Vieth v. Ohio Dept. of Job & Family Servs., 2009 Ohio 3748 (Ohio App. 7/30/2009)

• Decision Date: 30 July 2009
• Docket Number: No. 08AP-635.,08AP-635.
• Citation: 2009 Ohio 3748
• Parties: Susan Vieth, Executor of the Estate of Warren Vieth, Appellant-Appellant, v. Ohio Department of Job & Family Services, Appellee-Appellee.
• Court: Ohio Court of Appeals

Page 1

2009 Ohio 3748

Susan Vieth, Executor of the Estate of Warren Vieth, Appellant-Appellant, v. Ohio Department of Job & Family Services, Appellee-Appellee.

No. 08AP-635.

Court of Appeals of Ohio, Tenth District, Franklin County.

Rendered on July 30, 2009.

Appeal from the Franklin County Court of Common Pleas, (C.P.C. No. 07CVF-11-15746).

Cannizzaro, Fraser, Bridges, Jillisky & Streng, LLC, and Don W. Fraser; Browning, Meyer & Ball, Co., LPA, and William J. Browning, for appellant.

Richard Cordray, Attorney General, and Mark W. Fowler, for appellee.

DECISION

BROWN, J.

{¶1} This is an appeal by appellant, Warren Vieth, now Susan Vieth, Executor of the Estate of Warren Vieth, from a judgment of the Franklin County Court of Common Pleas, affirming the decision of appellee, Ohio Department of Job and Family Services ("the department"), denying appellant Medicaid vendor payments.

{¶2} The relevant facts of this case are not in dispute. On November 13, 2006, appellant was admitted to a medical institution; as of that date, the total value of available resources for appellant and his spouse, for purposes of calculating Medicaid eligibility, was $300,828.48.

{¶3} On January 29, 2007, appellant's spouse, Susan Vieth, purchased two annuities, one in the amount of $127,110.92, and the other in the amount of $13,814.51.¹ In all administrative hearings conducted in this matter, the department has agreed that the annuities at issue fully complied with the provisions of Ohio Adm.Code 5101:1-39-22.8, which became effective October 1, 2006.

{¶4} When appellant's spouse purchased the annuities, the maximum amount of the community spouse resource allowance ("CSRA") was $101,640. On April 12, 2007, appellant applied for Medicaid benefits, and the department subsequently conducted a resource assessment. On July 1, 2007, the Franklin County Department of Jobs and Family Services ("the agency") denied appellant Medicaid vendor payments based upon the agency's determination of an improper transfer of resources; specifically, the order provided: "Improper transfer of assets: Assets belonging to the couple, excluding the CSRA of $101,640.00, were put into annuities in the community spouse[`]s name in order to make the institutionalized spouse eligible for Medicaid." In support of its determination, the agency cited the provisions of Ohio Adm.Code 5101:1-39-07.

{¶5} Appellant filed objections to the agency's denial of Medicaid vendor payments, and a state hearing officer conducted a hearing on the matter. The hearing officer issued a report recommending that the objections be overruled on the basis that "any amount of a couple's resources exceeding the CSRA may not be converted to another form for the purpose of generating additional income for the community spouse unless permitted in a hearing decision." On September 20, 2007, the state hearing authority reviewed the report and adopted the hearing officer's recommendation. Appellant filed an administrative appeal from the state hearing authority's decision, and, on October 26, 2007, the department affirmed the hearing decision.

{¶6} On November 19, 2007, appellant filed an appeal with the trial court from the decision of the department. By decision and entry filed June 30, 2008, the trial court affirmed the department's decision and dismissed appellant's appeal.

{¶7} On appeal, appellant sets forth the following single assignment of error for this court's review:

THE REVIEWING COURT ERRED AS A MATTER OF LAW IN AFFIRMING APPELLEE'S DECISION TO DENY MEDICAID BENEFITS TO THE APPELLANT ON THE BASIS THAT O.A.C. 5101:1-39-07 PRECLUDES A COUPLE FROM CONVERTING COUNTABLE RESOURCES IN EXCESS OF THE CSRA INTO INCOME OF THE COMMUNITY SPOUSE WHICH IS NOT COUNTABLE IN DETERMINING MEDICAID ELIGIBILITY FOR THE INSTITUTIONALIZED SPOUSE BY PURCHASING IRREVOCABLE ACTUARIALLY SOUND COMMERCIAL ANNUITIES THAT FULLY COMPLY WITH O.A.C. 5101:1-39-22.8 FOR THE SOLE BENEFIT OF THE COMMUNITY SPOUSE.

{¶8} R.C. 119.12 governs the standard of review for a court of common pleas in an administrative appeal, and provides in part:

The court may affirm the order of the agency complained of in the appeal if it finds, upon consideration of the entire record and any additional evidence the court has admitted, that the order is supported by reliable, probative, and substantial evidence and is in accordance with law. In the absence of this finding, it may reverse, vacate, or modify the order or make such other ruling as is supported by reliable, probative, and substantial evidence and is in accordance with law.

{¶9} Under the provisions of R.C. 119.12, a common pleas court is required "to conduct two inquiries: a hybrid factual/legal inquiry and a purely legal inquiry." Bartchy v. State Bd. of Edn., 120 Ohio St.3d 205, 2008-Ohio-4826, ¶37.

{¶10} An appellate court's review of the decision of the common pleas court is more limited, and involves a determination whether the trial court abused its discretion. Steinfels v. Ohio Dept. of Commerce (1998), 129 Ohio App.3d 800, 803. On purely legal questions, however, an appellate court's review is "plenary." Id.

{¶11} Appellant argues that the trial court erred in affirming the department's decision to deny him Medicaid vendor payments on the basis that Ohio Adm.Code 5101:1-39-07 precludes a married couple from converting countable resources in excess of the CSRA into income of the community spouse through the purchase of actuarially sound commercial annuities for the sole benefit of the community spouse. Appellant maintains that his spouse's purchase of the annuities was proper under both Ohio law (Ohio Adm.Code 5101:1-39-22.8) and federal Medicaid law, and that the application should have been approved. Appellant also challenges the department's position that the transfer of funds was improper, pursuant to Ohio Adm.Code 5101:1-39-07, because it was done without a hearing.

{¶12} By way of background, Congress established the Medicaid program in 1965 by adding Title XIX to the Social Security Act, 42 U.S.C. 1396 et seq., "for the purpose of providing federal financial assistance to States that choose to reimburse certain costs of medical treatment for needy persons." Harris v. McRae (1980), 448 U.S. 297, 301, 100 S.Ct. 2671, 2680. The federal government shares the costs of Medicaid with states that elect to participate. Atkins v. Rivera (1986), 477 U.S. 154, 156-57, 106 S.Ct. 2456, 2458. Although participation in the Medicaid program is optional, "once a State elects to participate, it must comply with the requirements of Title XIX." Harris at 301, 100 S.Ct. 2680. Participating states are "required to develop reasonable standards for determining eligibility consistent with the act." Kinasz-Regan v. Ohio Dept. of Job & Family Servs., 164 Ohio App.3d 458, 2005-Ohio-5848, ¶12. Ohio is a participant in the Medicaid program, and "has codified its eligibility requirements at R.C. 5111.01 et seq." Id.

{¶13} Prior to 1988, a married individual in a nursing home was essentially required to "`spend down' all of the family assets to the relevant eligibility limits before he or she could become eligible for assistance." Martin v. Ohio Dept. of Human Servs., (1998), 130 Ohio App.3d 512, 518. Congress enacted 42 U.S.C. 1396r-5 as part of the Medicare Catastrophic Coverage Act of 1988 ("MCCA"), and this legislation "was designed, in part, to prevent the impoverishment of one spouse when the other enters a nursing home." Id. Because "[b]oth husband and wife could be reduced to poverty by medical expenses before either one of them could receive Medicaid assistance to pay for nursing home care * * * [t]he spousal impoverishment section of the MCCA, codified at Section 1396r-5, was enacted to remedy that situation." Id., citing Mistrick v. Div. of Med. Assistance & Health Servs. (1998), 154 N.J. 158, 168, 712 A.2d 188, 194.

{¶14} The MCCA "permits the spouse living outside the nursing home (designated the `community spouse') to keep half of the couple's resources, generally, without affecting the eligibility of the spouse within the nursing home (designated the `institutionalized spouse')." Martin at 518. After this "equal division, the community spouse's share must fit within certain minimum and maximum amounts that are indexed to inflation," and the adjusted amount is designated the CSRA. Id., citing 42 U.S.C. 1396r-5(f)(2). Any of the couple's resources not a part of the CSRA, and which are not otherwise excluded from consideration, are "deemed available to the institutionalized spouse," and "[t]he institutionalized spouse may then spend down any amount in excess of the eligibility levels to receive Medicaid benefits. Martin at 519.

{¶15} After the MCCA became effective, the Ohio General Assembly directed the Ohio Department of Human Services ("ODHS") "to `establish standards consistent with federal law for allocating income and * * * resources' of an institutionalized spouse who applied for Medicaid benefits and his spouse." George v. Ohio Dept. of Human Servs., 10th Dist. No. 04AP-351, 2005-Ohio-2292, ¶5, quoting R.C. 5111.011(F) (as enacted by Am.Sub.H.B. No. 672, effective Nov. 14, 1989). In response, ODHS "promulgated Ohio Adm.Code 5101:1-39-22 through 5101:1-39-222 to address the allocation and transfer of income and Ohio Adm.Code 5101:1-39-35 through 5101:1-39-362 to address the allocation and transfer of resources." George at ¶5. Ohio Adm.Code 5101:1-39-07(B)(5) defines an "improper transfer" to mean "a transfer on or any time after the look-back date * * * of a legal or equitable interest in a resource for less than fair market value for the purpose of qualifying for medicaid, a greater amount of medicaid, or for the purpose of avoiding the utilization of the resource to meet medical needs."

{¶16} Income allocation under the MCCA is "governed by [42 U.S.C.] §§ 1396r-5(b) and (d)." Wis. Dept. of Health & Family Servs. v. Blumer (2002), 534 U.S. 473, 480, 122...