Randall v. Lukhard, Civ. A. No. 80-0050-C.

• Decision Date: 16 April 1982
• Docket Number: Civ. A. No. 80-0050-C.
• Citation: 536 F. Supp. 723
• Court: U.S. District Court — Western District of Virginia
• Parties: Evelyn RANDALL, et al., Plaintiffs, v. William LUKHARD, et al., Defendants.

536 F. Supp. 723

Evelyn RANDALL, et al., Plaintiffs, v. William LUKHARD, et al., Defendants.

Civ. A. No. 80-0050-C.

United States District Court, W. D. Virginia, Charlottesville Division.

April 16, 1982.

COPYRIGHT MATERIAL OMITTED

Herbert L. Beskin, Carlton S. Gregory, Charlottesville-Albemarle Legal Aid Society, Charlottesville, Va., for plaintiffs.

John Rupp, Robert T. Adams, Asst. Attys. Gen., Richmond, Va., E. Montgomery Tucker, Asst. U. S. Atty., Roanoke, Va., Diane Maskel, U. S. Dept. of Health & Human Services, Philadelphia, Pa., for defendants.

OPINION and ORDER

TURK, Chief Judge.

In an effort to prevent fraud in the use of Medicaid funds, the Commonwealth of Virginia has employed a transfer of assets rule which disqualifies those Medicaid applicants or recipients who have transferred property to other persons for a consideration which is less than the fair market value of the property. Plaintiffs filed this class action challenging the Commonwealth's transfer of assets rule on the grounds that the transfer rule, as it has existed in all of its forms since 1965, violated Title XIX of the Social Security Act, as amended, and also the due process and equal protection clauses of the fourteenth amendment. This court possesses jurisdiction of these matters pursuant to 28 U.S.C. § 1331 and 28 U.S.C. § 1343(3).

Congress established the Medicaid program in 1965 as Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. If a state chooses to participate in the program, the federal government will reimburse the state for a portion of the costs of medical treatment for needy persons. A participating state must develop a plan containing "reasonable standards ... for determining eligibility for and the extent of medical assistance." 42 U.S.C. § 1396a(a)(17). The plan must comply with the requirements imposed both by the Social Security Act and by the Secretary of Health and Human Services. Id., Schweiker v. Gray Panthers, 453 U.S. 34, 101 S.Ct. 2633, 2636, 69 L.Ed.2d 460 (1981).

When first enacted in 1965, Medicaid required participating states to provide medical assistance to "categorically needy" individuals. The "categorically needy" were persons eligible to receive cash payments under one of four welfare programs established elsewhere in the Act. 42 U.S.C. § 1396a(a)(10) (1970 ed.). A participating state also had the option, however, of providing medical assistance to the "medically needy," those persons who possessed incomes or resources too large to qualify for categorical welfare assistance, but too small to pay for their medical expenses. In assessing whether an individual qualified for medical assistance as either a "categorically needy" or "medically needy" person, a state was required to evaluate financial need using only "such income and resources as are, as determined in accordance with standards prescribed by the Secretary, available to the applicant or recipient." 42 U.S.C. § 1396a(a)(17)(B).

As of January 1, 1972, the standards promulgated by the Secretary to define the term "available" stated, in pertinent part,

(a) State Plan requirements: A State plan under title XIX of the Social Security Act must:

....

(2) With respect to both the categorically needy and, if they are included in the plan, the medically needy:

(1) Provide that only such income and resources as are actually available will be considered and that income and resources will be reasonably evaluated....

45 C.F.R. § 248.21(a)(2)(i) 1972 (later recodified at 42 C.F.R. § 448.3(b)(1)) (emphasis supplied).

Virginia chose to participate in the Medicaid program and, as of January 1, 1972, Virginia's program applied a transfer of assets rule to all applicants who sought medical assistance under the Old Age Assistance and Aid to the Permanently and Totally Disabled programs. In general the rule required an applicant who had transferred real or personal property within one or two years of the date of his application, for a consideration less than the fair market value of the property, to demonstrate that the transfer was not for the purpose of becoming eligible for Medicaid.¹

In 1972 Congress revised the Social Security Act. The welfare programs aiding the aged, blind, and disabled (but not dependent children) were repealed, effective January 1, 1974. A new program, Supplemental Security Income for the Aged, Blind, and Disabled (SSI), gave the federal government the responsibility not only for partially funding payments but also for setting eligibility standards. 42 U.S.C. § 1381 et seq., Pub.L. 92-603, 86 Stat. 1465 (1972). The SSI standards of need were more liberal than those used by some states under the previous state-run categorical need programs, and thus SSI confronted these states with the possibility of providing Medicaid assistance to a much larger number of persons.

"In order not to impose a substantial fiscal burden on these States" or discourage them from participating in Medicaid, Congress created the "§ 209(b) option", S.Rep. No.553, 93d Cong., 1st Sess., 56 (1973). By exercising this option a state could ignore the more liberal SSI Medicaid eligibility standards and provide Medicaid assistance only to those persons who would have been eligible for the state Medicaid plan in effect on January 1, 1972. 42 U.S.C. § 1396a. Virginia chose to exercise the § 209(b) option. Therefore the Commonwealth continued to apply a transfer of assets rule to aged, blind, and disabled applicants for Medicaid, as it had done on January 1, 1972.

Plaintiffs filed this class action on April 24, 1980, seeking declaratory and injunctive relief on the grounds that Virginia's transfer of assets rule violated Title XIX of the Social Security Act and the due process and equal protection clauses of the fourteenth amendment. Subsequently, on December 28, 1980, President Carter signed Amendment No. 1936 to the Pneumococcal Vaccine Act, H.R. 8406, Section 5 of Public Law 96-611 (the Boren-Long Amendment). Despite its title, the Amendment in part permitted all state Medicaid plans to employ a transfer of assets rule which presumed that a transfer of property for less than fair market value within the previous 24 months was for the purpose of becoming eligible for Medicaid.² To rebut the presumption an applicant must offer "convincing evidence" that the transfer was made exclusively for some other purpose. Id.; codified at 42 U.S.C. § 1382b(c)(2). Virginia accordingly developed a new transfer of assets rule to conform with the Boren-Long Amendment.³ By leave of the Court plaintiffs then amended their complaint to challenge Virginia's new transfer rule as well as its previous rule.

Plaintiffs are various individuals who have either been disqualified from Medicaid eligibility at some time because of the transfer of assets rule or who have been informed by Virginia Medicaid officials that if they applied for Medicaid benefits, their application would be denied because of the transfer rule. Thus each plaintiff has either exhausted his administrative remedies or discovered that to do so would be futile. Plaintiffs now seek certification of three classes of individuals pursuant to Fed.R. Civ.P. 23(b)(2), as well as summary judgment against defendants in their official capacity as the Secretary of the United States Department of Health and Human Services, Commissioner of the Virginia Department of Welfare, the Commonwealth's Commissioner of Health, and the Director of the Virginia Medical Assistance Program. Defendants also have moved for summary judgment.

I

Pursuant to Rule 23(b)(2) of the Federal Rules of Civil Procedure, the Court will certify the following three classes of plaintiffs:

(a) All those elderly, blind or disabled persons who (1) applied for Medicaid through the Virginia Medical Assistance Program before July 1, 1981; (2) at the time of their application met all the Medicaid eligibility requirements except the Virginia transfer of assets rule; and (3) were denied Medicaid because of the application of this rule to property which they transferred before July 1, 1979. Plaintiffs Morse and Miller represent this class.

(b) All those elderly, blind or disabled persons who (1) applied for Medicaid through the Virginia Medical Assistance Program before July 1, 1981; (2) at the time of their application met all the Medicaid eligibility requirements except the Virginia transfer of assets rule; and (3) were denied Medicaid because of the application of this rule to property which they transferred on or after July 1, 1979. Plaintiffs Matthews, Lamb, Smith and Pompey and Rachel Wingo represent this class.

(c) All those elderly, blind or disabled persons who (1) applied for Medicaid through the Virginia Medical Assistance Program on or after July 1, 1981; (2) at the time of their application met all the Medicaid eligibility requirements except the requirements of the Virginia transfer of assets rule; and (3) were denied Medicaid benefits because of the application of the Virginia rule to property which they transferred on or after July 1, 1979. Plaintiff Evelyn Randall represents this class.

The record contains sufficient evidence that each class is so numerous that joinder of its members is impracticable; that common questions of law or fact exist; that plaintiffs' claims are typical of the claims of each class; and that each plaintiff is an adequate representative of his or her designated class. Furthermore, defendants have acted on grounds generally applicable to each class.

II

The Court finds that the transfer of assets rule employed in the Virginia Medicaid program prior to July 1, 1981, was inconsistent with section 1902(a)(17)(B) of the Social Security Act, 42 U.S.C. § 1396a(a)(17)(B). In particular, Virginia's former transfer rule violated the statutory requirement that a state plan take into account "only such income and resources as are, as determined in accordance with standards prescribed by the Secretary, available to...