Cook v. Department of Social Services

• Decision Date: 05 September 1997
• Docket Number: Docket No. 194655
• Citation: 225 Mich.App. 318,570 N.W.2d 684
• Parties: , 54 Soc.Sec.Rep.Ser. 621 Anna COOK, Petitioner-Appellee, v. DEPARTMENT OF SOCIAL SERVICES, Respondent-Appellant.
• Court: Court of Appeal of Michigan — District of US

Page 684

570 N.W.2d 684

225 Mich.App. 318, 54 Soc.Sec.Rep.Ser. 621

Anna COOK, Petitioner-Appellee, v. DEPARTMENT OF SOCIAL SERVICES, Respondent-Appellant.

Docket No. 194655.

Court of Appeals of Michigan.

Submitted July 9, 1997, at Detroit.

Decided Sept. 5, 1997, at 9:00 a.m.

Released for Publication Nov. 25, 1997.

John B. Payne, Dearborn, for petitioner-appellee.

Frank J. Kelley, Atty. Gen., Thomas L. Casey, Sol. Gen., and Chantal B. Fennessey, Asst. Atty. Gen., for respondent-appellant.

Before DOCTOROFF, P.J., and MacKENZIE and GRIFFIN, JJ.

PER CURIAM.

Respondent, Department of Social Services, appeals by leave granted from a circuit court order reversing a Department of Social Services Bureau of Administrative Hearings determination that petitioner Anna Cook was ineligible to receive Medicaid benefits. We reverse.

Anna Cook is an incompetent adult who resides in a nursing home. On August 31, 1977, she and her now-deceased husband established an irrevocable trust requiring the trustee to pay all trust funds for the benefit of the grantors. Until early 1995, Anna Cook's nursing home care was paid with income and principal from this trust.

In February 1995, Kenneth Cook, Anna's guardian and son, as well as trustee of the Cook trust, began applying only the trust income toward his mother's care and sought Medicaid benefits through respondent Department of Social Services to cover her excess nursing home expenses. The application for Medicaid indicated that the trust had a value of $98,016.17; it also listed a bank account in the name of the trust valued at $18,647.16. The Cooks' joint bank account was valued at $1,976.48.

The department denied the application. In reaching this result, it concluded that the Cook trust met the characteristics of a Medicaid Qualifying Trust (MQT), a type of trust the assets of which are countable in determining the grantor's eligibility for Medicaid benefits. Because Anna Cook's assets, including the trust assets, exceeded the $2,000 limit for Medicaid qualification, she was determined to be ineligible to receive benefits. An administrative hearing followed. Rejecting the applicant's contention that the trust was not an MQT with assets attributable to Anna Cook, the hearing referee also ruled that she did not qualify for Medicaid benefits because her assets exceeded the $2,000 limit. On appeal the circuit court reversed, concluding that the trust assets were not countable as Anna Cook's assets and that she was entitled to Medicaid benefits.

The Medicaid program, 42 U.S.C § 1396 et seq., was established by Congress in 1965 as a cooperative federal-state program in which the federal government reimburses the state for a portion of the costs of medical care for needy individuals. Ronney v. Dep't of Social Services, 210 Mich.App. 312, 315, 532 N.W.2d 910 (1995). The test for Medicaid eligibility is essentially a needs-based test, with coverage being denied if the applicant exceeds a ceiling in countable assets. Id. Generally, funds held in an irrevocable trust are not countable assets. Id. This general rule applied when the Cooks' irrevocable trust was created in 1977.

In 1986, however, Congress amended the Medicaid statutes so that assets in certain trusts would be counted in determining whether a Medicaid applicant satisfied the maximum asset requirement. Relevant to this case was the addition of 42 U.S.C. § 1396a(k), which defined an MQT and established the circumstances under which the assets of an MQT would be deemed countable in determining the grantor's Medicaid eligibility. In this case, the parties do not dispute that, if § 1396a(k) is applicable to the Cook trust, the trust qualifies as an MQT and is countable as an asset of Anna Cook.

In 1993, Congress again amended the provisions governing Medicaid qualification. In so doing, § 1396a(k) was deleted and the treatment of trusts for Medicaid qualification was moved to § 1396p(d). At that time, even stricter criteria were added regarding the treatment of trusts. However, Congress specifically provided that the amendments of § 1396p(d) concerning trust assets would not apply "with respect to trusts established on or before the date of the enactment of this Act," August 10, 1993. In light of this provision, it is undisputed that, in this case, the Cook trust is not governed by § 1396p(d). Instead, the issue in this case is whether trusts like the Cook trust, created before August 10, 1993, continue to be governed by the now deleted § 1396a(k).

Petitioner argues, and the circuit court agreed, that because Congress repealed the 1986 provisions governing MQTs, those provisions cannot apply to the Cook trust. Respondent, on the other hand, contends that Congress intended that the Medicaid laws established in 1986, including the MQT provisions, are to be applied to all trusts established on or before August 10, 1993, while the even more stringent 1993 criteria are to be reserved for trusts established after August 10, 1993. We conclude that respondent is correct.

Congress enacted the 1986 provisions governing MQTs in response to the increased use of irrevocable trusts by persons of considerable means to qualify for Medicaid benefits without depleting their estates. See Cohen v. Comm'r of the Division of Medical Assistance, 423 Mass. 399, 401-407, 668 N.E.2d 769, 770-773 (1996); In re Kindt, 542 N.W.2d 391, 395 (Minn.App., 1996). As recognized by this Court, the purpose of the Medicaid qualification provisions concerning the treatment of trust assets was to prevent "individuals, otherwise ineligible for Medicaid benefits, from making themselves eligible by creating irrevocable trusts in order to preserve assets for their heirs." Ronney, supra, p. 319, 532 N.W.2d 910. The bill containing the provisions finally enacted as the MQT law was referred to the House Committee on Energy and Commerce, which recommended passage with the following statement:

The Committee feels compelled to state the obvious. Medicaid is, and always has been, a program to provide basic health coverage to people who do not have sufficient income or resources to provide for themselves. When affluent individuals use Medicaid qualifying trusts and similar "techniques" to qualify for the program, they are diverting scarce Federal and State resources from low-income elderly and disabled individuals, and poor women and children. This is unacceptable to the Committee. [H.R. Rep. No. 265, 99th Cong., 1st Sess, pt. 1, at 72.]

It seems clear that, when Congress subsequently amended the Medicaid qualification provisions to provide even more stringent requirements on grantors with trusts established after August 1993, it did not at the same time intend simply to abandon all qualification requirements for grantors with trusts created before 1993 and once again allow those persons to "divert[ ] scarce Federal and State resources from low-income elderly and disabled individuals." Id. Rather, the only reasonable conclusion is that Congress intended the 1986 provisions regarding MQTs to continue to apply to trusts established before August 10, 1993.

We have...