Commissioner of Dept. of Social Services of City of New York v. Spellman

• Decision Date: 05 February 1997
• Citation: 661 N.Y.S.2d 895,173 Misc.2d 979
• Parties: , 54 Soc.Sec.Rep.Ser. 239, 1997 N.Y. Slip Op. 97,487 COMMISSIONER OF the DEPARTMENT OF SOCIAL SERVICES OF the CITY OF NEW YORK, Plaintiff, v. Benjamin SPELLMAN, Defendant.
• Court: New York Supreme Court

Page 895

661 N.Y.S.2d 895

173 Misc.2d 979, 54 Soc.Sec.Rep.Ser. 239,

1997 N.Y. Slip Op. 97,487

COMMISSIONER OF the DEPARTMENT OF SOCIAL SERVICES OF the CITY OF NEW YORK, Plaintiff, v. Benjamin SPELLMAN, Defendant.

Supreme Court, New York County.

Feb. 5, 1997.

Littman Krooks Roth & Ball, P.C., New York City (Bernard Krooks, of counsel), for defendant.

Douglas R. Israel and Howard K. Gibbs, New York City, for plaintiff.

JANE S. SOLOMON, Justice.

This action by the Commissioner of the Department of Social Services of the City of New York (the "Department") against defendant Benjamin Spellman is brought to recover benefits paid under the auspices of the Federal Medical Assistance Program ("Medicaid") for the care of defendant's wife, who is in a nursing home. Mr. Spellman moves to dismiss, raising an issue of first impression: whether, under the New York State Social Services Law ("SSL"), the Department may recover the Medicaid assistance paid for the care of an institutionalized spouse from the community spouse, or whether such recovery is barred because there is no analogous federal statutory scheme. As stated by defendant, "the sections of the Social Services Law upon which DSS relies are unequivocally preempted by the federal Medicaid statute. 42 U.S.C. § 1396 et. seq." As set forth below, I conclude that there is no such preemption.

Factual Background

For the purposes of this motion to dismiss, the factual allegations in the complaint are deemed to be true.

On or about January 1, 1994, Pearl Spellman, defendant's wife, was admitted to Clearview Nursing Home, a skilled nursing facility. Mrs. Spellman applied for Medicaid coverage of her nursing home charges and such coverage became effective as of April 1995. Mrs. Spellman is an "institutionalized spouse," as that term is defined by SSL § 366-c(2)(a). Mr. Spellman is referred to as the "community spouse." SSL § 366-c(2)(b).

At the time of Mrs. Spellman's application for Medicaid, the Department requested that defendant provide for his wife's care, which he expressly refused to do. Mrs. Spellman's application was nevertheless approved, since both state and federal law require that Medicaid benefits be provided, notwithstanding the refusal to pay of an applicant's responsible relative with sufficient income and resources.

From April 1 through December 15, 1995, the Department paid $32,975.25 for Mrs. Spellman's care and further charges accrued at the rate of $141.95 per day. So long as Mrs. Spellman remains eligible, the Department will continue to pay for her care, which accrues at $141.95 per day.

Under New York law, spouses are obligated for the support of each other, SSL § 101. To prevent the impoverishment of both partners when one becomes institutionalized, a matter of grave concern at both the national and state level, the law recognizes the need for the community spouse to retain some property for his or her own benefit, permanently unencumbered by the spousal support obligation. The New York statute embodying the matter of calculating the shares of resources available to each spouse is section 366-c of the SSL, entitled "Treatment of income and resources of institutionalized persons."

It is implicit from the papers submitted on this motion that Mr. and Mrs. Spellman disclosed their financial affairs to the Department. Thereafter, the Department determined that, under the several provisions of 366-c, Mr. Spellman's resource allowance is $74,820 and he is allowed $1,871.88 in monthly income. However, Mr. Spellman, concededly a responsible party under § 101(1) of the SSL, has resources of $223,160.41, which exceed the allowable resource level calculation under § 366-c by $148,340.41. This led the Department to determine that Mr. Spellman has sufficient income and resources under the statute to provide financial assistance to Mrs. Spellman. By letter dated October 6, 1995 the Department demanded that he pay for her care (up to the amount his resources exceed the amount the statute permits him to keep). He refused. The Department then commenced this action. This motion then followed.

Statutory Framework

Title XIX of the Social Security Act, codified at 42 U.S.C. § 1396, et seq. ("Medicaid Act"), was established by Congress in 1965 as "a cooperative federal-state health benefits assistance program designed to provide necessary medical services to low income persons." Citizens Action League v. Kizer, 887 F.2d 1003, 1005 (9th Cir.1989), cert. denied, 494 U.S. 1056, 110 S.Ct. 1524, 108 L.Ed.2d 764 (1990). State and local governments responsible for administering Medicaid must abide by the requirements of the Medicaid Act to qualify for receipt of federal funds. ¹ Id. Under the Medicaid Act, a state or local administering agency is required to "take all reasonable measures to ascertain the legal liability of third parties (including health insurers, group health plans * * * service benefit plans, and health maintenance organizations) to pay for care and services available under the plan." (42 U.S.C. § 1396a(a)(25)(A).)

As relevant here, under SSL § 366(3)(a) the Department has "an implied contract with" a person in Mr. Spellman's position from whom reimbursement may be sought. Section 366(3)(c) specifically authorizes a proceeding "to compel any responsible relative to contribute to the support of any person receiving or liable to become in need of medical assistance."

In 1988, Congress passed the Medicare Catastrophic Coverage Act (Pub.L. 100-360, 102 U.S.Stat. 683, codified at, inter alia, 42 U.S.C. § 1396r-5) (the "MCCA"), which established rules for determining how much of an institutionalized spouse's income must be used for his or her institutional care and how much may be contributed to support the community spouse. The MCCA also permitted a state to establish a minimum monthly needs allowance for the community spouse to be paid, if necessary, from income received by the institutionalized spouse. See Gomprecht v. Gomprecht, 86 N.Y.2d 47, 48, 629 N.Y.S.2d 190, 652 N.E.2d 936 (1995). In response to the MCCA, New York enacted SSL § 366-c in 1989.

In determining whether an institutionalized spouse is eligible for medical assistance, all resources held by either the institutionalized spouse or the community spouse or both are considered available to the extent that the value of the resources exceeds the community spouse's resource allowance (SSL § 366-c(5)(a)). The purpose of the spousal allowance provision is "to protect the community spouse from financial disaster." Schachner v. Perales, 85 N.Y.2d 316, 323, 624 N.Y.S.2d 558, 648 N.E.2d 1321 (1995). Mrs. Spellman was not considered ineligible for medical assistance, even though assets held by Mr. Spellman exceed his resource allowance, because he exercised his right of spousal refusal ( § 1396r-5(c)(3); SSL § 366(3)(a), § 366-c(5)(b)). See also Matter of DaRonco, 167 Misc.2d 140, 143, 638 N.Y.S.2d 275 (Sup.Ct.Westch.Co.1995).

Allegations

Mr. Spellman moves to dismiss, claiming that the only provision in the Medicaid Act regarding recovery of Medicaid benefits correctly paid is found in 42 U.S.C. § 1396p(b). This section provides that

(1) No adjustment or recovery of any medical assistance correctly paid on behalf of an individual under the State plan may be made, except that the State shall seek adjustment or recovery of any medical assistance correctly paid on behalf of an individual under the State plan in the case of the following individuals:

(A) In the case of an individual described in subsection (a)(1)(B) [of this section], the State shall seek adjustment or recovery from the individual's estate or upon sale of the property subject to a lien imposed on account of medical assistance paid on behalf of the individual.

(B) In the case of an individual who was 55 years of age or older when the individual received such medical assistance, the State shall seek adjustment or recovery from the individual's estate, * * *

Relying on the language that "no * * * recovery * * * may be made, except * * *," Mr. Spellman maintains that Congress intended there be no recovery under any circumstances other than those enumerated, namely by a real property lien, or claim after death against an estate. ² In other words, he contends that the New York statutes on which the Department relies are preempted by the federal Medicaid Act.

The Department asserts that § 1396p is irrelevant because § 1396k authorizes it to seek recoupment from Mr. Spellman. Section 1396k provides that

(a) For the purpose of assisting in the collection of medical support payments * * * a State plan for medical assistance shall--

(1) provide that, as a condition of eligibility for medical assistance * * * the individual is required--

(A) to assign the State any rights, of the individual * * * to support * * * and to payment for medical care from any third party

* * * * * *

(C) to cooperate with the State in identifying, and providing information to assist the State in pursuing, any third party who may be liable to pay for care and services available under the plan * * *

The Department claims that Mr. Spellman is a third party under 42 U.S.C. § 1396k and that SSL § 366(3)(a) expressly creates an implied contract between the Department and the community spouse, on which the Department may rely in seeking to recover the cost of such care.

Defendant argues that § 1396k applies only to third party entities such as insurance companies, not a recipient's spouse. Alternatively, even if § 1396k applies, he submits that the statute merely delineates eligibility requirements and does not confer a right of recovery. In essence, he argues that the statute, providing for care for his wife when he refuses to support her, reflects a governmental intention never to look to him again.

Discussion

Under the Supremacy Clause (U.S. Const., art. VI, cl. 2), if Congress enacted a statute with the intention of exercising its authority to set...