Beltran v. Myers

Decision Date25 May 1982
Docket NumberNo. 81-5689,81-5689
Citation677 F.2d 1317
PartiesAntonia BELTRAN and Enosinsio Manahan, individually and on behalf of all others similarly situated, Plaintiffs-Appellees, v. Beverly A. MEYERS, individually and in her capacity as Director of the California State Department of Health; and Elizabeth Lyman, individually and in her capacity as Deputy Director of the California State Department of Health, Defendants-Appellants.
CourtU.S. Court of Appeals — Ninth Circuit

Richard J. Magasin, Deputy Atty. Gen., Los Angeles, Cal., for defendants-appellants.

Gill Deford, Nat. Senior Citizens Law Center, Los Angeles, Cal., for plaintiffs-appellees; Marie Y. Janiewski, Nat. Senior Citizens Law Center, Los Angeles, Cal., on brief.

Appeal from the United States District Court for the Central District of California.

Before WRIGHT and SNEED, Circuit Judges, and EAST *, District Judge.

SNEED, Circuit Judge:

This is an appeal from the grant of a preliminary injunction against enforcement of the State of California's transfer of assets rule for medical assistance eligibility. Plaintiffs and appellees are a class of aged, blind, and disabled individuals who have been denied Medicaid (known in California as "Medi-Cal") benefits by application of California's transfer of assets rule, on the grounds that prior to applying for benefits, they transferred assets for less than adequate consideration in order to become eligible for assistance. They brought suit in the district court alleging that the California rule, which they allege is more strict than federal rules for determining eligibility, has been preempted by the Boren-Long Amendment to the Social Security Act, Pub.L.No.96-611, sec. 5(a)-(c), §§ 1613(c), 1902(j), 94 Stat. 3566, 3567-68 (1980) (codified at 42 U.S.C.A. §§ 1382b(c), 1396a(j) (Supp. 1975-1981)) (hereinafter cited to U.S.C. and U.S.C.A. only). Jurisdiction in the district court was based on 28 U.S.C. § 1343(3) and (4) and on 28 U.S.C. § 1331. The district court granted the preliminary injunction and the State of California appeals. We affirm.

A. Applicable Law
1. Supplemental Security Income

The Social Security Act defines available resources for the purpose of determining eligibility for Supplemental Security Income (SSI) for the aged, blind, and disabled at 42 U.S.C. § 1382b (1976 & Supp. II 1978). In determining whether an individual's resources exceed the limits for SSI eligibility, the Social Security Administration must exclude certain assets from consideration, including the individual's home, automobile, household goods, and personal effects. 1

The Boren-Long Amendment alters section 1382b by adding a requirement that any transfer of assets for less than fair value within 24 months preceding the application for assistance shall be presumed to have been for the purpose of establishing eligibility for benefits or assistance under the Act. Assets so transferred shall be included in the applicant's resources for the purpose of determining eligibility based on need. 42 U.S.C.A. § 1382b(c) (Supp. 1975-1981). 2 Assets excluded under section 1382b(a) are also excluded under the Amendment, however, so that the transfer of an individual's home for less than fair value, for example, does not cause a denial of benefits under the Boren-Long Amendment. 3

2. Medicaid

Medicaid provides federal financial assistance to approved state plans furnishing medical assistance to aged, blind, or disabled individuals whose income and resources are insufficient to meet the costs of necessary medical services. 42 U.S.C. § 1396 et seq. (1976). A state Medicaid program must provide coverage to the "categorically needy"-including those individuals who receive SSI for the aged, blind, and disabled. 42 U.S.C. § 1396a(a)(10)(A); 42 C.F.R. § 435.4. States may provide coverage to the "medically needy"-those individuals with income and resources exceeding the limits for SSI eligibility, but nevertheless insufficient to meet the costs of necessary medical care. 42 U.S.C. § 1396a(a) (10)(C); 42 C.F.R. § 435.4.

If a state plan does provide assistance to the "medically needy," it may apply a transfer of assets rule similar to the federal rule for SSI to those applicants. The Boren-Long Amendment changes the Social Security Act's rules for Medicaid plans, 42 U.S.C. § 1396a (1976), to allow states to deny medical assistance to individuals who are eligible only because they have disposed of resources for less than fair market value. 42 U.S.C.A. § 1396a(j) (Supp. 1975-1981). However, the state plan for implementing denial of Medicaid assistance to such individuals can be no more restrictive than the federal law governing the denial of SSI, except that states may extend the period of ineligibility beyond two years where the uncompensated value of disposed of resources exceeds $12,000, 42 U.S.C.A. § 1396a(j)(2). 4

B. Standard Of Review

The grant or denial of a preliminary injunction should be reversed only if the district court abused its discretion or based its decision on an erroneous legal standard or on clearly erroneous findings of fact. Aleknagik Natives Ltd. v. Andrus, 648 F.2d 496, 501 (9th Cir. 1980); Miss Universe, Inc. v. Flesher, 605 F.2d 1130, 1132-33 & n.5 (9th Cir. 1979).

As this court frequently has stated, to obtain a preliminary injunction the moving party must demonstrate either a combination of probable success on the merits and the possibility of irreparable injury, or that serious questions are raised and the balance of hardships tips sharply in the moving party's favor. We also have observed frequently that the greater the relative hardship to the moving party, the less strong need be the showing of probable success that is required. William Inglis & Sons Baking Co. v. ITT Continental Baking Co., 526 F.2d 86, 88 (9th Cir. 1975); Benda v. Grand Lodge of International Association of Machinists, 584 F.2d 308, 315 (9th Cir. 1978).


We hold that the district court correctly applied the above standard in finding that plaintiffs-appellees are entitled to a preliminary injunction under either branch of the test.

A. Under The First Branch Of The Test
1. Probable Success On The Merits

Turning to the probable success on the merits of the plaintiffs-appellees, the Boren-Long Amendment, as already mentioned, prohibits states from applying to Medicaid applicants transfer of assets rules more restrictive than the rules for recipients of SSI. See 42 U.S.C.A. §§ 1396a(j), 1382b(c) (Supp. 1975-1981); see n.2 & 4, supra. The California rule appears to be significantly more restrictive in at least one respect. In two other respects there are differences of lesser and varying significance. Whether these latter two standing together, but without the first, would be significantly more restrictive is doubtful; however, they do not stand alone. After considering all differences we conclude that the California rule, when considered as a whole, appears to be significantly more restrictive. We recognize that the district court may well conclude, when considering whether to make the injunction permanent, that certain of the differences are insufficiently significant to be enjoined.

a. Transfer of exempt property.

Federal law, as already mentioned, excludes certain exempt assets, including homes, from consideration as transferred assets for SSI eligibility purposes. See supra pp. 1318-1319 & n.1. Only the transfer of non-exempt property can result in denial of benefits. The California rule, on the other hand, considers the value of exempt assets in its resources determination if they are transferred for less than fair value, and only excludes it when the property continues to be used by the transferor in the manner which caused its exempt status. Excerpt of Record at 242. This policy is clearly in conflict with federal law. The State's argument that Social Security Act exemptions, 42 U.S.C. § 1382b(a) (1976 & Supp. II 1978), are conditioned upon the resource being used both before and after its transfer for the purpose which caused its exempt status, State Brief at 22, is unconvincing. It is the status of property at the time of transfer, not thereafter, that determines whether it is exempt or non-exempt.

To support the State's argument the parenthetical expression "(but subject to the exclusions under subsection (a) of this section)" of 42 U.S.C. § 1382b(c) (1) should have included an exception which would have read somewhat as follows:

"(but subject to the exclusions under subsection (a) of this section, except that the exclusion under subsection (a)(1) is applicable only so long as the individual continues to use the home as his principal place of residence following a transfer described in this paragraph )."

We have no authority to add such an exception to the statute. Thus, this California rule is significantly more restrictive than federal law.

b. Ineligibility period limited to 24 months after transfer.

The SSI transfer rules only apply to transfers occurring within 24 months prior to application. 42 U.S.C. § 1382b(c)(1) (Supp. 1975-1981.) The Boren-Long Amendment creates a 24-month period after the date of transfer during which the resources transferred for less than fair market value to achieve SSI eligibility are deemed owned by the transferor for the purpose of determining SSI eligibility. 126 Cong.Rec. S16505-06 (daily ed. Dec. 13, 1980) (deemed ownership) (remarks of Senator Long). For example, if on September 1, 1981, an applicant gave away property worth $3,000 prior to applying for SSI, and the applicant's only remaining asset is a bank account of $200, for the purpose of determining SSI eligibility the applicant will be deemed to have resources of $3,200. The uncompensated value of $3,000 will continue to count against the applicant until September 3, 1983.

The Amendment also permits a state to implement a similar ineligibility period...

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