Kaspari v. Olson

• Decision Date: 24 June 2011
• Docket Number: No. 20100379.,20100379.
• Parties: David KASPARI and Sarah Kaspari, Appelleesv.Carol K. OLSON, Executive Director, North Dakota Department of Human Services, Appellant.
• Court: North Dakota Supreme Court

799 N.W.2d 348

2011 ND 124

David KASPARI and Sarah Kaspari, Appellees

v.Carol K. OLSON, Executive Director, North Dakota Department of Human Services, Appellant.

No. 20100379.

Supreme Court of North Dakota.

June 24, 2011.

C. Nicholas Vogel, Fargo, N.D., for appellees.Jeanne Marie Steiner, Assistant Attorney General, Office of Attorney General, Bismarck, N.D., for appellant.VANDE WALLE, Chief Justice.

[¶ 1] The Department of Human Services appealed from a judgment reversing the Department's calculations of David and Sarah Kaspari's monthly recipient liabilities for their nursing home costs. The Department argues the district court erred in construing Medicaid regulations to allow the Kasparis to reduce their monthly recipient liabilities for nursing home care by their payments for mortgage interest and for real estate taxes relating to their life estate interest in farmland. We hold the court erred in construing the Medicaid regulations, and we reverse the judgment and remand for reinstatement of the Department's decision.

I

[¶ 2] In 1996, the Kasparis conveyed approximately 561 acres of farmland in Ransom County by warranty deed to their son and daughter-in-law. The Kasparis retained a life estate in the farmland and leased their interest in the land to a third-party tenant. The land is adjacent to the Sheyenne River and is subject to a conditional right to use water from the river for irrigation, which would lapse if not exercised. The Kasparis exercised the water rights and constructed irrigation equipment on the land, which was paid for with a series of loans secured by mortgages on the land. The new loans were combined with an existing mortgage on the land. After the irrigation equipment was placed on the land, the Kasparis received increased rental payments for the irrigated land, and as relevant to their application for benefits, they received $44,000 per year in rental payments for the land. The 1996 warranty deed also required the Kasparis to pay their son and daughter-in-law a $5,000 per year management fee while the mortgage remained unpaid.

[¶ 3] In April 2009, the Kasparis entered a nursing home and thereafter applied to Cass County Social Services for Medicaid for their nursing home care. After an initial determination by Cass County Social Services and a subsequent administrative hearing, the Department decided the Kasparis were eligible for benefits and calculated their respective recipient liabilities without allowing deductions for their payments for interest on the mortgage, for real estate taxes for the land, and for the management fee for the land. Using calculations based on their social security and their proportionate share of rental income from the farmland, the Department decided David Kaspari's recipient liability for his nursing home care was $2,366.33 per month and Sarah Kaspari's recipient liability for her nursing home care was $1,534.73 per month.

[¶ 4] On appeal to the district court, it reversed and remanded for recalculation of the Kasparis' respective monthly recipient liabilities, concluding they were entitled to deductions for their payments of mortgage interest and real estate taxes. The court construed the phrase “net income remaining after all appropriate deductions, disregards, and medicaid income levels have been allowed” in N.D. Admin. Code § 75–02–02.1–41.1 with N.D. Admin. Code § 75–02–02.1–38.1(3) and said “[w]hile section 75–02–02.1–38.1(3) enumerates certain deductions, the section cannot be read in conjunction with section 75–02–02.1–41.1 to establish all deductions which are appropriate in determining recipient liability.” The court said the “use of ‘all appropriate deductions' [in 75–02–02.1–41.1] is a much broader term than ‘allowed,’ [in 75–02–02.1–38.1(3) ] and should be interpreted to include not just the ‘allowed’ deductions enumerated in section 75–02–02.1–38.1(3), but also the necessary expenses that are normally deducted in arriving at an individual's net income from a particular activity.” The court explained that “[b]y combining a reference to the recipient's ‘net income’ with an allowance for ‘all appropriate deductions,’ section 75–02–02.1–41.1 makes clear that a recipient's income must be reduced by such ordinary and necessary expenses as required mortgage interest payments and annual real estate taxes in determining recipient liability.”

II

[¶ 5] When a decision of an administrative agency is appealed from the district court to this Court, we review the agency's decision and the record compiled before the agency. Reinholdt v. North Dakota Dep't of Human Servs., 2009 ND 17, ¶ 10, 760 N.W.2d 101; Rennich v. North Dakota Dep't of Human Servs., 2008 ND 171, ¶ 10, 756 N.W.2d 182. Courts exercise a limited review in appeals from administrative agency decisions under the Administrative Agencies Practice Act, N.D.C.C. ch. 28–32. Rennich, at ¶ 10. Under N.D.C.C. § 28–32–49, our standard of review of the agency's decision is the same as the standard applied by the district court under N.D.C.C. § 28–32–46. Rennich, at ¶ 10; Oyloe v. North Dakota Dep't of Human Servs., 2008 ND 67, ¶ 7, 747 N.W.2d 106. We will not reverse the agency's decision unless:

1. The order is not in accordance with the law.

2. The order is in violation of the constitutional rights of the appellant.

3. The provisions of this chapter have not been complied with in the proceedings before the agency.

4. The rules or procedure of the agency have not afforded the appellant a fair hearing.

5. The findings of fact made by the agency are not supported by a preponderance of the evidence.

6. The conclusions of law and order of the agency are not supported by its findings of fact.

7. The findings of fact made by the agency do not sufficiently address the evidence presented to the agency by the appellant.

8. The conclusions of law and order of the agency do not sufficiently explain the agency's rationale for not adopting any contrary recommendations by a hearing officer or an administrative law judge.

N.D.C.C. § 28–32–46.

[¶ 6] In determining whether an agency's findings of fact are supported by a preponderance of the evidence, we do not make independent findings of fact or substitute our judgment for that of the agency; rather, we determine only whether a reasoning mind reasonably could have determined the agency's factual conclusions were proved by the weight of the evidence from the entire record. Rennich, 2008 ND 171, ¶ 11, 756 N.W.2d 182. Questions of law are fully reviewable on appeal from an agency's decision. Reinholdt, 2009 ND 17, ¶ 10, 760 N.W.2d 101; Rennich, at ¶ 11.

III

[¶ 7] In 1965, Congress enacted the Medicaid program in Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq., as a cooperative federal-state program designed to provide financial assistance to qualified needy persons for their necessary medical care. Wahl v. Morton County Soc. Servs., 1998 ND 48, ¶ 10, 574 N.W.2d 859. The Medicaid program is governed by the interplay of federal and state statutes and regulations. See 42 U.S.C. § 1396 et seq. ; 42 C.F.R. § 430 et seq. ; N.D.C.C. ch. 50–24.1; N.D. Admin. Code ch. 75–02–02.1. The Department administers the Medicaid program in North Dakota and is authorized to promulgate rules and regulations to determine eligibility for benefits. See N.D.C.C. §§ 50–24.1–01.1 and 50–24.1–04; Reinholdt, 2009 ND 17, ¶ 12, 760 N.W.2d 101; Oyloe, 2008 ND 67, ¶ 8, 747 N.W.2d 106. To be eligible for Medicaid benefits, an applicant must have insufficient income or assets to pay the costs for their necessary medical care and services. N.D.C.C. § 50–24.1–02; Reinholdt, at ¶ 12; Oyloe, at ¶ 8. Medicaid is intended to be a payor of last resort, and an applicant's other available resources must be exhausted before the applicant is eligible to have Medicaid pay for care. Reinholdt, at ¶ 12; Oyloe, at ¶ 8. An applicant for Medicaid benefits bears the burden of proving eligibility. N.D. Admin. Code § 75–02–02.1–02.1; Rennich, 2008 ND 171, ¶ 12, 756 N.W.2d 182; Oyloe, at ¶ 8.

[¶ 8] “ ‘[A]n applicant's participation in the program involves a two-phase process: first, determining medical eligibility and financial eligibility based on the applicant's income and resources; and second, determining the extent of assistance to which the applicant is eligible based on another calculation of income.’ ” Wahl, 1998 ND 48, ¶ 11, 574 N.W.2d 859 (quoting Estate of Krueger v. Richland County Soc. Servs., 526 N.W.2d 456, 458 (N.D.1994)). “The purpose of the second, post-eligibility phase, calculation of income is to determine the recipient's share of the cost for medical services.” Krueger, at 458.

[¶ 9] North Dakota law requires consideration of an applicant's “actually available assets” to establish eligibility for Medicaid. N.D. Admin. Code § 75–02–02.1–25. “Asset” is defined as “any kind of property or property interest, whether real, personal, or mixed, whether liquid or illiquid, and whether or not presently vested with possessory rights.” N.D. Admin. Code § 75–02–02.1–01(2). Under N.D. Admin. Code § 75–02–02.1–26, a one-person unit's assets not otherwise exempted or excluded under N.D. Admin. Code §§ 75–02–02.1–27 through 75–02–02.1–28.1 may not exceed $3,000. See also N.D. Admin. Code §§ 75–02–02.1–29 (Forms of Asset Ownership); 75–02–02.1–30 (Contractual Rights to Receive Money Payments); 75–02–02.1–31 (Trusts); 75–02–02.1–31.1 (Trusts Established by Applicants, Recipients, or Their Spouses After August 10, 1993); 75–02–02.1–32 (Valuation of Assets); 75–02–02.1–33.1 (Disqualifying Transfers Made Before February 8, 2006); 75–02–02.1–33.2 (Disqualifying Transfers Made On or After February 8, 2006); 75–02–02.1–34 (Income Considerations); 75–02–02.1–37 (Unearned Income); 75–02–02.1–38 (Earned Income).

[¶ 10] The value of an applicant's life estate is excluded as an actually available asset for purposes of establishing initial Medicaid eligibility. N.D. Admin. Code § 75–02–02.1–28(...