Alabama Medicaid Agency v. Primo

• Decision Date: 04 January 1991
• Parties: , 1 NDLR P 183 ALABAMA MEDICAID AGENCY v. Mary PRIMO. Civ. 7832.
• Court: Alabama Court of Civil Appeals

Page 1355

579 So.2d 1355

33 Soc.Sec.Rep.Ser. 637, 1 NDLR P 183

ALABAMA MEDICAID AGENCY v. Mary PRIMO.

Civ. 7832.

Court of Civil Appeals of Alabama.

Jan. 4, 1991.

Rehearing Denied Feb. 13, 1991.

Certiorari Denied June 7, 1991

Alabama Supreme Court 1901109.

Don Siegelman, Atty. Gen., and Charles H. Durham III, Asst. Atty. Gen., for appellant.

Sarah S. Frierson, Mobile, for appellee.

L. CHARLES WRIGHT, Retired Appellate Judge.

The Alabama Medicaid Agency (Agency) terminated Mary Primo's eligibility for medicaid benefits in December 1988. She requested a fair hearing, which was held in March 1989. The hearing officer made a recommendation that the benefits be restored. The Commissioner of the Agency (Commissioner) did not concur with the hearing officer's recommendation. The Agency informed Primo of the nonconcurrence and entered an order terminating her Medicaid benefits. A requested rehearing was denied. Primo filed a Petition for Judicial Review in the Circuit Court of Mobile County. The circuit court reversed the Agency's termination order and found Primo to be eligible for Medicaid benefits. The Agency appeals.

Mary Primo, a resident of a nursing home, applied for and received Medicaid benefits beginning in November 1982. In December 1987 Lillian McCandless, Primo's sister, died testate. Her Last Will and Testament, together with two codicils, was probated and finally settled in September 1988. The second codicil, dated November 14, 1980, created the following testamentary trust:

"In case my sister, MAE KLAAS PRIMO, shall survive me, I give, devise and bequeath all the rest, residue and remainder of my estate of whatever kind and character, and wheresoever situated, to my Trustees hereinafter named, in Trust, to be held, administered and distributed as hereinafter provided.

"a) To pay to or use for the benefit of my sister, MAE KLAAS PRIMO, so much of the net income and principal as my Trustees, in their sole discretion, determine to be adequate, reasonable, and appropriate for her support, maintenance, and medical care. The term 'medical care' as used herein shall be broadly construed, and shall include doctors, nurses, hospitals, retirement homes, and nursing homes. Any part of the net income not paid out shall be accumulated and added to and vested and thereafter treated as part of the principal of said trust.

"b) Upon the death of my sister, MAE KLAAS PRIMO, this trust shall terminate, and the trust estate then in the custody of the Trustees shall be paid over free of trust to my niece, MARGARET KLAAS HICKMAN, and her two children, MICHAEL TIMOTHY HICKMAN and EDITH MARIE COBBLE, equally, share and share alike."

The trust estate at issue is comprised of a piece of realty with an estimated value of $53,666. The Agency found that the testamentary devise created a trust for the support, maintenance, and medical needs of Primo and as such was a resource available to her for the purpose of determining her Medicaid eligibility. In reaching this determination the Agency relied upon the Alabama Medicaid Agency Administrative Code, Rule No. 560-X-25-.08, which provides for the evaluation of an applicant's ownership interest in a liquid resource. The evaluation rule pertaining to trusts provides the following:

"(4) Trusts--Whether the principal of a trust is a resource to the applicant/recipient depends on its availability to the applicant/recipient by the terms of the trust instrument itself."

The Agency, finding that the principal of the trust was available to Primo, determined that it was a resource that exceeded the financial eligibility criteria for the receipt of Medicaid benefits set at $1,900 for 1988 and $2,000 for 1989.

The court disagreed with the Agency's determination and entered an order finding the Agency's application of Rule 560-X-25.08 to be unreasonable, arbitrary, and an abuse of its discretion. The court determined that the principal of the trust was not available to Primo because all distributions, whether of income or principal, were to be made at the trustees' discretion. Finding that Primo's access to the principal was restricted, the court concluded that the trust could not be considered a resource for purposes of evaluating Primo's eligibility for Medicaid. The court found its interpretation to be in accord with the underlying federal principles controlling the distribution of Medicaid benefits.

The Agency initially asserts that the court usurped its limited review function under the Alabama Administrative Procedure Act (AAPA), Code 1975, §§ 41-22-1 through -27, by improperly substituting its judgment for that of the Agency.

The circuit court's standard of review in cases involving administrative agencies is limited. Alabama Medicaid Agency v. Norred, 497 So.2d 176 (Ala.Civ.App.1986). Specifically, § 41-22-20(k) provides that the Agency's order is to be taken as prima facie just and reasonable and that the court may not substitute its judgment for that of the Agency as to the weight of the evidence. The court, however, may reverse the Agency's decision "if substantial rights of the petitioner have been prejudiced because the agency action is.... [u]nreasonable, arbitrary or capricious or characterized by an abuse of discretion or a clearly unwarranted exercise of discretion." § 41-22-20(k)(7).

The court found the Agency's termination of Medicaid benefits to be unreasonable, arbitrary, and an abuse of the Agency's discretion. After a careful review of the Agency's action, the record, and the applicable law and regulations, we cannot say that the court erred in its finding. The sole issue on appeal, therefore, involves a legal determination as to whether the trust is an available resource that should be considered in the determination of Medicaid eligibility.

The United States Supreme Court has characterized the Medicaid statute as both "Byzantine," and "almost unintelligible to the uninitiated." Schweiker v. Gray Panthers, 453 U.S. 34, 101 S.Ct. 2633, 69 L.Ed.2d 460 (1981). For the benefit of the uninitiated as well as the initiated, we find that a brief history of the development of the statute would be helpful in gaining insight into the issue involved in this appeal.

The Medicaid program was established in 1965 by Title XIX of the Social Security Act, see 42 U.S.C.A. §§ 1396 through 1396p (West 1982), to provide federal financial assistance to states that chose to reimburse certain costs of medical treatment for needy persons. Schweiker, at 36, 101 S.Ct. at 2636. States choosing to participate in the program were required to develop a plan for determining the eligibility of individuals seeking medical assistance. 42 U.S.C.A. § 1396a(a). The criteria for eligibility included a maximum level of income and resources. Relevant to the 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." 42 U.S.C.A. § 1396a(a)(17)(B).

Two types of recipients have traditionally received Medicaid assistance. The first group, the "categorically needy," are those already receiving general welfare payments under several federal programs. These programs were originally: Old Age Assistance, 42 U.S.C.A. § 301 et seq.; Aid to Families with Dependent Children, 42 U.S.C.A. § 601 et seq.; Aid to the Blind, 42 U.S.C.A. § 1201 et seq.; and Aid to the Permanent and Totally Disabled, 42 U.S.C.A. § 1351 et seq. The Medicaid laws required all participating states to provide benefits to the "categorically needy." The second category is the "medically needy." These are persons whose incomes are too high to qualify for one of the categorical programs, but who...