Johnson v. Guhl
| Decision Date | 07 April 2000 |
| Docket Number | No. 99-CIV.-5403 WGB.,99-CIV.-5403 WGB. |
| Citation | 91 F.Supp.2d 754 |
| Parties | Donald H. JOHNSON, et al., Plaintiffs, v. Michele K. GUHL, Commissioner of the New Jersey Department of Human Services, et al., Defendants. |
| Court | U.S. District Court — District of New Jersey |
Donald M. McHugh, McHugh & Macri, East Hanover, NJ, for plaintiffs.
Shirley B. Whitenack, Schenck, Price, Smith & King, LLP, Morristown, NJ, for plaintiffs.
Mary F. Rubinstein, DAG, Attorney General of New Jersey, Trenton, NJ, Meredith Van Pelt, Special Deputy Atty. Gen., Mary F. Rubinstein, for defendants Michele K. Guhl, Commissioner of the New Jersey Department of Human Services, Margaret A. Murray, Director of the New Jersey Division of Medical Assistance and Health Services.
Edwin C. Eastwood, Jr., North Bergen, NJ, for defendant Edward Testa, Director of Bergen County Board of Social Services.
Donald L. Berlin, Berlin, Kaplan, Dembling & Burke, Morristown, NJ, for defendant Elizabeth Lehmann, Director of the Morris County Board of Social Services.
Rehabilitation Ass'n of Virginia v. Kozlowski, 42 F.3d 1444 (4th Cir.1994). With this in mind, we begin.
Plaintiffs are married couples with one spouse living in the community ("community spouse") and the other residing in a skilled nursing facility ("institutionalized spouse"). Plaintiffs challenge certain provisions of the New Jersey Medicaid plan governing Medicaid eligibility to cover the cost of the institutionalized spouse's receipt of long term care.
Defendants' motion to dismiss for failure to state a claim upon which relief may be granted is denied on all counts, except as to the due process and equal protection claims, and except as to all claims by those Plaintiffs who have not yet applied for Medicaid benefits. Plaintiffs' motion for preliminary injunction is denied.
Some of the Plaintiffs1 are institutionalized spouses currently residing in long-term care facilities in New Jersey. (See First Amended Compl. ¶ 4.)2 Of those institutionalized spouses, some have been denied Medicaid benefits and have filed fair hearing appeals,3 and some have Medicaid applications pending.4 (Id. at ¶ 5.) Some Plaintiffs are prospective Medicaid applicants.5 (Id. at ¶ 6.) Plaintiffs residing in the community are the beneficiaries of Community Spouse Annuity Trusts ("CSATs").6 (Id. at ¶ 7.)
In this action, Plaintiffs challenge the treatment of the CSATs as a countable resource in determining Medicaid eligibility. Because the institutionalized spouses have been denied, or will be denied benefits as a result of such treatment, Plaintiffs claim that Defendants' treatment of CSATs constitutes impermissible rulemaking in violation of their rights to due process and equal protection. Plaintiffs urge this Court to order the State to implement regulations governing undue hardship hearings.
Plaintiffs are suing Michele Guhl, Commissioner of the New Jersey Department of Human Services ("DHS"), Margaret Murray, Director of the Division of Medical Assistance and Health Services ("DMAHS"), as well as the Directors of the Board of Social Services for Bergen County and Morris County (collectively referred to as "Defendants"). The first amended complaint contains six counts: (1) 42 U.S.C. § 1983; (2) Declaratory Judgment; (3) constitutional due process; (4) improper rule making; (5)equitable estoppel and equal protection; and (6) violation of New Jersey regulations. Plaintiffs seek the following relief:
• to enjoin the fair hearings appeal of Plaintiffs' denials pending resolution of this action;
• declaratory judgment that Defendants engaged in improper rule making;
• a requirement that Defendants utilize proper standards and procedures to adopt regulations to implement undue hardship regulations;
• declaratory judgment that Defendants' denials of each of the institutionalized Plaintiffs pending Medicaid applications were illegal, null and void;
• a requirement that Defendants redetermine each Plaintiff's pending Medicaid application in accordance with current law, regulations and prior "policy" determinations;
• a declaratory judgment that prospective Medicaid applications utilizing CSATs drafted and funded prior to the adoptions of undue hardship regulations be permitted as exceptions to the transfer rules pursuant to 42 U.S.C. § 1396p(c)(2)(B)(i) and (ii);
• estoppel of Defendants from determining that Plaintiffs' contributions of available resources to CSATs constitute transfers for less than fair market value resulting in a period of ineligibility for Medicaid benefits;
• compensatory damages; and
• attorneys' fees and costs pursuant to 42 U.S.C. § 1988.
Plaintiffs move for preliminary and permanent injunctive and declaratory relief, and Defendants move to dismiss. Oral argument was held on March 27, 2000.
To understand the issues and place them in context, a brief overview of Medicaid and its eligibility requirements for institutionalized spouses is required.
The Medicaid Act7 is a cooperative federal-state program that is jointly financed with federal and state funds. Wilder v. Virginia Hospital Ass'n, 496 U.S. 498, 501, 110 S.Ct. 2510, 110 L.Ed.2d 455 (1990). The purpose of the program is to "provide a nationwide program of medical assistance for low income families and individuals." West Virginia Univ. Hosps., Inc. v. Casey, 885 F.2d 11, 15 (3d Cir.1989).
Although participation in the program is voluntary, participating States must comply with certain requirements imposed by the Act and regulations promulgated by the Secretary of Health and Human Services (Secretary). To qualify for federal assistance, a State must submit to the Secretary and have approved a "plan for medical assistance," § 1396a(a), that contains a comprehensive statement describing the nature and scope of the State's Medicaid program. 42 C.F.R. § 430.10 (1989).
Wilder, 496 U.S. at 501, 110 S.Ct. 2510. The Medicaid program is "`basically administered by each state within certain broad requirements and guidelines.'" West Virginia, 885 F.2d at 15 (citation omitted).
On the federal level, the Secretary of the U.S. Department of Health and Human Services ("HHS") administers the program through the Health Care Financing Administration ("HCFA"). HCFA has issued guidelines, known as "Transmittal 64," or the "State Medicaid Manual," interpreting the transfer of assets and treatment of trusts provisions of the Medicaid Act [hereinafter "HCFA Guidelines" or "Transmittal 64"].8
The New Jersey Medical Assistance and Health Services Act, N.J.S.A. 30:4D-1, et seq., authorizes New Jersey's participation in the Medicaid program. On the state level, the DMAHS, an agency contained within the DHS, is responsible for administration of the Medicaid program in New Jersey. N.J.S.A. 30:4D-4. The county welfare agencies ("CWA") assist DMAHS in administering the program by processing applications for Medicaid, including determining whether an applicant has met the income and resource eligibility standards. N.J.S.A. 30:4D-7a; N.J.A.C. 10:71-3.15. CWA staff members make their determinations based on information received from an applicant and from their own investigations to verify, supplement or clarify such information. N.J.A.C. 10:71-1.1 et seq.
With certain exceptions, for an individual to be eligible for Medicaid benefits, a person's income and resources must fall below a certain limit. When inventorying an applicant's income and resources to determine eligibility, Medicaid "deems" the income and resources of each spouse to be available to the other when both spouses live together in the community. When, however, one spouse enters a nursing facility ("institutionalized spouse") and is eligible for Medicaid, while the other spouse stays in the community ("community spouse"), the rules become more complex. John Bigler, Diane Archer, John Regan, An Overview of Social Security, Medicare and Medicaid, 65 N.Y. State Bar Journal 14 (September/October, 1993) [hereinafter "Bigler Article"]. The Medicare Catastrophic Coverage Act ("MCCA"), enacted in 1988, and the 1993 Omnibus Budget Reconciliation Act ("OBRA") contain provisions addressing this more complex situation.
Prior to enactment of the MCCA, shortly after a spouse was institutionalized, each spouse was treated as a separate household. Income, such as Social Security checks, pensions, and interest or dividends from investments, were considered to belong to the spouse whose name was on the instrument conveying the funds. Consequently, when the husband, for example, entered a nursing home and the couple's pension check had the husband's name on it, all of that income was attributed to him when determining Medicaid eligibility, leaving the wife destitute. Conversely, if the wife entered the nursing home, the husband had no obligation under federal law to contribute any of that income toward the cost of the wife's care. See H.R.Rep. No. 100-105(II), 100th Cong., 2nd Sess., at 66 (1987), reprinted in 1988 U.S.C.C.A.N. 857, 889.
A similar rule was in effect for the attribution of resources. Ibid. Generally, in the month following institutionalization, jointly held resources to which a spouse had unrestricted access, such as a joint savings account, or resources solely held by the institutionalized spouse, were considered available to...
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