Schachner v. Perales

• Citation: 624 N.Y.S.2d 558,648 N.E.2d 1321,85 N.Y.2d 316
• Court: New York Court of Appeals Court of Appeals
• Decision Date: 28 March 1995
• Parties: , 648 N.E.2d 1321, Medicare & Medicaid Guide P 43,157 In the Matter of Erwin SCHACHNER et al., Appellants, v. Cesar PERALES, as Commissioner of the New York State Department of Social Services, et al., Respondents.

Page 558

624 N.Y.S.2d 558

85 N.Y.2d 316, 648 N.E.2d 1321,

Medicare & Medicaid Guide P 43,157

In the Matter of Erwin SCHACHNER et al., Appellants, v. Cesar PERALES, as Commissioner of the New York State Department of Social Services, et al., Respondents.

Court of Appeals of New York.

Decided March 28, 1995.

Jonathan Ben-Asher, New York City, and Wayne G. Hawley, for appellants.

Dennis C. Vacco, Atty. Gen., New York City (Robert F. Bacigalupi, Victoria A. Graffeo, Harvey M. Berman and Judy E. Nathan, of counsel), for Cesar Perales, respondent.

Paul A. Crotty, Corp. Counsel, New York City (Trudi Mara Schleifer, Leonard Koerner, Barry P. Schwartz and Alan G. Krams, of counsel), for Barbara Sabol, respondent.

OPINION OF THE COURT

SIMONS, Judge.

Under a 1988 amendment to the Medicaid program, the financially dependent spouse of an individual who is institutionalized for long-term, Medicaid-subsidized medical care is entitled to a minimum monthly maintenance allowance awarded from the income of the institutionalized spouse. The minimum allowance is set by statute but must be increased upon a showing of exceptional circumstances resulting in financial distress to the noninstitutionalized spouse. Petitioners commenced this CPLR article 78 proceeding to challenge the determination of respondent Commissioner of Social Services that the expense of providing a private secondary and college education for their child does not qualify as an exceptional circumstance for purposes of mandating an increase in the community spouse income allowance. The courts below sustained the Commissioner's determination, as do we.

I

Medicaid, a joint Federal and State program, provides for the medical care of individuals whose own income and resources are insufficient to meet the costs of their medical needs. Because Medicaid is a means-tested program, its benefits are only available to those whose income and resources fall below a certain level. Moreover, once a Medicaid-qualified individual enters a nursing home, most of the income the Medicaid recipient does have must be applied to the cost of nursing home care. Under prior law, an institutionalized spouse could make income available to his or her noninstitutionalized spouse (termed the community spouse) only up to the medical assistance eligibility level or the public assistance standard of need, whichever was higher. As a result, many community spouses found themselves virtually impoverished because the greater part of the couple's income derived from a pension or other source that was solely in the name of the institutionalized spouse.

To ameliorate this harsh result, Congress in 1988 amended the rules for treatment of the income and resources of the institutionalized spouse as part of the Medicare Catastrophic Coverage Act (42 U.S.C. § 1396r-5, as amended by Pub.L. 100- 102 U.S.Stat. 754). Noting that "the leading cause of financial catastrophe among the elderly is the need for long-term care", the legislation was expressly directed at ending the "pauperization" of the community spouse (see, HR Rep. No. 100-105[II], 100th Cong., 2d Sess., at p. 65, reprinted in 1988 U.S.Code Cong. & Admin.News at pp. 857, 888). The Act provided for an allowance to the community spouse paid out of the institutionalized spouse's income in order to bring the community spouse's income up to a minimum monthly needs allowance specified in the statute (see, 42 U.S.C. § 1396r-5[d]. ¹

The allowance is paid only to the extent that the institutionalized spouse has sufficient income to cover it--that is, the State is not required to make up any shortfall between the statutory allowance and what the institutionalized spouse is able to provide. However, the institutionalized spouse's contribution to his or her own medical expenses is reduced by the amount of the community spouse allowance, and that reduction must be made up from public funds.

The statute further provides for a separate family member allowance to be paid to a minor child, dependent child, dependent parent or dependent sibling of either the institutionalized or the community spouse, if over half of that family member's needs are met by either the institutionalized spouse or the community spouse (42 U.S.C. § 1396r-5[d][1][C]. Finally, in recognition that the minimum maintenance allowance may not be adequate in every case, the statute permits either the institutionalized spouse or the community spouse to establish at a fair hearing "that the community spouse needs income, above the level otherwise provided by the minimum monthly maintenance needs allowance, due to exceptional circumstances resulting in significant financial duress" (see, 42 U.S.C. § 1396r-5[e][2][B].

In order to receive Federal Medicaid funds, a State's Medicaid plan must conform to the standards set out in Federal statutes and regulations. Accordingly, in 1989 the State enacted Social Services Law § 366-c, the State counterpart to the spousal allowance provisions of the Federal Medicare Catastrophic Coverage Act. Section 366-c(8)(b), mirroring the equivalent Federal provision, directs that the community spouse allowance must be increased "based upon exceptional circumstances which result in significant financial distress (as defined by the commissioner in regulations)." To implement the statute, respondent Commissioner of Social Services accordingly issued Administrative Directive 89 ADM-47, codified as 18 NYCRR 360-4.10(a)(10):

"[s]ignificant financial distress means exceptional expenses * * * [which] may be of a recurring nature or may represent major one time costs, and may include but are not limited to: recurring or extraordinary noncovered medical expenses [of the community spouse or family members as defined in the Directive]; amounts to preserve, maintain or make major repairs on the homestead; and amounts necessary to preserve an income-producing asset."

On its face, the regulation does not purport to include all expenses that might be considered as exceptional.

The question raised on this appeal is whether respondent Commissioner's determination here that the voluntarily assumed costs of a private secondary and college education for petitioners' daughter do not constitute exceptional circumstances for the purposes of Social Services Law § 366-c is an overly restrictive interpretation of the statutory provision, in derogation of the legislative intent.

II

In October 1989, petitioner Alice Schachner, the primary income provider in the Schachner household, became so debilitated by Alzheimer's disease that she required nursing home care. Mrs. Schachner was receiving a monthly pension of $2,850 and $1,000 in monthly Social Security disability payments; her husband, petitioner Erwin Schachner, received income of approximately $550-$600 per month. At the time Mrs. Schachner entered the nursing home, the Schachners' daughter Erica was 17 years old and attended a private secondary school. Alice Schachner applied for, and received, Medicaid coverage for her nursing home expenses, and in November 1990 the New York City Department of Social Services also awarded petitioner Erwin Schachner a monthly community spouse income allowance of $1,083.14 for the period October 1989 through December 1989, and of $1,126.14 for the period January 1990 through December 1990. Erica, who was now attending a private college, received a family member allowance of $190 per month for the same period. Petitioners requested a fair hearing to challenge the amount of income that Mrs. Schachner was required to contribute to her own care and the amount of Mr. Schachner's allowance.

Prior to the fair hearing, petitioner Erwin Schachner brought a proceeding in Family Court on behalf of himself and Erica, seeking an order of support against his wife. In April 1991, Family Court issued an order directing Mrs. Schachner to pay $3,386.02 in monthly support, beginning in January 1991. Accordingly, Mr. Schachner's community spouse income allowance was raised to $3,386.02, effective January 1991, as both the State and Federal statutes provide that the allowance shall not be less than the amount of court-ordered support (see, 42 U.S.C § 1396r-5[d][5]; Social Services Law § 366-c[2][g].

When the previously requested fair hearing was held, petitioners sought a retroactive increase in Mr. Schachner's community spouse income allowance for the period not covered by Family Court's support order. Petitioners contended that certain of Mr. Schachner's medical expenses and Erica's private school and college expenses constituted "exceptional circumstances" within the meaning of Social Services Law § 366-c and entitled Mr. Schachner to an increased allowance. The Hearing Officer concluded that these expenses were not exceptional or extraordinary and denied the requested increase, and petitioners sought article 78 review of that determination. Supreme Court dismissed the petition, and the Appellate Division affirmed, 203 A.D.2d 21, 609 N.Y.S.2d 241. The Court took the view that the sorts of expenses enumerated in the regulation defining exceptional circumstances only "pertain to things which may be deemed 'necessaries' ", and providing a college education to a child is not a necessary expense for which the parent may be obligated under the common law, absent special circumstances or a voluntary agreement (203 A.D.2d 21, 22, 609 N.Y.S.2d 241). We agree with the Appellate Division that the voluntarily assumed expenses of a private secondary and college education are not the sort of "exceptional expenses" contemplated by Social Services Law § 366-c, although we reach that conclusion by a different route.

III

Our analysis begins, and indeed essentially ends, with the legislative intent underlying the Medicare Catastrophic Coverage Act and its State counterpart: "to end th[e] pauperization [of the community spouse] by assuring that the community spouse has a sufficient--but not excessive--amount of income...