Richardson v. Hamilton, 2:17-cv-00134-JAW

CourtUnited States District Courts. 1st Circuit. United States District Court (Maine)
PartiesYVONNE R. RICHARDSON, by her Conservator Barbara Carlin, and the MAINE POOLED DISABILITY TRUST, on its own behalf and on behalf of its current and future participating beneficiaries over age 64, and on behalf of all other similarly situated individuals, Plaintiffs, v. RICKER HAMILTON, in his official Capacity as Commissioner of the MAINE DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendant.
Docket Number2:17-cv-00134-JAW
Decision Date27 February 2018

YVONNE R. RICHARDSON, by her Conservator Barbara Carlin,
and the MAINE POOLED DISABILITY TRUST, on its own behalf and on behalf of
its current and future participating beneficiaries over age 64, and
on behalf of all other similarly situated individuals, Plaintiffs,
RICKER HAMILTON, in his official Capacity as Commissioner of



February 27, 2018


A Medicaid beneficiary and a pooled special needs trust bring this action seeking injunctive and declaratory relief against the Commissioner of the Maine Department of Health and Human Services (MDHHS), alleging improper treatment of deposits into pooled special needs trusts for purposes of benefits eligibility determinations in violation of the Medicaid Act, 42 U.S.C. §§ 1396 et seq. The Medicaid beneficiary deposited into the trust the proceeds of the sale of her home, and MDHHS treated this asset transfer as one that did not give the beneficiary equal value. As a result, MDHHS notified the Medicaid beneficiary that it would temporarily suspend certain benefits as a penalty. The beneficiary administratively

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appealed MDHHS's determination to a state of Maine Administrative Hearing Officer; her appeal is still pending and has been stayed pending this Court's adjudication of this action. The Commissioner moves to dismiss the Plaintiffs' claims on the ground that the Medicaid Act requires it to treat such asset transfers in the manner that it does.

The Court dismisses the Medicaid beneficiary's claims as unripe. The Court also dismisses Count I because it is not cognizable and Count II because the Medicaid Act provides for the penalty that the MDHHS imposes upon transfers into pooled special needs trusts for the benefit of persons over age sixty-four.


A. Procedural History

On April 13, 2017, Yvonne Richardson and the Maine Pooled Disability Trust (MPDT) filed a complaint pursuant to 42 U.S.C. § 1983 on behalf of themselves and a purported class against Mary Mayhew1 in her official capacity as Commissioner of the MDHHS. Compl. (ECF No. 1). The Complaint contains two counts, each representing a theory of how MDHHS violates the Medicaid Act in its treatment of deposits into the MPDT by individuals over age sixty-four as transfers of assets for less than fair market value. Id. at 8-9. Count I, brought by Ms. Richardson and "others similarly situated", alleges that Ms. Richardson and others "receive fair market value from the expenditures the MPDT can make on her behalf pursuant to

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its fiduciary duties to them." Id. Count II, apparently brought by MPDT alone, alleges that "no statute imposes a transfer of assets penalty for transfers to an exempt pooled special needs trust such as the MPDT." Id. at 9.

On May 12, 2017, the Commissioner filed a motion to dismiss the Complaint pursuant to Rule 12(b)(6). Def.'s Mot. to Dismiss (ECF No. 7) (Def.'s Mot.). The Plaintiffs responded and requested oral argument on June 2, 2017. Pls.' Opp'n to Def.'s Mot. to Dismiss and Req. for Oral Arg. (ECF No. 8) (Pls.' Opp'n). On June 5, 2017, the Court granted the motion for oral argument. Order (ECF No. 10). The Commissioner replied to the Plaintiffs' response on June 16, 2017. Def.'s Reply in Supp. of Mot. to Dismiss Compl. (ECF No. 11) (Def.'s Reply).

The Court issued an interim order on the motion to dismiss on December 28, 2017, in which it identified one issue the parties had not sufficiently briefed and other issues the parties had not addressed at all. Interim Order on Mot. to Dismiss (ECF No. 14). The Court invited the parties to submit supplemental memoranda on ripeness, standing, and enforceability via § 1983 of the relevant provisions of the Medicaid Act, and it ordered the parties to be prepared to discuss them at oral argument. Id at 6-7. On January 25, 2018, the Plaintiffs and Defendant filed supplementary memoranda. Def.'s Supplemental Mem. in Support of Mot. to Dismiss (ECF No. 17) (Def.'s Supp. Mem.); Pls.' Resp. to Interim Order (ECF No. 18) (Pls.' Supp. Mem.). The Court heard oral argument on February 9, 2018. Min. Entry (ECF No. 19).

B. Statutory Background

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Medicaid is a "cooperative federal-state program that provides federal funding for state medical services to the poor." Frew v. Hawkins, 540 U.S. 431, 433 (2004). Maine's Medicaid plan, like all state Medicaid plans, must comply with certain requirements imposed by Congress as a condition of participation in the program. Armstrong v. Exceptional Child Ctr., Inc., 135 S. Ct. 1378, 1382 (2015). One of these is that it "comply with the provisions of section 1396p." 42 U.S.C. § 1396a(a)(18).2 In 1988, Congress enacted § 1396p(c) "which requires a period of ineligibility for Medicaid benefits in response to the applicant's transfer of assets for the purpose of obtaining benefits." Peebler v. Reno, 965 F. Supp. 28, 29 (D. Ore. 1997). The penalty ineligibility period is "directly proportionate to the value of the assets that were transferred." Id.

As a general rule, if an individual sixty-five or older applies for Medicaid for nursing facility, assisted living, or home and community-based waiver services, and has made a transfer of assets for less than fair market value within the prior sixty months, that transfer will disqualify the individual for that Medicaid coverage for a penalty period based on the amount of the transfer. Compl. ¶ 2; 42 U.S.C. § 1396p(c)(1)(A).

C. The Alleged Facts3

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1. The Parties

Yvonne R. Richardson is a resident of St. Joseph's Manor nursing facility in Portland, Maine. Compl. ¶ 14. She appears by Barbara Carlin, who was appointed as conservator for Ms. Richardson by the Cumberland County Probate Court. Id. 5. MPDT is a corporation established under the laws of the state of Maine with its principal office and place of business in York County, Maine. Id. ¶ 6. It is a pooled special needs trust under 42 U.S.C. § 1396p(d)(4)(C). Id. Since its inception in 2002 through 2016, the MPDT has enrolled 171 disabled individuals as participants, including forty-three over the age of sixty-four at the time of their enrollment. Id. 9.

Ricker Hamilton is Commissioner of the MDHHS and as Commissioner is responsible for the administration of the Medicaid program in the state of Maine. Id. ¶ 7. He has his principal office in Kennebec County, Maine, and the MDHHS has an office in Cumberland County. Id. His actions in this case have been and continue to be taken under color of law. Id.

2. Yvonne Richardson's Experience

Yvonne Richardson receives Medicaid benefits to help pay for the cost of her nursing facility care. Id. ¶¶ 15, 16. After she sold her home, $38,500 of the proceeds from the sale was deposited into the MPDT in January 2017. Id. ¶ 15. As a result, the MDHHS issued a notice threatening to temporarily suspend Medicaid coverage for her care at St. Joseph's Manor effective April 1, 2017 but advising her that MDHHS might reconsider if she provided information that showed: (1) the transfer

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was made for a reason other than to obtain MaineCare4; (2) she did receive something of equal value in return; (3) the transferred assets have been returned; or (4) the penalty would place her in severe hardship. Id.; id. Attach. 2 Notice Terminating Medicaid Coverage at 1 (MDHHS Notice). Ms. Richardson timely requested an administrative "fair hearing" to contest the MDHHS decision. Compl. ¶ 16. Pending a decision in that appeal, her Medicaid benefits have been continued. Id. ¶ 16. The administrative hearing officer stayed the fair hearing pending this Court's adjudication of this case. Pls.' Supp. Mem. at 2; Def.'s Supp. Mem. at 2 n.1.

Ms. Richardson desires to make purchases that would increase her quality of life, such as large-print word search and crossword puzzle books, new clothing, sweets, manicures, magazines, and a radio. Id. ¶ 19. She cannot currently afford such items, but funds from the MPDT could put them within reach. Id. Using funds from her MPDT sub-account, Ms. Richardson is also interested in obtaining the services of a private caregiver who could bring her on outings and get her out of her room where she spends most of her days. Id.

3. Treatment as Transfers of Assets for Less than Fair Market Value and Penalty Period of Medicaid Ineligibility

The MDHHS treats the funding of pooled special needs trusts by individuals over age sixty-four as a transfer of assets for less than fair market value. Id. ¶ 3. As a result of such treatment, MDHHS imposes a penalty period of Medicaid ineligibility on those individuals for nursing facility, assisted living, or home- and community-

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based services pursuant to 42 U.S.C. § 1396p(c). Id.


Rule 12(b)(6) requires dismissal of a complaint that "fail[s] to state a claim upon which relief can be granted." FED. R. CIV. P. 12(b)(6). To state a claim, a complaint must contain, among other things, "a short and plain statement of the claim showing that the pleader is entitled to relief." FED. R. CIV. P. 8(a)(2). "[T]he pleading standard Rule 8 announces does not require 'detailed factual allegations[.]'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Rather, to survive a motion to dismiss, a complaint must contain "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. (quoting Twombly, 550 U.S. at 570). A claim is facially plausible when "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556).

The First Circuit explained that "[t]he plausibility inquiry necessitates a two-step pavane." García-Catalán v. United States, 734 F.3d 100, 103 (1st Cir. 2013) (citing Rodríguez-Reyes v. Molina-Rodríguez, 711 F.3d 49, 53...

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