ECONOLO v. DIV. OF REIMBURSEMENT

• Decision Date: 02 April 2001
• Docket Number: No. 1243,1243
• Citation: 137 Md. App. 639,769 A.2d 296
• Parties: William ECOLONO, Jr. v. DIVISION OF REIMBURSEMENTS OF THE DEPARTMENT OF HEALTH AND MENTAL HYGIENE.
• Court: Court of Special Appeals of Maryland

769 A.2d 296

137 Md. App. 639

William ECOLONO, Jr. v. DIVISION OF REIMBURSEMENTS OF THE DEPARTMENT OF HEALTH AND MENTAL HYGIENE.

No. 1243, Sept. Term, 2000.

Court of Special Appeals of Maryland.

April 2, 2001.

Laura L. Cain, Baltimore, for appellant.

Wendy A. Kronmiller, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen. on the brief), Baltimore, for appellee.

Argued before DAVIS, JAMES R. EYLER, and KENNEY, JJ JAMES R. EYLER, Judge.

The question presented by this case is whether the State Department of Health and Mental Hygiene violated State or federal law when it utilized Social Security benefits, payable to an individual committed to a State hospital, to pay current charges for that inpatient care. We find a violation of federal law and, as a result, shall reverse the decision of the Circuit Court for Howard County.

Factual Background

On December 10, 1994, William Ecolono, Jr., appellant, was committed to institutional care at the Clifton T. Perkins Hospital Center (the Hospital), a mental health facility operated under the direction of the Mental Hygiene Administration, an agency of the Department of Health and Mental Hygiene, appellee. It was the fourth such admission for appellant. Appellant was conditionally released from the Hospital on March 26, 1996.

On May 16, 1995, William Varley, a financial agent supervisor employed by appellee's Division of Reimbursements, applied to the Social Security Administration (SSA) requesting that the Secretary of the Department of Health and Mental Hygiene (the Secretary), as head of the agency, be appointed representative payee for appellant. Federal law required that SSA appoint a representative payee for the purpose of receiving Social Security benefits owed appellant because appellant was incapable of handling his own finances.

On or before February 2, 1996, the SSA appointed the Secretary representative payee. On February 2, 1996, Mr. Varley learned that appellant had been awarded $17,155.40 by the SSA, representing back payment of Social Security disability benefits.¹

Under Maryland law, financial agents such as Mr. Varley were required to determine an individual patient's assets and to calculate the cost of institutional care pursuant to a formula contained in the applicable regulations. Pursuant to those regulations, Mr. Varley calculated the amount due for care, subtracted $2,500 as an exempt amount plus $80 for personal needs expenses, and applied the net amount of $14,575.40 to pay the State's bill for institutional care for the months of February and March.

On February 7, 1996, Mr. Varley advised appellant and his social worker that he had applied the funds as above. He also advised them that appellant had the right to seek both an informal and a formal review.

The charge in the amount of $14,575.40 was for the period of February 1 through March 31, 1996. Because appellant was actually released on March 26, Mr. Varley recomputed the charge and refunded $1,347.21 to appellant.

Subsequent to the payment of disability benefits on February 2, 1996, appellant's father requested that SSA appoint him representative payee. This request was eventually granted.

Appellant's conditional release on March 26 was conditioned on his residing apart from his parents in 90 days or less after his release. The terms of the release also required him to attend Alcoholics Anonymous and Narcotics Anonymous meetings daily for the first 90 days of his release and weekly thereafter.

Administrative Hearing

Appellant challenged the application of his disability benefits to the payment of the bill for institutional care and pursued his challenge through the administrative process. On July 18, 1996, a hearing was conducted at the Office of Administrative Hearings. At that hearing, appellant asserted that (1) federal law required a representative payee to use disability benefits in the best interest of the beneficiary; (2) federal law prohibited a creditor, including the State, from seizing Social Security benefits; and (3) State law required appellee to investigate a patient's expenses prior to assessing charges against him. Appellant argued that these laws had been violated by appellee.

At that hearing, a member of appellant's treatment team at the Hospital testified that appellant, after release, would have living expenses and would incur costs in reviving his prior lawn care business. The witness testified that monies would have to be expended for those purposes in order for appellant to become self-supporting. The treatment team member testified that she knew, at some point pre-release, that appellant would be receiving money from Social Security, but that he would probably not get it until February or March. She explained that the 90-day provision was put in the release so that he would have ample time to get money. The treatment team member explained more specifically that appellant would incur post-release expenses for the following: (1) rent plus security deposit, (2) furnishings, (3) gas, electric, and phone service, (4) medication for bipolar disorder and substance abuse, (5) cost of urine screens, (6) fees charged by clinics not covered by medical assistance, and (7) costs to repair equipment for his landscaping business. The member of the team further testified that it had been her understanding that some money would be taken out of the Social Security benefits to pay the State's bill, but she had assumed that he would have adequate funds remaining for his discharge plan. On direct examination, when asked whether, in her opinion, he in fact had adequate funds for his discharge plan, she stated that it would be very difficult for him to do what he had to do on the money available, and that it did compromise his discharge plan. Our reading of the transcript indicates that the witness was under the impression that appellant had been paid $2,500. On cross-examination, when asked whether she thought $3,900 [the amount paid to appellant] was adequate, she stated that she was not "really qualified to determine a price of what it's going to cost him to live."

At the time that Mr. Varley paid the State's bill, he was not aware that appellant was about to be released, and he had no communications with appellant's treatment team. The treatment team was not aware that the benefits had been received and applied in the manner that they were applied until after the application of the funds on February 2, 1996. The treatment team made no request to Mr. Varley for the payment of expenses.

At the time of the hearing before the administrative law judge (ALJ), appellant resided with a friend, rent-free. He had applied for and qualified for medical assistance. He had placed a deposit on an apartment with a monthly rent of $624. Appellant's father testified that a portion of the Social Security disability benefits given to him by appellee had been used by him to repair his lawn equipment and that $450 to $500 remained.

As previously stated, the charge calculated by Mr. Varley covered the months of February and March, 1996. The cost of hospitalization for February was $9,490, computed at $312 per day. The cost for the month of March was $5,085.40, computed at $167.19 per day. After calculation of the refund due, subtraction of $2,500 as exempt, and subtraction of $80 for living expenses, appellant was paid a total of $3,927.40. As of the time of the hearing before the ALJ, appellant was receiving $511 monthly in Social Security benefits, which terminated effective January 1, 1997.²

The ALJ concluded that, under Maryland law, appellant was primarily liable for the cost of his institutional care and that appellee violated neither State nor federal law in applying the benefits received to his bill for current care. The Secretary adopted the ALJ's decision, and the Secretary's decision was affirmed by the Board of Review. Appellant filed a petition for judicial review in the Circuit Court for Howard County. The circuit court affirmed the agency's decision. General Principles of Law

Federal

The Social Security Act provides for the payment of benefits to aged persons, blind persons, and mentally or physically disabled persons. See 42 U.S.C. § 401, et seq.

If an individual is unable to manage his benefits, a person or entity can apply to be representative payee to receive the individual's benefits. See 42 U.S.C. § 405(j). If the SSA certifies the representative payee, it pays the benefits to that payee. 42 U.S.C. § 405(j)(1)(a). The payments are paid to the payee as a fiduciary to be used for the use and benefit of the beneficiary. Id. The statute provides that if the SSA or a court of competent jurisdiction determines that a representative payee misused funds, the SSA shall revoke the certification of the representative payee. Id.

Federal regulations provide that the representative payee shall be an individual or agency who best serves the interests of the beneficiary. See 20 C.F.R. § 404.2001(a). Factors to be taken into account in certifying a representative payee are the relationship of the payee to the beneficiary, the amount of interest that the payee has shown in the beneficiary, and whether the payee is in a position to know of and look after the needs of the beneficiary. 20 C.F.R. § 404.2020.

Appellee points out that prior to the 1996 amendment to exclude persons whose disability was contributed to by alcohol and drug addiction from receiving disability benefits, the regulations provided that a governmental agency whose mission was to carry out income maintenance, social service, or health care-related activities was a preferred applicant to become representative payee for a person with an alcohol or drug addiction. See 42 U.S.C. § 405(j)(2)(C)(V). Subsequent to the amendment, such an agency with custody can qualify as representative payee but without the preference as before. 20 C.F.R. § 404.2021(a)(3) (A public or nonprofit agency with custody is third in...