Bird v. PA DEPT. OF PUBLIC WELFARE

• Decision Date: 03 June 1999
• Citation: 731 A.2d 660
• Parties: Margaret BIRD and H. Paul Bird, Petitioners, v. PENNSYLVANIA DEPARTMENT OF PUBLIC WELFARE, Respondent.
• Court: Pennsylvania Commonwealth Court

731 A.2d 660

Margaret BIRD and H. Paul Bird, Petitioners, v. PENNSYLVANIA DEPARTMENT OF PUBLIC WELFARE, Respondent.

Commonwealth Court of Pennsylvania.

Argued March 11, 1999.

Decided June 3, 1999.

David L. Narkiewicz, Montgomeryville, for petitioners.

Lesley Smith Oakes, Philadelphia, for respondent.

Before FRIEDMAN, J., LEADBETTER, J., and MIRARCHI, Jr., Senior Judge.

MIRARCHI, Jr., Senior Judge.

Margaret Bird and H. Paul Bird, wife and husband, petition this Court to review a final administrative order of the Pennsylvania Department of Public Welfare (DPW) affirming a hearing officer's denial of medical assistance (MA) benefits to Margaret Bird. We affirm.

The essential facts are undisputed. Margaret Bird entered Brandywine Hall Care Center, a nursing home in Chester County, on January 29, 1996. At that time, Mrs. Bird and her husband, H. Paul Bird, possessed $213,459.41 in assets available for Mrs. Bird's care. On June 28, 1996, the Birds' two daughters, Jean McBride, who is also Mrs. Bird's attorney-in-fact, and Barbara Ristine, created an irrevocable trust, naming themselves as grantors. The trustee of the trust was Linda Foy, described as the banker and friend of Mr. Bird. On that same date, Mrs. Bird assigned her right, title, and interest in seven certificates of deposit to Mr. Bird, who then purchased an annuity from the irrevocable trust. The amount used to purchase the annuity was $143,400. Pursuant to the terms of an annuity agreement entered into between Linda Foy and Mr. Bird, Mr. Bird was to receive monthly payments in the amount of $1000 beginning August 1, 1996 for a period of thirty-six months and, thereafter, monthly payments in the amount of $3000 for the remainder of Mr. Bird's life. Upon the death of Mr. Bird, the annuity agreement expired and no further payments would be made to Mr. Bird's estate. The annuity agreement specifically provided:

The intent of this irrevocable annuity is to return to Annuitant [Mr. Bird] an amount, the present value of which is equal to or greater than the Investment, taking into consideration Annuitant's actuarial life expectancy as defined by State Medicaid Manual, Health Care Financing Administration Transmittal 61, November 1994, Section 3258.9(B), while also preserving the Investment for use by annuitant if medical assistance or other public benefits covering long-term nursing care are reduced or eliminated.

Exhibit C-7, p. 1.

The trust agreement provides, among other things, that upon the death of Mr. and Mrs. Bird, the principal and undistributed income of the trust estate shall be distributed equally between the Grantors (the Birds' children), per stirpes. The trust agreement also permits the trustee, in her sole discretion, to make loans from the trust estate to the estate of any Grantor or the estate of any Grantor's spouse. The trustee's discretion may not be challenged, and the terms for any loan may be made in the trustee's sole discretion. The trustee is also authorized to purchase assets from the Grantors' estates and assets from the estate of any deceased member of the Grantors' immediate family. The trustee, in her sole and absolute discretion, may also make gifts from the trust estate. See, generally, Exhibit C-6.

Also, on June 28, 1996, Jean McBride, as Mrs. Bird's attorney-in-fact, completed an application for MA for Mrs. Bird. By notification dated October 28, 1996, the County Assistance Office (CAO) advised the Birds that Mrs. Bird was ineligible for MA for twenty-six months from June 28, 1996, the date that the CAO determined that a transfer of assets for less than fair consideration had occurred. The CAO arrived at its determination by noting that at the time Mrs. Bird entered the nursing home, she and her husband had $213,459.41 in available assets. As will be more fully explained later in this opinion, DPW regulations provide that the MA applicant is eligible for MA when her assets are reduced to $2400, while the spouse remaining in the community (community spouse) is permitted to retain a share of the assets (Community Spouse Resource Allowance), which DPW calculated for Mr. Bird to be, as adjusted, $83,172. Subtracting $2400 and $83,172, together with $17,619 already spent on nursing home charges, there remained $110,268.41 from the original $213,459.41. The CAO determined that this remaining amount had been transferred for less than fair consideration and in violation of DPW regulations when it was used to purchase the annuity. This money was thus considered available for paying Mrs. Bird's nursing home costs. According to the regulatory scheme, the CAO then divided $110,268.41 by the then-average monthly nursing home charge in Pennsylvania to arrive at a twenty-six month period of ineligibility for MA, commencing on the date the funds were transferred.

The Birds appealed and a hearing was held before a hearing officer. Testifying for DPW were an income maintenance caseworker, an income maintenance caseworker supervisor, and the counsel for the southeastern region of DPW, all of whom reviewed Mrs. Bird's application. Jean McBride testified for Mrs. Bird only to identify Linda Foy as Mrs. Bird's banker and friend. The hearing officer denied the appeal, concluding that the Birds had not rebutted the CAO's determination that the transfer of assets was for less than fair consideration and was made with the intent to qualify for MA. Specifically, the hearing officer opined as follows:

In the absence of arguments or testimony to establish why, with [Mrs. Bird] being in the nursing home since January, 1996, and with appreciable assets currently available to her, on June 28, 1996, her power of attorney applied for [nursing home care] benefits and [Mrs. Bird] assigned her interest to her community spouse, this Hearing Officer concludes that the presumption has not been rebutted that [Mrs. Bird's] power of attorney and [Mrs. Bird] acted in the ultimate best interest of the community spouse, rather than that of [Mrs. Bird] and did so to qualify [Mrs. Bird] for MA benefits.

As regards the issue of the transfer of assets by the institutionalized spouse to her community spouse and the subsection of same to fair consideration, while regulations 55 Pa.Code § 178.104(e)(2) and (3) detail that an individual will not be ineligible for payment for [nursing home care] if assets were transferred to the community spouse or to another for the sole benefit of the community spouse, nevertheless it must be shown that either the individual intended to dispose of the assets for fair consideration or for other valuable consideration, or the assets were transferred exclusively for a purpose other than to qualify for MA, or the assets transferred for less than fair market value were returned to the individual. Arguments by [Mrs. Bird's] legal representative have not shown that any of these conditions was met.

Appeal of: Margaret Bird, Case No. 150210741-001, slip. op. at 3-4 (January 23, 1998). The Director of the Bureau of Hearings and Appeals affirmed the hearing officer's decision, and this appeal followed.

This Court's scope of review is limited to a determination of whether an error of law was committed, whether necessary findings of fact are supported by substantial evidence, and whether constitutional rights were violated. Oriolo v. Department of Public Welfare, 705 A.2d 519 (Pa.Cmwlth.1998). The Birds argue that DPW's final administrative order affirming the denial of MA benefits is in error because: (1) DPW ignored its own regulations pertaining to MA eligibility and spousal protection; (2) DPW ignored its regulations permitting permissible transfers between spouses and transfers for fair market value; (3) the hearing officer's opinion omits supporting facts and evidence and, (4) DPW's decision is arbitrary and inconsistent with the law. The crux of the Birds' argument is that DPW's regulations permit unrestricted transfers between spouses and transfers for fair market value to others. The Birds argue that all that occurred here was a permitted transfer from one spouse to another who then purchased an annuity at fair market value, thereby reducing the Birds' assets to a point rendering Mrs. Bird eligible for MA. We disagree with the Birds' reading of the law on several levels.

"The Medicaid program was established in 1965 in Title XIX of the Social Security Act [42 U.S.C. §§ 1396-1396r] to provide federal financial assistance to states that choose to reimburse certain costs of medical treatment for needy persons." Oriolo, 705 A.2d at 520. Coverage may be provided for those described as the "medically needy," whose income and resources are insufficient to meet necessary medical costs. 42 U.S.C. § 1396A(a)(10)(c). States providing such coverage must establish eligibility standards for the medically needy. 42 U.S.C. § 1396A(a)(17). In Pennsylvania, Section 442.1 of the Public Welfare Code¹ authorizes DPW to establish such standards. DPW's duly promulgated regulations provide that an applicant is eligible for medically needy MA benefits if the applicant has available resources of $2400 or less. 55 PA Code § 178 (App.A).

Prior to 1988, the eligibility rules under the Medicaid program often forced married couples to spend virtually all of their joint resources to allow one to qualify for MA nursing home benefits, thus often leaving the community spouse impoverished. See Cleary v. Waldman, 959 F.Supp. 222 (D.N.J.1997). In response to this circumstance, Congress passed the Medicare Catastrophic Coverage Act of 1988 (MCCA), 42 U.S.C. § 1396r-s, as amended. The primary intent of the MCCA was "to end the pauperization [of the community spouse] by assuring that [he or she] has a sufficient but not excessive amount of income and resources available" when the other spouse is institutionalized in a nursing home. H.R.Rep. No. 105(II), pt. 2 at 67, 1988 U.S.C.G.A.N. at 888. See also Cleary. Also, the MCCA was designed to eliminate loopholes...