FRERKS BY FRERKS v. Shalala

• Decision Date: 28 March 1994
• Docket Number: No. CV 91-1928.,CV 91-1928.
• Citation: 848 F. Supp. 340
• Parties: David A. FRERKS, by his Guardian and Father, August FRERKS, SS#: XXX-XX-XXXX, Plaintiff, v. Donna SHALALA, Secretary of the Department of Health & Human Services, and Gregory Kaladjian, Commissioner of the New York State Department of Social Services, Defendants.
• Court: U.S. District Court — Eastern District of New York

848 F. Supp. 340

David A. FRERKS, by his Guardian and Father, August FRERKS, SS#: XXX-XX-XXXX, Plaintiff, v. Donna SHALALA, Secretary of the Department of Health & Human Services, and Gregory Kaladjian, Commissioner of the New York State Department of Social Services, Defendants.

No. CV 91-1928.

United States District Court, E.D. New York.

March 28, 1994.

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Robert, Lerner & Bigler, Rockville Centre, NY, for plaintiff; Charles Robert, of counsel.

Zachary W. Carter, U.S. Atty. E.D.N.Y., Brooklyn, NY, for defendant Donna Shalala; Elliot M. Schachner, Asst. U.S. Atty., of counsel.

G. Oliver Koppell, Atty. Gen., Mineola, NY, for defendant Gregory Kaladjian; Michele M. Woodard, Deputy Atty. Gen., of counsel.

OPINION AND ORDER

SPATT, District Judge:

The plaintiff, David Frerks ("Frerks"), is a mentally handicapped twenty-four year old whose parents have been appointed as his guardians by the Nassau County Surrogate's Court. In 1988 and 1990 respectively, Frerks was denied eligibility for Supplemental Security Income ("SSI") by the United States Secretary of Health and Human Services ("Secretary"), and Medicaid by the New York State Commissioner of Social Services ("Commissioner"). The ground for the eligibility denials was that a medical malpractice settlement received by the plaintiff and held in a guardianship account ordered by the Surrogate's Court was determined by the agencies to be a "resource" available to the plaintiff. By counting the value of the settlement as a resource available to him, the plaintiff exceeded the resource limit for eligibility in these programs set by federal and state statutes. Accordingly, he was disqualified from receiving benefits.

As a result of these eligibility denials, the plaintiff initiated this action for judicial review of the Secretary's actions pursuant to 42 U.S.C. § 405(g). The plaintiff also seeks relief against the Commissioner, based on the allegation that the New York State Department of Social Services ("NYDSS") failed to follow federal and state laws when it denied the plaintiff Medicaid eligibility and additional state funds that supplement SSI payments.

The Secretary and Commissioner move to dismiss the Complaint. The defendant Secretary moves pursuant to Fed.R.Civ.P. 12(c) for a judgment on the pleadings, on the ground that the Secretary's decision to deny the plaintiff SSI is supported by substantial evidence in the record. The defendant Commissioner moves to dismiss the complaint against him pursuant to Fed.R.Civ.P. 12(b), on the grounds of lack of subject matter jurisdiction, failure to state a claim, and failure to join a necessary party to the action, or in the alternative, for summary judgment.

STATUTORY AND REGULATORY FRAMEWORK

The federal Supplemental Security Income program, 42 U.S.C. § 1381 et seq., provides non-medical cash assistance to aged, blind or disabled persons. Under the statute, an aged, blind or disabled person is eligible for SSI if either their monthly income or overall available resources do not exceed certain maximum amounts set forth in the statute and regulations. See 42 U.S.C. § 1382, and 20 C.F.R. § 416 subparts D and K (setting forth criteria for income limits) and 20 C.F.R. § 416.1205 (resource limits). In 1988, the year Frerks was denied eligibility, the maximum amount of resources a disabled individual not residing with a spouse could have available was $1,900. See 42 U.S.C. § 1382(a)(1)(B)(ii), and 20 C.F.R. § 416.1205. If the Department of Health and Human Services ("HHS") determines that either of an individual's available resources or monthly income exceed the prescribed limits, he or she is ineligible for SSI.

The statute does not define the terms "income" or "resource." Instead, the definition of these terms is provided in the regulations promulgated under the statute. With respect to the definition of a "resource," 42 C.F.R. § 410.1201 discusses resources generally, and gives the following definition:

(a) Resources; defined. Resources means cash or other liquid assets ... that an individual ... owns and could convert to cash to be used for his or her support and maintenance.

(1) If the individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource.

The regulation goes on to specifically define liquid and nonliquid resources that an individual owns or could convert to cash in order to use for his or her support and maintenance:

(b) Liquid Resources. Liquid resources are cash or other property which can be converted to cash within 20 days.... Examples of resources that are ordinarily liquid are stocks, bonds, mutual funds shares, promissory notes, mortgages, life insurance policies, bank accounts (savings and checking), certificates of deposit and similar items.

(c) Nonliquid Resources. (1) Nonliquid resources are property which is not converted to cash within 20 days.... Examples of resources that are ordinarily nonliquid are loan agreements, household goods, automobiles, trucks, tractors, boats, machinery, livestock, building and land.

42 C.F.R. § 410.1201(b) and (c).

The NYDSS provides Optional State Supplement ("OSS") payments to SSI recipients as well. Through OSS, also known as "supplemental assistance" and "additional state payments," a state provides additional aid to SSI recipients and to those who do not meet the eligibility standards for SSI. See 42 U.S.C. § 1382e, and New York State Social Services Law § 207 et seq. Although OSS assistance comes almost exclusively from state funds, the federal statute provides that, at a state's request, the federal government will administer the OSS assistance. See generally Oklahoma v. Schweiker, 655 F.2d 401, 404 (D.C.Cir.1981).

New York State has entered into an agreement with the HHS, whereby HHS administers the OSS payments and determines the eligibility of individuals for such payments. See New York State Social Services Law § 211(1); Casey v. New York State Department of Social Services, 56 A.D.2d 72, 391 N.Y.S.2d 173, 176 (2d Dept.1977).

In addition to SSI, the federal Medicaid program, 42 U.S.C. § 1396 et seq., provides medical assistance to those who lack sufficient income and resources to pay for health care. Medicaid is also a joint federal-state program. In order for a state to participate in the Medicaid program, it must create a state plan that complies with the requirements of the federal statute and regulations. See Himes v. Sullivan, 779 F.Supp. 258, 259 (W.D.N.Y.1991), aff'd without opinion 956 F.2d 1159 (2d Cir.1992).

New York State's Medicaid program is entitled the Medical Assistance Program, and is set forth in New York State Social Services Law § 366 et seq., and at 18 New York Code Rules and Regulations ("NYCRR") part 360. Similar to SSI, an applicant whose income or resources are in excess of the standards prescribed in the regulations will be ineligible for Medical Assistance. Specifically with respect to resources, an applicant whose net available resources are in excess of the resource standards will be ineligible for Medical Assistance until they incur medical expenses equal to or greater than the excess resources. 18 NYCRR 360-4.1 and 360-4.8(b). In 1990, the resource limit standard for Medical Assistance eligibility was $3,350 for a single individual.

PROCEDURAL BACKGROUND

1. Background With Respect to Secretary's Denial of SSI Benefits.

According to the pleadings, which include the Administrative Transcript of the SSI benefits eligibility determination, the following chronology summarizes the events that transpired with respect to the Secretary's denial of the plaintiff's SSI eligibility.

The plaintiff's parents applied for SSI benefits on their son's behalf on June 1, 1988. On June 29, 1988 the plaintiff was approved for SSI benefits, and began receiving SSI and Medicaid benefits.

Surrogate Raymond Radigan of the Nassau County Surrogate's Court appointed the plaintiff's parents as his co-guardians on June 8, 1988. The order appointing them as guardians stated that they could not collect or dispose of their son's property "without further order" of the Surrogate's Court.

On September 15, 1988 Frerks received a settlement in a medical malpractice case, and received $333,333 net of the contingent attorney's fee. Pursuant to the Compromise Order approving the settlement dated September 15, 1988 and filed in Nassau County Supreme Court, no withdrawals could be made from the settlement amount without further order of the Surrogate's Court. Frerks's parents notified the HHS and NYDSS of the tort settlement on October 3, 1988.

Frerks's settlement amount was placed into four court-approved bank accounts ("guardianship accounts"). A letter explaining the policy with respect to withdrawals from these accounts was sent to HHS by the Surrogate's Court in April, 1990. The letter stated in part:

The guardian must apply to the court for an order to withdraw funds. All funds are held in joint control and cannot be withdrawn without a court order. The court will only release funds held in guardianship accounts that the court deems necessary for the support, education and medical needs of the respondent.

Frerks's parents were allowed a $700 disbursement per month from one of the guardianship accounts to pay for the support and education of their son.

On March 16, 1990 HHS notified the plaintiff that his SSI benefits were being terminated because of excess resources as of October 1988, and HHS would seek retroactive recovery of benefit payments made since October 1988. Frerks's parents appealed for a reconsideration of the decision to the local Social Security office on March 29, 1990. The ground for the appeal was that Frerks's parents did not have access to the guardianship accounts, as all withdrawals had to be court approved.

On reconsideration, the local Social Security office affirmed the decision to...