The opinion
Opinions of the United
1999 Decisions States Court of Appeals
for the Third Circuit
2-8-1999
Cleary v. Waldman
Precedential or Non-Precedential:
Docket 97-5145
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Filed February 8, 1999
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 97-5145
THOMAS J. CLEARY, by his next friend Carolyne Cleary;
CAROLYNE CLEARY, individually, on their own behalf and
on behalf of all other persons similarly situated,
Appellants,
v.
WILLIAM WALDMAN, in his official capacity as
COMMISSIONER OF NEW JERSEY DEPARTMENT OF
HUMAN SERVICES; LEONARD FISHMAN, in his official
capacity as COMMISSIONER OF NEW JERSEY
DEPARTMENT OF HEALTH AND SENIOR SERVICES;
VELVET MILLER, in her official capacity as DIRECTOR
OF DIVISION OF MEDICAL ASSISTANCE AND HEALTH
SERVICES; MARK SCHIFFER, in his official capacity
as DIRECTOR OF PASSAIC COUNTY BOARD OF
SOCIAL SERVICES
NEW JERSEY ASSOCIATION OF HEALTH CARE
FACILITIES; NEW JERSEY ASSOCIATION OF NON-
PROFIT HOMES FOR THE AGING, INC.
Intervenors-Defendants in
District Court.
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil Action No. 96-cv-04774)
District Judge: Honorable Dickinson R. Debevoise
Argued January 27, 1998
Before: SCIRICA, ROTH and RENDELL, Circuit Judges
(Opinion filed February 8, 1999)
Stephen A. Feldman, Esquire
(Argued)
Ellen R. Wase, Esquire
Beth A. Lovitch, Esquire
Feldman & Feldman
1500 Walnut Street
Suite 904
Philadelphia, PA 19102
Attorneys for Appellant
Charles A. Miller, Esquire (Argued)
Ann-Kelley Yelverton, Esquire
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566
Washington, DC 20044
Peter Verniero
Attorney General of New Jersey
Meredith G. Van Pelt
Deputy Attorney General
Richard J. Hughes Justice Complex
Office of Attorney General of
New Jersey
CN 112
Division of Law
25 Market Street
Trenton, NJ 08625
Attorneys for Appellees Waldman,
Fishman, Miller and Schiffer
2
Jonathan D. Weiner, Esquire
Richard J. Kravitz, Esquire
Maureen E. Kerns, Esquire
Fox, Rothschild, O'Brien & Frankel
LLP
Princeton Pike Corporate Center
997 Lenox Drive
Building 3
Lawrenceville, NJ 08648-2311
Attorney for Appellee New Jersey
Association of Health Care
Facilities
Bruce W. Clark, Esquire
Kara W. Swanson, Esquire
Dechert, Price & Rhoads
P.O. Box 5218
Princeton Pike Corporate Center
Princeton, NJ 08543-5218
Attorneys for Appellee New Jersey
Association of Non-Profit Homes
For the Aging, Inc.
Achilles M. Perry, Esquire
O'Melveny & Myers LLP
Citicorp Center
153 East 53rd Street
New York, NY 10022-4611
Attorney for Amicus Curiae
Alzheimer Associations, NJ
Joel M. Hamme, Esquire
Joseph W. Metro, Esquire
Reed, Smith, Shaw & McClay
1301 K Street, N.W.
Suite 1100-East Tower
Washington, DC 20005
Attorneys for Amicus Curiae
American Health Care Association
3
OPINION OF THE COURT
ROTH, Circuit Judge.
In this appeal we must decide if New Jersey's
implementation of a portion of the Medicare Catastrophic
Coverage Act ("MCCA" or the "Act") violates Federal law.
Specifically, we must determine whether New Jersey may
employ an "income-first" approach, rather than a "resource-
first" approach, when determining Medicaid eligibility for a
spouse who is institutionalized in a long-term care facility.
I. FACTS
Thomas and Carolyne Cleary, representing themselves
and a class of persons similarly situated, sued the New
Jersey Department of Health Services to enjoin application
of its "income-first" rule. They contend that the New Jersey
rule violates the MCCA when it attributes a portion of
Thomas Cleary's income to his wife (income-first method)
instead of allowing the couple to dedicate more of their
resources to Carolyne Cleary's support (resource-first
method). The Clearys argue that the Federal statute
mandates a "resource-first" approach and that the New
Jersey rule is an impermissible construction of the Act. In
denying the Clearys' motion for injunctive relief, the District
Court held that the income-first method is a permissible
interpretation of the MCCA.
When the Clearys brought this action, Thomas Cleary
was 79 years old and suffering from Parkinson's disease
and dementia. On November 21, 1995, Thomas entered a
long-term care facility in New Jersey. A year later, Carolyne
Cleary sought Medicaid benefits on behalf of her husband
and, pursuant to the Act, requested an assessment of the
couple's assets by the Passaic County Board of Social
Services. The board determined that the Clearys' total
resources had been worth $240,000 at the time of Thomas'
institutionalization and assessed the then-current value of
their assets as $180,000.
4
Under the Spousal Impoverishment Provisions ("SIP") of
the MCCA, 42 U.S.C. S 1396, et seq., several steps are
taken when a couple applies for Medicaid benefits to cover
the care of a spouse who has been institutionalized. First,
the state must calculate the total value of the couple's
resources and allocate a share of the resources to each
spouse. 42 U.S.C. S 1396r-5(c)(1). The amount allocated to
the community spouse is called the Community Spouse
Resource Allowance ("CSRA").1 This amount then need not
be spent for the care of the institutionalized spouse.
The income generated from the CSRA, along with the
community spouse's other income, such as social security,
makes up the community spouse's Minimum Monthly
Maintenance Needs Allowance ("MMMNA"). The MMMNA is
a level of income which has been estimated by the state as
necessary to permit the non institutionalized spouse to live
independently in the community. If either spouse is
dissatisfied with the CSRA, he or she may request a "fair
hearing." 42 U.S.C. S 1396r-5(e). The Clearys challenge New
Jersey's method of revising the CSRA when it, along with
the community spouse's other sources of income, is
insufficient to meet the MMMNA.
The issue that divides the parties to this appeal is the
question of what constitutes the community spouse's other
sources of income. According to the Clearys, the Act
provides that any shortfall between the MMMNA and the
amount available to the community spouse as income is to
be made up by the substitution of another CSRA, i.e., a
larger portion of the couple's joint resources is to be
attributed to the community spouse. The income from such
a reallocated amount, along with the community spouse's
other income, should then be sufficient to meet the
MMMNA. This is the "resource-first" approach. However, in
New Jersey, before reformulating a CSRA with a larger
share of resources, the fair hearing officer will consider a
contribution of income from the institutionalized spouse to
_________________________________________________________________
1. The CSRA is the greatest of (a) $12,000, (b) the lesser of one-half
total
joint resources or $60,000, (c) an amount established pursuant to a fair
hearing under subsection (e)(2) or (d) and amount transferred under
court order. 42 U.S.C. S 1396r-5(f)(2)(A).
5
make up the shortfall between the MMMNA and the
community spouse's other income. This is the "income-first"
approach.
At the time she applied for Medicaid benefits for her
husband, Carolyne Cleary was informed that Thomas was
ineligible due to the couple's excess resources. Therefore,
the Clearys were required to "spend down" their resources
below a certain level before they could become eligible for
Medicaid. Prior to the MCCA, an individual had to spend
down all his or her resources before eligibility. The MCCA
altered this by providing a protected spousal share of
resources for the non-institutionalized or "community"
spouse.
Pursuant to the Act, New Jersey determined that
Carolyne Cleary was entitled to $1,524.50 per month as her
MMMNA. At the time of the assessment, Mrs. Cleary's total
monthly income was $828.25 ($516.50 in social security
payment and $311.75 in interest from her CSRA). Thus,
her income fell short of her MMMNA by $696.25.
Under New Jersey's income-first approach, this shortfall
should be remedied by taking a portion of Thomas Cleary's
income to be included as part of Carolyne Cleary's. Only
after this step, will New Jersey look to other assets of the
Clearys to augment Carolyne Cleary's income. The Clearys
contend that this method does not conform to the
provisions of the Act and that Thomas' income cannot be
transferred to Carolyne. The Clearys assert that New Jersey
must make up the MMMNA shortfall by allocating a larger
portion of the couple's resources to Carolyne's CSRA.
The Clearys filed suit in the District Court seeking
injunctive relief from application of the income-first rule.
The District Court denied their motion and granted motions
to intervene by the New Jersey Association of Health Care
Facilities and the New Jersey Association of Nonprofit
Homes for the Aging.2
_________________________________________________________________
2. The Clearys also sought declaratory and injunctive relief in the
District
Court on the issue of their right to be notified under the Act of the
requirements and procedures for eligibility for Medicaid. The District
Court denied injunctive relief on this issue as well. The Clearys,
however,
are not appealing the notice issues.
6
II. JURISDICTION AND STANDARD OF REVIEW
The District Court had jurisdiction over this action
pursuant to 42 U.S.C. S 1983 and 18 U.S.C. S 1331. The
Clearys filed an interlocutory appeal from the District
Court's denial of their motion for a preliminary injunction.
We have jurisdiction of this appeal pursuant to 28 U.S.C.
S 1292(a)(1).
We review the denial of a preliminary injunction for an
abuse of discretion. However, the District Court'sfindings
of fact are reviewed under a clearly erroneous standard.
New Jersey Hosp. Ass'n v. Waldman, 73 F.3d 509, 512 (3d
Cir. 1995). After applying the same standard as the District
Court, we will find an abuse of discretion only upon
concluding that the District Court's view was contrary to
reason. U.S. v. A.R., 38 F.3d 699 (3d Cir. 1994).
III. DISCUSSION
The Clearys contend that New Jersey's income-first rule
violates the MCCA because it requires couples to allocate
income from the institutionalized spouse for the
maintenance of the community spouse, rather than
designating a further portion of the couple's resources to
create income for the community spouse. In effect, New
Jersey requires couples to keep a greater portion of their
resources available for "spend down" on medical care,
thereby postponing Medicaid eligibility.
The Clearys argue that this method of revision violates
both the letter and the spirit of the MCCA. We conclude
that the MCCA, as interpreted by the federal and state
agencies charged with its administration, grants states the
discretion to employ either an income-first or a resource-
first method when revising the CSRA. We will, therefore,
affirm the decision of the District Court.
Because this appeal turns on the interpretation of a
Federal statute, we will first examine the language of the
statute and the context in which this particular dispute
arises. Medicaid was established in 1965. While it is often
thought of as providing medical care only for the indigent,
it also provides coverage for the aged "whose income and
7
resources are insufficient to meet the costs of necessary
medical services" including nursing home care. 42 U.S.C.
S 1396, et seq.
Medicaid is a cooperative federal-state venture through
which the states operate programs of their own design.
These programs must, however, be consistent with federal
standards and regulations. 42 U.S.C.A. S 1396a(a)(1-5),
(a)(10)(A, C), (a)(13)(B), (a)(17). The Federal agencies
responsible for administering the Act, the Health Care
Financing Administration ("HCFA") and the Department of
Health and Human Services ("HHS"), have not adopted
formal regulations interpreting the specific provisions at
issue here. Rather, these agencies have left it to the states
to decide whether to consider an institutionalized spouse's
income or resources in making adjustments to the standard
resource allowance for community spouses. At the state
level in New Jersey, it is the Division of Medical Assistance
and Health Services (DMAHS) and the New Jersey
Department of Human Services (DHS) which administer
Medicaid. N.J.S.A. 30:40D-4.
In order to be eligible for Medicaid, a person's available
income and resources may not exceed certain limits.
Persons seeking eligibility for Medicaid benefits must
"spend down" their available assets to the prescribed limits
before becoming eligible. 42 U.S.C. S 1396 (a)(10). Prior to
1988, these eligibility rules forced couples to spend down
the entirety of their resources in order for one of them to
qualify for Medicaid. This resulted in the virtual
impoverishment of the spouse who remained in the
community.
In 1988, Congress enacted the MCCA, H.R. 2470, 100th
Cong., 1st Sess., 102 Stat. 683 (1988). The chief purpose of
the MCCA was to end the "pauperization [of the community
spouse] by assuring that [she] has a sufficient -- but not
excessive -- amount of income and resources available"
while the other spouse is institutionalized. H.R. Rep. No.
105 (II), 1988 U.S.C.C.A.N. at 888. The goal of the MCCA
was to provide sufficient income and resources for the
community spouse while also ensuring that a fair share of
the couple's resources were employed for the care of the
institutionalized spouse. Through its Spousal
8
Impoverishment Provisions, the MCCA set aside a protected
level of income and resources for the community spouse.
This amount is "protected" since it is not included when
determining the institutionalized spouse's eligibility for
Medicaid and it need not be "spent down" on the
institutionalized spouse's care.
Because Medicaid serves the purpose of providing
necessary medical services for both the indigent and the
elderly, a related goal of the MCCA is to preclude couples
who possessed substantial resources from qualifying for
Medicaid. By sheltering a portion of their shared resources
in trusts or in the community spouse's name, a couple
might appear to have fewer resources, making them eligible
for Medicaid. The 1988 Act curbed this sheltering practice
by attributing certain amounts of the couple's overall
resources to each spouse for eligibility purposes. The MCCA
seeks to achieve a balance between spousal
impoverishment and apportioning medical costs
appropriately. It does this through a series of complex and
interlocking provisions.
The statutory provision at issue in this case is S 1396r-
5(e)(2)(C) of the Spousal Impoverishment Provisions of the
MCCA. This section governs revisions to the resources
allotted to the community spouse.
REVISION OF COMMUNITY SPOUSE RESOURCE
ALLOWANCE. -- If either such spouse establishes that
the community spouse resource allowance (in relation
to the amount of income generated by such an
allowance) is inadequate to raise the community
spouse's income to the minimum monthly needs
allowance, there shall be substituted, for the
community spouse resource allowance under
subsection (f)(2), an amount adequate to provide such
a minimum monthly maintenance needs allowance.
42 U.S.C. S 1396r-5(e)(2)(C) (emphasis added).
We must determine what constitutes the "community
spouse's income" within subsection (e)(2)(C). The Clearys
contend that only Carolyne's personal income (for instance,
her social security check) may be considered for this
purpose and that the MCCA mandates a transfer of the
9
couple's resources in an amount sufficient to generate
income to make up any shortfall. New Jersey argues that,
prior to a transfer of any additional resources to meet the
community spouse's needs, the MCCA permits the state to
consider any income the institutionalized spouse may
transfer to the community spouse.
States have adopted different methods of implementing
the SIP. Some use a resource-first method; others, like New
Jersey, an income-first approach. Under the latter method,
adjustments can be made to resources only after taking
into account income transferred from the institutionalized
spouse. When a hearing officer considers the sufficiency of
the CSRA to meet the community spouse's MMMNA, the
hearing officer may consider as part of the "community
spouse's income" a contribution of the institutionalized
spouse's income. The New Jersey statute provides for this
in the following language:
Post-eligibility treatment of income: institutionalized
individuals:
(d) When the institutionalized individual's in come
is insufficient to provide the maximum authorized
deduction for the community spouse, either the
institutionalized spouse or the community spouse
can request a fair hearing in accordance with the
N.J.A.C. 10:71-8.4. If either member can establish at
the fair hearing that the income generated by the
community spouse's share of the couple's resources
is inadequate to raise the community spouse's
income (together with the community spouse
maintenance deduction) to the maximum authorized
level, additional resources (beyond the community
spouse's share as established at N.J.A.C. 10:71-48)
may be set aside for the community spouse. The
amount of resources to be set aside shall be that
amount that is determined sufficient to generate
sufficient income to raise the community spouse's
gross income to the maximum authorized level.
N.J.A.C. 10:71-5.7(d).
The Clearys maintain that this statutory language which
permits the transfer of income from the institutionalized
10
spouse to make up part of a "community spouse
maintenance deduction" contravenes the plain language of
the MCCA. The Clearys contend that the MCCA follows the
"name on the check" rule. Following this approach, they
assert, income of the institutionalized spouse cannot be
considered "community spouse's income" for purposes of
subsection (e)(2)(C).
To resolve this dispute, we must interpret "community
spouse's income" as used in S 1396r-5(e)(2)(c). While the
Federal agencies which administer the Act have not
adopted formal regulations, neither have they remained
silent. Both HCFA and HHS have stated in policy
memoranda and letters that states may adopt either the
income-first or the resource-first method and that
subsection (e)(2)(C) permits consideration of potential
income transfers from one spouse to another. In addition,
these agencies have stated that the resource-first method,
although permissible, is not mandatory.3 Nevertheless, the
Clearys argue that New Jersey has run afoul of Federal
standards in its implementation of the Act.
In considering this question, we will look first at the
statute and, using traditional tools of statutory
construction, determine if Congressional intent is apparent.
If we can do so, we must give effect to that intent. Reich v.
Local 30, IBT, 6 F.3d 978, 986, citing, I.N.S. v. Cardoza-
Fonseca, 480 U.S. 421, 446-48 (1987), and Chevron U.S.A.,
Inc. v. Natural Resources Defense Council, Inc., 467 U.S.
837, 842-43 (1984). But, where "the statute is silent or
ambiguous with respect to the specific issue, the question
for the court is whether the agency's answer is based on a
permissible construction of the statute." Chevron, 467 U.S.
at 843.
_________________________________________________________________
3. See HCFA State Medicaid Manual, HCFA-Pub. 45, S 3262.3,
interpreting the Spousal Impoverishment Provisions and indicating that
states should adopt an income-first approach. See also memoranda to
states indicating that either resource-first or income-first may be used,
HCFA Memorandum from Medicaid Bureau Director Sally Richardson
(March 1994), Joint Appendix ("JA") at 99-100; HCFA Letter to
Pennsylvania Department of Public Welfare (April 1994), JA at 101-103;
Chicago Regional State Letter 22-94 (July 1994), JA at 103-04; Letter for
Donna E. Shalala to George V. Voinovich (March 1996), JA at 105.
11
We agree with the District Court that the statute is
complex and contains many interrelated provisions that
make it impossible to attach a plain meaning to provisions
in isolation. As such we find the definition of"community
spouse's income" to be ambiguous within the context of
subsection (e)(2)(C). As a result, we must go on to examine
the purposes of the Act and the interpretation proffered by
the administering agencies. Because, however, the views of
the administering agencies in this case are not made in
formal regulations, we are confronted with another
question: What level of deference should we grant to the
agency interpretation?
Where an agency has promulgated rules pursuant to
notice and comment procedures, the Supreme Court has
held that courts must defer to the agency's reasonable
interpretation. Chevron, 467 U.S. at 844. The task becomes
more complicated when the agency's interpretation is
contained in informal views or guidelines outside the course
of notice and comment procedures. We have questioned
what degree of deference, if any, to afford an agency's views
in this context. Reich, 6 F.3d at 986; E.I. du Pont de
Nemours & Co. v. C.I.R., 41 F.3d 130, 135 (3d Cir. 1994),
aff'd sub nom. Conoco, Inc. v. C.I.R., 42 F.3d 972 (5th Cir.
1995); Sekula v. F.D.I.C., 39 F.3d 448, 453 (3d Cir. 1994).
Since the Supreme Court's decision in Chevron , courts
have deferred to an agency's reasonable interpretation of a
statute over which that agency has been granted
administrative and lawmaking authority. Chevron, 467 U.S.
at 844. In the wake of Chevron, a great body of commentary
has emerged regarding the extent of this deference. See,
Sunstein, "Law and Administration After Chevron", 90
Colum. L. Rev. 2071 (1990). Despite dispute as to Chevron's
scope, the principles announced there center on the
institutional competence of agencies to make factual
determinations and resolve issues of policy. As the
Supreme Court stated in Chevron, where a statute is
ambiguous and Congressional intent is not clear, agencies
promulgating reasonable interpretations, while exercising
their delegated rulemaking authority, will be granted
deference to those reasonable interpretations.
12
The agency views at issue here are not, however, formal
regulations promulgated pursuant to notice and comment
rulemaking. In such cases, we have questioned whether
Chevron deference applies. Therefore, we must determine
the degree of deference, if any, that is warranted.
The Supreme Court has stated that, where an
administrative agency's interpretation is registered in
informal views, as long as that agency has a delegated
authority to administer the statute and the views are made
"in pursuance of official duty, based upon more specialized
experience and broader investigations and information than
is likely to come to a judge", then those views warrant some
deference. Skidmore v. Swift & Co., 323 U.S. 134, 140
(1944). In Skidmore, the Court decided that employees of a
packing plant were entitled to overtime pay for night-time
duty even though most of the time was spent idle. In so
holding, the Court relied on the informal views of the Fair
Labor Standards Act Administration that had determined
that waiting during night duty was akin to work. The Court
decided that, although the Administration's views were not
contained in formal rules and "while not controlling upon
the court by reason of their authority, they do constitute a
body of experience and informed judgment to which courts
and litigants may properly resort for guidance." Id. How
much guidance and weight depends, however, on the
"thoroughness evident in its consideration, the validity of
its reasoning, its consistency with earlier and later
pronouncements, and all those factors which give it power
to persuade, if lacking power to control." Id.
Because the Supreme Court's decision in Skidmore
precedes Chevron by more than 40 years, the question
arises whether Chevron's deference principle with regard to
legislative rules (those made pursuant to notice and
comment procedures) replaces the reasoning of Skidmore.
We have noted repeatedly that Skidmore and its progeny
were not expressly overruled by Chevron. See Reich, 6 F.3d
at 987; Sekula, 39 F.3d at 453; International Raw Materials,
Ltd. v. Stauffer Chemical Co., 978 F.2d 1318 n.9 (3d Cir.
1992).
We have tested interpretative rules against the principles
enunciated in Skidmore and determined that, if an agency
13
has been granted administrative authority by Congress for
a statute, its interpretation -- despite arising in an informal
context -- will be given deference as long as it is consistent
with other agency pronouncements and furthers the
purposes of the Act.4 Most recently, in Elizabeth Blackwell
Health Center for Women v. Knoll, we concluded that
interpretive rules by an agency with lawmaking authority
(as opposed to legislative rules) will get deference even if the
agency's interpretation is not made pursuant to that
lawmaking authority. 61 F.3d 170 (3d Cir. 1995) (directive
from HCFA giving guidance to states about Medicaid plans
is an interpretative rule and gets deference when
reasonable).
The interpretations that form the basis for New Jersey's
implementation in this case are contained in informal views
from the agency with the statutory mandate to administer
the Act. The case law clearly provides that these views will
receive some deference by the court if they are consistent
with the plain language and purposes of the statute and if
they are consistent with prior administrative views.
In this case, we have an ambiguous statute as well as
agency views that are informal and not made subject to
notice and comment procedures. But the agency involved
has delegated authority under the statute to administer the
Act and therefore satisfies the requirement that a
precondition to Chevron deference is a congressional
delegation of administrative authority. See Adams Fruit Co.,
Inc. v. Barrett, 494 U.S. 638, 649 (1990). Under the
Skidmore analysis outlined above, we must probe further to
determine whether the interpretation is consistent and
contemporaneous with other pronouncements of the agency
and whether it is reasonable given the language and
purpose of the Act. We have made such an assessment,
reviewing the above factors in the order that they are made
_________________________________________________________________
4. See Sekula, 39 F.3d at 453 (Resolution Trust Corporation
interpretation made in context of legislative rulemaking gets deference);
and, E.I. du Pont de Nemours & Co., 41 F.3d at 135 (if the secretary has
delegated rule making authority and there has been no prejudice from
delay between enactment of the statute and interpretation it will receive
deference if reasonable.)
14
in the Clearys' arguments. For the reasons we state below,
we conclude that the informal views of the agencies should
be given deference.
The Clearys' primary contention is that the granting to
states of discretion to adopt an income-first rule runs
contrary to the statute's plain language. The crux of their
argument is that "income" as used in the statute is
confined to the "name on the check" rule. We disagree.
To support their position of what constitutes Carolyne
Cleary's income, the Clearys cite to the SIP definition of
income in 42 U.S.C. S 1396r-5(b)(2). The Clearys contend
that under the income provisions in subsection (b)(2), no
income from the institutionalized spouse should be deemed
available to the community spouse as this would violate
subsection (b)(2)'s "name on the check rule."
Subsection (b) does indeed incorporate the "name on the
check" rule. Basically, any income payment made solely in
a spouse's name (either the institutionalized or the
community spouse) is considered income available only to
the named spouse. If an income payment is made in the
names of both spouses, half of it is considered available to
each spouse.
Why the Clearys argument fails lies in the fact that the
income provisions of S 1396r-5(b)(2) do not apply to a
revision of resources under S 1396r-5(e)(2)(C). Subsection
(b) applies "in determining the income of an
institutionalized spouse or community spouse for purposes
of the post-eligibility income determination described in
subsection (d)." And subsection (d), S 1396r-5(d), to which
subsection (b) refers, is entitled "Protecting Income for
Community Spouse." Subsection (d) defines the allowances
which will be offset from the income of the institutionalized
spouse before that income will be applied to pay for
institutionalization costs. One such allowance is the
community spouse monthly income allowance -- to the
extent that it comes from the income of the institutionalized
spouse. Subsection (d) defines the community spouse
monthly income allowance as the difference between the
MMMNA and whatever income the community spouse
generates on her own. Subsection (b) then computes the
15
community spouse's MMMNA, which, as we describe above,
is designed to keep the community spouse living above the
poverty line. This statutory language makes it clear that a
certain portion of the community spouse's income may
come from the income of the institutionalized spouse.
In addition, some, or all, of the community spouse's self-
generated income will be income from the CSRA. The
couple may not, however, be happy with the amount of the
CSRA, either as originally computed or as changed
circumstances may affect it. Subsection (e)(2)(C) then
provides for a revision of the CSRA if either spouse
establishes that the CSRA is inadequate to raise the
community spouse's income to the MMMNA. Nevertheless,
in computing the community spouse's total income, one
cannot focus only on the income generated by the CSRA
and ignore the other sources of income defined in
subsections (b) and (d).
We agree with the District Court that to conflate the
detailed provisions dealing with income in subsection (d)
with the resource revisions procedure addressed in
subsection (e) would run contrary to the statute. The
purpose of subsection (d) is to make available to the
community spouse so much of the institutionalized
spouse's income as is necessary to ensure her monthly
need. We agree that "it would be anomalous to construe
(e)(2)(C) in such a manner as to exclude the
institutionalized spouse's income from the calculation."
Cleary v. Waldman, 959 F. Supp. 222, 232 (D. N.J. 1997).
The reading advanced by the Clearys would make (d)
superfluous.
Moreover, the Act does make an explicit reference to a
transfer of income from one spouse to another. In
determining the amount of the institutionalized spouse's
income that will be applied to the payment of the costs of
the institution, subsection (d) provides that, first, the
community spouse's monthly income allowance, to the
extent that it is paid by the institutionalized spouse, will be
deducted from the institutionalized spouse's income. This
deduction will be made before the institutionalized spouse
must contribute to medical costs. This language in
subsection (d) demonstrates that the "name on the check"
16
principle will not prevent allocation under the SIP of the
institutionalized spouse's income for the needs of the
community spouse.
The Clearys argue, however, that the plain language of
the MCCA guarantees the community spouse an "adequate
amount of resources to provide the MMMNA." They contend
that this means that a greater share of the couple's
resources should go to the community spouse in the event
she can not meet her monthly need. The Clearys rely on
language in subsection (e) that provides that, if either
spouse is dissatisfied with the CSRA and can establish that
the amount of income generated by it for the community
spouse is inadequate to meet the community spouse's
MMMNA, "there shall be substituted, for the [CSRA] under
subsection (f)(2) of this section, an amount adequate to
provide such a minimum monthly maintenance needs
allowance." S 1396r-5(e)(2).
The Clearys rely on the words "substituted" and "an
amount adequate" for their argument that any shortfall
between the community spouse's income and the MMMNA
must be made up by allocating more income from a larger
share of resources to generate more income.
This argument ignores the import of the fair hearing
process embedded within the Act. Subsection (e)(2)(A)
permits a "fair hearing" if either spouse is dissatisfied with
the determination of any one of the five components that
create the community spouses's income: the community
spouse monthly income allowance (from the
institutionalized spouse), the amount of monthly income
otherwise available to the community spouse, the
computation of the spousal share of resources, the
attribution of resources, and the determination of the
CSRA. Subsection (e)(2)(B) provides for the revision of the
MMMNA. Subsection (e)(2)(C) then provides for a revision of
the CSRA if either spouse "establishes that the community
spouse resource allowance (in relation to the amount of
income generated by such an allowance) is inadequate to
raise the community spouse's income to the minimum
monthly maintenance needs allowance . . .."
The fact that the "fair hearing" subsection, (e)(2), starts in
(e)(2)(A) with a recitation of the five components that make
17
up the community spouse's income would indicate that a
revision of one of those components, the CSRA, should be
made only with a consideration of the other four. The five
elements are interrelated and an adjustment of one will
affect the other four. For this reason, a spouse may not be
able to demonstrate an inadequacy of the CSRA, pursuant
to (e)(2)(C), if a larger community spouse monthly income
allowance is possible.
This interpretation of the language of subsection (e)(2) is
consistent with the legislative history. Congress intended in
subsection (e)(2)(C) that an "adequate" amount of resources
to provide for the monthly need would occur after taking
into account any other income attributable to the community
spouse. House Conf. Rep. No. 100-661, at 256, reprinted in
1988 U.S.C.C.A.N. 923,1043.
The Clearys also contend, however, that New Jersey's
income-first rule violates the purpose of the Act. They
assert that the Act was designed with people like
themselves in mind -- those who will exhaust their
retirement savings by paying for long-term care expenses.
The Clearys are correct that, with the Spousal
Impoverishment Provisions, Congress was addressing the
problem of scarce resources for health care expenditures for
the elderly. The legislative history refers to the ballooning
costs of health care for the elderly and the inadequacy of
the existing Medicare structures to deal with them. 5 The
purpose of the MCCA was to address these increasing costs
and the disparity between what Medicare would and would
not pay for. H.R. No. 100-105(I), at 8 (1988), reprinted in
1988 U.S.C.C.A.N. 803, 810.
An important Congressional consideration at the time the
MCCA's adoption was the dual problems of scarce Medicare
and Medicaid resources and an aging population. But it
was also evident that Congress did not intend the MCCA to
_________________________________________________________________
5. "Greater life expectancy merely postpones the inevitable need for care
of chronic and terminal illnesses....Expenditures for personal health care
services for the elderly nearly tripled between 1977 and 1984, rising
from $43 billion to an estimated $120 billion." H.R. No. 100-105(I), at 8,
reprinted in 1988 U.S.C.C.A.N. 803, 810.
18
be a final solution. The bill directs the Secretary of Health
and Human Services to conduct research on long-term care
delivery. Congress apparently recognized the problem of
long-term care financing was in its nascent stages, and that
Medicaid, the sole source of financing for long-term care,
must cover a broad range of income groups.
The leading cause of financial catastrophe among the
elderly is the need for long-term care, especially the
need for nursing home placement. The expense of
nursing home care which can range from $2,000 to
$3,000 per month or more-has the potential for rapidly
depleting the lifetime savings of all but the wealthiest.
Id. at 888.
Indeed, Medicaid is not just for the poorest among us. It
must be available to assist an ever-increasing number of
the medically needy. Granting discretion to the states to
implement the Act according to their resources, priorities,
and populations furthered this purpose by preserving as
many Medicaid resources as possible.
The Clearys maintain, however, that the legislative
history supports a resource-first approach. Again, we
disagree. The Spousal Impoverishment Provisions originated
in the House and contained no resource revision provision.
Under the House bill, the only sources of income available
to meet the community spouse's monthly need were the
community spouse's own income, (e.g., social security), any
income generated by the CSRA, and any transfers of
income from the institutionalized spouse (e.g., the
community spouse monthly income allowance).
The Senate bill added a provision reducing the resources
available to the institutionalized spouse by an amount
necessary to achieve the monthly need of the community
spouse. The Senate did not, however, consider a transfer of
income from the institutionalized spouse. The Senate bill
also included a provision for a hearing to increase the
MMMNA or the CSRA if either was inadequate to support
the community spouse. The Clearys argue that the Senate
bill accurately reflects the will of the Congress and the
meaning of the MCCA.
19
The problem with this argument is that the Conference
Committee adopted neither the House nor the Senate
versions of the bill. Unlike the House bill, the Conference
Committee provided an adjustment to the resource
allowance in order to meet the community spouse's
monthly need. But, unlike the Senate bill, the Conference
Committee did not achieve this adjustment by shifting more
resources toward the community spouse. Instead, the
Conference version provided for the fair hearing process in
subsection (e)(2), which permits a reconsideration of any
one of the five components of the community spouse's
income in subsection (e)(2)(A) and allows a revision of the
CSRA in subsection (e)(2)(C). As we discuss above,
subsection (e)(2)(C) should be read as a part of the entire
"fair hearing" subsection.
The Clearys seize upon the inclusion of the fair hearing
provision as an implicit adoption of the Senate's view that
more resources should go to the community spouse in the
event of a shortfall. But, this argument fails for the reasons
we state above. Indeed, the Conference Committee gave no
indication of an intent to augment the CSRA before
increasing the community spouse monthly income
allowance. The Conference Report speaks to the
responsibility of the state to allow the community spouse to
retain an "adequate" amount of resources to provide for her
monthly need after "taking into account any other income
attributable to the community spouse." House Conf. Rep.
No. 100-661, at 265, reprinted in 1988 U.S.C.C.A.N. 923,
1043.
We are mindful of the daunting crisis which long-term
care costs pose even to those who have saved for their
retirement. The prospect of a growing elderly population in
America, who are impoverished by these costs, prompted
Congress to enact the Medicare Catastrophic Coverage Act.
But, the MCCA creates a federal state cooperative venture
for the provision of Medicaid assistance to the medically
and categorically needy. The statute permits states to
implement their own programs as long as they do so in
accordance with the federal statute and its applicable
regulations.
20
The Health Care Financing Administration and the
Secretary of the Department of Health and Human Services
have clearly stated their views, albeit in policy letters, that
the states should have the discretion to employ either an
income-first or a resource-first method. As we have shown,
this policy conforms to the language of the statute, to its
legislative history, and to the purpose for which it was
enacted. Moreover, these agencies have statutory authority
to administer the Act, and their policy is a reasonable
interpretation consistent with the plain language and stated
purposes of the statute. We will, therefore, grant deference
to this view.
IV.
For the foregoing reasons we will affirm the judgment of
the District Court.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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