Missouri State Div. of Family Services v. Barclay, WD

• Decision Date: 17 December 1985
• Docket Number: No. WD,WD
• Citation: 705 S.W.2d 518
• Court: Missouri Court of Appeals
• Parties: Medicare & Medicaid Guide P 35,122 MISSOURI STATE DIVISION OF FAMILY SERVICES, Appellant, v. In re Betty BARCLAY, Respondent. 36531.

Page 518

705 S.W.2d 518

Medicare & Medicaid Guide P 35,122

MISSOURI STATE DIVISION OF FAMILY SERVICES, Appellant, v. In re Betty BARCLAY, Respondent.

No. WD 36531.

Missouri Court of Appeals Western District.

Dec. 17, 1985.

Motion for Rehearing and/or Transfer

to Supreme Court Overruled and

Denied Jan. 28, 1986.

Application to Transfer Denied

March 25, 1986.

Mark W. Kiesewetter Jefferson City, for appellant.

Edward Berg, Columbia, for respondent.

Before SHANGLER, P.J., and TURNAGE and BERREY, JJ.

BERREY, Judge.

The Missouri State Division of Family Services (DFS) appeals the reversal of the decision of the director of DFS which limited Betty Barclay's personal needs allowance to $25.

The following narrative will assist in understanding the issues herein.

Betty Barclay, the respondent, is a deaf mute who suffers from many medical impairments. She lived with her grandmother for some period of time. After the death of her grandmother, the respondent became a resident at the Riverside Nursing Home in Mokane, Missouri, where she currently resides.

Up until 1980, her grandmother's estate provided the necessary funds for her care. At that time the funds were exhausted and the Probate Court of Callaway County found respondent to be incompetent. The probate court appointed Mr. A.B. Musik, the public administrator of Callaway County, Fulton, Missouri, as her legal guardian.

Mr. Musik obtained $353.60 in social security benefits ¹ for the respondent. He also procured Medicaid funds through DFS to pay for her care at the Riverside Nursing Home. Expenses incurred which were not covered by Medicaid were paid by Mr. Musik out of a $1,000 burial fund. These funds, however, were depleted in 1982.

On November 1, 1982, Mr. Musik petitioned the probate court to allow him to withhold and set aside a portion of the respondent's monthly social security benefits to pay certain expenditures. The court ordered the guardian to withhold the following amounts from respondent's monthly income:

                1. Court costs                 $ 2.08
                2.  Guardian's commission        16.50
                3.  Attorney fees                 3.42
                4.  Medication costs             30.00
                5.  Clothing & personal needs    30.00
                                               ------
                                               $82.00
                

On January 10, 1984, the DFS determined that the only allowable deductions were $25 for respondent's personal needs and $14.60 for the Medicare insurance premium, an amount deducted by social security upon issuance of her monthly social security check. The remaining balance of $314 was to be paid to the nursing home. This figure was calculated by a method set forth in the Missouri Division of Family Services Income Maintenance Manual, Chapter VI, Section IV, pages 24-30 (also referred to herein as IMM).

Following an evidentiary hearing the director of DFS decided on March 8, 1984, that the deductions totaling $39.60 and the remaining balance of $314 were correctly determined pursuant to 42 C.F.R. § 435.733 and the DFS's Income Maintenance Manual.

However, Mr. Musik relied on the probate court order and retained the $82 from the monthly social security checks. He has paid $254 per month to the nursing home and has been billed the difference. He appealed the director's decision to the Circuit Court of Callaway County, which reversed the director.

DFS challenges the circuit court's reversal of the decision of the director of DFS on the grounds that the court ordinarily plays a limited role in reviewing the decisions of an administrative body. Generally, where there is an application of law to facts, the issue for the court becomes whether or not there is competent and substantial evidence upon the record as a whole to support the administrative decision. Holt v. Personnel Advisory Board, 679 S.W.2d 340, 342-343 (Mo.App.1984).

The issues in the instant case, however, do not involve an examination of the facts. Here, the resolution of the issues turns on the validity of DFS's Income Maintenance Manual and the interpretation of Federal Medicaid statutes. If an administrative agency's decision is based upon its interpretation or application of the law, then the matter is for the independent judgment of the reviewing court. King v. Laclede Gas Co., 648 S.W.2d 113, 114 (Mo. banc 1983); Daily Record Co. v. James, 629 S.W.2d 348, 351 (Mo. banc 1982); St. Louis County v. State Tax Commission, 562 S.W.2d 334, 337-338 (Mo. banc 1978).

In an attempt to untangle these issues, this court must examine whether the DFS' Income Maintenance Manual (IMM) provides a permissible means to carry out agency policy affecting the legal rights of persons like the respondent. The IMM is a voluminous compilation of materials and guidelines used by DFS. Although the IMM incorporates portions of the Code of State Regulations at 13 C.S.R. 40 et seq., the provisions of IMM in Chapter VI, Section IV, page 20, item b, are the only agency policy at issue in this case; these provisions are not contained in the state code or on file with the Secretary of State.

In Page Western v. Community Fire Protection, 636 S.W.2d 65, 68 (Mo. banc 1982), the Supreme Court stated that "[r]ules duly promulgated pursuant to properly delegated authority have the force and effect of law." The legislature in § 207.020, RSMo 1978 has granted DFS the authority to issue the necessary rules and regulations.

The next question becomes whether the IMM, Chapter VI, § VI, page 20, which "sets forth the method by which the Agency is required to use to compute the amount of a recipient's income to be paid the nursing home" is within the definition of a "rule" according to § 536.010.4, RSMo 1978, or if it comes within an exception thereunder. Section 536.010.4 describes the term "rule" as "each agency statement of general applicability that implements, interprets, or prescribes law or policy, or that describes the organization, procedure or practice requirements of any agency." The method to determine a recipient's allocation of income is a rule within this definition as it "substantially affects the legal rights of" persons who seek financial aid through the state's Medicaid program.

Further examination of § 536.010.4 reveals the DFS' provisions cannot find refuge within the exceptions to the definition. Cf. McCallister v. Priest, 422 S.W.2d 650, 659 (Mo. banc 1968) (internal management rules set forth in a police manual were determined to be within the listed exceptions under § 536.010.4). It may be asserted that the portions of IMM in issue come within the exception which states "those portions of staff manuals, instructions or other statements issued by an agency which set forth criteria or guidelines to be used by its staff in auditing ..." § 536.010.4(f). The provisions in IMM, however, do not merely involve the verification of a person's financial accounts. These provisions establish a methodology to be used in determining an individual's income allocation.

An agency, like DFS, who desires its rules to possess effective legal force, must satisfy publication and filing requirements. Tonnar v. Missouri State Highway and Transportation Commission, 640 S.W.2d 527, 532 (Mo.App.1982). The procedure for administrative agency rule making is set forth in § 207.021, RSMo 1978. ² Although several courts have found it "unnecessary to determine whether ... the manual [IMM] had any effect as 'an authority definition or expression of agency policy' or rose to the dignity of a regulation" Pummill v. Missouri Division of Family Services, 674 S.W.2d 647, 650 (Mo.App.1984) and cases cited therein, this court finds, in the instant case, the asserted portion of IMM has no controlling force due to the noncompliance with the required procedures.

Assuming arguendo that the provisions had effective legal force, the director's decision to limit the deductions to $25 from Betty's social security check is contrary to law in view of the Medicaid statutes and accompanying regulations.

The purpose of the Medicaid program, as enacted in 1965, is to provide medical assistance to needy persons whose income and resources are insufficient to meet the expenses of health care. 42 U.S.C. § 1396. Under this program, the states and the federal government engage in "cooperative federalism": " 'the federal government provides matching funds to ... states which ... locally administer their own programs and transmit payments to providers of nursing home services.' " Department of Social Services v. Villa Capri Homes, Inc., 684 S.W.2d 327, 330 (Mo. banc 1985). Citing AGI-Bloomfield Convalescent Center, Inc. v. Toan, 679 S.W.2d 294, 298 (Mo.App.1984).

While a state may refuse to participate in this program, once a state has elected to accept substantial federal funds, it must comply with all federal statutes and regulations in the administration of its program. Harris v. McRae, 448 U.S. 297, 301, 308, 100 S.Ct. 2671, 2680, 2683, 65 L.Ed.2d 784 (1980); see also, King v. Smith, 392 U.S. 309, 333, 88 S.Ct. 2128, 2141, 20 L.Ed.2d 1118 (1968). Although a state may design a plan to meet the needs and conditions of the state, it still must operate within the framework laid out by the federal government. District of Columbia Podiatry Society v. District of Columbia, 407 F.Supp 1259, 1264 (D.D.C.1975). By Missouri's decision to participate in the Medicaid assistance program in 1967, it became subject to those conditions. Villa Capri Homes, supra, at 330.

The federal regulation at issue directs that a state agency must reduce its payment to an institution because certain deductions must be allowed to the individual. 42 C.F.R. § 435.725. ³ Specifically, § 435.725(c) states:

In reducing its payment to the institution, the agency must deduct the following amounts in the following order, from the individual's total income including amounts disregarded in determining eligibility:

(1) A personal needs allowance that is reasonable in amount for clothing and other personal needs of...