NY Court of Appeals
liibulletin-ny
LII
Collection home Search Tell me more  
LII home

In re Shah, 2000 N.Y. Int. 0069 (June 8, 2000).

MEDICAID RESIDENCY REQUIREMENTS – SPOUSAL REFUSAL - MENTAL HYGIENE LAW § 81.21 - TRANSFER OF ASSETS - INCAPACITATED PERSONS - INTERSTATE AGREEMENT 

An incapacitated person's residence for purposes of Medicaid eligibility is determined by the Health Care Financing Agency's regulations (42 C.F.R. 435 § 435.2(c)), even if there is a letter from New Jersey agreeing not to contest New York's determination that the incapacitated person is a New Jersey resident. The guardian spouse may transfer all of the incapacitated spouse's assets to herself under New York's Mengal Hygiene Law § 81 while simultaneously executing a spouse refusal right under New York's Social Services Law § 366(3)(a) to shield those assets from being used to cover the cost of Medicaid-supported services.

[SUMMARY] | [ISSUE & DISPOSITION] | [AUTHORITIES CITED] | [COMMENTARY]

SUMMARY

Plaintiffs, Bipin and Kashmira Shah, commenced this proceeding following a workplace accident that incapacitated Mr. Shah, creating the need for medical cost assistance. Living in New Jersey, Mr. Shah suffered a severe injury at work in New York and lapsed into a coma. The injury rendered Mr. Shah incapacitated and with little expectation of improvement. He was transferred to Helen Hayes Hospital in Rockland County, New York. In January 1997, Mrs. Shah exercised a “spousal refusal” right, whereby she declined to make her income and resources available for the cost of Mr. Shah’s medical care. She then commenced a guardianship proceeding in Rockland County pursuant to N.Y. Mental Hyg. Law § 81.21 so that she could transfer all of Mr. Shah’s assets to herself in order to support their family. By doing so, she also intended to facilitate Mr. Shah’s Medicaid entitlement and so she filed a Medicaid application for her husband.

Defendants Helen Hayes Hospital and Rockland County Department of Social Services (DSS) intervened in the guardianship proceeding and opposed the transfer. At Plaintiff’s request, the Supreme Court of Rockland County held a hearing on this matter and authorized the guardianship appointment and the asset transfer. Defendants appealed from this finding. While this proceeding was pending, DSS denied Mr. Shah’s Medicaid application on the grounds that he was not a New York resident.

In June 1997, New Jersey provided a letter to Defendant New York Department of Health (DOH) stating that New Jersey would not dispute Mr. Shah's New Jersey residency. In July, after Plaintiff’s request for a fair hearing, the DOH used this letter as justification for upholding Rockland County's denial of Medicaid benefits. Plaintiff then commenced a C.P.L.R. article 78 proceeding to challenge the DOH decision. In July 1999, the Appellate Division, Second Department ruled in favor of the Shahs with respect to Mr. Shah’s residency and his eligibility for Medicaid benefits, as well as the guardianship appointment and asset transfer to Mrs. Shah. The court also granted the DOH and Rockland County DSS leave to appeal from the residency ruling and granted Helen Hayes Hospital and Rockland County DSS leave to appeal from the guardianship-transfer ruling.

ISSUE & DISPOSITION

Issue(s)

1. Is Plaintiff's state residency for Medicaid purposes established by an "interstate agreement" in the form of a June 1994 letter from New Jersey?

2. May a guardian spouse transfer to herself all of the assets of her incapacitated spouse for the purposes of Medicaid planning under Mental Hyg. Law § 81.21?

Disposition

1. No. Plaintiff is clearly a New York State resident under 42.C.F.R. § 435.403(i)(3) because he became incapacitated after age 21 and he is physically present in New York State. The June 1994 letter is only an opinion of a New Jersey government employee, not an "interstate agreement."

2. Yes. Mental Hyg. Law § 81.21 permits a guardian spouse to execute this kind of Medicaid planning.

AUTHORITIES CITED

Cases Cited by the Court
Other Sources Cited by the Court

RELATED SOURCES

COMMENTARY

State of the Law Before Shah

The Court had not previously considered the issue of determining residency for an incapacitated person under 42 C.F.R. § 435.403(d).

N.Y. Mental Hyg. Law § 81.21, permits the guardian of an incapacitated person to transfer the assets of the incapacitated person to or for the benefit of another person. In In re John XX, 226 A.D.2d 79 (N.Y. App. Div. 1996), the Appellate Division found that for purposes of Medicaid planning, Mental Hyg. Law § 81.21 allows a guardian to transfer the leftover portion of an incapacitated person’s assets to third parties after setting aside enough money to cover medical care for 36 months.

Finally, the Court had not before addressed whether Mental Hyg. Law § 81.21 authorizes a guardian spouse to transfer all of her incapacitated spouse’s assets to herself and exercise the right of spousal refusal to protect those assets from the costs of Medicaid-related services.

Effect of Shah on Current Law

First, the Court held that the DOH must follow the definition of residency under 42 C.F.R. § 435.403(d) for purposes of determining Medicaid eligibility. Thus, the Court limited the DOH's ability to refuse Medicaid benefits based upon a residency determination that is inconsistent with the strict parameters set forth in these regulations. Accordingly, once an applicant falls within one of the definitions and qualifies as a New York resident eligible for Medicaid, exception to this qualification is limited only to those specific circumstances outlined in the regulations. The DOH argued the letter from New Jersey constituted an "interstate agreement" exception to the qualification. However, the Court found the letter was only the opinion of a New Jersey government employee, and not an "interstate agreement."

Second, the Court held that a guardian spouse is permitted to transfer all of the assets of the incapacitated spouse to herself in order to provide support for the guardian spouse and her family. Furthermore, the Court noted that this may be done with the additional purpose of rendering the incapacitated spouse eligible to receive Medicaid benefits. Relying upon Mental Hyg. Law § 81.21, state and federal law, and the doctrine of substituted judgment, the Court held that it is within the power of a guardian spouse to transfer all of the assets of the incapacitated spouse while simultaneously applying for government benefits, provided that such actions would conform with the intent of the incapacitated spouse. Finally, the Court noted that under the spousal refusal rule, the state possesses the right to seek reimbursement from the guardian spouse once Medicaid benefits have been exhausted.

Unanswered Questions

The Court’s determination in this case that the letter from New Jersey does not qualify as an “interstate agreement” seems to support the Court’s holding that Mr. Shah is a resident and eligible to receive New York Medicaid benefits. Considering the alternative methods of determining residency under 42 C.F.R. § 435.403, what effect might a qualified interstate agreement have on a residency determination?

Under § 435.403(i)(3), the residency determination regulation applicable to incapacitated persons, there is an exception to residency determination where another State makes a “placement.” If New York argued that another State made a placement, what effect would this have had on the residency determination?

Survey of the Law in Other Jurisdictions

Other jurisdictions agree with the Shah court’s interpretation of 42 C.F.R. § 435.403. As long as an applicant is an eligible resident as defined by § 435.403(d), the state agency must provide Medicaid. See, e.g., Beasley v. Adult and Family Services Division, 616 P.2d 517 (Or. Ct. App. 1980).

Where the applicant is incapacitated, courts in other jurisdictions such as California and Texas generally apply the common law doctrine of substituted judgment in authorizing the applicant’s guardian to transfer assets. See generally Christiansen v. Christiansen (In re Christiansen), 248 Cal. App. 2d 398, 407-8 (1967); In re Guardianship of Estate of Neal, 406 S.W.2d 496, 500 (Tex. Civ. App. 1966). The New Jersey Supreme Court, Appellate Division, held that the wife/guardian of a mentally incompetent applicant, in adopting a Medicaid planning measure, was entitled to make spousal transfer of assets under the substituted judgment doctrine. See In re Labis, 714 A.2d 335 (N.J. Sup. Ct. App. Div. 1998).

As the Shah court noted, the procedural benefit of spousal refusal is not available in every state. In the states where it is not available, while a guardian spouse can transfer all of the institutionalized applicant’s assets to herself pursuant to the substituted judgment doctrine without rendering the applicant automatically ineligible, not all of those assets will be shielded from the cost of the applicant’s medical care. These states adopt the resource allowance rules and limitations set out in the Medicare Catastrophic Coverage Act of 1988 and permit the guardian spouse to keep only a minimum amount of resources while the incapacitated spouse is receiving Medicaid benefits. See Cleary v. Waldman, 959 F.Supp. 222 (D. N.J. 1997); Bird v. Pennsylvania Dep't of Public Welfare, 731 A.2d 660 (Pa. Commw. Ct. 1999); Thomas v. Comm. of the Div. of Med. Assistance, 425 Mass. 738 (1997).

Prepared by:

Copyright
About us
Send email