Dillingham v. NORTH CAROLINA DHR, COA98-820.

• Decision Date: 06 April 1999
• Docket Number: No. COA98-820.,COA98-820.
• Citation: 513 S.E.2d 823,132 NC App. 704
• Court: North Carolina Court of Appeals
• Parties: David DILLINGHAM, as guardian ad litem for Charles B. Dillingham, Petitioner-appellant, v. NORTH CAROLINA DEPARTMENT OF HUMAN RESOURCES, Respondent-appellee.

513 S.E.2d 823

132 NC App. 704

David DILLINGHAM, as guardian ad litem for Charles B. Dillingham, Petitioner-appellant, v. NORTH CAROLINA DEPARTMENT OF HUMAN RESOURCES, Respondent-appellee.

No. COA98-820.

Court of Appeals of North Carolina.

April 6, 1999.

Pisgah Legal Services by Curtis B. Venable, Asheville, for petitioner-appellant.

Attorney General Michael F. Easley by Assistant Attorney General Kathryn J. Thomas, for respondent-appellee.

MARTIN, Judge.

In August of 1996, Charles Dillingham was discharged from a hospital to a nursing care facility after suffering a stroke. Mr. Dillingham was 86 years of age. In September 1996, Mr. Dillingham transferred assets worth $126,735.76 to his son, David Dillingham, the petitioner. In November 1996, petitioner applied to the Buncombe County Department of Social Services for Medicaid coverage for his father's long term nursing care. The Department of Social Services denied benefits and imposed sanctions based upon the uncompensated asset transfer. Contending the transfer of assets took place exclusively for a purpose other than to qualify for Medicaid assistance, petitioner appealed to the Division of Social Services of the North Carolina Department of Human Resources (now North Carolina Department of Health and Human Resources) (hereinafter "DHR").

The Division of Social Services hearing officer issued a tentative decision in which he concluded "the greater weight of the written documentation [offered by petitioner] is not clear and convincing that the transfer was exclusively devoid of all Medicaid considerations" (emphasis original) and affirmed the decision of the Buncombe County Department of Social Services. The hearing officer cited the provisions of the North Carolina "Aged, Blind and Disabled Medicaid Manual", otherwise known as the "State Adult Medicaid Manual," § 2240, VIII.B (MA-2240 VIII B), which provides in pertinent part:

1. When a non-allowable transfer is verified, presume the transfer was made to establish Medicaid eligibility for cost of care. Determine the sanction penalty....

2. Advise the a/r [applicant/recipient] he may rebut the presumption that the asset was transferred to establish or retain Medicaid eligibility. The a/r must present clear and convincing written evidence to show the asset was transferred exclusively for a reason other than qualifying for Medicaid. The evidence presented must be more persuasive than all evidence to the contrary (emphasis original).

At petitioner's request pursuant to G.S. § 108A-79, the hearing officer's tentative decision was reviewed by the Chief Hearing Officer for the Division of Social Services. Petitioner argued the requirement for "written evidence" contained in the Adult Medicaid Manual and applied by the hearing officer had not been enacted in accordance with the requirements of the Administrative Procedures Act and, thus, was of no consequence. The Chief Hearing Officer entered a Final Decision in which she concluded:

It is conceded that the Medicaid manual reference requiring "written" evidence was not duly promulgated by the State in accordance with the requirements of the Administrative Procedures Act. However, the undersigned disagrees with the contention that the Tentative Decision turns upon this requirement of the Medicaid manual. Rather, this manual requirement citation must be construed as nothing more than incidental support for the decision to uphold the imposition of sanction. Irrespective of any reference to "written" documentation, and based solely on the cited Federal regulations, the totality of the evidence and testimony presented supports the essential conclusion that it is not clearly and convincingly documented that the transfer was exclusively void of Medicaid considerations (emphasis original).

Petitioner petitioned for judicial review of the final agency decision pursuant to G.S. § 108A-79(k) and G.S. § 150B-51(b). The superior court affirmed DHR's final agency decision, concluding that "the final agency decision was supported upon the whole record by substantial competent evidence, was within the statutory authority and jurisdiction of the agency, was made upon lawful procedure, was not arbitrary or capricious, was not in violation of constitutional provisions, and was not affected by error of law...." Petitioner appeals.

Initially, we observe that petitioner-appellant's brief does not conform to the requirements of Rule 28 of the North Carolina Rules of Appellate Procedure. The brief fails to state the question or questions presented, N.C.R.App. P. 28(b)(2) & (5); fails to argue those questions separately, N.C.R.App. P. 28(b)(5); fails to reference the assignments of error pertinent to the arguments by number and location in the record on appeal, N.C.R.App. P. 28(b)(5); and does not contain the required headings in their prescribed order. N.C.R.App. P. 28(b) and Appendix E to the North Carolina Rules of Appellate Procedure. We remind counsel that the Rules of Appellate Procedure are mandatory and a party's failure to comply with them frustrates the review process and subjects the party to sanctions, which may include dismissal of the appeal. N.C.R.App. P. 25(b). Steingress v. Steingress 350 N.C. 64, 511 S.E.2d 298 (1999). Because of the potential importance of the issues involved in this case, we elect to exercise the discretion granted us by N.C.R.App. P. 2 and address the merits of petitioner's assignments of error.

By his assignments of error, petitioner contends DHR's final agency decision was affected by an error of law because the agency applied substantive standards with respect to the form of evidence and level of required proof which had not been promulgated as required by law. Specifically, petitioner argues the provisions of the State Adult Medicaid Manual, requiring the presumption of ineligibility arising from a transfer of assets for less than fair market value to be rebutted by written, clear and convincing evidence, are invalid because they have not been adopted in accordance with the administrative rule making procedures prescribed by Article 2A of Chapter 150B of the General Statutes.

Appellate review of a judgment of the superior court entered upon review of an administrative agency decision requires that the appellate court determine whether the trial court utilized the appropriate scope of review and, if so, whether the trial court did so correctly. ACT-UP Triangle v. Com'n for Health Serv., 345 N.C. 699, 483 S.E.2d 388 (1997). The nature of the error asserted by the party seeking review dictates the appropriate manner of review: if the appellant contends the agency's decision was affected by a legal error, G.S. § 150B-51(b)(1)(2)(3) & (4), de novo review is required; if the appellant contends the agency decision was not supported by the evidence, G.S. § 150B-51(b)(5), or was arbitrary or capricious, G.S. § 150B-51(b)(6), the whole record test is utilized. In re Appeal by McCrary, 112 N.C.App. 161, 435 S.E.2d 359 (1993).

In this case, petitioner's assignments of error assert DHR's final agency decision was affected by legal error, thus the appropriate standard of review for the trial court and this Court is de novo review. Id. Accordingly, we consider de novo whether DHR erred in requiring that petitioner rebut by written evidence which was clear and convincing the presumption of ineligibility arising from Mr. Dillingham's transfer of his assets.

Congress established the Medicaid program as Title XIX of the Social Security Act, 42 U.S.C. §§ 1396 et seq., in 1965 to provide "federal financial assistance to States that choose to reimburse certain costs of medical treatment for needy persons." Harris v. McRae, 448 U.S. 297, 301, 100 S.Ct. 2671, 2680, 65 L.Ed.2d 784, 794 (1980). States participating in the optional program are reimbursed for a portion of their costs. See Atkins v. Rivera, 477 U.S. 154, 106 S.Ct. 2456, 91 L.Ed.2d 131 (1986)

; McKoy v. North Carolina Department of Human Resources, 101 N.C.App. 356, 399 S.E.2d 382 (1991). "Although participation in the Medicaid program is entirely optional, once a State elects to participate, it must comply with the requirements of Title XIX," Harris, 448 U.S. at 301,

100 S.Ct. at 2680,

65 L.Ed.2d at 794 and, the requirements of the Secretary of Health and Human Services. Atkins, 477 U.S. at 157,

106 S.Ct. at 2458,

91 L.Ed.2d at 137. Participating states must serve (1) the "categorically needy," defined as families with dependent children eligible for public assistance under the Aid to Families with Dependent Children ("AFDC") program, 42 U.S.C. § 601 et seq., and (2) the aged, blind, and disabled persons eligible for benefits under the Supplemental Security Income ("SSI") program, 42 U.S.C. § 1381 et seq. See 42 U.S.C. § 1396a(a)(10)(A); Harris, 448 U.S. at 301 n. 1,

100 S.Ct. at 2680 n.1,

65 L.Ed.2d at 795 n. 1; Elliot v. North Carolina Dept. of Human Resources, 115 N.C.App. 613, 446 S.E.2d 809 (1994),

affirmed,

341 N.C. 191, 459 S.E.2d 273 (1995).

Federal and North Carolina law provides coverage for long term nursing facility care, but denies such coverage when applicants "dispose of assets for less than fair market value" within 36 months of filing their Medicaid application. 42 U.S.C. § 1396p(c)(1)(A) & (B)(i); 10 N.C.A.C. 50B .0312(1). An improper transfer within the three year look back period raises a statutory presumption of ineligibility. Federal law provides that an applicant may rebut this presumption upon a "satisfactory showing" that:

(i) the individual intended to dispose of the assets either at fair market value, or for other valuable consideration, (ii) the assets were transferred exclusively for a purpose other than to qualify for medical assistance, or (iii) all assets transferred for less than fair market value have been returned to the individual.

42 U.S.C. § 1396p(c)(2)(C) (emphasis added). Neither federal statutes nor regulations establish either the form of evidence...