Ramey & Shupe v. Reinertson

• Decision Date: 04 October 2001
• Docket Number: Nos. 00-1121,00-1143,s. 00-1121
• Parties: (10th Cir. 2001) LORY ANN RAMEY, Plaintiff-Appellee, RENEE M. FARMER, Plaintiff-Cross-Appellant, SHERRY S. SHUPE, Intervenor-Appellee, v. KAREN REINERTSON, in her official capacity as Executive Director of the Colorado Department of Health Care Policy and Financing, Defendant-Appellant-Cross- Appellee
• Court: U.S. Court of Appeals — Tenth Circuit

Page 955

268 F.3d 955 (10th Cir. 2001)

LORY ANN RAMEY, Plaintiff-Appellee, RENEE M. FARMER, Plaintiff-Cross-Appellant, SHERRY S. SHUPE, Intervenor-Appellee, v. KAREN REINERTSON, in her official capacity as Executive Director of the Colorado Department of Health Care Policy and Financing, Defendant-Appellant-Cross- Appellee.

Nos. 00-1121, 00-1143

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

October 4, 2001

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO (D.C. NO. 98-WM-1261)

Ann M. Hause, Assistant Attorney General, Denver, Colorado (Ken Salazar, Attorney General, with her on the briefs), for Appellant.

R. Eric Solem, Solem, Mack & Steinhoff, P.C., Denver, Colorado (David F. Steinhoff, Solem, Mack & Steinhoff, P.C., Denver, Colorado; Mary Helen Miller, Boulder, Colorado, with him on the briefs), for Appellees and Cross-Appellant.

Before HENRY^* and PORFILIO, Circuit Judges, and OWEN, District Judge.^**

HENRY, Circuit Judge.

This appeal requires our examination of the Social Security Act ("Act"), in particular those provisions relating to the Medicaid program, established in 1965, see 42 U.S.C. 1396a. We recognize, as have other courts, that "[t]he Social Security Act is among the most intricate ever drafted by Congress. Its Byzantine construction, as Judge Friendly has observed, makes the Act 'almost unintelligible to the uninitiated.'" Schweiker v. Gray Panthers, 453 U.S. 34, 43 (1981) (hereinafter Gray Panthers) (quoting Friedman v. Berger, 547 F.2d 724, 727 n.7 (2d Cir. 1976)).

Before us are essentially two issues to determine: (1) whether a particular section of the Act, 42 U.S.C. 1396a(k) (1986), though repealed effective August 10, 1993, still applies to trusts established before that date and (2) whether recipients of Supplemental Security Income for the Aged, Blind and Disabled ("SSI") are also entitled to Medicaid benefits under Colorado's medical assistance program. We have jurisdiction pursuant to 28 U.S.C. 1331 (2001) and, for the reasons stated below, affirm.

I. BACKGROUND

For purposes of clarity, we provide first a brief discussion of the relevant provisions of the Act, namely the Medicaid program and the SSI program.

A. Medicaid Program

The Medical Assistance program, commonly known as "Medicaid," "is a cooperative federal-state venture designed to afford medical assistance to persons whose income and resources are insufficient to meet the financial demands of necessary care and services." New Mexico Dep't of Human Servs. v. Department of Health & Human Servs. Health Care Fin. Admin., 4 F.3d 882, 883 (10th Cir. 1993). Under this federal program administered by the states, participating states receive partial reimbursement for the costs of providing medical services as well as reimbursement for the costs of administering the program.

Each participating State develops a plan containing reasonable standards . . . for determining eligibility for and the extent of medical assistance. An individual is entitled to Medicaid if he fulfills the criteria established by the State in which he lives. State Medicaid plans must comply with requirements imposed both by the Act itself and by the Secretary of Health and Human Services ["Secretary of HHS"] . . . .

Gray Panthers, 453 U.S. at 36-37 (internal quotation marks and citations omitted) (emphasis added). Participation in the program is optional, see Colorado Health Care Ass'n v. Colorado Dep't of Social Servs., 842 F.2d 1158, 1164 (10th Cir. 1988) ("While participation in the Medicaid program is optional, once a State elects to participate, it must comply with federal statutory requirements."), and Colorado is currently a participant in the Medicaid program. See Hern v. Beye, 57 F.3d 906, 913 (10th Cir. 1995) (observing that "because Colorado has decided to participate and accept federal Medicaid funds, it must do so on the terms established by Congress").

B. SSI Program

Prior to 1972, the SSI program did not exist. Instead, the Act provided for four welfare programs known as Old Age Assistance, Aid to the Blind, Aid to the Permanently and Totally Disabled, and Aid to Families with Dependent Children ("AFDC"). See Schweiker v. Hogan, 457 U.S. 569, 573 n.2 (1982). In 1972, Congress attempted to streamline these various programs combining the first three into a new program known as Supplemental Security Income for the Aged, Blind and Disabled. See Gray Panthers, 453 U.S. at 38 (noting that "Congress replaced three of the four categorical assistance programs with [SSI]"). The purpose of the newly created program was to afford cash assistance for basic necessities (but not medical expenses) to disabled persons who met the resource eligibility requirements. See Miller v. Ibarra, 746 F. Supp. 19, 23 (D. Colo. 1990).

The creation of SSI, however, engendered concern because "Congress imposed the requirement that all recipients [of] SSI . . . were entitled to Medicaid." Gray Panthers, 453 U.S. at 38. This

portended increased Medicaid obligations for some states . . . . Congress feared that these States would withdraw from the cooperative Medicaid program rather than expand their Medicaid coverage in a manner commensurate with the expansion of [SSI]. [I]n order not to impose a fiscal burden on these States or discourage them from participating [in Medicaid], Congress offered what has become known as the 209(b) option[:] Under it, States could elect to provide Medicaid assistance only to those individuals who would have been eligible under the state Medicaid plan in effect on January 1, 1972 [i.e., before SSI]. States thus became either SSI States or 209(b) States depending on the coverage that they offered.

Id. (internal quotation marks and citations omitted). Colorado is a SSI state. See Colo. Rev. Stat. 26-4-201(1)(i) (1999).

Under SSI, states, at their option, may provide assistance not only to the "categorically needy," but also to the "optionally categorically needy," who are those applicants eligible for SSI but are not receiving it or who are ineligible for SSI but meet other statutory criteria. See New Mexico Dept. of Human Servs., 4 F.3d at 883. For instance, one of the groups covered under Colorado law are persons in institutions, provided the applicant meets the specified income level. See id. 26-4-301(1)(g).

C. Trusts

"In structuring the Medicaid program, Congress chose to direct [the] limited funds to persons who were most impoverished . . . .." Mattingly v. Heckler, 784 F.2d 258, 266 (7th Cir. 1986). Similarly, Congress created the SSI program "to guarantee a minimum subsistence income level for aged, blind, and disabled persons." White v. Apfel, 167 F.3d 369, 376 (7th Cir. 1999); see also Reed v. Heckler, 756 F.2d 779, 781 n.1 (10th Cir. 1985). Accordingly, eligibility for both Medicaid and SSI benefits is a function of the applicant's "available" assets. If the applicant's "available" assets exceed a statutory ceiling, then coverage is denied. See 42 U.S.C. 1396a(a)(10)(I)(II).

In an effort to maximize their income that would not tally as an "available" asset, many applicants for Medicaid and SSI tried to "shelter," or shield, their assets. One common instrument for sheltering was an irrevocable trust. Not surprisingly, Congress responded to the use of this technique with condemnation. For example, in 1986, Congress reiterated its intent that Medicaid was designed to provide basic medical care for those without sufficient income or resources to provide for themselves and thus passed 42 U.S.C. 1396a(k).

Section 1396a(k) was known as the MQT statute, "MQT" being an acronym for Medicaid qualifying trust. The statute defined MQT as a trust, or similar legal devise, established (other than by will) by an individual (or an individual's spouse) under which the individual may be the beneficiary of all or part of the payments from the trust and the distribution of such payments is determined by one or more trustees who are permitted to exercise any discretion with respect to the distribution to the individual.

42 U.S.C. 1396a(k)(2).

With the passage of 1396a(k), MQTs were no longer a permissible means to shelter assets for purposes of Medicaid eligibility. Section 1396a(k) clarified that the amount "available" to an applicant for purposes of determining Medicaid eligibility included the maximum amount of payments that may be permitted under the terms of the trust to be distributed to the grantor, assuming the full exercise of discretion by the trustee or trustees for the distribution of the maximum amount to the grantor.

Id. 1396a(k)(1).

In the years that followed, Congress remained true to its conviction that MQTs were an impermissible means of sheltering assets for purposes of Medicaid eligibility. In fact, in 1993, 1396a(k) was repealed by Congress and replaced by another statute even less forgiving of such trusts. See 42 U.S.C. 1396p(d) (1993). This statute added stringent criteria regarding the treatment of MQTs such as the inclusion of the corpus and proceeds of various irrevocable trusts as countable resources. See H.R. Rep. No. 103-111, at 207-08 (1993).

D. Ms. Ramey, Ms. Farmer, and Ms. Shupe

In the instant case, we are concerned with the eligibility of three persons for Medicaid benefits who are also in possession of certain trusts established before August 10, 1993. The Colorado Department of Health Care Policy and Financing ("Colorado Department") contends that the trusts of Ms. Ramey, Ms. Farmer, and Ms. Shupe are MQTs, which therefore disqualifies them from receiving Medicaid benefits. The following material facts are not in dispute.

1. Lory Ann Ramey

Ms. Ramey, currently residing in an assisted living facility, first qualified as a categorically eligible SSI recipient and therefore a Medicaid recipient as well in 1992. See Gray Panthers, 243 U.S. at 38 (noting that all SSI recipients are also entitled to Medicaid). On July 22, 1992, Ms. Ramey's father, Donald Ramey, established...