Petition — Beltran v. Myers

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i Supreme Court, U. $,

80-5303 FILED

AUG2 7 1980

IN THE WICH trues,

they LLERK

SUPREME COURT OF THE UNITED STATES

October Term, 1980

No. 80-

AatowoiA RBELTRAW “

—-ROSSYE DAWSON, individually and on behalf of

all others simiiarly situated,

Petitioner,

Vv.

BEVERLEE A. MYERS, individually and in her

official capacity as Director of the California

State Department of Health; and ELISABETH LYMAN

individually and in her official capacity as

Deputy Director of the State Department of

Health, ‘

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

GILL DEFORD

NEAL S. DUDOVITZ

National Senior Citizens Law Center

1636 West 8th Street, Suite 201

Los Angeles, California 90017

(213) 388-1381

STUART PARKER

Senior Citizens Legal Advocacy

Legal Aid Society of Orange County

2700 North Main Street, llth floor

Santa Ana, California 92701

(714) 835-8808

QUESTIONS PRESENTED

1. Whether the application by California of 4

"transfer of assets" rule to its medically needy aged, blind,

and disabled applicants for, and recipients of, Medicaid,

resulting in the denial of assistance to individuals otherwise

eligible, contradicts the applicable portions of the Social

Security Act and thus violates the Supremacy Clause.

2. Whether the application by California of a

"transfer of assets" rule to its medically needy aged, blind,

and disabled applicants for, and recipients of, Medicaid, re-

sulting in the denial of assistance to individuals otherwise

eligible, violates the due process and equal protection clauses

of the Fourteenth Amendment.

LIST OF PARTIES

Petitioner: Antonia Beltran*

Respondents: Beverlee A. Myers and Elisabeth Lyman

* Rossye Dawson, whose name has remained on the papers

throughout this litigation, died while this case was before the

district court. Enosinsio Manahan, another named plaintiff,

died while the case was before the Court of Appeals. Antonia

Beltran is the remaining named plaintiff.

TABLE OF CONTENTS

Pages

EN RO tig gai Be. ee ee es eee we BR ire

List of Parties . . . ° 7 7 . . ° . ° . . . . . . 7 . ° . .

ee rr eee. .- ek og se 2s 6 8 ee ee ee Ut lt ee SS

Opinicns Below . 7 * * . . . 7 . . . . * . . . 7 >. .* . . .

Pee 6S 6 66 sc ee 6 we 686 ee eee em eee

Constitutional and Statutory Provisions Involved .....

OGecemene Of Che Case . 1 ts sc wee esses eee vee ee

REASONS FOR GRANTING THE WRIT

I. The court's ruling on petitioner's first

claim directly contradicts the interpretation

of the responsible federal agency and three

appellate courts, and necessarily violates a

long-standing premise of Medicaid law upheld

by every court which has considered the issue. . .

II. The decision below also deviates from those of

courts evaluating petitioner's other supremacy

Clause contentions ..+.«+s+«+se*«-ereese ee eo @ @

III. The Ninth Circuit's decision also conflicts

with decisions enforcing constitutional guarantees

Conc 1 us ion - ° . . . . . 7 . . . ° *. . * . . o . . . . . .

Append ice s ° . . . 7 . 7 . o . . - . . . . . . . . . * . *

TABLE OF AUTHORITIES

CASES

Aitchison v. Berger, 404 F.Supp. 1137 (S.D.N.¥.1975),

aff'd without opinion 538 F.2d 307 (2d Cir.), cert.

Gansea 420 Uschi ee teers, «<b. «sé 2 ee ew we ee 6 6URB OD

peal v. Dee, 632.0.8..450 (2977) . « 2 ae 6 0 6 0 #0 oe

Blum v. Caldwell, 100 S.Ct 1635 (1980) (Marshall, J.),

later order 100 S. Ct. 2959 (1980) (en hanc)9, 10, 13, 14

Brown v. Beal, 404 F.Supp. 770 (E.D.Pa.1975) ...... 19

Brown v. Stanton, 617 F.2d 1224 (7th Cir.1980), pet. for

cert. pending No. 79-1690, 48 U.S.L.W. 3734

(April 24, 1980) 7 . . . . . 7 . . . . . . . . . . . * 15

Buckner v. Maher, 424 F.Supp. 366 (D.Conn.1976), aff'd

eum. 434°O.8. SOB CAST?) « «0's @ ee ee ee oe |lh6UES,

Caldwell v. Blum, 621 F.2d 491 (2d Cir.1980), pet. for

cert. pending No. 79-2034, 49 U.S.L.W. 3005

(Same 24, ASSC) «1 oe 0 et oe + ee lw 6 Ry AL, 12, 23, 14

Carleson v. Remillard, 406 U.S. 598 (1972) ....... .16

Chapman v. Houston Welfare Rights Organization, 441

U.8. 600 (1979). . - 7 ~ o . o . . . . * . . 7 . 7 o - 6

Dawson v. Myers, No. 79-3246 (9th Cir., May 14, 1980),

aff'g sub.nom. Dawson v. Beach, No. 78-2350

[Cs WeGeees Ce SG, APVOP « « as 0 6 ee 8 8 eee . PROC

Doe :v. Kiein, 599 F.2G 330 (Sth Cir. 1979). . ws ew bw oe ©

Dominguez v. Milliken, CCH Medicare & Medicaid Guide,

q¥26,633 (W.D.Mich. 1973) . - . . 7 . . - ° . . . . 7 . 13

Fabula v. Buck, 598 F.2d 869 (4th Cir. 1979). . ... . .passim

Fabula v. Solomon, 463 F.Supp. 830 (D.Md.1978), rev'd

sub nom. Fabula v. Buck, 598 F.2d 869 (4th Cir.1979) . 10

Friedman v. Berger, 547 F.2d 724 (2d Cir.1976), cert.

denied 430 U.S. 984 (1977) . J J * . . . * . 7 * * 7: 4, 13

Greklek v. Toia, 565 F.2d 1259 (2d Cir. 1977), cert.

denied sub nom. Blum v. Toomey, 436 U.S. 962 (1978). . 13

Hendrickson v. Noot, CCH Medicare & Medicaid Guide,

§30, 499 (D. Minn.1980) . . . . . . . . . . . . . . 7 . 13

King v. Smith, 392 0.8. 309 (1968). . «.. « 2 « « » « AS, 26

Lerner v. Division of Family Services, 235 N.W.2d 478

(Wis. 1975) . . . . . . . . . o > o . . . 7 .* . . . . . 15

Sewse. ©. Seceine 329? U8. SER TT. 2 2 oct ea Cre ce

iii

TABLE OF AUTHORITIES

CASES

Manfredi v. Maher, 435 F.Supp. 1106 (D.Conn.1977)....,

Medora v. Colautti, 602 F.2d 1149 (3d Cir.1979)......

Memorial Hospital v. Maricopa County, 415 U.S. 250 (1974),

Owens v. Roberts, 377 F.Supp. 45 (M.D.Fla.1974), . . . 16,

Rinefierd v. Blum, 412 N.Y.S.2d 526, 66 A.D.2d 351

(4th Dept. 1979) . . . . . . . . . . . . . . . . . 7 .

Robinson v. Pratt, No. 79-1278-S (D.Mass., June 24, 1980),

BoenGe. o.. Ween, 207 B.6. 27. CROTe? 2 i ce te ee ele ee

Scarpuzza v. Blum, 426 N.Y.S.2d 505, 73 A.D.2d 237

(2a Dept. 1980) . . . . . . . . o . 7 . + - 10, ll, 13,

Schaak v. Schmidt, 344 F.Supp. 99 (E.D.Wis.1971) .....

Silbowitz v. Secretary of H.E.W., 397 F.Supp. 862

(S.D.Fla.1975), aff'd mem. 430 U.S. 924 (1977). ....

Townsend v. Swank, 404 U.S. 282 (1971) . « « « « « « « « «

Udina v. Walsh, 440 F.Supp. 1151 (E.D.Mo.1977) ... . 15,

U.S.Department of Agriculture v. Murry, 413 U.S. 508

(1973) . « . . >. . * . . . . . . . . . . . . . . . . .

Van Lare v. Hurley, 421 U.S. 338 (1975)- - « «© «© «© «© «© « «

Vlandis v. Kline, 412 U.S. 441 (1973)- «© «© «© « «© « « « « «

West v. Cole, 390 F.Supp. 91 (N.D.Miss.1975) . «© « « « « -«

Winter v. Quern, CCH Medicare & Medicaid Guide, 430,572

(N.D.I11.1980), previous opinion sub nom. Winter v.

Trainor, CCH Medicare & Medicaid Guide, 428,151 (1977).

Wong v. Brian, CCH Medicare & Medicaid Guide, 426,605

(Cal.Ct.App.1972) e e e . ° e . ° . . . . . . o ~ . . .

STATUTES

United States Code, Title 28

section 1254(1) ...

Section i293 «+ -e%

eegtion Laan és ss

section 1343(3), (4).

AaaAHY

TABLE OF AUTHORITIES

Page

STATUTES

United States Code, Title 42

section 1396, et seq. . ‘ a

section 1396a(a) (10) (A)

section 1396a(a) (10) (C)

section 1396a(a)(17). .

section 1396a(a) (17) (B)

section 1396a(f) ...

Section 239GC . <« « « «

2 ££ ee es. e

. . . . . . .

® £ 64 -e-°9 £18

e 8 e¢ ¢ & #25

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i a a a ie

ee 6 8.976

a a ae oe ee

. . . . . . .

. * . * # .

. . . . * . .

oOo

REGULATIONS

22 California Administrative Code

section 50409(b)(2) .....

seetion SO0411 ..-. -

section 50418 ....

Section 50420 ... «

section 50425-50489 .

. . . a.

. . . .

. . . . .

* . > .

. . . . .

. . . .

Code of Federal Regulations, Title 42

NE ee a ee a a a ee ee ee ee)

ee ee a a

Code of Federal Regulations, Title 45

ite -— sas es © e« ¢ SC eee se ee ew ate ee

() errr - = » 6 6» 6 « ¢+ eee eee eee Oe

MISCELLANEOUS

42 Federal Register 2684 (Jan. 13, 1977) ...... 12,19

44 Federal Register 10553 (Feb. 21, 1979) ....2.+2++2+2+22

Health Care Financing Administration Regional Office

Manual, Part 6, Medicaid Guidelines, Transmittal

No. 31, §1937, reported at CCH Medicare & Medicaid

Guide q¥30,092 . . 7 . . . - - . . . . . . . . . . ll

Social Security Administration Claims Manual, §12507(a) .. 9

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1980

No. 80-

ROSSYE DAWSON, individually and on behalf of

all others similarly situated,

Petitioner,

Vv.

BEVERLEE A. MYERS, individually and in her

official capacity as Director of the California

State Department of Health; and ELISABETH LYMAN

individually and in her official capacity as

Deputy Director of the State Department of Health,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

OPINIONS BELOW

The opinion of the Court of Appeals, as yet unreported,

appears as Appendix A. The district court's unreported Findings

of Fact and Conclusions of Law of May 10, 1979, with the summary

judgment order, are attached as Appendix B.

JURISDICTION

The Court of Appeals filed its Opinion on May 14, 1980.

On July 30, 1980, a timely petition for rehearing and rehearing

en banc was denied (Appendix C), with this petition for certi-

orari filed within 90 days of that date. This Court's juris-

diction is invoked under 28 U.S.C. §1254(1).

///

CONSTITUTIONAL, STATUTORY AND

REGULATORY PROVISIONS INVOLVED

The following provisions are significantly involved

in this case, and, because of their length, are cited here,

with their pertinent texts set out verbatim in Appendix D:

1. United States Constitution, 14th Amendment, §1

(due process and equal protection clauses)

2. Title 42, United States Code, §§1396a(a) (10) (C);

1396a(a) (17) (B)

3. California Welfare and Institutions Code §14015

4. Title 42, Code of Federal Regulations,

§435.401(c) (2)

5. Title 22, California Administrative Code,

§§50409, 50411 (a)

6. Social Security Administration Claims Manual,

§12507 (a)

STATEMENT OF THE CASE

1. California participates in the Medical Assistance

("Medicaid") program established by Title XIX of the Social

Security Act, 42 U.S.C. §1396, et seq.

“This cooperative federal-state program is designed to

provide medical assistance to certain classes of indi-

viduals 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. §1396a(b) ....

After a state's plan is approved by the Secretary of

{the Department of Health and Human Services], the

state then receives reimbursement for a portion of

the funds which are expended. 42 U.S.C. §1396."

Dawson v. Myers, No. 79-3246, Slip Op., at 2 (9th Cir.,

May 14, 1580) Tapp. A, at 3).

Under the federal formula, California is reimbursed 50% of its

costs. 44 Fed.Reg. 10553 (Feb. 21, 1979).

A necessary condition of participation and reimburse-

ment is that the state comply with controlling federal law.

E.g., Fabula v. Buck, 598 F.2d 869, 870-871 (4th Cir. 1979).

-2-

In theory, the Secretary of the Department of Health and ;

Humand Services ("HHS") can deprive the state of its match-

ing funds, 42 U.S.C. §1396c, but as that is the sole sanction

available to the Secretary, she rarely, if ever, takes that

action. Instead, the Secretary undertakes a process of in-

forming and warning the state of its non-compliance, an effort

intended to avoid the drastic remedy of terminating payments

to the state. 45 C.F.R. §201.6; see generally Rosado v.

Wyman, 397 U.Ss 397, 405 n.8 (1970).

Within the confines of the federal statute and regu-

lations, the states have considerable latitude in structuring

their programs. If a state decides to participate, it must

provide assistance to the so-called categorically needy, who

are those individuals meeting both the categorical definitions

of age, blindness, disability, or childhood dependency, and

their financial eligibility conditions. Even so, the state

has flexibility in defining the eligibility conditions of the

categorically needy. It can either use the same eligibility

conditions as are applicable to recipients of Supplemental

Security Income ("SSI"), the federally-administered and -funded

welfare program of cash assistance to the aged, blind and dis-

abled, Title XVI of the Social Security Act, or it can use more

restrictive eligibility conditions, but no more restrictive

than those validly in effect in the state on January l, 1972.

Compare 42 U.S.C. §1396a(a) (10) (A) wath 42 U.S.C. §1396a(f);

see Slip Op., at 2 & nn.1,2; (App. A, at 2, 17 nn.1,2); see also,

e.g., West v. Cole, 390 F.Supp. 91, 95-99 & nn.5,6 (N.D.Miss.

1975). California, like most states, has explicitly chosen

to provide Medicaid pursuant to the SSI eligibility conditions.

Slip Op., at in.2 (App. A, at 17n.2). It is informally

///

known, therefore, as an “SSI state."

A state also has the option of providing Medicaid

to the "medically needy", who also must meet the categorical

definitions but whose income or resources are above the

categorically needy levels. 42 U.S.C. §1396a(a) (10) (C); see,

e.g., Beal v. Doe, 432 U.S. 438, 440 & n.1 (1977); Friedman

v. Berger, 547 F.2d 724, 726 (2d Cir. 1976), cert. denied

430 U.S. 984 (1977). "The medically needy begin receiving

assistance after they have incurred medical expenses which

reduce their income (and assets) below a prescribed level."

Slip Op., at 3 (App. A, at p-3.) California does include the

medically needy in its state plan. Id., at 3 (App. A, at p.3.)

In its Medicaid »rogram, which it cails "Medi-Cal",

California has adopted a transfer of assets rule.

"Basically, this prevents persons from qualifying as

medically needy if they have transferred assets for

ess than fair consideration within two years prior

to their application for assistance. The transfer

rule applies to applicants in the medically needy

group; it has no application at all to the categori-

cally needy." Slip Op., at 3 (App. A, at Pp.3)

(emphasis in original).

The eligibility conditions deny medically needy assistance to

individuals with resources valued over $1500, 22 Cal.Admin.c.

§50420, but homes and certain other properties are exempt

from consideration. 22 Cal.Admin.C. §50418, 50425-50489.

But if an asset, whether or not exempt, is transferred for

less than fair consideration prior to application, a presump-

tion arises that the transfer was effected in order to obtain

Medi-Cal eligibility./ The individual is then denied eligi-

bility for a period of time which reflects the actual value

of the transferred asset, the cost of care, and the value

received for the asset. 22 Cal.Admin.c. §50411l.

1/ Whether this presumption is rebuttable or irre-

buttable is one of the issues of this case. See, infra, at 17-18.

California has been told by HHS that the application

of any transfer rule to its medically needy, however it is

worded, violates federal law. As early as September 29, 1978,

respondent Myers was informed by letter that the state could

not apply a transfer rule to its medically needy aged, blind,

and disabled. California has not altered its regulations, and

HHS has continued with its efforts to force compliance with

federal law. Amicus Brief of Secretary Of HHS, lodged in

support of Appellants' Petition for Rehearing.

2. The sole living class representative in this case,

Antonia Beltran, is, like Rossye Dawson and Enosinsio Manahan,

who have died during the course of this litigation, an elderly,

sick individual who requires convalescent care but who has been

found ineligible for Medi-Cal as a result of the transfer of

assets rule. She is now 88, and will require nursing home care

indefinitely. About a year prior to her entry into the home

on March 20,-:1978, she and her husband grant-deeded some land

with two houses on it, one of which they lived in, to their

children because of the parents' inability to care for the

property. They had been determined eligible for Medi-Cal

since May, 1977, but she was terminated effective September,

1978, for reasons which are unclear. She re-applied, but was

denied assistance in a decision dated January 8, 1979 because

of the February, 1977 transfer of the property. The county

computed her period of ineligibility to be 885 months, just

under 74 years. The most recent bills from her nursing home

indicate that she is in debt to the home for over $20,000.

As the Court of Appeals observed,

"[b]Joth 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

consideration prior to applying for Medi-Cal. Neither

~Se

was able to overcome the presumption of ineligibility

resulting from these transfers." Slip Op., at 4

(App. A, at 4). .

3. This case was filed in forma pauperis by Rossye

Dawson on June 19, 1978. Enosinsio Manahan and Antonia Beltran

later intervened; Rossye Dawson died before the case was decided

on the merits. The intervenors' complaint, like that of

Rossye Dawson, sought declaratory and injunctive relief on

their own behalf, and on behalf of similarly situated Califor-

nians seeking medically needy coverage, invalidating and enjoin-

ing the state's policy of denying or terminating Medi-Cal

benefits to those who had allegedly transferred assets for less

than fair consideration.

The district court granted plaintiffs' motion for

class certification on May 10, 1979. On the same day, the

court denied plaintiffs' motion for summary judgment, and

granted defendants'. The court found that the plaintiffs

would have been eligible for Medi-Cal but for the application

of the transfer of assets rule. (App. B, at 27.) In its

conclusions of law, the court recognized that it had jurisdic-

tion under 28 U.S.C. §1343(3), (4), and 28 U.S.C. §1331.2/

(App. B, at 27.)

2/ The Court of Appeals questioned, but did not resolve,

whether jurisdiction was proper pursuant to 28 U.S.C. §1343(3)

and (4), citing Chapman v. Houston Welfare Rights Organization,

441 U.S. 600 (1979), and Doe v. Klein, 599 F.2d 338 (9th Cir.

1979). Slip Op., at ii n.6 (App. A, at 18 n.6). Since the amount

in controversy exceeded $10,000, however, “the district court

did cleariy have federal question jurisdiction (28 U.S.C. §1331)."

Id., at iin.6 (App. A, at 18n.6) (citations omitted). The

Court of Appeals had jurisdiction over the appeal pursuant to

28 U.S.C. §1291. Id., at ii n.6 (App. A, at 18 n.6).

The district court agreed with plaintiffs’ basic con-

tention that California had obligated itself to provide Medi-

Cal to all SSI recipients and that “a state may not impose

conditions of eligibility on the medically needy that are more

restrictive than those imposed on the categorically needy, that

is, recipients of SSI." Conclusions of Law, #448, 10 (App. B,

at 30). Despite these conclusions, it held that the applica-

tion of a transfer of assets rule to the medically needy (but

not to the categorically needy) was permissible, as the rule was

a “collateral restriction" and was therefore a “procedural

regulation" not a “substantive eligibility requirement.” Id.,

at 4410-11 (App. B, at 30).

As a member of the class was, on the very date of the

decision (May 10, 1979), about to be evicted from her nursing

home because the transfer rule had rendered her ineligible, she

sought an injunction pending appeal from the district court.

That was denied by that court on May 11 after plaintiffs filed

their Notice of Appeal, but upon docketing the appeal on that

same date, she sought and obtained a temporary injunction from

an appellate judge .2/ The request for an injunction pending

appeal for the one class member was later extended for the

duration of the appeal, but denied without prejudice for the

class. That request was renewed upon oral argument, but

was denied by the panel hearing the case. Another class member,

however, later faced with imminent eviction, also received an

injunction pending appeal which provided Medi-Cal benefits

during the pendency of the appeal.

3/ Because the appeal had to be filed and docketed

immediately, there was not sufficient time to obtain and file

the necessary affidavits for the appeal to proceed in forma

pauperis.

The panel's decision of May 14, 1980 affirmed the

district court, but on considerably different grounds. First,

the court specifically repudiated the district court's charac-

terization .é the transfer rule, and recognized that it was a

substantive eligibility requirement. Slip Op., at 7 (App.

A, at 7). But the decision then ignored the explicit inter-

pretation of HHS by determining that the "comparability" language

in the statute, 42 U.S.C. §1396a(a) (10) (C), did not require that

the medically needy be treated equally with the categorically

needy. Slip Op., at 8, 11-13 (App. A, at 8, 11-13.)

The court also held that there was no violation of the

"availability" requirement of 42 U.S.C. §1396a(a) (17), as it

held that a state can consider former resources to be available.

Id., at 11 (App. A, at 11). The court rejected in a footnote

plaintiffs' arguments that the transfer rule presented an eli-

gibility condition not countenanced by the Social Security Act,

id., atiiin.8 (App. A, at 19 n.8), and held that due process

was not violated as the transfer rule did not utilize an irre-

buttable presumption. Id., at 13-14 (App. A, at 13-14.) Finally,

the panel concluded that there was a rational basis to treat

the medically needy differently than the categorically needy,

and thus disposed of the equal protection claim. Id., at 14-16

(App. A, at 14-16) .4/

in light of the fact that three othe? #ppellate courts,

one state and two federal, had recently reached the diametrically

opposite conclusion on plaintiffs' first argument, and that HHS

had specifically corroborated the propriety of that argument,

4/ Since the court ruled against plaintiffs, it ex-

plicitly refused to consider plaintiffs' request for an order

detailing the manner in which relief should be provided. Slip

Op., at v n.13 (App. A, at 21n.13).

plaintiffs sought a rehearing. On July 21, 1980, HHS lodged

an amicus brief supporting plaintiffs' request for a rehearing

and repudiating the panel's conclusion that HHS had not directly

spoken on the issue of this case. See Slip Op., at 8-9 (App. A,

at 8-9). On July 30, 1980, the request for a rehearing and

for a rehearing en banc was denied. The court also refused to

permit the filing of the HHS amicus brief. (App. C, at 33.)

REASONS FOR GRANTING THE WRIT

I. THE COURT'S RULING ON PETITIONER'S FIRST CLAIM

DIRECTLY CONTRADICTS THE INTERPRETATION OF THE

RESPONSIBLE FEDERAL AGENCY AND THREE APPELLATE

COURTS, AND NECESSARILY VIOLATES A LONG-STANDING

PREMISE OF MEDICAID LAW UPHELD BY EVERY COURT

WHICH HAS CONSIDERED THE ISSUE

Petitioner's first argument to the courts below

involves a simple two-step analysis. First, the categorically

needy aged, blind, and disabled (i.e., SSI recipients) do not

and cannot have a transfer of assets rule applied to them in

determining Medicaid eligibility. Regardless of whether they

have transferred, and regardless of the value of the property

and the value received for it, they cannot be deprived of Medi-

caid eligibility. This is so because the Social Security Ad-

ministration specifically forbids consideration of asset

transfers in determining SSI eligibility, Social Security Ad-

ministration Claims Manual, §12507(a) (App. D, at 37), and

because, in the SSI states, the SSI eligibility conditions

must be applied to categorically needy Medicaid applicants.

42 U.S.C. §1396a(a) (10) (A). See Blum v. Caldwell, 100 S.Ct.

1635, 1637 (1980) (Marshall, J.) (denying request for

///

stay) 2/; Caldwell v. Blum, 621 F.2d 491, 494 (2d Cir.1980),

pet. for cert. pending No. 79-2034, 49 U.S.L.W. 3005 (June 24,

1980); Fabula v. Buck, supra, 598 F.2d, at 874 n.13; Scarpuzza

v. Blum, 426 N.Y.S.2d 505, 508 n.8, 73 A.D.2d 237 (2d Dept. 1980).

Secondly, a state is forbidden from applying more

restrictive eligibility conditions to the medically needy than

to the categorically needy. The statute and regulations re-

quire this equal treatment, so that the only permissible dis-

tinction between the categorically and medically needy is that

the latter may have more liberal income and resource eligibility

conditions applied to them. 42 U.S.C. §1396a(a)(10)(C); 42 C.F.R.

§435.401(c) .&/

The panel's conclusion permitting application of a

transfer rule is in direct conflict with two other federal

appellate courts, both of which determined that the argument

outlined above forbade an SSI state from applying a transfer

rule to its medically needy. Caldwell v. Blum, supra; Fabula

v. Buck, supra. It also directly contradicts a New York state

appellate court which relied on the same reasoning. Scarpuzza

5/ A second application for a stay of Caldwell --

New York's transfer of assets case -- was made after the decision

below came down. It was referred to the entire Court and also

denied. 100 S.Ct. 2959 (1980).

6/ Case authority for this proposition is cited in

full, infra, at p.13 n.9. The only decision with a contrary

conclusion, Fabula v. Solomon, 463 F.Supp. 830 (D.Md.1978),

was reversed on this point. Fabula v. Puck, supra, 598 F.2d,

at 873.

///

-10-

v. Blum, supra. And, another federal court, also relying

on this same argument, declared that Massachusetts' transfer

rule violated federal law. Robinson v. Pratt, No. 79-1278-S

(D.Mass., June 24, 1980) .2/

In addition, the panel's conclusion contradicts the

interpretation and order of the responsible federal agency.

HHS has informed state Medicaid directors that the relation-

ship between the categorically and medically needy required

that the SSI states not apply transfer rules to the medically

needy. See Fabula v. Buck, supra, 598 F.2d, at 873 n.10;

Caldwell v. Blum, supra, 621 F.2d, 495; Slip Op., at p.8

(App. A, at p.8); Scarpuzza v. Blum, supra, 426 N.Y.S.2d, at

513 & n.19. Indeed, it directly informed defendant Myers of

this noncompliance by letter of September 29, 1978. Moreover,

HHS has published this interpretation, again based on the argu-

ments made here by petitioners. Health Care Financing Adminis-

tration Regional Office Manual, Part 6, Medicaid Guidelines,

Transmittal No. 31, §1937, reported at CCH Medicare & Medicaid

Guide, %30,092. And, HHS attempted to file an amicus brief

in the Ninth Circuit supporting petitioners' request for a

rehearing in which again it noted the propriety of this argument.

In addition to the deviation from this specific

interpretation, the decision below also violates the established

interpretation of the Medicaid statute which requires states

not to apply more restrictive rules to the medically needy

than to the categorically needy. HHS details this statutory

requirement by regulation: "The [state] agency must not use

requirements for determining eligibility for optional coverage

7/ That court, however, has refused to enjoin appli-

cation of the state rule on the grounds that it is solely the

obligation of HHS to force a state to comply with federal law.

groups that are -- ... (2) For aged, blind, and disabled in-

dividuals, more restrictive than those used under SSI ...."

42 C.F.R. §435.401(c) .2/ In the comments to other regulations,

which were also dependent on this policy, the agency explained:

"(42 U.S.C. §1396a(a) (10) (C) (i)] means that while a

state might use more generous maintenance amounts

in determining financial eligibility ..., all other

SSI eligibility criteria are to be used .... [A]J1l

aged, blind, and disabled persons applying in states

covering all SSI eligibles must have their eligi-

bility determined using all SSI eligibility rules

except for -- and only except for -- higher dollar

amounts for income and resource eligibility levels."

42 Fed.Reg. 2684 (Jan. 13, 1977).

HHS, though, has not been alone in this interpre-

tation. The courts have unanimously agreed that eligibility

conditions can be no more restrictive for the medically needy

///

8/ This regulatory requirement was previously codi-

fied at 42 C.F.R. §448.2(b) (2) and 45 C.F.R. §248.2(b) (2). See

Caldwell v. Blum, supra, 621 F.2d, at 497 n.8.

=12-

than for the categorically needy , 2/ Indeed, if there is one

interpretation of the federal Medicaid statute on which every-

one was in agreement, it was this. The Ninth Circuit's decision

explicitly deviates from this established authority by inter-

preting the statute to permit more restrictive treatment of

the medically needy.

Thus, with respect to the propriety of transfer of

assets rules in the SSI states, the decision of the court below

directly contrasts with the decisions of two other Courts of

Appeals and with a state appellate court. It also specifically

9/ Caldwell v. Blum, supra, 621 F.2d, at 497-498,

aff'g CCH Medicare & Medicaid Guide, 430,093 (N.D.N.Y.1979);

Fabula v. Buck, supra, 598 F.2d, at 873; Greklek v. Toia, 565

F.2d 1259, 1261 (2d Cir. 1977), cert. denied sub nom. Blum v.

Toomey, 436 U.S. 962 (1978); Friedman v. Berger, supra, 547

F.2d, at 729; Winter v. Quern, CCH Medicare & Medicaid Guide,

430,572, at 10,343 (N.D.1I11.1980), previous opinion in same

case on same point (by different judge) sub nom. Winter v.

Trainor, CCH Medicare & Medicaid Guide, 428,151, at 10,599

(N.D.I11.1977); Hendrickson v. Noot, CCH Medicare & Medicaid

Guide, 430,499, at 9920 (D.Minn.1980); Dawson v. Beach, supra,

Conclusions of Law #10 (App. B, at 30); Aitchison v. Berger,

404 F.Supp. 1137, 1149 (S.D.N.¥.1975), aff'd without opinion

538 F.2d 307 (2d Cir.), cert. denied 429 U.S. 890 (1976);

Dominguez v. Milliken, CCH Medicare & Medicaid Guide, 426,633

at 9221 (W.D.Mich.1973); Schaak v. Schmidt, 344 F.Supp. 99,

103-104 (F.D.Wis.1971) (3-judge court); Scarpuzza v. Blum,

supra, 426 N.Y.S.2d, at 511-512; Wong v. Brian, CCH Medicare

—

& Medicaid Guide 26,605, at 9034-9015 (Cal.Ct.App.1972).

See also Blum v. Caldwell, supra, 100 S.Ct., at 1637.

o33-

repudiates the explicit interpretation of the responsible ~

federal agency, despite the deference which is normally

paid to agency interpretation and despite the court's in-

ability to demonstrate that that interpretation is incon-

sistent with the statute .12/ In addition, the court below

contradicts the numerous other courts, and HHS, which have

considered the larger issue of proper treatment of the

medically needy.

In rejecting New York's first application for a

stay, Justice Marshall observed: “The terms of the Social

Security Act support the judgment of the Court of Appeals

{for the Second Circuit], and the agency responsible for

administering the Act is in complete accord with the de-

cision below." Blum v. Caldwell, supra, 100 S.Ct., at 1638.

Given that context, the contrary decision of the Ninth Circuit

should be reviewed by this Court.

II. THE DECISION BELOW ALSO DEVIATES FROM THOSE

OF COURTS EVALUATING PETITIONER'S OTHER

SUPREMACY CLAUSE CONTENTIONS

1. Petitioner also argued that application of the

transfer rule has the effect of assuming resources available

which are not, in fact, available, in violation of 42 U.S.C.

§1396a(a) (17) (B). The court rejected that contention as "an

overly rigid and literal interpretation of the term ‘available'

ecoe” Slip Op., at ll (App. A, at 1l).

There are, however, numerous cases which have

strictly interpreted the availability requirement in sub-

paragraph (B) to mean actual availability, as opposed to

10/ See, e.g., Udall v. Tallman, 380 U.S. l, 16

(1965); Caldwell v. Blum, supra, 621 F.2d, at 497; Fabula v.

Buck, supra, 598 F.2d, at 873.

-14-

presumed availability. See, e.g., Brown v. Stanton, 617

F.2d 1224, 1227-1231 (7th Cir.1980), pet. for cert. pending

No. 79-1690, 48 U.S.L.W. 3734 (April 24, 1980); Manfredi v.

Maher, 435 F.Supp. 1106 (D.Conn.1977) (noting, in the context

of Medicaid "deeming", that Congress intended that states

not count income which was not in fact available). And, this

Court, in its evaluation of the similar availability rule in

the Aid to Families with Dependent Children ("AFDC") program,

has repeatedly emphasized that states may not merely presume

availability. Van Lare v. Hurley, 421 U.S. 338 (1975); Lewis

v. Martin, 397 U.S. 552 (1970); King v. Smith, 392U.S. 309 (1968).

Moreover, courts have also interpreted the availa-

bility requirement to forbid the application of transfer of

assets rules: "[B]y denying eligibility for assistance over

a period of time during which a transferred asset would other-

wise sustain the applicant, were it still available, the rule

assumes the availability of unavailable resources, in clear

contradiction of the case law doctrine." Buckner v. Maher,

424 F.Supp. 366, 373 (D.Conn.1976), aff'd sum. 434 U.S. 898

(1977); see also Udina v. Walsh, 440 F.Supp. 1151, 1155 (E.D.

Mo.1977). Contra, Lerner v. Division of Family Services, 235

N.W.2d 478 (Wis.1975); Rinefierd v. Blum, 412 N.Y.S.2d 526,

66 A.D.2d 351 (4th Dept. 1979) .22/

///

11/ Neither the Rinefierd nor the Lerner court had

the issue presented in petitioner's first argument, discussed,

Supra, at 9-14, before it. The court's reliance below on those

cases (Slip Op., at 16 (App. A, at 16)), is thus inappropriate

in evaluating that issue. See Fabula v. Buck, supra, 598 F.2d

at 873 n.10; Scarpuzza v. Blum, supra, 426 N.Y.S.2d, at 510-511.

=})8-

2. In addition, the use of a transfer rule violates

the requirement that states not employ eligibility conditions

which are not countenanced by the Social Security Act and

which deprive otherwise eligible individuals of benefits. The

court below rejected this argument in a footnote. Slip Op.,

at iii n.8 (App. A, at 19).

This requirement, though, has been conclusively

established and adhered to by this Court:

"[I]n the absence of congressional authorization for

the exclusion clearly evidenced from the Social Security

Act or its legislative history, a state eligibility

standard that excludes persons eligible for assistance

under federal AFDC standards violates the Social Security

Act and is therefore invalid under the Supremacy Clause."

Townsend v. Swank, 404 U.S. 282, 286 (1971); see also

Carleson v. Remillard, 406 U.S. 598 (1972); King v. Smith,

Supra.

This analysis has been expressly utilized in evaluat-

ing transfers of assets rules: “Nowhere in the Social Security

Act or in the HEW regulations is there intimation that the mere

transfer of assets within two years prior to or during the re-

cept of assistance is to operate as a lever which thrusts the

burden of explanation therefor on the applicant." Owens v.

Roberts, 377 F.Supp. 45, 55 (M.D.Fla.1974) (3-judge court);

see also Fabula v. Buck, supra, 598 F.2d, at 874; Buckner v.

v. Maher, supra, 424 F.Supp., at 373; Udina v. Walsh, supra,

440 F.Supp., at 1156.

The states cannot accept federal funds while de-

priving individuals of benefits by using eligibility conditions

which the Act expressly forbids or for which it makes no provision.

The decision below on these points violates explicit judicial

authority.

///

o¢=

III. THE NINTH CIRCUIT'S DECISION ALSO CONFLICTS

WITH DECISIONS ENFORCING CONSTITUTIONAL

GUARANTEES

1. Petitioner also argued that California's

transfer rule is an irrebuttable presumption which denies

her due process. The court determined, however. that the

presumption was rebuttable and that there was no constitu-

tional infirmity in discounting evidence that the transfers

were not effected in order to obtain eligibility. Slip Op.,

at 14 (App. A, at 14).

This Court and others have repeatedly determined

that irrebuttable presumptions violate the due process clause

of the Fourteenth Amendment. E.g., Vlandis v. Kline, 412 U.S.

441 (1973); U.S. Dept. of Agriculture v. Murry, 413 U.S. 508

(1973); Owens v. Roberts, supra. In that latter case, in

which Florida's transfer rule was invalidated, the three-

judge court noted that the state "regulation ... arbitrarily

and irrationally forecloses from eligibility for welfare

assistance those individuals who have transferred an asset

worth more than $600.00 for less than its assessed or fair

market value without regard whatsoever for the good faith

of the individual claimant." 377 F.Supp., at 5l. In this

instance, though more subtly accomplished, the state is taking

the same action.

The California statute irrebuttably presumes that

a transfer for less than adequate consideration was effected

"with intent to qualify for assistance and such act shall

disqualify the owner for further aid ...." Welf. & Inst.

Code §14015. The regulation implementing that statute, while

nominally rendering the presumption rebuttable, permits the

applicant only to use "objective facts", and precludes intro-~

ducing evidence of “subjective intent", i.e., that the

@)7J=

applicant had other, non-fraudulent reasons for transferring.

Moreover, the regulation specifically renders irrelevant two

explanations which often represent the reason in fact for the

transfer: that the individual sought to avoid probate costs or

problems (a common action by elderly people) or that the indi-

vidual was unaware that Medi-Cal existed. 22 Cal.Admin.c.

§50409(b) (2). In short, the presumption is only superficially

rebuttable; since the state will not consider the most common

innocent reasons which an applicant might have, it effectively

renders the presumption irrebuttable.

The California rule effectively prevents most

applicants from demonstrating the reasons for their actions,

thereby establishing a conclusive presumption. By validating

that rule, the court below has created a conflict with the

numerous courts which have rejected irrebuttable presumptions.

2. Finally, the Ninth Circuit refused to find the

differential treatment of the medically and categorically needy

to be an equal protection violation. The court found a rational

basis for this distinction in the financial savings to the

state. Slip Op., at 15 (App. A, at 15). In that conclusion,

however, the court ignored the several decisions, including

those of this Court, which have refused to view fiscal concerns

as providing a sufficient rationale for discriminatory treat-

ment. See, e.g., Memorial Hospital v. Maricopa County, 415

U.S. 250, 263 (1974); Medora v. Colautti, 602 F.2d 1149, 1153

n.9 (3d Cir. 1979); Silbowitz v. Secretary of H.E.W., 397 F.

Supp. 862, 867 (S.D.Fla.1975) aff'd mem. 430 U.S. 924 (1977).

Moreover, the court below also determined that the

medically needy and categorically needy were not identically

situated, Slip Op., at 15 (App. A, at 15), on the theory that

the former had more income and resources than the latter. But

-18-

that reasoning ignores the Congressional conclusion that those

not receiving cash benefits (i.e., the medically needy) are

equally impoverished when their incomes are reduced by medical

costs. Indeed, the very premise of the medically needy pro-

gram was to recognize the equality of poverty which existed

between the two groups when medical costs were taken into con-

sideration. See, e.g., Aitchison v. Berger, supra, 404 F.Supp.

at 1149 & n.43; Brown v. Beal, 404 F.Supp. 770, 778-779 (E.D.

Pa.1975) .22/ Once a state opts to provide for the medically

needy, it has accepted equality of treatment between the two

groups - except, as HHS recognizes, that the medically needy

may have more liberal eligibility rules applied to them. See

42 Fed.Reg. 2684 (Jan. 13, 1977).

The impropriety of differential treatment of the two

groups has been repeatedly noted by other courts in the statu-

tory context. Supra, at 13 n.9. It has also been suggested

that this discrimination may rise to a constitutional violation.

See, e.g., Aitchison v. Berger, supra, 404 F.Supp., at 1149.

And the Fourth Circuit has noted, in the same context as this

case, that there is no rationale for punishing one group of

Medicaid applicants for behavior which does not subject

12/ The court's cénfusion on this point is especially

glaring in light of its misunderstanding of how Title XIX is

structured. In explaining how Congress distinguished between

the two groups, the court notes: "It must be remembered that

the categorically needy receive benefits regardless of whether

a state adopts a medicaid program under Title XIX." Slip Op.,

at 15 (App. A, 15). That is wrong; there is no such requirement.

Participation in the federal Medicaid program is entirely op-

tional. The court has failed to grasp the basics of Title XIX.

-19-

the other group of Medicaid applicants to any sanction:

"(W]e question how the transfers made by plaintiffs, which

would be expressly permitted under SSI guidelines, can be

fraudulent acts under the Medicaid program simply because they

are performed by the medically needy rather than by an SSI

recipient." Fabula v. Buck, supra, 598 F.2d, at 874 (footnote

omitted). .

If there is any logic in denying medical assis-

tance to individuals who transfer assets for less than valid

consideration, that logic is equally applicable to the

categorically needy. The rule is therefore both underinclusive

and overinclusive; there is no valid explanation for differen-

tial treatment of these similarly situated Medicaid applicants.

CONCLUSION

The decision below expressly contradicts numerous

decisions of this and other federal and state courts. Support for

petitioner's position is overwhelming, and on one argument,

petitioner's first, is unanimous. In this circumstance, it is

entirely appropriate that a writ of certiorari issue to review |

the decision of the Ninth Circuit.

Respectfully submitted,

GILL DEFORD

NEAL S. DUDOVITZ

National Senior Citizens Law Center

1636 West 8th Street, Suite 201

Los Angeles, California 90017

(213) 388-1381

STUART PARKER

Senior Citizens Legal Advocacy

Legal Aid Society of Orange County

2700 North Main Street, llth floor

Santa Ana, California 92701

(714) 835-8808

DATED: August 25, 1980.

Attorneys for Petitioner

wT ae

Fer Peoheastisa

IN THE UNITED STATES COURT OF APPEALS

9 7 “ae

FOR THE NINTH CIRcuIT f° |, |: 1 )

MAY 1 « 1830

ROSSYE DAWSON, individually and

on behalf of all others similarly

situated, ha os webew

Plaintiff-appellant, | No. 79-3246

vs. OPINION

BEVERLEE A. MYERS,* et al., D.C. No. C 78-2350 MML

Defendants-Appellees.

ae a Ne ee Ne ee Ne te ee et

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 finan-

cial eligibility requirements for Medi-Cal. The class men-

bers argue that the transfer rule conflicts 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.

*Beverlee A. Myers, the Director of the Califorcnia

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(c) (1).

The Honprable Gus J. Solomon, Senior United States

D¥strict Judge for the District of Oregon, sitting by

designation.

APPENDIX A

Frt-SNT..10378

eM 1s

I. BACKGROUND

A. Medicaid

Title XIX of the Social Security Act established

the Medicaid program. 42 U.S.C. § 1396 et seq. This co-

operative 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 re-

quired 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 stan-

dards (42 U.S.C. § 1396a), the individual states are given

wide discretion in the administration of their local pro-

grams. 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 rein-

bursement for a portion of the funds which are expended.

42 U.S.C. § 1396.

A state which has chosen to adopt a Medicaid pro-

gram 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 neiiie at 42 U.S.C.

§ 1396a(10) (A). Generally, in order to be considered cate-

gorically 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 sex)

When they establish their Medicaid program, the

ol C4

aQu’

FRE-SST. 10978

125M - 12S

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 sont” 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 distinc-

tion 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 medi-

cally needy as well as the categorically needy. California

has adopted a comprehensive statutory and regulatory scheme

to implement its Medi-Cal program.

As part of its plan, the California legislature

adopted wks “hn called a transfer of assets rule. Cal.

(Welf. & Inst.) Code § 14015.2/ Basically, this prevents

persons from qualifying as medically needy if they have

transferred assets for less than fair consideration 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 categori-

cally needy.

California has promulgated regulations which, among

other things, establish eligibility requirements for the

medically needy and implement the transfer wal Under

these regulations, an individual is cligible as medically

needy only if his or her assets are valued at ‘$1500 or less,

FPh- SST-103 78

W2SM = 12aS

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, 50425-50489. Although this property is exempt

insofatas determining eligibility, it remains potentially

subject to California's recovery procedures. That is, after

the individual dies, California is entitled to recover the

cost of medical assistance it provided to the individual

from the assets (including both exempt and nonexempt prop-

erty) 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 pre-

sumption 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 consideration 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 simi-~

larly situated, sought declaratory and injunctive relicf

invalidating and enjoining the California transfer rule. In

-4-

FPT- SST—10378

P2SM - 245

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 bene-

fits based on California's transfer rule.

On May 10, 1979, the-district court granted

California'a motion for summary judgment and denied the

cross motion filed by the appellants. The court entered

findings of fact and conclusions of law which held that the

state's transfer rule did not conflict with the federal stat-

utory and regulatory framework, nor did it amount to a

denial of due process or equal protection. The appellants

then brought this spbestc

II. 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(a) (10) (C), 1396a(a) (17) (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 con-

stitutional issues. Dandridge v. Williams, 397 U.S. 471,

475-476, 25 L.Ed.2d 491, 90 S.Ct. 1153 (1970). Morcover,

in addressing appellants’ arguments, the cardinal principle

of statutory construction must be kept in mind, that is,

statutes should be construed to avoid constitutional ques-

tions. See Swain v. Pressley, 430 U.S. 372, 378 n.1l,

aBas

PPE-SNST~10378

V2SM-~ 1238

97 S.Ct. 1224, 51 L.Ed.2d 411 (1977)

A. 42 U.S.C. § 1396a(a) (10) (C)

Appellants' primfary argument is that the California

transfer rule conflicts with 42 U.S.C. § 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 in-

sufficient (as determined in accordance with comparable

standards) income and resources to meet the costs of neces-

sary medical and remedial care and savsioes.* The appel-

lants attribute the following meaning to § 1396(a) (10) (C):

“except for the definitional distinction that 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."

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 administra-

tively 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 concluded that the California transfer rule did not

conflict with § 1396a(a)(10)(C). 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

wE=-

FPIE- SST- 10378

125M -1235

_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(a) (10) (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 deter-

mination of whether an applicant's assets exceed the eligi-

bility requirements,

In considering the appellant's argument, we must

first turn to the language of the statute itself. Obviously,

the face of this statute says nothing about prohibiting

transfer rules such as California's.”

The portion of the statute with which we are ccn-

cerned may be divided into two parts. The first part pro-

vides 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 provis-

ion 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. mite 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 ecligibility 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

: evaluation of the applicant's. income and resources be de-

‘ termined by using comparable standards. Since an SSI

: applicant is apparently specifically allowed to transfer

: assets in the manner which is prohibited by the California

1“ 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

a all, the statute only requires the standards to be compar-

“ able, not identical. Comparable only means that there must

ni be enough similar characteristics or qualities to make com-

9 parison appropriate. Webster's Third New International

: Dictionary, G.& C. Merriam Co. (1976). The other standards

na which are used for Ccetermining financial eligibility are

eo similar enough to invite comparison. We therefore cannot

" say that the standards used by California to determine eli-

- gibility into the medically needy group (including the

” transfer rule) are not comparable to those which are used

= under the SSI program.

23 In support of their argument, the appellants claim

24 that HEW, the agency charged with administering the Medicaid

25 program, has interpreted § 1396a(a)(10)(C) in the same

26 manner as they would have this court. Apparently, three

27 different HEW Regional Medical Directors have written let-

28 ters stating that state transfer rules are inconsistent with

29 § 1396a(a) (10) (C) because they impose more restrictive cli-

30 gibility requirements on the medically needy than on SSI

31 applicants. See Fabula v. Ruck, 598 F.2d 869, 873 (4th Cir.

“ee 8

FPIL-SST-103 78

123M -- 1235

1979). Although this court generally defers to an admin-

istrative 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 inter-

pretation of § 139Ga(a)(10)(C) is correct, that is, the

California transfer rule does not conflict with the statute.

This court's "deference does not extend to agencies' con-

struction which conflict with statutory directives." Pacific

Coast, supra, slip op. at 2526. While regional administra-

tors may be writing letters disapproving of state transfer

rules, HEW as a whole has approved California's Medi-Cal

program (and the transfer rule). By this approval, and by

vnk: Kakite 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 subscquent

legislative history of the Medicaid program. In 1978, as

part of the Medicare-Medicaid Administrative and Recimburse-

ment Reform Act, the Senate Finance Committee proposed an

-9—

PrL- SST—103.78

123M -12a5

amendment to the Medicaid statute which would have specifi-

cally 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(a) (10) (C), the Senate .Committee said that the states

were not able to adopt transfer rules under present law.

Id. 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 U.S. 317, 329-330, 62 S.Ct.

1095, 86 L.Ed. 1501 (1942). Nevertheless, 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 admin-

istrative interpretation, and because we remain convinced

that our interpretation of § 1396a(a) (10) (C) is correct, we

choose net to accord any deference to the latter legislative

pronouncements.

We conclude that California's transfer rule does

not conflict with 42 U.S.C. § 1396a(a) (10) (C).

B. 42 U.S.C. § 1396a(a) (17) (B)

The appellants argue that the California transfer

rule violates 42 U.S.C. § 1396a(a) (17) (B) —” This section

requires states to only consider the income and resources

which are "available" to the applicant in determining

eligibility. The California transfer rule assumes the

availability of assets, which, according to the appellants,

are no longer available to the applicant.

The appellants' argument may be correct under what

-10=

PrE-SST 10978

VISM-- 1205

we believe is an overly rigid and literal interpretation of

the term “available” under § 1396a(a)(17)(B). We refuse to

interpret this statute as equating available with present

record title. This would be inconsistent with the approach

which is taken under the Medicaid program.

; Initially, "we do not lose sight of the [Medicaid]

statute's strong emphasis upon flexibility in determining

eligibility." Norman, supra, 610 F.2d at 1240. In another

context the Supreme Court interpreted § 1396a(a)(17) as

conferring broad discretion on the states to adopt reason-

able standards. Beal v. Doe, 432 U.S. 438, 444, 97 S.Ct.

2366, 53 L.Ed.2d 464 (1977) 224 The California transfer

rule presumes that an asset remains available to an appli-

cant after the applicant has given it away, or sold it for

less than adequate consideration. We find nothing in the

Plain language of this statute which would prohibit such a

rule, nor is there anything in the legislative history which

equates “available” as requiring present record title or

ownership.

To the extent that the regulations address the

definition of “available,” they support our interpretation.

Under the regulations, a state is allowed to examine an

applicant's income and assets for a six-month prospective

period in determining eligibility. 42 C.F.R. §§ 435.83l(a),

435.845(b). Since a state is authorized to consider future

asscts, it must follow that it should also be allowed to

consider those assets which have been recently disposed of

under circumstances which indicate that the purpose was to

qualify for public medical assistance.

We hold that California's transfer rule does not

conflict with 42 U.S.C. § 1396a(17) (B).

C. 42 C.F.R. § 435.401 ;

Appellants also claim that the California transfer

PPE-SST-—103 78

125M - 1235

a 1

rule is inconsistent with 42 C.F.R. § 435>401.22/ This reg-

ulation provides that a state Medicaid agency cannot use

requirements for determining eligibility for the medically

needy which are “more restrictive" than those used for the

categorically needy. Since the California transfer rule is

a more restrictive requirement, the appellants reason that

it therefore violates § 435.401.

While we agree that the California transfer rule

imposes a more restrictive requirement on the medically need

we do not believe that § 435.401 has any bearing on the

validity of financial eligibility requirements such as the

transfer rule.

First of all, if we were to give § 435.401 the

broad reading attributed to it by the appellants, we would

be reading an inconsistency into the federal statutory and

regulatory framework. The Medicaid program is designed to

provide benefits to two differently situated groups. The

medically needy are those individuals who have more avail-

able income and resources than the categorically needy. By

Gefinition, different financial requirements apply to

the medically needy than to the categorically needy. Only

when § 435.401 is read as not applying to financial require-

ments, such as the transfer rule, can it be viewed con-

sistently with the other Medicaid statutes and regulations.

After all, § 435.401 is merely one of five sections

under the general heading entitled: "Subpart E - General

Eligibility Requirements." There is absolutely no dis-

cussion of financial eligibility requirements in any of

the other sections of this subpart. Instead, the focus of

all of the sections is directed toward much more gencral

concerns, such as eligibility requirements which are based

on citizenship, alienage, or state a In addition,

a thorough reading of the statutes and regulations shows

oa} Den

Prt SST -10378

HISM. 1245

that the sections of Subpart E parallel the subsections of

42 U.S.C. § 1396a(b). From this it is apparent that Subpart

E (including § 435.401) was designed to carry out the statu-

tory mandate of 42 U.S.C. § 1396a(b) which does not in-

volve financial eligibility requirements. See, e.g.,

Pacific Coast, supra, slip op. at 2526 .22/ And finally,

there are three specific subparts which cover the financial

eligibility requirements. Subpart G states the general

financial eligibility requirements, Subpart H states the

financial eligibility requirements for the categorically

needy, and Subpart I states the financial eligibility

requirements for the medically needy. These specific and

detailed guidelines for financial eligibility requirements

must control over the general rule of § 435.401.

We conclude that 42 C.F.R. § 435.401 does not apply

to financial eligibility requirements and therefore there is

no conflict between it and the California transfer rule.

D. Due Process

In their opening brief, the appellants claim that

the transfer rule creates an irrebuttable presumption in

violation of the due process clause. In their reply brief,

the appellants call it an "effectively" irrebuttable pre-

sumption. We disagree with either characterization and find

that the transfer rule creates a rebuttable presumption

which is permissible under the due process clause.

The California transfer rule obviously does not

create an irrebuttable presumption. After all, the regula-

tions expressly provide that the presumption may be overcome

by evidence that the applicant had adequate resources for

support and medical care at the time of the transfer of

property. 22 Cal. Admin. Code § 50409(b)(2). Such a de-

termination can be based on “such things as the applicant's

* « « age, health, life expectancy, and ability to understand

~13-

FPi-SST-—-10378

123M—1225

—_— nee ee

[the] extent of [his or her] resources." Id. This would

mean that if a person was in good health at the time of the

transfe., then the presumption might be rebutted because the

person would have no reason to anticipate any large expend-

iture for medical care and support.

The appellants argue. that it is an "effectively"

irrebuttable presumption because the applicant is precluded

from relying on his or her subjective intent. According to

the appellants, this excludes the two most likely explan-

ations for this type of transfer, which are: (1) the appli-

cant was unaware of Medi-Cal benefits, and/or (2) a desire

to avoid probate. While the state could have considered

these subjective considerations, we cannot say that the

failure to do so creates a due process violation. Cal-

ifornia's objective test for determining how the presump-

tion can be overcome does not create an effectively irrebut-

table presumption which might run afoul of the due process

clause.

E. Equal Protection

The appellants’ final argument is based on equal

protection grounds. They claim that there is no rational

basis for treating the medically needy any differently

from the categorically needy. According to the appel-

lants, the medically needy are in the identical situation

as the categorically needy, that is, in need of medical

care and without sufficient income or resources to pay for

it. Since the "transfer of assets" rule only applies to

the medically needy, the appellants argue that it violates

the equal protection clause because there is no reasonable

basis for the disparate treatment between the two groups.

We fail to see how the application of the transfer

of assets rule to the medically needy group gives rise to

alga

FYE-SNT -10378

125M - 1238

even a colorable constitutional claim under the equal pro-

tection clause.

Initially, we note that the two groups are not

identically situated. By definition, the categorically

needy have less income and resources than the medically

needy. Furthermore, Congress-has obviously viewed the two

groups differently, or, at least, as not being identically

situated. Why else would Congress have left the decision to

provide benefits to the medically needy entirely up to the

individual state? It must be remembered that the categori-

cally needy receive benefits regardless of whether a state

adopts a medicaid program under Title XIX. However, the

medically needy only become entitled to benefits if a state

first adopts a program, and, secondly, if the state elects

to include the medically needy group in its benefit progran.

In addition, California has a rational basis for

its transfer rule. California is confronted with two com-

peting interests, the protection of a limited public

treasury, and the provision of benefits to those who are in

need. The transfer rule was a reasonable response to these

conflicting concerns. Under the rule, benefits are provided

to those individuals who, in fact, have a financial need,

and benefits are denied to the individuals who have arti-

ficially created a need by disposing of assets for less than

fair consideration.

We hold that California's transfer rule is ration-

ally related to the legitimate government objectives of

protecting the public treasury and discouraging intentional

impoverishment so as to qualify under a public assistance

program. Any disparate treatment resulting from the appli-

cation of the rule is sufficiently rational to be upheld

-15-

e.” 1 against appellants' equal protection challenge. Sec

P Dandridge, supra, 397 U.S. at 471; Richardson v. Belcher,

3 404 U.S. 78, 83-84, 92 S.Ct. 254, 30 L.Eds.2d 231 (1972);

2 Sims v. Harris, 607 F.2d 1253 (9th Cir. 1979).

5 III. CONCLUSION

In upholding the California transfer rule, we

F recognize that the majority of the courts which have been

; faced with similar challenges have reached the opposite

9 conclusion, See, e.g., Caldwell v. Blun, F.2d ’

10 No. 79-7864 (2d Cir. April 10, 1980); Fabula v. Buck,

1 598 F.2d 869 (4th Cir. 1979); Udina v. Walsh, 440 F.Supp.

- 1151 (E.D. Mo. 1977); Buckner v. Maher, 424 F.Supp. 366 (D.

13 Conn. 1976), aff'd 434 U.S. 898, 98 S.Ct. 290, 54 L.Ed.2d

184; Owens v. Roberts, 377 F.Supp. 45 (M.D. Fla. 1974);

a contra, Rinefierd v. Blum, 412 N.Y.S. 2d 526 (App. Div.

1. 1979); Lerner v. Division of Family Services, 235 N.W. 2d

i 478 (Wis. 1975). Nevertheless, for the reasons stated in

this opinion, we are convinced that ovr analysis of the

a question is correct.

19 13/

AFFIRMED.” ~~

’ 25

31 °

” -16-

Fri- SST.-10378

125M - 125

FOOT NHOTPERS

The regulations define this group as follows:

"“Categorically needy" means aged, blind

or disabled individuals or families and chil-

dren who are otherwise cligible for medicaid

and who meet the financial eligibility require-

ments for AFDC, SSI,.or an optional State

supplement;"

42 C.F.R. § 435.4.

States have the option of using more restrictive

criteria than those used under the AFDC or SSI programs.

California has not chosen this option and so this opin-

ion does not deal with those provisions of the Medicaid

Act which would then come into play.

The regulations define this group as follows:

"Medically needy" means aged, blind, or

Gisabled individuals or families and children

who are otherwise eligible for medicaid and

whose income and resources are above the limits

set under the medicaid State plan;"

42 C.F.R. § 435.4.

The 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 hold-.

ings 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 prop-

erty with intent to qualify for assistance and

such act shall disqualify the owner for further

aid for a period determined under standards estab-

lished 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 cir-

cumstances 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 con-

ditions 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:

“(a) Transfer of property shall result in

1 ineligibility for Medi-Cal if the transfer did

not meet at least one of the conditions specified

2 in Section 50408 or the transfer was in return for

an enforceable life care contract which includes

3 complete medical care.

4 "(b) Transfer of property without adequate

consideration shall result in ineligibility for

5 Medi-Cal if the transfer was made to establish

eligibility or to reduce the share of cost.

"(1) It shall be presumed that property

7 transferred without adequate consideration

was for the purpose of establishing eligibil-

8 ity or to reduce the share of cost as limited

by (2).

"(2) To overcome the presumption, the

10 applicant or beneficiary has the burden of

establishing by objective facts, rather

ll than statement of subjective intent, that

this presumption is not correct. The appli-

12 cant or beneficiary shall provide evidence

- that adequate resources were available at

13 the time of the transfer of property for

support and medical care considering such

14 things as the applicant's or beneficiary's

age, health, life expectancy, and ability

15 to understand extent of resources.

16 "(A) The declaration of another

purpose, such as to avoid probate, by

17 itself, shall not be sufficient to

Overcome the presumption. A showing

18 that the sole purpose of the transfer

was for reasons other than to establish

19 eligibility or to reduce the share of

cost shall be supported by evidence

20 such as that specified above.

21 "(B) The establishment of the fact

that the applicant or beneficiary did

22 not have specific knowledge of the

availability or benefits of the Medi-Cal

program is not sufficient to overcome

23 the presumption."

6/ The district court concluded that it had juris-

25 diction under 28 U.S.C. § 1343(3) & (4) (civil rights

26 jurisdiction) and under 28 U.S.C. § 1331 (federal

guestion jurisdiction). It is unclear whether juris-

07 diction was properly invoked under 28 U.S.C. § 1343.

See Chapman v. Houston Welfare Rights Org., 441 U.S. 600,

28 99 S.Ct. 1905, 60 L.Ed.2a 508 (1979); Doe v. Klein,

599 F.2d 338 (9th Cir. 1979). Nevertheless, the

29 amount in controversy exceeds $10,000 and so the

district court did clearly have federal question juris-

Giction (28 U.S.C. § 1331). Brown v. Stanton, F.2d

30 No. 79-1459, slip op. 2 n.1 (7th Cir. 1980); see

Chapman, supra, 60 L.Ed.2d at 515. Since the appellants

31 filed a timely notice of appeal from the final judgment,

this court has jurisdiction to consider the appeal under

32 28 U.S.C. § 1291.

FPI- SST-10328 -ii-

125M -- $235

FHI-SST—10 378

125M - 9225

This 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

Gescribed 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 deter-

mined 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 elig-

ible for aid or assistance under any such

State plan or to have paid with respect

to tnem 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 individuals not described

in clause (A) shall be equal in amount, dur-

ation, and scope;

x“ ke eH

(emphasis added to show that portion of the

statute which the appellants rely upon)

42 U.S.C. § 1396a(a) (10).

At 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 cooperative federal

state program. See, New York Department of Social

Services v. Dublino, 413 U.S. 405, 93 S.Ct. 2507, 37

L.Ed.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 mani-

festation of an intention to do so." 413 U.S. at 413,

quoting Schwartz v. Texas, 344 U.S. 199, 202-203,

73 S.Ct. 232, 97 L.Ed. 231 (1952)).

-iii-

PHL SST-.103 78

125M .~ 1235

This statute provides in part as follows:

"A state plan for medical assistance must---

“include reasonable standards (which

Shall be comparable for all groups and inay,

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 Seccretary,

available to the applicant or recipient and

(in the case of any applicant or recipient

who would, except for income and resources,

be eligible for aid or assistance in the

form of money payments under any plan of

the State approved under subchapter I, X,

XIV, or XVI, or part A of subchapter IV,

or to have paid with respect to him supple-

mental security income benefits under sub-

chapter XVI of this chapter as would not be

disregarded (or set aside for future needs)

in determining his eligibility for such aid,

assistance, or benefits .. .

x * MN

(emphasis added to show that portion of the

Statute which the appellants rely upon)

42 U.S.C. § 1396a(a) (17).

The Supreme Court was considering the extent of

medical assistance which the states were required to

provide. Beal, supra, 432 U.S. at 444.

This regulation provides as follows:

"(a) A medicaid agency may not impose

any eligibility requirement that is prohibited

under title XIX of the Act.

"(b) The agency must base any optional

group covered under subparts B and C of this

part on reasonable classifications that do

not result in arbitrary or inequitable treat-

ment Cf individuals and groups and that are

consistent with the objectives of title XIX.

-iv-

PL SST-10378

125M = 1238

"(c) The agency must not use requirements

for determining eligibility for optional coverage

groups that are--

"(1) Por families and children, more

restrictive than those used under the State's

AFDC plan; and

"(2) For_agqed, blind, and disabled indi-

viduals, more restrictive than those used

under SSI, except tor individuals receiving an

optional State supplement as specified in

§ 435.230 or individuals in categories spec-

ified by the agency under § 435.121."

(emphasis added to show that portion of the regula-

tion which the appellants rely upon)

42 C.F.R. § 435.401.

In Pacific Coast, supra, this court noted that

"[e]xisting regulations must be construed in light of

the statutory mandates under which they issue."

Slip op. at 2526.

Appellants also ask this court, providing they

prevail on this appeal, to grant the full measure of

relief requested in their complaint and provide notice

to all class members. Because we affirm the district

court, it is unnecessary for us to address the propriety

of this request.

-Vvo

. a aeti. -« ‘+ 0 - 0 Meee

GUORGE DEUKMEILAU, Attorney General P

ANE GS. PRESSMAN, ( .~

DOHALD A, ROMLISON,

cw ||

RICHARD J. MAGASIN, tea 1 Aoi

Deputy Attorneys Gener: At" ps S96.

3580 Wilshire Boulevard, Suite 400. Rapa ee

Los Angeles, California 90010 cians oi | L. {2 D

Welecphones: (213) 736-2214, 736-2606

Attorneys for Defendants eins

ENTERED “is

UNIVED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA MAY 4 0 1979

CLERK, U. S. DISTRICT COURT

CENTRAL DISIRICT CF CALIFORNIA

BY DEPUTY

ROSSYE DAWSON, individually and NO. 78-2350 MNL(Sx)

on behalf of all others similarly

situated,

Plaintiff, PRYPSEHOD SUMMARY JUDGMENT

EDWARD BEACH, et al.,

Defendants.

ANTONIA BELTRAN AND ENOSINSIO

MANAHAN, Individually and on

behalf of all other similarly

situated,

Intervenor-Plaintiff£,

i er

This cause came on to be heard on motion of the

Gefendants for summary judgment and on cros s-motion of the

plaintiffs and intervenor plaintiffs for summary judgment,

pursuant to Rule 56 of the Pederal Rules of Civil Procedure, and

the court haviny considered all papers, and the eourt having

heard the argument of counsel, and due deliberation having been

APPENDIX B

“2+ om ooee-

mee

had thereon, it is

ORDERED, that plauintif£{s' cross-motion for summary

judgment be and the same hereby is denied, and it is further

ORDERED, that defendants! motion for summary judgment

be and the same hereby is granted, and it is further fut

Peers epnano A DECI CE " that the action be

419% BAN boil

dismissed on its merits, and that pardensceecseinatussrr costs

Of auit.

DATED: _ 543/74 .

be tek by i+>

BALCOLIT | ile sae 3

United Sates District Judge

ee ee ee cs eee = ee eee

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nod Dd DYDD WD DD YP YP YP PP PP PY Pe Pe

Oo 2s oo @eetuaeanerovsedk®kereanrrktkwepb rt SO

Bim PB

BAY 10 1979

CLESK, U.S. DISTRICT COUR

CHSC WISHHAGE OF CHILE |

_ Sew adele:

vate

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

ROSSYE DAWSON, individually and

on behalf of all others similarly

Situated, :

NO, CV~-78--2350-MML

Plaintif£,

Vv.

FINDINGS OF FACT

EDWARD BACH, et al.,

AND CONCLUSIONS OF LAW

Defendants.

ANTONIA BLELTRAN and ENOSINSIO

MANAHAN, individually and on

behalf of all others similarly

Situated,

Intervenor-Plaintiff,

i a i el

This cause came on for hearing on defendants' Motion for

Summary Judgment and plaintiffs’ Cross-Motion for Summary Judg~

ment, and the Court, having considered the memoranda of points

and authorities filed by the parties in support of such motions

and the documents and exhibits thereto, and the stipulation of

the parties, and having heard oral argument by the parties in

Support of such motions, finds the facts and states the conclusi¢

OF law as follows:

tw ‘

PrP FP PP YP YP PP PY SY

FINDINGS OF PACT

J. With respect to Rossye Dawson.

a. On February 18, 1977, an application for Medi-Cal

was Ciled on behalf of Rossye Dawson; .

b. The County of Riverside Department of Public Social

Services approved the application pending a property verification

c. On May 17, 1977, the County of Riverside Department

of Public Social Services sent a Notice of Action letter to

Rkossye Dawson .determining that she was no longer eligible for

Medical-Cal because she had transferred property without adequate

consideration in violation of Title 22, California Administrative

Code section 50409; 7

G. Rossye Dawson filed a request for a fair hearing,

which was held on September 14, 1977; 4

e. The hearing officer found that the transfer of

property for inadequate consideration was made in May 1977,

that Rossye. Dawson had failed to overcome the presumption that

the tcansfer was made for the purpose of qualifying for Medi-

Cal, and that therefore her claim for Medi-Cal benefits should

be denied; ‘

{. ‘The proposed decision of the hearing officer was

adopted by the Director of the State Department of Health on

February 15, 1978;

g. Rossye Dawson has never sought judicial review of

the director's decision by filing a petition for writ of mandate

pursuant to section 1094.5 of the California Code of Civil

Pi ocedure; and

h. On or about October 30, 1978, counsel for Rousye

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Dawson filed a “Certificate of Counsel re Death of Plaintiff."

No substitution for the deceased plaintiff has been made,

2. With respect to intervenor Enosinsio Manahan;:

a. On April 12, 1978, an application for Medi-Cal was

filed on behalf of Mr. Manahan;

b. The Orange County Department of Social Services

denied his application on the ground that he had transferred

property in order to be eligible for Medi-Cal in violation of,

inter alia, Title 22 California Administrative Code section

50409;

c. A fair hearing was requested and held on July 6

and 7, 1978 on the county's denial of Medi-Cal;

dad. The hearing officer found that Mr. Manahan had

overcome the presumption that the transfer of property was for

the purpose of qualifying for Medi-Cal. The hearing officer

recommended that he be eligible for Medi-Cal once he met.the

Medi-Cal property limit spend-down.

e. On January 12, 1978, the Director of the State

Department of Health Services reversed the proposed decision of

the hearing officer. The director found that Mr. Manahan had

not overcome the presumption; and-

f. He has not sought judicial review of the director's

decision by filing a petition for writ of mandate in the state

court pursuant to California Code of Civil Procedure section

1094.5.

3. With respect to intervenor Antonia Beltran:

a. On October 27, 1978, she re-applied for Nedi-

cal benelLits;

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b. The Notice of Action dated January 8, 1979

indicated that the denial of Medi-Cal cligibility was based

on a transfer of property in 1977,

c. She did not request a fair hearing from the

determination of the county, and no fair hearing was held.

4. Except for the application of the transfer of assets

rule to these three individuals, they would be cligible for

Medi-Cal coverage under the state's medically needy program,

5. Defendant Beverlee A. Myers, successor to Edwin W.

Beach, is the Director of the California State Department of

Health Services, successor to the State Department of Nealth.

6. Defendant Elisabeth Lyman, successor to Bruce Yarwood,

23 the Acting Chief Deputy Director of the Medical Care

Services and Medical Care Standards Division of the State

Department of Health Services.

7. Yo the extent that any of the following conclusions

of law are deemed findings of fact, the same are incorporated

herein by reference.

CONCLUSIONS OF LAW

1. The Court has jurisdiction over this case pursuant

to 28 U.S.C. §1343(3), (4), as this is an action author ized

by 42 U.S.C. §1383 to redress the deprivation of rights

under color of state law. The Court has pendent jurisdiction

over any claims not specifically authorized pursuant to 42

U.S.C. §1983. Jurisdiction is also conferred by 28 U.S.C.

§1331, as there is more then $10,000.00 in controversy.

Yhis case has been certified as a class action.

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2. Rossye Dawson lacks capacity to sue as she is deceased

and no substitution has been made for her pursuant to Federal

Rules of Civil Procedure section 25(a)(1).

3. The federal Medicaid Program, Title XIX of the

Social Secruity Act, 42 U.S.C. §1396 et seq., is a system of

cooperative federalism in which the states and other jurisdiction

have the option to participate, and to receive partial reimbursem

for services provided. If they decide to participate, the

states are required to operate their Medicaid Program within

the contours of the federal statute and regulations, and to

submit a state plan to the Secretary of the Department of

Health, Education, and Welfare that comports with gontrolling

federal laws. In order to be eligible for reimbursement,

the states which decide to participate must comply with the

mandatory requirements established by the Social Security

Act as interpreted and implemented by IIfW. Townsend ve

Swank, 404 U.S. 282, 286 (1971); King v. Smith, 392 U.S.

309, 333 (1968); County of Alameda v. Carleson, 5 Cal.3d

730, 739 (1971); Wony v. Brian, CCH Medicare & Medicaid

Guide, [1974] Transfer Binder, 426, 605 (cal.Cct. App. 1972).

4. Once a state decides to participate, it must provide

Medicaid benefits to the "categorically needy", who are

individuals meeting both the categorical requirements of

being aged, blind, or disabled, and also the financial eligibilit

requirements. 42 U.S.C. §1396a(a)(10)(A); 42 C.F.R. §435,120;

see Friedman v. Beryer, 547 F.2d 724, 726 (2d Cir, 1976),

cert. denicd 430 U.S. 984 (1977); Wong v. Brian, supra, 426,

605 at 90)5.

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5. In addition, states have the option of providing

Medicaid assistance to the so-called “medically needy" who

are individuals meeting the cateyorical requirements of

being aged, blind or disabled, but who have incomes or resources}.

above the financial requirements. 42 U.S.C. §139Ga(a) (10) (C);

42 C.F.R. §435.300 et seqg.; see Fricdman v. Berger, supra;

Wong v. Brian, supra.

6. California has opted to participate in the Medicaid

Program, and has further opted to provide assistance to the

medically needy. 22 Cal.Adm. Code §60249(a)(1); Wong v.

Brian, supra.

7. The general rule is that recipients of Supplemental

Security Income ("SSI"), who are aged, blind, or disabled

individuals receiving federal cash benefits, are categorically

needy and are therefore automatically eligible for Medicaid.

42 U.S.C. §1396a(a)(10(A). California, as well as other

states, has been given the option by .Congress of wuine a

different eligibility test for the categorically needy than

that they be recipients of SSI. Under this test, a state

can use more restrictive financial eligibility conditions

than those set out in the SSI program, but no more restrictive

than those in effect in the state on January 1, 1972, 42

U.S.C. §1396a(f); 42 C.F.R. §431.121; see Wayes v. Stanton,

512 P.2d 133, 137-138 (7th Cir. 1975); West v. Cole, 390

F.Supp. 91, 95-96 (N.D. Miss. 1975); Gray Panthers v. Seerctary,

Department of Health, Education and Welfare, 461 F.Supp.

3k9, 322 (D.D.C. 1978).

8. In its Medicaid Program, known in this state as

Medi-Cal, California has not selected this option, and therefore

must provide, and docs provide, automatic categorical assistance

to all recipients of SSI. Cal.Adm. Code §50227.

9. The federal Medicaid statute requires thous States

which provide medically needy benefits to include tn: a2sarKen

"all individuals who would, except for income and resources,

be eligible to have paid with respect to them Supplemental

Security Income benefits. ...™ 42 U.S.C. §139Ga(a)(10)(C)(i).

10. A state may not impose conditions of eligibility

on the medically needy that are more restrictive than those

imposed on the categorically needy, that is, recipients of

SSI. 42 C.F.R. §435.401(c). Of course, a state may impose

collateral restrictions on the medically needy that are not

imposed on the categorically needy. 42 U.S.C. §139G6a(a) (17) (A);

45 CFR §233.10(a)(1)(ii)(B).

ll. Cal.Welf. & Inst. Code §14015 and 22 Cal.Adm. Code

§50409 are designed to eliminate fraudulent practices affecting

eligibility for benefits. The federal statute is concerned

with substantive eligibility requirements only, ana does not

Place any specific restrictions on the state's right to

police fraud. Consequently, the transfer of assets rule is

a procedural regulation which is not prohibited by 42 usc

§139Ga(a)(10)(C)(i).

12. Cal.Welf. & Inst. Code §14015 and 22 Cal.Adm. Code

$50409 de not violate 42 U.S.C, §139Ga(a)(17)(B) or 42 CFR

$435.845. The purpose of these state law provisions is to

deter transfers of assets solely for the purpose of qualificatic

-7-

AT SS

; ‘

1 Yo the extent an asset is transferred for. the purpose of

2 qualifying for benefits, the asset should be treated as

3 being available for the applicant's use.

4 13. Cal.Welf. & Inst. Code §14015 and 22 Cal.Adm, Code

5 §50409 are not in conflict with any federal law or regulation

6 governing the Medicaid/iedi-Cal program. ‘They do not violate

9 the Supremacy Clause of the United States Constitution

8 14. Cal. Welf. & Inst. Code §14015 and 22 Cal.Adm,

9 Code §50409 do not establish an irrebutable presumption that

10 a transfer of assets was made with the intent of gaining

11 eligibility and so do not violate the due process clause of

12 the Fourteenth Amendment to the United States Constitution.

13 15. A rational distinction between SSI recipients and

14 the medically needy is made in Cal. Welf. & Inst. Code §14015

15 and 22 Cal. Adm. Code §50409. The state has an interest in

16 assuring that medical assistance benefits are dispersed only

17 to those who are truly in need. Those receiving SSI by

18 definition are in financial need. It is rational for the

19 state to scrutinize transfers of assets by the medically

20 needy to assure that financial eligibility is not improperly

21 manufactured. The Court therefore holds that the equal

RA protection clause of the Fourteenth Amendment has not been

23 violated by Cal.Welf. & Inst. Code §14015 and 22 Cal.Adm,

2A Code §50409.

25 16. To the extent that any of the forcgoing findings

26 of fact are deemed conclusions of law, the same are incorporates

27 herein by reference.

28 17. ‘the plaintiff£'s motion for summary judgment is

-g-

1 denied, and the defendants! motion for summary judgment is

2 granted, Judgment shall be entered accordingly.

Dated: May /O , 1979

PTI -tandatone

13-29-74 OOM 621

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{ ; [ E. [ “e

IN THE UNITED STATES COURT OF APPEALS JUL '% 0 1990

FOR THE NINTH CIRCUIT RICHARD H PE

CLERK, U.S. COURT CH AE.

ROSSYE DAWSON, individually and )

on behalf of all others similarly )

situated, )

)

Plaintiff-Appellant, ) No. 79-3246

)

vs. ) OR DER

)

BEVERLEE A. MYERS, et al., )

)

Defendants-Appellees. )

)

Before: WRIGHT and ANDERSON, Circuit Judges, and SOLOMON, *

District Judge.

The panel as constituted in the above case has

voted to deny the petition for rehearing and to reject the

suggestion for a rehearing en banc.

The full court has been advised of the suggestion

for en banc rehearing, and no judge of the court has re--

quested a vote on the suggestior for rehearing en bane.

Fed. R. App. P. 35(b).

The motion of the Secretary of Health and Human

Services for permission to file an amicus curiae brief is

JENTIED.

The petition for rehearing is denied and the

suggestion for a rehearing en banc is rejected.

*The Honorable Gus J. Solomon, Senior United States

District Judge, District of Oregon, sitting by designation.

yey

APPENDIX c”'

§l1 (due process and equal protection clauses):

(C),

APPENDIX D

1. United States Constitution, 14th Amendment,

“... nor shall any State deprive any person of life,

liberty, or property, without due process of law;

nor deny to any person within its jurisdiction the

equal protection of the laws."

2. Title 42, United States Code, §§1396a(a) (10)

1396a(a) (17) (B):

"A State plan for medical assistance must

(10) provide -

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 individuals not described in clause (A)

shall be equal in amount, duration, and scope ....

[and]

"(17) include reasonable standards (which shall be com-

parable 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 deter-

mining 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 pre-

scribed by the Secretary, available to the applicant

or recipient and (in the case of any applicant or

ey ;

APPENDIX D u'

recipient who would, except for income and resources,

be eligible for aid or assistance in the form of money

payments under any plan of the State approved under

subchapter I, X, XIV, or XVI, or part A of subchapter

IV, or to have paid with respect to him supplemental

security income benefits under subchapter XVI of this

chapter) as would not be disregarded (or set aside for

future needs) in determining his eligibility itor such

eid, assistance, or benefits ...."

3. California Welfare & Institutions Code, §14015:

"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 noc shali 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 de-

termined 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."

4. Title 42, Code of Federal Regulations, 435.401

"(c) The agency must not use requirements for deter-

mining eligibility for optional coverage groups that are -

---(2) For aged, blind and disabled individuals,

more restrictive than those used under SSI, except

for individuals receiving an optional Stat supple-

ment as specified in §435.230 or individuais in

categories specified by the agency under §435.121."

5. Title 22, California Administrative Code,

§§50409, 50411:

"50409. Transfer of Property Which Results in Ineligibility.

(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 cligibility or to reduce the share

of cost.

(2) To overcome the presumption, the applicant

or beneficiary has the burden of establishing

by objective facts, rather 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 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 under-

stand extent of resources.

(A) The declaration of another purpose, such

as to avoid probate, by itself, shall not be

sufficient to overcome the presumption. A show-

ing that the sole purpose of the transfer was

for reasons other than to establish eligibility

or to reduce the share of cost shall be supported

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 over-

come the presumption."

"50411. Period of Ineligibility Due to Transfer of Property.

(a) Following a determination of ineligibility due to the

transfer of property, there shall be a period of ineli-

gibility. This period shall be the time during which the

net market value of the property at the time of transfer,

less consideration received, would have supported the

applicant or beneficiary and the applicant's or benefi-

Ciary's family.

(b) The period of ineligibility shall be computed in the

following manner:

(1) Determine the net market value of the property

at the time of transfer less any consideration re-

ceived which is the net value of the property

transferred.

(2) Determine the portion of the net value of the

property transferred which, if included in the pro-

perty reserve at the time of transfer, would not

have caused such reserve to exceed the property

limit that was applicable at that time.

(3) The portion of the net value of the property

transferred that would not have fallen within the

property limit at the time of transfer is the ex-

cess net value of the property transferred and

shall be used to determine the period of ineligibility.

(4) The number of months in the period of ineli-

gibility shall be determined by dividing the excess

net value of the property transferred by the monthly

maintenance need for the applicant or beneficiary

and the applicant's or beneficiary's family. The

maintenance needs used shall be the maintenance

needs in effect during each individual month since

the date of the transfer. Income received by the

family after the transfer shall not affect this

computation.

’

P Ae.

(5) The period of ineligibility may be further

reduced by deducting the actual cost to the

applicant or beneficiary of the following:

(A) Medical expenses.

(B) Out-of-home care costs in excess of the

maintenance needs.

home into a liveable condition.

of the month following the date the transfer which re-

sulted in ineligibility occurred, unless a 10-day notice

is required and cannot be given. In that case, the

period of ineligibility shall begin the first of the

next month.

(d) The period of ineligibility shall end when any of

the following situations occur:

(1) The property which was transferred and caused

ineligibility is reconveyed to the applicant or

beneficiary.

(2) The applicant or beneficiary receives adequate

consideration for the property.

(3) Deduction of the amounts specified in (b) (4)

and (5) has reduced the excess net market value

to zero."

6. Social Security Administration Claims Manual,

§12507(a):

"12507. Disposition or transfer of Resources Prior

to Filing Application

(a) General

The valid disposal or transfer, as by sale or gift, of a

resource prior to the filing of an SSI program application,

does not preclude eligibility for payment, even though re-

tention of the resource would have placed an individual's

or couple's resources over the applicable limit. This is

true with respect to cash and real or personal property

and also true though the resource may have been given as

a gift or sold for less than its market value to a re-

lative or friend.

In addition, an individual may also reduce his resources,

for the purpose of being within the applicable limits, by

prepaying debts (such as rent, taxes, installment charges,

etc.). (Note: where a renter has prepaid rent, do not

count the rental value of the dwelling as unearned income.)

However, such prepayments must be bona fide and irre-

vocable. If an individual has the legal right to get a

prepayment back, those funds available to him are still |

his resource." .

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.