Lyon v. Bowen, 85-3694

• Decision Date: 17 October 1986
• Docket Number: No. 85-3694,85-3694
• Citation: 802 F.2d 794
• Parties: , 15 Soc.Sec.Rep.Ser. 191 Eugene LYON, Plaintiff-Appellant, v. Otis R. BOWEN, M.D., Secretary of Health and Human Services, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 794

802 F.2d 794

55 USLW 2243, 15 Soc.Sec.Rep.Ser. 191

Eugene LYON, Plaintiff-Appellant, v. Otis R. BOWEN, M.D., Secretary of Health and Human Services Defendant-Appellee.

No. 85-3694.

United States Court of Appeals Fifth Circuit.

Oct. 17, 1986.

Mark A. Moreau, New Orleans Legal Assistance Corp., New Orleans, La., Johnny Nixon, Kansas City, Mo., Gill Deford, Nat. Senior Citizens Law Center, Los Angeles, Cal., for plaintiff-appellant.

Mack Davis, Office of General Counsel, Baltimore, Md., John P. Volz, U.S. Atty., Nancy A. Nungesser, Asst. U.S. Atty., New Orleans, La., Karen J. Behner, Dept. of H.H.S., Dallas, Tex., for defendant-appellee.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before GARWOOD and HILL, Circuit Judges, and WILL ^*, Senior District Judge.

ROBERT MADDEN HILL, Circuit Judge:

Eugene Lyon, a disabled social security recipient, challenges a regulation of the Secretary of Health and Human Services (the Secretary), 20 C.F.R. Sec. 416.1123(b) (1986), which deems withheld social security disability benefits under Title II of the Social Security Act (the Act), 42 U.S.C. Secs. 401-433, as income for purposes of calculating Supplemental Security Income (SSI) benefits under Title XVI of the Act, 42 U.S.C. Secs. 1381-1383c. Finding that the challenged regulation, viewed in the context of the entire Social Security regulatory scheme, is not inconsistent with the Act and is appropriate to carrying out its provisions, we affirm the district court and uphold the regulation as a lawful exercise of the Secretary's authority.

I. Factual Background

Lyon was diagnosed in 1963 as suffering from disabling mental impairments and since then has been eligible to receive social security disability benefits under Title II of the Act. Between December 1974 and March 1979 Lyon received an overpayment of $11,886.70 in Title II benefits as a result of failing to report his income from employment to the Social Security Administration (SSA). After discovering this unreported income, the SSA notified Lyon that it would recoup the overpayment by administratively withholding 100% of his monthly social security Title II disability benefits until the overpayment had been fully recovered. ¹

On October 19, 1981, Lyon requested a waiver of the overpayment pursuant to 42 U.S.C. Sec. 404(b), relief which was denied because he failed to prove that he was not at fault. ² In addition to the relief provided in section 404(b), the Secretary has set forth in 20 C.F.R. Sec. 404.502(c) (1986) a means by which individuals not entitled to waiver may reduce withholding to as little as ten dollars per month. Lyon, who as we have already noted was mentally impaired, apparently did not have sufficient familiarity with the regulations to grasp the distinction between waiver and reduction and thus did not file a separate application for section 404.502(c) relief. And, notwithstanding that requirements of proof for a reduction of withholding are less stringent than those for waiver, the SSA declined to construe Lyon's application for waiver liberally so as to make this relief available to him. As a result, between 1983 and 1985, Lyon (who had been found eligible for SSI benefits), by reason of the withholding of Title II benefits and the counting of these benefits as income for the purpose of calculating his SSI benefit level, actually received less than 60% of the amount which the SSI program guarantees recipients for basic subsistence. ³

Lyon's request for waiver was denied by a final decision of the Secretary on November 20, 1984. Thereafter, Lyon filed suit in the district court requesting declaratory and injunctive relief from the policy of the Secretary embodied in 20 C.F.R. Sec. 416.1123(b) which diminished SSI benefits by counting withheld social security disability benefits as income. The district court upheld the Secretary's policy and this timely appeal ensued.

II. Statutory and Regulatory Setting

The SSI program was added to the Social Security Act by the Social Security Amendments of 1972, P.L. 92-603, 42 U.S.C. Secs. 1381-1383c, effective January 1, 1974. SSI, like the social security disability program, is administered by the SSA. SSI and social security are, however, separate programs, each operating pursuant to a different statutory authority and receiving funding from separate sources. ⁴ Congress and the Supreme Court have described the basic purpose of the SSI program as follows:

This program was intended "[t]o assist those who cannot work because of age, blindness, or disability" by "set[ting] a Federal guaranteed minimum income level for aged, blind, and disabled persons...." The SSI program provides a subsistence allowance, under federal standards, to the Nation's needy, aged, blind, and disabled.

Schweiker v. Wilson, 450 U.S. 221, 223, 101 S.Ct. 1074, 1077, 67 L.Ed.2d 186 (1981) (quoting legislative history; footnotes omitted). In short, SSI is a welfare program of last resort designed to provide only a "subsistence allowance."

To be eligible for SSI an individual must be aged, blind, or disabled as defined in 42 U.S.C. Sec. 1382c and have income and resources below the levels specified in 42 U.S.C. Sec. 1382a. The issue posed by the parties is whether or not the Secretary's policy of counting withheld social security payments as "income" as provided for in 20 C.F.R. Sec. 416.1123(b) conflicts with 42 U.S.C. Sec. 1382a which defines income for SSI purposes. Section 1382a(a)(2) provides:

(a) For purposes of this subchapter, income means both earned income and unearned income; and--

* * *

(2) Unearned income means all other income, including--

(A) support and maintenance furnished in cash or kind....;

(B) any payments received as an annuity, pension, retirement, or disability benefit, including veterans' compensation and pensions, workmen's compensation payments, old-age, survivors, and disability insurance benefit, railroad retirement annuities and pensions, and unemployment insurance benefits;

(C) prizes and awards;

(D) he proceeds of any life insurance policy to the extent that they exceed the amount expended for purposes of the insured's last illness and burial or $1500, whichever is less;

(E) gifts (cash or otherwise), support and alimony payments, and inheritances; and

(F) rents, dividends, interest, and royalties.

In interpreting this statutory provision, the Secretary's predecessor promulgated regulations which recognized that eligibility for SSI could be based only on income which the applicant actually possessed: "In determining the amount of unearned income the amount actually available to the individual is considered." 20 C.F.R. Sec. 416.1120 (1977). In 1979 this interpretation was reaffirmed when the Secretary proposed new rules premised on the notion that income is "anything an individual receives in cash or in kind that can be used to meet his or her needs for food, clothing, and shelter." 44 Fed.Reg. 6430 (Feb. 1, 1979). In keeping with this principle, 20 C.F.R. Sec. 416.1123(a) (1979) entitled "How we count unearned income" was added to the Code of Federal Regulations and provided in pertinent part that "[w]e count unearned income when you actually receive it or when it is first available to you or set aside so you can use it at any time." Id. at 6433.

Under this approach, Title II benefits withheld to recoup an overpayment of Title II benefits could not count as income for SSI purposes. Any withholding which reduced a recipient's benefits below the minimum subsistence allowance established under Title XVI was "refunded" to the recipient through the SSI program. To this extent, then, the Title XVI SSI program was repaying the recipient's indebtedness to the Title II social security disability program.

In April 1982 the Secretary promulgated 20 C.F.R. Sec. 416.1123 (1986) which was designed to bridge the flow of SSI benefits to an overpaid recipient of Title II benefits. This regulation, which is the subject of this action, provides in pertinent part:

(b) We may include more or less of your unearned income than you actually receive. (1) We include more than you actually receive where another benefit payment ... has been reduced to recover a previous overpayment.

The Secretary argues that this regulation is defensible on the theory that recipients whose benefits have been withheld to repay a debt to the social security trust "constructively" receive the withheld payments. According to the Secretary, the "amount withheld from the Social Security disability benefit to recover the disability benefit overpayment is 'available' to the plaintiff in the sense that it provides actual benefit to him in the form of extinguishing part of an outstanding debt."

The government's point is well taken: In the lexicon of legal fiction "withheld" sometimes means "received" or "available." We see no need for resort to verbal distortions of this order, however, because we do not believe that the Secretary's method of withholding need be justified as a pure welfare measure. There are two Congressional purposes at the heart of the Title II and Title XVI programs. First is the government's apparent aim to provide a minimally decent standard of living to destitute, blind, aged, and disabled individuals. Second is the government's need to prevent the dissipation of its resources through neglect, abuse, or fraud. We take the position that "income" may be defined in a way that accommodates both of these aims. Thus, while availability for expenditure on food and shelter is the essential characteristic of "income" where no overpayment has taken place, this requirement may be dispensed with when the recipient has violated the terms governing his eligibility for disability benefits.

III. Analysis

Essentially, there are three objections to the Secretary's construction of section 1382a. We discuss them in the order presented.

A.

First is that the language of the...