Petition — Blum v. Caldwell
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Supreme Court of the United States
OCTOBER TERM, 1979
No.__%9-2084
BARBARA BLUM, as Commissioner of the New York State
Department of Social Services,
Petitioner,
v.
ETHEL CALDWELL, individually and on behalf of all other
persons similarly situated,
Respondent,
and
ELLA MC CULLOUGH, JANET RICHMOND, AGNES GRANT
and MURIEL ROTHSTEIN, as next friend of BELLE
BARNETT, individually and on behalf of all other persons
similarly situated,
Respondents,
and
[OVER]
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF
APPEALS FOR THE SECOND CIRCUIT
Rochester, New York
ROBERT ABRAMS
Attorney General of the
State of New York
Attorney for Petitioner Blum
SHIRLEY ADELSON SIEGEL
Solicitor General
CLIFFORD A. ROYAEL
Principal Attorney
of Counsel
A ENE ERENT MEARE OSD ORG OS OER RRR IARI
The Daily Record 61 35 Spaulding Law Printing
( e >) Syracuse, New York
In The vate Recon Rog
JAMES L. COVERT, as Commissioner of the Madison County
Department of Social Services, MADISON COUNTY, NEW
YORK, JOHN L. LASCARIS, as Commissioner of the
Onondaga County Department of Social Services, ONON-
DAGA COUNTY, NEW YORK, JOSEPH P. MENALDINO,
as Commissioner of Warren County Department of Social
Services, WARREN COUNTY, NEW YORK, ROBERT E.
LAUNDREE, as Commissioner of the Essex County
Department of Social Services, ESSEX COUNTY, NEW
YORK, GABRIEL T. RUSSO, as Commissioner of the Monroe
County Department of Social Services, MONROE COUNTY,
NEW YORK,
Respondents.
BARBARA BLUM, individually and as Commissioner of the
New York State Department of Social Services,
Petitioner,
v
ANITA PERITO and JAMES PERITO, individually and on
behalf of all others similarly situated,
Respondents,
and
LOUIS FRIEDMAN,
Respondent,
and
BLANCHE BERNSTEIN, individually and as Commissioner of
the New York City Department of Social Services,
Respondent.
BARBARA BLUM, individually and as Commissioner of the
New York State Department of Social Services,
Petitioner,
| v.
JENNIE LANDERS,
Respondent,
and
JOSEPHINE MANICCIA,
Respondent,
and
DAVID R. ADINOLFI, as Commissioner of the Cortland County
Department of Social Services, CORTLAND COUNTY, NEW
YORK,
Respondents.
BARBARA BLUM, as Commissioner of the New York State
Department of Social Services,
Petitioner,
v.
JULIA WHITLOCK,
Respondent,
and
ROBERT WAGNER, as Commissioner of the Tompkins County
Department of Social Services, TOMPKINS COUNTY, NEW
YORK,
Respondents.
TABLE OF CONTENTS
EI Pye Ee rae eee eee
eh in re eel un CLS a Awe 6
RS en Do eT Na en ea a
Statutes and Regulations Involved .................
ee LE a PP hen Pe en ene we eee
ee ay ee
Decision and Order of the District Court.............
Opinion of the Court of Appeals ...................
Reasons for Granting the Writ
I — The decision below conflicts with the decision of the
Court of Appeals for the Ninth Circuit in Dawson v
RE 8 oie PR ey eee Ec Eb
II — The decision below raises significant and recurrent
issues in a program of cooperative Federalism con-
cerning the state’s ability to establish complementary
eligibility standards for the medical assistance
NS 00h soe s bute dU Ras eee eke een ds
CONCLUSION — For the reasons stated, the petition for
a writ of certiorari should be granted..............
APPENDICES
APPENDIX A — Decision and Order of District Court
for the Northern District of New York ............
APPENDIX B — Opinion of Court of Appeals, Second
SN sacha a5 oe ee ke eS ae OR
APPENDIX C — Statutes and Regulations Involved... .
APPENDIX D — Agreement Between Secretary of
Health, Education and Welfare and State of New York
APPENDIX E — Decision of Court of Appeals, Ninth
CN 5d 5S Kok PEGA Ae e ee ee Cee eer
1]
15
A-1
A-26
A-43
A-47
a1
TABLE OF AUTHORITIES
Cases: Page
Beal v Doe, 432 US 438, 444 (1977). ............00 00 14
Dawson v Myers, et al( F2d [9th Cir., Docket No. 79-
3246, decided May 14, 1980])................00.. 9,13
Drogolewicz v Quern, 74 Ill App 3d 862 (1979) ......... 12
Fabula v Buck (598 F2d 869 [4th Cir., 1979])........... 10
Lerner v Thivision of Family Services, 70 Wis 2d 670
SP ao cr nie Ee Cie ee at oe cies 12
New York State Dept of Social Services v Dublino, 413 US
EL. ks nie ws Ke Fa We Rak hale eee Ss 13, 14
Organization For a Better Austin v Keefe, 402 US 415,
RT EE Seeds eee oc eee tase 4
Red Lion Broadcasting Co. v F.C.C., 395 US 357, 381
Se a oe Psd Sob ale Maeda beens 14
Robinson v Pratt, (Civil No. 79-1278-§) .............. 10
Shea v Vialpando, 416 US 251, 262, n 11(1974)......... 14
Other Authorities:
I iis Pd. d Be aS ae a a ne nea s 5
Rae oe Ss cit Ss aah ae ea 7
MI ote a ak oh are Be 14
IR as choice oa ee eka eile 6, 10, 11
Se ae ese as eu oan 8, 9, 13
JR EAE ay ae rao ag ORG Pear oe tea 11,12
Se Wee I 5 dv cid nos Kose ue We cen eames 9
42 USC §139GalaNlONCMi) ... 2... eee ee 4,6, 7,8, 10, 14
Oe INTE 6 54 Cickas ive ick dessa ees 14
7)
Page
I Sok do's on de Wad ves ve paw eaen 12
I 5 crs bv noe eo vee Catone en 5
ee eee ee a re 12
UE Sars oan vcs © ke he dieru gre wu kieia Melee ie 7,9, 11
NS 0 55 fo cee Cdk eek cadena ed cael 4,7,8
Social Security Act, Title XIX ................. 4, 10, 13, 14
Laws of New York of 1966, ch 256.................. 13
New York Social Services Law, §366.l(e)............. 4,6, 7
kt | Re err ea err 4,6,7
S Rep No. 404, 89th Cong, Ist Sess, 77-78 (1965) ........ 11
H Rep No. 213, 89th Cong, Ist Sess, 67 (1965).......... 11
In The
Supreme Court of the United States
OCTOBER TERM, 1979
NO.
BARBARA BLUM, as Commissioner of the New York State
Department of Social Services,
Petitioner,
v.
ETHEL CALDWELL, individually and on behalf of all other
persons similarly situated,
Respondent,
and
ELLA MC CULLOUGH, JANET RICHMOND, AGNES GRANT
and MURIEL ROTHSTEIN, as next friend of BELLE
BARNETT, individually and on behalf of all other persons
similarly situated,
Respondents,
and
JAMES L. COVERT, as Commissioner of the Madison County
Department of Social Services, MADISON COUNTY, NEW
YORK, JOHN L. LASCARIS, as Commissioner of the
Onondaga County Department of Social Services, ONON-
DAGA COUNTY, NEW YORK, JOSEPH P. MENALDINO,
as Commissioner of Warren County Department of Social
Services, WARREN COUNTY, NEW YORK, ROBERT E.
LAUNDREE, as Commissioner of the Essex County
Department of Social Services, ESSEX COUNTY, NEW
YORK; GABRIEL T. RUSSO, as Commissionér of the Monroe
County Department of Social Services, MONROE COUNTY,
NEW YORK,
Respondents.
BARBARA BLUM, individually and as Commissioner of the
New York State Department of Social Services,
Petitioner,
v
ANITA PERITO and JAMES PERITO, individually and on
behalf of all others similarly situated,
Respondents,
and
LOUIS FRIEDMAN,
Respondent,
and
BLANCHE BERNSTEIN, individually and as Commissioner of
the New York City Department of Social Services,
Respondent.
BARBARA BLUM, individually and as Commissioner of the
New York State Department of Social Services,
Petitioner,
v.
JENNIE LANDERS,
Respondent,
and
JOSEPHINE MANICCIA,
Respondent,
and
DAVID R. ADINOLFI, as Commissioner of the Cortland County
Department of Social Services, CORTLAND COUNTY, NEW
YORK,
Respondents.
BARBARA BLUM, as Commissioner of the New York State
Department of Social Services,
Petitioner,
v.
JULIA WHITLOCK,
Respondent,
and
ROBERT WAGNER, as Commissioner of the Tompkins County
Department of Social Services, TOMPKINS COUNTY, NEW
YORK,
Respondents.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF
APPEALS FOR THE SECOND CIRCUIT
The petitioner, Barbara Blum, as Commissioner of the New
York State Department of Social Services, respectfully prays
that a writ of certiorari issue to review the judgment of the
United States Court of Appeals for the Second Circuit entered in
this proceeding on April 16, 1980.
Opinions Below
The decision and order of the District Court for the Northern
District of New York (HOWARD G. MUNSON, D.J.), dated
November 29, 1979, which inter alia certified a class and
preliminarily enjoined “*** the defendants from enforcing
{New York] Social Services Law §366.1(e), 18 N.Y.C.R.R. [New
York Code of Rules and Regulations] 360.8 * * * with regard to
plaintiffs during the pendency of these actions” is set forth as
Appendix “A”.* It is not yet reported.
“Numbers hereafter appearing in parentheses preceded by the letter “A”
refer to pages in the Appendix.
The opinion for affirmance of the Court of Appeals dated April
16, 1980 is set forth as Appendix “B” and is not yet reported.
Although the opinion of the Court of Appeals addresses the
issuance of a “preliminary injunction”, the issuance of such
injunction by the District Court did not rest upon any disputed
question of fact which might be resolved differently upon a
further hearing, and the opinion of the Court of Appeals finally
determines the legal issues raised by this action. The issuance of
a permanent injunction with respect to the legal issues raised,
therefore, appears to be a mere formality (see Organization Fora
Better Austin v Keefe, 402 US 415, note at 418 [1971)).
Questions Presented
1. Is not HEW'’s interpretation of the comparability
provision contained in 42 USC §1396a (a) (10) (C) (i) with respect
to the State’s transfer-of-assets prohibition irrational, since
HEW does not disapprove of transfer prohibitions in themselves
and there is no rational correlation between allowing persons to
transfer property for the purpose of qualifying for SSI and
allowing them to transfer property for the purpose of qualifying
for medical assistance?
2. Is not HEW’s position, as expressed in its regulation 42
CFR §435.401(c), that 42 USC §1396a (a) (10) (C) (i) precludes New
York from enforcing its transfer-of-assets prohibition as to the
medically needy, unauthorized by Title XIX of the Social
Security Act, since the State’s prohibition constitutes a com-
plementary eligibility standard consistent with the broad ob-
jectives of Title XIX, and there is no clear manifestation of
congressional intent to preempt such prohibitions?
Statutes and Regulations Involved
42 USC §1396a (a) (10) (C) (i), 42 CFR §435.401(c), New York
Social Services Law, §366.1(e) and 18 NYCRR §360.8 are set
forth in pertinent part in Appendix “C”,
5
Jurisdiction
The jurisdiction of this Court to review the case on petition for
certiorari rests upon 28 USC §1254(1).
Statement of Case
Plaintiffs,” plaintiffs-intervenors and members of the class
include aged, blind and disabled persons who although
categorically related to the Federal Supplemental Security
Income program (SSI), are ineligible for that program because of
excess income and resources, and who have transferred or will
transfer assets for the purpose of qualifying for medical
assistance as “medically needy” persons under New York's
Medicaid program,
Recipients of SSI are eligible to receive medical assistance
under New York's Medicaid program by virtue of the sole fact
that as SSI recipients they are deemed “categorically needy”
persons. Their medical assistance eligibility is Federally
determined pursuant to an Agreement entered into in 1973 be-
tween the Secretary of Health, Education and Welfare (now the
Secretary of Health and Human Services) and the New York
State Department of Social Services (Agreement annexed as
Appendix “D”). HEW requires that as a condition for deter-
mining medical assistance eligibility for SSI applicants and
recipients it will apply SSI eligibility standards (20 CFR
§416.2111), As found by the courts below, the Secretary coun-
tenances the transfer of assets prior to application for SSI
benefits and such transfer has no effect on SSI eligibility,
*The District Court noted:
“Plaintiffs Ethel Caldwell, Anita Perito and Julia Whitlock have
died since the commencement of their actions. The claims of Ethel
Caldwell and Julia Whitlock have, by admission of their attorneys,
become moot, The estate of Anita Perito has not been substituted asa
party, However, her husband, James Perito remains a party in the
action,” (A-3),
Eligibility for the “medically needy” under the Medicaid
program is determined by local departments of social services by
applying State law and regulations of the State Department of
Social Services. Under New York Social Services Law, §366.1(e)
and regulation 18 NYCRR 360.8, a person cannot qualify for
medical assistance who has made a voluntary transfer of assets
for the purpose of qualifying for medical assistance, increasing
his need therefor or defeating a future right of recovery.
The New York statute dealing with the prohibition against
voluntary transfer of assets for the purpose of qualifying for
medical assistance, although amended from time to time, has
been on the statute books since the inception of the State
Medicaid program in 1966, Until 1974, the Secretary approved
the prohibition against transfers as part of New York's State
plan under the medical assistance program (42 USC §1396, et
seq.).” In 1978, well after the inception of the SSI program in
1972, HEW notified New York that its transfer-of-property
prohibition with respect to aged, blind and disabled persons was
not in compliance with the comparability standard of the Social
Security Act (42 USC §1396a [a] [10] [C] [i) in that the State could
not impose an eligibility requirement on the “medically needy”
not imposed by the Secretary in determining the eligibility of
the “categorically needy” under the State's Agreement for
Federal determinations of eligibility (A-20).
These consolidated actions** were thereafter commenced. The
plaintiffs have claimed, and the courts below have agreed, that
“After 1974 HEW started using pre-printed State medical assistance plans,
and State regulations were no longer submitted for approval as part of the
State plan,
** These actions were consolidated in the United States District Court for the
Northern District of New York, Perito v Blum was commenced in the
Southern District of New York and transferred for consolidation with
Caldwell » Blum, The other three actions were commenced in the Northern
District of New York (A-3).
New York's prohibition against the voluntary transfer of
property for the purpose of qualifying for medical assistance
conflicts with the Social Security Act (42 USC §1396a |a] [10]
(C} {i} and Federal regulation (42 CFR §435.401) because it
results in a more restrictive eligibility requirement for the
“medically needy” who are categorically related to SSI than for
“categorically needy” SSI recipients.
Decision and Order of the District Court
The District Court determined that jurisdiction is present
under 28 USC §1343(3) based upon plaintiffs’ claims of denial of
due process and equal protection of the laws.
It certified “a class consisting of all aged, blind or disabled
persons who had been denied or will in the future be denied
medical assistance benefits for the ‘medically needy’ in New
York State on the basis of a transfer-of-assets in violation of
Social Services Law, §366.1(e) and 18 NYCRR §360.8" (A-13).
In granting plaintiffs’ motion for a preliminary injunction, the
District Court concluded that there had been a sufficient
showing of likelihood of success on the merits. Under 42 USC
§1396a (a) (10) (C) (i), the State must make medical assistance
available to all persons who, except for income and resources,
would be eligible for SSI benefits “and who have insufficient (as
determined in accordance with comparable standards) income
and resources to meet the costs of necessary medical and
remedial care and services”. HEW has interpreted this provision
to mean that a State agency must not use requirements for
determining eligibility for medical assistance for medically
needy “* * * aged, blind and disabled individuals [that are]
more restrictive than those used under SSI * * *” (42 CFR
§$435.401[c). Since the District Court found that under the SSI
program an applicant may transfer assets for the purpose of
qualifying for benefits, it concluded that there was an “apparent
conflict between the State transfer of assets restriction and
federal requirements.” The Court held, therefore, in that it also
found that plaintiffs would be irreparably harmed, that
plaintiffs had met the requirements for the issuance of a
preliminary injunction.
Opinion of the Court of Appeals
The Court of Appeals affirmed the granting of the preliminary
injunction “substantially for the reasons stated by Judge
Munson.”
The Court found that although 42 USC §1396a (a) (10) (C) (i) “is
not unambiguous, HEW has in its regulation [42 CFR
§435.401(c)] adopted the view that it does require comparable
eligibility requirements for the medically needy and the
categorically needy.” Since considerable deference must be given
the “reasonable interpretation” of a statute by an agency en-
trusted with its administration and because prior court
decisions have upheld other HeW interpretations of the com-
parability provision, the Court of Appeals saw no reason to
differ with HEW’s interpretation.
The Court did note, however, that there was “some force” to
the State’s argument that Congress, in enacting the predecessor
to section 1396a (a) (10) (C) (i) in 1965 and amending it in 1973 to
extend medical assistance eligibility to persons in SSI categories,
did not intend to bar states from imposing more restrictive
eligibility requirements on the medically needy than on the
categorically needy. The Court concluded, however, that
“(njothing in the legislative history of §1396a (a) precludes or is
inconsistent with HEW’s interpretation.” Moreover, the Court
noted “that Congress has recently considered sever?! amend-
ments to the Social Security Act which would authorize states to
impose transfer-of-assets restrictions” and the “fact that a
concerned committee of Congress considers that ‘present law’
bars transfer of assets has some tendency to confirm HEW'’s
interpretation of Congress’ intent in its earlier enactment of
comparability provisions in 1965 and amendment of them in
1973.”
Reasons for Granting the Writ
I
The decision below conflicts with the decision of the Court
of Appeals for the Ninth Circuit in Dawson v Myers.
In the case of Dawson v Myers, et al ( F2d (9th Cir.,
Docket No. 79-3246, decided May 14, 1980]), the Court of Appeals
for the Ninth Circuit considered, inter alia, whether California’s
transfer-of-assets prohibition conflicts with the provisions of 42
USC §1396a.* The issue before the Court was whether “the
California transfer rule conflicts with 42 USC §1396a (a) (10) (C),
which requires states providing benefits to the medically needy
to cover ‘all individuals who would, except for income and
resources’ be eligible for SSI (and therefore come under the
categorically needy classification), ‘and who have insufficient (as
determined in accordance with comparable standards) income
and resources to meet the costs of necessary medical and
remedial care and services’ ” (A-66).
The plaintiffs in Dawson contended that although “‘* * * the
medically needy may have higher income and resource levels, the
states must use the same rules for the medically needy as for the
categorically needy’ ” (A-66). Since under the SSI program the
“categorically needy” may dispose of excess assets to qualify for
SSI and concomitantly medical assistance, plaintiffs asserted
that California’s transfer-of-assets prohibition “therefore cannot
be applied to the medically needy” (A-67).
The Ninth Circuit rejected plaintiffs’ contention and concluded
that “California’s transfer rule does not conflict with 42 USC
§1396a (a) (10) (C).” Because it believed its interpretation of the
Federal law to be correct, the Court refused to attach any weight
to HEW’s contrary interpretation, and concluded that
regulation 42 CFR §435.401 does not apply to financial
eligibility requirements (A-69).
*The decision of the Ninth Circuit is appended as Appendix “E”.
10
The decision of the Ninth Circuit directly conflicts with the
holding of the Second Circuit in the case at bar. New York’s
transfer-of-assets prohibition, which is similar to that of
California, has been held to violate the provisions of 42 USC
§1396a(aX10XC\i) because it imposes an eligibility requirement
on the “medically needy” which is not imposed on the
“categorically needy.” Medical assistance eligibility for New
York’s “categorically needy” SSI applicants is determined by
HEW based upon SSI standards, the sam~ as for California’s
“categorically needy.” However, the Second Circuit, contrary to
the Ninth Circuit, has deferred to HEW’s interpretation of 42
USC §1396a(a)(10\c) that because SSI applicants may transfer
property for the purpose of qualifying for SSI benefits, transfer-
of-assets prohibitions may not be imposed against the “medically
needy.”
These conflicting decisions result in a substantial difference in
the «(ministration of the medical assistance programs in
California and New York, and the latitude which each state has
to define the scope of its program within the parameters
established by Congress in Title XIX of the Social Security Act
(42 USC §1396 et seq.).”
*The Fourth Circuit has also held that Maryland’s transfer-of-assets
prohibition conflicts with the Social Security Act in Fabula v Buck (598 F2d
869 [4th Cir, 1979]. The Massachusetts transfer-of-assets prohibition has
been challenged in the United States District Court for the District of
Massachusetts in Robinson v Pratt (Civil No. 79-1278-S). Moreover, Michigan
has also been notified by HEW that its transfer-of-assets prohibition does
not comply with the Social Security Act (A-34).
11
The decision below raises significant and recurrent issues
in a program of cooperative Federalism concerning the
state’s ability to establish complementary eligibility stand-
ards for the medical assistance program.
A
Congress apparently intended in 42 USC §1396a (a) (10), with
respect to State limitations on income and resources for purposes
of eligibility for medical assistance, to assure comparability
among the various categorical groups of needy people. The
standards of eligibility for the aged, blind and disabled must be
comparable “to the standards used to determine the eligibility of
those who are to receive medical assistance as needy children” (S
Rep No. 404, 89th Cong, Ist Sess, 77-78 [1965]; see also H Rep No.
213, 89th Cong, Ist Sess, 67 [1965}) (A-36, 37).
HEW has interpreted the comparability provision of 42 USC
§1396a (a) (10) to require that a State may not impose more
restrictive eligibility requirements for the “medically needy”
than it does for the “categorically needy” within the same
categorical group (42 CFR §435.401). Under the HEW interpreta-
ion, programmatic symmetry is satisfied by requiring that aged,
blind and disabled applicants for medical assistance be allowed
to transfer property voluntarily for the purpose of qualifying for
medical assistance just because SSI recipients in the same
category may do so for the purpose of qualifying for SSI
benefits. *
*HEW does not disapprove of transfer-of-assets prohibitions in themselves.
New York's transfer-of-assets prohibition was approved by the Secretary of
Health, Education and Welfare as part of New York's State plan under the
medical assistance program (42 USC § 1396, et seq.), prior to implementation
of the SSI program in 1974. Upon withdrawing from its agreement with
HEW for Federal determinations of medical assistance eligibility for
persons eligible for SSI and making its own eligibility determinations for
Footnote continued on next paye—
12
However, there is no logical ‘correlation between. the transfer
of property for the purpose of qualifying for SSI and the transfer
of property for the purpose of qualifying for medical. assistance.
It is most unlikely that an applicant for SSI would transfer vast
assets to qualify for a Federal monthly income benefit of $208.80
(the monthly benefit including New York State supplementation
is $271.41).* Comparable considerations do not apply to ap-
plicants for medical assistance since those benefits are
unlimited. for example, a person who is entering a nursing
home to spend the remainder of his or her life, where the cost of
care is approx{mately $20,000 per year, has a tremendous in-
centive to transfer consic_rable assets to the family rather than
use them to pay the cost of medical care. Thus, HEW’s in-
terpretation of the comparability provision contained in 42 USC
§1396a(a) (10) is not only inconsistent with its legislative history,
ba@t it is also irrational.
ee eee ee
—Footnote continued from preceding page
such persons, New York will again, in HEW's view, have the right to apply
medical assistance eligibility standards more restrictive than the SSI
eligibility standards, including the prohibition against voluntarily trans-
ferring property to qualify for medical assistance (42 USC § 1396alf}; 422 CFR
§ 435. 1[d]; ef Drogolewicz v Quern, 74 TL App 3d 862 [1979]; Lerner v Division
of Family Services, 70 Wis 2d 670 [1975]. On April 30, 1980, New York
notified the Secretary of Health, Education and Welfare that it would
terminate its agreement in 120 days. It should be notéd that termination of
the agreement will not moot the petitioner's appeal. The State, and its local
social services districts, are and will continue to be adversely affected by the
decision of the Court below during any period for which HEW makes
medical assistance eligibility determinations for New York and the District
Court's injunction is in effect. Moreover, New York will incur considerable
additional administrative cost by withdrawing from the contract and if it
should re-exercise its option to enter into an agreemen. for Federal
eligibility determinations in the future, it would be unable to enforce its
transfer-of-assets prohibition, unless the judgment of the Court below is
reversed,
*The benefit levels at the times relevant to this proceeding.
13
B
New York's transfer-of-assets prohibition establishes a
complementary eligibility standard consistent with the purposes
of the Title XIX medical assistance program. This Court has held
that State collateral eligibility standards in public assistance
programs should not be voided by the Courts unless there is a
clear manifestation of congressional intent that such
requirements may not be imposed (New York State Dept of
Social Services v Dublino, 413 US 405, 413 [1973)).
Title XIX contains no provision which precludes State
transfer-of-assets prohibitions.* The legislative history of the
medical assistance program is also silent on transfer of assets
and the Court below apparently did not find any clear
manifestation of congressional intent that this State’s transfer-
of-assets prohibition could not be imposed because of Federal
comparability requirements (A-37).**
New York’s medical assistance program has contained a
prohibition against the voluntary transfer-of-assets for the
purpose of qualifying for assistance since its enactment in 1966
(ch 256 of the Laws of New York of 1966). It expresses the policy
of the State that it will use its finite resources to provide medical
assistance only for truly needy persons, and not for those persons
who create their own need by giving their property away. It is
"Significantly, the Title XIX program allows excess income and resources to
be spent down on necessary care and services for the purpose of qualifying
for medical assistance (42 USC § 1396a[a}f 17).
**The Court of Appeals noted that Congress is considering several amend-
ments to the Social Security Act which would authorize states to impose
transfer-of-assets restrictions (A-38). However, that fact, or the fact that a
Committee of Congress seems to agree with HEW's interpretation, does not
establish a “clear manifestation of Congressional intent” with respect to the
provisions of the Social Security Act passed by a prior Congress. The Ninth
Circuit in Dawson v Myers et al., supra, chose to disregard the Com-
mittee’s statement because it was “apparently relying upon the erroneous
administrative interpretation” (A-70).
14
consistent with the objective of the Federal program enacted in
1965, to provide medical assistance to those persons with in-
sufficient income and resources “to meet the costs of necessary
medical services” (42 USC §1396) and the “broad discretion”
conferred on the states to adopt reasonable standards “* * * for
determining eligibility and the extent of medical assistance
under the plan * * * consistent with the objectives of * * *” Title
XIX (Beal v Doe, 432 US 438, 444 [1977]; 42 USC §1396a [a] [17)).
Under the circumstances of this case, the Court below should
not have deferred to HEW’s interpretation of 42 USC §1396a
(a) (10) (C) (i) that the State’s transfer-of-assets prohibition could
not be imposed. Although HEW’s interpretation is often af-
forded deference, it must, nevertheless, conform to the law and
should not be followed if it is lacking in rationality or is
unauthorized by the Social Security Act (Red Lion Broadcasting
Co v F-CC., 395 US 367, 381 [1969]; Shea v Vialpando, 416 US
251, 262, n 11 [1974]; New York State Dept of Social Services v
Dublino, supra). Since HEW’s interpretation was both irrational
and unauthorized by the Social Security Act, New York’s
transfer-of-assets prohibition should not have been held to be in
conflict with the provisions of Federal law and regulations.
Accordingly, the decision of the Court below raises serious
issues in a program of cooperative Federalism concerning the
ability of this State to establish complementary eligibility
standards, consistent with the objectives of Title XIX and not
prohibited by Congress, in the face of contrary policies of HEW.
15
CONCLUSION
For the reasons stated, the petition for a writ of certiorari
should be granted.
Dated: Albany, New York
June , 1980
Respectfully submitted,
ROBERT ABRAMS
Attorney General of the
State of New York
Attorney for Petitioner Blum
SHIRLEY ADELSON SIEGEL
Solicitor Genera]
CLIFFORD A. ROYAEL
Principal Attorney
of Counsel
Appendices
A-1
APPENDIX A — DECISION AND ORDER OF DISTRICT
COURT FOR THE NORTHERN DISTRICT OF NEW YORK
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
ETHEL CALDWELL, individually and on behalf of all other
persons similarly situated,
Plaintiff,
and
ELLA MC CULLOUGH, JANET RICHMOND, AGNES GRANT
and MURIEL ROTHSTEIN, as next friend of BELLE
BARNETT, individually and on behalf of all other persons
similarly situated,
Plaintiff-Intervenors,
US,
BARBARA BLUM, as Commissioner of the New York State
Department of Social Services, JAMES L. COVERT, as
Commissioner of the Madison County Department of Social
Services, MADISON COUNTY, NEW YORK, JOHN L.
LASCARIS, as Commissioner of the Onondaga County
Department of Social Services, ONONDAGA COUNTY, NEW
YORK, JOSEPH P. MENALDINO, as Commissioner of the
Warren County Department of Social Services, WARREN
COUNTY, NEW YORK, ROBERT E. LAUNDREE, as
Commissioner of the Essex County Department of Social
Services, ESSEX COUNTY, NEW YORK. GABRIEL T.
RUSSO, as Commissioner of the Monroe County Department
of Social Services, MONROE COUNTY, NEW YORK,
Defendants.
78-CV-569
ANITA PERITO and JAMES PERITO, individually and on
behalf of all others similarly situated,
Plaintiffs,
and
LOUIS FRIEDMAN,
Plaintiff-Intervenor,
US,
A-2
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
BARBARA BLUM, individually and as Commissioner of the
New York State Department of Social Services, and
BLANCHE BERNSTEIN, individually and as Commissioner
of the New York City Department of Social Services,
Defendants,
79-CV -34
JENNIE LANDERS,
Plaintiff,
Us.
BARBARA BLUM, Individually and as Commissioner of the
New York State Department of Social Services, and DAVID
R. ADINOLFI, as Commissioner of the Cortland County
Department of Social Services, CORTLAND COUNTY, NEW
YORK,
Defendants.
79-CV-30
JULIA WHITLOCK,
Plaintiff,
US.
BARBARA BLUM, as Commissioner of the New York State
Department of Social Services, and ROBERT WAGNER, as
Commissioner of the Tompkins County Department of Social
Services, TOMPKINS COUNTY, NEW YORK,
Defendants,
79-CV-309
APPEARANCES:
MONROE COUNTY LEGAL ASSISTANCE CORP.,
GREATER UPSTATE LAW PROJECT, Attorneys for Plain-
tiffs, 80 West Main Street, Rochester, NY 14614, OF COUNSEL:
RENE H. REIXACH, ESQ.
A-3
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
HON. ROBERT ABRAMS, ATTORNEY GENERAL OF THE
STATE OF NEW YORK, DEPARTMENT OF LAW, Attorneys
for Barbara Blum, 333 E. Washington Street, Syracuse, NY
13202, OF COUNSEL: ANNES. MEADVIN, ESQ., ASSISTANT
ATTORNEY GENERAL.
HOWARD G. MUNSON, D.J.
MEMORANDUM-DECISION AND ORDER
The above consolidated actions are before the Court on
plaintiff's motion for class certification and a preliminary in-
junction and defendant Blum’s motion to dismiss or alter-
natively for summary judgment. !
The plaintiffs and plaintiff-intervenors in these lawsuits are
individuals who have been denied medical cssistance benefits as
a result of voluntary transfers of property made either prior to
application or while receiving medical assistance as SSI
lFour actions have been consolidated. Perito v. Blum, No. 78-VC-34 (filed
January 15, 1979) was commenced in the Southern District of New York and
transferred by court order for consolidation with Caldwell v. Blum, 78-CV-
569 (filed November 6, 1978), Landers v. Blum, 79-CV-30 (filed January 16,
1979) and Whitlock v. Blum, 79-CV-309 (filed May 10, 1979).
Four people have been allowed to intervene in Caldwell and one in Perito.
Plaintiffs Ethel Caldwell, Anita Perito and Julia Whitiock have died since
the commencement of their actions. The claims of Ethel Caldwell and Julia
Whitlock have, by admission of their attorneys, become moot. The estate of
Anita Perito has not been substituted as a party. However, her husband,
James Perito remains a party in the action.
Defendants, all commissioners of the state or county social services depart-
ments, are presently providing medical assistance benefits to the plaintiffs
and plaintiff-intervenors pursuant to temporary restraining orders issued
by the Court on stipulation of the parties.
Although defendant Blanche Bernstein has joined with defendant Blum in
her motion to dismiss or alternatively for summary judgment, the Court
shall refer to it as defendant Blum's motion.
A-4
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
recipients. In this action for declaratory anc injunctive relief,
they challenge the validity of the New York State rule regarding
the transfer of assets by individuals applying for or receiving
medical assistance benefits as “medically needy” persons.
Plaintiffs claim that the transfer restriction is un-
constitutional as a denial of equal protection and due process.
They also allege that the rule is in conflict with the federal
statutes and regulations dealing with eligibility for medical
assistance benefits in violation of the Supremacy Clause. :
I,
Medicaid is a cooperative federal-state program established by
Title XIX of the Social Security Act of 1965, 42 U.S.C. §§1396-
1396k, for the purpose of providing medical assistance to low
income persons who are age 65 or over, blind, disabled or
members of families with dependent children. While state
participation in the program is not mandatory, a state, such as
New York, having elected to participate, must submit a medical
assistance plan, in compliance iwth federal requirements, for
HEW approval. 42 U.S.C. §§1396, 1396a.
The state plan must provide benefits to the “categorically
needy”? and at the state's option may also include beneftis for
the “medically needy”.* A state choosing to provide the optional
242 U.S.C. §1396a (10) (A). “Categorically needy” as defined at 42 C.F.R.
§435.4, “means aged, blind or disabled individuals or families and children
who are otherwise eligible for medicaid and who meet the financial
eligibility requirements for AFDC, SSI, or an optional State supplement.”
3"Medically needy” as defined at 42 C.F.R. $435.4, “means aged, blind or
disabled individuals or families and children who are otherwise eligible for
medicaid and whose income and resources are above the limits prescribed
for the categorically needy but are within limits set under the medicaid
State plan.”
A-5
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
benefits must comply with all of the federal requirements
pertaining to the “medically needy”. 42 U.S.C. §1396a(aX1OXC)
Aitchison v. Berger, 404 F. Supp. 1137, 1141 (S.D.N.Y. 1975),
aff'd, 538 F.2d 307 (2d Cir. 1976), cert. denied, 429 U.S. 890, 95
S.Ct. 246, 50 L. Ed. 2d 172 (1976).
New York State has opted to include in its plan provision for
the payment of benefits to “medically needy” individuals who
satisfy eligibility requirements established by the state with
regard to income and resources. Social Services Law §366.2.
Under New York law, an applicant is allowed resources of
$500 per person for a burial allowance, [Social Services Law
§366.2(a) (3)] and a savings in an amount equal to one-half of the
annual income exemption allowance set forth at Social Services
Law §366.2(a) (8) (i).‘ Certain assets, including a homestead, are
exempt from consideration as resources. Social Services Law
§366.2.
New York law also requires that an applicant not have made a
voluntary transfer of assets for the purpose of qualifying for or
maintaining eligibility for the benefits or in order to defeat any
future right to recovery of medical assistance paid. Any transfer
made within eighteen months of application is presumed to have
been made for one of the proscribed reasons. Social Security Law
§366. 1(e).°
4The annual income exemption for one person at the time these plaintiffs
applied for benefits was $3,100, resulting in a resource exemption, including
burial reserve, of $2,050. The income exemption for one has recently been
raised to $3,300, raising the resources exemption to $2,150.
Social Services Law §366.1 (e) provides that medical assistance benefits shall
be provided only if the applicant
(e) has not made a voluntary transfer of property (i) for the purpose
of qualifying for such assistance, or (ii) for the purpose of defeating
Footnote continued on nert page—
A-6
APPENDIX A — Decision and Order of District Court
of the Northern Instrict of New York
It is this provision, along with its corresponding regulation
and the administrative directives implementing the statute,
which is being challenged by plaintiffs and plaintiff-intervenors
in these actions.®
—Footnote continued from preceding page
any current or future right to recovery of medical assistance paid, or
for the purpose of qualifying for, continuing eligibility for or in-
creasing need for medical assistance. A transfer of property made
within eighteen months prior to the date of application shall be
presumed to have been made for the purpose specified in sub-
paragraph (i); a transfer of property that would be exempt from
consideration under this title, made within eighteen months prior to
the date of application without fair and reasonable consideration or
made, without prior approval of the social services official, at any
time after the application or determination of eligibility, shall be
deemed to have been made for one or more of the purposes specified
in subparagraph (ii) hereof. The social services official shall approve
such an assignment or transfer if he determines based on the transfer
agreement that the applicant or recipient will receive fair and
reasonable consideration for such transfer. Such consideration shall
be applied as a resource available to meet the person's medical needs
as it becomes available unless all or a part of it subsequently qualifies
as exemont property under subdivision two of this section.
618 N.Y.C.R.R. §3608 provides as follows:
360.8 Transfer of property. (a) In determining eligibility for
medical assistance, if a transfer or assignment of real or personal
property has been made within 18 months prior to the date of ap-
plication or at any time after a determination of eligibility without
the prior approval of the social services official, such transfer or
assignment shall be presumed to have been made for the purpose of
qualifying for such assistance, or for the purpose of defeating any
current or future right to recovery of medical assistance paid.
(b) If such transfer or assignment was made within 18 months prior
to the date of application or at any time after a determination of
eligibility without the prior approval of the social services official for
Footnote continued on next page—
A-7
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
II.
All of the plaintiffs and plaintiff-intervenors with the ex-
ception of Jennie Landers are over the age of 65 and would be
eligible for SSI benefits but for their income and resources.
Jennie Landers is a disabled person who but for her income and
resources would be eligible for medical assistance benefits. The
plaintiffs and plaintiff-intervenors are all in poor health and in
need of the type of care and attention generally provided in a
skilled nursing home facility. None have the resources necessary
to pay for such care.
Plaintiffs James Perito and Jennie Landers and plaintiff-
intervenors Janet Richmond and Agnes Grant each voluntary
transferred his or her home to a family member within eighteen
months prior to applying for medical assistance benefits. Each
was denied benefits as a result of the transfer.
—Footnote continued from preceding paye
medical assistance, the applicant shall prove to the satisfaction of the
social services official that such transfer or assignment was a normal
transaction not done for the purpose of qualifying for medical
assistance.
(c) If the transfer or assignment is found to have been made for the
purpose of qualifying for medical assistance, or for the purpose of
defeating any current or future right to recovery of medical
assistance paid, such assistance shall be denied.
(d) The social services official shall approve such assignment or
transfer if he determines, based on the transfer agreement, that the
applicant or recipient will receive fair and reasonable consideration
for such transfer. Such consideration shall be applied as a resource
available to meet the person’s medical needs as it becomes available,
unless all or part of it subsequently qualifies as exempt property
under section 366.2 of the Social Services Law.
The Administrative Directives merely provide instruction for the im-
plementation of the statute and regulation.
A-8
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
Plaintiff-intervenors Louis Friedman and Belle Barnett were
denied medical assistance benefits as a result of transfers of
money made within eighteen months of application for benefits.
Mr. Friedman made voluntary transfers of money from his
savings account to his son and grandson. Mrs. Barnett’s husband
transferred her interest in a joint savings account to himself.
Plaintiff-intervenor Ella McCullough has received medical
assistance benefits since 1966 and SSI benefits from 1974
through late 1978. In January of 1978, while receiving SSI and
medicaid, she voluntarily transferred her home to a family
member. In September of 1978 she entered a skilled nursing
home facility and became ineligible for SSI by virtue of her
income. She subsequently received notice that her medical
assistance benefits were being terminated as a result of the
transfer.
Each of the plaintiffs and plaintiff-intervenors requested a fair
hearing as a result of the denials, and in each instance, the
hearing decision upheld the agency’s denial of benefits.’
7Although some plaintiffs transferred exempt real property while others
transferred money, separate treatment on that issue is not necessary.
According to the Social Security Claims Manual §12507 (b), transfers of
both real property and money are allowed prior to application for SSI
benefits.
A-9
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
Il.
Plaintiffs allege that the jurisdictional basis for this 42 U.S.C.
§1983 civil rights action® is provided by 28 U.S.C. §§1331(a)? and
1343(3).!°
The Second Circuit, applying the liberal standard set forth in
Hagans v. Lavine, 415 U.S. 528, 534-43, 94S, Ct. 1372, 39 L. Ed.
2d 577 (1974), has determined that in “welfare” type cases
alleging violations of due process and equa! protection,
jurisdiction under 28 U.S.C. §1343(3) will lie so long as the
constitutional isSues presented are neither frivolous nor so
insubstantial as to be beyond the jurisdiction of the court.
Greklek v. Toia, 565 F.2d 1259 (2d Cir. 1977) cert. denied sub.
842 U.S.C. §1983 provides that
Every person who, under color of any statute, ordinance,
regulation, custom, or usage, of any State or Territory, subjects, or
causes to be subjected, any citizen of the United States or other
person within the jurisdiction thereof to the deprivation of any
rights, privileges, or immunities secured by the Constitution and
laws, shall be liable to the party injured in an action at law, suit in
equity, or other proper proceeding for redress.
928 U.S.C. §1331 (a) provides in pertinent part that
(a) The district courts shall have original jurisdiction of all civil
actions wherein the matter in controversy exceeds the sum or value
of $10,000, exclusive of interest and costs, and arises under the
Constitution, laws, or treaties of the United States. . .
1028 U.S.C. §1343 (3) provides that “the district court shall have original
jurisdiction of any civil action authorized to be commenced by any person
(3) To redress the deprivation, under color of any State law, statute,
ordinance, custom or usage, of any right, privilege or immunity
secured by the Constitution of the United States or by any Act of
Congress providing for equal rights of citizens or of all persons within
the jurisdiction of the United States.”
A-10
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
nom. Blum v. Toomey, 436 U.S. 962 (1978). Andrews v. Maher,
525 F.2d 113 (2d Cir. 1975).
Concluding in this case that the plaintiffs’ claim of denial of
due process and equal protection is neither frivolous nor in-
substantial, the Court finds that jurisdiction is present under 28
U.S.C. §1343(3) and need not examine 28 U.S.C. §1331(a) as a
jurisdictional basis for these actions.!!
Having found jurisdiction present with regard to the con-
stitutional claims, this Court is empowered to decide plaintiffs’
pendent claim as well.'* Hagans v. Lavine, supra.
IV.
Plaintiffs seek to represent a class composed of all persons who
have been, are presently, or who may in the future be eligible for
medical assistance benefits for the “medically needy” in New
11Under Hayans v. Lavine, supra, at p. 539:
A claim is insubstantial only if ‘its unsoundness so clearly results
from the previous decisions of this court as to foreclose the subject
and leave no room for the inference that the questions sought to be
raised can be the subject of controversy.’ Ex parte Poresky, 290 US.
30, 32 (1933)
Although transfer of assets restrictions have been challenged in other
lawsuits, [Cf. Fabula v, Buck, 598 F.2d 869 (4th Cir. 1979); Buckner v. Maher.
424 F. Supp. 366 (D. Conn. 1976), aff'd, 434 U.S. 898 (1977); Dawson v. Beach,
No, C 78-2350MML (Sx) (C.D. Cal., May 10, 1979)] the issue has not been
clearly resolved,
12In their pendent claim, plaintiffs and plaintiff-intervenors allege violations
by defendants of 42 U.S.C. §§1396a (a) (10) (C) (i), 1896a (a) (17) and 1396a (a)
(18), and former regulations 42 C.F.R. 448.2 (b) (1), 448.2 (b) (2), 448.3 (e) (3) (ii)
and 448.3 (c) (4), recodified effective October 1, 1978 at 42 C.F.R. Part 435.
A-11
APPENDIX A — Decision and Order of District Court
of the Northern Instrict of New York
York State, including those who have in the past been denied
eligibility as a result of a voluntary transfer of assets.!"
In order for class certification to be granted, the prerequisites
set forth at Rule 23(a) of the Fed. R. Civ. Pro. must be satisfied.
First, the class must be so numerous that joinder of all members
would be impracticable. Counsel for the plaintiff has submitted
statistical data obtained from defendants indicating that in
June of 1978 there were over 150,000 persons in New York State
receiving medical assistance only.!4 It can be reasonably
assumed that the number of applicants was substantially
greater. Therefore, the numerosity requirement has clearly been
met.
The second requirement, that there be questions of law or fact
common to the class, has likewise been satisfied. The common
legal question is whether Social Services Law §366.l(e), 18
N.Y.C.R.R. 360.8 and New York State Department of Social
Services Administrative Directives 77ADM-73 and 78ADM-89
are in violation of federal requirements.
Although each class member would, no doubt, present a
slightly varying factual situation, the claim made by plaintiffs of
I3Caldwell v. Blum and Perito v. Blum were commenced as class actions.
Landers v. Blum, a tag-along action now consolidated with Caldwell and
Perito was not brought as a class action, and plaintiff Jennie Landers has
expressed no interest in being a class representative.
This motion for class certification was brought by plaintiff's counsel in
Caldwell. Although Ethel Caldwell is now deceased and her claim moot,
there are four plaintiff-intervenors in Caldwe/l as well as the plaintiff and
plaintiff-intervenor in Perito who serve as potential class representatives at
this time,
I4This figure includes only those individuals who were receiving medical
benefits alone, not those receiving medical benefits in conjunction with cash
public assistance benefits,
A-12
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
improper denial of medical assistance benefits on the basis of an
impermissible state imposed eligibility requirement, is identical
to that of class members. Thus, the third requirement of Rule
23(a) has been met.
There is no indication that there are antagonistic interests
between the proposed class representatives and class members.
In addition, plaintiffs’ counsel has had considerable experience
in conducting class action litigation. Therefore, the Court is
convinced that the final requirement of Rule 23(a), that the
representative parties will be able to fairly and adequately
represent the interests of the class, has been satisfied.
Since plaintiffs assert that certification is appropriate under
Rule 24(bX2), Fed. R. Civ. Pro., they must also demonstrate that
“the party opposing the class has acted or refused to act on
grounds generally applicable to the class thereby making ap-
propriate final injunctive relief or corresponding declaratory
relief with respect to the class as a whole.”
In this regard, defendant Blum, while not denying that the
requirement has been satisfied, argues that class certification is
unnecessary because even without class certification, judgment
in favor of the plaintiffs would run to the benefit of all persons
similarly situated,!®
However, in these cases, the Court cannot ignore the fact that
because of the advanced ages and infirm health of the plaintiffs
and plaintiff-intervenors, class certification is necessary in order
l5The Section Circuit has indicated that in class actions involving state ad-
ministrative official defendants, where injunctive relief is sought, class
certification may not be necessary. Galvan ». Levine, 490 F.2d 1255 (2d Cir.
1973), cert. denied 417 U.S. 936, 94 S. Ct. 2652, 41 L.Ed 2d 240 (1974).
However, the class action is still widely allowed in “welfare” type cases. Cf.
Greklek V. Toia, supra; Aitchison v. Berger, supra; Becker v. Toia, 439 F.
Supp. 324 (S.D.N.Y. 1977).
A-13
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
to avoid the substantial possibility of mootness.'® See Greklek v.
Tova, supra; Mendoza v. Lavine, 72 F.R.D. 520 (S.D.N.Y. 1976).
Therefore, the Court finds that class certification is ap-
propriate and certifies a class consisting of all aged, blind or
disabled persons who have been denied or will in the future be
denied medical assistance benefits for the “medically needy” in
New York State on the basis of a transfer of assets in violation of
Social Services Law §366.i(e) and 18 N.Y.C.R.R. §360.8.
V.
Defendant Blum has moved for dismissal of the complaints in
these consolidated actions under the doctrine of abstention. !7 In
determining whether abstention is appropriate, the Court must
keep in mind that “abstention from the exercise of federal
jurisdiction is the exception, not the rule.” Colorado River Water
Cons. Dist. v. U.S., 424 U.S. 800, 813, 96 S. Ct. 1236, 47 L. Ed. 2d
483 (1975).
Application of the doctrine has traditionally been limited to
the following three types of cases. See Colorado River Water
Cons. Dist. v. ULS., supra, at pp. 814-17.
(1) Cases raising a federal constitutional issue which
depending upon a state court interpretation of pertinent
state law might be mooted or presented in a: different
posture. Cf. Stone v. Philbrook, 528 F.2d 1084 (2d Cir.
1975); Goldberg v. Carey, 601 F.2d 653 (2d Cir. 1979).
16As previously pointed out, three named plaintiffs have died since the com-
mencement of their actions.
I7Historically, under the principles of comity and federalism, state courts have
been offered a measure of protection from interference by federal courts
through the doctrine of abstention. Cf. Younger v. Harris, 401 U.S. 37, 9158.
Ct. 746, 27 L. Ed.2d 669 (1971); Huffman v. Pursue, Ltd., 420 U.S. 592, 95S.
Ct. 1200, 43 L. Ed.2 482 (1975). |
A-14
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
(2) Cases presenting difficult questions of state law
relating to policy problems which are of substantial
import and whose importance transcends the case at bar.
Cf. Lowisiana Power & Light Co. v. City of Thibadaux,
360 U.S. 25, 79S. Ct. 1070, 3 L. Ed. 2d 1058 (1959).
(3) Cases which fall within the rule articulated in
Younger v. Harris, supra, and Huffman v. Pursue, Ltd.,
supra, because of the existence of a pending state court
action involving the same issue.!*
Defendant Blum relies primarily on the Younger-Huffman
principle as the basis for abstention and argues that the Court
should abstain from exercising jurisdiction in these actions
because of the existence of an action pending in state court at the
time the present actions were commenced.
Rinefierd v. Blum, supra, an action involving an attack on the
New York State transfer of property restriction, was brought in
state court by way of an Article 78 proceeding challenging a fair
hearing decision. The hearing decision affirmed a denial of
medical assistance benefits to Mr. Rinefierd as a result of a
l8In Younger v. Harris, supra, federal jurisdiction was refused when invoked
for the purpose of restraining criminal proceedings pending in a state court
against the party initiating the federal action. The Court, in Huffman v.
Pursue, Ltd., supra, extended the policy to actions which, while not strictly
criminal, are more akin to criminal proceedings than most civil actions
because of the involvement of a state interest as great as that in criminal
cases,
The Court in Huffman explained that the abstention policy was necessary
... 8ince interference with a state judicial proceeding prevents the
state not only from effectuating its substantive policies, but also from
continuing to perform the separate function of providing a forum
competent to vindicate any constitutional objections interposed
against those policies. Such interference also results in duplicative
legal proceedings, and can readily be interpreted ‘as reflecting
negatively upon the state court's ability to enforce constitutional
principles.’ Cf, Steffel v. Thompson, 415 U.S. 402 (1974). (p. 604)
A-15
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
voluntary transfer of property within eighteen months of ap-
plication.
Rinefierd was decided by the Appellate Division, Fourth
Department in January of 1979. The Court, affirming a State
Supreme Court ruling, found that Social Services Law §366.1(e)
did not violate federal requirements.'” The petitioner did not
seek leave to appeal to the Court of Appeals, and the time to do
so has now expired.
The Court does not agree with defendant Blum’s contention
that the existence of Rinefierd requires abstention under
Younger-Huffman. First of all, Rinefierd is no longer pending in
state court. Secondly, unlike in Younger and Huffman, none of
the plaintiffs or plaintiff-intervenors in these actions was a
party in the state court action.2° Mr. Rinefierd, the petitioner in
the state court action, is, according to plaintiffs’ counsel, now
deceased and therefore not even a potential class member in this
lawsuit.
The Supreme Court in Doran v, Salem Inn, Inc., 422 U.S. 922,
930, 95 S. Ct. 2561, 45 L. Ed.2d 648 (1975), determined that
although a federal court should in almost all cases refuse to
interfere with an ongoing state criminal proceeding, when no
19The Court, in Rinefierd, did not address the issue of whether the transfer of
assets restriction is in violation of 42 U.S.C. §1396a (a) (10) (C) (i) and its
corresponding regulations.
201n each of the cases relied upon by defendant Blum in her argument for
abstention under Younger-Huffman, the plaintiffs in the federal court
action were parties to the pending state action. Judice v. Vail, 430 U.S. 327,
97S. Ct. 1211, 51 L. Ed.2d 376 (1977); Trainor v. Hernandez, 431 U.S. 434, 97
S. Ct. 1911, 52 L. Ed.2d 486 (1977).
A-16
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
such proceeding is pending against the federal plaintiff, ab-
stention under Younger is not appropriate.?!
Nor does the Court find that these actions fall into either of
the other categories in which abstention is proper.
In Harman v. Forssenius, 380 U.S. 528, 85 S. Ct. 1177, 14 L.
Fd.2d 50 (1965), the Court, addressing the issue of abstention in
situations in which the interpretation of a state statute is in
question stated that
[w]here resolution of the federal constitutional question is
dependent upon, or may be materially altered by, the
determination of an uncertain issue of state law, ab-
stention may be proper in order to avoid unnecessary
friction....The doctrine, however, contemplates that
deference to state court adjudication only be made where
the issue of state law is uncertain. (citations omitted) If
the state statute in question, although never interpreted
by a state tribunal, is not fairly subject to an in-
terpretation which will render unnecessary, or sub-
stantially modify the federal constitutional question, it is
the duty of the federal court to exercise its properly
invoked jurisdiction. pp. 534-35.
The New York State intermediate appellate court deciding
Rinefierd adopted the same interpretation of Social Services
Law §366.1(e) as offered by the plaintiffs in these actions. This
Court can suggest no other reasonable interpretation.22 Fur-
21 While Doran involved a pending state criminal action, rather than civil as in
this case, the Court can see no reason why the rule limiting the application
of Younger-Huffman to situations in which the federal court plaintiff is a
party to the state action would not be equally applicable to civil actions in
which the federal plaintiff is not a party.
22In Stone v. Philbrook, supra, a case relied upon by defendant Blum, the
Court was presented with a much different situation than the present since
there was a serious question regarding the correct interpretation of a state
statute.
A-17
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
thermore, it is most unlikely that the issue of the con-
stitutionality of the statute will ever need to be determined since
the Court is required to attempt to decide these actions on the
basis of the pendent statutory claims before addressing the
constitutional issues. See Hagans v. Lavine, supra.
Finally, these actions do not present the type of situation
intended to fall within the category of cases in which abstention
is proper because the action presents difficult questions of state
law which relate to policy problems of substantial public import
transcending the result of the case at bar.2"
Cases falling into this group as a rule involve parochial state
issues, (Cf. Lowisiana Power & Light Co. v. City of Thibadaux,
supra, involving the state’s eminent domain policy; Alabama
Comm'n. v. Southern R. Co., 341 U.S. 341, 71 S. Ct. 762, 95 L.
Ed.2d 1002 (1951), involving state regulation of intrastate trains)
rather than issues of state law directly related to, and to a great
extent controlled by, federal statutes and regulations.
While the Court does not doubt that the fiscal integrity of the
State's public welfare system is of substantial public import, the
fact that the medical assistance program is so interwoven with
and to so great an extent controlled by federal law, precludes
abstention on that basis.
Although this Court’s refusal to abstain in this instance
creates the potential for conflicting outcomes in the litigation of
23Defendant Blum also suggests that abstention is appropriate because
plaintiffs and plaintiff-intervenors have not exhausted their state ad-
ministrative remedies. However, as previously indicated, each plaintiff and
plaintiff-intervenor did have an administrative hearing prior to the com-
mencement of their federal actions. In any event, when a plaintiff is
asserting a constitutional claim, exhaustion of state remedies is not nor-
mally required. See Monroe v. Pape, 365 U.S. 167, 81 S. Ct. 473, 5 L. Ed.2d
492 (1961); Cordova v. Reed, 521 F.2d 621 (2d Cir. 1975); Almenares v.
Wyman, 453 F.2d 1075 (2d Cir. 1971).
A-18
APPENDI” A — Decision and Order of District Court
of che Northern District of New York
similar issues, “.. . the mere potential for conflict in the results
of adjudications, does not, without more, warrant staying
exercise of federal jurisdiction.” Colorado River Water District
v. U.S. supra, at p. 816.
Having decided that abstention is not appropriate in these
actions, the Court must deny defendant Blum’s motion to
dismiss.
VI.
As previously indicated, plaintiffs are asking this Court to
grant a preliminary injunction, enjoining the defendants from
enforcing Social Services Law §366.1(e), 18 N.Y.C.R.R. 360.8 and
Administrative Directives of the New York State Department of
Social Services 77ADM-73 and 78ADM-89.
A preliminary injunction may be issued only upon a showing
of a likelihood of success on the merits and irreparable harm.
Sonesta Intl. Hotels Corp. v. Wellington Associates, 483 F.2d
247, 250 (2d Cir. 1973); Triebwasser & Katz v. AT&T. 535 F.2d
1356, 1359 (2d Cir. 1976). It is the opinion of this Court that
plaintiffs have satisfied both requirements.
Plaintiffs contend that in addition to being unconstitutional,
the New York transfer of assets restriction conflicts with federal
statutes and regulations in violation of the Supremacy Clause.
More specifically, plaintiffs claim that the rule violates federal
requirements by creating more restrictive eligibility criteria for
the “medically needy” than is allowed with regard to the
“categorically needy”, and by assuming the availability of
resources not actually available to an applicant for medical
assistance benefits.
In support of their position as to eligibility criteria, plaintiffs
rely upon 42 U.S.C. §1396a(aX10C\i). This provision of the
Social Security Act states that a state medical assistance plan
which includes benefits for the “medically needy” must make
A-19
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
such assistance available to “all individuals who would, except
for income and resources, be eligible. .. to have paid with respect
to them supplemental! security income benefits."
2442 U.S.C. §1396a (a) (10) provides in pertinent part:
A State plan for medical assistance must —
(10) provide—
(A) for making medical assistance available to all individuals
receiving aid or assistance under any plan of the State approved
under subchapter |, X, XIV, or XVI, or part A or subchapter IV of
this chapter, or with respect to whom supplemental security income
benefits are being paid under subchapter XVI of this chapter;
(B) that the medical assistance made available to any individual
described in clause (A)—
(i) shall not be less in amount, duration, or scope than the
medical assistance made available to any other such in-
dividual, and
(ii) shall not be less in amount, duration, or scope than the
medical assistance made available to individuals not described
in Clause A; and
(C) if medical assistance is included for any group of individuals
who are not described in clause (A) and who do not meet the income
and resources requirements of the appropriate State plan, or the
supplemental security income program under subchapter XVI of this
chapter, as the case may be, as determined in accordance with
standards prescribed by the Secretary —
(i) for making medical assistance available to all individuals
who would, except for income and resources, be eligible for aid
or assistance under any such State plan or to have paid with
respect to them supplemental security income benefits under
subchapter XVI of this chapter, and who have insufficient (as
determined in accordance with comparable standards) income
and resources to meet the costs of necessary medical and
remedial care and services, and
(ii) that the medical assistance made available to all in-
dividuals not described in clause (A) shall be equal in amount,
duration, and scope;
A-20
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
The corresponding regulation, at 42 C.F.R. §435.401(c) provides
that “(t)he agency must not use requirements for determining
eligibility for optional coverage groups that are. . (2) For aged,
blind, and disabled individuals, more restrictive than those used
under SSI...”
Plaintiffs point out that under the Social Security Act and the
regulations promulgated thereunder, an applicant for SSI
benefits who has resources in excess of the eligibility limit is
allowed to dispose of the assets in order to qualify, and must be
paid conditional SSI and medical assistance benefits pending
disposal. 42 U.S.C. §1382b, 42 C.F.R. §435.120(b).
The Social Security Claims Manual at §12507 provides that the
transfer of assets prior to application for SSI benefits has no
affect on eligibility, even if the assets would have brought the
applicant’s resources above the eligibility limit. A transfer made
by a person receiving SSI benefits usually has no effect on
eligibility as long as the recipient’s countable resources met the
eligibility requirements prior to the transfer. Social Security
Claims Manual §12508.2°
HEW officials from the New York Office, in letters written
May 16, 1978 and August 4, 1978, have advised defendant Blum
that the New York transfer of assets restriction is in violation of
federal requirements in that it results in a more restrictive
eligibility criteria for the “medically needy” than is allowed for
the “categorically needy.” More recently, in the HEW Com-
25]n her argument for summary judgment, defendant Blum points out that the
Social Security Claims Manual is not a mandatory regulation but merely a
statement of policy adopted by HEW, and therefore not binding on the State
Department of Social Services. Nonetheless, policy explanations by HEW
with regard to the Social Security Act are entitled to considerable deference
and cannot be totally disregarded by this Court. Friedman v. Beryer, 5A7
F.2d 724, 731 (2d Cir. 1976), cert. denied, 430 U.S. 948 (1977).
A-21
APPENDIX A — Decision and Order of District Court
of the Northern Instrict of New York
pliance Report for the quarter ending June 30, 1979, New York
State was officially cited as being out of compliance with federal
requirements on the same basis.
It is clear that a state may not adopt eligibility criteria which
result in the denial of benefits to a class of individuals made
eligible by federal standards. Townsend v. Swank, 404 U.S. 282,
291, 92S. Ct. 502, 30 L. Ed.2d 448 (1971); King v. Smith, 392 US.
309, 88 S. Ct. 2128, 20 L. Ed.2d 1118 (1968); Buckner v. Maher,
424 F. Supp. 366 (D. Conn. 1976), aff'd, 434 U.S. 898 (1977).
The issue of the treatment of the “medically needy” as com-
pared with the “categorically needy” has been raised in other
lawsuits, with the courts generally accepting the principle that,
unless specifically authorized by federal law, requirements for
the former group may be no harsher than for the latter. Cf.
Greklek v. Tova, supra; Aitchison v. Berger, supra.?6
More recently, in Fabula v. Buck, supra, a case challenging a
Maryland transfer of assets regulation similar to the New York
restriction, the Court found that the restriction on the transfer
of assets by the “medically needy” violated federal requirements
since no such prohibition was permitted with regard to
“categorically needy” recipients.2?
26Defendant Blum has suggested that where there is an inconsistency between
federal regulations-and a state statute results in the imposition of imper-
missible eligibility criteria, federal law must prevail. Townsend v. Swank,
supra.
27The Maryland regulation at COMAR §10.09.10 (D) provides as follows:
D. Transfer of Assets.
(1) An applicant who assigns or transfers assets, including those
[which would be excluded in determining financial eligibility,] with
the intent of becoming eligible for Medical Assistance or to ciream-
vent the Program’s recovery procedures during the 3 years before
Footnote continued on nert page—
A-22
APPENDIX A — Decision and Order of District Court
of the Northern Instrict of New York
Defendant Blum, however, contends that the New York
transfer of assets prohibition is not a substantive eligibility
requirement but rather a valid administrative tool for
dispensing public assistance. This Court disagrees.
Social Services Law §§366.1 & 1(e) clearly state that in order to
be eligible for medical assistance benefits, an applicant may not
—Fvotnote continued from preceding page
filing application is ineligible if the transfer results in a loss of a
resource which would have been available to meet medical expenses
or in the loss of a potential source of recovery. . .
(2) Assets transferred by a recipient, while receiving Medical
Assistance, for the purpose of continuing to receive assistance or to
circumvent recovery procedures, and without the consent of the local
department of social services, are considered an existing asset af-
fecting current and continued eligibility for a period not to exceed 3
years.
(3) The unreported transfer of assets for the purpose of circum-
venting the provision of §D (1)"nd (2), above, will result in the
recipient’s ineligibility ... COMAR 10.09.01.10 (D).
The major difference between the Maryland and New York rule is the time
period prior to application for benefits during which transfers of property
are presumed to have been made for a proscribed reason.
The Court of Appeals, enjoining the enforcement of the transfer of assets
restriction in Fabula, reversed a determination by the District Court that
the regulation was not an eligibility requirement but rather a provision
designed to eliminate fraud.
The Court relied in part on an HEW amplification of its interpretation of
42 U.S.C. 1396a (a) (10) (C) (i), stating that it
means that while a state might use more generous maintenance
amounts in determining financial eligibility (i.e. medically needy
levels ..., disregards or asset exemptions) all other SSI eligibility
criteria are to be used ... (A)ll aged, blind and disabled persons .. .
must have their eligibility determined using all SSI eligibility rules
except for — and only except for — higher dollar amounts for income
and resource eligibility levels. 42 Fed. REg. 2685 (1977).
A-23
APPENDIX A — Decision and Order of District Court
of the Northern District of New York
have made a voluntary transfer of property for one of the
proscribed reasons. Thus, the applicant has the burden of
proving that a transfer of property was not made for eligibility
purposes or to prevent future recovery for benefits paid. Paiiure
to overcome the presumption that a transfer made within
eighteen months of application was made for one of the
proscribed reasons results in a denial of benefits. Because of the
burden placed upon the applicant to prove entitlement to
benefits it appears to the Court that it is a substantive eligibility
requirement.”* As an eligibility requirement, it cannot be upheld
as an administrative took if, as in this case, it conflicts with
federal requirements.2”
Defendant Blum also argues that even if the transfer of assets
restriction is an eligibility requirement, it does not conflict with
federal requirements since pursuant to Social Security Law
§366.1(e), the Department of Social Services has the authority to
validate a transfer which would otherwise preclude eligibility.
However, since federal law does not allow the imposition of a
transfer restriction to begin with, the fact that the Department
of Social Services has the option of deciding whether or not to
apply the restriction in a particular case does not cure the defect.
28In Buckner v. Maher, supra, the Court found a Connecticut statute which
resulted in a denial of AFDC benefits to individuals who had made transfers
of property within seven years of application for less than reasonable
consideration or for the purpose of qualifying for benefits, to be a sub-
stantial eligibility requirement. See also Lavine v. Milne, 424 U.S. 577, 96S.
Ct. 1010, 47 L. Ed.2d 249 (1976).
29While state welfare procedures and rules have been upheld in the past if
they served a valid administrative purpose. [Cf. Wyman v. James, 400 U.S.
309, 91 S. Ct. 381, 27 L. Ed.2d 408 (1971)] the fact remains that eligibility
requirements which violate federal requirements may not stand even if done
for administrative reasons. Townsend v. Swank, supra.
A-24
APPENDIX A — Decision and Order of District Court
of the Northern Instrict of New York
While the Court sympathizes with the State’s interest in
preserving the fiscal integrity of its welfare system, it recognizes
that this cannot be done by a violation of federal requirements.
In light of the apparent conflict between the State transfer of
assets restriction and federal requirements, the Court believes
that the plaintiffs’ and plaintiff-intervenors’ likelihood of success
in these actions is strong.”
The second requirement, as previously indicated, has also been
satisfied. Each of the plaintiffs and plaintiff-intervenors in these
actions is elderly, in poor health, and unable to afford the care
and attention needed. Thus, the very survival of these in-
dividuals and those class members in similar situations is
threatened by a denial of medical assistance benefits during the
pendency of these actions.
In “welfare” type cases and in situations involving individuals
with pressing medical needs, courts have generally recognized
the probability of irreparable harm in the absence of injunctive
relief. Cv. Boddie v. Wyman, 323 F. Supp. 1189 (N.D.N.Y. 1970),
aff'd, 434 F.2d 1207 (2d Cir. 1970), aff'd, 402 U.S. 991 (1971); Bass
v. Richardson, 338 F. Supp. 478 (S.D.N.Y. 1971). These actions
are no exception.
30Since the Court has found that plaintiffs are entitled to a preliminary in-
junction, based upon their claim with regard to eligibility criteria, pursuant
to 42 U.S.C. §1396a (a) (10) (C) (i), it is not necessary at this time to examine
plaintiffs claim with regard to 42 U.S.C. §1396a (a) (17).
3lHaving determined that plaintiffs’ and plaintiff-intervenors’ likelihood of
success in these actions is strong enough to support a preliminary in-
junction, it is clear that the Court does not believe that defendant Blum is
entitled to summary judgment. No further discussion is required with
regard to that motion.
A-25
APPENDIX A — Decision and Order of District Court
of the Northern Instrict of New York
The Court finds, therefore, that having met the requirements,
plaintiffs are entitled to a preliminary injunction and hereby
enjoins the defendants from enforcing Social Services Law
§366.1(3), 18 N.Y.C.R.R. 360.8 and New York State Department
of Social Services Administrative Directives 77ADM-73 and 78
ADM-89 with regard to plaintiffs, plaintiff-intervenors and
members of the class as defined by this Court during the pen-
dency of these actions.
Defendant Blum’s motion for summary judgment is denied.
It is so ordered.
Howard G. Munson
US. District Court
Dated: November 29, 1979
Syracuse, New York
A-26
APPENDIX B — OPINION OF COURT OF APPEALS,
SECOND CIRCUIT
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
No. 718—September Term, 1979.
(Argued January 18, 1980 Decided April 16, 1980.)
Docket No. 79-7864
ETHEL CALDWELL, individually and on behalf of all other
persons similarly situated,
Plaintiff-A ppellee,
and
ELLA MC CULLOUGH, JANET RICHMOND, AGNES GRANT
and MURIEL ROTHSTEIN, as next friend of BELLE
BARNETT, individually and on behalf of all other persons
similarly situated,
Plaintiff-Intervenors-A ppellees,
against
BARBARA BLUM, as Commissioner of the New York State
Department of Social Services,
Defendant-A ppellant,
and
JAMES L. COVERT, as Commissioner of the Madison County
Department of Social Services, MADISON COUNTY, NEW
YORK, JOHN L. LASCARIS, as Commissioner of the
Onondaga County Department of Social Services, ONON-
DAGA COUNTY, NEW YORK, JOSEPH P. MENALDINO,
as Commissioner of the Warren County Department of Social
Services, WARREN COUNTY, NEW YORK, ROBERT E.
LAUNDREE, as Commissioner of the Essex County
Department of Social Services, ESSEX COUNTY, NEW
YORK, GABRIEL T. RUSSO, as Commissioner of the Monroe
County Department of Social Services, MONROE COUNTY,
NEW YORK,
Defendants-A ppellees.
A-27
APPENDIX B—Opinion of Court of Appeals, Second Circuit
ANITA PERITO and JAMES PERITO, individually and on
behalf of all others similarly situated,
Plaintiffs-A ppellees,
and
LOUIS FRIEDMAN,
Plaintiff-Intervenor-Appellee,
against
BARBARA BLUM, individually and as Commissioner of the
New York State Department of Social Services,
Defendant-Appellant,
and
BLANCHE BERNSTEIN, individually and as Commissioner of
the New York City Department of Social Services,
Defendant-A ppellee.
JENNIE LANDERS,
Plaintiff-A ppellee,
and
JOSEPHINE MANICCIA,
Plaintiff-Intervenor-A ppellee,
against
BARBARA BLUM, Individually and as Commissioner of the
New York State Department of Social Services,
Defendant-A ppellant,
and
DAVID R. ADINOLFI, as Commissioner of the Cortland County
Department of Social Services, CORTLAND COUNTY, NEW
YORK,
Defendant-A ppellee.
A-28
APPENDIX B—Opinion of Court of Appeals, Second Circuit
JULIA WHITLOCK,
Plaintiff-Appellee,
against
BARBARA BLUM, as Commissioner of the New York State
Department of Social Services,
Defendant-A ppellant,
and
ROBERT WAGNER, as Commissioner of the Tompkins County
Department of Social Services, TOMPKINS COUNTY, NEW
YORK,
Defendant-Appellee.
Before:
FRIENDLY, MANSFIELD and KEARSE,
Circuit Judges.
Appeal from a decision and order of the United States District
Court for the Northern District of New York, Howard G.
Munson, Judge, granting a preliminary injunction restraining
enforcement of §366.1(e) of New York State Social Services Law.
which denies Medicaid benefits to persons who have made
property transfers for the purpose of receiving medical
assistance benefits, on the ground that it is contrary to the Social
Security Act, 42 U.S.C. §1396a(a)(10)(C\i).
Affirmed.
CLIFFORD A. ROYAEL, Esq., Albany, NY (Robert Abrams,
Attorney General of the State of New York, Jeremiah
Jochnowitz, Assistant Solicitor General, Alan W. Rubenstein,
Esq., Albany, NY, of counsel), for Appellant State Com-
missioner of Social Services.
RENE H. REIXACH, Esq., Greater Upstate Law Project,
Rochester, NY, for Plaintiffs-Appellees and Plaintiffs-
Intervenors-A ppellees.
A-29
APPENDIX B—Opinion of Court of Appeals, Second Circuit
MANSFIELD, Cirewit Judge:
The Commissioner of the New York State Department of
Social Services appeals from a decision and order of the District
Court for the Northern District of New York entered by Judge
Howard G. Munson on December 3, 1979, which granted the
application of plaintiffs (aged, blind or disabled New York
residents who had been denied medical assistance benefits
because of their transfers of their property to others) for class
certification and a preliminary injunction restraining the
enforcement of N.Y. Social Services Law §366.1(e),! and
lNew York Social Services Law §366.1(e) provides in pertinent part:
Ҥ 366. Eligibility
“1. Medical assistance shall be given under this title to a person
who requires such assistance and who
“(e) has not made a voluntary transfer of property (i) for the
purpose of qualifying for such assistance, or (ii) for the purpose of
defeating any current or future right to recovery of medical
assistance paid, or for the purpose of qualifying for, continuing
eligibility for or increasing need for medical assistance. A transfer of
property made within eighteen months prior to the date of ap-
plication shall be presumed to have been made for the purpose
specified in subparagraph (i); a transfer of property that would be
exempt from consideration under this title, made within eighteen
months prior to the date of application without fair and reasonable
consideration or made, without prior approval of the social services
official, at any time after the application or determination of
eligibility, shall be deemed to have been made for one or more of the
purposes specified in subparagraph (ii) hereof. The social services
official shall approve such an assignment or transfer if he determines
based on the transfer agreement that the applicant or recipient will
receive fair and reasonable consideration for such transfer. Such
consideration shall be applied as a resource available to meet the
person's medical needs as it becomes available unless all or a part of
it subsequently qualifies as exempt property under subdivision two of
this section.”
A-30
APPENDIX B--Opinion of Court of Appeals, Second Circuit
Regulation 18 N.Y.C.R.R. 360.8,2 and denied the Commissioner's
motion to dismiss the action. The statute and regulation deny
Medicaid benefits to persons who have made property transfers
for the purpose of receiving medical assistance benefits.
Federal jurisdiction was invoked on the ground that the state
statute and regulation denied plaintiffs due process and equal
protection of the laws. Injunctive relief was granted on the
ground that the New York transfer-of-assets restriction violates
2Regulation 18 N.Y.C.R.R. 360.8 provides:
“360.8 Transfer of property.
(a) In determining eligibility for medical assistance, if a transfer or
assignment of real or personal property has been made within 18
months prior to the date of application or at any time after a deter-
mination of eligibility without the prior approval of the social
services official, such transfer or assignment shall be presumed to
have been made for the purpose of qualifying for such assistance, or
for the purpose of defeating any current or future right to recovery of
medical assistance paid.
“(b) If such transfer or assignment was made within 18 months
prior to the date of application or at any time after a determination
of eligibility without the prior approval of the social services official
for medical assistance, the applicant shall prove to the satisfaction of
the social services official that such transfer or assigniient was a
normal transaction not done for the purpose of qualifying for medical
assistance.
“(c) If the transfer or assignment is found to have been made for the
purpose of qualifying for medical assistance, or for the purpose of
defeating any current or future right to recovery of medical
assistance paid, such assistance shall be denied.
“(d) The social services official shall approve such assignment or
transfer if he determines, based on the transfer agreement, that the
applicant or recipient will receive fair and reasonable consideration
for such transfer. Such consideration shall be applied as a resource
available to meet the person’s medical needs as it becomes available.
unless all or part of it subsequently qualifies as exempt property
under section 366.2 of the Social Services Law.”
A-31
APPENDIX B—Opinion of Court of Appeals, Second Circuit
the Social Security Act, 42 U.S.C. §1396a(aX10\(C)i).? We affirm
the grant of preliminary relief, substantially for the reasons
3Title 42 U.S.C. §1396a provides in pertinent part:
“§$1396a. State plans for medical assistance — Contents
“(a) A State plan for medical assistance must—
(10) provide—
“(A) for making medical assistance available to all individuals
receiving aid or assistance under any plan of the State approved
under subchapter I, X, XIV, or XVI, or part A of subchapter IV of
this chapter, or with respect to whom supplemental security income
benefits are being paid under subchapter XVI of this chapter;
“(B) that the medical assistance made available to any individual
described in clause (A)—
(i) shall not be less in amount, duration, or scope than the
medical assistance made available to any other such in-
dividual, and
(ii) shall not be less in amount, duration, or scope than the
medical assistance made available to individuals not described
in clause A; and
“(C) if medical assistance is included for any group of individuals
who are not described in clause (A) and who do not meet the income
and resources requirements of the appropriate State plan, or the
supplemental security income program under subchapter XVI of this
chapter, as the case may be, as determined in accordance with
standards prescribed by the Secretary —
(i) for making medical assistance available to all individuals
who would, except for income and resources, be eligible for aid
or assistance under any such State plan or to have paid with
respect to them supplemental security income benefits under
subchapter XVI of this chapter, and who have insufficient (as
determined in accordance with comparable standards) income
and resources to meet the costs of necessary medical and
remedial care and services, and
(ii) that the medical assistance made available to all in-
dividuals not described in clause (A) shall be equal in amount,
duration, and scope;
A-32
APPENDIX B—Opinion of Court of Appeals, Second Circuit
stated by Judge Munson, and dismiss as interlocutory and
nonappealable defendant’s cross-appeal from the orders granting
class action status and denying dismissal of the action.
Title XIX of the Social Security Act, 42 U.S.C. §§1396-96k,
authorizes each state to participate in a cooperative federal-state
program for medical assistance to the needy, known as Medicaid,
and to operate a medical assistance plan, subject to federal
statutory and regulatory guidelines. If a state chooses to par-
ticipate, it must adopt a statutory plan setting forth the
coverage to be extended to recipients, including the terms upon
which individuals will be eligible and it must extend benefits to
those who are eligible for federally-funded financial assistance,
such as recipients of Supplementary Security Income (SSI) for
the aged, blind and disabled, known as the “categorically needy.”
In addition, a participating state may elect to provide for
payment for medical services to those aged, blind or disabled
individuals, known as the “medically needy,” whose incomes or
resources, while exceeding the financial eligibility requirements
for the categorically needy (such as an SSI recipient) are in-
sufficient to pay for necessary medical care.
New York elected to participate in the Medicaid program and
to pay benefits to the “medically needy” upon their meeting
eligibility requirements specified in N.Y. Social Services Law,
§366. The issue now before us is whether New York’s statutory
eligibility requirements for the medically needy are compatible
with applicable federal law.
It is undisputed that New York imposes more restrictive
eligibility requirements on the medically needy than on the
categorically needy. Under the Social Security Act and
regulations thereunder, a “categorically needy” applicant for SSI
benefits, whose assets exceed the program’s eligibility limits,
may by disposing of his excess assets become eligible for
A-33
APPENDIX B—Opinion of Court of Appeals, Second Circuit
Medicaid benefits, 42 U.S.C. §1382b(b),1 42 C.F.R. §435.120(b),5
Social Security Manual at §12507. However, under the N.Y.
Social Services Law, §366(1)e) and regulations thereunder, 18
N.Y.C.R.R. 360.8, a voluntary transfer of assets in order to
qualify for or maintain eligibility for medicaid benefits (or to
defeat recovery of medical assistance already paid, see N.Y.
Social Services Law, §369(1)(b)) renders a medically needy person
ineligible for Medicaid benefits.®
The issue here turns on whether, as plaintiffs contend, the
language of the Social Security Act, 42 U.S.C. §1396a prohibits
the State from thus imposing more restrictive eligibility
4Title 42 U.S.C. §1382(b) provides:
“(b) The Secretary shall prescribe the period or periods of time
within which, and the manner in which, various kinds of property
must be disposed of in order not to be included in determining an
individual's eligibility for benefits. Any portion of the individual's
benefits paid for any such period shall be conditioned upon such
disposal; and any benefits so paid shall (at the time of the disposal) be
considered overpayments to the extent they would not have been paid
had the disposal occurred at the beginning of the period for which
such benefits were paid.”
Title 42 C.F.R. §435.120(b) provides in pertinent part:
Ҥ$435.120 Individuals receiving SSI.
“Except as allowed under §435.121, the agency must provide
medicaid to aged, blind, and disabled individuals or couples who
receive SSI, including—
“(b) Individuals receiving SSI under an agreement with the Social
Security Administration to dispose of resources that exceed the SSI
dollar limits on resources.
6As §366(1Xe) and 18 N.Y.C.R.R. 360.8 state, any transfer of property for less
than full consideration made within 18 months prior to the filing of an
application for assistance will be presumed to have been made for one of the
proscribed reasons.
A-34
APPENDIX B—Opinion of Court of Appeals, Second Circuit
requirements upon the medically needy than upon the
categorically needy. Plaintiffs rely principally on
§1396a(aX10XC\i), which obligates states that have chosen to
include the medicaily needy in their Medicaid Plans to use
“comparable standards” in determining Medicaid eligibility. It
directs a state to make Medicaid benefits available to
“all individuals who would, except for income and
resources, be eligible ... to have paid with respect to
them supplemental security income benefits . . ., and who
have insufficient (as determined in accordance with
comparable standards) income and resources to meet the
costs of necessary medical and remedial care and ser-
vices.” (Emphasis added).
Although the foregoing quoted provision is not unambiguous,
HEW has in its regulations adopted the view that it does require
comparable eligibility requirements for the medically needy and
the categorically needy. Title 42 C.F.R. §435.401(c), provides that
a state medicaid agency
“must not use requirements for determining eligibility
for optional coverage groups [such as the medically needy]
that are ... (2) For aged, blind and disabled individuals,
more restrictive than those used under SSI... .”
Indeed, HEW has written to the states of New York, California
and Michigan, which have transfer-of-assets prohibitions with
respect to medicaid eligibility for the medically needy but not for
the categorically needy, advising them that their policy is not in
compliance with the Social Security Act.
Moreover, the courts have repeatedly recognized
§1396a(aX10XCXi) as obligating states to adopt no more
restrictive standards for medicaid eligibility than those
governing the eligibility of other groups. In Greklek v. Toia, 565
F.2d 1259 (2d Cir. 1977), cert. denied sub nom. Blum v. Toomey,
436 U.S. 962 (1978), we invalidated a more restrictive state
standard for deduction of work expenses for medically needy
A-35
APPENDIX B—Opinion of Court of Appeals, Second Circuit
than for categorically needy and in Fabula v. Buck, 598 F.2d 869
(4th Cir. 1979), the Fourth Circuit held that a Maryland transfer-
of-assets prohibition similar to that of New York, which applied
to the medically needy, violates §1396a(aX10XC\i). But see
contra, Dawson v. Beach, ___ F.Supp. ___ (C.D. Cal., May 10,
1979, Civ. 78-2350-MML). Since the argument of this appeal the
Appellate Division of the Supreme Court of the State of New
York, Second Judicial Department, has held §366.1(e) of N.Y.
Social Services Law to be violative of the Supremacy Clause by
reason of its conflict with the foregoing provisions of the Social
Security Act and regulations thereunder, Scarpuzza v. Blum,
—_ A.D.2d ____ (2d Dept. March 17, 1980).
Plaintiffs’ position is further buttressed by §1396a(a)X17) which
requires a state plan for assistance to
“(17) include reasonable standards (which shall be
comparable for all groups . . .) for determining eligibility
for and the extent of medical assistance under the plan
which ... (B) provide for taking into account only such
income and resources as are, as determined in accordance
with standards prescribed by the Secretary, available to
the applicant or recipient and (in the case of an applicant
who would, except for income and resources, be eligible
[to receive ... SSI benefits i.e. the categorically needy}) as
would not be disregarded ... in determining his
eligibility for such aid, assistance or benefits.”
In other words, as we noted in Friedman v. Berger, 547 F.2d 724,
728 (2d Cir. 1976), cert. denied, 430 U.S. 984 (1977), “for persons
such as plaintiffs, who would be eligible to receive SSI benefits
because of their age, blindness or disability were it not for their
income, state standards must provide that income which is
disregarded in determining SSI eligibility also be disregarded in
determining eligibility for and the extent of medical assistance
under Medicaid.”
A-36
APPENDIX B—Opinion of Court of Appeals, Second Circuit
Thus plaintiffs have clearly shown a strong likelihood of
success on the merits here. The State’s principal defense, and one
which has apparently not been raised in prior cases, is that
Congress, in enacting the predecessor to §1396a(aX10\C\i) in
1965, did not intend to bar states from imposing more restrictive
eligibility requirements on the medically needy than on the
categorically needy. Specifically, the State contends that
Congress intended that the standards for medical assistance for
the needy blind, aged, disabled and dependent children be
comparable as between these classifications, not that the
medically needy be treated comparably with the categorically
needy. 42 C.F.R. §435.401(c), the State argues, is therefore in-
consistent with the statute and thus invalid. In support of this
contention the State relies on a statement in the Senate and
House Report, which apparently relates to §1396a(a\10), that the
purpose of the comparability provision was to
“make more specific a provision now in the law that in
determining eligibility for and the extent of aid under the
plan, States must use reasonable standards consistent
with the objectives of the titles. Although States may set
a limitation on income and resources which individuals
may hold and be eligible for aid, they must do so by
maintaining a comparability among the various
categorical groups of needy people. Whatever level of
financial eligibility the State determines to be that which
is applicable for the eligibility of the needy aged, for
example, shall be comparable to that which the State sets
7The predecessor of §1396a(aX10XC\Xi) required those states which chose to
extend aid to the medically needy to provide:
“(i) for making medical or remedial care and services available to
all individuals who would, if needy, be eligible for aid or assistance
under any such State plan and who have insufficient (as determined
in accordance with comparable standards) income and resources to
meet the costs of necessary medical or remedial care and services,
....” Pub. L.No. 89-97 §1902(aX 10K VXI).
A-37
APPENDIX B—Opinion of Court of Appeals, Second Circuit
to determine the eligibility for the needy blind and
disabled; and must also have a comparability to the
standards used to determine the eligibility of those who
are to receive medical assistance as needy children and
the parents or other relatives caring for them.” S. Rep.
No. 404, 89th Cong., 1st Sess. 77-78 (1965); see H. Rep. No.
213, 89th Cong., Ist Sess. 67 (1965).
In 1972 Congress adopted the Supplemental Security Income
program (SSI) under which the separate state programs under
which the aged, blind and disabled had received assistance were
combined into a federally funded assistance program with
nationwide uniform eligibility requirements. Pub. L. No. 92-603
(1972), 42 U.S.C. §§1381, et seg. Although Congress neglected to
extend medical assistance to the new SSI recipients or medically
needy persons in the SSI categories, it amended §1396a(a)(10) in
1973 to state expressly (as it now does) that states must provide
medical assistance to SSI recipients. Pub. L. No. 93-233, §13
(1973). According to the State, that amendment of
§1396a(aX10\XC\i) was merely technical and should not be read to
require a state to treat the medically needy the same as the
categorically needy, but only to treat the aged, blind and
disabled medically needy comparably.
Although the State’s argument is not without some force, we
are not persuaded by the language of the House and Senate
Reports that 42 C.F.R. §435.401(c) should be held invalid.
Nothing in the legislative history of §1396a(a) precludes or is
inconsistent with HEW’s interpretation. That the aged, blind
and disabled medically needy must be treated comparably as be-
tween each other does not mean that as a group (the medically
needy) they should not be treated comparably with the
categorically needy. HEW has promulgated a number of
regulations on comparability in addition to 42 C.F.R. §435.401(c),
and the thrust of those regulations, which have been invariably
A-38
APPENDIX B—Opinion of Court of Appeals, Second Circuit
upheld by the court® and which are based not only on
§1396a(aXlOXCXi) but also on the explicit language of
1396a(aX17), supra, is that “while a state might use more
generous maintenance amounts in determining financial
eligibility ... all other SSI eligibility criteria are to be used.” 42
Fed. Reg. 2685 (1977).
Considerable deference must be given to the reasonable in-
terpretation of a statute by an agency entrusted with its ad-
ministration, New York Department of Social Service v.
Dublino, 413 U.S. 405, 421 (1973); Friedman v. Berger, supra, and
we see no reason to differ with that interpretation of the per-
tinent provisions of the statute here, particularly in light of the
fact that the courts have invariably upheld the validity of
HEW’s numerous comparability provisions. We further note
that Congress has recently considered several amendments to
the Social Security Act which would authorize states to impose
transfer-of-assets restrictions.? The fact that a concerned
8See, for example, Greklek v. Toia, supra (relying on 42 C.F.R. §448.3(c);
Aitchison v. Berger, 404 F. Supp. 1137 (S.D.N.Y. 1975), affd, without opinion,
528 F.2d 307 (2d Cir.), cert. denied, 429 U.S. 890 (1976) (upholding 45 C.F.R.
248.3(c)); Schaak v. Schmidt, 344 F.Supp. 99 (E.D. Wise. 1971) (upholding 45
C.F.R. 248.21); and Dominquez v. Milliken, CCH Medicare and Medicaid
Guide 4 26,633 (W.D. Mich. 1973) (upholding 45 C.F.R. 248.21). Because HEW
insists on continually redesignating its regulations, we note that the
predecessor to the current regulations was first proposed as 45 C.F.R. Part
248 at 38 Fed. Reg. 32216 (Nov. 13, 1974), and updated at 39 Fed. Reg. 9512
(March 11, 1974). The regulations were then codified as 42 C.F.R. Part 448,
42 Fed. Reg. 52827 (Sept. 30, 1977) and were recodified in their present form
as 42 C.F.R. Part 435 at 43 Fed. Reg. 45204 (Sept. 29, 1978). The predecessor
to 42 C.F.R. 435.401 is thus 45 C.F.R. 248.2 (a), (b) and (c).
9S. Rept. No. 96-471, 96th Cong., Ist Sess. 48 (1979) (to accompany H.R. 934)
§257 reads:
“The bill permits States to deny medical assistance to any aged,
blind, or disabled person (including individuals who are not
Footnote continued on next page—
A-39
APPENDIX B—Opinion of Court of Appeals, Second Circuit
committee of Congress considers that “present law” bars
transfer of assets prohibitions has some tendency to confirm
HEW’s interpretation of Congress’ intent in its earlier enact-
ment of comparability provisions in 1965 and amendments of
them in 1973. See New York Department of Social Service v.
Dublino, supra, 413 U.S. at 416 n.19; Banco Nacional de Cuba v.
Farr, 383 F.2d 166, 175 (2d Cir. 1967), cert. denied, 390 U.S. 956
(1968).
Accordingly, we do not find persuasive the State’s contention
that §366.1(e) is complementary to and is not contrary to federal
law. Decisions principally relied upon by the Commissioner are
clearly distinguishable from or not inconsistent with our holding
here. In New York Department of Social Services v. Dublino, 413
—Footnote continued from preceding page
‘categorically ineligible’) who has given away assets in order to meet
the medicaid eligibility requirements (or has ‘sold’ such assets for less
than their fair market value).
“Under present law. States may provide medical assistance
eligibility to recipients of aid to families with dependent children
(AFDC) and to recipients of supplemental security income (SSI). In
the case of SSI recipients, States have the option of making all SSI
recipients eligible for medicaid or of limiting eligibility to those who
met. the State standards under the former State programs of aid to
the aged, blind and disabled as in effect in 1972. States may deny
eligibility for AFDC to persons who give away assets in order to meet
the resources limits of that program and States which had such
restrictions in their former programs for the aged, blind, and
disabled in 1972 may continue to apply them in determining
medicaid eligibility (but only if they are among the States that have
elected to continue using those 1972 standards). However, States
which have elected to make all SSI recipients eligible for medicaid do
not have this option. In such States an individual who is on the SSI
rolls must be included in the medicaid program even if he became an
SSI recipient only by giving away property (or by selling it for far less
than its true value).
Footnote continued on next page—
A-40
APPENDIX B—Opinion of Court of Appeals, Second Circuit
U.S. 405 (1973), the Supreme Court, in considering an entirely
different program under the Social Security Act (the Federal
Work Incentive Program known as WIN), held that it was not
intended to preempt state work programs or work rules but
remanded the case to determine whether certain sections of New
York’s Work Rules did contravene specific provisions of the
Social Security Act. In Rush v. Smith, 573 F.2d 110 (2d Cir. 1978),
the plaintiffs simply failed to show any conflict between New
York procedures and the Social Security Act or any intent by
Congress to bar state procedures of the type in issue. The
Commissioner’s contention that plaintiffs here have failed to
demonstrate a likelihood of success must therefore be rejected.
We likewise find no merit in appellant's argument that
plaintiffs have failed to prove a sufficient threat of irreparable
—Footnote continued from preceding page
“Where an individual with significant assets is faced with the
prospect of substantial medical expenses — particularly in cases
where a prolonged period of institutionalization may be needed —
present law may provide a strong incentive for him to give those
assets away to a friend or relative so as to qualify for medicaid
immediately. To the extent that this happens, the costs of the
program are increased since medical expenses which could be met
from the individual’s assets are instead being paid for by public
funds.
“The bill would allow States the option of denying or limiting
eligibility in this type of situation. If a State chooses to make use of
this provision, an aged, blind, or disabled person would be considered
(for purposes of medicaid eligibility) to still possess a disposed of asset
for a period of 12 months if he gave it away in order to become
eligible for medicaid. (In the case of an individual who sells an asset
far less than its value, he will be considered for 12 months to have an
asset worth the difference between the sale price and the fair market
value.)
Footnote continued on next paye—
A-41
APPENDIX B—Opinion of Court of Appeals, Second Circuit
harm to entitle them to relief against enforcement of the New
York transfer-of-assets prohibition. Those medically needy
applicants who have already transferred their assets and are
being denied Medicaid benefits can hardly be expected to recover
those assets for use in payment of medical bills; in the meantime
they would, absent relief, be exposed to the hardship of being
denied essential medical benefits. The state has made no
showing of hardship to it other than the requirement that
pending final decision it provide Medicaid benefits to those
medically needy who have transferred their excess assets. The
balance of hardships therefore would tip decidedly toward
plaintiffs if relief were denied.
Since the plaintiffs have satisfied the essential requirements
for issuance of preliminary relief, Jackson Dairy Inc. v. H.P.
—Footnote continued from preceding page
“The gift or sale for less than value of an asset will, under the
provisions of the bill, be presumed to have been for purposes of
establishing’ medicaid eligibility unless the individual submits
adequate evidence to rebut that presumption.
“The committee intends that this authority would be administered
by the States even though other elements of medicaid eligibility may
be determined by the Social Security Administration under the
agreements entered into pursuant to section 1634 of the Social
Security Act. It is expected, however, that the Social Security Ad-
ministration would agree to reasonable State requests for referral of
SSI applicants to appropriate State or county agencies for deter-
mination of this additional eligibility factor.
“The committee emphasizes that the provision is aimed at abusive
situations where assets are sold for substantially less than their fair
market value. It is not intended, for example, that the provision
would be used to call into question the sale of a piece of land for
$1,000 or $2,000 in which the sale price may fall short of the agency's
estimate of fair market value by $100 or $200.”
See also S. Rept. 95-1111, 95th Cong., 2d Sess. 24 (1978) (to accompany H.R.
5285).
A-42
APPENDIX B—Opinion of Court of Appeals, Second Circuit
Hood & Sons, 596 F.2d 70, 72 (2d Cir. 1978); Caulfield v. Board of
Education, 583 F.2d 605, 610 (2d Cir. 1978); Sockwell v. Maloney,
554 F.2d 1236 (2d Cir. 1977) (denial of benefits), and no abuse of
discretion on the part of the district court is shown, the order of
the district court is affirmed and the stay of that order is
vacated.
A-43
APPENDIX C — STATUTES AND REGULATIONS
INVOLVED
Statutes Involved
42 USC §1396a:
“$1396a. State plans for medical assistance -- Contents
“(a) A State plan for medical assistance must—
(10) provide—
“(A) for making medical assistance available to all
individuals receiving aid or assistance under any plan of
the State approved under subchapter I, X, XIV, or XVI,
or part A of subchapter I'V of this chapter, or with respect
to whom supplemental security income benefits are being
paid under subchapter XVI of this chapter;
“(B) that the medical assistance made available to any
individual described in clause (A)—
(i) shall not be less in amount, duration, or
scope than the medical assistance made available
to any other such individual, and
(ii) shall not be less in amount, duration, or
scope than the medical assistance made available
to individuals not described in clause A; and
“(C) if medical assistance is included for any group of
individuals who are not described in clause (A) and who
do not meet the income and resources requirements of the
appropriate State plan, or the supplemental security
income program under subchapter XVI of this chapter, as
the case may be, as determined in accordance with
standards prescribed by the Secretary—
(i) for making medical assistance available to
all individuals who would, except for income and
resources, be eligible for aid or assistance under
any such State plan or to have paid with respect to
them supplemental security income benefits under
A-44
APPENDIX C — Statutes and Regulations Involved
subchapter XVI of this chapter, and who have
insufficient (as determined in accordance with
comparable standards) income and resources to
meet the costs of necessary medical and remedial
care and services, and
(ii) that the medical assistance made
available to all individuals not described in clause
(A) shall be equal in amount, duration, and scope;
. * *))
New York Social Services Law:
“$366. Eligibility
“1. Medical assistance shall be given under this title to
a person who requires such assistance and who
* * *
“(e) has not made a voluntary transfer of property (i) for
the purpose of qualifying for such assistance, or (ii) for the
purpose of defeating any current or future right to
recovery of medical assistance paid, or for the purpose of
qualifying for, continuing eligibility for or increasing
need for medical assistance. A transfer of property made
within eighteen months prior to the date of application
shall be presumed to have been made for the purpose
specified in subparagraph (i); a transfer of property that
would be exempt from consideration under this title,
made within eighteen months prior to the date of ap-
plication without fair and reasonable consideration or
made, without prior approval of the social services of-
ficial, at any time after the application or determination
of eligibility, shall be deemed to have been made for one
or more of the purposes specified in subparagraph (ii)
hereof. The social services official shall approve such an
assignment or transfer if he determines based on the
transfer agreement that the applicant or recipient will
receive fair and reasonable consideration for such
transfer. Such consideration shall be applied as a resource
available to meet the person’s medical needs as it becomes
A-45
APPENDIX C — Statutes and Regulations Involved
available unless all or a part of it subsequently qualifies
as exempt property under subdivision two of this sec-
tion.”
Federal Regulation 42 C.F.R. §435.401
* * *
(c) The agency must not use requirements for deter-
mining eligibility for optional coverage groups that are—
(1) For families and children, more restrictive than
those used under the State’s AFDC plan; and
(2) For aged, blind, and disabled individuals, more
restrictive than those used under SSI, except for in-
dividuals receiving an optional State supplement as
specified in §435.230 or individuals in categories specified
by the agency under §435.121.
Regulations of the State Department of Social Services In-
“360.8 Transfer of property. (a) In determining
eligibility for medical assistance, if a transfer or
assignment of real or personal property has been made
within 18 months prior to the date of application or at
any time after a determination of eligibility without the
prior approval of the social services official, such transfer
or assignment shall be presumed to have been made for
the purpose of qualifying for such assistance, or for the
purpose of defeating any current or future right to
recovery of medical assistance paid.
“(b) If such transfer or assignment was made within
18 months prior to the date of application or at any time
after a determination of eligibility without the prior
approval of the social services official for medical
assistance, the applicant shall prove to the satisfaction of
the social services official that such transfer or assign-
ment was a normal transaction not done for the purpose
of qualifying for medical assistance.
A-46
APPENDIX C — Statutes and Regulations Involved
“(c) Ifthe transfer or assignment is found to have been
made for the purpose of qualifying for medical assistance,
or for the purpose of defeating any current or future right
to recovery of medical assistance paid, such assistance
shall be denied.
“(d) The social services official shall approve such
assignment or transfer if he determines, based on the
transfer agreement, that the applicant or recipient will
receive fair and reasonable consideration for such
transfer. Such consideration shall be applied as a resource
available to meet the person's medical needs as it becomes
available, unless all or part of it subsequently qualifies as
exempt property under section 366.2 of the Social Ser-
vices Law.”
A-47
APPENDIX D — AGREEMENT BETWEEN SECRETARY
OF HEALTH, EDUCATION AND WELFARE
AND STATE OF NEW YORK
SUPPLEMENTAL SECURITY INCOME FOR THE
AGED, BLIND, AND DISABLED
(Agreement with the State Pursuant to
Section 1634 of the Social Security Act)
AGREEMENT
Between
The Secretary of Health, Education, and Welfare
and
The State of New York
The Secretary of Health, Education, and Welfare, hereinafter
referred to as the Secretary, and the State Department of Social
Services hereinafter referred to as the State, pursuant to section
1634 of the Social Security Act (providing for Federal deter-
minations of eligibility for medical assistance in the case of aged,
blind, or disabled individuals who are eligible for medical
assistance under the State’s plan approved under title XIX of the
Social Security Act) hereby agree to the following:
Article I
DEFINITIONS
For purposes of this agreement—
A. The term “Secretary” means the Secretary of Health,
Education, and Welfare or his delegate.
B. The term “State” means the State of New York, including
any subdivision thereof, acting through the Department of
Social Services.
C. The term “Act” means the Social Security Act.
D. The term “supplementary payment” means the money
payment determined to be payable by the Secretary on behalf of
A-48
APPENDIX D — Agreement Between Secretary of Health,
Education and Welfare and State of New York
the State in accordance with the provisions of the agreement be-
tween the Secretary and the State for Federal administration of
such State supplementary payments pursuant to section 1616 of
the Act or the money payment determined to be payable by the
Secretary on behalf of the State in accordance with the
provisions of section 212 of P.L. 93-66.
E. The term “basic Federal payment” means the money
payment determined to be payable by the Secretary in ac-
cordance with section 1611 of the Act and section 211 of P.L. 93-
66.
F. The terms “eligible individual” and “eligible spouse” shall
have the same meaning as they have when used in title XVI of
the Act and in regulations and policies prescribed thereunder by
the Secretary.
G. The term “supplemental security income program” means
the Federal program of Supplemental Security Income for the
Aged, Blind, and Disabled established by section 301 of the
Social Security Amendments of 1972, P.L. 92-603, and amended
and modified by P.L. 93-66, and administered by the Social
Security Administration.
H. The term “Medicaid” means medical assistance provided by
the State under the State plan approved under title XIX of the
Act.
Article II
FUNCTIONS TO BE PERFORMED
BY THE SECRETARY
The Secretary shall:
A. Make determinations (including redeterminations) of
Medicaid eligibility on behalf of the State with respect to in-
A-49
APPENDIX D — Agreement Between Secretary of Health,
Education and Welfare and State of New York
dividuals residing in the State who are receiving or eligible to
receive basic Federal payments or Federally administered
supplementary payments, or both.
B. Make redeterminations of eligibility for Medicaid as
frequently as redeterminations are made with respect to
eligibility for basic Federal payments or federally administered
State supplementary payments, or both.
C. Send to the State on a timely basis notifications of such
determinations and redeterminations of Medicaid eligibility ina
manner mutually agreed upon by the Secretary and the State.
D. Furnish to the State, at its request, copies of the title XVI
applications (or the data contained therein which is relevant to
Medicaid eligibility) and other related and necessary infor-
mation secured in connection with such applications in cases
where the individuals are determined to be not eligible for basic
Federal payments, or federally administered supplementary
payments, or both, to assist the State in carrying out its func-
tions under its Medicaid program.
EK. Notify the State of status changes with respect to in-
dividuals determined to be eligible for Medicaid pursuant to
paragraph A of this article.
F. Conduct such studies and evaluations as the State may
request; provided, however, that (1) the costs of such studies and
evaluations shall be borne by the State, and (2) the Secretary
determines that any such study or evaluation requested by the
State is in the interest of effective and efficient administration
of the supplemental security income program.
G. Conduct studies and evaluations which he determines to be
necessary to ensure effective and efficient administration of the
supplemental security income program, and provide periodic
reports thereon to the State.
A-50
APPENDIX D — Agreement Between Secretary of Health,
Education and Welfare and State of New York
H. In carrying out the functions set forth in this article,
establish procedures to detect and, where appropriate, in-
vestigate fraud or program abuse and make recommendations to
the State for the disposition of such cases. This provision shall be
understood not to preclude the Secretary from taking ap-
propriate action where the fraud or abuse may constitute an
offense committed against the United States.
I. Perform such other functions as may be mutually agreed
upon in order to carry out the provisions of this agreement.
Article III
FUNCTIONS TO BE PERFORMED
BY THE STATE
The State shall:
A. In aceordance with article IV, pay the Secretary for the
services performed under article II as described in Appendix A
(Schedule of Data).
B. Provide written notices of the Secretary’s Medicaid
determination to individuals covered by such determinations.
C. Continue to perform the functions it has been carrying out
under its State plan approved under title XIX of the Act prior to
the date of this agreement excepting those listed in article II
above, including making determinations of retroactive
eligibility for Medicaid.
D. Perform such other administrative functions as are
necessary to carry out the terms of this agreement.
Article IV
COSTS
It is the general intent of this agreement that the Secretary in
performing his functions and duties under this agreement shall
be paid an amount equal to one-half of the administrative costs
A-51
APPENDIX D — Agreement Between Secretary of Health,
Education and Welfare and State of New York
incurred which are additional to the costs he incurs in carrying
out the supplemental security income program established
under title XVI of the act and administering the State’s program
of supplementary payments. Therefore, in determining and
establishing the costs referred to in article III of this agreement,
the Secretary shall take into account only such administrative
costs incurred by him that are additional to the cost of carrying
out his functions under the Supplemental Security Income
Program (including federally administered supplementary
payments). The Secretary shall determine the amount of these
costs and invoice the State periodically.
If the Secretary and the State are unable to agree upon any
items in dispute, an official designated by the Secretary shall
make an initial determination and inform the State of his
determination with a full explanation thereof. The Secretary
shall review the initial determination if a written request is
filed with him by the State within 90 days after notification to
the State of such determination. On the basis of the evidence
obtained by or submitted to the Secretary, he shall render a final
decision affirming, modifying, or reversing such initial deter-
mination. In notifying the State of his decision, the Secretary
shall state the basis thereof. In connection with the Secretary’s
review, the State shall be afforded an opportunity to be heard
and to offer evidence in support of its position. Pending the final
decision of the Secretary, the State shall proceed diligently with
the performance of this agreement. The final decision of the
Secretary upon such review shall be conclusive as to any
question of fact in connection with his final decision. The
delegate of the Secretary who makes the final decision shall not
be the same delegate who made the initial determination on
behalf of the Secretary.
A-52
APPENDIX D — Agreement Between Secretary of Health,
Education and Welfare and State of New York
Article V
LIMITATION OF LIABILITY
The Secretary shall not be responsible for any financial loss
incurred by the State, whether directly or indirectly, through the
use of any data furnished pursuant to this agreement.
Article VI
CONFIDENTIAL NATURE AND LIMITATION
ON USE OF INFORMATION AND RECORDS
The Secretary and the State shall adopt policies and procedures
to ensure that information contained in their respective records
and obtained from each other or from others in carrying out
their functions under this agreement shall be used by them and
disclosed solely as provided in section 1106 of the Act and the
regulations prescribed thereunder.
Article VII
TERM OF AGREEMENT
This agreement shall begin on January 1, 1974 and end on June
30, 1974. It will automatically be renewed for successive periods
of one year unless the State or the Secretary gives written notice
not to renew at least 120 days before the end of the current
period.
Article VIII
TERMINATIONS AND MODIFICATION
OF AGREEMENT
A. This agreement may be terminated or modified in writing at
any time by mutual consent of the parties hereto.
B. The Secretary or the State may terminate this agreement at
any time upon 120 days written notice to the other party.
A-53
APPENDIX D — Agreement Between Secretary of Health,
Education and Welfare and State of New York
C. Nothing in this agreement shall be construed to preclude the
Secretary from terminating this agreement if the State fails to
comply with the terms of this agreement (which shall include the
failure of the State to make payments in a timely manner under
article IV) and fails to cure such noncompliance, or request an
initial determination under article IV of this agreement, within
a period of 30 days (or such longer period as the Secretary may
allow) after provision by the Secretary of notice explaining the
grounds for the proposed termination.
Article IX
APPENDIX
Appendix A (Schedule of Data) attached hereto is made a part of
this agreement. |
The attached addendum is hereby incorporated into and made a
part of this agreement.
In Witness Whereof, the parties hereby execute this agreement
this Thirtieth day of November, 1973.
THE SECRETARY OF HEALTH
EDUCATION, AND WELFARE
BY /s/ JOSEPH J. KELLY
SSI Regional Commissioner
New York City Region
(TITLE)
(STATE)
BY /s/ ABE LAVINE
State Commissioner of Social Services
(TITLE)
1450 Western Avenue
Albany, New York 12203
(ADDRESS)
A-54
APPENDIX D — Agreement Between Secretary of Health,
Education and Welfare and State of New York
APPROVED JAN 7 BY
ls/| THOMAS J MAHON
———— Commissioner (?)
I, Louis J. Lefkowitz, certify that I am the Attorney General of
the State of New York, that Abe Lavine, who signed this
agreement on behalf of the State, was then Commissioner of
Social Services of said State; and that he is authorized to enter
into this agreement on behalf of the State and that there is
authority under the laws of the State of New York to carry out
all the functions to be performed by the State as provided herein
and comply with the terms of this agreement.
ls) LOUIS J. LEFKOWITZ
Attorney General
APPENDIX A
SCHEDULE OF DATA
The data to be furnished to the State under this agreement are
as follows:
Data Element Description Frequency
Field 43 Third Party Weekly on New
Insurance Indicator Claims
Field 44 Retroactive Weekly on New
Medicaid Indicator Claims
ADDENDUM
This addendum is hereby made a part of this agreement. The
provisions of this addendum prevail over the terms contained in
the body of the agreement.
A-55
APPENDIX D — Agreement Between Secretary of Health,
Education and Welfare and State of New York
1. Page 6, Article IV second paragraph — replace this
paragraph with the following:
“E. Ifthe Secretary and the state are unable to agree upon any
item in dispute, an official designated by the Secretary shall
make an initial determination and inform the state, in
writing, of his determination with a full explanation thereof.
The Secretary shall review the initial determination if a
written request is filed with him the the state within 90 days
after notification to the state of such determination. On the
basis of the evidence obtained by or submitted to the
Secretary, he shall render a final decision affirming,
modifying or reversing such initial determination. In
notifying the state of his decision the Secretary shall state the
basis thereof. In connection with the Secretary’s review, the
state shall be afforded an opportunity to be heard and to offer
evidence in support of its position. Pending the final decision
of the Secretary, the state and the Secretary shall proceed
diligently with the performance of this agreement. The final
decision of the Secretary upon such review shall be conclusive
as to any question of fact in connection with ' is final decision,
unless a court of competent jurisdiction finds such decision not
to have been supported by substantial evidence. The previous
provision of this paragraph do not preclude consideration by
the Secretary of any question of law in connection with
decision provided therein, except that nothing in this
agreement shall be construed as making final such decisions
on a question of law. The delegate of the Secretary who makes
the final decision shall not be the same delegate who made the
initial determination on behalf of the Secretary. The official
designated by the Secretary to make the initial determination
will be empowered by the Secretary to make his decision based
on his own judgment of the facts, and the law, and this
A-56
APPENDIX D — Agreement Between Secretary of Health,
Education and Welfare and State of New York
decision will be final unless appealed by the state within 90
days as provided above.
2. Page 7, Article V should be revised as follows:
“Notwithstanding the preceding sentence the Secretary shall
not withhold or refuse to reimburse the state its Federal
financial participation under Title XIX for payments made by
the state on account of an erroneous medicaid eligibility
determination made by the Secretary. This does not include
cases of ineligibility which were caused by incorrect data
furnished by the state to the Secretary.”
3. Page 8, Article VIII (C) should now begin as follows:
“Nothing in this agreement shall be construed to preclude the
Secretary from terminating this agreement in less than 120
days if the state fails to comply with the terms of paragraphs
A, of Article III of this agreement.”
STATE OF NEW YORK
DEPARTMENT OF SOCIAL SERVICES
40 NORTH PEARL STREET
ALBANY, N. Y. 12243
BARBARA B. BLUM
COMMISSIONER
April 30, 1980
Dear Secretary Harris:
This letter will notify you in accordance with Article VIII of
the Agreement (hereinafter referred to as the “agreement”’) be-
tween the State of New York and the Secretary of Health.
Education and Welfare (Secretary), whereby the Secretary
pursuant to Section 1634 of the Social Security Act determines
eligibility for medical assistance of persons receiving or eligible
A-57
APPENDIX D — Agreement Between Secretary of Health,
Education and Welfare and State of New York
to receive Supplemental Security Income payments, is ter-
minated. This termination will, in accordance with Article VIII
which requires one hundred and twenty (120) days notice, be
effective August 29, 1980.
This action is necessary because the Second Circuit Court of
Appeals has held in the case of Caldwell v. Blum that New York
State cannot enforce a statutory prohibition against trans-
ferring assets to qualify for medical assistance against persons
who are aged, blind or disabled but financially ineligible for
Supplemental Security Income (SSI) benefits. Under State law,
the Department’s authority to enter into and remain a party to
the agreement is conditioned upon its ability to enforce the
statutory prohibition against transferring assets to qualify.
By virtue of the Caldwell decision, this State is placed in the
impermissible situation of ignoring a statutory mandate should
it remain a party to the agreement. Clearly, such a result is not
an option.
You should be aware that the Court relied in its decision on
DHEW’s regulatory requirement that a “contract” State cannot
impose supplementary financial eligibility criteria. In our view,
this regulation might be amended even at this date to permit the
State to apply supplementary eligibility criteria, and thus
permit this State’s continuation as a party to the agreement. We
do not understand the continuing reluctance of DHEW to
support our approach. In these times of severe fiscal constraints
and reduction of necessary governmental expenditures, we
question why DHEW continues on an approach that allows and
even encourages people to circumvent reasonable transfer of
property requirements in order to qualify for medical assistance.
Your position is particularly difficult to grasp, in light of the
fact that you continue to support transfer of property legislation
which is pending in Congress.
A-58
APPENDIX D — Agreement Between Secretary of Health,
Education and Welfare and State of New York
As you are aware, there would be a great fiscal impact in
federal, state and local dollars if we were to continue in the
agreement according to the terms which you require. In light of
this fiscal consequence, we are requesting an immediate meeting
with you to explore the question of termination of this
agreement before the required 120-day notice period has been
exhausted. At that meeting we would also be most interested in
learning the reasons why you have exercised your discretion so
that we have arrived at the result described in this letter.
Sincerely,
ls/BARBARA B. BLUM
Barbara B. Blum
Commissioner
Honorable Patricia Harris
Secretary
Department of Health, Education
and Welfare
Hubert H. Humphrey Building
200 Independence Avenue, S.W.
Washington, D.C. 20201
A-59
APPENDIX E — DECISION OF COURT OF APPEALS,
NINTH CIRCUIT
IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ROSSYE DAWSON, individually and on behalf of all others
similarly situated,
Plaintiff-appellant,
VS.
BEVERLEE A. MYERS,” et al.,
Defendants-Appellees.
D.C. No. C 78-2350 MML
On Appeal from the United States District Court for the Central
District of California The Honorable Malcolm M. Lucas,
Presiding
Before: WRIGHT and ANDERSON, Circuit Judges, and
SOLOMON, ””® District Judge.
J. BLAINE ANDERSON, Circuit Judge:
This is a class action challenging the State of California’s
transfer of assets rule which was relied upon to deny Medi-Cal
benefits to members of the class. In short, this rule denies Medi-
Cal benefits to any individual who has transferred assets so as to
qualify under the financial eligibility requirements for Medi-
Cal. The class members argue that the transfer rule conflicts
*Beverlee A. Myers, the Director of the California State Department of
Health Services, is the successor to Edwin W. Beach, the originally named
defendant. Since Myers succeeded Beach prior to when this appeal was
taken, we make the substitution under Fed. R. Civ. P. 25(d\(1) rather than
Fed. R. App. P. 43(cX1).
**The Honorable Gus J. Solomon, Senior United States District Judge for the
District of Oregon, sitting by designation.
A-60
APPENDIX E — Decision of Court of Appeals, Ninth Circuit
with the federal Medicaid statutes and regulations, and they also
challenge the rule’s constitutionality based on due process and
equal protection grounds. The court below rejected all of these
arguments and upheld the transfer rule. We believe that the
district court reached the correct result and affirm.
I. BACKGROUND
A. Medicaid
Title XIX of the Social Security Act established the Medicaid
program. 42 U.S.C. §1396 et seg. This cooperative federal-state
program is designed to provide medical assistance to certain
classes of individuals who are in need of such assistance.
Although states are not required to participate, if they choose to
do so they must develop a plan which conforms to the federal
guidelines. 42 U.S.C. §1396(b). Despite the extensive federal
standards (42 U.S.C. §1396a), the individual states are given
wide discretion in the administration of their local programs.
Norman v. St. Clair, 610 F.2d 1228, 1230 (5th Cir. 1980). After a
state's plan is approved by the Secretary of Health, Education
and Welfare, the state then receives reimbursement for a
portion of the funds which are expended. 42 U.S.C. §1396.
A state which has chosen to adopt a Medicaid program has the
option of deciding whether it should provide benefits to only one
or to both of the statutorily-defined groups of needy persons.
States participating in the program must provide assistance to
the group which is referred to as the categorically needy.’ 42
1The regulations define this group as follows:
“Categorically needy” means aged, blind or disabled individuals or
families and children who are otherwise eligible for medicaid and
who meet the financial eligibility requirements for AFDC, SSI, or an
optional State supplement;”
42 C.FR. § 435.4.
A-61
APPENDIX E — Decision of Court of Appeals, Ninth Cireuit
U.S.C. §1396a(10XA). Generally, in order to be considered
categorically needy, an individual must be receiving financial
assistance, or be financially eligible for such assistance, under
Title IV-A of the Social Security Act (Aid to Families with
Dependent Children, referred to as AFDC) or Title XVI of the
Social Security Act (Supplemental Security Income for the Aged,
Blind, and Disabled, referred to as SSI).2
When they establish their Medicaid program, the states have
the option of also providing benefits to the group which is
referred to as the medically needy. This group covers individuals
who would qualify for AFDC or SSI except that they have
sufficient income and resources to cover the essentials aside
from their medical costs.? The medically needy begin receiving
assistance after they have incurred medical expenses which
reduce their income (and assets) below a prescribed level. Thus,
the chief distinction between the two groups is that the
categorically needy have lower incomes and less resources than
the medically needy.
B. Medi-Cal
California, through its Medi-Cal program, has voluntarily
chosen to participate in the Medicaid program. In addition,
California voluntarily chose to cover the medically needy as well
2States have the option of using more restrictive criteria than those used
under the AFDC or SSI programs. California has not civ»sen this option and
so this opinion does not deal with those provisions of the Medicaid Act which
would then come into play.
3The regulations define this group as follows:
“Medically needy” means aged, blind, or disabled individuals or
families and children who are otherwise eligible for medicaid und
whose income and resources are above the limits set under the
medicaid State plan;”
42 C.F.R. § 435.4.
A-62
APPENDIX E — Decision of Court of Appeals, Ninth Circuit
as the categorically needy. California has adopted a com-
prehensive statutory and regulatory scheme to implement its
Medi-Cal program.
As part of its plan, the California legislature adopted what is
called a transfer of assets rule. Cal. (Welf. & Inst.) Code §14015.1
Basically, this prevents persons from qualifying as medically
needy if they have transferred assets for less than fair con-
sideration within two years prior to their application for
assistance. The transfer rule only applies to applicants in the
medically needy group; it has no application at all to the
categorically needy.
California has promulgated regulations which, among other
things, establish eligibility requirements for the medically needy
and implement the transfer rule.5 Under these regulations, an
4The statutory part of the transfer rule provides as follows:
“The providing of health care under this chapter shall not impose
any limitation or restriction upon the person's right to sell, exchange
or change the form of property holdings nor shall the care provided
constitute any encumbrance on the holdings. However, any transfer
of the holdings by gift or, knowingly, without adequate and
reasonable consideration, shall be presumed to constitute a gift of
property with intent to qualify for assistance and such act shall
disqualify the owner for further aid for a period determined under
standards established by the director, and in no event for less than
half of the period that the capital value of the transferred property
would have supplied the person’s maintenance needs based on his
circumstances at the time of his transfer plus the cost of any needed
medical care.”
Cal. (Welf. & Inst.) Code § 14015.
‘The transfer rule is implemented, for the most part, through 22 Cal. Admin.
Code §§ 50408, 50409. The first section (§ 50408) states the general conditions
for when the transfer of property will not result in ineligibility. The rule
and the procedure for overcoming the presumption are then stated in
§ 50409:
Footnote continued on next page—
A-63
APPENDIX E — Decision of Court of Appeals, Ninth Cireuat
individual is eligible as medically needy only if his or her assets
are valued at $1500 or less. 22 Cal. Admin. Code §50420. An
individual’s home, income-producing real property, and certain
other assets are not counted toward the $1500 limitation. 22 Cal.
Admin. Code §§50418, 50425-50439. Although this property is
exempt insofar as d&termining eligibility, it remains potentially
subject to California’s recovery procedures. That is, after the
individual dies, California is entitled to recover the cost of
—Footnote continued from preceding page
“(a) Transfer of property shall result in ineligibility for Medi-Cal if
the transfer did not meet at least one of the conditions specified in
Section 50408 or the transfer was in return for an enforceable life
care contract which includes complete medical care.
“(b) Transfer of property without adequate consideration shall
result in ineligibility for Medi-Cal if the transfer was made to
establish eligibility or to reduce the share of cost.
“(1) It shall be presumed that property transferred without
adequate consideration was for the purpose of establishing
eligibility or to reduce the share of cost as limited by (2).
“(2) To overcome the presumption, the applicant or
beneficiary has the burden of establishing by objective facts,
cather than statement of subjective intent, that this
presumption is not correct. The applicant or beneficiary shall
provide evidence that adequate resources were available at the
time of the transfer of property for support and medical care
considering such things as the applicant’s or beneficiary's age,
health, life expectancy, and ability to understard extent of
resources.
“(A) The declaration of another purpose, such as to
avoid probate, by itself, shall not be sufficient to over-
come the presumption. A showing that the sole purpose
of the transfer was for reasons other than to establish
eligibility or to reduce the share of cost shall be sup-
ported by evidence such as that specified above.
“(B) The establishment of the fact that the applicant or
beneficiary did not have specific knowledge of the
availability or benefits of the Medi-Cal program is not
sufficient to overcome the presumption.”
A-64
APPENDIX E — Decision of Court of Appeals, Ninth Circuit
medical assistance it provided to the individual from the assets
(including both exempt and nonexempt property) which are left
in the individual’s estate.
Under the regulations which implement the transfer rule, any
transfer of assets (including exempt property) for less than
adequate consideration creates a rebuttable presumption that
the transfer was made for the purpose of establishing eligibility.
Unless the applicant rebuts the presumption, the state can deny
benefits on this basis.
C. Facts
Dawson, who originally filed this action, has died. Two other
individuals, Beltran and Manahan, intervened. Beltran, who is
87, lives in an extended care facility. Manahan, who is 85, lives
in a convalescent home. Both Beltran and Manahan were
medically needy and otherwise qualified to receive Medi-Cal
benefits. However, both were denied benefits based on the fact
that they had transferred assets for less than adequate con-
sideration prior to applying for Medi-Cal. Neither was able to
overcome the presumption of ineligibility resulting from these
transfers.
In their complaint, Beltran and Manahan (referred to as
appellants), on behalf of themselves and others similarly
situated, sought declaratory and injunctive relief invalidating
and enjoining the California transfer rule. In addition, the
appellants sought reimbursement for those amounts which they
had been forced to pay because of the state’s transfer rule. The
district court certified a class consisting of all those who had
been denied Medi-Cal benefits based on California’s transfer
rule.
On May 10, 1979, the district court granted California’s motion
for summary judgment and denied the cross motion filed by the
appellants. The court entered findings of fact and conclusions of
A-65
APPENDIX E — Decision of Court of Appeals, Ninth Cireuit
law which held that the state’s transfer rule did not conflict with
the federal statutory and regulatory framework, nor did it
amount to a denial of due process or equal protection. The ap-
pellants then brought this appeal.®
Il. DISCUSSION
The appellants make five distinct arguments against
California’s transfer rule. They claim that it creates an
irrebuttable presumption in violation of the due process clause.
Since the rule only applies to the medically needy, they contend
that it also violates the equal protection clause. Furthermore,
the appellants claim that the transfer rule conflicts with two
different sections of the federal statutes (42 U.S.C.
§§1346a(aX10XC), 1396a(aX17\B), as well as one section of the
federal regulations (42 C.F.R. §435.401). We address the
challenges based on the federal statutes and regulations first
because if the appellants’ arguments are correct, we would not
need to reach the constitutional issues. Dandridge v. Williams,
397 U.S. 471, 475-476, 25 L.Ed.2d 491, 90 S.Ct. 1153 (1970).
Moreover, in addressing appellants’ arguments, the cardinal
principle of statutory construction must be kept in mind, that is,
statutes should be construed to avoid constitutional questions.
See Swain v. Pressley, 430 U.S. 372, 378 n.11, 97 S.Ct. 1224, 51
L.Ed.2d 411 (1977)
6The district court concluded that it had jurisdiction under 28 U.S.C. § 1343(3)
& (4) (civil rights jurisdiction) and under 28 U.S.C. § 1331 (federal question
jurisdiction). It is unclear whether jurisdiction was properly invoked under
28 U.S.C. § 1343. See Chapman v. Houston Welfare Rights Org., 441 U.S. 600,
99 S.Ct. 1905, 60 L.Ed.2d 508 (1979); Doe v. Klein, 599 F.2d 338 (9th Cir.
1979). Nevertheless, the amount in controversy exceeds $10,000 and so the
district court did clearly have federal question jurisdiction (28 U.S.C.
§ 1331). Brown v. Stanton, F.2d No. 79-1459, slip op. 2n.1 (7th Cir. 1980); see
Chapman, supra, 60 L.Ed.2d at 515. Since the appellants filed a timely notice
of appeal from the final judgment, this court has jurisdiction to consider the
appeal under 28 U.S.C. § 1291.
A-66
APPENDIX E — Decision of Court of Appeals, Ninth Circuit
A. 42US.C. §1396a(ay10VC)
Appellants’ primary argument is that the California transfer
rule conflicts with 42 U.S.C. §1396a (aX10XC), which requires
states providing benefits to the medically needy to cover “all
individuals who would, except for income and resources” be
eligible for SSI (and therefore come under the categorically
, needy classification), “and who have insufficient (as determined
in accordance with comparable standards) income and resources
to meet the costs of necessary medical and remedial care and
services.” The appellants attribute the following meaning to
§1396(aX10\C): “except for the definitional distinction that the
medically needy may have higher income and resource levels, the
7This statute provides, in part, as follows:
“A state plan for medical assistance must —provide—
|
“(C) if medical assistance is included for any group of individuals
who are not described in clause (A) and who do not meet the income
and resources requirements of the appropriate State plan, or the |
supplemental security income program under subchapter XVI of this
chapter, as the case may be, as determined in accordance with
standards prescribed by the Secretary —
|
“(i) for making medical assistance available to all individuals
who would, except for income and resources, be eligible for aid
y or assistance under any such State plan or to have paid with
respect tu them supplemental security income benefits under
subchapter XVI of this chapter, and who have insufficient (as
determined in accordance with comparable standards) income
and resources to meet the costs of necessary medical and
remedial care and services, and
“(ii) that the medical assistance made available to all in-
dividuals not described in clause (A) shall be equal in amount,
duration, and scope;
(emphasis added to show that portion of the statute which the ap-
pellants rely upon)
42 U.S.C. § 1396a(aX10).
A-67
APPENDIX E — Decision of Court of Appeals, Ninth Circuit
states must use the same rules for the medically needy as for the
categorically needy.”
Under the Social Security Act, an SSI applicant whose assets
exceed the eligibility levels may dispose of the excess assets in
order to become eligible for SSI payments. 42 U.S.C. §1382b(b).
This has been administratively interpreted to permit the
transfer of the excess assets for less than adequate consideration
or as a gift. Social Security Claims Manual §12507(a). According
to the appellants, since transfer rules cannot be applied to SSI
applicants (i.e., the categorically needy), they therefore cannot be
applied to the medically needy.
The court below rejected the appellants’ reasoning and con-
cluded that the California transfer rule did not conflict with
§1396a(aX10XC). The court agreed with the appellants that
California could not employ any substantive eligibility
requirements on the medically needy which were more
restrictive than those used for the categorically needy.
Nevertheless, the court characterized the transfer rule as a
collateral or procedural eligibility requirement which was
permissible under the Social Security Act. While we agree with
the district court that the California transfer rule does not
conflict with §1396a(aX10\C), we do not accept the semantic
distinction which was relied upon.
We believe that the California transfer rule is properly
characterized as a substantive eligibility requirement. It
directly applies to the state’s determination of whether an
applicant’s assets exceed the eligibility requirements.
In considering the appellant’s argument, we must first turn to
the language of the statute itself. Obviously, the face of this
a)
A-68
APPENDIX E — Decision of Court of Appeals, Ninth Cirewit
statute says nothing about prohibiting transfer rules such as
California’s.®
The portion of the statute with which we are concerned may be
divided into two parts. The first part provides that the medically
needy group includes all who would, except for their income and
resources, be eligibile for SSI. The second part provides that the
medically needy group includes all who have insufficient income
and resources, as determined under comparable standards, to
pay for their medical care.
The first part specifically excepts income and resources when
it equates SSI eligibility to the medically needy eligibility
requirements. And so, while this provision does extend all of the
SSI eligibility requirements to the medically needy, it does not
do so for those which deal with the applicant’s income and
resources. Were this not the case, then there would be no
distinction between the two groups. There can be no question but
that the California transfer rule is an eligibility requirement
which pertains to the applicant’s income and resources. It
therefore clearly comes within the exception to the first clause of
the statute.
The second part may be read as requiring that the eva!uation
of the applicant’s income and resources be determined by using
comparable standards. Since an SSI applicant is apparently
specifically allowed to transfer assets in the manner which is
8At one point, appellants suggest that states can only use requirements which
are explicitly authorized by the federal statute. We were unable to find any
provision of the statute which said this. In the absence of some expression by
Congress to the contrary, we decline to read such a prohibition into a statute
which is, after all, establishing a covperative federal state program. See,
New York Department of Social Services v. Dublino, 413 US. 405, 93 S.Ct.
2507, 37 L.Bd.2d 688 (1973) (“It will not be presumed that a federal statute
was intended to supersede the exercise of the power of the state unless there
is a clear manifestation of an intention to do so.” 413 U.S, at 413, quoting
Schwartz v, Texas, 344 US. 199, 202-203, 73 S.Ct. 232, 97 L.Ed. 231 (1952).
A-69
APPENDIX E — Decision of Court of Appeals, Ninth Circuat
prohibited by the California transfer rule, we are faced with an
inconsistent standard. Nevertheless, this does not make the
California rule necessarily in conflict with this part of the
statute. After all, the statute only requires the standards to be
comparable, not identical. Comparable only means that there
must be enough similar characteristics or qualities to make
comparison appropriate. Webster’s Third New International
Dictionary, G.&C. Merriam Co. (1976). The other standards
which are used for determining financial eligibility are similar
enough to invite comparison. We therefore cannot say that the
standards used by California to determine eligibility into the
medically needy group (including the transfer rule) are not
comparable to those which are used under the SSI program.
In support of their argument, the appellants claim that HEW,
the agency charged with administering the Medicaid program,
has interpreted §1396a(aX10\C) in the same manner as they
would have this court. Apparently, three different HEW
Regional Medical Directors have written letters stating that
state transfer rules are inconsistent with §1396a(a)10\C)
because they impose more restrictive eligibility requirements on
the medically needy than on SSI applicants. See Fabula v. Buck,
598 F.2d 869, 873 (4th Cir. 1979). Although this court generally
defers to an administrative agency’s interpretation of the law
which it is charged with administering, we are by no means
bound by the agency’s interpretation. Pacific Coast Medical
Enterprises v. Harris, F.2d __, slip op. 2516, 2525-2526 (9th
Cir., March 28, 1980); Baker v. United States, 613 F.2d 224, 226-
227 (9th Cir. 1980).
In the present case, we not only refuse to follow the letter
interpretations, but we also refuse to attach any weight to them.
Initially, we are convinced that our interpretation of
§1396a(aX10\C) is correct, that is, the California transfer rule
does not conflict with the statute. This court’s “deference does
not extend to agencies’ construction which conflict with
A-70
APPENDIX E — Decision of Court of Appeals, Ninth Cirewit
statutory directives.” Pacific Coast, supra, slip op. at 2526.
While regional administrators may be writing letters disap-
proving of state transfer rules, HEW as a whole has approved
California's Medi-Cal program (and the transfer rule). By this .
approval, and by not taking any action against California
because of the transfer rule, HEW “has in effect expressed its
view that the plan is in compliance with applicable statutory
and regulatory requirements.” Michael Reese Physicians &
Surgeons, S.C. v. Quern, 606 F.2d 732, 735-736 (7th Cir. 1979).
Based on the preceding, not only do we believe that the letter
rulings should not be followed, but we also believe that HEW’s
general acceptance of California’s Medi-Cal program supports
our interpretation.
As further support for their argument under §1396a(a\(10\C),
the appellants rely upon the subsequent legislative history of the
Medicaid program. In 1978, as part of the Medicare-Medicaid
Administrative and Reimbursement Reform Act, the Senate
Finance Committee proposed an amendment to the Medicaid
statute which would have specifically required states to adopt
transfer rules such as California’s. S. Rep. No. 95-1111, 95th
Cong., 2d Sess., 24-25 (1978). Apparently, relying upon what we
have already concluded was an erroneous agency interpretation
of §1396a(aX10C), the Senate Committee said that the states
were not able to adopt transfer rules under present law. Jd. We
recognize that the pronouncements of legislative committees as
to the meaning of previously enacted statutes are often afforded
considerable deference. Sioux Tribe of Indians v. United States,
316 US. 317, 329-330, 62 S.Ct. 1095, 86 L.Ed. 1501 (1942); Never-
theless, courts are not bound by such pronouncements and it has
been suggested that subsequently expressed Congressional views
should not be relied upon at all. Mathews v. Weber, 423 U.S. 261,
272 n.7, 96 S.Ct. 549, 46 L.Ed.2d 483 (1976). Since the Senate
Committee was apparently relying upon the erroneous ad-
ministrative interpretation, and because we remain convinced
that our interpretation of §1396a(aX10XC) is correct, we choose
A-71
APPENDIX E — Decision of Court of Appeals, Ninth Circuit
not to accord any deference to the latter legislative pronoun-
cements.
We conclude that California’s transfer rule does not conflict
with 42 U.S.C. §1396a(aX10XC).
B. 42 U.S.C. §1396a(aN17B)
The appellants argue that the California transfer rule violates
42 U.S.C. §1396a(aX17\B).” This section requires states to only
9This statute provides in part as follows:
“A state plan for medical assistance must—
“include reasonable standards (which shall be comparable for all
groups and may, in accordance with standards prescribed by the
Secretary, differ with respect to income levels, but only in the case of
applicants or recipients of assistance under the plan who are not
receiving aid or assistance under any plan of the State approved
under subchapter I, X, XIV, or XVI, or part A of subchapter IV of
this chapter, and with respect to whom supplemental security income
benefits are not being paid under subchapter XVI of this chapter
based on the variations between shelter costs in urban areas and in
rural areas) for determining eligibility for and the extent of medical
assistance under the plan which (A) are consistent with the objectives
of this subchapter, (B) provide for taking into account only such
income and resources as are, as determined in accordance with
standards prescribed by the Secretary, available to the applicant or
recipient and (in the case of any applicant or recipie
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