Appendix — Beltran v. Myers
Supreme Court brief1981
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2 AES RS ie
No. 80-5303
In the Suyreme Court of the United Stes
OCTOBER TERM, 1980
ANTONIA BELTRAN, INDIVIDUALLY AND ON BEHALF OF
ALL OTHER SIMILARLY SITUATED, PETITIONER,
,
BEVERLEE A. MYERS, INDIVIDUALLY AND AS DIRECTOR,
CALIFORNIA STATE DEPARTMENT OF HEALTH,
RESPONDENTS
ON WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR
THE NINTH CIRCUIT
JOINT APPENDIX
GEORGE DEUKMEJIAN,
Attorney General
THOMAS WARRINER,
Assistant Attorney General
ANNE S. PRESSMAN,
GILL DEFORD DONALD A. ROBINSON,
NEAL S. DUDOVITZ RICHARD J. MAGASIN,
National Senior Citizens Deputy Attorneys General
Law Center 3580 Wilshire Boulevard,
1636 West 8th Street, #201 Suite 800
Los Angeles, California 90017 Los Angeles, California 90010
Telephone: (213) 388-1381 Telephone: (213) 736-2214; 2606
Attorneys for Petitioners Attorneys for Respondent
PETITION FOR WRIT OF CERTIORARI
FILED AUGUST 27, 1980
CERTIORARI GRANTED NOVEMBER 3, 1980
TABLE OF CONTENTS
PROUVANE DOCKOE EMUTIOS oie cece recccevveees
Complaint (with Exhibits A, B, C and D).........
RE Oe a ok 8 hao ik oe Nee ocee teed gere
Order Granting Plaintiffs’ Motion for Certification
i eG A eels Se Pais k bie BRO 6 680 WN ban wore’
Findings of Fact and Conclusions of Law .........
ING STi cava dae cb unceebuvationcwcwe
Opinion of the United States Court of Appeals for
SE UN REE Cig Nis Nabe ihe cv.cck ey ee scans
SINE ROMO GUUOUTUI Vi cspccesicatesvecesdes
Order of the Supreme Court of the United States
Granting Motion for Leave to Proceed in forma
pauperis and Granting Petition for Writ of Cer-
Ps abd b Wak Khoa eas ea cae nko eee ec esheses te
RELEVANT DOCKET ENTRIES
IN THE UNITED STATES DISTRICT COURT FOR
THE CENTRAL DISTRICT OF CALIFORNIA:
Complaint in Intervention for Declaratory and In-
junctive Relief, filed February 26, 1979
Answer to Complaint in Intervention for Declaratory
and Injunctive Relief, Filed March 19, 1979
Order Granting Plaintiffs’ Motion for Certification of
the Class, filed May 10, 1979
Findings of Fact and Conclusions of Law, filed May
10, 1979
Summary Judgment, filed May 10, 1979
IN THE UNITED STATES COURT OF APPEALS FOR
THE NINTH CIRCUIT:
Opinion, filed May 14, 1980
Order Denying Rehearing, filed July 30, 1980
2
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
No. C 78 -2350 MML(Sx)
ROSSYE DAWSON, INDIVIDUALLY “ND ON BEHALF OF ALL
OTHERS SIMILARLY SITUATED, PLAINTIFF
US.
EDWARD BEACH, ET AL., DEFENDANTS.
ANTONIA BELTRAN AND ENOSINSIO MANAHAN, INDI-
VIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, INTERVENOR-PLAINTIFFS.
COMPLAINT IN INTERVENTION FOR
DECLARATORY AND INJUNCTIVE RELIEF
FILED FEBRUARY 26, 1979
CLASS ACTION
INTRODUCTION
1. This class action challenges the failure of the State of
California to provide Medicaid benefits (referred to in
California as “Medi-cal”) to individuals otherwise eligible
because of the State’s application of an additional eligibil-
ity requirement which does not comport with controlling
federal law.
JURISDICTION
2. Jurisdiction is invoked pursuant to 28 U.S.C. § 1343
(3) and (4), which provide for original jurisdiction of this
court over actions authorized by 42 U.S.C. § 1983 to red-
ress the deprivation of rights under color of state law.
Jurisdiction is also conferred by 28 U.S.C. § 1331, as there
is more than $10,000 in controversy; an actual controversy
3
does exist and plaintiff seeks a declaration of rights pur-
suant to the Declaratory Judgment Act, 28 U.S.C.
§§ 2201, 2202.
PARTIES
3. Intervenor-plaintiff ANTONIA BELTRAN is an eighty-
six (86) year old resident of Los Angeles, California, who
requires, and who, because of physical frailty, will con-
tinue to require, long-term care in a nursing home facility.
4. Intervenor-plaintiff ENOSINSIO MANAHAN is an
eighty-five (85) year old long term care patient living in a
convalescent home in Anaheim, California. Because of
age-related, severe illness, he requires and will continue
to require long-term care in a nursing home facility.
5. Defendant EDWARD BEACH is the former Director of
the State Department of Health Services, and pursuant to
Rule 25(d)(1), F.R.Civ.P., his successor is automatically
substituted as a party. His successor and the present Di-
rector of the State Department of Health Services is
Beverly A. Myers, and as Director she is responsible for
the overall administration of the Medi-Cal Program.
6. Defendant BRUCE YARWOOD is the Deputy Director
of the State Department of Health Services and is in
charge of the Medi-Cal Division of the Department.
CLASS ACTION ALLEGATIONS
7. Intervenors Beltran and Manahan bring this action
on their own behalf and, pursuant to Rules 23(c) and
23(b)(2) of the Federal Rules of Civil Procedure, as the
representatives of a class consisting of all aged, blind, and
disabled individuals who have been, are being, or will be,
denied Medi-Cal benefits because of an alleged transfer of
assets for inadequate consideration pursuant to Welfare
and Institutions Code (“W.&I.C.”), Section 14015, and 22
Cal. Admin. Code § 50409. The class is so numerous that
joinder of all its members is impracticable. There are
questions of law and fact common to the class. Inter-
venors’ claims are typical of the claims of all class mem-
7%
4
bers, and intervenors will fairly and adequately protect
the interests of the class. In addition, defendants have
acted and continue to act on grounds generally applicable
to all members of the class, thereby making appropriate
declaratory and injunctive relief with respect to the class
as a whole.
STATUTORY AND REGULATORY FRAMEWORK
8. The Medical Assistance Program (referred to gener-
ally as “Medicaid”) is a cooperative federal-state program
established pursuant to Title XIX of the Social Security
Act, 42 U.S.C. § 1396, et seq. In accordance with the Act,
the Secretary of the Department of Health, Education and
Welfare promulgates regulations which, in addition to the
statutes, provide the framework in which the states must
develop and operate their Medicaid programs.
9. California has chosen to participate in the Medicaid
program, and, consequently, the responsible state agency,
the State Department of Health Services, is required to
administer the program in compliance with federal stand-
ards.
10. Among the categories of individuals who, if they
meet income eligibility guidelines, are eligible fer
Medicaid, are the aged (over 65), blind, and disabled.
11. Under federal law, all recipients of Supplemental
Security Income (“SSI”), the federal cash benefit program
for the needy aged, blind and disabled, are automatically
eligible for Medicaid benefits. These eligibles are known as
the “categorically needy.” (Certain other groups, not here
involved, are also among the categorically needy.)
12. In addition, states have the option, pursuant to 42
U.S.C. § 1396a(a)(10)(C), of providing Medicaid benefits
to individuals who meet the categorical definitions (i.e.,
aged, blind or disabled) but who are not financially eli-
gible. Known as the “medically needy”, they may gain eli-
gibility for Medicaid by spending down on medical needs to
the eligibility level. California has a medically needy pro-
gram for its aged, blind and disabled.
7%
5
13. In the SSI program, the transfer of assets prior to
application for less than full consideration is not a relevant
factor in determining eligibility.
14. Under California law, transfer of property for less
than adequate consideration is specifically noted as an ex-
ception to the rule that the provision of health care will
not be restricted by property holdings. Under W.&I.C.
§ 14015,
any transfer of the holdings by gift or, knowingly,
without adequate and reasonable consideration, shall
be presumed to constitute a gift of property with in-
tent to qualify for assistance and such act shall dis-
qualify the owner for further aid for a period deter-
mined under standards established by the director
15. The state regulations implementing this provision
provide, inter alia, that:
To overcome the presumption, the applicant or ben-
eficiary has- the burden of establishing by objective
facts, rather than statement of subjective intent, that
this presumption is not correct. The applicant or ben-
eficiary shall provide evidence that adequate re-
sources were available at the time of the transfer of
property for support and medical care considering
such things as the applicant’s or beneficiary’s age,
health, life expectancy, and ability to understand the
extent of resources.
(A) The declaration of another purpose, such as to
avoid probate, by itself, shall not be sufficient to
overcome the presumptions. A showing that the sole
purpose of the transfer was for reasons other than to
establish eligibility or to reduce the share of cost shall
be 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 of genefits of the Medi-Cal program is not
sufficient to overcome the presumption.22 Cal.Ad-
min.Code § 50409(b)(2).
16. Once a determination is made that a transfer was
effected improperly,
6
there shall be a period of ineligibility. This period
shall be the time during which the net market value of
the property at the time of transfer, less considera-
tion received, would have supported the applicant or
beneficiary and the applicant’s or beneficiary's family.
22 Cal.Admin.Code § 50411(a).
FACTUAL STATEMENT
17. Intervenor Antonia Beltran requires long-term care
in an institutional setting, and is expected to continue to
require such care for the indefinite future. She lived in her
own home with her husband, Philip, until March, 1978,
when her overall weakness required her to go to a conva-
lescent home. She has remained in convalescent homes
since that time, and is presently living in the Santa
Teresita extended care facility in Duarte, California.
18. On February 23, 1977, she and her husband, Philip,
grant-deeded their home in East Los Angeles to their
three children, Philip, Emilio, and Josephine. The deed
was recorded on March 7, 1977. After deeding the home,
they continued to live in it until Mrs. Beltran was forced to
leave in March, 1978. Mr. Beltran has continued to live in
the home to this day. In May, 1977, both of them were
found eligible for Medi-Cal under the state’s medically
needy program.
19. In the summer of 1978, Antonia Beltran was notified
that her Medi-Cal would be terminated. It was terminated
effective September 1, 1978, and she has not received
Medi-Cal benefits since that time. Her husband, Philip,
has continued to receive Medi-Cal benefits.
20. In the fall of 1978, Mrs. Beltran applied again for
Medi-Cal benefits. This application was denied in a Notice
of Action dated January 8, 1979. A copy of that Notice of
Action is attached to this complaint as Exhibit “A”.
21. The Notice of Action indicates that the Beltrans’
transfer of property in the winter of 1977 is the cause of
this denial. According to the Notice of Action, unless cer-
tain other conditions are met, Mrs. Beltran will remain in-
7
eligible for Medi-Cal for the next eight hundred eighty-
five (885) months, a period of more than 71 years.
22. Intervenor Enosinsio Manahan is an eighty-five (85)
year old long-term care patient living at the Fountainbleau
Convalescent Home, 3415 West Ball Road, Anaheim,
California. Because of advancing diabetes mellitus and
senile dementia, he requires long-term care in an institu-
tional setting and is expected to continue to require such
care for the indefinite future.
23. Mr. Manahan entered the convalescent home in
January, 1977, and since then has been separated and liv-
ing apart from his wife, Lucy Manahan. Mrs. Manahan re-
sides with her daughter by a previous marriage, Mrs.
Lucille Tom, to whom she pays monthly rent.
24. On April 12, 1978, application for Medi-Cal was
made on Ensinsio Manahan’s behalf by &#s step-daughter,
Mrs. Lucille Tom, at the Orange County Department of
Social Services.
25. On June 5, 1978, the Orange County Department of
Social Services denied Medi-Cal eligibility for Enosinsio
Manahan, on the grounds of a transfer of assets for in-
adequate consideration pursuant to Welfare and Institu-
tions Code § 14015 and 22 Cal. Admin. Code § 50409. This
denial was based on sale of the family home by Mrs. Man-
ahan in May, 1977, four months after Enosinsio Manahan
entered the convalescent home and eleven months before
the application for Medi-Cal was made. (Exhibit “B”, at-
tached to the complaint.)
26. On July 6 and 7, 1978, a Fair Hearing was held on
whether Orange County correctly denied Mr. Manahan’s
application for Medi-Cal benefits because of its determina-
tion that he transferred property in order to become eli-
gible. ;
27. The Hearing Officer recommended that Orange
County rescind its denial of the claimant’s Medi-Cal appli-
cation and that Mr. Manahan be allowed to spend down
$1,630.98 in order to meet the property limit for Medi-Cal.
(Exhibit “C”, attached to the complaint.)
8
28. On January 12, 1979, the Director of the State De-
partment of Health Services overturned the decision of the
hearing officer, and ruled that Orange County correctly
applied Section 50409(b) in denying Mr. Manahan’s Medi-
Cal application. The Director ruled that Mr. Manahan re-
ceived a community property share from the proceeds of
the sale of the home, and that he has not overcome the
presumption that the transfer of property was for the pur-
pose of establishing eligibility. (Exhibit “D”, attached to
the complaint.) :
29. The present outstanding balance to the nursing
home for cost of his care is $8,944.93.
IRREPARABLE INJURY
INADEQUACY OF REMEDY AT LAW
30. Defendant’s determination that plaintiff-intervenors
are ineligible for Medi-Cal benefits has caused them ir-
reparable harm, and continues to cause them irreparable
harm, in th&t they are incapable of paying for the cost of
necessary institutionalized care with their own incomes.
Without Medi-Cal benefits, they will be forced to leave the
institution.
31. There is no adequate remedy at law. Defendants are
depriving intervenors and their class of necessary health
care, and this harm is not susceptible of redress by a mere
award of money damages. Only injunctive relief can insure
the provision of health care to intervenors and their class.
FIRST CAUSE OF ACTION
32. California has chosen to provide Medi-Cal benefits
automatically to all recipients of SSI.
33. The SSI program does not predicate eligibility on a
transfer of assets for adequate consideration prior to ap-
plication. In order to meet the requirement that it provide
Medi-Cal benefits to all SSI recipients, California cannot
utilize a transfer of assets provision for its categorically
needy program.
yy
9
34. Pursuant to section 1902(a)(10)(C)(i) of the Social
Security Act, 42 U.S.C. § 1396a(a)(10)(C)(i), a state is
precluded from applying more restrictive eligibility condi-
tions to the medically needy than the categorically needy.
35. Additionally, federal regulations require that a state
use resource standards equal to the higher of the state’s
standards in the Aid to Families with Dependent Children
(AFDC) or SSI programs. 42 C.F.R. § 435.840(a), at 43
Fed. Reg. 45216 (September 29, 1978). [In the September
29, 1978, Federal Register, HEW reworded and re-
codified, but with no substantive changes, all of its
Medicaid regulations. 43 Fed. Reg. 45716, et seg. Title 42
C.F.R. § 435.840(a) is equivalent to the former 42 C.F.R.
§ 448.3(c)(1)(iv), which was itself previously codified at 45
C.F.R. § 248.3(¢)(1)(iv).]
36. By requiring that assets be transferred for adequate
consideration in order to be eligible for Medi-Cal, defend-
ants are applying an eligibility condition more restrictive
than that utilized in the SSI program, and thereby are in
violation of federal statutory and regulatory requirements.
SECOND CAUSE OF ACTION
37. Pursuant to 42 U.S.C. § 1396a(a)(17), states are
permitted to consider only income and resources which are
actually available to the recipient. By deeming the value of
a former property available to them when in fact neither
that property nor its cash value is available, defendants
are violating this federal requirement
THIRD CAUSE OF ACTION
38. By requiring applicants to demonstrate that they
disposed of assets for adequate consideration prior to ap-
plication, defendants have added an additional eligibility
condition which is nowhere found in the Social Security
Act. Such additional eligibility conditions are in violation
of the Supremacy Clause of the Constitution.
10
FOURTH CAUSE OF ACTION
39. Section 50409 of Title XXII, California Administra-
tive Code, represents a conclusive presumption that any
transfers of assets within a two-year period prior to appli-
cation are for the purpose of qualifying for aid. Section
14015, W.&I.C., conclusively presumes that any transfer
for inadequate consideration is for the purpose of obtain-
ing Medi-Cal benefits. There is no realistic opportunity to
rebut these presumptions, as section 50409(b)(2) of the
California Administrative Code does not permit any proof
of “subjective intent.” There is no logical nexus between
the basic fact of the transfer for inadequate consideration
and the presumed fact of transfer to obtain benefits.
FIFTH CAUSE OF ACTION
40. The transfer of assets rule has created two classes
of aged, blind and disabled individuals. One class consists
of those aged, blind and disabled who are automatically
eligible for Medi-Cal benefits without regard to any
transfer of assets that they may have made prior to ap-
plying for Medi-Cal. The other class consists of those
aged, blind and disabled who, like the first class, are in
need of health care but who are not eligible for SSI bene-
fits and are therefore subject to the transfer of assets rule
in applying for Medi-Cal. This classification is arbitrary
and irrational, and serves no legitimate purpose. It is con-
trary to a major goal of the Medicaid program, to provide
health care to needy aged, blind and disabled individuals
unable to pay for their own care. Such arbitrary and irra-
tional classifications violate the equal protection clause of
the 14th Amendment.
PRAYER FOR RELIEF
WHEREFORE, intervenors respectfully pray on behalf
of themselves and all others similarly situated that this
Court:
11
1. Assume jurisdiction over this case.
2. Certify by order at an appropriate time that this suit
is properly maintainable as a class action pursuant to Rule
23(b)(2) of the Federal Rules of Civil Procedure.
3. Declare that defendants’ policy of terminating Medi-
cal eligibility due to an alleged transfer of assets without
adequate consideration prior to applying for Medi-Cal, as
expressed in W.&1.C. § 14015 and 22 Cal.Admin.Code
§ 50409, violates controlling federal law and implementing
regulations, and the equal protection and due process
clauses of the Fourteenth Amendment to the United
States Constitution.
4, Enter a permanent injunction restraining defendants,
their successors in office, agents, and employees, and all
persons acting in concert with them, from denying Medi-
Cal benefits to the intervening plaintiffs and all members
of their class for the reason that they allegedly transferred
assets prior to application without due consideration.
5. Order defendant to notify all members of the class
that their ineligibility for Medi-Cal due to a transfer of
property without due consideration has been re-evaluated
and that if they are otherwise eligible: (1) they may reap-
ply for Medi-Cal without regard to any previous transfer
of assets; and (2) that they may request reimbursement for
these amounts which they were forced to spend on medical
care during the period of ineligibility based on a transfer
of assets which would otherwise have been covered by
Medi-Cal.
6. Award intervenors the costs of this suit, including
reasonable attorneys fees.
7. Grant such other and further relief as to the Court
seems just and proper.
12
DATED: February 8, 1979.
Respectfully submitted,
DANIEL HANTMAN
IRENE CARDEANS GALLARDO
PAUL HENRY ABRAM
RONALD L. TAYLOR
RICHARD Ross
GARY ROWSE
GILL DEFORD
NEAL DUDOVITZ
STUART PARKER
By
GILL DEFORD
Attorneys for Plaintiffs
13
MEDI-CAL Medi-Cal Central District #80
NOTICE OF ACTION 1801 W. Valley Blvd.
DENIAL/DISCONTINUANCE P.O. Box 2630
OF BENEFITS Alhambra, CA 91803
Antonia Beltran State No. 5243322
% Philip Beltran District: 80
1111% So. Lorena St. Denial/discontinuance for:
Los Angeles, CA. 90023 Antonia Beltran
We have reviewed all information available to us about
your circumstances, and we find that:
Your application for Medi-Cal dated 10/27/78 has
been denied.
[] Your eligibility to receive Medi-Cal will be discon-
tinued effective the last day of ;
(Month)
The reason for this denial/discontinuance is: the value of
the property you transferred on 3-7-77 causes your prop-
erty reserve to exceed the allowable maximum. You are
ineligible for a period of 285 months, or until you have
spent the excess value of $22,121,000 in medical bills.
Your period of ineligibility will also expire if your property
is returned to you or if you receive fair price for the prop-
erty you transferred.
[]) You did not return your completed RECORD OF
HEALTH CARE COSTS form for
(Month)
and so did not receive a Medi-Cal card. We will assume
that you wish to have your Medi-Cal eligibility discon-
tinued unless you request a RECORD OF HEALTH
CARE COSTS form for _.. from this
(Month)
office by . If we do not hear from
(date)
you, your eligibility will be discontinued effective the
last day of.
(Month)
The regulations which require this action are California
Administrative Code, Title 22, Section(s): 50411.2.24
EXHIBIT “A”
14
PERIOD OF INELIGIBILITY
If you are eligible for Medicare and your Medi-Cal eligi-
bility is discontinued, this means that is the
(Month)
last month the State will pay your premium for
supplementary insurance coverage (Part B Medicare). You
will receive a written notice from the Social Security Ad-
ministration, or you may call your Social Security District
Office if you have any questions about your Medicare
status.
If you have any questions about this action or if there
are additional facts relating to your circumstances which
you have not reported to us, please write or telephone. We
will answer your questions or make an appointment to see
you in person. Please remember that this action pertains
only to the circumstances you reported to us, and that you
may reapply at any time.
T Live 576-1261 1-8-79
(Eligibility Worker) (Phone) (dated)
EXHIBIT “A”
15
MEDI-CAL HUMAN SERVICES AGENCY/
NOTICE OF ACTION SOCIAL SERVICES
DENIAL/DISCONTINUANCE 1624 W. 19th STREET
OF BENEFITS P.O. Box 1999
SANTA ANA, CALIFORNIA 92702
Enosinsio Manahan
15261 Swallow Lane State No. 3013-0315454
Westminster, Ca. 92683 District: 09
Denial/discontinuance for:
MANAHAN, Enosinsio
We have reviewed all information available to us about
your circumstances, and we find that:
(} Your application for Medi-Cal dated 4/12/78 has been
denied.
C) Your eligibility to receive Medi-Cal will be discon-
tinued effective the last day of :
(Month)
The reason for this denial/discontinuance is: A period of
ineligibility exists starting 5/77 and are allowing expendi-
tures from transferred property at the rate of the State
maintenance Needs of $278. This accounts for approx.
$3600. of the transferred property for the period 5/77-
5/78. Therefore, as of 6/78 we have determined the re-
mainder of monies transferred without adequate consid-
eration to be $50,342. based on the information you pro-
vided on proceeds from sale of your home. (see attached.)
[]) You did not return your completed RECORD OF
HEALTH CARE COSTS form for and
(Month)
so did not receive a Medi-Cal card. We will assume that
you wish to have your Medi-Cal eligibility discontinued
unless you request a RECORD OF HEALTH CARE
COSTS form for __from this
(Month)
office by . If we do not hear from
(Date)
you, your eligibility will be discontinued effective the
last day of
(Month)
EXHIBIT “B”
16
The regulations which require this action are California
Administrative Code, Title 22, Secton(s): 50409,
50096 50411
If you are eligible for Medicare and your Medi-Cal eligi-
bility is discontinued, this means that
(Month)
is the last month the State will pay your premium for
supplementary insurance coverage (Part B Medicare). You
will receive a written notice from the Social Security Ad-
ministration, or you may call your Social Security District
Office if you have any questions about your Medicare
status.
If you have any questions about this action or if there
are additional facts relating to your circumstances which
you have not reported to us, please write or telephone. We
will answer your questions or make an appointment to see
you in person. Please remember that this action pertains
only to the circumstances you reported to us, and that you
may reapply at any time.
Patty Fleming 834-6152 6-5-78
(Eligibility Worker) (Phone) (Dated)
MANAHAN, Enosinsio
. 30138-0315454
Medi-Cal Notice of Action
You will not be eligible until these monies are expended
at a rate of $25.00 per month for Mr. Manahan, plus
$253.00 per month for Mrs. Manahan, plus substantiated
medical expenses.
EXHIBIT “B”
17
CALIFORNIA DEPARTMENT OF
HEALTH SERVICES
Fair Hearing No. 78163110 OR
State No. 30-13-315454
District
03 030 01 1
IN THE MATTER OF THE HEARING OF CLAIMANT
ENOSINSIO MANAHAN
15261 Shallow Lane
Westminister, CA 92683
Hearing Officer: ERNESTO J. PEREZ
Country Representative: JOHN JACOBS
Authorized Representative: TIM FLYNN
Place: Santa Ana, California
Date of Hearing: July 6 & 7, 1978*
Date of County Notice: June 5, 1978
Fair Hearing Filing Date: June 8, 1978
Air Paid Pending: N/A (Denial Action)
PROPOSED DECISION
ISSUE
The issue for resolution is whether Orange County cor-
rectly denied the claimant’s April 12, 1978 application for
Long-Term Care California Medical Assistance Program
(Medi-Cal) benefits because of its determination that he
transferred property in order to become eligible.
STATEMENT OF FACT 7
COUNTY ACTION AND POSITION:
Orange County took the above-action after determining
that the claimant’s community property share of the
*Record left open until July 28, 1978 for the claimant to submit addi-
tional documents. Such information was received, and the record was
closed on August 15, 1978. The county did not submit rebuttal evi-
dence.
EXHIBIT “C”
18
$75,000 proceeds from the sale of his home in May 1977
had been transferred for the purpose of establishing pro-
gram eligibility. In evaluating the disposition of the
$75,000, the county accepted the following transactions as
acceptable dispositions:
1. Claimant’s medical expenses $ 8,381.88
2. Spouse’s medical expenses 2,240.14
3. Claimant’s and spouse’s personal expenses 5,466.68
4. Burial plots for claimant and spouse 1,969.10
TOTAL: $18,057.80
After allowing the $18,057.80 expense, Orange County
identified $56,942.20 as the community property remain-
ing from the sale of the home ($75,000.00—
$18,057.80 = $56,942.20. The remainder was then halved
to determine the claimant’s community property share
from the proceeds of the sale of his home
(% x $56,942.20 = $27,648.65). As the claimant declared
ownership of a $2,999.96 savings account in his own name
on the date of application, the county contends that he has
failed to verify the disposition of $24,648.69 remaining
from his share from the transfer of his home. Inspection of
that account by the Hearing Officer established that the
monies are under the name of the claimant’s spouse and
her daughter (not adopted by claimant). Since that trans-
fer (creation of accounts and expenditures therefrom) oc-
curred within two years of this application it is Orange
County’s position that according to Title 22, California
Administrative Code (CAC), Section 50400(b) the claimant
now has the burden of demonstrating by objective facts
(rather than by statements of objective intents) that he
did not dispose of $24,648.69 for the purpose of establish-
ing program eligibility. Assuming that the claimant is un-
able to overcome the presumption that he transferred his
funds in order to establish program eligibility, the county
stated that since he is currently in long-term care status
he will become eligible for program participation at that
point when a $25 monthly maintenance allowance (plus
verified paid medical expenses) reduces his property
EXHIBIT “C”
19
holdings below the $1,500 limit for a one-person Medi-Cal
Family Budget Unit (MFBU).
Orange County rejected the claimant’s Authorized Rep-
resentative (AR) argument that the $75,000 proceeds from
the sale of his home were the separate property of his
spouse. The county stated that although the purchase of
that property may have initially been made possible as the
result of a gift or loan of money from the claimant’s
spouse’s mother directly to her daughter, the claimant’s
spouse’s testimony at the hearing established that these
monies were repaid by the claimant’s spouse during their
marriage from the claimant’s spouse’s earnings. The
county therefore reasoned that property obtained during
the marriage by use of a community property fund (earned
income) becomes community property and is no longer the
separate property of either spouse. Additionally, the
county pointed out that the only property which it alleged
to be owned by the claimant was the real property sold in
1977, in which the claimant was recorded by title deed as a
joint tenant in conjunction with his spouse.
Orange County refused to allow $18,476 expenditures as
reductions of the claimant’s personal property holdings
which the claimant’s spouse’s daughter claimed to have
been paid from the May 1977 property sale proceeds for
“loan commitments.” The county explained that affidavits
submitted to establish the occurrence of these transactions
are not sufficient to show that they were transfers to
satisfy legal debts because of the following:
1. All transactions were between the claimant and friends
or relatives. The county submits that where the re-
lationships of contracting parties are personal, the re-
quirements of Title 22, CAC, Section 50409(b) impose a
high standard of proof to establish that the transactions
were legally valid. Absent pre-existing evidence re-
garding how the obligations were incurred by the
claimant, the county submits that mere written state-
ments by those who received funds are insufficient;
EXHIBIT “C”
20 .
2. The affidavit by the claimant’s spouse’s daughter stat-
ing that she was paid $1,000 does not indicate what the
$1,000 was paid for;
3. The affidavit stating that the claimant’s spouse’s son-
in-law was repaid $2,176.10 fails to indicate what the
money was owed for and how it was originally provided;
and that
4. Three affidavits accounting for the receipt of $15,300
are vague as to when the monies or services were pro-
vided. Additionally, Orange County argued that the
fact that one affidavit is undated and the other two are
dated after April 19, 1978, establishes that no
previously-existing debts actually occurred between
these recipients and the claimant.
Notwithstanding its position that the $18,476 paid to the
-claimant’s spouse’s daughter, the claimant’s spouse’s
son-in-law, and three other friends or relatives was not a
transfer to satisfy a legal debt, the county pointed out that
even had it acknowledged such an amount as a valid dispo-
sition of the claimant’s property, his remaining holdings
still render him ineligible for current enrollment in the
Medi-Cal program ($27,648.65-$18,476.00 = $9,172.65).
No evidence was introduced to show that the county
completed an eligibility evaluation or advised the claimant
of qualification by spenddown.
CLAIMANT’S POSITION:
The claimant’s AR contended that Orange County had
incorrectly treated $37,500 from the sale of a home in May
1977 as the claimant’s community property share. He ar-
gued that the claimant had no community property share
in that property because it represented a 1963 transfer of
$7,500 paid to the claimant’s spouse by her mother as a
partial inheritance and for the services rendered to her by
her daughter.
Alternatively, it was argued that the family had prop-
erly accounted for the disposition of the claimant’s interest
in the proceeds from the May 1977 sale.
EXHIBIT “C”
21
Records and deeds were submitted to show the follow-
ing disposition of the $75,000:
1. Proceeds from home: $75,403.43
Gross Sales Price (Contract price plus taxes)
2. Less Closing Costs
a. Settlement charges $ 542.25
b. Payoff of second mortgage 9,421.59
ec. Interest for second mortgage
payoff 53.99
d. Statement fee + 15.00
e. Reconveyance fee 25.00
($10,057.83)
3. Cash due (1-2) — 10,057.83
$65,345.60
Of the remaining cash due ($65,345.60), $25,000 was re-
ceived in the form of a second trust deed on the property,
payable to the claimant’s spouse and her daughter as joint
tenants and as their sole and separate property. The terms
of the trust deed note provide that 3 percent interest will
be paid annually and that monthly installments of not less
$225 for a period of ten years shall be paid against the
principal. On February 6, 1978, this trust deed was trans-
ferred to the claimant’s spouse’s daughter as her separate
property. In reviewing a title search abstract provided by
the Title Search Section of the Los Angeles County De-
partment of Public Social Services, the record indicates
that the $25,000 trust deed is a product from the sale of
the claimant’s property in May 1977 in which he held a
joint tenancy with his spouse.
The AR argued that the $25,000 second trust deed
should be excluded from consideration as the claimant’s
property because it represents the legacy. which the claim-
ant’s spouse and her previous spouse intended for the
claimant’s non-adopted stepdaughter. The basis for this
contention was testimony at the hearing by the eclaimant’s
EXHIBIT “C”
22
spouse and her daughter. but no documentary evidence
(such as wills, letters, etc.) was provided.
Assuming the $25,000 is properly excluded, the AR then
argued that the outstanding amount to be accounted for is
$40,345.60 ($65,345.60 balance from home sale
proceeds—$25,000.00 second trust deed). The claimant’s
spouse and her daughter testified that the remainder has
been disposed of as follows: (Note: These are the transac-
tions which Orange County has labeled unacceptable “loan
commitments”.)
1. Loan repayment to George Tom
(spouse of claimant’s spouse’s daughter): $2,176.01
Both testified that the claimant’s spouse’s daughter and
her husband have assisted the claimant and his spouse
since 1960 when the claimant retired. They explained
that the claimant and his spouse only had Social Secu-
rity income of about $3,600 annually plus whatever the
claimant’s spouse could earn by sewing. The claimant’s
spouse’s daughter said that she and her husband helped
pay: (1) the claimant’s and his spouse’s property taxes
(which were up to $2,400 per year prior to the May 1977
sale), (2) medical expenses, (3) food and (4) miscellany.
She said that because of the claimant’s limited income,
other members of the family also helped out during the
last fifteen years.
To prove that the money paid to the son-in-law was
reimbursement for benefits received by the claimant
and his spouse, cancelled checks written from January
21, 1977, through March 22, 1978 were introduced to-
talling $2,411.05. These checks were written by George
Tom and made payable to the county tax assessor
($1,344.01), ambulance service companies ($240.40),
doctors ($549.00), utility companies ($231.84) and mis-
cellaneous ($45.80).
2. Loan Repayment to Lucille Tom: $1,000.00
The claimant’s spouse testified that her daughter
(Lucille Tom) has helped her since the claimant retired.
EXHIBIT “C”
23
To show that the payment of this money was for an
equal value of benefits received by the claimant, bank
records were submitted to establish that on May 19,
1977, Lucille Tont made a $1,000 payment to Union
Federal Savings as part of the closing costs on the sale
of the claimant and his spouse’s home. A review of the
bank records by the Hearing Officer found that the ac-
count from which payment by Lucille was made was a
joint account, in which the claimant’s spouse was the
other member. This account (#144874) was opened on
May 16, 1977, with a deposit of $37,845.60 from the
proceeds of the sale of the home. On April 25, 1978, its
balance was $262.01.
. Loan Repayment to Sidney Loquet: $10,000.00
The claimant’s spouse testified that the above is her
nephew and that she raised him after he became an or-
phan. She explained that because of her care she be-
lieved that Mr. Loquet had felt a moral obligation to
assist her and her spouse when he became an adult.
This help was received by Mr. Loquet paying for an eye
surgery operation, clothing and insurance at the rate of
about $20 monthly over a 15-year-period. The claim-
ant’s spouse’s daughter said that she believed Mr.
Loquet had provided at least $10,000 in benefits during
the past. No other evidence was introduced to docu-
ment the claimant and his spouse’s indebtedness to Mr.
Loquet.
. Payment for services rendered by
Ernest Orozco: $3,300.00
The claimant’s spouse explained that Mr. Orozco (the
claimant’s spouse’s nephew) worked for her and her
' spouse for 9 months (August 1976 through April 1977)
as a caretaker of their home. She said that he main-
tained the yard, drove the claimant to the doctor, and
house-sat. His services included painting the house,
stripping the floors, and generally getting it into condi-
tion for sale. She stated that it was agreed that he
EXHIBIT “C”
24
would be paid about $3,000 for his work when he
started.
5. Loan repayment to Gertrude Podolinski: $2,000.00
The claimant’s spouse testified that Ms. Podolinski (her
niece) has provided benefits during the past to the
claimant by paying insurance premiums and gifts. To
document this obligation, cancelled checks were sub-
mitted. Those checks totalled 14 in number, written
during the period for December 10, 1972 through
January 16, 1977, and ranging in amounts from $10 to
$200 per check (totalling $530 in all). Four of the checks
are marked “gift” by Ms. Podolinski, and four are
marked “insurance”. Those marked “insurance” total
$95.
TOTAL DISPOSITION BY LOAN REPAYMENT
(1+2+3+4+ 5) $18,476.01
Deducting the above expenditures, the AR contends re-
sults in a remaining property from the home sale proceeds
of $21,869.59 ($40,345.60 balance from home sale
proceeds—$18,476.01). By then deducting the $18,057.80
expenditures accepted by the county at the hearing, the
amount remaining to be accounted for is $3,811.79
(21,869.59—$18,057.80), of which half must be deducted to
preserve the claimant’s spouse’s community property
share. When that halving occurs, the amount of the claim-
ant’s property remaining unaccounted for is $1,905.89
(% x $3,811.79).
The Hearing Officer would like to note that his review of
all documents and materials submitted at the hearing es-
tablish that the claimant is 84 years of age and has been in
a nursing home since January 1977. According to his
spouse’s testimony, he concurred with her decision to sell
their home in 1977, but she executed all the legal papers
pursuant to a power of attorney which she has held for him
since 1963. The claimant’s signature does not appear in the
sale of his home in 1977, on the transfers of the $25,000
trust deed, nor on any of the checks written from the ac-
count established from the proceeds of the 1977 sale. Addi-
EXHIBIT “C”
25
tionally, a medical evaluation completed on July 5, 1978 by
a medical doctor and a psychiatrist diagnose the claimant
as having severe Dementia since December 1976. The psy-
chiatrist reported: (1) that the claimant’s ability to “com-
prehend and follow instructions” is “poor” (the lowest
capacity rating provided in his reporting form), (2) severe
memory defect, (3) moderately severe orientation defect,
(4) moderately severe autistic or regressive behavior, (5)
moderately severe illogical association of ideas, and (6) se-
vere judgment defect, with no improvement expected. The
medical doctor first saw the claimant on January 28, 1977,
and his most recent examination was on July 1, 1978. June
30, 1978 was the date of the most recent psychiatric
examination.
FINDINGS OF FACT
Since January 1977, the claimant has lacked a mental
capacity to transact legal business. This finding is based
on a review of the medical reports described in the State-
ment of Facts. Additionally, it is found that except for his
oral agreement with his spouse in early-1977 that she
should sell their home, he has not participated in making
any decisions about the disposition of his property. This
finding is based on the claimant’s spouse’s testimony and a
review of all the documentary evidence—including the
title deeds, trust notes, and cancelled checks—none of
which contain the claimant’s signature. It should be noted
that even were his signature present on some of the docu-
ments executed since the sale of his home, the significance
of such occurrence would have to be weighed in light of the
medical doctor’s evaluation which describes the claimant
as having been severely demented since December 1976.
CONCLUSIONS OF LAW
I
Title 22, CAC, Section 50420 states that the property
reserve of a one-person MFBU shall not exceed $1,500.
EXHIBIT “C”
26
Title 22, CAC, Section 50403 requires that the separate
property and community property share of any person in-
cluded in the MFBU shall be evaluated in determining
Medi-Cal eligibility. Subsection (b)(4) excludes from con-
sideration the separate and share of community property
of a person who is not included in the MFBU due to
Long-Term Care (LTC) status.
CONCLUSION 1:
Following the sale of the claimant’s home in May 1977,
his community property share was $32,672.80. This figure
is reached as follows:
A. Gross Sales Price: $75,403.43
B. Less Closing Costs and Pay-Off
of Prior Mortgage: — 10,057.83
C. Community Property Value from Sale
of Home (A-B): $65,345.60
D. Claimant’s Community Property
Share (% of C): $32,672.80
Deducting the $1,500 exemption, the claimant held
$31,172.80 in property to be accounted for.
I]
Title 22, CAC, Section 50408(a)(2)(A) provides that
transfers of property shall not result in ineligibility where
the transfer was to satisfy a legal debt.
CONCLUSION 2:
From the $31,172.80 community property share of the
proceeds from the sale of his home in May 1977, $13,749.77
must be disregarded as dispersals for the satisfaction of
legal debts, leaving $17,423.03 to be accounted for. This
conclusions was reached as follows:
EXHIBIT “C”
27
ALLOWABLE EXPENDITURES
(TO SATISFY LEGAL DEBTS)
AMOUNT
1. Claimant’s own medical expenses
(accepted by county) $ 8,381.88
2. % of the personal expenses of the
claimant and his spouse
that were accepted by the county 2,733.34
3. % of expense for common burial plot 984.55
4. % of payment to Ernest Orozco for services
rendered from August 1976 through April
1977. This expense is accepted by the Hearing
Officer as a legal debt based on the following:
(a) the claiment’s spouse’s testimony that Mr.
Orozco performed his tasks pursuant to an
agreement that he would be paid, (b) the can-
celled check showing payment, and (c) the re-
ceipt signed by Mr. Orozco indicating the
payment was accepted for services he had
rendered. 1,650.00
TOTAL: $13,749.77
III
Title 22, CAC, Section 50406: Transfer or conversion of
property may affect eligibility. See Sections 50407 through
50411.
50408. Transfer of Property Which Does Not Result in
Ineligibility.
(a) Transfer of property shall not result in ineligibility for
Medi-Cal under any of the following conditions:
(1) The net market value of the property trans-
ferred, when included in the property reserve, would
not result in ineligibility. The determination of value
shall be made as of the time of transfer. If eligibility
exists, the value of the property shall no longer be
considered.
EXHIBIT “C”
28
(2) Adequate consideration is received. Adequate
consideration includes:
(A) A transfer which was to satisfy a legal debt.
(B) A transfer which was to reimburse someone
other than a responsible relative, as specified in
Section 50351, for care or benefits provided on the
basis of an agreement or understanding that reim-
bursement would be made. The applicant or benefi-
ciary shall provide evidence that clearly establishes
that the value of the care or benefits provided was
reasonably equivalent to the value of the property
transferred.
(3) Foreclosure or repossession of the property was
imminent at the time of transfer, and there is no evi-
dence of collusion.
(4) The transfer was made in return for an enforce-
able contract for life care which does not include com-
plete medical care. In this case, each full item of need
provided under the life care contract shall be consid-
ered income in kind in accordance with Section 50509.
(b) There is a presumption that property transferred by
the applicant or beneficiary more than two years preced-
ing the date of initial application was not transferred to
establish eligibility or reduce the share of cost. Such prop-
erty shall not be considered in determining eligibility, un-
less there is evidence that conflicts with this presumption.
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 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.
EXHIBIT “C”
7
29
(1) It shall presumed that property transferred
without adequate consideration was for the purpose of
establishing eligibility or to reduce the share of cost
as limited by (2).
(2) To overcome the presumption, the applicant or
beneficiary has the burden of establishing by objec-
tive facts, rather than statement of subjective intent,
that this presumption is not correct. The applicant or
beneficiary shall provide evidence that adequate re-
sources were available at the time of the transfer of
property for support and medical care considering
such things as the applicant’s or beneficiary’s age,
health, life expectancy, and ability to understand ex-
tent of resources.
(A) The declaration of another purpose, such as
to avoid probate, by itself, shall not be sufficient to
overcome the presumption. A showing that the sole
purpose of the transfer was for reasons other than
to establish eligibility or to reduce the share of cost
shall be supported by evidence such as that speci-
fied above.
(B) The establishment of the fact that the appli-
cant or beneficiary did not have specific knowledge
of the availability or benefits of the Medi-Cal pro-
gram is not sufficient to overcome the presumption.
CONCLUSION 3:
Orange County’s denial of the claimant’s Medi-Cal appli-
cation rests on its application of the presumption embodied
in Section 50408(b). As it has been already concluded in
Sections I and II above that $15,249.77 of his $32,672.80
community property share from the proceeds of the sale of
the home have been properly disposed of, the remainder
($17,423.03) is subject to the presumption. Of that
amount, $1,630.98 has not been transferred (this is one-
half of amount of the funds in checking and savings ac-
counts acknowledged in the record to be unspent as of
EXHIBIT “C”
30
April 25, 1978). Thus, $15,792.05 is the outstanding bal-
ance that remains unaccounted for.
It is now concluded that that amount ($15,792.05) was
not transferred for the purpose of establishing program
eligibility. While the Hearing Office does not accept the
expenditures submitted by the AR as valid dispositions
(payments to claimant’s daughter and son-in-law and niece
and nephew), the objective facts present in this case are
sufficient to conclude that the claimant has overcome the
regulatory presumption as required by Title 22, CAC,
Section 50409(b)(2). Those objective facts include consid-
eration of the claimant’s age (84), health (severe demen-
tia), and life expectancy (short, in light of his age).
Perhaps most importantly, though, are the objective facts
present in this case which strongly establish that this
claimant was without any possible capacity to understand
the extent of his resources during the period under re-
view. Given the previous factual finding that since
January 1977 he has been unable to transact any legal
business, it must be concluded that the transfers which oc-
curred were not done by the claimant for the purpose of
establishing program eligibility.
Moreover, this conclusion is further supported by the
fact that because of his medical condition the claimant did
not even sign the papers required for the sale of his home,
much less participate in the subsequent transfers of his
property.
Finally, althoagh the transfers from the claimant’s
community property share of the proceeds from the sale of
his home may have been detrimental to the claiment’s
legal interests, the fact remains that such transfers were
not effected by him. Under such circumstances, the county
may desire to demand an accounting via its Office of Public
Guardian, but the claimant’s eligibility for Medi-Cal must
be acknowledged. When that is done, the $15,792.05 is dis-
regarded, leaving him with personal property of $1,630.98
in excess of the program limit.
EXHIBIT “C”
31
IV
Title 22, CAC, Section 50421 provides that program eli-
gibility may be established by spenddown of excess, prop-
erty when the property reserve exceeds the property
limit. If the property reserve has been in excess of the
property limit from the first day of the month of applica-
tion through the date of application, and the property re-
serve is brought within the property limit by the last day
of the month of application, the MFBU shall be eligible
under the following conditions: .
(1) All eligibility requirements except for the prop-
erty limit shall be met.
(2) The property reserve is brought within the prop-
erty limit in any manner except by transfer with-
out consideration.
CONCLUSION 4:
As there was no evidence to show that the claimant was
advised of the possibility of qualifying by spending down
his excess personal property, Orange County must recon-
sider the April 1978 application.
ORDER
Orange County shall rescind its denial of the claimant’s
April 12, 1978 Medi-Cal application. If the claimant is then
found to be otherwise eligible, the county shall allow him
to meet the property limit by spending $1,630.98. In any
way other than by transferring without adequate consid-
eration and upon that event, approve his application be-
ginning April 1978 and continuing thereafter.
Further, Orange County shall give the claimant the op-
portunity to choose between the following alternative
remedies for any excessive shares of cost which the ben-
eficiary has paid or obligated himself to pay since that
April 1978:
EXHIBIT “C”
e.
32
1. Having his current monthly shares of cost reduced in
consecutive months (beginning with the month im-
mediately following the month in which this decision
is implemented by a total amount equal to the total
difference between the shares of cost paid or obli-
gated by the beneficiary and the months in which the
cost of covered medical services exceeded the correct
si.are of cost; or
. Having the county (a) issue retroactive Medi-Cal
cards for each month in which the beneficiary paid or
obligated himself to pay an excessive share of cost;
(b) assist the claimant as needed in obtaining the ap-
propriate refunds from the providers of covered
services received during such months; and (c) notify
the fiscal intermediary that the delayed billings have
been authorized by a Fair Hearing Decision adopted
by the Director of the Department of Health Serv-
ices.
EXHIBIT “C”
33
CALIFORNIA DEPARTMENT
OF HEALTH SERVICES
In the Matter of the Hearing of Claimant
ENOSINSIO MANAHAN
15261 Shallow Lane
Westminister, CA 92683
Fair Hearing No. 78163110 OR
State No. 30-13-315454
District
DECISION OF THE DIRECTOR
Hearing Officer: ERNESTO J. PEREZ
County Representative: JOHN JACOBS
Authorized Representative: TIM FLYNN
Place: Santa Ana, California
Date of Hearing: July 6 & 8, 1978*
Date of County Notice: June 5, 1978
Fair Hearing Filing Date: June 8, 1978
Aid Paid Pending: N/A (Denial Action
ISSUE
The issue for resolution is whether Orange County cor-
rectly denied the claimant’s April 12, 1978 application for
Long-Term Care California Medical Assistance Program
(Medi-Cal) benefits because of its determination that he
transferred property in order to become eligible.
Based on the evidence presented at the hearing, the ref-
eree prepared a proposed decision. The Director of the
* Record left open until July 28, 1978 for the claimant to submit addi-
tional documents. Such information was received, and the record was
closed on August 15, 1978. The county did not submit rebuttal evi-
dence.
EXHIBIT “b”
34
State Department of Health Services, being disatisfied
with the decision, herein adopts the Statement of Fact to-
gether with an amended Conclusion of Law and Order as
follows:
STATEMENT OF FACT
The referee’s Statement of Fact is incorporated herein
by this reference.
FINDINGS OF FACT
The referee’s Findings of Fact is incorporated herein by
this reference.
CONCLUSIONS OF LAW
The referee’s Conclusions of Laws I and II are incorpo-
rated herein by this reference.
III
Title 22, CAC, Section 50406: Transfer or conversion of
property may affect eligibility. See Sections 50407 through
50411.
50408. Transfer of Property Which Does Not Result in
Ineligibility.
(a) Transfer of property shall not result in ineligibility
for Medi-Cal under any of the following conditions:
(1) The net market value of the property trans-
ferred, when included in the property reserve, would
not result in ineligibility. The determination of value
shall be made as of the time of transfer. If eligibility
exists, the value of the property shall no longer be
considered.
(2) Adequate consideration is received. Adequate
consideration includes:
(A) A transfer which was to satisfy a legal debt.
EXHIBIT “D”
35
(B) A transfer which was to reimburse someone
other than a responsible relative, as specified in
Section 50351, for care or benefits provided on the
basis of an agreement or understanding that reim-
bursement would be made. The applicant or benefi-
ciary shall provide evidence that clearly establishes
that the value of the care or benefits provided was
reasonably equivalent to the value of the property
transferred.
(3) Foreclosure or repossession of the property was
imminent at the time of transfer, and there is no evi-
dence of collusion.
(4) The transfer was made in return for an enforce-
able contract for life care which does not include com-
plete medical care. In this case, each full item of need
provided under the life care contract shall be consid-
ered income in kind in accordance with Section 50509.
(b) There is a presumption that property transferred by
the applicant or beneficiary more than two years preced-
ing the date of initial application was not transferred to
establish eligibility or reduce the share of cost. Such prop-
erty shall not be considered in determining eligibliity, un-
less there is evidence that conflicts with this presumption.
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 one of the conditions
specified in Section 50408 or the transfer was in return for
an enforceable ‘ife 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 presume that property transferred
without adequate consideration was for the purpose of
establishing eligibility or to reduce the share of cost
as limited by (2).
EXHIBIT “D”
36
(2) To overcome the presumption, the applicant or
beneficiary has the burden of establishing by objec-
tive facts, rather than statement of subjective intent,
that this presumption is not correct. The applicant or
beneficiary shall provide evidence that adequate re-
sources were available at the time of the transfer of
property for support and medical care considering
such things as the applicant’s or beneficiary’s age,
health, life expectancy, and ability to understand ex-
tent of resources.
(A) The declaration of another purpose, such as
to avoid probate, by itself, shall not be sufficient to
overcome the presumption. A showing that the sole
purpose of the transfer was for reasons other than
to establish eligibility or to reduce the share of cost
shall be supported by evidence such as that speci-
fied above.
(B) The establishment of the fact that the appli-
cant or beneficiary did not have specific knowledge
of the availability or benefits of the Medi-Cal pro-
gram is not sufficient to overcome the presumption.
CONCLUSION 3:
Orange County’s denial of the claimant’s Medi-Cal appli-
cation rests on its application of the presumption embodied
in Section 50409(b). As it has been already concluded in
Sections I and II above that $15,249.77 of his $32,672.80
community property share from the proceeds of the sale of
the home have been properly disposed of, the remainder
($17,423.03) is subject to the presumption. Of that
amount, $1,630.98 has not been transferred (this is one-
half of amount of the funds in checking and savings ac-
counts acknowledged in the record to be unspent as of
April 25, 1978). Thus, $15,792.15 is the outstanding bal-
ance that remains unaccounted for.
It is concluded that the claimant has not overcome the
presumption that the transfer of property was for the pur-
pose of establishing eligibility. In accordance with Section
EXHIBIT “D”
37
50409(b), this presumption may only be overcome by the
claimant providing evidence that adequate resources were
available at the time of the transfer to provide for the
claimant for the remainder of his life. The transfer of
property occurred some time after May 1977. The claimant
had been in a nursing home since January 1977 and was in
continuing need of extensive support and medical care.
Evidence was not provided to show that adequate re-
sources were available at the time of the transfer to care
for the claimant for the remainder of his life. The fact that
the claimant’s spouse, having power of attorney and acting
on behalf of the claiment, made the transfer of property
does not absolve the claimant of this action. Although the
claimant was incompetent, a competent person, his wife
acted in his behalf.
ORDER
The claim is denied.
The foregoing is the Decision and Order of the Director,
State Department of Health Services, in the above-
entitled matter.
1-12-79 /s/ Elizabeth H. Lyman
(Date)
EXHIBIT “D”
38
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
No. 78-2350 MML(Sx)
ROSSYE DAWSON, individually and on behalf of all others
similarly situationed, PLAINTIFF,
Vv.
EDWARD BEACH, ET AL., DEFENDANTS.
ANTONIA BELTRAN AND ENOSINSIO MANAHAN, individu-
ally and on behalf of all other similarly situated,
INTERVENOR-PLAINTIFF.
ANSWER TO COMPLAINT IN INTERVENTION FOR
DECLARATORY AND INJUNCTIVE RELIEF
FILED MARCH 19, 1979
CLASS ACTION
COME NOW defendants Beverlee A. Myers, successor
to Edwin W. Beach, herein erroneously sued as Edward
Beach, individually and in her official capacity as Director
of the California State Department of Health Services,
successor to the State Department of Health, and
Elisabeth Lyman, successor to Bruce Yarwood, individu-
ally and in her official capacity as Acting Chief Deputy Di-
rector of the Medical Care Services and Deputy Director
of Medical Care Standards Division of the State Depart-
ment of Health Services, successor to the State Depart-
ment of Health, and each of them, and answer the com-
plaint for declaratory and injunctive relief as follows:
1. Answering paragraph 1 of the complaint, defendants
deny that the State of California is improperly applying
39
eligibility requirements which do not comport with federal
law.
2. Answering paragraph 2 of the complaint, defendants
deny that there is in excess of $10,000 in controversy and
admit the remaining allegations of paragraph 2.
3-4. Defendants deny for lack of sufficient information
or belief each and every allegation contained in paragraphs
3 and 4 of the complaint.
5. Defendants deny that Edward Beach is the former
Director of Department of Health Services and affirma-
tively allege that Edwin Beach is the former Director of
the Department of Health, predecessor to the Department
of Health Services.
6. Answering paragraph 6 of the complaint, defendants
deny that Bruce Yarwood is the Deputy Director of the
State Department of Health Services and affirmatively
allege that Elisabeth Lyman, successor to Bruce Yarwood,
is the acting Chief Deputy Director of Medical Care Serv-
ices and Deputy Director of Medical Care Standards Divi-
sion of the Department of Health Services.
7. Answering paragraph 7 of the complaint, defendants
admit that intervenors Beltran and Manahan bring this ac-
tion on their own behalf and deny each and every remain-
ing allegation contained in said paragraph 7.
8. Answering paragraph 8 of the complaint, defendants
deny that state Medicaid programs are controlled solely by
federal regulations. In connection therewith, defendants
affirmatively allege that pursuant to the State Medicaid
plan, the state enters into contracts to fulfill the particular
federal options for coverage which it chooses to apply.
State Medicaid programs are also controlled by state stat-
utes and regulations.
9. Defendants admit the allegation contained in para-
graph 9.
10. Answering paragraph 10 of the complaint, defend-
ants deny that income is the only Medicaid eligibility
guideline for the aged, blind, and disabled.
11. Defendants admit the allegations contained in para-
graph 11 of the complaint. Defendants affirmatively allege
°.
40
that Supplemental Security Income (SSI) recipients are
eligible for Medicaid benefits if the State Plan so provides.
12. Defendants admit the allegations contained in para-
graph 12 of the complaint.
13. Defendants deny each and every allegation con-
tained in paragraph 13 of the complaint.
14. Answering paragraph 14 of the complaint, defend-
ants deny the existence of a rule stating that the provision
of health care will not be restricted by property holdings.
Defendants admit that the quote contained in said para-
graph 14 is a portion of Welfare and Institutions Code sec-
tion 14015.
15. Defendants admit the allegations contained in para-
graph 15 of the complaint.
16. Except as otherwise provided by 22 California Ad-
ministrative Code section 50411(a), defendants admit the
allegations contained in paragraph 16 of the complaint.
17. Defendants deny for lack of sufficient information
and belief, each and every allegation contained in para-
graph 17.
18. Defendants deny for lack of sufficient information
and belief each and every allegation contained in para-
graph 18. Defendants admit that Mr. and Mrs. Beltran
were found eligible for Medi-Cal in May 1977. Defendants
affirmatively allege that Mr. and Mrs. Beltran were found
eligible under the In Home Supportive Services Program
which was not then, but is now the medically needy pro-
gram.
19. Defendants deny each and every allegation con-
tained in paragraph 19 of the complaint.
20. Defendants admit the allegations contained in para-
graph 20 of the complaint. Defendants affirmatively allege
that a copy of only the front side of the Notice of Action is
attached to the complaint as Exhibit A.
21. Except as otherwise provided by the Notice of Ac-
tion defendants admit the allegations contained in para-
graph 21 of the complaint.
41
22. Defendants deny for lack of sufficient information
and belief each and every allegation contained in para-
graph 22 of the complaint.
23. Defendants deny for lack of sufficient information
and belief each and every allegation contained in para-
graph 23 of the complaint. Defendants admit that Mr.
Manahan entered the convalescent home in January 1977.
24. Defendants deny for lack of sufficient information
and belief each and every allegation contained in para-
graph 24. Defendants admit that on April 12, 1978, the
application for Medi-Cal was made on Enosinsio Manahan’s
behalf by Mrs. Lucille Tom at the Orange County Depart-
ment of Social Services.
25. Defendants admit the allegations contained in para-
graph 25 of the complaint. Defendants affirmatively allege
that only the front side of Exhibit B is attached to the
complaint.
26. Defendants admit the allegations contained in para-
graph 26 of the complaint.
27. Defendants admit the allegations contained in para-
graph 27 of the complaint. Defendants affirmatively allege
that page 12, signature page, form no. DPA 320 (8-76) is
missing from Exhibit C.
28. Defendants deny each and every allegation con-
tained in paragraph 28 of the complaint. Defendants admit
that on January 12, 1979, the director of the State De-
partment of Health Services alternated the decision of the
hearing officer and a copy of the decision of the director is
attached as Exhibit D to the complaint.
29. Defendants deny for lack of sufficient information
and belief each and every allegation contained in para-
graph 29.
30-31. Defendants deny each and every allegation con-
tained in paragraphs 30 and 31.
FIRST CAUSE OF ACTION
382-33. Defendants deny each and every allegation con-
tained in paragraphs 32 and 33. Defendants affirmatively
**>
42
allege that California is providing Medi-Cal benefits auto-
matically to all persons receiving SSI benefits and that the
SSI program does not predicate eligibility on a transfer of
assets for adequate consideration prior to application if the
transfer is bona fide and irrevocable.
34-35. Defendants admit the allegations contained in
paragraphs 34 and 35. Defendants affirmatively allege that
42 Code of Federal Procedure section 448.3(c)(1)(iv) and
its successor regulation provide an alternative by which
the states may impose a more stringent criteria.
36. Defendants deny each and every allegation con-
tained in paragraph 36 of the complaint.
SECOND CAUSE OF ACTION
37. Defendants deny each and every allegation con-
tained in paragraph 37 of the complaint.
THIRD CAUSE OF ACTION
38. Defendants deny each and every allegation con-
tained in paragraph 38 of the complaint.
FOURTH CAUSE OF ACTION
39. Defendants deny each and every allegation con-
tained in paragraph 39 of the complaint.
FIFTH CAUSE OF ACTION
40. Defendants deny each and every allegation con-
tained in paragraph 40 of the complaint.
FIRST AFFIRMATIVE DEFENSE
1. The Court should dismiss the complaint for lack of
jurisdiction over the subject matter and for failure to state
a claim upon which relief could be granted on the ground
that the plaintiffs have failed te exhaust their available
administrative remedies provided by California Govern-
ment Code section 11426.
43
SECOND AFFIRMATIVE DEFENSE
2. The Court should dismiss the complaint for lack of
jurisdiction over the subject matter and for failure to state
a claim upon which relief can be granted, on the ground
that the exclusive remedy for judicial review of adjudica-
tory administrative action is to file a petition for writ of
mandate in the state court pursuant to California Code of
Civil Procedure section 1094.5.
THIRD AFFIRMATIVE DEFENSE
3. The Court should dismiss the complaint for lack of
jurisdiction over the subject matter and for failure to state
a claim upon which relief could be granted on the ground
that plaintiff Antonia Beltran has failed to exhaust her
available administrative remedy provided by Welfare and
Institutions Code sections 10950-10963, 14001; Title 22
California Administrative Code sections 50951-50955.
FOURTH AFFIRMATIVE DEFENSE
4. The Court should dismiss the complaint for failure to
state a claim upon which relief could be granted on the
ground that one or more of the plaintiffs lack the mental
and/or physical capacity to sue. On or about October 12,
1978, defendants are informed and believe that plaintiff
Rossye Dawson died.
FIFTH AFFIRMATIVE DEFENSE
5. The Court should dismiss the complaint for lack of
jurisdiction over the subject matter because the amount in
controversy is less than ten thousand dollars, exclusive of
interests and costs, in that if any one or more of the plain-
tiffs have any claim against defendants, such claims consti-
tute separate claims of the particular plaintiffs so dam-
aged, none of which separately equals or exceeds ten
thousand dollars, exclusive of interests and costs, and such
claims, cannot be aggregated for purposes of the amount
in controversy requirement.
44
SIXTH AFFIRMATIVE DEFENSE
6. The complaint fails to state a claim against defend-
ants upon which relief can be granted.
WHEREFORE, defendants deny that the plantiffs are
entitled to the relief prayed for in the complaint, or any
relief whatsoever against defendants, and defendants re-
spectfully pray that the complaint be dismissed with costs
and disbursements to the defendants.
DATED: March 19, 1979.
GEORGE DEUKMEJIAN, Attorney General
ANNE S. PRESSMAN,
DONALD A. ROBINSON,
RICHARD J. MAGASIN, Deputy Attorneys General
By
DONALD A. ROBINSON
By
RICHARD J. AGASIN
Attorneys for Defendants
45
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
No. CV-78-2350-MML
ROSSYE DAWSON, individually and on behalf of all others
similarly situated, PLAINTIFF,
Vv.
EDWARD BEACH, ET AL., DEFENDANTS.
ANTONIA BELTRAN AND ENOSINSIO MANAHAN, individu-
ally and on behalf of all others similarly situated,
INTERVENOR-PLAINTIFF,
ORDER GRANTING PLAINTIFFS’ MOTION FOR
CERTIFICATION OF THE CLASS
FILED MAY 10, 1979
The Court having considered plaintiffs’ motion for an
order certifying this case as a class action pursuant to
Rule 23(c)(1) of the Federal Rules of Civil Procedure, and
the Court having considered memoranda and arguments of
the parties, it is determined that this action meets the re-
quirements of Rule 23(a) in that:
(1) Joinder of all members of the class would be imprac-
ticable since their number, though unknown, is great (the
defendants having stipulated to numerosity); they are dis-
persed throughout the State of California and by definition
they are aged, blind and disabled and, therefore, would be
incapable of participating in this action as individual plain-
tiffs;
(2) There are questions of law and fact common to each
member of the class. The common question of fact is that
each has been denied Medi-Cal benefits because of the de-
46
fendants’ application of a transfer of assets rule to them.
The common question of law is the propriety of the appli-
cation of the transfer of assets rule;
(3) The claims of the plaintiffs are typical of the claims
of each class member, as each of the named plaintiffs has
been denied Medi-Cal as a result of the application of the
transfer of assets rule;
(4) Plaintiffs will fairly and adequately protect the
interests oi the class. They are represented by able coun-
sel, who are experienced in class action litigation.
Furthermore, this action also meets the requirements of
Rule 23(b)(2) in that the defendants have acted on grounds
generally applicable to the class, and final injunctive and
declaratory relief with respect to the class as a whole is
appropriate.
IT IS THEREFORE ORDERED that this action shall
be maintained as a class action, the class to consist of all
aged, blind and disabled individuals who, as of June 19,
1978, have been or are denied Medi-Cal benefits because of
an alleged transfer of assets for inadequate consideration
pursuant to Welf. & Inst. C. § 14015 and 22 Cal.Adm.
Code § 50409.
Dated: May 9, 1979
/s/
MALCOLM M. LUCAS
United States District Judge
47
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
No. CV-78-2350-MML
ROSSYE DAWSON, individually and on behalf of all others
similarly situated, PLAINTIFF
v.
EDWARD BEACH, ET AL., DEFENDANTS
ANTONIA BELTRAN AND ENOSINSIO MANAHAN, individu-
ally and on behalf of all others similarly situated,
INTERVENOR-PLAINTIFF,
FINDINGS OF FACT AND CONCLUSIONS OF LAW
FILED MAY 10, 1979
This cause came on for hearing on defendants’ Motion
for Summary Judgment and plaintiffs’ Cross-Motion for
Summary Judgment, 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 mo-
tions, finds the facts and states the conclusion of law as
follows:
FINDINGS OF FACT
1. With respect to Rossye Dawson.
a. On February 18, 1977, an application for Medi-Cal
was filed on behalf of Rossye Dawson;
b. The County of Riverside Department of Public So-
cial Services approved the application pending a property
verification;
48
ce. On May 17, 1977, the County of Riverside Depart-
ment of Public Social Services sent a Notice of Action let-
ter to Rossye Dawson determining that she was no longer
eligible for Medical-Cal because she had transferred prop-
erty without adequate consideration in violation of Title
22, California Administrative Code section 50409;
d. Rossye Dawson filed a request for a fair hearing,
which was held on September 14, 1977;
e. The hearing officer found that the transfer of prop-
erty for inadequate consideration was in May 1977, that
Rossye Dawson had failed to overcome the presumption
that the transfer was made for the purpose of qualifying
for Medi-Cal, and that therefore her claim for Medi-Cal
benefits should be denied;
f. 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 man-
date pursuant to section 1094.5 of the California Code of
Civil Procedure; and
h. On or about October 30, 1978, counsel for Rossye
Dawson filed a “Certificate of Counsel re Death of Plain-
tiff.” No substitution for the deceased plaintiff has been
ervenor 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 trans-
ferred property in order to be eligible for Medi-Cal in vio-
lation of, inter alia, Title 22 California Administrative
Code section 50409;
ce. A fair hearing was requested and held on July 6
and 7, 1978 on the county’s denial of Medi-Cal;
d. 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 hear-
49
ing 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 De-
partment of Health Services reversed the proposed deci-
sion 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 sec-
tion 1094.5.
3. With respect to intervenor Antonia Beltran:
a. On October 27, 1978, she re-applied for Medical
benefits;
b. The Notice of Action dated January 8, 1979 indi-
cated that the denial of Medi-Cal eligibility was based on a
transfer of property in 1977.
c. She did not request a fair hearing from the deter-
mination 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 eligible for
Medi-Cal coverage under the state’s medically needy pro-
gram.
5. Defendant Beverlee A. Myers, successor to Edwin
W. Beach, is the Director o: the California State Depart-
ment of Health Services, successor to the State Depart-
ment of Health.
6. Defendant Elisabeth Lyman, successor to Bruce
Yarwood, is the Acting Chief Deputy Director of the
Medical Care Services and Medical Care Standards Divi-
sion of the State Department of Health Services.
7. To 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 authorized by
50
42 U.S.C. § 1883 to redress the deprivation of rights
under color of state law. The Court has pendent jurisdic-
tion over any claims not specifically authorized pursuant to
42 U.S.C. § 1988. Jurisdiction is also conferred by 28
U.S.C. § 13831, as there is more than $10,000.00 in con-
troversy. This case has been certified as a class action.
2. Rossye Dawson lacks capacity to sue as she is de-
ceased 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 So-
cial Security Act, 42 U.S.C. § 1396 et seq., is a system of
cooperative federalism in which the states and other juris-
dictions have the option to participate, and to receive par-
tial reimbursement for services provided. If they decide to
participate, the states are required to operate their
Medicaid Program within the contours of the federal stat-
ute and regulations, and to submit a state plan to the Sec-
retary of the Department of Health, Education, and Wel-
fare that comports with controlling federal laws. In order
to be eligible for reimbursement, the states which decide
to participate must comply with the mandatory require-
ments established by the Social Security Act as inter-
preted and implemented by HEW. Townsend v. Swank,
404 U.S. 282, 286 (1971); King v. Smith, 392 U.S. 309, 333
(1968); County of Alameda v. Carleson, 5 Cal.3d 739, 739
(1971); Wong v. Brian, CCH Medicare & Medicaid Guide,
[1974] Transfer Binder, 4 26, 605 (Cal.Ct. 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 eligi-
bility requirements. 42 U.S.C. § 1396a(a)(10)(A); 42
C.F.R. § 435.120; see Friedman v. Berger, 547 F.2d 724,
726 (2d Cir. 1976), cert. denied 430 U.S. 984 (1977); Wong
v. Brian, supra, § 26, 605 at 9013.
5. In addition, states have the option of providing
Medicaid assistance to the so-called “medically needy” who
are individuals meeting the categorical requirements of
being aged, blind or disabled, but who have incomes or
51
resources above the financial requirements. 42 U.S.C.
§ 1396a(a)(10)(C); 42 C.F.R. § 435.300 et seg., see Fried-
man 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 categori-
cally 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
using 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 condi-
tions 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. § 13896a(f); 42 C.F.R. § 431.121; see
Hayes v. Stanton, 512 F.2d 138, 187-138 (7th Cir. 1975);
West v. Cole, 390 F.Supp. 91, 95-96 (N.D. Miss. 1975);
Gray Panthers v. Secretary, Department of Health,
Education and Welfare, 461 F.Supp. 319, 321 (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 does provide, automatic
categorical assistance to all recipients of SSI. Cal. Adm.
Code § 50227.
9. The federal Medicaid statute requires those states
which provide medically needy benefits to include as eli-
gible “all individuals who would, except for income and re-
sources, be eligible to have paid with respect to them Sup-
plemental Security Income benefits ....” 42 U.S.C.
§ 1396a (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
52
collateral restrictions on the medically needy that are not
imposed on the categorically needy. 42 U.S.C. § 1396a
(a)(17)(A); 45 CFR § 233.10(a)(1)(i1)(B).
11. Cal.Welf. & Inst. Code § 14015 and 22 Cal.Adm.
Code § 50409 are designed to eliminate fraudulent prac-
tices affecting eligiblity for benefits. The federal statute is
concerned with substantive eligibilty requirements only,
and 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 § 1396a(a)(10)(C)(i).
12. Cal.Welf. & Inst. Code § 14015 and 22 Cal.Adm.
Code § 50409 do not violate 42 U.S.C. § 1396a(a)(17)(B) or
42 CFR § 435.845. The purpose of these state law provi-
sions is to deter transfers of assets solely for the purpose
of qualification. To the extent an asset is transferred for
the purpose of qualifying for benefits, the asset should be
treated as being available for the applicant’s use.
13. Cal.Welf. & Inst. Code § 14015 and 22 Cal.Adm.
Code § 50409 are not in conflict with any federal law or
regulation governing the Medicaid/Medi-Cal program.
They do not violate the Supremacy Clause of the United
States Constitution.
14. Cal. Welf. & Inst. Code § 14015 and 22 Cal.Adm.
Code § 50409 do not establish an irrebutable presumption
that a transfer of assets was made with the intent of gain-
ing eligibility and so do not violate the due process clause
of the Fourteenth Amendment to the United States Con-
stitution.
15. A rational distinction between SSI recipients and
the medically needy is made in Cal. Welf. & Inst. Code
§ 14015 and 22 Cal. Adm. Code § 50409. The state has an
interest in assuring that medical assistance benefits are
dispersed only to those who are truly in need. Those re-
ceiving SSI by definition are in financial need. It is ra-
tional for the state to scrutinize transfers of assets by the
medically needy to assure that financial eligibility is not
improperly manufactured. The Court therefore holds that
the equal protection clause of the Fourteenth Amendment
53
has not been violated by Cal.Welf. & Inst. Code § 14015
and 22 Cal. Adm. Code § 50409.
16. To the extent that any of the foregoing findings of
fact are deemed conclusions of law, the same are incorpo-
rated herein by reference.
17. The plaintiff's motion for summary judgment is de-
nied, and the defendants’ motion for summary judgment is
granted. Judgement shall be entered accordingly.
Dated: May 10, 1979
/s/
MALCOLM M. LUCAS
United States District Judge
54
GEORGE DEUKMEJIAN, Attorney General
ANNE S. PRESSMAN,
DONALD A. ROBINSON,
RICHARD J. MAGASIN, Deputy Attorneys General
3580 Wilshire Boulevard, Suite 800
Los Angeles, California 90010
Telephones: (213) 736-2214, 736-2606
Attorneys for Defendants
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
NO. 78-2350 MML(Sx)
ROSSYE DAWSON, individually and on behalf of all others
similarly situated, PLAINTIFF,
Uv.
EDWARD BEACH, ET AL., DEFENDANTS.
ANTONIA BELTRAN AND ENOSINSIO MANAHAN, Indi-
vidually and on behalf of all other similarly situated,
INTERVENOR-PLAINTIFF,
SUMMARY JUDGMENT
ENTERED MAY 10, 1979
This cause came on to be heard on motion of the defend-
ants for summary judgment and on cross-motion of the
plaintiffs and intervenor plaintiffs for summary judgment,
pursuant to Rule 56 of the Federal Rules of Civil Proce-
dure, and the court having considered all papers, and the
court having heard the argument of counsel, and due de-
liberation having been had thereon, it is
ORDERED, that plaintiffs’ cross-motion for summary
judgment be the same hereby is denied, and it is further
55
ORDERED, that defendants’ motion for summary
judgment be and the same hereby is granted, and it is fur-
ther
ORDERED, ADJUDGED AND DECREED that the
action be dismissed on its merits, and that each side bear
own costs of suit.
DATED: 5/19/79.
/s/
MALCOLM M. LUCAS
United States District Judge
|
56
IN THE UNITED STATES COURT
OF APPEALS
FOR THE NINTH CIRCUIT
No. 79-3246
ROSSYE DAWSON, individually and on behalf of all others
similarly situated, PLAINTIFF-APPELLANT,
v.
BEVERLEE A. MYERS,* ET AL., DEFENDANTS-APPELLEES.
On Appeal from the United States District Court
for the Central District of California
The Honorable Malcolm M. Lucas, Presiding
OPINION—FILED MAY 14, 1980
D.C. No. C 78-2350 MML
Before: WRIGHT and ANDERSON, Circuit Judges, and
SOLOMON, ** District Judge.
J. BLAINE ANDERSON, Circuit Judge:
This is a class action challenging the State of California’s
transfer of assets rule which was relied upon to deny
Medi-Cal benefits to members of the class. In short, this
rule denies Medi-Cal benefits to any individual who has
transferred assets so as to qualify under the financial eli-
*Beverlee A. Myers, the Director of the California State Depart-
ment 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)(i) rather than Fed. R. App. P. 43(c)(1).
**The Honorable Gus J. Solomon, Senior United States District
Judge for the District of Oregon, sitting by designation.
57
gibility requirements for Medi-Cal. The class members
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.
I. BACKGROUND
A. Medicaid
Title XIX of the Social Security Act established the
Medicaid program. 42 U.S.C. § 1396 et seq. This coopera-
tive federal-state program is designed to provide medical
assistance to certain classes of individuals who are in need
of such assistance. Although states are not required to
participate, if they choose to do so they must develop a
plan which conforms to the federal guidelines. 42 U.S.C.
§ 1396(b). Despite the extensive federal standards (42
U.S.C. § 1396a), the individual states are given wide dis-
cretion in the administration of their local programs.
Norman v. St. Clair, 610 F.2d 1228, 1230 (5th Cir. 1980).
After a state’s plan is approved by the Secretary of
Health, Education and Welfare, the state then receives
reimbursement for a portion of the funds which are ex-
pended. 42 U.S.C. § 1396.
A state which has chosen to adopt a Medicaid program
has the option of deciding whether it should provide bene-
fits to only one or to both of the statutorily-defined groups
of needy persons. States participating in the program
must provide assistance to the group which is referred to
as the categorically needy.' 42 U.S.C. § 1396a(10)(A).
Generally, in order to be considered categoricaily needy,
1 The regulations define this group as follows:
Categorically needy” means aged, blind or disabled individuals
or families and children who are otherwise eligible for medicaid
and who meet the financial eligibility requirements for AFDC,
SSI, or an optional State supplement;”
42 C.F.R. § 435.4.
58
an individual must be receiving financial assistance, or be
financially eligible for such assistance, under Title IV-A of
the Social Security Act (Aid to Families with Dependent
Children, referred to as AFDC) or Title XVI of the Social
Security Act (Supplemental Security Income for the Aged,
Blind, and Disabled, referred to as SSI).?
When they establish their Medicaid program, the states
have the option of also providing benefits to the group
which is referred to as the medically needy. This group
covers individuals who would qualify for AFDC or SSI ex-
cept that they have sufficient income and resources to
cover the essentials aside from their medical costs.* The
medically needy begin receiving assistance after they
have incurred medical expenses which reduce their income
(and assets) below a prescribed level. Thus, the chief dis-
tinction 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 voluntar-
ily chosen to participate in the Medicaid program. In addi-
tion, California voluntarily chose to cover the medically
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
what is called a transfer of assets rule. Cal. (Welf. & Inst.)
2 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 opinion does not deal with those provisions of the
Medicaid Act which would then come into play.
3 The regulations define this group as follows:
“Medically needy” means aged, blind, or disabled individuals or
families and children who are otherwise eligible for medicaid and
whose income and resources are above the limits set under the
medicaid State plan;”
43 C.F.R. § 435.4.
59
Code § 14015.4 Basically, this prevents persons from
qualifying as medically needy if they have transferred as-
sets 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 categorically needy.
California has promulgated regulations which, among
other things, establish eligibility requirements for the
medically needy and implement the transfer rule.’ Under
* The statutory part of the transfer rule provides as follows:
“The providing of health care under this chapter shall not im-
pose any limitation or restriction upon the person’s right to sell,
exchange or change the form of property holdings nor shall the
care provided constitute any encumbrance on the holdings. How-
ever, any transfer of the holdings by gift or, knowingly, without
adequate and reasonable consideration, shall be presumed to con-
stitute a gift of property with intent to qualify for assistance and
such act shall disqualify the owner for further aid for a period
determined under standards established by the director, and in
no event for less than half of the period that the capital value of
the transferred property would have supplied the person’s
maintenance needs based on his circumstances at the time of his
transfer plus the cost of any needed medical care.”
Cal. (Welf. & Inst.) Code § 14015.
5 The transfer rule is implemented, for the most part, through 22
Cal. Admin. Code §§ 50408, 50409. The first section (§ 50408) states
the general conditions for when the transfer of property will not result
in ineligibility. The rule and the procedure for overcoming the pre-
sumption are then stated in § 50409:
“(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 with-
out adequate consideration was for the purpose of estab-
lishing eligibility or to reduce the share of cost as limited by
(2).
“(2) To overcome the presumption, the applicant or ben-
eficiary has the burden of establishing by objective facts,
60
these regulations, an individual is eligible as medically
needy only if his or her assets are valued at $1500 or less.
22 Cal. Admin. Code § 50420. An individual’s home,
income-producing real property, and certain other assets
are not counted toward the $1500 limitation. 22 Cal.
Admin. Code §§ 50418, 50425-50489. Although this prop-
erty is exempt insofar as determining eligibility, it re-
mains potentially subject to California’s recovery proce-
dures. That is, after the individual dies, California is enti-
tled to recover the cost of medical assistance it provided to
the individual from the assets (including both exempt and
nonexempt property) which are left in the individual's
estate.
Under the regulations which implement the transfer
rule, any transfer of assets (including exempt property)
for less than adequate consideration creates a rebuttable
presumption that the transfer was made for the purpose of
establishing eligibility. Unless the applicant rebuts the
presumption, the state can deny benefits on this basis.
C. Facts
Dawson, who originally filed this action, has died. Two
other individuals, Beltran and Manahan, intervened. Bel-
rather than statement of subjective intent, that this pre-
sumption is not correct. The applicant or beneficiary shall
provide evidence that adequate resources were available at
the time of the transfer of property for support and medical
care considering such things as the applicant’s or benefi-
ciary’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 showing that the sole
purpose of the transfer was for reasons other than to
“establish eligibility or to reduce the share of cost shall
be supported by evidence such as that specified
above.
“(B) The establishment of the fact that the appli-
cant or beneficiary did not have specific knowledge of
the availability or benefits of the Medi-Cal program is
not sufficient to overcome the presumption.”
61
tran, who is 87, lives in an extended care facility. Mana-
han, who is 85, lives in a convalescent home. Both Beltran
and Manahan were medically needy and otherwise qual-
ified 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 apply-
ing for Medi-Cal. Neither was able to overcome the pre-
sumption of ineligibility resulting from these transfers.
In their complaint, Beltran and Manahan (referred to as
appellants), on behalf of themselves and others similarly
situated, sought declaratory and injunctive relief in-
validating and enjoining the California transfer rule. In
addition, the appellants sought reimbursement for those
amounts which they had been forced to pay because of the
state’s transfer rule. The district court certified a class
consisting of all those who had been denied Medi-Cal
benefits based on California’s transfer rule.
On May 10, 1979, the district court granted California’s
motion for summary judgment and denied the cross motion
filed by the appellants. The court entered findings of fact
and conclusions of law which held that the state’s transfer
rule did not conflict with the federal statutory and regula-
tory framework, nor did it amount to a denial of due proc-
ess or equal protection. The appellants then brought this
appeal.
II. DISCUSSION
The appellants make five distinct arguments against
California’s transfer rule. They claim that it creates an ir-
$ The district court concluded that it has jurisdiction under 28
U.S.C. § 1343(3) & (4) (civil rights jurisdiction) and under 28 U.S.C.
$1331 (federal question jurisdiction). It is unclear whether jurisdiction
was properly invoked under 28 U.S. § 1343. See Chapman v. Houston
Welfare Rights Orig., 441 U.S. 600, 99 S.Ct. 1905, 60 L.Ed. 2d 508
(1979); Doe v. Klein, 559 F.2d 338 (9th Cir. 1979). Nevertheless, the
amount in controversy exceeds $10,000 and so the district court did
clearly have federal question jurisdiction (28 U.S.C. § 1331). Brown v.
Stanton, F.2d No. 79-1459, slip op. 2 n.1 (7th Cir. 1980); see Chap-
man, supra, 60 L.Ed.2d at 515. Since the appellants filed a timely
notice of appeal from the final judgement, this court has jurisdiction to
consider the appeal under 28 U.S.C. § 1291.
62
rebuttable 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 trans-
fer rule conflicts with two different sections of the federal
statutes (42 U.S.C. § 1846a(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’ ar-
guments 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). Moreover,
in addressing appellants’ arguments, the cardinal principle
of statutory construction must be kept in mind, that is,
statutes should be construed to avoid constitutional ques-
tions. See Swain v. Pressley, 480 U.S. 372, 378 n.11, 97
S.Ct. 1224, 51 L.Ed.2d 411 (1977)
A. 42 U.S.C. § 1396a(a)(10)(C)
Appellants’ primary argument is that the California
transfer rule conflicts with 42 U.S.C. § 1896a (a)(10)(C),
which sequires states providing benefits to the medically
needy to cover “all individuals who would, except for in-
come and resources” be eligible for SSI (and therefore
come under the categorically needy classification), “and
who have insufficient (as determined in accordance with
comparable standards) income and resources to meet the
costs of necessary medical and remedial care and serv-
ices.”? The appellants attribute the following meaning to
7 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 individu-
als 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 accord-
ance with standards prescribed by the Secretary—
“(i) for making medical assistance available to all indi-
viduals who would, except for income and resources, be eli-
gible for aid or assistance under any such State plan or to
63
§ 1396(a)(10)(C): “except for the definitional distinction
that the medically needy may have higher income and re-
source 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 ex-
cess assets in order to become eligible for SSI payments.
42 U.S.C. § 1382b(b). This has been administratively in-
terpreted to permit the transfer of the excess assets for
less than adequate consideration or as a gift. Social Secu-
rity Claims Manual § 12507(a). According to the appel-
lants, since transfer rules cannot be appliec to SSI appli-
cants (i.e., the categorically needy), they tnerefore 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 appel-
lants that California could not employ any substantive eli-
gibility requirements on the medically needy which were
more restrictive than those used for the categorically
needy. Nevertheless, the court characterized the transfer
rule as a collateral or procedural eligibility requirement
which was permissible under the Social Security Act.
While we agree with the district court that the California
transfer rule does not conflict with § 1396a(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 eligiblity requirement. It
have paid with respect to them supplemental security in-
come 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 and services, and
“(ii) that the medical assistance made available to all in-
dividuals not described in clause (A) shall be equal in
amount, duration, and scope;
***(emphasis added to show that portion of the statute which the
appellants rely upon)
42 U.S.C. § 1396a(a) (10).
64
directly applies to the state’s determination of whether an
applicant’s assets exceed the eligibility requirements.
In considering the appellant’s argument, we must first
turn to the language of the statute itself. Obviously, the
face of this statute says nothing about prohibiting transfer
rules such as California’s.®
The portion of the statute with which we are concerned
may be divided into two parts. The first part provides that
the medically needy group includes all who would, except
for their income and resources, be eligible for SSI. The
second part provides that the medically needy group in-
cludes 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 eli-
gibility requirements. And so, while this provision does
extend all of the SSI eligibility requirements to the med-
ically needy, it does not do so for those which deal with
the applicant’s income and resources. Were this not the
case, then there would be no distinction between the two
groups. There can be no question but that the California
transfer rule is an eligibility requirement which pertains
to the applicant’s income and resources. It therefore
clearly comes within the exception to the first clause of the
statute.
The second part may be read as requiring that the
evaluation of the applicant’s income and resources be de-
8 At one point, appellants suggest that states can only use require-
ments which are explicitly authorized by the federal statute. We were
unable to find any provision of the statute which said this. In the ab-
sence 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 So-
cial Services v. Dublino, 413 U.S. 405, 98 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
manifestation of an intention to do so.” 413 U.S. at 413, quoting
Schwartz v. Texas, 344 U.S. 199, 202-208, 73 S.Ct. 232, 97 L.Ed. 231
(1952) ).
65
termined by using comparable standards. Since an SSI ap-
plicant is apparently specifically allowed to transfer assets
in the manner in which is prohibited by the California
transfer rule, we are faced with an inconsistent standard.
Nevertheless, this does not make the California rule
necessarily in conflict with this part of the statute. After
all, the statute only requires the standards to be compar-
able, not identical. Comparable only means that there
must be enough similar characteristics or qualities to make
comparison appropriate. Webster’s Third New Interna-
tional Dictionary, G.& C. Merriam Co. (1976). The other
standards which are used for determining financial eligi-
bility are similar enough to invite comparison. We there-
fore cannot say that the standards used by California to
determine eligibility into the medically needy group (in-
cluding the transfer rule) are not comparable to those
which are used under the SSI program.
In support of their argument, the appellants claim that
HEW, the agency charged with administering the
Medicaid program, has interpreted § 1396a(a)(10)(C) in the
same manner as they would have this court. Apparently,
three different HEW Regional Medical Directors have
written letters stating that state transfer rules are incon-
sistent with § 13896a(a)(10)(C) because they impose more
restrictive eligibility requirements on the medically needy
than on SSI applicants. See Fabula v. Buck, 598 F.2d 869,
873 (4th Cir. 1979). Although this court generally defers to
an administrative agency’s interpretation of the law which
it is charged with administering, we are by no means
bound by the agency’s interpretation. Pacific Coast Med-
ical 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 let-
ter interpretations, but we also refuse to attach any
weight to them. Initially, we are convinced that our in-
terpretation of § 1396a(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
66
Coast, supra, slip op. at 2526. While regional adminis-
trators 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 ap-
proval, and by not taking any action against California be-
cause 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 7382,
735-736 (7th Cir. 1979). Based on the preceding, not only
do we believe that the letter rulings should not be fol-
lowed, but we also believe that HEW’s general acceptance
of California’s Medi-Cal program supports our interpreta-
tion.
As further support for their argument under § 1396a
(a)(10)(C), the appellants rely upon the subsequent legilsa-
tive history of the Medicaid program. In 1978, as part of
the Medicare-Medicaid Administrative and Reimburse-
ment Reform Act, the Senate Finance Committee pro-
posed an amendment to the Medicaid statute which would
have specifically required states to adopt transfer rules
such as California’s. S. Rep. No. 95-1111, 95th Cong., 2d
Sess., 24-25 (1978). Apparently, relying upon what we
have already concluded was an erroneous agency interpre-
tation of § 1396a(a)(10)(C), the Senate Committee said
that the states were not able to adopt transfer rules under
present law. Jd. We recognize that the pronouncements of
legislative committees as to the meaning of previously
enacted statutes are often afforded considerable defer-
ence. 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 pronounce-
ments and it has been suggested that subsequently ex-
pressed 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 administrative
interpretation, and because we remain convinced that our
interpretation of § 1396a(a)(10)(C) is correct, we choose
67
not to accord any deference to the latter legislative pro-
nouncements.
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 re-
quires states to only consider the income and resources
which are “available” to the applicant in determining eligi-
bility. The California transfer rule assumes the availability
of assets, which, according to the appellants, are no longer
available to the applicant.
® 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 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 supple-
mental security income benefits are not being paid under sub-
chapter 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 re-
sources 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 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 who have paid with respect to him supplemental security in-
come >enefits under subchapter 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...
aK oY?
(emphasis added to show that portion of the statute which the
appellants rely upon)
42 U.S.C. § 1396a(a) (17).
68
The appellants’ argument may be correct under what 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] stat-
ute’s strong emphasis upon flexibility in determining eligi-
bility.” Norman, supra, 610 F.2d at 1240. In another con-
text 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. 488, 444, 97 S.Ct.
2366, 53 L.Ed. 464 (1977).!° The California transfer rule
presumes that an asset remains available to an applicant
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. §§ 435.831(a),
435.845(b). Since a state is authorized to consider future
assets, it must follow that it should also be allowed to con-
sider 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).
10 The Supreme Court was considering the extent of medical assist-
ance which the states were required to provide. Beal, supra, 432 U.S.
at 444.
69
C. 42 C.F.R. § 435.401
Appellants also claim that the California transfer rule is
inconsistent with 42 C.F.R. § 435.401.1! This regulation
provides that a state Medicaid agency cannot use require-
ments 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 needy,
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
available income and resources than the categorically
11 This regulation provides as follows:
“(a) A medicaid agency may not impose any eligibility require-
ment 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 treatment of individuals and
groups and that are consistent with the objectives of title XIXX.
“(c) The agency must not use requirements for determining eli-
gibility for optional coverage groups that are-
“(1) For families and children, more restrictive than
those used under the State’s AFDC plan; and
“(2) For aged, blind, and disabled individuals, more re-
strictive than those used under SSI, except for individuals
receiving an optional State supplement as specified in
§ 435.230 or individuals in categories specified by the
agency under § 435.121.”
(emphasis added to show that portion of the regulation which the
appellants rely upon)
42 C.F.R. § 435.401.
70
needy. By definition, different financial requirements
apply to the medically needy than to the categorically
needy. Only when § 435.401 is read as not applying to fi-
nancial requirements, such as the transfer rule, can it be
viewed consistently with the other Medicaid statutes and
regulations.
After all, § 485.401 is merely one of five sections under
the general heading entitled: “Subpart E—General Eligi-
bility Requirements.” There is absolutely no discussion of
financial eligibility requirements in any of the other sec-
tions of this subpart. Instead, the focus of all of the sec-
tions is directed toward much more general concerns, such
as eligibility requirements which are based on citizenship,
alienage, or state residence. In addition, a thorough read-
ing of the statutes and regulations shows that the sections
of Subpart E parallel the subsections of 42 U.S.C.
§ 1396a(b). From this it is apparent that Subpart E (in-
cluding § 435.401) was designed to carry out the statutory
mandate of 42 U.S.C. § 1896a(b) which does not involve
financial eligibility requirements. See, e.g., Pacific Coast,
supra, slip op. at 2526.12 And finally, there are three spe-
cific subparts which cover the financial eligibility require-
ments. Subpart G states the general financial eligibility
requirements, Subpart H states the financial eligibility re-
quirements for the categorically needy, and Subpart I
states the financial eligibility requirements for the medi-
cally needy. These specific and detailed guidelines for fi-
nancial eligibility requirerients must control over the gen-
erai rule of § 435.401.
We conclude that 42 C.F.R. § 435.401 does not apply to
financial eligibility requirernents 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 a rebuttable presumption in violation
12 In Pacific Coast, supra, this court noted that “[e)xisting regula-
tions must be construed in light of the statutory mandates under which
they issue.” Slip op. at 2526.
71
of the due process. In their reply brief, the appellants call
it an “effectively” irrebuttable presumption. 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 regulations ex-
pressly 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
[the] extent of [his or her] resources.” Jd. This would
mean that if a person was in good health at the time of the
transfer, then the presumption might be rebutted because
the person would have no reason to anticipate any large
expenditure for medical care and support.
The appellants argue that it is an “effectively” irrebutt-
able presumption because the applicant is precluded from
relying on his or her subjective intent. According to the
appellants, this excludes the two most likely explanations
for this type of transfer, which are: (1) the applicant was
unaware of Medi-Cal benefits, and/or (2) a desire to avoid
probate. While the state could have considered these sub-
jective considerations, we cannot say that the failure to do
so creates a due process violation. California’s objective
test for determining how the presumption can be over-
come does not create an effectively irrebuttable presump-
tion which might run afoul of the due process clause.
E. Equal Protection
The appellant’s final argument is based on equal protec-
tion grounds. They claim that there is no rational basis for
treating the medically needy any differently from the
categorically needy. According to the appellants, 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
72
needy, the appellants argue that it violates the equal pro-
tection 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 as-
sets rule to the medically needy group gives rise to even a
colorable constitutional claim under the equal protection
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. Fur-
thermore, 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 indi-
vidual 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 program.
In addition, California has a rational basis for its trans-
fer rule. California is confronted with two competing
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 conflict-
ing 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 artificially
created a need by disposing of assets for less than fair con-
sideration.
We hold that California’s transfer rule is rationally re-
lated to the legitimate government objectives of protect-
ing the public treasury and discouraging intentional im-
poverishment so as to qualify under a public assistance
program. Any disparate treatment resulting from the ap-
plication of the rule is sufficiently rational to be upheld
against appellants’ equal protection challenge. See Dan-
dridge, supra, 397 U.S. at 471; Richardson v. Belcher,
404 U.S. 78, 83-84, 92 S.Ct. 254, 30 L.Ed.2d 231 (1972);
Sims v. Harris, 607 F.2d 1253 (9th Cir. 1979).
=.
73
III. CONCLUSION
In upholding the California’s transfer rule, we recognize
that the majority of the courts which have been faced with
similar challenges have reached the opposite conclusion.
See, e.g., Caldwell v. Blum, F.2d No. 79-7864 (2d Cir.
April 10, 1980); Fabula v. Buck, 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. 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); contra,
Rinefierd v. Blum, 412 N.Y.S. 2d 526 (App. Div. 1979);
Lerner v. Division of Family Services, 235 N.W. 2d 478
(Wis. 1975). Nevertheless, for the reasons stated in this
opinion, we are convinced that our analysis of the question
is correct.
AFFIRMED.}%
13 Appellants also ask this court, providing they prevail on this ap-
peal, to grant the full measure of relief requested in their complaint
and provide notice to all classmembers. Because we affirm the district
court, it is unnecessary for us to address the propriety of this request.
74
IN THE UNITED STATES COURT
OF APPEALS
FOR THE NINTH CIRCUIT
ROSSYE DAWSON, INDIVIDUALLY AND ON BEHALF OF ALL
OTHERS SIMILARLY SITUATED, PLAINTIFF-APPELLANT,
US.
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 sugges-
tion 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 requested a
vote on the suggestion for rehearing en banc. 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
DENIED.
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.
75
In the Supreme Court of the United States
No. 80-5303
ANTONIA BELTRAN,
PETITIONER
Uv.
BEVERLEE A. MYERS, INDIVIDUALLY AND AS
DIRECTOR, CALIFORNIA STATE DEPARTMENT
OF HEALTH, ET AL.
ON PETITION FOR WRIT OF CERTIORARI to the United
States Court of Appeals for the Ninth Circuit.
On. Consideration of the motion for leave to proceed
herein in forma pauperis and of the petition for writ of
certiorari, it is ordered by this Court that the motion to
proceed in forma pauperis be, and the same is hereby,
granted; and that the petition for writ of certiorari be, and
the same is hereby, granted limited to Question 1 pre-
sented by the petition.
November 3, 1980
wU.S. GOVERNMENT PRINTING OFFICE: 1980 333436 158
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