Cook v. Glover

• Citation: 295 Ga. 495,761 S.E.2d 267
• Decision Date: 11 July 2014
• Docket Number: No. S13G1127.,S13G1127.
• Court: Supreme Court of Georgia
• Parties: COOK et al. v. GLOVER.

295 Ga. 495

761 S.E.2d 267

COOK et al.

v.GLOVER.

No. S13G1127.

Supreme Court of Georgia.

July 11, 2014.

Jason Samuel Naunas, Asst. Atty. Gen., Dennis R. Dunn, Deputy Atty. Gen., Shalen S. Nelson, Asst. Atty. Gen., Michelle Townes, Asst. Atty. Gen., Samuel S. Olens, Department of Law, Atlanta, for Appellant.

Joel Kevin Tharpe, J. Kevin Tharpe, P.C., Gainesville, for Appellee.

THOMPSON, Chief Justice.

We granted certiorari in Cook v. Bottesch, 320 Ga.App. 796, 740 S.E.2d 752 (2013) to consider whether the Court of Appeals properly interpreted 42 U.S.C. § 1396p with respect to whether a Medicaid applicant's purchase of an annuity was subject to an asset transfer penalty. In this case, the Georgia Department of Human Services, Family and Children Services (“DFCS”) granted appellee Jerry L. Glover's application for Medicaid benefits but imposed a multi-month asset transfer penalty on him pursuant to § 2339 of DFCS's Georgia Economic Support Services Manual (the “Eligibility Manual”) due to his refusal to name the State as the remainder beneficiary on an annuity. ¹ Glover appealed the penalty to an Office of State Administrative Hearings Administrative Law Judge (“ALJ”) who issued an initial decision reversing the penalty. DFCS thereafter filed a request for agency review by the Georgia Department of Community Health (“DCH”), the state agency responsible for administering Georgia's Medicaid program, and DCH issued a final decision upholding the penalty. Pursuant to OCGA § 50–13–19 of the Administrative Procedures Act, Glover then sought judicial review from the Superior Court of Hall County which affirmed the final agency decision. The Court of Appeals granted Glover's application for discretionary appeal and reversed the superior court, concluding that § 2339 of the Eligibility Manual as applied to Glover was inconsistent with the plain language of the federal Medicaid statute and that pursuant to 42 U.S.C. §§ 1396p (c)(1) (F) and (G), Glover's annuity was not an asset to which the asset transfer penalty would apply. See Cook v. Bottesch, supra. In holding that the penalty did not apply, the Court of Appeals found the federal statutory language was unambiguous and refused to defer to DCH's decision which was based on a contrary interpretation of the statute provided by the United States Department of Health and Human Services, Centers for Medicare and Medicaid Services (“CMS”), the federal agency charged with administering the Medicaid program.

Appellants, David Cook in his official capacity as Commissioner of DCH and Clyde L. Reese in his official capacity as Commissioner of DFCS, appealed to this Court arguing that the Court of Appeals improperly interpreted the annuity section of the Medicaid Act and erred in holding that § 2339 as applied to Glover violated federal law. Asserting that the statutory provisions at issue are ambiguous, appellants contend that the Court of Appeals was required to defer to CMS's interpretation of the federal statute. See Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 843, n. 9, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984) (reviewing court must give effect to an agency's regulation containing a reasonable interpretation of an ambiguous statute). Because we find that the federal statutory provisions at issue are ambiguous and the relevant administrative agencies' interpretations thereof are based on a permissible construction of the statutory language,² we reverse the Court of Appeals' decision in this case.

1. Medicaid is a joint federal-state program that provides medical care to needy individuals. See Douglas v. Independent Living Center of Southern California, Inc., ––– U.S. ––––, 132 S.Ct. 1204, 182 L.Ed.2d 101 (2012). As a participant in the Medicaid program, the State of Georgia is required to have an approved state plan for medical assistance which complies with certain requirements imposed by the Medicaid Act as well as with regulations promulgated by the Secretary of Health and Human Services. See Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 502, 110 S.Ct. 2510, 110 L.Ed.2d 455 (1990); 42 U.S.C. § 1396a (a). As federal administrator of the Medicaid program, CMS is responsible for the approval of state Medicaid plans and for providing statutory interpretation and guidance with respect to Medicaid eligibility and the penalties for noncompliance with Medicaid rules. ³ See Douglas, supra, 132 S.Ct. at 1208.

In Georgia, DCH is the state agency responsible for administering the Medicaid program and is statutorily authorized by the State “to establish such rules and regulations as may be necessary or desirable in order to execute the state plan and to receive the maximum amount of federal financial participation available.” OCGA § 49–4–142(a). See also 42 C.F.R. § 431.10. DCH, which issues policies and procedures governing the state's Medicaid program, contracts with DFCS to make Medicaid eligibility determinations. Relevant to this case, federal law requires Georgia's plan for medical assistance to comply with the provisions of 42 U.S.C. § 1396p with respect to the transfer of assets by Medicaid applicants. See 42 U.S.C. § 1396a (a)(18). Specifically, in assessing an applicant's eligibility for medical assistance under the plan, subsection 1396p (c) requires that the state provide a penalty for the disposal of assets for less than fair market value during a five-year, look-back period. This subsection additionally sets forth rules regarding the assessment of penalties for the transfer of various types of assets, as well as provisions for protecting certain transfers from the penalty. With respect to the treatment of annuities, subsection 1396p (c)(1)(F) specifically requires:

For purposes of this paragraph, the purchase of an annuity shall be treated as the disposal of an asset for less than fair market value unless—

(i) the State is named as the remainder beneficiary in the first position for at least the total amount of medical assistance paid on behalf of the institutionalized individual under this subchapter; or

(ii) the State is named as such a beneficiary in the second position after the community spouse or minor or disabled child and is named in the first position if such spouse or a representative of such child disposes of any such remainder for less than fair market value.

Next, subsection 1396p (c)(1)(G) provides:

For purposes of this paragraph with respect to a transfer of assets, the term “assets” includes an annuity purchased by or on behalf of an annuitant who has applied for medical assistance with respect to nursing facility services or other long-term care services under this subchapter unless ...

(ii) the annuity—

(I) is irrevocable and nonassignable;

(II) is actuarially sound (as determined in accordance with actuarial publications of the Office of the Chief Actuary of the Social Security Administration); and

(III) provides for payments in equal amounts during the term of the annuity, with no deferral and no balloon payments made.

CMS has interpreted the interplay between these subsections as requiring that all annuities comply with both (F) and (G) in order to avoid the imposition of a penalty. See CMS, Changes in Medicaid Annuity Rules under the Deficit Reduction Act of 2005, § II.B (July 27,2006) Letter Enclosure § 6012.⁴ See also Hutcherson v. Arizona Health Care Cost Containment Sys. Admin., 667 F.3d 1066, 1069–70 (9th Cir.Ariz.2012). DCH Policy § 2339, which comports with the guidance set forth by CMS for determining whether the purchase of an annuity will be treated as the disposal of an asset for less than fair market value, thus first requires that the state be named a remainder beneficiary in accordance with 42 U.S.C. § 1396p (c)(1)(F), before examining the annuity to determine whether it additionally meets the requirements of subsection (G) that it be actuarially sound. In this case, Glover disclosed his annuity, which met the requirements of subsection (G); however, because it did not comply with the requirement of subsection (F) that the state be named a remainder beneficiary, he was assessed a transfer penalty.

In reversing DCH's decision upholding the penalty, the Court of Appeals noted that the CMS interpretation on which it was based, requiring an annuitant applicant to comply with both 42 U.S.C. §§ 1396p (c)(1)(F) and (G) to avoid the asset transfer penalty, was partly inconsistent with the court's own reading of the federal statute. See Bottesch, 320 Ga.App. at 802–803, 740 S.E.2d 752. Although agreeing that a plain reading of subsection (F) standing alone clearly required that the state be named a remainder beneficiary of any annuity, the Court of Appeals interpreted subsection (G) to unambiguously remove actuarially sound annuities benefitting Medicaid applicants from the requirements of subsection (F) by removing them altogether from the definition of “assets” with respect to a transfer of assets. Id. Concluding that the statutory language was plain and unambiguous and that the intent of Congress with respect to the treatment of annuities under subsections (F) and (G) was thus clear, the Court of Appeals determined that the judicial deference generally afforded an agency's interpretation of a statute under its purview was not warranted with respect to that portion of CMS's interpretation with which the court disagreed. See Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 843, n. 9, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984) (“The judiciary is the final authority on issues of statutory construction and must reject administrative constructions which are contrary to clear congressional intent.”); Christensen v. Harris County, 529 U.S. 576, 588, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000) (where language is not ambiguous deference to agency interpretation is unwarranted). See also Handel v. Powell, 284 Ga. 550, 553, 670 S.E.2d 62 (2008) (“While judicial deference is afforded an agency's interpretation...