Stevens v. Department of Social Welfare, 91-227

• Decision Date: 11 December 1992
• Docket Number: No. 91-227,91-227
• Court: Vermont Supreme Court
• Parties: , 40 Soc.Sec.Rep.Ser. 302, Medicare & Medicaid Guide P 41,110 Beverly M. STEVENS v. DEPARTMENT OF SOCIAL WELFARE, Cornelius Hogan, Secretary.

Page 737

620 A.2d 737

159 Vt. 408, 40 Soc.Sec.Rep.Ser. 302,

Medicare & Medicaid Guide P 41,110

Beverly M. STEVENS v. DEPARTMENT OF SOCIAL WELFARE, Cornelius Hogan, Secretary.

No. 91-227.

Supreme Court of Vermont.

Dec. 11, 1992.

Sheila E. Reed, Vermont Senior Citizens Law Project, St. Johnsbury, for plaintiff-appellant.

Jeffrey L. Amestoy, Atty. Gen., Montpelier, and Wendy A. Burroughs, Asst. Atty. Gen., Waterbury, for defendant-appellee.

Before ALLEN, C.J., GIBSON and JOHNSON, JJ., and PECK, J. (Ret.), Specially Assigned.

GIBSON, Justice.

Plaintiff Beverly Stevens appeals from a decision of the Secretary of the Agency of Human Services (Secretary) reversing a decision of the Human Services Board (Board) that granted her retroactive Medicaid benefits. The Secretary concluded that reversal was necessary because the Board (1) exceeded the authority granted it in 3 V.S.A. § 3091(d) by applying the doctrine of equitable estoppel, and (2) erroneously held that the elements of estoppel were met. We reverse the Secretary's decision and reinstate the decision of the Board.

In May of 1990, plaintiff, a sixty-year-old woman, was diagnosed with cancer. At the time of her diagnosis, she was employed and had accumulated $4,167.64 in savings. On June 19, 1990, plaintiff was hospitalized to undergo surgery. While in the hospital, a social worker assisted plaintiff in applying for Medicaid. Her application indicating that she had $4,167.64 in savings was filed on June 26, 1990.

On July 9, 1990, a social welfare eligibility specialist from the Department of Social Welfare (DSW) telephoned plaintiff to discuss her application. By that time, plaintiff had incurred doctors' bills related to her surgery totaling $2,411.28. She discussed with the eligibility specialist whether she should pay the doctors' bills with her savings. The eligibility specialist told plaintiff "to wait to make payments until she learned whether she met the disability criteria for Medicaid eligibility." Plaintiff had no further communication with DSW regarding her doctors' bills or her savings.

To be eligible for Medicaid, plaintiff had to satisfy two requirements: (1) her income and resources had to be within the eligibility limits, and (2) she had to meet the criteria necessary to establish that she was disabled. The social welfare eligibility specialist determines only whether an applicant meets the financial requirements; the determination on disability is made by medical personnel at the Disability Determination Unit (DDU) in Waterbury. When the DSW eligibility specialist telephoned plaintiff on July 9, 1990, she had reviewed plaintiff's financial status, but no determination as to disability had been made.

In late July, plaintiff spoke with an advocate from the Area Agency on Aging concerning her Medicaid eligibility. The advocate told plaintiff that she had to spend all but $2,000 of her savings to be eligible for Medicaid.

Between June 26 and August 8, 1990, plaintiff spent about $2,550 of her savings on maintenance, prescriptions, doctors appointments and other personal expenses. At the end of July 1990, after speaking with the advocate, plaintiff purchased a car for $750, ball joints for $80 and a new tire for $30 so that her daughter could drive her from St. Johnsbury to Hanover, New Hampshire, for chemotherapy at Dartmouth-Hitchcock Medical Center. Later, plaintiff discovered that she did not need the car for this purpose because she could receive her chemotherapy treatments in St. Johnsbury.

On August 8, 1990, plaintiff filed a second Medicaid application with the assistance of the advocate from the Area Agency on Aging, although she had not yet received a decision concerning the first application. The new application indicated that plaintiff's savings totaled only $1,617.

In September, DSW notified plaintiff that the first application had been denied but that she was eligible for Medicaid as of August 1, 1990, based on her second application. Retroactive benefits for the three months prior to the second application (May, June, and July) were denied because plaintiff had excess resources amounting to $2,167.64 during this period. Although plaintiff would have been eligible for benefits during these three months if she had spent the excess resources on medical expenses, DSW found that only $1,027.11 had been spent on allowable medical expenses. This left plaintiff with the $2,411.28 in unpaid doctors' bills from the surgery in June.

On April 4, 1991, the Human Services Board reversed DSW's denial of benefits based on the first application and also found plaintiff eligible for retroactive benefits for the three months prior to this application, March, April and May. The Board concluded that DSW correctly applied the regulations regarding the dates of plaintiff's eligibility. Nevertheless, the Board held that DSW was estopped from denying plaintiff retroactive benefits because the erroneous information it provided to plaintiff caused her to become ineligible.

The Board found that plaintiff would have been eligible based on the first application if she had spent her excess resources on medical expenses she incurred during March, April, May and June. Although plaintiff had doctors' bills from this period totaling $2,411.28, she did not make any payments toward them because she was told by the eligibility specialist to wait until the determination on disability was made. Further, the Board found that if she had been told that she was required to spend excess resources on medical expenses in order to be eligible for retroactive benefits, she would have paid the doctors' bills, rather than purchasing a car to "spend-down" her resources. The Board concluded that plaintiff was left with $2,411.28 in unpaid medical bills that she cannot afford to pay because she relied on the information provided by the eligibility specialist.

On April 16, 1991, the Secretary issued an opinion in which he accepted the Board's findings of fact but reversed its decision because he concluded that the Board did not have the authority to apply the doctrine of equitable estoppel; he found further that, even if the Board had this authority, plaintiff had not met the elements of estoppel. Plaintiff appeals this decision.

I.

The Medicaid program was established in 1965 by Title XIX of the Social Security Act, 42 U.S.C. §§ 1396-1396n, to provide medical assistance to the poor. Massachusetts Ass'n of Older Americans v. Sharp, 700 F.2d 749, 750 (1st Cir.1983); 42 U.S.C. § 1396. The program provides federal financial assistance to those states that choose to participate provided they submit and follow an approved state plan that complies with the Act and federal regulations. Sharp, 700 F.2d at 750; see 42 U.S.C. § 1396a (requirements for state plans). In Vermont, the Medicaid program is administered by DSW.

To be eligible for Medicaid based on disability, applicants must meet both income and resource requirements. See 4 Code of Vermont Rules, Medicaid Manual §§ 230 240. The resource limit for one person is $2,000. A person whose resources exceed this maximum, but is otherwise eligible for benefits, may become eligible in two ways. First, Medicaid may be granted for the month in which the application was filed if the resource test is met at any point in the month and all other eligibility criteria are satisfied. Id. § 235. Thus, an applicant with excess resources may become eligible for Medicaid by spending or giving away the excess. If, however, the applicant spends the excess resources on allowable medical expenses, the applicant may be eligible for up to three months of retroactive benefits. Id.

The parties agree that DSW has an affirmative obligation to inform applicants who exceed the resource limit of the "spend-down" provisions. This affirmative obligation arises pursuant to 42 C.F.R. § 435.905(a), which provides that the state agency responsible for administering the Medicaid program:

must furnish the following information in written form, and orally as appropriate, to all applicants and to all other individuals who request it:

(1) The eligibility requirements.

(2) Available Medicaid Services.

(3) The rights and responsibilities of applicants and recipients.

In Lavigne v. Department of Social Welfare, 139 Vt. 114, 423 A.2d 842 (1980), we held as a matter of law that DSW "has an affirmative duty to advise applicants specifically of their rights under ANFC," the Aid to Needy Families with Children program. Id. at 118, 423 A.2d at 844. Like the Medicaid program, ANFC is a program based on cooperative federalism. Id. at 116, 423 A.2d at 843. States that choose to participate in the program must conform to federal statutes and regulations regarding the program. The affirmative duty to inform applicants about eligibility requirements for ANFC arose from 45 C.F.R. § 206.10(a)(2), which provided in part that "[a]pplicants and all individuals who inquire about the program shall be informed about the eligibility requirements and their rights and obligations under the program." This regulation is similar to 42 C.F.R. § 435.905(a), the Medicaid provision mandating that information be furnished regarding the Medicaid program.

In Doe v. Wilson, Commissioner of DSW, Medicare & Medicaid Guide (CCH) p 32,148, at 10,541 (D.Vt. Aug. 16, 1982), the United States District Court for the District of Vermont held that the Commissioner of DSW had violated the federal rights of Medicaid applicants, under 42 C.F.R. § 435.905, by failing to inform them of spend-down requirements that could be used to advance their Medicaid eligibility dates. Id. at 10,541. Following Lavigne and Doe, we conclude that DSW has an affirmative obligation to provide Medicaid applicants, and other individuals who request it, with information concerning the Medicaid eligibility requirements, including resource spend-down provisions.

We do not decide the extent of this obligation because in ...