Medicaid is a medical assistance program which provides funds for eligible individuals to help pay for medical care. In 1988, Congress enacted the Medicare Catastrophic Coverage Act (hereafter, "MCCA") which allocates a "minimum monthly maintenance needs allowance" (hereafter, "MMMNA") to cover a minimum level of monthly income and a "community spouse resource allowance" (hereafter, "CSRA") to prevent the community spouse from being forced to spend owned assets. Only resources of the couple in excess of the CSRA are included in the determination of the institutionalized spouse's eligibility for Medicaid.
Mrs. Golf petitioned the Monroe County Department of Social Services (hereafter, "Monroe County") for Medicaid benefits to pay for two months of her husband's nursing home expenses. Monroe County determined that Mrs. Golf's actual monthly income was less than her established monthly need. Using the "income first" method, Monroe County transferred a part of Mr. Golf's income to meet her monthly need level. Since Mr. Golf had excess resources after the transfer, Monroe County found Mr. Golf ineligible for Medicaid and denied Mrs. Golf's petition.
At the fair hearing, Mrs. Golf objected to Monroe County's application of the income first method and argued that Monroe County should have utilized the "resource first" method. She asserted that under the resource first method, Monroe County should have transferred all of Mr. Golf's excess resources to Mrs. Golf to raise her income to the monthly need level. Monroe County should then have examined Mr. Golf's eligibility, and since he would have no resources, he would be eligible for Medicaid. The New York State Department of Social Services (hereafter, "NYSDSS") rejected Mrs. Golf's arguments and decided that the pertinent laws and regulations did not require a contrary result. Mrs. Golf then commenced this Article 78 proceeding to annul the State's determination. The Supreme Court denied the annulment and held that the State's determination was not arbitrary and capricious since the statutes did not definitively require application of the resource first method or income first method. The Appellate Division unanimously reversed, holding that the NYSDSS erred in not employing a "resource first" method. On remittal, the Supreme Court awarded judgment to Mrs. Golf. The Court of Appeals granted leave by the NYSDSS to appeal directly from the Supreme Court judgment.
Whether a Department of Social Services may utilize the "income first" method rather than the "resource first" method to determine the Medicaid eligibility of an institutionalized spouse.
Yes, a local agency is entitled to deference in its decision to utilize the income first method because the relevant statutes are ambiguous and the income first method is based on a reasonable interpretation of the statutes and is consistent with the underlying policy of the statutes.
The relevant state statute, New York Social Services Law § 366-c(8)(c), addresses the transfer of resources from the institutionalized spouse to the community spouse to raise the community spouse's income to the MMMNA in that "the department shall establish a resource allowance for the spousal share of the institutional spouse adequate to provide such [MMMNA]." N.Y. Soc. Servs. Law § 366-c(8)(c). Also applicable, the federal statute, Social Security Act 42 U.S.C. § 1396r-5(e)(2)(C), states that if the CSRA is "inadequate to raise the community spouse's income to the [MMMNA], there shall be substituted, for the [CSRA] . . . an amount adequate to provide such MMMNA." 42 U.S.C. § 1396r-5(e)(2)(C)). Local departments of social services have interpreted these relevant provisions of the state and federal statutes on a case by case basis to apply either the income first method or the resource first method. See, e.g., Golf at para. 5. Reviewing the determinations by social services departments, lower courts have applied the resource first method as the preferred method to determine Medicaid eligibility. See, e.g., Richardson v. Commissioner of New York City Dep't of Soc. Serv., 88 N.Y.2d 35 (N.Y. 1996). In Golf, the Court of Appeals examines for the first time the issue of whether statutory law requires use of the income first method or resource first method.
State and federal statutory provisions relating to Medicaid do not conclusively mandate either the income first method or the resource first method. The income first method is based on a reasonable interpretation of the statute, and it is consistent with the statute's policy objectives which seek merely to prevent impoverishment of community spouses. Golf at para. 17. Therefore, the NYSDSS may utilize the income first method to determine eligibility for Medicaid. The legislature is free to mandate a particular method at any time. Id. at para. 33.
This holding allows the NYSDSS to transfer some of the institutionalized spouse's income to the community spouse in order to meet shortfalls in the monthly income need of the community spouse. Where, as here, the community spouse has an income level below the MMMNA and the institutionalized spouse has excess resources, the NYSDSS is not required by statute to first allocate the excess resources to remedy the community spouse's income shortfall. As a result of the transfer of income rather than resources, the institutionalized spouse may thereafter be deemed ineligible for Medicaid assistance because of the continued existence of excess resources.
The dissent would find the agency decision arbitrary and capricious because the use of the income first method is outside the statutory language and subsequent regulations of the Social Services Law. The dissent believes no ambiguity exists in the language of Social Services Law § 366-c(8)(c). In particular, the dissent relies on the statutory language which states that if the community spouse's CSRA does not meet the MMMNA, "the department shall establish a resource allowance for the spousal share of the institutionalized spouse adequate to provide such [MMMNA]." Golf at dissent para. 23 (emphasis in dissent) (citing N.Y. Soc. Servs. Law § 366-c(8)(c)). In contrast, the federal statute states if the CSRA is "inadequate to raise the community spouse's income to the [MMMNA], there shall be substituted, for the [CSRA] *** an amount adequate to provide such MMMNA." Id. at dissent para. 13 (emphasis in dissent) (citing 42 U.S.C. § 1396r-5(e)(2)(C)). The dissent agrees the federal statute leaves open whether states may use the income first or resource first methods. Id. at dissent para.14.
However, the language of New York's Social Services Law indicates a legislative intent to require the resource first method, since the department must "establish a resource allowance," as opposed to the federal statute's required "amount." Regulations promulgated by the NYSDSS support this reading, requiring this "resource allowance" to be provided " from those resources considered to be available to the institutionalized spouse." Id. at dissent para. 23 (emphasis in original) (citing N.Y. Soc. Servs. Law § 366-c(2)(d)(iii)). Finally, the Social Services Law does allow "additional necessary income from the income otherwise available to the institutionalized spouse" when the community spouse's needs exceed the MMMNA because of exceptional circumstances. Id. at dissent para. 26 (emphasis in dissent) (citing N.Y. Soc. Servs. Law § 366-c(8)(b)). Thus, this section demonstrates that the State Legislature intended and expressly authorized the use of the resource first method in determining Medicaid eligibility.
If the NYSDSS can apply the income first method, which is not specifically indicated by statute, other uncontemplated methods or combinations might be employed in the future. The limits and permissible mechanics of such methods are yet to be determined, though they must fall within a reasonable interpretation of statutory language and purpose.
Both the majority and the dissent rely on federal statutes, federal agency decisions, state statutes, and state agency decisions. While both give New York statutory law greatest weight, it is unclear how a policy statement by the Federal Health Care Financing Administration may change the analysis. That agency has indicated that states are free to use the income first rule until it issues final regulations. Letter from Sally K. Richardson, Director, Medicaid Bureau, Health Care Financing Administration, to All Regional Administrators (March 3, 1994). A non-binding preference statement by that agency for a resource first approach could complicate the majority's position.
The majority states that the approach of the NYSDSS is based on a reasonable interpretation of the law. On the whole, the choice of New York State's most fiscally beneficial alternative in each case may indicate the existence of a cost-conscious policy behind the legislation. While NYSDSS has the power to choose a method, it remains to be seen whether it may reasonably vary the method on a case-by-case basis.
Most courts have not considered this issue. However, as discussed in the present case, three other jurisdictions have been confronted with whether it is permissible for an agency to use the income first method of determining the community spouse's minimum monthly maintenance needs allowance. Golf at paras. 11, 14.
In Cleary v. Waldman, 959 F. Supp 222 (D.N.J. 1997), the federal district court held that the income first method adopted by New Jersey was not contrary to the MCCA. The court reasoned that other sections of 42 U.S.C. § 1396r-5 do not necessarily apply to the resource section 1396r-5(e)(2)(C) and that the community spouse's income may include income deemed from the institutionalized spouse. Id. at 227. A major distinction between that case and the instant case is that the New Jersey legislature had formally adopted the income first rule. N.J.A.C. 10:71-5.7(d). Similarly, the income first method was held permissible under section 1396r-5 by the Supreme Judicial Court of Massachusetts in Thomas v. Commissioner of the Div. of Med. Assistance, 682 N.E.2d 874 (Mass. 1997). In that case, the court deferred to the interpretation of the Commissioner and agreed that the reasoning in Cleary was consistent with federal policy objectives. Id. at 879.
In contrast, Ohio did not have a statute or agency regulation requiring a particular method. The Court of Appeals of Ohio held that the MCCA is unambiguous and not open to interpretation by the state department of human services. According to the Ohio court, the MCCA required the application of the resource first rule. Gruber v. Ohio Dept. of Human Services, 647 N.E.2d 861, 863 (Ohio App. 1994). See also, Kimnach v. Ohio Dept. of Human Services, 645 N.E.2d 825 (Ohio App. 1994) (CSRA can be revised using the resource first method and this revision can be done prior to a determination of eligibility).