Roloff v. Sullivan

• Citation: 772 F. Supp. 1083
• Decision Date: 24 July 1991
• Docket Number: No. S87-31 (RLM).,S87-31 (RLM).
• Parties: Eleanor ROLOFF, et al., Plaintiffs, v. Louis W. SULLIVAN, et al., Defendants.
• Court: U.S. District Court — Northern District of Indiana

772 F. Supp. 1083

Eleanor ROLOFF, et al., Plaintiffs, v. Louis W. SULLIVAN, et al., Defendants.

No. S87-31 (RLM).

United States District Court, N.D. Indiana, South Bend Division.

July 24, 1991.

Kent Hull, South Bend, Ind., for plaintiffs.

Gary L. Shaw, Deputy Atty. Gen., Indianapolis, Ind., for Suzanne L. Magnant.

Clifford D. Johnson, Asst. U.S. Atty., South Bend, Ind., Barbara F. Altman, Chicago, Ill., for all other defendants.

MEMORANDUM AND ORDER

MILLER, District Judge.

This cause is before the court on cross-motions for summary judgment filed both by the plaintiffs and the defendants in this cause. The plaintiffs are a class of individuals certified by the court pursuant to Federal Rule of Civil Procedure 23. The named defendants can be separated into two groups, certain officials of the United States Department of Health and Human Services ("federal defendants")¹ and certain officials of the Indiana Department of Public Welfare ("state defendants").² The federal defendants and the state defendants have filed separate summary judgment motions.

The parties have fully briefed the motions which are now ripe for the court's ruling. For the reasons that follow, the defendants' motions will be granted.

I.

A.

Medicaid is a federal benefits program administered by the Health Care Financing Administration within the United States Department of Health and Human Services and in conjunction with those states which choose to participate in the program. Harris v. McRae, 448 U.S. 297, 301, 100 S.Ct. 2671, 2680, 65 L.Ed.2d 784 (1980). Congress established the Medicaid program in 1965. 42 U.S.C. § 1396 et seq. The federal-state Medicaid program is distinct from Medicare, a completely federally-operated medical insurance system for beneficiaries and dependents through the Social Security Administration.

The Medicaid program originally was categorized into four sub-programs: Old Age Assistance, Aid to Families with Dependent Children ("AFDC"), Aid to the Blind, and Aid to the Permanently and Totally Disabled. In 1972, Congress consolidated three of these sub-programs into one program known as Supplemental Security Income ("SSI"). AFDC remained independent from the SSI program.

When Congress reorganized the Medicaid program in 1972, that legislature realized that the restructuring would increase the costs of Medicaid for certain states. The federal government assumed the duty for funding payments and setting the standards of need with respect to the SSI program's benefits. Accordingly in some states, the number of individuals eligible for SSI was significantly larger than the number eligible under the pre-1972 state-administered need programs. Because of the anticipated increase in Medicaid eligibility, Congress feared that some states would choose to withdraw from the Medicaid program entirely, rather than expand their programs to accommodate SSI. See Schweiker v. Gray Panthers, 453 U.S. 34, 37-38 & n. 1, 101 S.Ct. 2633, 2636-37 & n. 1, 69 L.Ed.2d 460 (1981).

To relieve the financial burden on the states, Congress offered an option to states wishing to remain part of the Medicaid program. Under the "§ 209(b) option", 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. States thus became either "SSI States" or "§ 209(b) States". 42 U.S.C. § 1396a(f); see also Mattingly by Mattingly v. Heckler, 784 F.2d 258, 262 & n. 3 (7th Cir.1986); Winter v. Miller, 676 F.2d 276, 278 (7th Cir.1982).

After the 1972 restructuring, all states participating in Medicaid were required to provide Medicaid coverage to the "categorically needy" or SSI and AFDC recipients. In addition to the mandatory coverage of the categorically needy, a state could elect to provide Medicaid to another group described as "medically needy", regardless of whether the state had opted for § 209(b) or SSI. The medically needy are defined as those "who meet the nonfinancial eligibility requirements for cash assistance under AFDC or SSI, but whose income or resources exceed the financial eligibility standards for those programs." Atkins v. Rivera, 477 U.S. 154, 157, 106 S.Ct. 2456, 2459, 91 L.Ed.2d 131 (1986).

A state opting to provide benefits to the medically needy establishes income and resource standards for those persons that generally are higher than those applicable to the state's categorically needy programs. See generally 42 C.F.R. §§ 435.811, 434.812, 435.840, 435.841. Because of this differential, a state deducts from the determination of an applicant's income those "incurred medical expenses that are not subject to payment by a third party ..." 42 C.F.R. § 435.831(c); see 42 U.S.C. § 1396a(a)(17). This deduction of incurred medical expenses from income to determine eligibility for medically needy Medicaid benefits is referred to as an "income spend down". In states that have added the medically needy option into their Medicaid programs, an applicant who is financially ineligible for any of the categorically needy cash assistance programs may nevertheless establish eligibility for Medicaid by spending down their medical expenses to offset their income. Atkins v. Rivera, 477 U.S. 154, 158, 106 S.Ct. 2456, 2459, 91 L.Ed.2d 131 (1986).

For § 209(b) States, a debate developed concerning the restrictiveness of eligibility standards applicable to the categorically needy and the medically needy. Congress resolved this matter in 1988 by passing legislation permitting § 209(b) States to use less restrictive methodologies than SSI in establishing eligibility of either medically needy or categorically needy individuals for Medicaid benefits. Section 209(b) States could continue to employ methodologies more restrictive than SSI methodologies to determine eligibility for categorically needy Medicaid programs, as long as such methodologies are no more restrictive than those in effect in January 1, 1972. 42 U.S.C. § 1396a(r)(2); see Mowbray v. Kozlowski, 914 F.2d 593 (4th Cir.1990).

The State of Indiana participates in the Medicaid program and has enacted legislation authorizing the IDPW to administer Medicaid in Indiana. IND.CODE 12-1-7-14.4. Under that program, Indiana has adopted the § 209(b) option. Indiana's Medicaid program does not provide medical assistance to the "medically needy", as provided in states exercising the SSI option. Indiana is one of only three states, the others being Missouri and Ohio, which have elected the § 209(b) option and have chosen not to provide Medicaid benefits to the medically needy.

The Indiana legislature currently requires that Medicaid eligibility will not be granted if the total cash value of an individual applicant's (or recipient's) resources exceeds $1,500.00, or $2,250.00 for an applicant (or recipient) and his or her spouse. The IDPW promulgated rules for implementing IND.CODE 12-1-7-18.5. In 1984, the IDPW adopted a rule providing that if an applicant(s) or recipient(s) has total equity value of non-exempt property on the first day of the month that exceeds $1,500.00 ($2,250.00 for married couples), then the applicant or recipient is ineligible to receive Medicaid benefits for that month. 470 I.A.C. § 9.1-3-17 (1991). The 1984 restriction has come to be known as "the first day of the month rule".

Indiana does not allow Medicaid applicants or recipients to offset incurred medical expenses against their resources in excess of those amounts proscribed in IND. CODE 12-1-7-18.5. That procedure, permitted in some other states, is known as "resource spend down".

B.

Beatrice Beall filed this case in January, 1987 on her own behalf and as the representative of the estate of her sister, Bernice Beall. The Beall sisters are now deceased; Eleanor Roloff represents their interests in this matter. R. Dianne Strickland intervened as a plaintiff and represents the interests of Robert G. Unger, now deceased, and Dorothy Unger. On February 11, 1991, the court certified this action as a class action pursuant to Federal Rule of Civil Procedure 23. Pursuant to that order, the class of persons included as plaintiffs in this action are:

... all persons who applied for (and will apply for in the future) Medicaid benefits for the aged, blind, or disabled in the State of Indiana since the promulgation of the "first day of the month rule" in 1984.

The court further found that Eleanor Roloff and R. Dianne Strickland are proper representatives of the plaintiff class.

The Beall sisters applied for Medicaid benefits for the aged during April, 1986. Their applications were made for them by their nephew Robert Roloff on April 30, 1986. As unmarried persons, the Beall sisters were subject to the $1,500.00 limitation of IND.CODE 12-1-7-18.5. The Beall sisters each were denied Medicaid benefits because each sister had assets totalling more than $1,500.00 as of April 1, 1986.

With the assistance of Eleanor and Robert Roloff, the Beall sisters learned that they could qualify for Medicaid benefits by disposing of their excess resources through creation of irrevocable funeral trusts. Mr. Roloff executed the forms necessary to create such trusts for each of the Beall sisters on April 3, 1986. By placing their excess resources in the funeral trusts, the Beall sisters depleted their resources below the $1,500.00 limitation for Medicaid eligibility. The Beall sisters were awarded Medicaid benefits beginning on May 1, 1986.

The Ungers were married residents of LaPorte, Indiana. Mrs. Unger resides in the Fountainview Nursing Home; Mr. Unger is deceased. Ms. Strickland was appointed guardian for the Ungers on March 28, 1989. An application for Medicaid benefits for Dorothy Unger was made on March 9, 1989 and one for Robert Unger on May 31, 1989. The Ungers were denied Medicaid coverage for the period from February to August, 1989 because their available assets exceeded $2,250.00 for those months. The Ungers were granted Medicaid...