Zander v. Adams

• Decision Date: 15 March 2010
• Docket Number: No. 1-09-0979.,1-09-0979.
• Citation: 340 Ill.Dec. 493,399 Ill.App.3d 290,928 N.E.2d 492
• Parties: Bette I. ZANDER, Plaintiff-Appellant,v.Carol L. ADAMS, Secretary, The Department of Human Services, Carmela A. Gardner, Chief Bureau of Assistance Hearings, The Department of Human Services, and Barry Maram, Director, The Department of Healthcare and Family Services, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

399 Ill.App.3d 290
928 N.E.2d 492
340 Ill.Dec. 493

Bette I. ZANDER, Plaintiff-Appellant,
v.
Carol L. ADAMS, Secretary, The Department of Human Services, Carmela A. Gardner, Chief Bureau of Assistance Hearings, The Department of Human Services, and Barry Maram, Director, The Department of Healthcare and Family Services, Defendants-Appellees.

No. 1-09-0979.

Appellate Court of Illinois,
First District, First Division.

March 15, 2010.

Janna Dutton, Janna Dutton & Associates, PC, Chicago, IL, for Plaintiff-Appellant.

Lisa Madigan, Attorney General, State of Illinois, Michael A. Scodro, Solicitor General, Carl J. Elitz, Assistant Attorney General, Chicago, IL, for Defendant-Appellee.

Justice GARCIA delivered the opinion of the court.

Plaintiff Bette I. Zander appeals from an administrative decision of the Illinois Department of Human Services (Department) imposing a penalty period during which the plaintiff is ineligible for Medicaid assistance. The circuit court confirmed the Department's decision. Mrs. Zander, an elderly resident of a long-term care facility, assigned her beneficial interest in an Illinois land trust to her three daughters more than 36 months prior to applying for benefits. She argues that period was sufficiently long to shield her from a penalty for transferring her assets under Department regulations. The Department ruled that Mrs. Zander was required to wait 60 months before applying for assistance.

We find the Department properly imposed a penalty on Mrs. Zander because the transfer of beneficial interest constituted a noncash or property disbursement from a revocable trust under Department regulations. Accordingly, we affirm.

BACKGROUND

On June 10, 2003, at the age of 79, Mrs. Zander began living in a group care facility in Illinois. On December 4, 2003, Mrs. Zander created the Zander Land Trust to which she transferred three parcels of real estate she owned in the County of McDonough, McComb, Illinois. One of Mrs. Zander's daughters, Karen Kae Skiles, served as trustee of the Zander Land Trust. The trust entitled Mrs. Zander to 100% of “the earnings, avails and proceeds of said real estate.” However, under the terms of the trust, the beneficiary had no “right, title or interest in or to any portion of real estate as such, either equitable or legal.” Less than two weeks later, on December 16, 2003, Mrs. Zander executed an assignment of beneficial interest in the Zander Land Trust transferring all of her beneficial interest to her three daughters.

On January 23, 2007, approximately 37 months after the beneficial interest in the Zander Land Trust was transferred to Mrs. Zander's three daughters, the Department received Mrs. Zander's application for Medicaid assistance. The Department found Mrs. Zander eligible for Medicaid, but imposed a penalty period of ineligibility from October 1, 2006, to June 30, 2014 (later adjusted to February 28, 2011), based on the transfer of beneficial interest in the trust, which the Department found was a nonallowable transfer of assets subject to review within 60 months of the application.

Administrative Hearing

On October 19, 2007, a formal hearing was held on the Department's denial of Medicaid assistance to cover the cost of Mrs. Zander's nursing home care. According to Mrs. Zander's main brief, “At the time she applied for medical assistance in January, 2007, Mrs. Zander believed that her gift to her daughters by assignment of beneficial interest would not affect her eligibility as it had occurred more than 36 months prior to her application.” Before a hearing officer, Ms. Skiles, the trustee of the Zander Land Trust, testified she had neither collected any income nor distributed any real estate from the trust.

In its decision, the Department set forth provisions of the Illinois Administrative Code (Code) (89 Ill. Adm.Code § 120.347, amended at 22 Ill. Reg. 16291, 16299-301, eff. August 28, 1998; 89 Ill. Adm.Code § 120.387 amended at 23 Ill.Reg. 11301, 11309-12, eff. August 27, 1999), Title XIX of the Social Security Act (42 U.S.C. § 1396p (2006)), and section 3259 of the State Medicaid Manual (State Medicaid Manual, Health Care Financing Administration Publication No. 45-3, Transmittal 64, § 3259 (November 1994) (Transmittal 64)). It found the trust was a revocable trust; Mrs. Zander's assignment constituted a transfer of assets from the trust inuring to the assignees' benefit, which constituted a “payment” under the State Medicaid Manual triggering the 60-month look-back period. Because Mrs. Zander applied for Medicaid assistance after only 37 months, a penalty period of ineligibility was triggered based on the nonallowable transfer of revocable trust assets.

Mrs. Zander sought timely review of the Department's decision in the Circuit Court of Cook County. Treating the issue as one of statutory construction subject to de novo review, the circuit court agreed with the Department that Mrs. Zander's transfer of her beneficial interest in the Zander Land Trust was a payment from a revocable trust under the State and federal Medicaid statutes, triggering the penalty period of ineligibility, and confirmed the Department's decision. This timely appeal followed.

ANALYSIS

An administrative agency's decision is subject to judicial review under Illinois Administrative Review Law (735 ILCS 5/3-101 et seq. (West 2006)). “When reviewing a decision of an administrative agency, the appellate court reviews the decision of the agency, not the decision of the circuit court.” Vincent ex rel. Reed v. Department of Human Services, 392 Ill.App.3d 88, 93, 331 Ill.Dec. 314, 910 N.E.2d 723 (2009).

Standard of Review

The Department asserts the issue is whether, “for purposes of Medicaid eligibility, an assignment of a beneficial interest in an Illinois land trust is a non-allowable transfer of assets subject to a 60-month look-back.” As framed by Mrs. Zander, the issue is whether her assignment “is a transfer of her personal property or a payment from a revocable trust under 89 Ill. Admin. Code § 120.387(e) affecting her eligibility for Medicaid coverage of her long term care.” In either regard, the parties submit the issue presents a question of law, subject to de novo review. See Vincent, 392 Ill.App.3d at 93, 331 Ill.Dec. 314, 910 N.E.2d 723 (whether trust assets were available to Medicaid applicant to determine eligibility presented a pure question of law). The Department, though charged with determining eligibility for Medicaid assistance, does not assert that its interpretation of the term “ payment,” to capture the transfer of beneficial interest in an Illinois land trust under its regulations, is entitled to any deference by this court. Cf. County of Du Page v. Illinois Labor Relations Board, 231 Ill.2d 593, 608-09, 326 Ill.Dec. 848, 900 N.E.2d 1095 (2008) (deference is owed to the construction of a statute by the agency charged with its interpretation). Accordingly, we construe the meaning of the term “payment” in the Department regulations without regard to the Department's interpretation.

Medicaid Legislation

In 1965, Congress enacted Title XIX of the Social Security Act (42 U.S.C. § 1396 et seq. (2006)), commonly known as the Medicaid Act. Gillmore v. Illinois Department of Human Services, 218 Ill.2d 302, 304, 300 Ill.Dec. 78, 843 N.E.2d 336 (2006). We quote at length the supreme court's description of the Medicaid program.

“This statute created a cooperative program in which the federal government reimburses state governments for a portion of the costs to provide medical assistance to two low income groups: the categorically needy and the medically needy. The categorically

needy are persons who are automatically eligible to receive cash grants under one of the general welfare programs [citations]. The medically needy are persons who are ineligible to receive cash grants * * * because their resources exceed the eligibility threshold * * *, but who still lack the ability to pay for medical assistance. See 305 ILCS 5/5-2(2) (West 2002); [citation] People who fall into the second category are called MANG (Medical Assistance-No Grant) recipients. See 89 Ill. Adm.Code § 120.10(a) (Conway-Greene CD-ROM March 2002). To qualify for Medicaid as a MANG recipient, a person must have low income and low assets, and the person must ‘spend down’ any resources over the statutory and regulatory limits. See 89 Ill. Adm.Code § 120.10(d) (Conway-Greene CD-ROM March 2002).” Gillmore, 218 Ill.2d at 304-05, 300 Ill.Dec. 78, 843 N.E.2d 336.

To ensure that a MANG applicant's true financial resources are considered in determining Medicaid eligibility, Congress added look-back provisions to the Medicaid Act to examine assets held in trusts.

“In 1993, Congress sought to combat the rapidly increasing costs of Medicaid by enacting statutory provisions to ensure that persons who could pay for their own care did not receive assistance. Congress mandated that, in determining Medicaid eligibility, a state must ‘look-back’ into a three- or five-year period, depending on the asset, before a person applied for assistance to determine if the person made any transfers solely to become eligible for Medicaid. See 42 U.S.C. § 1396p(c)(1)(B) (2000). If the person disposed of assets for less than fair market value during the look-back period, the person is ineligible for medical assistance for a statutory penalty period based on the value of the assets transferred. See 42 U.S.C. § 1396p(c)(1)(A) (2000). Congress also mandated that a state plan for medical assistance must comply with inter alia, the provisions of section 1396p with respect to ‘transfers of assets[ ] and treatment of certain trusts.’ 42 U.S.C. § 1396a(a)(18) (2000). That is, any assets disposed of during the look-back period are ‘countable’ toward the Medicaid limits and subject to the spend-down requirement, if the person's resources are over those limits.”

Gillmore, 218 Ill.2d at 306-07, 300 Ill.Dec. 78, 843 N.E.2d 336.

As the supreme...