Sai Kwan Wong v. Doar

• Decision Date: 22 June 2009
• Docket Number: Docket No. 08-4992-cv.
• Citation: 571 F.3d 247
• Parties: SAI KWAN WONG, by his guardian Kevin Wong, individually and on behalf of a class of all others similarly situated, Plaintiff-Appellant, v. Robert DOAR, in his official capacity as Commissioner, New York City Human Resource Administration, Richard F. Daines, M.D., in his official capacity as Commissioner of New York State Department of Health, Kathleen Sebelius, in her official capacity as Secretary, United States Department of Health and Human Services,<SMALL><SUP>1</SUP></SMALL> Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

571 F.3d 247

SAI KWAN WONG, by his guardian Kevin Wong, individually and on behalf of a class of all others similarly situated, Plaintiff-Appellant, v. Robert DOAR, in his official capacity as Commissioner, New York City Human Resource Administration, Richard F. Daines, M.D., in his official capacity as Commissioner of New York State Department of Health, Kathleen Sebelius, in her official capacity as Secretary, United States Department of Health and Human Services,¹ Defendants-Appellees.

Docket No. 08-4992-cv.

United States Court of Appeals, Second Circuit.

Argued: February 23, 2009.

Decided: June 22, 2009.

Aytan Yehoshua Bellin, White Plains, N.Y. (Rene H. Reixach, Jr., Rochester, NY, on the brief), for Plaintiff-Appellant.

Carolina A. Fornos, Assistant United States Attorney (Elizabeth Wolstein, Assistant U.S. Attorney, on the brief), for Lev Dassin, Acting United States Attorney for the Southern District of New York, for Defendant-Appellee Kathleen Sebelius, Secretary, United States Department of Health and Human Services.

Carol Fischer, Assistant Solicitor General (Michael Belohlavek, Senior Counsel, Division of Appeals & Opinions, on the brief), for Andrew M. Cuomo, Attorney General of the State of New York, for Defendant-Appellee Richard F. Daines, M.D., Commissioner, New York State Department of Health.

Janet Z. Zaleon (Kristen M. Helmers and Marilyn Richter, on the brief), for Michael A. Cardozo, Corporation Counsel of the City of New York, for Defendant-Appellee Robert Doar, Commissioner, New York City Human Resources Administration.

Before: CABRANES, RAGGI, and HALL, Circuit Judges.

REENA RAGGI, Circuit Judge:

Plaintiff Sai Kwan Wong is a permanently disabled Medicaid recipient who resides in a nursing home. Through his guardian, Wong appeals an award of summary judgment in favor of the named city, state, and federal defendants, which was entered in the United States District Court for the Southern District of New York (Miriam Goldman Cedarbaum, Judge) on September 29, 2009. Wong asserts that the district court erred in rejecting his challenge to State Medicaid Manual ("SMM") section 3259.7 ("section 3259.7" or "SMM 3259.7"), an informal rule issued by the Department of Health and Human Services' ("HHS") Centers for Medicare and Medicaid Services ("CMS").² SMM 3259.7 requires that, for purposes of determining the benefits due a Medicaid-eligible individual, states consider income placed in a Special Needs Trust for that individual's benefit. See 42 U.S.C. § 1396p(d)(4)(A) (defining Special Needs Trust). The rule effectively prevents Medicaid recipients such as Wong from using Special Needs Trusts to shelter their monthly Social Security Disability Insurance ("SSDI") income from certain Medicaid eligibility determinations. Wong asserts that the district court erred in accepting defendants' reliance on SMM 3259.7 in calculating his benefits because the rule conflicts with the express language of 42 U.S.C. § 1396p(d), the provision of the Medicaid Act that sets forth Medicaid eligibility rules for trusts created with an individual's assets.

We reject Wong's reading of § 1396p(d) and instead conclude that Congress did not speak to the question presented by Wong's claim. We apply Skidmore deference to SMM 3259.7, which was issued by the agency to fill the gap left by Congress. See Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944) (holding that an agency's "rulings, interpretations and opinions" of an act administered by the agency, "while not controlling upon the courts by reason of their authority, do constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance"). We conclude that SMM 3259.7 is an appropriate exercise of the agency's authority and we therefore affirm the district court's grant of summary judgment to defendants.

I. Background

A. Statutory Background

Medicaid provides "joint federal and state funding of medical care for individuals who cannot afford to pay their own medical costs." Arkansas Dep't of Health & Human Servs. v. Ahlborn, 547 U.S. 268, 275, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006); see also Rabin v. Wilson-Coker, 362 F.3d 190, 192 (2d Cir.2004). At the federal level, Congress has entrusted the Secretary of HHS with administering Medicaid, and the Secretary, in turn, exercises that delegated authority through the CMS. See 42 U.S.C. §§ 1301(a)(6), 1396-1; Arkansas Dept. of Health & Human Servs. v. Ahlborn, 547 U.S. at 275, 126 S.Ct. 1752; Rabin v. Wilson-Coker, 362 F.3d at 192. In New York State, Medicaid is administered by the State Department of Health. See Rubin v. Garvin, 544 F.3d 461, 463 (2d Cir.2008). At the local level, Wong's Medicaid needs are addressed by a social services district operated by the New York City Human Resources Administration. See Reynolds v. Giuliani, 506 F.3d 183, 187 (2d Cir.2007).

For a state to receive federal funding for its Medicaid program, CMS must determine that the state's plan for granting assistance complies with the requirements of the Medicaid Act and its implementing regulations. See 42 U.S.C. § 1396a(a); Rabin v. Wilson-Coker, 362 F.3d at 192 (citing Wisconsin Dep't of Health & Family Servs. v. Blumer, 534 U.S. 473, 479, 122 S.Ct. 962, 151 L.Ed.2d 935 (2002)). To comply with the Act, a state's plan must include, inter alia, "reasonable standards . . . for determining eligibility for and the extent of medical assistance under the plan." 42 U.S.C. § 1396a(a)(17). Section 1396a(a)(17) thus requires a state to make two separate determinations: (1) whether an individual is "eligib[le] for" Medicaid and, if so, (2) the "extent of" benefits to which he is entitled. Id. Both determinations are informed by an individual's available "income" and "resources," "as determined in accordance with standards prescribed by the Secretary." Id. § 1396a(a)(17)(B); Himes v. Shalala, 999 F.2d 684, 686 (2d Cir.1993); see also 42 U.S.C. § 1382a (defining income); id. § 1382b (defining resources).

The parties do not dispute that the first determination was properly made in Wong's favor, i.e., he is eligible for Medicaid assistance. The sole issue on this appeal relates to the second determination — referred to in the regulations and throughout this opinion as a "post-eligibility" determination. See, e.g., 42 C.F.R. § 435.832. Specifically, Wong submits that defendants erred as a matter of law when, in calculating his Medicaid benefits, they treated as income the monthly SSDI benefits that he places into a Special Needs Trust. To facilitate our discussion of this argument, we first review the statutory and regulatory provisions governing the post-eligibility treatment of income generally and of income placed in trusts specifically.

1. Post-Eligibility Treatment of Institutionalized Individuals' Income

Under the Medicaid Act, individuals receiving care in "medical institutions" are expected to contribute a significant portion of their income towards the cost of their institutional care. See 42 U.S.C. § 1396a(q)(1)(A). To implement this requirement, HHS promulgated 42 C.F.R. § 435.832, which governs post-eligibility treatment of income for individuals, like Wong, who receive care in a nursing home. Section 435.832 requires the agency to make certain deductions from the individual's income and then to apply the remaining income to the cost of the individual's institutional care.³ See 42 C.F.R. § 435.832.

Section 435.832 has a state analogue at N.Y. Comp.Codes R. & Regs. tit. 18, § 360-4.9, which requires that, subject to certain deductions, "all income must be applied toward the cost of [an institutionalized individual's] care in the facility."⁴ New York refers to a Medicaid recipient's monthly income minus the applicable deductions as the individual's "net available monthly income" or "NAMI." See New York Ass'n of Homes & Servs. for the Aging, Inc. v. Novello, 13 A.D.3d 958, 958, 786 N.Y.S.2d 827, 829 (3d Dep't 2004).

2. Post-Eligibility Treatment of Assets Placed in Trusts

To receive federal funding, states must also comply with 42 U.S.C. § 1396p(d), the section of the Medicaid Act that sets forth rules concerning trusts created with an individual's assets. See 42 U.S.C. §§ 1396a(a)(18), 1396p(h)(1) (defining "assets" to "include[ ] all income and resources of the individual and of the individual's spouse"). In general, § 1396p(d)(3) requires a state, in the course of determining whether an individual is eligible for Medicaid, to consider assets placed in a trust by an individual seeking Medicaid benefits. See Keith v. Rizzuto, 212 F.3d 1190, 1193 (10th Cir. 2000) ("Section 1396p(d)(3) does not merely `allow' states to count trusts in determining Medicaid eligibility; it requires them to do so." (emphasis in original)). With respect to revocable trusts, § 1396p(d)(3) provides that the trust corpus "shall be considered resources available to the individual" and "payments from the trust to or for the benefit of the individual shall be considered income of the individual." 42 U.S.C. § 1396p(d)(3)(A). With respect to irrevocable trusts, the statute states that the portion of the trust corpus or the income therefrom "from which . . . payment to the individual could be made . . . shall be considered resources available to the individual," and payments made "to or for the benefit of the individual" from the trust "shall be considered income of the individual." Id. § 1396p(d)(3)(B).

In section 1396p(d), however, Congress provided a limited exception to the general rule that a state must consider trust assets in making Medicaid eligibility determinations. Section 1396p(d)(1) instructs that the "rules specified in paragraph (3) shall apply to a trust established by" an individual seeking Medicaid assistance, but "subject to paragraph (4)." Id. § 1396p(d)(1). Paragraph (4), in turn, instructs that "[t]his subsection shall not apply to any of" the trusts defined in §...