Arkansas Department of Human Services v. Schroder
| Decision Date | 03 July 2003 |
| Docket Number | No. 02-998.,02-998. |
| Citation | 122 S.W.3d 10 |
| Parties | ARKANSAS DEPARTMENT OF HUMAN SERVICES, APPELLANT, v. BEVERLY SCHRODER, APPELLEE. |
| Court | Arkansas Supreme Court |
APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT, NO. CV 01-11775, HON. DAVID BOGARD, JUDGE.
REVERSED AND REMANDED.
Appellant, Arkansas Department of Human Services ("DHS"), appeals an order entered by the Pulaski County Circuit Court reversing an administrative determination made under the Arkansas Administrative Procedure Act that denied Medicaid benefits to appellee, Beverly Schroder. On appeal, DHS argues that a single-premium annuity purchased for $90,000.00 should be categorized as a countable asset, and that appellee was ineligible for Medicaid benefits. We reverse the decision of the trial court to the effect that Mrs. Schroder was eligible for Medicaid benefits, and we remand the matter to the administrative law judge ("ALJ") for further findings.
On September 24, 1999, appellee entered a long-term care facility. Appellee's husband, John Schroder, remained in the marital home. Before Mrs. Schroder was admitted to the nursing home, she applied for and was determined to be eligible for Medicaid benefits. At the time Mrs. Schroder entered the nursing home, the Schroders had countable assets of $184,788.68, including checking accounts, certificates of deposit, life insurance policies, and other resources. Under Medicaid eligibility rules, countable assets do not include the family home, one automobile, and other excludable property.
Ms. Schroder submitted a Medicaid application, which was initially accepted. However, a DHS caseworker evaluated the Schroders' assets and determined that Mrs. Schroder was ineligible for Medicaid. Mrs. Schroder's case was closed in December of 2000, and she did not appeal the caseworker's decision.
On November 18, 1999, just before Mrs. Schroder's first application was rejected, Mr. Schroder purchased an annuity from Hartford Life Insurance Companies ("Hartford") for a single premium of $90,000.00, with monthly payments of $1,651.50 to be distributed to Mr. Schroder for a fixed period of five years. According to the Office of Chief Counsel at DHS, the funds used to purchase the annuity came from appellee's spousal share. At the time of the purchase, Mr. Schroder was eighty-four years of age with a life expectancy of 5.59 years, according to Medicaid life expectancy tables.
The annuity lists Mr. Schroder as the annuitant, and Mr. Schroder's sons, John C. Schroder and David A. Schroder, are listed the beneficiaries in the event of Mr. Schroder's death prior to the end of the designated period of five years. Upon Mr. Schroder's death, the annuity payments would be continued to the beneficiaries. The annuity states, It further states, "This contract is intended to qualify as an annuity contract for federal income tax purposes." The annuity also provides that "[t]o change the owner or beneficiary, notify us in writing." In a letter from Cara C. Dougherty, an employee with Hartford, she states, "This policy does not allow for a change of annuitant, however, it does allow for a change of ownership."
On April 3, 2001, Mrs. Schroder filed a second Medicaid application. After receiving a second legal opinion from the Office of Chief Counsel on the matter, the caseworker denied the second application in May 2001. The Schroders appealed, and an ALJ affirmed the caseworker's decision. On October 26, 2001, a final order was entered in which the ALJ ruled that (1) an annuity purchased by Mr. Schroder had a value of $70,000.00 and could be sold and converted to cash, (2) the purchase of the annuity was not made for the "sole benefit" of Mr. Schroder, and (3) the purchase of the annuity was made for the purpose of qualifying for Medicaid benefits.
The Schroders filed a petition for judicial review in Pulaski County Circuit Court, pursuant to the Arkansas Administrative Procedures Act, codified at Ark. Code Ann. § 25-15-212 (Repl. 1996), seeking review of the ALJ's decision to deny Medicaid benefits to appellee. A hearing was held on July 25, 2001. After the hearing, the trial court reversed the decision of the ALJ, finding that the annuity was actuarially sound and that DHS acted arbitrarily in not considering this point. It is from the trial court's order that DHS brings its appeal.
Our standard of review was articulated in Wright v. Arkansas State Plant Board, 311 Ark. 125, 842 S.W.2d 42 (1992), where we stated:
[W]hen reviewing administrative decisions, we review the entire record to determine whether there is any substantial evidence to support the administrative agency's decision, whether there is arbitrary and capricious action, or whether the action is characterized by abuse of discretion. In re Sugarloaf Mining Co., 310 Ark. 772, 840 S.W.2d 172 (1992); Singleton v. Smith, 289 Ark. 577, 715 S.W.2d 437 (1986); Green v. Carder, 282 Ark. 239, 667 S.W.2d 660 (1984); Arkansas Alcoholic Beverage Control Bd. v. King, 275 Ark. 308, 629 S.W.2d 288 (1982). We have recognized that administrative agencies are better equipped than courts, by specialization, insight through experience, and more flexible procedures to determine and analyze underlying legal issues affecting their agencies, and this recognition accounts for the limited scope of judicial review of administrative action and the refusal of the court to substitute its judgment and discretion for that of the administrative agency. First Nat'l Bank v. Arkansas State Bank Comm'r, 301 Ark. 1, 5, 781 S.W.2d 744, 746 (1989); Arkansas State Hwy. Comm'n v. White Advertising Int'l, 273 Ark. 364, 620 S.W.2d 280 (1981); Arkansas Beverage Control Bd. v. King, supra; Gordon v. Cummings, 262 Ark. 737, 561 S.W.2d 285 (1978).
To determine whether a decision is supported by substantial evidence, we review the whole record to ascertain if it is supported by relevant evidence that a reasonable mind might accept as adequate to support a conclusion. Livingston v. Arkansas State Medical Bd., 288 Ark. 1, 701 S.W.2d 361 (1986); Partlow v. Arkansas State Police Comm'n, 271 Ark. 351, 609 S.W.2d. 23 (1980). To establish an absence of substantial evidence to support the decision, the appellant must demonstrate that the proof before the administrative tribunal was so nearly undisputed that fair-minded persons could not reach its conclusions. Beverly Enters.-Ark., Inc. v. Arkansas Health Servs., 308 Ark. 221, 824 S.W.2d 363 (1992); Williams v. Scott, 278 Ark. 453, 647 S.W.2d 115 (1983). Substantial evidence is valid, legal and persuasive evidence. Independence Sav. & Loan Ass'n v. Citizens Fed. Sav. & Loan Ass'n, 265 Ark. 203, 577 S.W.2d 390 (1979).
For its sole point on appeal, DHS argues that the trial court erred in reversing the ALJ's decision to deny Medicaid benefits to Mrs. Schroder based upon an annuity purchased by her husband. Specifically, DHS contends that a single-premium $90,000.00 annuity should be considered as a countable asset for purposes of determining Mrs. Schroder's eligibility for Medicaid nursing home benefits. However, DHS made the additional point in proceedings before the ALJ that Mrs Schroder was ineligible regardless of whether the annuity was considered.
An overview of the Medicaid program is appropriate. The Medicaid Act was established by Title XIX of the Social Security Act of 1965, codified at 42 U.S.C. § 1396 et seq. (1994). In Ramsey v. Department of Human Services, 301 Ark. 285, 783 S.W.2d 361 (1990), we provided a historical background of the Medicaid Program:
The Congress, in 1965, established the Medicaid program, which is a medical assistance program for people "whose income and resources are insufficient to meet the costs of necessary care and services" 42 U.S.C. § 1396-1396k (Supp. II 1982); Atkins v. Rivera, 477 U.S. 154, 156, 106 S. Ct. 2456, 2458, 91 L. Ed. 2d 131 (1986). Medicaid benefits are provided automatically for the "categorically needy," persons who receive welfare payments under the Aid for Dependent Children (AFDC) and Supplemental Security Income (SSI) programs. If a state participates in the Medicaid program, it must provide coverage for the "categorically needy." 42 U.S.C. § 1396a(a)(10)(A) (Supp. II 1982).
Congress also enacted an optional program for the "working poor" who were deemed "medically needy." The "medically needy" become eligible for medicaid benefits when their income and assets are reduced by incurred medical expenses that reduce their income and assets below certain established levels. [These circumstances] then put them in roughly the same position as the "categorically needy." Public Health, 42 C.F.R. §§ 435.301, 435.308 (1987); 42 U.S.C. § 1396a(a)(17) (Supp. II 1982). Arkansas has elected to include this optional plan under its State Medicaid Plan. Therefore, it must comply with the requirements imposed by the federal Medicaid statutes. Atkins v. Rivera, supra; 42 U.S.C. § 1396a, supra.
Arkansas is a participating state in the Medicaid program. While the Secretary of the United States Department of Health and Human Services, through the Health Care Financing Administration ("HCFA") administers Medicaid on the federal level,1 the Arkansas Department of Human Services and its county offices administer the program on the local level. HCFA has promulgated its standards in the State Medicaid Manual.
Prior to 1988, a married individual who was admitted to a nursing home or other facility ("institutionalized spouse") was required to "spend down" his or her assets jointly held with the spouse who remained in the home ("community spouse") to become eligible for Medicaid benefits. H.R. Rep. No. 100-105(II), 100th Congr., 2nd Sess., at 65-67 (1988), reprinted in 1988 U.S.C.C.A.N. 857, 888-90....
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