Cox v. Iowa Dep't of Human Servs.

Citation920 N.W.2d 545
Decision Date30 November 2018
Docket NumberNo. 18-0026,18-0026
Parties Susan E. COX and Edward A. Cox, Appellants, v. IOWA DEPARTMENT OF HUMAN SERVICES, Appellee.
CourtUnited States State Supreme Court of Iowa

Rebecca A. Brommel of Brown, Winick, Graves, Gross, Baskerville, and Schoenebaum, P.L.C., Des Moines, for appellants.

Thomas J. Miller, Attorney General, and Matthew K. Gillespie, Assistant Attorney General, for appellee.

Matthew Bollman of Pearson Bollman Law, West Des Moines, and Ron M. Landsman, Rockville, Maryland, for amici curiae National Academy of Elder Law Attorneys, Inc. and Special Needs Alliance, Inc.

WATERMAN, Justice.

In this appeal, we must determine whether the district court correctly interpreted the Federal Medicaid Act concerning eligibility for benefits for long-term institutional care. States must adhere to federal eligibility requirements to ensure that benefits are reserved for persons who lack financial means and who have not transferred personal assets that could pay for their care. The petitioners, husband and wife, are disabled and reside in a nursing home. At age sixty-five, they transferred over one-half million dollars to a pooled special needs trust. The Iowa Department of Human Services (DHS) determined the transfers were for less than fair market value and required a delay in their eligibility for Medicaid benefits. An administrative law judge (ALJ) affirmed the determination but required recalculation of the wife’s penalty delay. After exhausting intra-agency appeals, the petitioners sought judicial review. The district court affirmed the DHS position, and we retained the petitioners’ appeal.

On our review, we conclude the district court and DHS correctly construed and applied federal law requiring the delay in Medicaid benefits for long-term institutional care, effectively requiring the petitioners to tap their pooled trust assets first to pay for their nursing home care. Our determination is based on the plain meaning of the statutory text. Other appellate courts and the federal and Iowa agencies administering Medicaid have reached the same conclusion that Congress chose to treat transfers into pooled special needs trusts by such recipients under age sixty-five differently than transfers by those age sixty-five or older. Substantial evidence supports the DHS finding that the transfers were for less than fair market value. Accordingly, we affirm the district court judgment.

I. Background Facts and Proceedings.

Edward and Susan Cox, both born in 1950, are a married couple currently living at Westview Care Center in Indianola, Iowa. Both Edward and Susan are disabled and are unable to live on their own. Edward has lymphedema

, which causes swelling and makes his left arm unusable. He has had two kidney transplants and takes a number of medications daily. Susan had a stroke, which has induced left-side neglect.

In 2015, Susan received a settlement from a medical malpractice lawsuit relating to her stroke. Edward also received a settlement from the lawsuit for loss of consortium. They decided to transfer most of the funds they received from the settlement into separate pooled special needs trusts with The Center for Special Needs Trust Administration (the Center), a Florida-based nonprofit association. On February 8, 2016, when Edward and Susan were sixty-five years old, they executed joinder agreements for the trust. These joinder agreements created individual subaccounts within the trust for Edward and Susan. Edward’s subaccount received $101,921.81 and Susan’s subaccount received $474,457.88. The Center is the trustee of the trust accounts and is required to distribute the funds in accordance with the trust documents. The Center may only use the funds in these pooled trusts for Edward and Susan’s respective care.

In 2016, around the time the couple moved to the Westview Care Center, Edward and Susan applied for Medicaid long-term care benefits. The couple provided the pooled trust documents to the DHS for review. On June 14, the DHS issued Disposal of Assets Penalty Notices of Decision to Edward and Susan, denying their applications for long-term care benefits on the basis that they "transferred assets for less than fair market value." Edward’s notice of decision imposed an eighteen-month and twenty-five-day penalty, making him ineligible for Medicaid long-term care benefits through July 25, 2017. Susan received a penalty of eighty-seven months and twenty-two days, making her ineligible for Medicaid long-term care benefits through July 22, 2023.

Edward and Susan appealed their notices of decision and requested a hearing. The DHS consolidated the appeals. After the hearing, an ALJ issued a proposed decision finding that because Edward and Susan had made the transfers to the pooled trusts when they were sixty-five and had transferred assets for less than fair market value, they were subject to a penalty period. The ALJ found

[t]he Department determined the accounts constituted legitimate pooled trusts under 42 U.S.C. § 1396p(d)(4)(c) and, as such, the trusts were generally exempt from Medicaid eligibility rules. However, the Department further determined that the deposits into those subaccounts on February 8, 2016, after Edward and Susan had each turned 65 years old, constituted transfers of assets for less than fair market value requiring the imposition of penalty periods within which neither Mr. nor Mrs. Cox would be eligible for long term care assistance.

The ALJ affirmed the DHS’s decision as to Edward. With regard to Susan, the ALJ affirmed the decision that the transfer made her ineligible for Medicaid long-term care benefits, but remanded the matter to the DHS for a recalculation of the penalty period because it improperly included amounts paid for her care prior to the beginning of the penalty period. Under the revised calculation, Susan is ineligible for Medicaid long-term care benefits through April 28, 2023.

Edward and Susan appealed the proposed decision. Charles Palmer, then the director of the DHS, issued a final decision adopting the ALJ’s proposed decision in its entirety.

Edward and Susan filed a petition for judicial review challenging the DHS’s decision. The district court affirmed the final decision, concluding that the DHS had correctly interpreted the relevant statutory provisions relating to pooled special needs trusts and found that the transfer of assets after Edward and Susan had turned sixty-five subjected them to penalty periods. The district court also concluded that the DHS interpretation of the relevant statutory provisions did not constitute a per se approach to determining the Coxes’ penalties and the DHS had "conduct[ed] an individual review of the record, and concluded that the assets were transferred for less than fair market value."

Edward and Susan appealed the district court decision, and we retained their appeal.

II. Scope of Review.

Iowa Code section 17A.19 governs judicial review of this agency action. Iowa Dental Ass’n v. Iowa Ins. Div ., 831 N.W.2d 138, 142 (Iowa 2013) ; see also Iowa Code § 17A.19 (2016). This case turns on the interpretation of a federal statute, the Medicaid Act. Although the DHS is the state agency administering Medicaid benefits, we decline to give deference to the DHS interpretation of the Act and the DHS’s rules and regulations regarding Medicaid. See Am. Eyecare v. Dep’t of Human Servs. , 770 N.W.2d 832, 836 (Iowa 2009) (declining to defer to the DHS’s interpretation of its rules implementing Medicaid). But cf. Perry v. Dowling , 95 F.3d 231, 237 (2d Cir. 1996) (granting substantial deference to state agency’s interpretation of Federal Medicaid statute as joint federal–state program when "the state has received prior federal-agency approval to implement its plan, the federal agency expressly concurs in the state’s interpretation of the statute, and the interpretation is a permissible construction of the statute").

By contrast, we apply federal law on judicial deference to the federal statutory interpretation of the Centers for Medicare and Medicaid Services (CMS), the federal agency administering Medicaid. The CMS interpretation is set forth in its "State Medicaid Manual" and by opinion letter. The CMS interpretation was not the product of "a formal adjudication or notice-and-comment rulemaking." See Christensen v. Harris County , 529 U.S. 576, 587, 120 S.Ct. 1655, 1662, 146 L.Ed.2d 621 (2000). The Supreme Court has determined that "[i]nterpretations such as those in opinion letters—like interpretations contained in policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law—do not warrant Chevron -style deference." Id.1 "In Chevron , we held that a court must give effect to an agency’s regulation containing a reasonable interpretation of an ambiguous statute." Id. at 587–88, 120 S.Ct. at 1662. "Instead, interpretations contained in formats such as opinion letters are ‘entitled to respect’ under our decision in Skidmore v. Swift & Co. , 323 U.S. 134, 140, 65 S.Ct. 161, 164, 89 L.Ed. 124 (1944), but only to the extent that those interpretations have the ‘power to persuade.’ " Christensen , 529 U.S. at 587, 120 S.Ct. at 1663. In Skidmore , the United States Supreme Court clarified the level of deference to give to agency opinion letters.

We consider that the rulings, interpretations and opinions of the Administrator under this Act, while not controlling upon the courts by reason of their authority, do constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance. The weight [accorded to an administrative] judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.

323 U.S. at 140, 65 S.Ct. at 164.

Accordingly, we will give Skidmore deference to the CMS statutory...

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