottesville, Va. (V. Anne Edenfield, Legal Aid Society of Roanoke Valley, Roanoke, Va., on brief), for appellants in 82-1774 and for appellees in 82-1773.

Robert T. Adams, Asst. Atty. Gen., Richmond, Va. (John A. Rupp, Senior Asst. Atty. Gen., Gerald L. Baliles, Atty. Gen., Richmond, Va., on brief), for appellants in 82-1773 and for appellees in 82-1774.

John P. Alderman, U.S. Atty., E. Montgomery Tucker, Asst. U.S. Atty., Roanoke, Va., Diane C. Moskal, Regional Atty., Dept. of Health and Human Services, Philadelphia, Pa., David R. Smith, Dept. of Health and Human Services, Washington, D.C., on brief, for amicus curiae.

Before WINTER, Chief Judge, RUSSELL, Circuit Judge, and FAIRCHILD, ^* Senior Circuit Judge.

HARRISON L. WINTER, Chief Judge:

Before us are challenges to the Virginia Medicaid program's former and current "transfer of assets" eligibility rules, as applied to Medicaid applicants and recipients from April 24, 1978 through the present. These rules direct that an individual who transfers property for less than its fair market value, in order to become or remain eligible for Medicaid, is to be denied such assistance for a specified period of time.

Summarizing our conclusions, we agree with the district court that the former rule violated federal law and affirm, among others, that part of the district court's order, 536 F.Supp. 723, requiring that persons denied assistance under the former rule be given notice of this judgment, although we require that the content of the notice be modified. We reverse in part the district court's determination that the new rule is in all respects lawful; we think that it imposes an excessive burden of proof on persons attempting to demonstrate that their transfers were made for permissible reasons. We affirm the validity of the remainder of the new rule. We also reverse the district court's ruling that the new rule may not lawfully be applied to persons whose initial applications for assistance were filed prior to July 1, 1981. We think that the new rule may be applied to initial eligibility determinations made on or after July 1, 1981, even if the application was filed prior to that date, and to any eligibility redetermination occurring on or after July 1, 1981. We therefore reverse the district court's order granting relief to these individuals.

I.

The history of the Medicaid program and its provisions under which the present case arose were reviewed by the Supreme Court in Schweiker v. Gray Panthers, 453 U.S. 34, 36-39, 101 S.Ct. 2633, 2636-2637, 69 L.Ed.2d 460 (1981). As noted there, the Medicaid program was established in 1965 to "provid[e] federal financial assistance to States that choose to reimburse certain costs of medical treatment for needy persons." Id. at 36, 101 S.Ct. at 2636, quoting Harris v. McRae, 448 U.S. 297, 301, 100 S.Ct. 2671, 2680, 65 L.Ed.2d 784 (1980). Each participating state was required to have a plan for determining the eligibility of individuals seeking medical assistance. 42 U.S.C. Sec. 1396a(a). The criteria for eligibility included a maximum level of income and resources. Relevant to that determination, the state plan was required to "include reasonable standards ... which ... provide for taking into account only such income and resources as are, as determined in accordance with standards prescribed by the Secretary, available to the applicant or recipient." Id. Sec. 1396a(a)(17). The Secretary's regulations in effect on January 1, 1972 provided that the state plan must "[p]rovide that only such income and resources as are actually available will be considered." 45 C.F.R. Sec. 248.21(a)(2)(i) (1972) (emphasis added). ¹

As Medicaid was originally enacted, participating states were required to provide medical assistance only to those persons eligible to receive categorical assistance under one of four welfare programs established elsewhere in the Social Security Act. 42 U.S.C. Sec. 1396a(a)(10) (1970). Effective January 1, 1974, however, Congress replaced three of the four categorical assistance programs with the Supplementary Security Income ("SSI") program. 42 U.S.C. Sec. 1381 et seq. Under the new program, the federal government assumed the responsibility for defining standards of eligibility for categorical (now SSI) assistance theretofore borne by the states. Id. Sec. 1382. The new federal standards expanded the class of individuals eligible to receive such assistance, and hence threatened to expand Medicaid eligibility, which under the Social Security Act was linked coterminously with SSI eligibility. Id. Sec. 1396a(a)(10). Congress feared that many states would withdraw entirely from the Medicaid program rather than expand their coverage and resultant obligations. Therefore, "in order not to impose a substantial burden on these states," S.Rep. No. 93-553, 93d Cong., 1st Sess. 56 (1973), or discourage them from participating, Congress offered the states the "Sec. 209(b) option." Under this option, a state may choose to provide medical assistance only to those individuals who would have been eligible to receive assistance under the state Medicaid plan in effect on January 1, 1972. 42 U.S.C. Sec. 1396a(f). ² Virginia elected to exercise the Sec. 209(b) option, and therefore at all relevant times has limited medical assistance to those individuals who would have been eligible under the Virginia plan in effect on January 1, 1972.

Virginia had its former transfer of assets rule in effect on January 1, 1972. As of that date, the rule provided that a Medicaid applicant or recipient would be ineligible for benefits for a period of one year if he had transferred property for less than its fair market value within one year of the date of application or while receiving benefits, ³ and such transfer was made in order to become or remain eligible for Medicaid. ⁴

Plaintiffs filed the present action on April 24, 1980, seeking, under 42 U.S.C. Sec. 1983, a declaration that the Virginia rule was inconsistent with the Social Security Act, an injunction against further enforcement of the rule, and the reinstatement to eligibility of persons denied assistance because of the rule.

In December of 1980, however, the Boren-Long Amendment to the Social Security Act was signed into law. Pub.L. No. 96-611, Sec. 5, 94 Stat. 3567 (1980), codified at 42 U.S.C. Secs. 1382b(c) and 1396a(j). ⁵ The Amendment authorized state Medicaid plans to employ a transfer of assets rule providing for the inclusion in an applicant's resources of any property transferred for less than its full value within the preceding twenty-four months in order for the transferor to become or remain eligible for assistance. 42 U.S.C. Secs. 1382b(c)(1), 1396a(j)(1). The amendment also authorized Sec. 209(b) states to provide for a specified period of ineligibility in excess of twenty-four months where the amount of uncompensated value exceeded $12,000, rather than providing for inclusion in the person's resources of the uncompensated amount. Id. Sec. 1396a(j)(2). In Sec. 209(b) states, however, the state plans containing a transfer of assets disqualification were required to specify a procedure that otherwise is "not more restrictive" than that specified for the SSI transfer of assets rule in 42 U.S.C. Sec. 1382b(c). See id. Sec. 1396a(j)(1). In particular, that procedure requires the transferor to furnish "convincing evidence" that the transaction was exclusively for a purpose other than establishing eligibility for assistance. Id. Sec. 1382b(c)(2).

Virginia amended its rule, effective July 1, 1981, in order to conform to Boren-Long. ⁶ Under the new Virginia rule, an applicant is ineligible for a specified period of time if he has transferred property for less than fair market value within the preceding two years, or, for a recipient, within two years of the discovery of that transfer. The period of ineligibility is specified as two years from the date of the transfer, plus an additional two months for every $1,000 or part thereof in uncompensated value in excess of $12,000. The new rule provides that the burden is on the client to demonstrate, by objective evidence and not merely a subjective statement of intent or ignorance, that the transfer was not made in an effort to qualify for Medicaid. The client must "provide evidence that other resources were available, at the time of transfer, to meet current and expected needs of that client, including costs of nursing home care."

Plaintiffs then amended their complaint by adding two challenges to the new rule. First, they sought an injunction against its application to persons filing their initial Medicaid applications on or after July 1, 1981, the effective date of Boren-Long. Second, they sought an injunction...