Fujimori v. Dep't of Human Servs.
| Decision Date | 31 August 2022 |
| Docket Number | CAAP-17-0000466 |
| Parties | IN THE MATTER OF FLORENCE FUJIMORI, Appellant-Applicant/Appellant, v. DEPARTMENT OF HUMAN SERVICES, STATE OF HAWAI'I; PANKAJ BHANOT, DIRECTOR; LANE T. ISHIDA, HEARING OFFICER, Appellees-Appellees. AND IN THE MATTER OF EDWARD FUJIMORI, Appellant-Applicant/Appellant, v. DEPARTMENT OF HUMAN SERVICES, STATE OF HAWAI'I; PANKAJ BHANOT, DIRECTOR; LANE T. ISHIDA, HEARING OFFICER, Appellees-Appellees. |
| Court | Hawaii Court of Appeals |
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT CIVIL NOS 16-1-1703, 16-1-1914
Gregory W. Kugle Christopher J.I. Leong (Damon Key Leong Kupchak Hastert), for Appellants-Applicants/Appellants.
Ruth K. Oh, Deputy Attorney General, for Appellees-Appellees.
OPINION
Appellants-Applicants/Appellants Edward Fujimori (Edward) and Florence Fujimori (Florence) (collectively, Fujimoris) appeal from the Circuit Court of the First Circuit's[1]April 26, 2017 order and May 11, 2017 judgment affirming Appellees/Appellees Department of Human Services' (DHS) administrative decisions denying Edward's and Florence's applications for Medicaid assistance to pay for their long-term care. In challenging the circuit court's order and judgment, Edward and Florence request that we vacate and remand with instructions to "issue all benefits . . . determined to be due and owing since the time of their original applications." We affirm the circuit court's order and judgment.
"The purpose of [M]edicaid is to provide assistance to those whose income and resources are inadequate to meet the costs of necessary medical services." Barham by Barham v. Rubin, 72 Haw. 308, 312, 816 P.2d 965, 967 (1991) (citing 42 U.S.C. § 1396). "Medicaid is a cooperative Federal and State program that provides medical assistance to low income persons based on financial need[,]" Fournier v. Sec'y of the Exec. Off, of Health & Human Servs., 170 N.E.3d 1159, 1164 (Mass. 2021) (citation and internal quotation marks omitted), and "is designed to be the payer of last resort, available only when no other source is liable for the expense." Est, of Scheidecker v. Montana Dept. of Pub. Health & Human Servs., 490 P.3d 87, 91 (Mont. 2021) (citation and internal quotation marks omitted). Generally, an individual must have less than $2,000.00 in assets to qualify for Medicaid assistance. See Hawai'i Administrative Rules (HAR) § 17-1725.1-43; see also Fournier, 170 N.E.3d at 1164; Social Security Programs Operations Manual System at SI OHIO.003.A.1, SI OHIO.003.A.2 (effective Dec. 8, 2010).
"Through the practice known as Medicaid planning, however, individuals with significant resources devise strategies to appear impoverished in order to qualify for Medicaid benefits." Fournier, 170 N.E.3d at 1164 (citation and internal quotation marks omitted). "One such strategy is to transfer assets into an inter vivos trust, whereby funds appear to be out of the individual's control, yet generally are administered by a family member or loved one." Id. (citation omitted). "Accordingly, a loophole existed under the pre-1986 law, pursuant to which individuals anticipating the need for expensive long-term medical care could impoverish themselves and qualify for Medicaid assistance while preserving their resources for their heirs." Petition of Est, of Braiterman, 145 A.3d 682, 687 (N.H. 2016) (cleaned up).
In 1986, Congress responded to this loophole by enacting 42 U.S.C. § 1396a(k) (1988) (repealed 1993), which "deemed available to the applicant (the beneficiary) the maximum amount that could, at the trustee's discretion, be distributed to the beneficiary from an irrevocable trust regardless of whether the funds were actually distributed." Braiterman, 145 A.3d at 687 (cleaned up). In other words, Medicaid qualifying trusts "were no longer a permissible means to shelter assets for purposes of Medicaid eligibility." Id. at 688 (citation omitted). "Congress sought to prevent wealthy individuals, otherwise ineligible for Medicaid benefits, from making themselves eligible by creating irrevocable trusts in order to preserve assets for their heirs." Barham, 72 Haw. at 312, 816 P.2d at 967 (citation omitted).
"In 1993, in reaction to the sophisticated instruments used to circumvent the [Medicaid qualifying trust] rules, Congress repealed § 1396a(k) and enacted § 1396p(d) (1993), which was aimed at more effectively curtailing the use of trusts or similar mechanisms to qualify for Medicaid." Braiterman, 145 A.3d at 688 (cleaned up). In that enactment, the Omnibus Budget Reconciliation Act of 1993, "Congress established a general rule that trusts would be counted as assets for the purpose of determining Medicaid eligibility." Id. (citation omitted).
With respect to an irrevocable trust, the act provides that "if there are any circumstances under which payment from the trust could be made to or for the benefit of the individual, the portion of the corpus from which, or the income on the corpus from which, payment to the individual could be made shall be considered resources available to the individual."
Fournier, 170 N.E.3d at 1164 (quoting 42 U.S.C. § 1396p(d) (3) (B) (i)) .
In August 2006, Edward and Florence created the "Edward M. and Florence Y.K. Fujimori Irrevocable Trust" (Trust) "for the benefit of [their] descendants, by representation," and assigned their son, Alan Y. Fujimori, as trustee (Son). That same day, they funded the Trust with their residential property at 5314 Uhiuhi Street in Honolulu (Property), reserving "a life estate in an undivided ten-thousandth (.0001 or 1/10,000) interest in and to" the Property. (Formatting altered.)
Six years later, in 2012, Son, as trustee, sold the Property for $700,000 to Clint and Lisa Kagami (Kagamis), and conveyed the Property by warranty deed. In the same warranty deed, Edward and Florence conveyed their life estate in the undivided 0.0001% interest in the Property to the Kagamis. Two checks totaling $666,873.81 ($333,436.90 and $333,436.91) were made payable to the Trust and were deposited into two separate bank accounts belonging to the Trust.
Two years later, in July 2014, Florence applied for Medicaid assistance to pay for her long-term care, which was approved. In September 2015, Edward applied for Medicaid assistance to pay for his long-term care, and had been given presumptive eligibility beginning December 16, 2015.
In December 2015, DHS requested that Florence provide information to "[v]erify life estate interest in a property." DHS, apparently, requested that Edward also provide more information.
The response further asserted that the Fujimoris "did not keep a right to receive income, so when the trust sold the property in 2012 Mr. and Mrs. Fujimori did not dispose of any income or asset." (Emphasis omitted.)
In April 2016, DHS terminated Medicaid assistance in paying for Edward's and Florence's long-term care effective June 1, 2016, because they did "not meet other program requirements" and their "[a]ssets exceed[ed] eligibility limits." DHS also terminated assistance to Edward because the "[r]equired information was not provided."
Before his Medicaid assistance was set to end, Edward passed away on May 20, 2016. Edward's attorney requested that the administrative hearing proceed, but DHS denied the request because a "power of attorney terminates when the principal dies." Edward's attorney then requested that Medicaid reimburse Edward's estate for the three and one-half months (September 1, 2015 to December 15, 2015) of long-term care Edward paid for while his application was pending, attaching an Affidavit for Collection of Personal Property signed by Son.
DHS held an administrative hearing for Florence in June 2 016 and for Edward in August 2 016. On August 10, 2016, DHS issued its Notice of Administrative Hearing Decision for Florence's request for Medicaid assistance, concluding that:
(Formatting altered.) A month later, on September 13, 2016, DHS issued its Notice of Administrative Hearing Decision for Edward's request for Medicaid assistance, concluding among other things that:
(Formatting altered.)
Florence and Edward timely appealed to the circuit court. The circuit court consolidated the cases, and heard oral arguments. Without addressing whether the Trust was revocable, the circuit court held that:
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