Ind. Family & Soc. Servs. Admin. v. Patterson
| Decision Date | 17 January 2019 |
| Docket Number | Court of Appeals Case No. 18A-PL-925 |
| Citation | 119 N.E.3d 99 |
| Parties | INDIANA FAMILY AND SOCIAL SERVICES ADMINISTRATION, Appellant-Defendant, v. Lance PATTERSON, Appellee-Plaintiff. |
| Court | Indiana Appellate Court |
Attorneys for Appellant: Curtis T. Hill, Jr., Attorney General of Indiana, Aaron T. Craft, Patricia C. McMath, Deputy Attorneys General, Indianapolis, Indiana
Attorneys for Appellee: Dennis K. Frick, Emma L. Douglas, Indiana Legal Services, Inc., South Bend, Indiana
[1] This case requires us to once again delve into what we have previously referred to as the "unfortunately convoluted and complex" and "Byzantine" Medicaid system. Legacy Healthcare, Inc. v. Barnes & Thornburg , 837 N.E.2d 619, 622 & n.2 (Ind. Ct. App. 2005), trans. denied ; see also Schweiker v. Gray Panthers , 453 U.S. 34, 43, 101 S.Ct. 2633, 69 L.Ed.2d 460 (1981) () (quoting Friedman v. Berger , 547 F.2d 724, 727, n. 7 (2d Cir. 1976) ).
[2] At issue here is how to determine the portion of nursing home costs required to be paid by Lance Patterson ("Patterson"), a Medicaid recipient whose limited income is subject to a garnishment order due to a rather substantial child support arrearage. The Indiana Family and Social Services Administration ("the FSSA") determined that the garnished portion of Patterson's income should be included when determining Patterson's portion of the cost of his care. Patterson challenged this decision by filing a claim for judicial review in Henry Circuit Court. The trial court entered judgment in favor of Patterson, determining that the garnished portion of Patterson's income should be excluded when determining Patterson's share of nursing home costs because Patterson did not actually receive this income. The FSSA appeals the trial court's decision, arguing that the trial court erred in granting Patterson's petition because the FSSA's decision was consistent with federal and state law and was neither arbitrary nor capricious. Because we agree with the FSSA, we reverse.
[3] Before we address the specific facts of this case, we first present a relatively brief explanation of the Medicaid system. Title XIX of the Social Security Act, referred to as "Medicaid," was enacted by the United States Congress in 1965. Legacy Healthcare , 837 N.E.2d at 622 (citing Sullivan v. Day , 681 N.E.2d 713, 715 (Ind. 1997) ). The purpose of Medicaid "is to provide medical assistance to needy persons whose income and resources are insufficient to meet the expenses of health care." Brown v. Ind. Family & Soc. Servs. Admin. , 45 N.E.3d 1233, 1236 (Ind. Ct. App. 2015) ().
[4] "The Medicaid statutes create a comprehensive cooperative federal-state program for medical care under which participating states are federally financed for their medical assistance programs if they submit a state plan which comports with federal requirements." Legacy Healthcare , 837 N.E.2d at 622 (citing 81 C.J.S. Social Security & Public Welfare § 247 (2004) ). Thus, the Medicaid program operates through a combined scheme of state and federal statutory and regulatory authority. Brown , 45 N.E.3d at 1236. Although a state's participation in Medicaid is voluntary, once a state chooses to participate, as Indiana has, that state must comply with the federal statutes and regulations governing the program. Legacy Healthcare , 837 N.E.2d at 622 (citing 81 C.J.S. at § 247 ); see also Schweiker , 453 U.S. at 43–44, 101 S.Ct. 2633 () (citing 42 U.S.C. § 1396a(a)(17)(B) ).
[5] States that elect to participate in the Medicaid program and receive federal funds must make Medicaid available to all persons who are deemed "categorically needy." Lazzell v. Ind. Family & Soc. Servs. Admin. , 775 N.E.2d 1113, 1117 (Ind. Ct. App. 2002) (citing Sullivan , 681 N.E.2d at 715 ); see also 42 C.F.R. § 435.4 (defining "categorically needy."). Whether a person is "categorically needy" is determined by reference to eligibility for certain other programs, including supplemental security income ("SSI"). See id. ; see also 42 U.S.C. § 1396a(a)(10)(A)(i)(II)(aa) ;1 42 C.F.R. § 435.120.
[6] States may also opt to provide Medicaid available to the "optional categorically needy."2 That is, states may, at their option, cover other categorically needy groups of people. See 42 U.S.C. § 1396a(a)(10)(A)(ii) ; 42 C.F.R. § 435.201 ; Herweg v. Ray , 455 U.S. 265, 268–69, 102 S.Ct. 1059, 71 L.Ed.2d 137 (1982). Indiana has chosen to provide Medicaid coverage to certain institutionalized, disabled individuals whose monthly income is too high to otherwise qualify as categorically needy, so long as the individual's monthly income does not exceed the special income level of 300 percent of the maximum payable SSI benefit. See 405 I.A.C. 2-1.1-5(g) ; see also 42 U.S.C. § 1396a(a)(10)(A)(ii)(V) ; 42 C.F.R. § 435.1005.
[7] States participating in Medicaid must establish reasonable standards for determining eligibility, including the reasonable evaluation of an applicant's income and resources. Brown , 45 N.E.3d at 1236. To qualify for Medicaid, an applicant must meet both an income-eligibility test and a resources-eligibility test. Id. If either the applicant's income or the value of the applicant's resources is too high, the applicant does not qualify for Medicaid. Id.
[8] The federal Department of Health and Human Services ("HHS") has promulgated regulations establishing financial eligibility requirements for Medicaid applicants and recipients. A state may opt to use a less restrictive income methodology, so long as its methods do not result in granting Medicaid benefits to those whose income, as calculated using SSI standards, exceeds the "special income level." See 42 U.S.C. § 1382a ; 42 U.S.C. § 1396a(r)(2) ; 42 C.F.R. § 435.601(d)(1)(ii), (d)(2). A state's plan must specify whether it will use the relevant federal standard or a less-restrictive standard. 42 C.F.R. § 435.601(f). Indiana has adopted the federal rule, not a less-restrictive option. Specifically, 405 Indiana Administrative Code section 2-1.1-5(a) states, "Individuals declared eligible for benefits by reason of age, disability, or blindness are subject to the income definition and exclusions set forth in 42 U.S.C. 1382a and 20 CFR Part 416, Subpart K Income."3
[9] A disabled person who has been continuously institutionalized for at least thirty days is eligible for Medicaid under federal standards if his or her monthly income, as determined under 42 U.S.C. § 1382a, does not exceed 300 percent of the maximum SSI benefit. 42 U.S.C. §§ 1396a(a)(10)(A)(ii)(V), 42 C.F.R. §§ 435.236(a), 435.1005. In 2016, the maximum payable SSI benefit for an individual was $733 monthly in 2016. It increased to $735 in 2017, and to $750 in 2018. See SSI Federal Payment Amounts https://www.ssa.gov/oact/COLA/SSIamts.html.
[10] An individual's includible income includes gross earnings, net rental income, net self-employment income, and all gross unearned income except SSI benefits. 405 I.A.C. 2-1.1-5(g)(2). In determining Medicaid eligibility, the Act requires the State to "tak[e] 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[.]" 42 U.S.C. § 1396a(a)(17)(B) (emphasis added).
[11] Pursuant to 42 U.S.C. § 1382a(a), "income" includes "both earned income and unearned income[.]" "Earned income" includes wages, and "unearned income" including disability benefits. Id. at § 1382a(a)(1)(A), (a)(2)(B). As explained in the Code of Federal Regulations section entitled "What is earned income":
Earned income may be in cash or in kind. We may include more of your earned income than you actually receive. We include more than you actually receive if amounts are withheld from earned income because of a garnishment or to pay a debt or other legal obligation, or to make any other payments....
20 C.F.R. § 416.1110 (emphasis added).
[12] A similar provision applies to unearned income:
[13] In the present case, neither party makes any argument regarding Patterson's Medicaid eligibility; they both agree that Patterson is eligible for Medicaid. The question is, even though Patterson is eligible for Medicaid, how much of his income must he still contribute to the cost of his care, and how is this amount to be determined.
[14] A disabled person who is in an institution and who qualifies for Medicaid must still contribute some of his or her income to the cost of his or her institutional care, and Medicaid pays for the remaining costs at the Medicaid reimbursement rate. Medicaid Program Payments to Institutions, 53 Fed. Reg. 3586, 3586 (Feb. 8, 1988) ( 42 C.F.R. § 435.725 ). A state Medicaid agency must "reduce its payment to an institution ... by the amount that remains after deducting the amounts specified in paragraphs (c) and (d) of this section, from the individual's total income." 42 C.F.R. § 435.725(a)(1). States have...
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