STEVEN DORN v. DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-5311-04T55311-04T5

STEVEN DORN,

Petitioner-Appellant,

v.

DIVISION OF MEDICAL ASSISTANCE

AND HEALTH SERVICES,

Defendant-Respondent.

_______________________________

 

Argued June 6, 2006 - Decided July 21, 2006

Before Judges Kestin, R. B. Coleman

and Seltzer.

On appeal from a Final Decision of

the Director of the Division of Medical

Assistance and Health Services, HMA-7609-04.

Donald M. McHugh argued the cause for

appellant (McHugh and Macri, attorneys;

Mr. McHugh on the brief).

Julie Hubbs, Deputy Attorney General,

argued the cause for respondent (Zulima

V. Farber, Attorney General, attorney; Michael J. Haas, Assistant Attorney General, of counsel and Ms. Hubbs, on the brief).

PER CURIAM

Petitioner, Steven Dorn, appeals from a final decision of the Division of Medical Assistance and Health Services (DMAHS), rejecting his application for an increase in the monthly income/maintenance allowance for his wife, Nancy Dorn. See 42 U.S.C.A. 1396r-5(d)(1) and (2); and N.J.A.C. 10:71-5.7(c). We affirm.

The facts are largely undisputed. Petitioner and Nancy Dorn were married in 1978. They have two children, Tiffany and Devon. Diagnosed with multiple sclerosis, petitioner was permanently disabled in 1988. He was admitted to a nursing home in 2003, when he was forty-seven years old. At that time, Tiffany attended Cornell University and Devon attended the University of Maryland. Petitioner and his wife had accumulated approximately $116,000, including funds they had set aside for the college education of their children.

Petitioner applied for Medicaid assistance. The Medicaid program

was created to provide medical assistance to the poor at the expense of the public. It is an optional cooperative program in which [t]he Federal Government shares the costs

. . . with States that elect to participate in the program. States that choose to participate are required to comply with Title XIX of the Social Security Act, and the regulations adopted by the Secretary of Health and Human Services.

. . .

 
New Jersey has elected to participate in the Medicaid program by enacting the New Jersey Medical Assistance and Health Services Act. N.J.S.A. 30:4D-1 to -19.1. The Department of Human Services has the responsibility for administering the program. N.J.S.A. 30:4D-3c.
 
[Mistrick v. Div. of Med. Assistance & Health Servs., 154 N.J. 158, 166 (1998)

(citations omitted) (internal quotation marks omitted).]

Before Medicaid payments begin, the applicant's assets must be utilized, or "spent down," on nursing care expenses. Generally, this requires that one-half of the total assets owned by a married couple, without regard to title of the assets, be spent before an individual is eligible for assistance. Estate of F.K. v. Div. of Med. Assistance & Health Servs., 374 N.J. Super. 126, 134-135 (App. Div.) (citing Wisconsin Dep't of Health and Family Servs. v. Blumer, 534 U.S. 473, 480, 122 S. Ct. 962, 967, 151 L. Ed. 2d 935, 944 (2002)), certif. denied, 184 N.J. 209 (2005). Petitioner utilized one-half of the $116,000 in assets owned by him and his wife for his care. The remaining $58,000 was utilized by his wife for her expenses and for the tuition expenses of Tiffany and Devon, thereby depleting any source of future tuition payments.

In addition to the required use of assets, an individual seeking Medicaid assistance must also utilize available income. "[A]fter certain deductions are applied, the institutionalized spouse's entire income is applied to the cost of nursing home care. The remainder is paid by the State and Federal governments through Medicaid." H.K. v. Div. of Med. Assistance & Health Servs., 379 N.J. Super. 321, 324 n. 2. (App. Div.), certif. denied, 185 N.J. 393 (2005). Nevertheless,

[t]he Federal Medicaid statute, 42 U.S.C.A. 1396r-5(d), and our State's implementing regulations, N.J.A.C. 10:71-5.7(c), recognize that some portion of an institutionalized spouse's income may be used to support the community spouse to avoid the latter from becoming impoverished. See Wisconsin Dep't of Health and Family Servs. v. Blumer, 534 U.S. 473, 480, 122 S. Ct. 962, 968, 151 L. Ed. 2d 935 (2002) ("Congress sought to protect community spouses from 'pauperization' while preventing financially secure couples from obtaining Medicaid assistance."). But those same provisions place strict limits on the amount of a Medicaid recipient's income that can be used for the community spouse allowance. Id. at 481-82, 122 S. Ct. at 965."

[Id. at 324-25.]

The spousal allowance available to petitioner and his wife was $2,319 per month. That allowance may be increased if, at an administrative "fair hearing," the community spouse demonstrates "exceptional circumstances resulting in financial duress." N.J.A.C. 10:71-5.7(e). See 42 U.S.C.A. 1396r-5(e).

At the time of his admission to the nursing home, petitioner received income, including payment from a disability policy, in excess of $4,000 per month. The Board of Social Services originally considering petitioner's Medicaid application determined, in accordance with the existing limitation, that only $2,319 of petitioner's income might be diverted to his wife. That decision was appealed and a "fair hearing" was held before an Administrative Law Judge. The judge explained:

Petitioner submits that the exceptional circumstances, which warrant a finding of financial duress [were] in evidence in the testimony and by the documentation submitted at the hearing. The actual living costs and the educational cost for the family cannot be met on the current income received by Petitioner's wife. And, the summer income of the children is too little to assist with the debts incurred by the family.

Petitioner's wife's intent for the disability insurance policy purchased in 1986 was to provide disability income of $4,000 per month to pay for the needed family daily living expenses, including the educational costs of their children, if and when Petitioner was unable to work.

The judge found that "the actual monthly expenses for Petitioner's family [are] significantly in excess of the permitted maximum income of $2,319." She took that as proof of "exceptional circumstances resulting in financial duress" and increased the community spouse allowance by $2,000.

The DMAHS Director reversed the ALJ decision. The Director ruled:

[T]he test here is not whether the community spouse can meet her pre-institutionalization monthly expenses, but whether there are exceptional circumstances resulting in significant financial duress. 42 U.S.C 1396r-5(e)(2)(B). Petitioner here seeks to have her costs covered without showing exceptional circumstances. None of the expenses are the result of exceptional circumstances but are everyday expenses. The record does not contain any medical bills, home repair bills for significant structural problems, or credit card arrears that are related to the medical situation. The federal statute intended only to prevent the impoverishment of a community spouse and not to guarantee the amenities of the current lifestyle. (emphasis added).

Petitioner appeals and asserts the following five points:

POINT I

THE LEGAL CRITERIA OF COLLEGE EDUCATION COSTS AS "EXCEPTIONAL CIRCUMSTANCES" RESULTING IN "SUBSTANTIAL FINANCIAL DURESS" ARE MATTERS OF FIRST IMPRESSION IN NEW JERSEY WHICH ARE NOT RESTRICTED BY STATUTORY PROVISIONS AND WHICH WERE FACTUALLY PROVEN IN THIS CASE.

POINT II

THE FACTUAL AND LEGAL ANALYSIS OF THE DIRECTOR STATED IN THE FINAL AGENCY DECISION IS LEGALLY BASELESS FOR FAILURE TO COMPLY WITH THE REQUIREMENTS OF N.J.S.A. 52:14B-10.

POINT III

THE ARBITRARY, UNREASONABLE AND CAPRICIOUS ACTIONS OF DMAHS ARE ACTIONABLE IN DAMAGES UNDER 42 U.S.C. 1983.

POINT IV

THE TRANSFER OF THE MONTHLY DISABILITY INSURANCE BENEFIT TO NANCY DORN FROM OCTOBER 2 003 THROUGH SEPTEMBER 2005 IS AN EXEMPT INTERSPOUSAL TRANSFER NOT SUBJECT TO THE MEDICAID TRANSFER PENALTY OR, ALTERNATELY, IF SUBJECT TO THE TRANSFER PENALTY, RESULTS IN NO MONTHLY PENALTY.

POINT V

THE POST-ELIBILITY INCOME RULES SET FORTH IN N.J.A.C. 10:71-5.4(b)2(i) REQUIRE THAT THE MONTHLY DISABILITY INSURANCE BENEFIT ASSIGNED TO NANCY DORN IS OWNED SOLELY BY HER AND IS UNAVAILABLE FOR THE COST OF THE INSTITUTIONALIZED SPOUSE.

The last three points were not raised before the administrative agency and we see no reason to depart from the rule limiting consideration of issues on appeal to those raised before the agency from which the appeal is taken. See Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973). Accordingly, we decline to address those points not raised below and turn to petitioner's remaining arguments.

"Our review of agency determinations is quite limited. We can overturn only those administrative determinations that are arbitrary, capricious, unreasonable, or violative of expressed or implicit legislative policies." In Re Failure by the Dept. of Banking and Ins., 336 N.J. Super. 253, 263 (App. Div.) (citing Campbell v. Dept. of Civil Serv., 39 N.J. 556, 562 (1963)), certif. denied, 168 N.J. 292 (2001). "Agencies, however, have no superior ability to resolve purely legal questions, and that a court is not bound by an agency's determination of a legal issue is well established." Greenwood v. State Police Training Ctr., 127 N.J. 500, 513 (1992). The issue here is purely legal. We, therefore, consider, independently, the issue of whether the inability to meet pre-disability expenses is an "extraordinary circumstance" sufficient to increase the community spouse allowance.

By definition, "extraordinary circumstances" exclude those ordinarily encountered. "This word, in common parlance, denotes something unusual or remarkable. The dictionary includes among its definitions of the word: 'exceptional to a very marked extent: most unusual: far from common . . . rarely equaled: singular, phenomenal: strikingly impressive . . . having little or no precedent and usually totally unexpected. . . .' [Webster's Third New International Dictionary Unabridged 807 (1971).]." Flagg v. Twp. of Hazlet, 321 N.J. Super. 256, 260 (App. Div. 1999).

We would expect such circumstances, in the context in which we consider them, to include unexpected medical expenses incurred by the community spouse; expenses needed to preserve the home of the community spouse; or expenses necessary to protect an income producing asset. Such expenses are unexpected and non-recurring. College tuition, on the other hand, is expected and was an integral part of petitioner's pre-disability expense.

The precise issue presented here was considered by the New York Court of Appeals, which rejected the claim that pre-existing college expenses might be "extraordinary circumstances" meriting an increase in the spousal allowance:

The entry of a family member into a nursing home, particularly where that family member is the primary income producer, may have a devastating effect on a family's standard of living, but the focus of these ameliorative statutes, both State and Federal, is solely on the prevention of the sort of financial catastrophe to the elderly community spouse that too often ensued under the prior statutory scheme for Medicaid-funded care. Thus, respondent's determination that petitioners' voluntarily assumed expenses for the private secondary and college education of their child in this case do not constitute "exceptional circumstances resulting in significant financial duress" for the purposes of an increased community spouse income allowance [was correct].

 
[Schachner v. Perales, 648 N.E.2d 1321, 1325

(N.Y. 1995).]

The distinction between unexpected expenses and those incurred in the normal course appears to have been uniformly accepted. See Elizabeth D. Lauzon, Annotation, Application Of "Spousal Impoverishment Provisions" Of Medicare Catastrophic Coverage Act (42 U.S.C.A. 1396r-5), 186 A.L.R. Fed. 437, 12, 13 (2003).

The Director's distinction between "everyday expenses" (which cannot constitute a basis for increasing the spousal allowance); and the unexpected expenses, exemplified by "medical bills, home repair bills for significant structural problems, or credit card arrears that are related to the medical situation" (which might support an increase in the allowance) is a proper interpretation of the statute under which petitioner sought to increase the spousal allowance. We add that any other interpretation would require an increase in the spousal allowance whenever the institutionalization of a working spouse requires a contraction of the community spouse's standard of living. That would render meaningless any limitation on the spousal allowance.

We believe that the explanation given by the Director adequately discharged his duty to explain his decision, see N.J.S.A. 52:14B-10, and was essentially correct, rendering petitioner's claim to the contrary without merit.

Affirmed.

 

The federal statute requires a showing of "exceptional circumstances resulting in significant financial duress." The parties have not suggested that the omission of the word "significant" has any relevance to this appeal.

We are advised that the payments from the disability policy were assigned to petitioner's wife as of September 25, 2005. There appears to be no claim that the payments remain subject to a requirement that they be made available for nursing care expenses after that date. Accordingly, the dispute here is limited to the period from April 2003 (the date petitioner entered the nursing home) through September 2005 (the date the payments were no longer considered petitioner's income).

We do not consider whether any deference should be afforded an agency's interpretation of state codes implementing federal Medicaid provisions, see In re Alleged Non-Compliance by RCN of NY, 186 N.J. 83, 92 (2006), because we believe the Director properly interpreted the phrase "extraordinary circumstances resulting in financial duress."

(continued)

(continued)

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A-5311-04T5

July 21, 2006