Ahrendsen v. IOWA DEPT. OF HUMAN SERVICES

• Decision Date: 06 July 2000
• Docket Number: No. 99-0092.,99-0092.
• Citation: 613 N.W.2d 674
• Parties: Glen AHRENDSEN for Lydia AHRENDSEN and William Ahrendsen, Appellant, v. IOWA DEPARTMENT OF HUMAN SERVICES, Appellee.
• Court: Iowa Supreme Court

613 N.W.2d 674

Glen AHRENDSEN for Lydia AHRENDSEN and William Ahrendsen, Appellant, v. IOWA DEPARTMENT OF HUMAN SERVICES, Appellee.

No. 99-0092.

Supreme Court of Iowa.

July 6, 2000.

Robert T. Gaffney of Bunz & Gaffney, Manning, for appellant.

Thomas J. Miller, Attorney General, and Daniel W. Hart, Assistant Attorney General, for appellee.

Considered en banc.

CARTER, Justice.

Glen Ahrendsen, who filed an application for Medicaid benefits on behalf of his mother and deceased father, appeals from a district court decision upholding a regulation of the Iowa Department of Human Services (DHS) that limits retroactive payment of Medicaid benefits to a period of three months prior to the most recent application. After reviewing the record and considering the arguments presented, we affirm the judgment of the district court.

Glen Ahrendsen is the son of Lydia and William Ahrendsen. In August 1991 William and Lydia transferred 160 acres of farmland worth approximately $240,000 to Glen and his sister for a consideration of two dollars. Their attorney advised them at this time that this transfer would render them ineligible for Medicaid benefits for an unspecified period of time.

William and Lydia subsequently entered a nursing home in January 1992. In September 1992, upon the request of a social worker at the nursing home, Glen filed an application for Medicaid benefits for his parents with the Audubon County office of DHS. DHS is the administrator of the federal Medicaid program in Iowa. On September 30, 1992, DHS issued a decision denying the Ahrendsens' application. The decision indicated that they would be ineligible for Medicaid payments until August 1997. This statement was not correct. The correct period of ineligibility was until February 1994.

DHS had a policy allowing new applications for Medicaid benefits to be filed during a previously determined period of ineligibility. When such applications were filed, the previously determined ineligibility was reviewed anew. In September 1996 Glen filed a new application for his mother, Lydia, and also sought to obtain retroactive benefits for his father, who had died in July 1994. The application was approved for Lydia only with retroactive payments to June 1, 1996. Glen then requested an extended period of retroactivity based on the fact that the agency had given incorrect information concerning the period of ineligibility in its consideration of the Ahrendsen September 1992 application. This request was denied on the basis that a federal statute and administrative regulations of DHS only permit retroactive payment of benefits for a period of three months.

Ahrendsen filed a petition for judicial review. The district court affirmed the agency decision, and this appeal followed.

I. Standard of Review.

Iowa Code section 17A.19(8) (1999) governs this court's review of appeals from administrative actions. On review of agency actions, this court functions solely in an appellate capacity to correct errors of law on the part of the agency. Glowacki v. State Bd. of Med. Exam'rs, 516 N.W.2d 881, 884 (Iowa 1994). An appeal of a district court decision is governed by Iowa Code section 17A.20. The scope of review under this section is limited to determining whether the district court correctly applied the law in exercising its section 17A.19(8) judicial review function. Id. This court's review is limited to questions considered by the agency. Office of Consumer Advocate v. Iowa State Commerce Comm'n, 465 N.W.2d 280, 283 (Iowa 1991).

II. Standards for Medicaid Eligibility.

Medicaid is a cooperative federal and state welfare program in which the federal government provides financial assistance to states so that they can furnish medical care to certain needy individuals and families. See 42 U.S.C. § 1396. Although participation in the program is voluntary, participating states must comply with certain requirements imposed by the federal Medicaid statute and with federal regulations promulgated by the Secretary of the Department of Health and Human Services, who administers the program at the federal level.

To qualify for federal assistance, a state must obtain the Secretary's approval of a "plan for medical assistance." 42 U.S.C. § 1396a(a); Grants to States for Medical Assistance Programs, 42 C.F.R. § 430.10 (1999). Iowa participates in the Medicaid program pursuant to a state plan approved by the Secretary. The federal Medicaid statute and regulations that the state must follow impose financial limits on Medicaid eligibility and require states to impose a period of ineligibility for Medicaid benefits on individuals who transfer assets for less than fair market value in order to qualify for Medicaid. See 42 U.S.C. §§ 1396a(a)(10), 1396a(a)(17), 1396b(f), 1396p(c). The crux of this case is the mistake made by the department in 1992 regarding the period of ineligibility resulting from the transfer of assets from the Ahrendsens to their children. At that time, the Iowa Medicaid program had two different policies on transfers of assets, depending on when the transfer was made. Iowa's original policy on transfers of assets was promulgated in 1982 and provided for periods of ineligibility from twenty-four to seventy-two months, depending on the amount transferred to qualify for Medicaid benefits. IV Iowa Admin. Bull. 1060 (Feb. 17, 1982) (codified at Iowa Admin. Code r. 770—75.6, rescinded Feb. 1, 1999).

In the Medicare Catastrophic Coverage Act of 1988, Congress mandated a uniform national policy on transfers made after July 1, 1989, with a maximum ineligibility period of thirty months. Medicare Catastrophic Coverage Act of 1988, Pub.L. No. 100-360, § 303(b), 102 Stat. 683, 760-61 (1988) (codified as amended at 42 U.S.C. § 1396p(c)). DHS subsequently published new rules on June 28, 1989, for transfers made after July 1, 1989, with a maximum ineligibility period of thirty months. XI Iowa Admin. Bull. 2229 (June 28, 1989) (codified at Iowa Admin. Code r. 441— 75.15, rescinded Feb. 1, 1999). The department, however, retained the old rules for transfers made prior to July 1, 1989. XI Iowa Admin. Bull. 2229, 2231 (June 28, 1989) (amending Iowa Admin. Code r. 441—75.6, rescinded Feb. 1, 1999).¹ The Ahrendsens' transfer was made in August 1991 and an application for Medicaid benefits was filed in September 1992. Because the transfer was made after July 1, 1989, the correct period of ineligibility was thirty months.

Lydia's September 1996 application for Medicaid benefits was approved effective June 1, 1996, which was three months prior to the month in which the application was submitted. That was the maximum period for retroactive payment permitted by federal statute and state regulation. The federal Medicaid statute provides:

A State plan for medical assistance must—

....

(34) provide that in the case of any individual who has been determined to be eligible for medical assistance under the plan, such assistance will be made available to him for care and services included under the plan and furnished in or after the third month before the month in which he made application (or application was made on his behalf in the case of a deceased individual) for such assistance if such individual was (or upon application would have been) eligible for such assistance at the time such care and services were furnished.

42 U.S.C. § 1396a(a)(34) (emphasis added). Iowa administrative rules governing the effective date of Medicaid benefits in Iowa track with the federal statute:

76.5(1) Three-month retroactive eligibility.

a. Medical assistance benefits shall be available for all or any of the three months preceding the month in which the application is filed to persons who meet both of the following conditions:

(1) Have medical bills for covered services which were received during the three-month retroactive period.

(2) Would have been eligible for medical assistance benefits in the month services were received, if application for medical assistance had been made in that month.

Iowa Admin. Code r. 441—76.5(1)(a).

In seeking relief from the agency decision, the Ahrendsens advance three theories: (1) that the September 1996 application should be considered to be a timely appeal of the agency's ruling on the September 1992 application, (2) that the agency is estopped to assert its limit on retroactive benefits by reason of having misinformed the Ahrendsens of their rights, and (3) that the denial of retroactive benefits for the full period of eligibility would result in unjust enrichment. We separately consider these contentions.

A. Consideration of the September 1996 application as an appeal of the agency's ruling on the September 1992 application. The Ahrendsens argue that the application filed for Lydia in September 1996 and the subsequent proceedings before the department should be treated as a timely appeal of the period of ineligibility given in September 1992. More particularly, they argue that at common law a cause of action does not arise until the injury occurs. Moreover, they claim that due to the error made by the department, the "cause of action" did not accrue until discovery of the mistake in September 1996. See Iowa Code § 614.4 (in actions for relief on ground of mistake, cause of action shall not be deemed to have accrued until...