Hutson v. Mosier

• Decision Date: 08 September 2017
• Docket Number: No. 117,020,117,020
• Citation: 401 P.3d 673,54 Kan.App.2d 679
• Parties: Marcia HUTSON, Appellant, v. Susan MOSIER, M.D., in her Official Capacity as Secretary of Kansas Department of Health and Environment, Appellee.
• Court: Kansas Court of Appeals

54 Kan.App.2d 679

401 P.3d 673

Marcia HUTSON, Appellant,

v.Susan MOSIER, M.D., in her Official Capacity as Secretary of Kansas Department of Health and Environment, Appellee.

No. 117,020

Court of Appeals of Kansas.

Opinion filed September 8, 2017

Molly M. Wood, of Stevens & Brand, L.L.P., of Lawrence, for appellant.

Ron M. Landsman, of Ron M. Landsman, P.A., of Rockville, Maryland, and Craig Reaves, of Reaves Law Firm, P.C., of Kansas City, Missouri, for amicus curiae National Academy of Elder Law Attorneys, Inc.

Karen H. Weber, of Law Offices of Karen H. Weber, of Overland Park, for amicus curiae Special Needs Alliance, Inc.

Brian M. Vazquez, of Kansas Department of Health & Environment, for appellee.

Before Bruns, P.J., McAnany, J., and Steven R. Ebberts, District Judge, assigned.

Bruns, J.:

In this judicial review action, Marcia Hutson appeals from the district court's decision affirming a final order issued by the Division of Health Care Finance State Appeals Committee arising out of a Medicaid eligibility determination. The district court upheld the imposition of a transfer penalty that significantly delayed Hutson's receipt of Medicaid benefits for her long-term care. The Kansas Department for Children and Families (DCF)—the state agency handling Medicaid eligibility processing at the time—imposed the penalty on Hutson because she transferred assets to a pooled supplemental needs trust when she was in her 70s. After an administrative law judge and the State Appeals Committee upheld the imposition of the transfer penalty, Hutson sought judicial review. The district court also upheld the penalty because it found that Hutson did not receive fair market value for her transfer.

We find as a matter of law that transfers of assets by Medicaid applicants age 65 or older to a pooled supplemental needs trust are subject to a penalty period if the transfer is for less than fair market value. However, because we find that whether a particular transfer to a pooled supplemental needs trust is for less than fair market value is a question of fact, we vacate the part of the district court's order that found as a matter of law that Hutson "did not receive fair market value for her transfer." Accordingly, we affirm the district court's decision in part, we vacate it in part, and we remand this matter for further proceedings consistent with this opinion.

FACTS

On August 10, 2015, Hutson—who resides in a nursing home facility in Eudora—transferred $59,528.42 of assets to ARCare Trust II Pooled Trust. The trustee is ARCare, Inc., which is a not-for-profit corporation that established the irrevocable pooled supplemental needs trust in 1996 to help elderly and disabled people pay for living expenses not covered by needs-based public benefit programs. The assets that Hutson transferred to the pooled trust were funds that she received from the sale of her home as well as from life insurance following the death of her husband. At the time of the transfer of assets, Hutson was 72 years old.

Under the terms of the Transfer–Joinder Agreement signed on June 19, 2015, ARCare, Inc. is to administer a sub-account within the pooled trust for the sole benefit of Hutson. Specifically, the funds in the sub-account are to be used to maintain Hutson's "health, safety and welfare ... when, in the discretion of the [trustee], such requisites are not being provided by any public agency, office, or department of the state ... or are not otherwise being provided by any other source of income available to [Hutson]." As the trustee of the pooled supplemental needs trust, ARCare, Inc. has a contractual obligation to pay for Hutson's needs in order to enhance her quality of life. Although ARCare, Inc. has absolute discretion to approve or disapprove requests for disbursements from Hutson's sub-account, it must act in good faith in administering the pooled trust.

Furthermore, the terms of the pooled supplemental needs trust provide that upon Hutson's death, the trustee must reimburse the State for the total amount of Medicaid benefits paid on her behalf if there are available funds left in her sub-account. If any residual funds are left in Hutson's sub-account after the State has been reimbursed, these funds are to remain in the pooled supplemental needs trust to aid other trust beneficiaries, to assist other indigent people with disabilities, or to be used for other charitable purposes as determined by the trustee. Hutson's life expectancy is approximately 13 years based on actuarial tables. Moreover, ARCare, Inc. estimates that at her current rate of supplemental expenses, Hutson will likely exhaust her sub-account in four to six years.

On August 24, 2015, Hutson applied to DCF in Lawrence for Medicaid benefits to assist with her long-term care needs. In support of her Medicaid application, Hutson submitted a copy of the Transfer–Joinder Agreement that she had entered into with ARCare, Inc. Hutson's daughter subsequently provided additional information to DCF in support of her mother's application. In a notice dated October 19, 2015, DCF approved Hutson's application for Medicaid assistance to assist with her long-term care expenses. However, DCF imposed a transfer penalty that delayed Medicaid payments for a period of 313 days.

On November 13, 2015, Hutson appealed the imposition of the transfer penalty to the State Office of Administrative Hearings. The administrative law judge held a prehearing conference, at which the parties evidently agreed that the judge should decide the matter on the briefs. Because DCF was no longer handling Medicaid eligibility determinations, the Kansas Department of Health and Environment (KDHE) replaced DCF as the respondent in the administrative proceeding. Finally, on February 17, 2016, the administrative law judge issued an initial order summarily affirming the imposition of the transfer penalty.

On March 2, 2016, Hutson filed a request with the Division of Health Care Finance State Appeals Committee for review of the initial order issued by the administrative law judge. The State Appeals Committee—in its capacity as designee for the Secretary of KDHE—issued a final order on April 11, 2016, affirming the initial order. Thereafter, Hutson timely filed a petition for judicial review in district court.

On November 8, 2016, the district court entered a memorandum decision affirming the agency action. In reaching this decision, the district court concluded:

"While the court sympathizes with [Hutson's] circumstances and concerns, the federal statutory language [found in 42 U.S.C. § 1396p(d)(4) (2012) and incorporated into K.A.R. 129–6–109(c)(2)(G) ] is clear. [Hutson] was over 65 at the time of the transfer and did not receive fair market value for her transfer. Accordingly, [the agency] correctly determined that the transfer was an uncompensated transfer subjecting [Hutson] to a period of ineligibility."

On December 2, 2016, Hutson filed a notice of appeal. We subsequently granted the National Academy of Elder Law Attorneys, Inc. and the Special Needs Alliance, Inc. leave to file amicus briefs in this case. In addition, we granted leave to the National Academy of Elder Law Attorneys, Inc. to participate in the oral arguments.

ANALYSIS

Issues Presented

On appeal, Hutson contends that the district court erred in interpreting the applicable federal law and state administrative regulations relating to Medicaid eligibility. Moreover, Hutson argues that she received fair market value for her transfer of assets to the pooled supplemental needs trust, and as such, she should not be subject to a transfer penalty. In response, KDHE contends that DCF appropriately imposed a transfer penalty against Hutson because she did not receive fair market value for the transfer of her assets to the pooled supplemental needs trust.

Standard of Review

This appeal arises out of a judicial review action commenced by Hutson in district court. The scope of judicial review of a state administrative agency action is defined by the Kansas Judicial Review Act (KJRA), K.S.A. 77–601 et seq. See Ryser v. State , 295 Kan. 452, 458, 284 P.3d 337 (2012) ; Muir v. Kansas Health Policy Authority , 50 Kan. App. 2d 854, 856, 334 P.3d 876 (2014). Under the KJRA, we exercise the same statutorily limited review of an agency's action as does the district court. Kansas Dept. of Revenue v. Powell , 290 Kan. 564, 567, 232 P.3d 856 (2010). The party asserting the invalidity of an agency's action—in this case Hutson—bears the burden of proving invalidity. K.S.A. 2016 Supp. 77–621(a)(1) ; see Golden Rule Ins. Co. v. Tomlinson , 300 Kan. 944, 953, 335 P.3d 1178 (2014).

Interpretation of a statute or an administrative regulation is a question of law over which we have unlimited review.

In re Tax Appeal of LaFarge Midwest , 293 Kan. 1039, 1043, 271 P.3d 732 (2012). When a statute or regulation is plain and unambiguous, we are to give effect to the intent expressed through the words used—giving common words their ordinary meaning—instead of attempting to determine what the law should or should not be. Ullery v. Othick , 304 Kan. 405, 409, 372 P.3d 1135 (2016). Where there is no ambiguity, we are not to resort to statutory construction. Rather, only if the language or text is unclear or ambiguous are we to look at the canons of construction or legislative history. 304 Kan. at 409, 372 P.3d 1135.

Federal Medicaid Law

The United States Congress created the Medicaid program in 1965 to provide federal financial assistance to states that reimburse the costs of medical treatment for the needy. Schweiker v. Hogan , 457 U.S. 569, 571, 102 S.Ct. 2597, 73 L.Ed.2d 227 (1982). The purpose of Medicaid is to provide medical and rehabilitation assistance to those who qualify as poor, aged, blind, or disabled. Village Villa v. Kansas Health Policy Authority , 296 Kan. 315, 317, 291 P.3d 1056 (2013). As a cooperative federal and state program, both federal and state laws govern Medicaid. Schweiker v. Gray...