Dokos v. Miller

• Decision Date: 17 June 1981
• Docket Number: No. 78 C 319.,78 C 319.
• Citation: 517 F. Supp. 1039
• Parties: Angeline DOKOS, et al., Plaintiffs, v. Jeffrey C. MILLER, et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

517 F. Supp. 1039

Angeline DOKOS, et al., Plaintiffs, v. Jeffrey C. MILLER, et al., Defendants.

No. 78 C 319.

United States District Court, N. D. Ill., E. D.

June 17, 1981.

Dean Timothy Jost, Legal Services for the Mentally Disabled of Upton, Robert Berger, James D. Weill, Legal Assistance Foundation, Chicago, Ill., for plaintiffs.

Tyrone Fahner, Atty. Gen., Springfield, Ill., Patricia Suberlak, Asst. Atty. Gen., Chicago, Ill., for defendants.

MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

Angeline Dokos ("Dokos") and Katherine Malenk ("Malenk") (collectively "plaintiffs"), acting both for themselves and for a putative class, sue the Illinois Department of Public Aid ("IDPA") and its Director Jeffrey Miller ("Miller")¹ challenging the validity of Ill.Rev.Stat. ch. 23, § 3-1.3 (the "transfer of assets rule" or simply the "rule"). That rule applies to otherwise Medicaid-eligible aged, blind or disabled persons who have, before filing their Medicaid applications, transferred assets for less than fair market value. It presumptively excludes such persons from any Medicaid eligibility for a period of five years, measured from the date of such transfer. Since the decision in Drogolewicz v. Quern, 74 Ill.App.3d 862, 30 Ill.Dec. 865, 393 N.E.2d 1212 (1st Dist. 1979), however, defendants have been required to limit, and have limited, the presumed ineligibility in terms of the actual value of the transferred asset rather than for a full five years.

Plaintiffs claim the rule (1) violates their rights under the Fourteenth Amendment and (2) conflicts with federal law in violation of the Supremacy Clause. IDPA and plaintiffs have filed cross-motions for partial summary judgment on the latter issue. Alternatively plaintiffs seek a preliminary injunction enjoining IDPA from enforcing the rule and requiring it to reprocess Medicaid applications of the last five years on which aid has been denied under the rule. Finally plaintiffs have moved for class certification. For the reasons stated in this memorandum opinion and order:

1. Plaintiffs' motion for summary judgment is granted.

2. Plaintiffs' motion for class certification is continued pending further submissions, if desired, by the parties.

Facts

IDPA administers the Medical Assistance ("Medicaid") program under Article V of the Illinois Public Aid Code, Ill.Rev.Stat. ch. 23, §§ 5-1 et seq. Medicaid provides medical care for several classes of persons if they are unable to pay for such care themselves: aged, blind and disabled persons and dependent children and their families. Its program is funded jointly by state money and by federal money provided under Title XIX of the Social Security Act, 42 U.S.C. §§ 1396 et seq. Under 42 U.S.C. § 1396a IDPA is required to administer Medicaid in accordance with federal law.

Persons are eligible to receive Medicaid if they are either "categorically" or "medically" needy. Those receiving cash welfare payments under Aid to Families with Dependent Children ("AFDC") and Supplemental Security Income ("SSI") are, with a limited exception, "categorically needy" — meaning simply that they automatically qualify for Medicaid. Persons who do not receive cash welfare payments but demonstrate an inability to pay medical bills are deemed "medically needy" and are eligible for Medicaid to the extent such bills exceed their ability to pay.

Illinois' transfer of assets rule applies to all categorically and medically needy Medicaid applicants except for persons whose potential eligibility is as families with dependent children. In order to receive Medicaid:

The person shall not have made, at any time within 5 years immediately prior to the filing of his application, a voluntary or involuntary assignment or transfer of any legal or equitable interest in real or personal property, whether vested, contingent or inchoate, for the purpose of qualifying for or increasing his need for aid under this Article.

Any assignment or transfer of property made without consideration, or for a consideration which is not paid, or which does not approximate the fair, cash market value of the property shall, prima facie, be deemed made for the purpose of qualifying for or increasing the need for aid. Unless and until evidence sufficient to prove the contrary is submitted, or the property is reassigned or retransferred to the applicant, or its equivalent value returned, he shall be ineligible for aid under this Article for 5 years following the date of the transfer or assignment.

If aid has been granted as a result of a failure to disclose any transfer or assignment of property or to report any change in status with respect to property or income, as required by Section 11-18 and 11-19 of Article XI, the aid may at any time be cancelled or suspended or the amount thereof varied.

In November 1977 Dokos applied for and was denied Medicaid because assets transfers within the previous five years to her daughter-in-law, grandson and a creditor of her deceased son rendered her ineligible under the rule. Malenk applied for and began receiving Medicaid payments in July 1977. Several months later IDPA terminated payments when it discovered she had sold a house in 1975 and allegedly had received inadequate consideration for the sale. Termination of Malenk's benefits was subsequently upheld by an IDPA Board that heard her administrative appeal.²

On January 27, 1978 plaintiffs filed this action under 42 U.S.C. § 1983, 28 U.S.C. §§ 2201 and 2202 for declaratory and injunctive relief. Specifically they charge the transfer of assets rule is unlawful because:

1. it violates the Constitution by denying plaintiffs and the putative class members equal protection and due process under the law;

2. it "takes into account" in determining Medicaid eligibility financial resources other than those "currently available" to the applicants in violation of 42 U.S.C. §§ 1396a(a)(10) and (17);

3. it applies a more restrictive eligibility standard to aged, blind or disabled persons than to families with dependent children in violation of 42 U.S.C. §§ 1396a(a)(17) and 42 C.F.R. § 448.3(c)(1)(iv); and

4. it discriminates against handicapped persons in violation of 29 U.S.C. § 794 and 20 C.F.R. § 84.5(2).

Plaintiffs also sought certification of the class of:

all aged, blind and disabled persons who have applied, are applying, or will apply for medical assistance pursuant to Ill.Rev. Stat. ch. 23, § 5-1, and have been, are being, or will be denied benefits, or whose benefits have been, are being, or will be cancelled solely because they have transferred property within the preceding five years for less than adequate consideration.

On February 17 and March 17, 1978, respectively, Judge Bua entered a temporary restraining order and preliminary injunction enjoining IDPA from enforcing the transfer of assets provision against Dokos and Malenk. At the same time he denied class certification as unnecessary, stating that a determination as to the legality of the rule on plaintiffs' individual claims would necessarily "affect" all applicants.

On July 11, 1978 plaintiffs filed their summary judgment motion, limited to the contention that the transfer of assets provision contravenes applicable federal law. At the same time they again moved for class certification. On August 28, 1978 IDPA filed its cross-motion for summary judgment, also limited to the federal statutory issues. During the nearly two-year period thereafter while the case was still assigned to Judge Bua, the parties supplemented their submissions on the cross-motions to reflect continuing developments in this fluid area of the law. After assignment to this Court the parties updated their submissions but then suggested that a then-pending case in the United States Supreme Court, Beltran v. Myers, was likely to provide the definitive answer to the question before this Court.

Beltran has now been decided in a way that defeated the parties' expectations in that respect.³ Thus the cross-motions must be resolved without the Supreme Court's guidance. Two developments since the parties' original submissions are of particular significance in that resolution:

1. In Drogolowicz v. Quern, 74 Ill. App.3d 862, 30 Ill.Dec. 865, 393 N.E.2d 1212 (1st Dist. 1979) the Illinois Appellate Court determined that the automatic five-year disqualification feature of the transfer of assets provision violates the mandate of 42 U.S.C. § 1396a(a)(17) that, as the Court put it, states not "assume the availability of income which may not, in fact, be available...." Accordingly the Court held that, consistent with federal law, IDPA may "take into account only the actual value of the asset ... transferred and provide assistance for any medical expenses ... which may still be owing after such a computation." In response to that decision IDPA promulgated a new Rule 3.405:

Property transfers completed within five years of the date of application for assistance shall be considered in determining eligibility. If a fair market value was not received, the client shall be ineligible for assistance unless he can provide acceptable proof that he did not transfer the property to qualify for or increase his need for public assistance.... The period of ineligibility lasts from the initial date of application for as long as the asset would meet the clients sic needs if it were available, but in no case shall it last longer than 5 years from the date of transfer.

2. On December 28, 1980 President Carter signed into law Amendment No. 1936 to the Pneumococcal Vaccine Act, H.R. 8406 (the "Boren-Long Amendment"), Section 5 of Public Law 96-611. In inimitable Congressional style, despite the title of the Act itself the Boren-Long Amendment dealt with Medicaid eligibility:

Section 1613 of the Social Security Act is amended by adding at the end thereof the following new subsection:

DISPOSAL OF RESOURCES FOR LESS THAN FAIR MARKET VALUE

(c)(1) In determining the resources of an

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