In re Estate of Calhoun

                                             FIRST DIVISION
                                             August 18, 1997


No. 1-96-1688

IN RE THE ESTATE OF DAWN CALHOUN,
(Chicato Trust Company, as Guardian
of the Estate of Dawn Calhoun,

          Petitioner-Appellant,

     v.

THE ILLINOIS DEPARTMENT OF PUBLIC AID,

          Respondent-Appellee.))
)
)
)
)
)
)
)
)
)
)Appeal from the
Circuit Court of
Cook County





Honorable
Benjamin Novoselsky,
Judge Presiding.

     JUSTICE O'BRIEN delivered the opinion of the court:
     We consider whether an Illinois Department of Public Aid
(IDPA) lien on the proceeds of a personal injury settlement must be
paid before those funds may be transferred to a supplemental needs
trust, which is designed to provide for a disabled individual's
special needs without duplicating Medicaid services or destroying
Medicaid eligibility.  We conclude that the IDPA is first entitled
to payment of the lien from the proceeds of the personal injury
settlement, leaving the remainder available for transfer to the
trust.  
     Dawn Calhoun, a minor, suffered brain damage during and
shortly after birth.  Dawn's parents brought suit on her behalf
against a hospital and certain physicians.  The case settled for
$3,500,000.  After reduction of attorney fees and costs, Dawn's net
proceeds amounted to $2,670,584.37.  Pursuant to a court order from
the law division, the settlement proceeds were to be distributed as
determined by the probate division.
     Dawn had received $223,223.12 in Medicaid benefits from the
IDPA from the date of her injury to the date of the settlement. 
Neither party disputed the validity of the IDPA lien in the amount
of $223,223.12, but a dispute arose over the timing of the payment
of the lien.  The law division judge ordered that the amount of the
lien be segregated in an escrow account pending resolution of the
payment issue in the probate court.
     The Chicago Trust Company, the appointed guardian of Dawn
Calhoun's estate, filed a petition to establish a supplemental
needs trust for the benefit of Dawn.  The guardian filed the
petition because funds placed in a supplemental needs trust
(sometimes referred to herein as a discretionary trust) are not
considered resources available to a Medicaid recipient for the
purpose of assessing the recipient's eligibility for benefits (see
42 U.S.C. 1396p(d)(4)(A) (1994)); in other words, the creation of
such a trust would enable Dawn to keep her Medicaid benefits.  The
guardian also requested the deferral of payment of the IDPA lien
until Dawn's death.  The probate court authorized the creation of
the trust and permitted its funding with all assets other than the
segregated funds.  The court ordered briefs on the timing of the
payment of the IDPA lien.  After a hearing on April 12, 1996, the
probate court ordered the guardian to pay the lien within 30 days. 
The guardian appealed, and the probate court stayed enforcement of
the judgment pending resolution of the appeal.
     The guardian concedes that section 120.347(d)(1) of the
Administrative Code (89 Ill. Adm. Code 120.347(d)(1)(1996))
requires it to immediately pay the IDPA lien.  However, the
guardian argues that section 120.347(d)(1)(89 Ill. Adm. Code
120.347(d)(1)(1996)), conflicts with section 15.1 of the Trusts
and Trustees Act (760 ILCS 5/15.1 (West 1996), which the guardian
contends allows it to defer payment of the IDPA lien until Dawn's
death.  
     The resolution of this issue requires us to construe section
15.1 of the Trust and Trustees Act.  Because the construction of a
statute is a matter of law, we may independently construe section
15.1.  See Peoples Gas Light & Coke Co. v. Illinois Commerce
Comm'n, 286 Ill. App. 3d 21, 23 (1996).   
     The primary rule of statutory construction is to ascertain and
give effect to the true intent of the legislature.  Peoples Gas,
286 Ill. App. 3d at 23.  In determining legislative intent, a court
first considers the statutory language.  Peoples Gas, 286 Ill. App.
3d at 23.  Where the language of the statute is clear, it will be
given effect without resort to other aids for construction. 
Peoples Gas, 286 Ill. App. 3d at 23.
     Accordingly, we begin our analysis by examining the relevant
language of section 15.1:     
               "A discretionary trust for the benefit of an
          individual who has a disability that substantially
          impairs the individual's ability to provide for his
          or her own care or custody and constitutes a
          substantial handicap shall not be liable to pay or
          reimburse the State or any public agency for
          financial aid or services to the individual except
          to the extent the trust was created by the
          individual or trust property has been distributed
          directly to or is otherwise under the control of
          the individual, provided that such exception shall
          not apply to a trust created with the disabled
          individual's own property or property within his or
          her control if the trust complies with Medicaid
          reimbursement requirements of federal law. 
          Notwithstanding any other provisions to the
          contrary, a trust created with the disabled
          individual's own property or property within his or
          her control shall be liable, after reimbursement of
          Medicaid expenditures, to the State for
          reimbursement of any other service charges
          outstanding at the death of the disabled
          individual."  760 ILCS 5/15.1 (West 1996).
     The above-quoted language of section 15.1 indicates a
legislative intent that a discretionary trust created with a
disabled individual's property or property within her control must
comply with "Medicaid reimbursement requirements of federal law." 
760 ILCS 5/15.1 (West 1996).
     Under federal law, if Medicaid benefits have been made under
a state plan to an individual because of an injury where a third
party is liable, the state is required to seek as much
reimbursement as possible from that third party, i.e., to the
extent of the third party's liability.  42 U.S.C. 1396a(a)(25)(B)
(1994). To that end, the Medicaid recipient must assign to the
state any rights she has to seek payment for her medical care from
the third party.  42 U.S.C. 1396k(a)(1)(A) (1994).  When a
recovery is made, the state retains that portion of any amount
collected as necessary to reimburse it for the medical payments
made to the injured person, "and the remainder of such amount
collected [is] paid to such individual."  42 U.S.C 1396k(b)
(1996).
     These federal provisions indicate that the state has priority
in recouping funds from third parties liable for the Medicaid
recipient's medical expenses, and only the remainder of those funds
are available to the Medicaid recipient for placement in a trust.
Accordingly, the guardian of Dawn Calhoun's estate must pay the
IDPA $223,223.12 from the proceeds of the personal injury
settlement.  The $223,223.12 equals the amount of Medicaid benefits
provided to Dawn from the date of her injury to the date of
settlement.  The remainder of the settlement fund is available to
Dawn for placement in a trust.
     The guardian argues that such a construction of section 15.1
violates equal protection, because disabled persons whose
settlements or judgments do not exceed their medical lien would
have no funds to place in trust after IDPA is paid, whereas
disabled individuals whose settlements do exceed their medical lien
would have funds remaining to place in trust.  We disagree.  The
heart of the equal protection guarantee is that persons similarly
situated are treated similarly.  Jacobson v. Department of Public
Aid, 171 Ill. 2d. 314, 322 (1996).   Here, all disabled persons
seeking the benefits of section 15.1 trusts consisting of their
property or property within their control must comply with Medicaid
reimbursement requirements of federal law.  Accordingly, all
similarly situated persons are treated similarly, and no
constitutional violation exists.
     In re Estate of Hickey, 263 Ill. App. 3d 658 (1994), cited by
the guardian, is inapposite, as it involved the construction of an
earlier version of section 15.1 that did not contain the language
requiring the trust to comply with Medicaid reimbursement
requirements of federal law.  
     For the foregoing reasons, we affirm the trial court.
     Affirmed.
     CAMPBELL, P.J., and BUCKLEY, J., concur.