Final Law Review Comment Unformatted

AGE HAS NOTHING TO DO WITH IT: SENIOR CITIZENS, MEDICAID
ELIGIBILITY & POOLED TRUSTS

DAVID S. BANAS
I. INTRODUCTION: WHO IS INTERPRETING THE LAW?
The answer to the question, “Who interprets the law?” is simple enough, as inevitably the Supreme
Court of the United States has both the duty and authority after Marbury v. Madison,1 as well as the
specialized skill, to do so. However, a blind, disabled, or aged person ought to be discouraged to hear
that the Supreme Court has called the laws governing Medicaid “among the most intricate ever drafted
by Congress,”2 and has agreeably quoted a second circuit court which said the Medicaid Act is “’almost
unintelligible to the uninitiated.’”3
Budgetary constraints currently weigh heavily on every state, and funding health insurance for the
aged, blind and disabled has left many states in an untenable position. The spirit of the Medicaid
program4 is to ensure that needy individuals have access to medical care that maintains their dignity and
respects their life. However, in an attempt to curb the utilization of a safe harbor Congress provided in
the Medicaid Act and therefore limit eligibility for the elderly disabled, the federal agency charged with
administering the Medicaid program has proven to be a lion in sheep’s clothing. Through an
interpretive memo construing the Medicaid laws regarding the utilization of pooled trusts, the
administrative agency in charge of Medicaid has taken with one hand what Congress explicitly granted
with the other, rendering the safe harbor of the pooled trust a nullity for disabled individuals over the
age of 65.
Practically, this interpretive memo has a chilling effect on the utilization of pooled trusts by the
elderly disabled. It also places the burden of the time and cost of litigation upon the elderly disabled,
many of whom are wards subject to guardianships. Relying on the agency’s interpretive memo, state
Medicaid administrators are now equipped to ignore the clear language of their own regulations and
impose a penalty upon an elderly disabled individual applying for Medicaid. Few advisors and courts
are willing to utilize the pooled trust now knowing that in doing so, the elderly disabled will be faced
with certain litigation over the issue.
The interpretive memo has sent shockwaves through the elder law community. In addition to the
chilling effect, it has raised significant questions about a disabled individual’s rights under the Medicaid
1
5 U.S. 137 (1803).
2
Schweiker v. Gray Panthers, 453 U.S. 34 (1981).
3
DeJesus v. Perales, 770 F.2d 316, 321 (1985), quoting Friedman v. Berger, 547 F.2d 724, 727, n.7 (2nd Cir. 1977).
4
See Analysis, Section B, infra.
2 CAPITAL UNIVERSITY LAW REVIEW [39:XXX
statutes, whether States are bound by the federal agency’s interpretation, whether the pooled trust safe
harbor provision of the Medicaid Act is unambiguous, and how much, if any weight courts should give
to the agency interpretation of federal law.
Currently, a circuit-split appears to exist regarding these questions. Thus, to alleviate uncertainty
and inconsistency among the federal and state jurisdictions as it pertains to the law, and to adhere to the
spirit of the Medicaid Act , the Supreme Court of the United States should revisit the issues of §1983
actions and agency deference in the Medicaid-eligibility context, and offer a clear and decisive
interpretation of the safe harbor provisions found in federal Medicaid law.
II. HISTORY AND BACKGROUND
A. A Brief Overview of Medicaid
Medicaid is a program by which the federal government reimburses States for the cost of medical
care for needy individuals.5 “Each participating State develops a plan containing reasonable
standards ... for determining eligibility for and the extent of medical assistance.”6 The Medicaid statutes
themselves provide States with the baseline rules by which the program should be implemented, and the
Secretary of Health and Human Services is charged with interpretive responsibility.7 The States, then,
must create a system by which applicants for assistance are determined to be eligible based only upon
the available income and resources of the applicant, within the boundaries set by the Secretary.8 In
short, the Medicaid program is a mechanism to administer health insurance to those needy individuals.9
Born in 1965 after the completion of the Social Security Act’s Medicare program, Medicaid passed
into law as part of the “Great Society” legislation under the Johnson administration.10 The goal of the
Medicaid program was to provide healthcare to Americans considered poor, disabled, and elderly.11
5
See Social Security Act, tit. XIX, as added, 79 Stat. 343, and as amended, 42 U.S.C. § 1396 et seq. (1994 ed. and Supp.
V)
6
Schweiker v. Gray Panthers, 453 U.S. 34, 36–37, 101 S.Ct. 2633 (1981); 42 U.S.C. §1396a(a)(17) (1994 ed.).
7
See, generally, 42 U.S.C. 1396 et. seq.; See also, Centers for Medicare & Medicaid Services; Statement of Organization,
Functions and Delegations of Authority; Reorganization Order 66 FR 35437, 35437. (All delegations of authority from the
Secretary or other HHS officials to the Administrator, Health Care Financing Administration and redelegations from the
Administrator to subordinate employees pertaining to the Health Care Financing Administration are vested in the
Administrator, Centers for Medicare & Medicaid Services and such subordinate employees and remain in effect until revoked
or modified.)
8
42 U.S.C. § 1396a(a)(17)(B) (“provide for taking into account only such income and resources as are, as determined in
accordance with standards prescribed by the Secretary, available to the applicant.”).
9
Dayna Bowen Matthew, The “New Federalism” Approach to Medicaid: Empirical Evidence That Ceding Inherently
Federal Authority to the States Harms Public Health, 90 Ky. L.J. 973, 978–79 (YEAR).
10
Id. at 979.
11
Id.
2008] TITLE/SUBJECT/PARTY v. PARTY 3
Nearly all of the Medicaid statutes are focused on how to determine whether and when an individual is
poor, disabled, and/or elderly, and thus entitled to this government-funded health insurance.
From the beginning of the program, the federal government has applied significant control over how
each State administers the program.12 To receive federal funding as reimbursement for Medicaid
benefits, the federal government required each State to submit a plan that met the satisfaction of the
Department of Health and Human Services.13 Each State that wanted to participate in the partnership
formulated programs to be administered by their State governments that would provide medical care to
needy citizens while satisfying all the federal requirements and rules promulgated by the Secretary of
the Department of Health and Human Services.14
Practically, this meant that the federal government, through the Medicaid statutes15 and the
Secretary’s interpretation of those statutes, set the broad criteria for eligibility, and left the States to
determine income and resource restrictions.16 Although the degree of federal control over the Medicaid
program has varied over the course of time and presidential administrations, the basic partnership
structure as discussed remains characteristic of Medicaid.17
B. Federal Interpretation and Implementation
The Secretary of Health and Human Services delegated his authority to interpret and implement the
federal Medicaid statutes to a federal agency called the Centers for Medicare and Medicaid Services
(CMS). CMS publishes what are called the POMS, or the Program Operations Manual, which outlines
the requirements for the benefits individuals may receive under the different programs of the Social
Security Act.18 In Wisconsin v. Blumer,19 the Supreme Court stated that the rules outlined in the POMS
have persuasive authority.20
CMS also provides guidance to the states through interpretive memos that are distributed throughout
the year and which encompass a wide variety of topics.21 The interpretive memos are sent out to the
12
Id.
13
Id.
14
Id.
15
See 42 U.S.C. § 1396 et seq.
16
Dayna Bowen Matthew, The “New Federalism” Approach to Medicaid: Empirical Evidence That Ceding Inherently
Federal Authority to the States Harms Public Health, 90 KY. L.J. 973, 979.
17
Id. at 984–85.
18
19
534 U.S. 473 (2002).
20
Id. at __
21
For a review of CMS’s guidance and transmittals, see generally, http://www.cms.hhs.gov/home/regsguidance.asp.
various regional directors of CMS and the content is then distributed through the regional directors to
their respective states’ Medicaid Directors.22
C. Pooled Trusts
Part of the plethora of exceptions and exclusions for counting of resources built into the federal
Medicaid statutes today are contained in 42 U.S.C. 1396p(d)(4). This section is a creation of legislation
passed by Congress in 1993 that created a safe harbor for pooled special needs trusts.23 The legislation
that excepted pooled trusts from Medicaid asset limits is referred to as OBRA ’93.24 The relevant
provisions of the legislation state that trusts created by an individual who applies for Medicaid are assets
for eligibility determination except for three types of special needs trusts.25 One of the three types of
special needs trusts is a pooled trust, whereby an individual funds a trust that is administered by a non-
profit organization, and the assets are pooled together.26
The Medicaid statutes require that pooled trusts (1) are managed by a non-profit organization, (2)
contain a separate account, managed for each member of the pooled trust, (3) are established solely for
the benefit of a disabled individual (according to the definitions of disability found at 42 U.S.C.
1382c(a)), and (4) must provide for a distribution to the State of trust money that the trust does not
retain after the beneficiary dies, in the amount of Medicaid benefits paid on behalf of the beneficiary.27
Section 1396p(d)(4)(C), unlike 1396p(d)(4)(A), is void of any mention whatsoever of an age
restriction.28 The age restriction contained in the first sub-provision, coupled with the lack of an age
restriction in the proceeding sub-provisions, creates a stark contrast. As we will see in the next section,
the conflicting language in the various sub-sections of this statute has caused significant controversy and
confusion.
22
23
Pooled Supplemental Needs Trusts Help Keep Wolves From Seniors’ Doors, 21 ME. B.J. 28, 30-31 (2006).
24
Id.
25
Id.
26
42 U.S.C. 1396p(d)(4)(C) (2007).
27
Id.
28
42 U.S.C. 1396p(d)(4)(A) begins by stating, “A trust containing the assets of an individual under the age of 65 who is
disabled….” Section (d)(4)(C) has no such language. It simply states, “A trust containing the assets of an individual who is
disabled….”
III. RECENT DEVELOPMENTS
A. Common Practice & Utilization of Pooled Trusts
For nearly fifteen years, non-profit associations established pooled trusts in nearly every State, and
encouraged disabled individuals to take advantage of the safe harbor Congress had so clearly and
unequivocally carved out in 42 U.S.C. § 1396p(d)(4)(C).29 Numerous benefits exist that make pooled
trusts attractive, notwithstanding the federal exemption from assets under Medicaid eligibility
requirements.30 With no explicit age restriction within (d)(4)(C) (unlike the explicit age restriction in
(d)(4)(A)), disabled individuals of all ages have established trusts under this provision.31
B. Policy Change
Since early 2008, CMS has distributed memoranda to the various regions of the United States with a
new and controversial interpretation of 42 U.S.C. 1396p(d)(4)(C).32 These bulletins suggest to State
Medicaid Directors that an age restriction is implied within subsection (d)(4)(C), not pertaining to the
availability of the assets, but the permissibility of the transfer itself.33 The basis for their determination
is found in 1396p(c) of the Medicaid statutes.34 The specific provision cited in the CMS memos is
1396p(c)(2)(B)(iv), which relates back to paragraph (1) of the subsection.
When read together, section 1396p(c) dictates that the State eligibility plans must provide that, if an
individual residing in a nursing home (or, at the option of a State, a noninstitutionalized individual or
the spouse of such an individual) disposes of assets for less than fair market value, on or after the look-
back date specified by the Act, the individual is ineligible for Medicaid benefits.35
29
For a list of pooled trusts by state, See http://www.specialneedsanswers.com/resources/directory_of_pooled_trusts.asp?
gclid=CL2k2uPrv50CFSMNDQodty46iQ.
30
For more information on pooled trusts and their benefits, see www.sntcenter.org, a non-profit organization based in
Florida that provides services to pooled trusts across the United States. The McGivney Trust, for instance, has been in
existence in Ohio since 2005, and is one of five pooled trusts set up in Ohio.
31
Pooled trusts currently operate under the assumption that there is no age restriction to enter into a pooled trust. See
http://www.snthelp.com/faq.html (“An Individual must be under age sixty-five to utilize a Individual Special Needs Trust.
There are no age restrictions on participants who join a Pooled Special Needs Trust.” )
32
CMS Memo from Gale Arden (Baltimore) to Jay Gavens (Atlanta Region IV), Center for Medicaid and State
Operations, Disabled and Elderly Health Programs Group (DEHPG), April 14, 2008; U.S. Dept. of Health & Human Serv.
CMS Chicago Regional State Letter 08-03 July 2008.
33
Id.
34
Id.
35
42 U.S.C. § 1396p(c)(1)(A).
The statute does provide an exception to these “improper transfers.”36 According to subsection (c)
(2)(B)(iv), an individual will be eligible for Medicaid if they fund a trust (including a trust described in
subsection (d)(4)) established solely for the benefit of an individual under 65 years of age who is
disabled.37
Translated for our purposes, this means that a Medicaid applicant who places their assets in a pooled
trust, on or after five years prior to their application, is ineligible for Medicaid. Practically, if a disabled
individual places $25,000 in a pooled trust in 2006, and applies for Medicaid in 2010, they would be
deemed ineligible for Medicaid due to this “improper transfer” of assets. This provision is logically
formulated to keep people from divesting themselves of wealth in order to qualify for Medicaid.38
On its face, section 1396p(c) simply states that someone who transfers assets to a trust within five
years of application39 for Medicaid has performed an improper transfer, and will be ineligible for
Medicaid. However, if the individual transferred assets to a trust established solely for the benefit of an
individual less than 65 years of age who is disabled, the transfer is not improper. The statute
specifically refers to (d)(4) trusts as inclusive in this exception to the general definition of an improper
transfer.
Since the inception of (d)(4) trusts in 1993, the exceptional language of §1917(c)(2)(B)(iv) allowed
for transfers to trusts for the sole benefit of disabled individuals under age 65 and for trusts described in
subsection (d)(4). In early 2008, however, CMS had radically changed direction concerning pooled
trusts.
A May 12, 2008 letter sent to all Medicaid state agencies from Richard R. McGreal, Associate
Regional Administrator of Region I, regarding the application of transfer of assets penalty for pooled
36
While the federal code is silent as to a definition of an improper transfer, the Ohio Administrative Code offers the
following definition, based on the Medicaid statutes: “An ‘improper transfer’ means a transfer on or any time after the look-
back date…of a legal or equitable interest in a resource for less than fair market value for the purpose of qualifying for
Medicaid, a greater amount of Medicaid, or for the purpose of avoiding the utilization of the resource to meet medical needs or
other living expenses.” See O.A.C. § 5101:1-39-07.
37
42 U.S.C. § 1396p(c)(2)(B)(iv).
38
39
A tremendous amount of confusion surrounds the date of the “look-back” period, or the date from which one looks back
five years for improper transfers. The Medicaid statutes at §1396p(c)(1)(B)(i) defines the look back date as “a date that is 36
months (or, in the case of payments from a trust or portions of a trust that are treated as assets disposed of by the individual
pursuant to paragraph (3)(A)(iii) or (3)(B)(ii) of subsection (d) or in the case of any other disposal of assets made on or after the
date of enactment of the Deficit Reduction Act of 2005, 60 months) before the date specified in clause (ii). (ii) The date
specified in this clause, with respect to—(I) an institutionalized individual is the first date as of which the individual both is an
institutionalized individual and has applied for medical assistance under the State plan, or (II) a noninstitutionalized individual
is the date on which the individual applies for medical assistance under the State plan or, if later, the date on which the
individual disposes of assets for less than fair market value.” For clarity, the “look-back date” will be referred to generally as
the date of application.
trusts communicates a clarification in policy.40 The letter unequivocally clarifies that a pooled trust
established by an individual age 65 and older is not exempt from the transfer of assets provisions.41
Administrator McGreal states, “Although a pooled trust may be established for beneficiaries of any age,
funds placed in a pooled trust established for an individual age 65 or older may be subject to penalty as
a transfer of assets for less than fair market value.”42 He further clarifies that only trusts established for
a disabled individual age 64 or younger are exempt from application of the transfer of assets penalty
provisions.43 A nearly identical letter went out to the Atlanta Region IV, and the Chicago Region.44
C. Reverberation
In response, Susan H. Levin, on behalf of the Public Policy Committee of the Massachusetts
Chapter of the National Academy of Elder Law Attorneys, wrote a strongly worded letter to Allen
Bryan of the Department of Health and Human Services outlining the flaws in CMS’ interpretation of
the federal Medicaid law regarding pooled trusts.45 Ms. Levin’s first argument outlined that CMS’s
interpretation of the seemingly conflicting federal statutes46 is inconsistent with a prior CMS
interpretation of (d)(4)(B) trusts, which, like the pooled trusts, are explicitly exempted by Congress and
contain no age restriction.47 CMS’s predecessor, the Health Care Finance Agency, produced a memo in
1994 to clarify that (d)(4)(B) trusts were not subject to transfer of assets penalties, stating:
We believe that the conflicting provisions … could render the …exemption in section
1917(d)(4)(B) a nullity. That is, while section 1917(d)(4)(B) clearly attempts to
except certain trusts from being counted as available income or resources under the
Medicaid program, ….the transfer rules require a transfer penalty. In order to resolve
this conflict in the law, and to avoid interpreting a provision of the statute as a nullity,
we believe that we must give precedence to section 1917(d)(4)(B)….Congress clearly
intended….transfer of assets penalties will not apply to income placed in a [(d)(4)(B)]
trust48
40
US Department of Health and Human Services, Centers for Medicare & Medicaid Services, STATE AGENCY
REGIONAL BULLETIN No. 2008-05, May 12, 2008.
41
Id.
42
Id.
43
Id. (citing §1917(c)(2)(B)(iv) of the Social Security Act).
44
CMS Memo from Gale Arden (Baltimore) to Jay Gavens (Atlanta Region IV), Center for Medicaid and State Operations,
Disabled and Elderly Health Programs Group (DEHPG), April 14, 2008.
45
Letter of Susan H. Levin to Allen Bryan, CMS Region I, June 20, 2008.
46
1396p(c)(2)(B) conflicts with 1396p(d)(4)(C).
47
Susan H. Levin Letter (how do I cite these letters?)
48
Id., quoting HCFA Memorandum dated March 17, 1994, Sally K. Richardson, Director of Medicaid Bureau for HCFA.
Ms. Levin argues that the exact same argument ought to be applied to transfers to pooled trusts,
and highlights that (d)(4)(A) trusts are different than (d)(4)(B) and (C) trusts because there is specific
Congressional intent of an age restriction in that provision and only that provision.49 She writes, “It is
illogical for Congress to have exempted the assets in a qualified pooled trust from countability
regardless of the age of the disabled individual, but penalize the transfer of assets to such a trust.”50
In a public directive, HCFA Transmittal 64, the predecessor to CMS stated that the trust provisions
are more specific and detailed in requirements for dealing with funds placed in a trust, and as such
should be given precedence over the general transfer of assets provisions.51
Another compelling argument that goes against the CMS interpretation of pooled trust provisions
and the overall spirit of the memos is the fact that CMS should, with ambiguity in the federal statute,
leave the States with the discretion as to how they will treat pooled trusts, at the very least.52 When
ambiguity arose out of how to determine another Medicaid eligibility requirement, CMS decided to
defer to the States, invoking their rule-making authority under section 1902(a)(17) of the Act to leave
the choice in the hands of the States.53 In fact, the Supreme Court of the United States affirmed this
action in Wisconsin v. Blumer.54
Nevertheless, the directives of these memos have taken hold, at least in Ohio.55 In a recent
Administrative Appeal of the Ohio Department of Job and Family Services, the agency denied
Medicaid nursing home vendor payments due to the applicant’s purchase of participation in a pooled
trust arrangement.56 The agency justified its position by citing to 42 U.S.C. §1396p(c)(2)(B), 42 U.S.C.
§1396p(d)(4)(C), and one of the memos distributed by the Chicago Regional State Letter dated July of
2008.57 The issue, according to the memos and to the Administrative Appeal decision, was not that the
assets in the pooled trust were countable, but that the transfer into the pooled trust was an improper
49
Id.
50
Id.
51
Id. (quoting HCFA Transmittal 64 §3259.6 G. (“Because the trust provisions are more specific and detailed in their
requirements for dealing with funds placed in trust, the trust provisions are given precedence in dealing with assets placed in
trusts.”)).
52
Id.
53
Id.(citing 66 Fed. Reg. 46763, 46767).
54
534 U.S. 473 (2002). See section ____ infra for a discussion of Wisconsin v. Blumer.
55
56
Administrative Appeal Decision, Docket Number: AA-3743, Appeal No(s) 1444413, AG No. 5077875085, Franklin
County CDJFS. (need to cite properly) (This decision explained, “that interpretation is supported by both the explicit language
of the underlying federal Medicaid statute as well as a federal Medicaid interpretive letter. And it is clear that the Ohio
Medicaid program and rules must be in compliance with the federal Medicaid statutes.”) Citing, US Dept. of Health & Human
Serv. CMS Chicago Regional State Letter 08-03 July 2008.
57
Id.
transfer.58 Illuminating the problem, the agency stipulates in the decision that in Ohio’s Administrative
Code at §5101:1-39-07, pooled trusts seem to be exempted from the imposition of a penalty for transfer
of assets: “Transfers of assets to a pooled trust are not subject to the improper transfer provisions….”59
Amazingly, the Ohio Department of Job & Family Services, whose Medicaid rules mirror the
federal Medicaid statutes closely, has taken the position of the CMS letter and chosen to ignore the
plain language of the exemption found in subsection (d)(4)(C) of the federal statute. The state agency
shows a tremendous amount of deference to the CMS Letter in interpreting the federal statute and,
accordingly, the state administrative code. This deference shown to the interpretive letters on an issue
of such longstanding practical import, without a judicial interpretation, is startling.
A better understanding of the complexity of the issue brought forth in the CMS memos, as well as a
cursory glance of the arguments against CMS’ interpretation of the pooled trust exemption,
demonstrates that it is a problem that federal courts will likely be faced with very soon, as individuals
over 65 who entered pooled trusts apply for Medicaid in the coming years, within the 5 year look-back
period for improper transfers.
Three important questions are raised by this problem. First, how much deference do State agencies
owe to the CMS Memos such as the ones sent out to clarify the treatment of pooled trusts? Secondly,
how have federal courts interpreted the exemptions located at 42 U.S.C. 1396p(d)(4), the “special needs
trusts?” Lastly, does an applicant for Medicaid benefits have a claim under §1983 due to a State
agency’s imposition of a transfer of assets penalty for purchasing participation in a pooled trust?
This comment will explore these three important questions and identify the primary issues the
federal courts, and eventually the Supreme Court, will need to resolve. With healthcare reform on the
immediate horizon, the questions of deference, statutory construction, and rights and remedies for
Medical benefits require answers in the short run. Additionally, the costs of medical care do not appear
to be going down in the near future, and both the federal government and the States will face increased
pressure in dealing with smaller budgets and a growing, aging population.
58
Id.
59
Id., citing O.A.C. 5101:1-39-27.1(C)(3)(c)(vi).
IV. DISCUSSION
A. Deference Owed to CMS
When considering how much deference the CMS guidance should be given by the States in
interpreting federal statutes, the Supreme Court of the United States has taken two distinct approaches.60
The first approach is found in the Chevron v. Natural Resources Defense Council61 where a court
reviews an agency’s construction of a statute, which it administers, it is confronted with two questions:
(1) whether Congress has directly spoken to the precise question at issue, and (2) if the intent of
Congress is clear.62 If it is not clear what Congress intended, and an administrative agency has offered
an interpretation, the court may not simply supply its own statutory construction.63 Instead, a court must
consider if the agency’s interpretation is based on a “permissible construction of the statute.”64
In Morton v. Ruiz,65 the court dictated that an administrative agency has power to administer a
congressionally created program, which requires the formation of rules to fill gaps left by Congress,
whether those gaps were left implicitly or explicitly.66 When Congress has explicitly left gaps in
statutes, therein lies an “express delegation of authority to the agency to elucidate a specific provision of
the statute by regulation.”67 The Chevron court recognized that it is well established that considerable
weight should be accorded to an agency’s interpretation of a statute for which it is charged to
administer.68
Deference to interpretations by administrative agencies is pursued when decisions as to the meaning
or scope of a statute involves resolving conflicts in policy, and understanding the policy has depended
on more than ordinary knowledge of the issues the administrative agency seeks.69 The issue in Chevron
revolved around an Environmental Protection Agency regulation allowing states to treat all pollution-
emitting devices within same industrial grouping as though they were encased within a single bubble.70
60
61
467 U.S. 837 (1984).
62
Id. at 842.
63
Id. at 843.
64
Id.
65
415 U.S. 199 (1974).
66
Id. at 231.
67
Chevron, 467 U.S. at 843–44 (1984).
68
Id. at 844 (citing INS v. Jong Ha Wang, 450 U.S. 139, 144 (1981)).
69
Id. (citing Aluminum Co. of America v. Central Lincoln Peoples’ Util. Dist., 467 U.S. 380, 389 (1984)).
70
Id.
The question for the court was whether the EPA’s interpretation, via its regulation, was a permissible
construction of the statute.71
The court concluded, “When a challenge to an agency construction of a statutory provision, fairly
conceptualized, really centers on the wisdom of the agency’s policy, rather than whether it is a
reasonable choice within a gap left open by Congress, the challenge must fail.”72 The policy
determinations behind the regulations, when Congress leaves gaps in the statutes for agencies to
interpret, are not for the judiciary to determine, but the people.73 Accordingly, the Chevron court found
the administrative agency’s interpretation of the federal statute to be permissible.74
In Christensen v. Harris County,75 the Court addressed a scenario much like the CMS memos at
issue in the interpretation of the pooled trust provisions of the federal Medicaid statutes. The Court
tackled an agency interpretation found in an opinion letter rather than one promulgated through a formal
adjudication or notice-and-comment rulemaking.76 Agency interpretations that are found in opinion
letters lack the force of law.77 These letters do not deserve, according to the Christensen court,
Chevron-style deference.78
The Supreme Court in Skidmore v. Swift & Co.79 set out a path for courts to follow in regards to how
much deference administrative agencies’ regulations are owed.80 When regulations are not reached
because of the interpreter hearing adversarial proceedings in which he finds facts from evidence and
reaches conclusions of law from findings of fact, they do not constitute an interpretation of statute, nor
do they bind a court.81 However, just because an agency’s interpretations of statute are not products of
an adversarial hearing, does not mean that the interpretations deserve no respect.82 The Supreme Court
has often given significant and decisive weight to Treasury regulations and interpretations.83
71
Id. at 840.
72
Id. at 866.
73
Id. (quoting TVA v. Hill, 437 U.S. 153, 195 (1978) (“Our Constitution vests such responsibilities in the political
branches.”)).
74
Id.
75
529 U.S. 585 (2000).
76
Id. at 587.
77
Id.
78
Id. (citing Reno v. Koray, 515 U.S. 50, 51 (1995) (“internal agency guideline, which is not ‘subject to the rigors of the
Administrative Procedur[e] Act, including public notice and comment,’ entitled only to ‘some deference.’”)); EEOC v. Arabian
American Oil Co., 499 U.S. 244 (1991) (interpretive guidelines do not receive Chevron deference)
79
323 U.S. 134 (1944).
80
81
Id. at 139.
82
Id. at 140.
83
Id.
The Skidmore court held that rulings, interpretations, and opinions of agencies make up a body of
experience and “informed judgment to which courts and litigants may properly resort for guidance.”84
The degree of deference will be determined, under the Skidmore test, by the “thoroughness evident in its
consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all
those factors which give it power to persuade, if lacking power to control.”85
The Court’s decision in Barnhart v. Walton86 clarified both statutory construction issues as well as
agency deference. If the statute in question speaks clearly to the precise question at issue, a court must
give consequence to the expression of Congress.87
In Barnhart, the agency’s regulations reflected their longstanding interpretation, as proven by a
litany of cited sources to prove the consistency of the agency’s position.88 This evidence of consistent
interpretation, as well as the fact that the statute did not unambiguously forbid the agency’s
interpretation, after a determination that the interpretation was reasonable, led the court to apply
Chevron-style deference.89 The Barnhart court held that the Social Security Administration’s
interpretation of a statutory definition of disability was lawful construction.90
The court’s decision in Wisconsin Department of Health and Family Services v. Blumer91 provides
some of the best insight into how to determine how much deference is owed to CMS and the rules
promulgated by the Secretary of Health and Human Services.92 The case revolved around interpretation
of provisions of the Medicare Catastrophic Coverage Act of 1988, which is now part of the federal
Medicaid statute.93
Wisconsin utilized a particular method to determine income and resource allowances, which the
applicant appealed, claiming it delayed her benefits.94 In wading through the nebulous Medicaid
statutes, the court noted, “The Medicaid statute…is designed to advance cooperative federalism. When
interpreting other statutes so structured, we have not been reluctant to leave a range of permissible
choices to the States….”95
84
Id.
85
Id.
86
535 U.S. 218 (2002).
87
Id. at 218 (quoting Chevron, at 842–43).
88
Id. at 219–20.
89
90
Id. at 212.
91
534 U.S. 477 (2002).
92
93
Id. at 477.
94
Id. at 478.
95
Id. at 495.
The Secretary of Health and Human Services possesses the authority to prescribe standards for
Medicaid eligibility that are consistent with the federal Medicaid statutes.96 In Blumer, the court
references the Secretary’s proposed rule, and cites a Chicago Regional State Letter, going on to say that
the “Secretary’s position warrants respectful consideration.”97 In fact, in other decisions, the Secretary’s
interpretation or policy determination is given rather significant deference.98
96
42 U.S.C. 1396a(a)(17)
97
Id. at 497.
98
Thomas Jefferson University v. Shalala, 512 U.S. 504, 512 (1994) (reliance on Secretary’s “significant expertise”
particularly appropriate in the context of a “complex and highly technical regulatory program”);
1. Application of Chevron
A number of circuits have applied Chevron type deference to CMS interpretations in the Medicaid
context.99 The overriding theme, as evidenced in the following cases, is establishing whether the
underlying statute is unambiguous. If the underlying statute is unambiguous, the courts have given
little weight to conflicting CMS interpretations.
A Second Circuit case arising out of a handicapped student filing suit against the Secretary of Health
and Human Services to receive Medicaid benefits applies Chevron type deference.100 The court,
reviewing the secretary’s interpretation of a section of the code of federal regulations, sought to
determine whether congress had addressed the issue.101 The court declared, “If the intent of congress is
clear, that ends our inquiry, for the court’s duty is to enforce the unambiguously expressed will of
congress.”102 Nevertheless, if the court finds that Congress never specifically addressed the issue at
hand, it is bound to defer to the agency’s interpretation as long as it is a “sufficiently reasonable”
construction of the regulation.103
The Medicaid applicant in Detsel argued that the secretary’s interpretation conflicted with Congress’
explicit intent.104 The applicant argued that Congress directs states to administer the programs of 42
U.S.C. 1396 in “the best interests of the recipient.”105 The court, however, refined its role, stating, “our
role is not to speculate on what Congress might have intended had it considered this question, but
rather to determine whether Congress ‘actually ha[d] an intent.’”106
99
100
Detsel by Detsel v. Sullivan, 895 F.2d 58 (2nd Cir. 1990).
101
Id., at 62.
102
Id., citing Chevron 467 U.S. at 842–43.
103
Id., quoting Chevron 467 U.S. at 844–45.
104
105
Id., citing 42 U.S.C. 1396a(a)(19).
106
Id., at 63, quoting Chevron 467 U.S. at 845.
Determining that Congress had not spoken directly to the issue, the court assessed the reasonableness
of the secretary’s interpretation.107 The court deferred to the secretary’s resolution of the issue, but
clarified, “Holding the secretary to a ‘reasonableness’ standard…is not equivalent to reviewing his
decisions under the ‘minimum rationality’ standard we use in reviewing acts of Congress.”108 Further,
the court noted that administrative agencies must base their decisions on logic and reason in
connecting facts and choices made.109 The court relies on Bowen v. American Hospital Association,110
where the Supreme Court emphasized that agency deference is held to a higher standard than
congressional intent, and that agencies have a responsibility to “explain the rationale and factual basis
for its decision.”
In defense of his interpretation, the Secretary claimed that the interpretation reflected a common
understanding of the facts of the issue.111 The Secretary relied on a common understanding of facts
circa mid-1960s, when the regulation and the Medicaid program were initially formulated.112 The court
rejected this argument, stating, “Even if the secretary was correct in his assumption that [the
regulation] was originally intended to limit, rather than describe, the common understanding of [the
issue] as it existed in 1965, that limitation would not necessarily remain reasonable today.”113
107
Id., at 63.
108
Id., citing Motor Vehicle Mfrs. Assn. v. State Farm Mutual Auto. Ins. Co., 463 U.S. 29, at 43 & n. 9.
109
Id., citing Burlington Truck Lines Inc. v. United States, 371 U.S. 156, at 168.
110
476 U.S. 610 (1986).
111
Detsel, at 63.
112
Id..
113
Id., at 64.
The secretary also argued that his interpretation was a “rational exercise of the secretary’s duty to
allocate public resources efficiently.”114 The court also found this catchall defense to be without
merit.115 The court found that the secretary failed to show his interpretation of the regulation “furthers
any of the department’s legitimate fiscal concerns.”116
Lastly, the court addressed the secretary’s defense that his interpretation should be given special
deference because the regulation was issued at the same time the Medicaid laws passed and has not
changed.117 The court offered what it described as a “short and sufficient answer,” clarifying that the
regulation was not what the Medicaid applicant was challenging, which actually was the secretary’s
narrow interpretation.118
114
Id., at 63.
115
Id., at 64.
116
Id., at 65.
117
Id.
118
Id.
Moreover, and particularly applicable to the problem of CMS’ interpretation of (d)(4)(C), is the court’s
illumination of a conflict between the secretary’s interpretation and a CMS memo issued nine years
prior to the publishing of the decision.119 The CMS memo provided a stark contrast between a past
interpretation of an issue and the interpretation offered in the matter by the secretary.120 The court
stated, “Considering the inconsistencies in the department’s views in this area, we see no reason to
confer any greater degree of deference to the [interpretation] than it would ordinarily deserve.”121
119
120
Id.
121
Id.
In a Third Circuit case, Elizabeth Blackwell Health Center for Women v. Knoll,122 health care providers
brought action against state official challenging Medicaid funding for abortions.123 The court
addressed conflicting interests in the Medicaid statutes and the 1994 Hyde Amendment.124 The fact that
Pennsylvania had a reporting requirement when a pregnancy was the result of rape or incest, conflicted
with the Supreme Court’s holding in King v. Smith,125 that a state law cannot set Medicaid eligibility
requirements that are more restrictive than criteria set forth by Congress.126
122
61 F.3d 170 (3rd Cir. 1995).
123
Id.
124
Id., at 180.
125
392 U.S. 309 (1968).
126
Id.
Initially, the Secretary of Health and Human Services is responsible for resolving an issue like the one
presented in this case, and he proscribed a waiver provision in the state reporting requirement in order
to bring both interests in alignment.127 In December of 1993, the director of HCFA (CMS)128 sent a
directive to all state Medicaid directors explaining that states may not “impose reporting…
requirements that deny or impede coverage for abortions where pregnancies result from rape or
incest.”129 To solve the problem, the director proscribed a waiver.130
The court noted that the December 1993 directive was the secretary’s “attempt to give interpretive
guidance to the states in advance of their submission of state Medicaid plans.”131 The secretary’s
interpretation is actually an interpretation of the Hyde Amendment, and since the secretary’s directive
“clarifies and explains existing law, we deem it ‘interpretive.’”132
127
Id.
128
See note __, supra, regarding HCFA and its metamorphosis into CMS.
129
Id., at 181.
130
Id.
131
Id.
132
Id., quoting Bailey v. Sullivan, 885 F.2d 52, at 62 (3rd Cir. 1989).
Having established the secretary’s directive as an interpretation of a federal statute, the court recalls
that federal courts have traditionally given “considerable weight” to an executive’s interpretation of a
statute.133 The court found the secretary’s solution through its directive to be reasonable.134 “Because
the Secretary’s consistent and contemporaneously expressed construction of the Medicaid statute as
amended by the Hyde Amendment is a reasonable one, it is accorded considerable weight under the
principles announced in Chevron.135
Another matter concerned the secretary’s interpretation of a provision in the code of federal
regulations.136 Again, the court gives “substantial deference to an agency’s construction of its own
regulation.”137 The court noted that the secretary’s interpretation aligned with the plain reading of the
regulation.138
In Children’s Hospital and Health Center v. Belshe,139 hospitals with Medicaid covered patients sued
California’s Department of Health director, claiming the director’s methods executed through the
California Department of Health Services violated federal law.140 The court examined the statute at
issue and addressed legislative intent.141
133
Id., at 182, citing Chevron, at 844–85.
134
Id.
135
Id.
136
Id., at 183.
137
Id., citing Martin v. Occupational Safety and Health Review Comm’n, 449 U.S. 144, 150–51 (1991).
138
139
188 F.3d 1090 (9th Cir. 1999).
140
Id.
141
Id., at 1096.
The court began its examination with the language of the statute.142 Citing United States v. Ron Enters,
Inc.,143 the court declared that statutory interpretation starts with the language of the statute, and when
its plain meaning is unambiguous, that meaning is controlling.144 The court determined that a proper
statutory interpretation involves an examination of the specific provision and the structure of the statute
as a whole, including its objectives.145 Only when ambiguity exists do courts need to give treatment to
legislative history.146
In looking at the plain meaning of the statute at issue, the court found that it does not distinguish
between the points at issue, thus the plain meaning of the statute is that Congress had no intention to
differentiate.147 The court supports this stance by illuminating that the Medicaid statutes themselves
contain a plethora of provisions where Congress creates distinctions and explicitly differentiates
between particular facts or issues.148 Plainly stated, when Congress creates an unambiguous statute, it
must be presumed that if Congress wants to distinguish, it will do so.149
Additionally, since the statute at issue was deemed unambiguous by the court, an investigation of
Congressional intent through legislative history is unnecessary.150 However, if an issue is of great
importance, a court may very well examine the legislative history.151 In its treatment of the statute’s
legislative history, the court notes California’s director’s request that the court defer to CMS’
interpretation of the statute.152 Nevertheless, the court, citing Chevron, does not honor the director’s
request because the court is not permitted to defer to an agency’s interpretation when Congress has
unambiguously addressed the issue.153
142
Id.
143
489 U.S. 235, 241 (1989).
144
Id., citing 489 U.S. 235, 241 (1989).
145
Id., citing Green v. Commissioner, 707 F.2d 404, 405 (9th Cir. 1990).
146
Id., citing Green, 707 F.2d at 405.
147
Id., at 1096.
148
Id.
149
Arguments to follow in this note applying this logical method of statutory construction to pooled trusts and the statutory
construction of 42 U.S.C. 1396(d)(4) as well as § 1917(c) of the Social Security Act will demonstrate that (1) Congress was
unambiguous in (d)(4) as to its intentions, (2) Congress’ placement of an age restriction in subsection (d)(4)(A) is an explicit
differentiation from subsections (d)(4)(B) & (C), and (3) Congress could not have intended to “take with hone hand what it had
just given with the other.”
150
Id., at 1097, citing Green.
151
Id.
152
Id. at 1098.
153
Id., citing Chevron at 843.
The preceding review of various circuit courts’ application of Chevron type deference places a high
level of importance on the determination of whether the underlying statute is ambiguous. Chevron’s
progeny has undoubtedly provided some clarification as to how the courts will treat CMS
interpretations, and whether challengers of CMS interpretations will find themselves in a court that will
simply defer to the agency.
2. Application of Skidmore
A Third Circuit case arising out of New Jersey addressed whether the state’s implementation of a
portion of Medicaid law violated the law itself.154 In Cleary ex rel. Cleary v. Waldman,155 the court
recognized the obvious but oft-overlooked purpose of Medicaid, which is to “provid[e] necessary
medical services for both the indigent and the elderly.”156 The court endeavored to interpret § 1396r-
5(e)(2)(C), which addressed income an applicant’s spouse. The court further recognized, “While the
federal agencies which administer the Act have not adopted formal regulations, neither have they
remained silent.”157 In this case, both CMS and HHS stated in memoranda and letters an interpretation
of the federal statute.
Thus, the court was faced with a dilemma: (1) do they need to interpret the law (or is CMS’s
interpretation enough), and (2) if so, how do they interpret the statute? First, the court looks to the
statute, searching for congressional intent apparent on the face of it.158 As stated above, the court must
decide whether congressional intent is apparent enough to defeat an interpretation by CMS. Finding the
statute ambiguous, the court then endeavored to apply the proper degree of deference to the CMS
interpretation.159
The court thus takes on an ambiguous statute and analyzes a CMS interpretation, which is “informal
and not made subject to notice-and-comment procedures.”160 However, CMS is delegated the authority
to administer the Act.161 This court’s analysis of the problem before it begs the question, is there a
difference between interpretation and administration of a statute?
154
167 F.3d 801 (3rd Cir. 1999).
155
Id.
156
Id., at 805.
157
Id., at 806.
158
Id., at 807.
159
Id.
160
Id., at 808.
161
Id.
The § 1983 Plaintiff in Cleary contended that New Jersey’s implementation of the statute ran
contrary to the plain language of the statute.162 In response, the court reads beyond the plain language of
the statute, placing it into the nebulous context of the surrounding subsections, which exempts and
applies various provisions, evidence of the complexity for which the Medicaid Act is infamous.163
Nevertheless, the court states, “…to conflate the detailed provisions [of the Medicaid Act]…would run
contrary to the statute.”164 Is the court saying, in short, that since the Medicaid statute is so complex, the
plain meaning of a statute cannot speak for itself? Is the court supplanting traditional statutory
construction with total deference to CMS?
The plaintiff also asserts that New Jersey’s implementation violates the purpose of the Act.165 The
court agrees with the plaintiff’s assessment of the purpose of Medicaid, to the extent that Medicaid was
meant by Congress to be a source of financing for a broad range of income groups; not just the poor but
the medically needy as well (disabled).166
But astonishingly, amongst admissions about ambiguity and complexity, the Court holds, “[CMS]
ha[s] statutory authority to administer the Act, and their policy is a reasonable interpretation consistent
with the plain language and stated purposes of the statute.”167 Thus, the Court granted deference to the
Agency view and the Plaintiff applicant lost the decision.168
This seems to be the danger in applying the Skidmore doctrine. The Skidmore court said that as
long as an administrative agency has delegated authority to administer the statute, and their views were
made pursuant to experience that is more specialized and information than a judge would likely have,
then that view deserved some deference.169 Applying this rule, as seen in Cleary, grants the courts with
an “out.” Courts can defer to CMS and simply take CMS for its word. This sets a dangerous precedent
and runs counter to the foundational ideal that the branches of government balance one another. The
Skidmore doctrine arbitrarily places the role of interpreting the will of Congress within the realm of an
agency created by the statute itself. Additionally, if the statute at issue in Cleary was formulated with
162
Id.
163
Id., at 809.
164
Id.
165
Id., at 810.
166
Id., at 810–11.
167
Id., at 812.
168
169
Id., at 807–08.
“plain language” and “stated purposes,” why does the agency need to offer an interpretation and for
what does the court defer to the agency?170
One must be reminded that opinion letters from CMS do not have the force of law and are not
entitled Chevron deference.171 However, Chevron did not overrule Skidmore. Skidmore controls when,
“[i]nterpretive guidance from administrative agencies that is not the product of formal, notice-and-
comment rulemaking, is entitled respect ‘to the extent that the interpretations have the power to
persuade.’”172 Hence, as seen in Cleary, courts ought to defer to CMS interpretations so long as they are
persuasive. For a § 1983 plaintiff suing for enforcement of a statutory right, this doctrine places all too
much power in the hands of CMS, and left unchecked, is subject to the whims of the Secretary of Health
and Human Services, the economy, or political pressures.173 Outside of Chevron, a plaintiff must
persuade a court that the agency interpretation is “arbitrary, capricious, an abuse of discretion, or
otherwise not in accord with the law.”174
3. No Deference Applied
Chevron & Skidmore are not, however, all encompassing. There are numerous instances where
courts, dealing with the complex and ambiguous Medicaid statute and a CMS interpretation, have
foregone the application of these deference doctrines in light of circumstances that make a CMS
interpretation arbitrary.175 CMS interpretations may not be afforded deference when the interpretation
was not made contemporaneously with the enactment of the statute, and when the interpretation
contradicts what the agency had allowed previously.176 Hence, as with CMS’s interpretation of the age
requirement and transfer penalty of pooled trusts, since the interpretation was 15 years late and CMS
had acquiesced to no age requirement since the inception of the pooled trust, courts may simply dispose
of them without affording any deference.
In Westmiller, the plaintiffs claimed that the Secretary’s enforcement of a transmittal, which
interpreted the Medicaid statute in contravention of 14 years of “uninterrupted federal toleration of and
170
Id. at 812.
171
Battle Creek Health System v. Leavitt, 498 F.3d 401 at 409 (6th Cir. 2007).
172
Bank of New York v. Janowick, 470 F.3d 264, 269 (6th Cir. 2006), quoting Christensen, 529 U.S. at 587.
173
174
Battle Creek Health System, 498 F.3d at 410, citing Clark Reg’l Med. Ctr., 314 F.3d at 245.
175
See Westmiller v. Sullivan, 729 F.Supp. 260, (W.D.N.Y. 1990); Matarazzo v. Rowe, 623 A.2d 470 (Conn. 1993); Utah
Women’s Clinic, Inc. v. Graham, 892 F.Supp.1379 (D. Utah 1995); Arizona v. Thompson, 281 F.3d 248 (D.C. Cir. 2002);
Spectrum Health Continuing Care Group v. Anna Marie Bowling Irrevocable Trust Date June 27, 2002, 410 F.3d 304 (6th Cir.
2005).
176
Westmiller v. Sullivan, 729 F.Supp. 260, at 265 (W.D.N.Y. 1990), citing General Electric Co. v. Gilbert, 429 U.S. 125,
143–44 (1976); Barnett v. Weinberger, 818 F.2d 953 (D.C. Cir. 1987).
acquiescence,” violated the Medicaid Act.177 In reply, the Secretary asserted that Congress used plain
language in providing for income spend-down, and that if it intended states to employ resource spend-
down, it would have said so explicitly.178 The Secretary further asserted that the interpretation complied
with the plain language of the Medicaid Act, forbidding states to allow for resource spend-down.179 The
court disagreed with the Secretary, saying, “the Transmittal violates at least the spirit, if not the letter of
the Medicaid Act.”180
What about deference? The Westmiller Court, in addressing the Secretary’s argument that the court
should afford great deference to his agency’s interpretations, as set forth in Chevron, notes that this case
involved “some judicially-recognized circumstances in which administrative interpretations are not to
be accorded great weight.”181 Circumstances in which administrative interpretations are not given great
weight include, when the interpretation is not made contemporaneously with the enactment of the
statute, and “when it contradicted the position which the agency had taken previously.182 Further, the
Court notes that deference is inappropriate if a court determines that the “agency interpretation is
unreasonable because it violates the spirit of the statute.”183 In Westmiller, the court found that the
interpretation was not issued 15 years after the passage of the Medicaid Act, and that its position
directly contravened the agency’s position it had held for 14 years prior.184 Thus, notwithstanding
Skidmore and Chevron, the court afforded the agency interpretation no deferential weight. The court
found the interpretation to be a violation of the Medicaid Act.185
B. Is there an age requirement for special needs trusts?
The plain language of 43 U.S.C. § 1396p(d)(4)(C) is unambiguous as it pertains to an age

requirement. While (d)(4)(A) clearly states that it provides exemption for disabled individuals who are
under age 65, no such distinction or qualification exists within subsection (d)(4)(C). The complete lack
of any language requiring an age limitation in the language of the statute has led many states, like Ohio,
to adopt Medicaid plans to be correspondingly void of any age limitation in their pooled trust statutes.
177
Westmiller, 729 F.Supp. at 262 (W.D.N.Y. 1990).
178
Id., at 262.
179
Id., at 263.
180
Id., citing Haley v. Commissioner of Public Welfare, 394 Mass. 466, 476 N.E.2d 572 (1985).
181
Id., at 265, citing Foley v. Suter.
182
Id., citing General Electric Co. v. Gilbert, 429 U.S. 125, 143–44 (1976); Barnett v. Weinberger, 818 F.2d 953 (D.C. Cir.
1987).
183
Id., quoting Capitano v. Secretary of Health & Human Services, 732 F.2d 1066, 1076 (2d Cir. 1984).
184
Id., at 266.
185
Id.
For instance, Ohio Revised Code § 5111.151(F), which is the corresponding statute authorizing the
exception of pooled trusts, clearly states that a person of any age can utilize the safe harbor, and that a
transfer to a pooled trust is not an improper disposition of assets.186
This situation now poses a serious problem. If a guardian petitions a court to create a pooled trust
for a ward over 65 years of age, should the court establish the trust knowing that the CMS memo is
urging state departments to treat the transfer as an improper disposition of assets? Additionally, for
guardianships especially, it would appear that the courts could not create trusts in the best interest of the
ward (which a court is bound to do) if it is subject to collateral attack by another court or an
administrative review in the future. Notwithstanding the clear language of the law (both the federal and
Ohio statutes are clear), the uncertainty of how ODJFS will treat the utilization of the pooled trust
creates an unacceptable conflict between a right created by statute enforceable under §1983 and the
practice of denying eligibility based on the CMS interpretations.
C. Whether federal statutory “exemptions” like Special Needs Trusts create a right actionable under
Section 1983.
Gonzaga University v. Doe,187 decided in 2002, provides a detailed framework and analysis for
determining if (d)(4)(C) confers a federal right enforceable in suits for damages under § 1983. The
Gonzaga Court reflects on its past treatment of this question, examining Maine v. Thiboutot,188 which
held that § 1983 actions could be brought against state actors to enforce rights created by federal statues
and the Constitution.189 In Thiboutot, the Court held that plaintiffs could recover payments wrongfully
withheld by a state agency in violation of the Social Security Act.190 The Court analyzed Pennhurst
State School and Hospital v. Halderman,191 reiterating its holding that unless Congress clearly
communicates its unambiguous intent to confer individual rights, federal funding provisions [like
Medicaid] provide no private enforcement under § 1983.192
The Gonzaga court recalls its holding in Blessing v. Freestone,193 which distinguished individual
entitlement to services from a measuring stick used to evaluate system-wide performance.194 The court
186
Ohio Revised Code §5111.151(F)(3)(c)
187
536 U.S. 273 (2002).
188
448 U.S. 1 (1980).
189
Gonzaga, at 280.
190
Id., citing Thiboutot, at 4.
191
451 U.S. 1(1981).
192
Gonzaga, at 281, citing Pennhurst, at 17, 28, and n.21.
193
520 U.S. 329 (1997).
194
Gonzaga, at 281, quoting Blessing, at 343.
noted the three factors of the Blessing test to determine whether a statute confers a right, which included
that Congress had to have intended that the statute at issue benefit the plaintiff, that the plaintiff must
demonstrate that the right was not so vague and amorphous that it would strain judicial competence, and
that the provision must be mandatory rather than precatory.195 Interpretation of this test leads to the
conclusion that only violations of rights, not laws, give rise to § 1983 actions.196
Additionally, the Gonzaga court recalled that it had held in order for Congress to establish a private
right, the statute by its terms must grant that right to an identifiable class.197 “For a statute to create such
private rights, its text must be “phrased in terms of the persons benefited.”198 Consequently, if the
statute is phrased with explicit rights creating terms and clearly identifies a class of individuals, like
disabled persons, then Congress has established a federal right.
Individuals suing under § 1983 do not possess the burden of showing that Congress intended him to
have a private remedy because § 1983 itself provides the remedy.199 As soon as an individual
demonstrates that the statute confers an individual right, it is presumed that it is enforceable by §
1983.200 Hence, the primary analysis remains to determine whether or not a statute “confer[s] rights on
a particular class of person.”201
Gonzaga’s holding is unequivocal: “if Congress wishes to create new rights enforceable under §
1983, it must do so in clear and unambiguous terms—no less and no more than what is required for
Congress to create new rights enforceable under an implied private right of action.”202 Initially,
especially in the area of Medicaid, Gonzaga seemed to foreclose Medicaid applicants from enforcing
their perceived rights to Medicaid benefits through § 1983. After Gonzaga and Blessing, and due to
budget constraints and various policy initiatives, states are likely to argue that federal courts need not
illuminate the Medicaid laws because ensuring that state Medicaid law complies with 42 U.S.C. § 1396p
is the responsibility of the CMS and not the courts. However, this argument is premised upon the
assertion that the federal courts cannot enforce any aspect of the Medicaid statute. This argument is
195
Id., at 282.
196
Id., at 283, citing Blessing, at 340.
197
Id., at 283–84, citing Touche Ross & Co. v. Redington, 442 U.S. 560, 576 (1979).
198
Id., at 284, citing Cannon v. University of Chicago, 441 U.S. 677 (1979).
199
Id.
200
Id., at 285.
201
Id., quoting California v. Sierra Club, 451 U.S. 287, 294 (1981).
202
Id., at 290.
discernibly inaccurate in light of numerous cases permitting enforcement of various provisions of the
Medicaid Act under § 1983, even after Blessing & Gonzaga.203
In Lewis v. Rendell, the court stated that the state official in his capacity as director of the Medicaid
program was a person for purposes of § 1983. 204 Additionally, the court ruled that the provisions of §
1396p(d)(4) confer enforceable rights under 42 U.S.C. § 1983. The court concluded, “1396p(d)(4)(A)
creates a federal right enforceable under § 1983.”205 The court found that (d)(4)(A) refers to the
“eligibility” for Medicaid and that a special needs trust shall not affect eligibility. 206 The court provided
its logic, quoting Johnson207 “‘because Plaintiffs contend they would benefit from the State’s
compliance with § 1396p, they are part of the intended beneficiaries.’”208 Based on this, the court found
an enforceable § 1983 claim in (d)(4)(A).209
Furthermore, the Eighth Circuit Court of Appeals has held that even if enforcement is not available
under § 1983, it is available under the Supremacy Clause of the Constitution.210
The Eighth Circuit has recognized that under the preemption doctrine, state laws that interfere with
or are contrary to the laws of Congress are preempted.211 Concerning the Medicaid Act, “state law is
preempted to the extent that it actually conflicts with federal law.” 212 The Eighth Circuit noted, “An
actual conflict arises where compliance with both state and federal law is a ‘physical impossibility,’ or
where the state law ‘stands as an obstacle to the accomplishment and execution of the full purposes and
objectives of Congress.’”213
203
See, e.g. Lewis v. Rendell, 501 F.Supp.2d 671 (E.D.Pa. 2007); Sabree ex rel. Sabree v. Richman, 367 F.3d 180 (2004);
Harris v. Olszewski, 442 F.3d 456 (6th Cir. 2006); Ball v. Rodgers 492 F.3d 1094 (9th Cir. 2007); S.D. v. Hood, 391 F.3d 581
(5th Cir.2004); Bryson v. Shumway, 308 F.3d 79 (1st Cir.2002); Doe 1-13 v. Chiles, 136 F.3d 709 (11th Cir.1998); Okla.
Chapter of Am. Acad. of Pediatrics v. Fogarty, 366 F.Supp.2d 1050 (N.D.Okla.2005).
204
Lewis v. Rendell, 501 F.Supp.2d 671, at 679 (E.D. Pa. 2007).
205
Id., at 687.
206
Id., at 688.
207
91 F.Supp.2d at 770.
208
Lewis, 501 F.Supp.2d at 688.
209
See also, Sabree v. Richman, 367 F.3d 180, at 182 (3rd Cir. 2004).
210
Lankford v. Sherman, 451 F.3d 496 (8th Cir. 2006).
211
Lankford v. Sherman, 451 F.3d 496, 510-11 (8th Cir. 2006), citing Wis. Publ. Intervenor v. Mortier, 501 U.S. 597, 604
(1991).
212
Id. at 510, citing Pac. Gas & Elec. Co. v. State Energy Res. Conservation & Dev. Comm’n, 461 U.S. 190, 203-04
(1983).
213
Id. citing Pac. Gas & Elec. Co. 461 U.S. 190, quoting Fla. Lime & Avacado Growers, Inc. v. Paul, 373 U.S. 132, 142-43
(1963).
When a state voluntarily accepts Congress’s requirements, the state is obligated by the Supremacy
Clause to comply.214 In short, “Once a state has accepted federal funds, it is bound by the strings that
accompany them.”215
D. Federal Interpretation of (d)(4)
While the question at issue in this comment has yet to fully addressed by the federal court system,
some federal case law does exist that sheds light on how the courts have viewed the safe harbor found in
subsection (d)(4). In Wong v. Daines216 a Medicaid recipient sued the local agencies under § 1983,
seeking a declaratory judgment that his assets placed in an SNT would not be included against him
when determining his Medicaid eligibility.217 The court provided a clear description of SNTs and their
development from their inception.218 The court stated,
Supplemental Needs Trusts are governed by state law. They arose in order to provide
support for permanently and severely disabled persons. A beneficiary is not given
any control over trust distributions, because if the beneficiary had control, the trust
assets would be considered resources of the beneficiary and could disqualify him
from eligibility for government benefits.219
Further, the court stated, “Any payments from the trust that are not specifically covered by the statute
are considered to be assets transferred by the individual, who triggers a penalty period….”220
Advocates for the disabled worried that the tough new laws concerning trusts found in OBRA ’93
would discourage the use of special needs trusts.221 Thus, Congress created three exceptions to the
restrictions on trusts and codified them at § 1396p(d)(4). The exceptions were codified in response to
the advocates’ concerns that special needs trusts, designed to aid the disabled, would be underutilized.222
The Wong court states that § 1396p(d) is not ambiguous.223 The Secretary of Health and Human
Services argued that because Congress spoke in the negative, i.e. did not use express language, the
214
Id., citing Jackson v. Rapps, 947 F.2d 332, 336 (8th Cir. 1991); King v. Smith, 392 U.S. 309, 316, 326-27 (1968).
215
Planned Parenthood of Houston & Se. Tex v. Sanchez, 403 F.3d 324, 337 (5th Cir. 2005).
216
582 F.Supp.2d 475 (S.D.N.Y. 2008).
217
Id., at 477.
218
Id., at 479.
219
Id.
220
Id., at 480
221
Id.
222
Id.
223
Id., at 483.
subsection is ambiguous.224 Being ambiguous, the CMS interpretation, according to the Secretary,
should be afforded considerable deference.225
The court called this argument, “circular,”226 and reasoned that Congress created rules and then
created an exception to those rules.227 The court thought that the Secretary ignored the obvious
explanation, “that Congress excepted [(d)(4)(A)] trusts from all eligibility and benefits calculations.228
In a disturbing decision out of the Tenth Circuit, called Hobbs v. Zenderman229 the court addressed
the issues and found differently than its Sister Circuits. The court found that there was no enforceable
right under § 1983 found in § 1396p(d)(4), and that it owes deference to CMS’s interpretation of those
provisions.230 The court, ignoring Congressional intent and the best interests of disabled individuals,
stated, “We are compelled to conclude that § 1396p(d)(4)(A) does not require States to exempt special
needs trusts from Medicaid eligibility determinations.”231 This statement of the Tenth Circuit begs the
question: if § 1396p(d)(4)(A) does not require states to exempt SNTs from Medicaid eligibility
determinations, what is the purpose of its existence in the federal Medicaid code?
V. ANALYSIS
A. The CMS Interpretation from the July 2008 Interpretive Memo Should be Afforded Extremely
Limited, if Any Deference.
In analyzing (d)(4)(C) and the CMS interpretive memo at issue, we are reminded that under
Chevron, we must determine whether Congress has specifically spoken to the precise question at issue,
and if Congress’s intention is clear from the statute itself.232 As the issue of whether there is an age
limitation in (d)(4)(C) is a question of policy, a challenger ought to focus on whether the CMS
interpretation is reasonable in light of a gap left by Congress, rather than the “wisdom” of the
determination itself.233 Policy decisions are for people, not the judiciary.234
224
Id., at 484.
225
Id.
226
Id.
227
Id.
228
Id.
229
579 F.3d 1171 (10th Cir. 2009).
230
Id., at 1187.
231
Id., at 1181.
232
Chevron v. Natural Resources Defense Council, 467 U.S. 837, at 842 (1984).
233
Id., at 866.
234
Id.
According to the decision of Christenson v. Harris County235, the interpretation of (d)(4)(C) in the
CMS memo lacks the force of law.236 Because the CMS letters are not a product of notice-and-comment
type promulgation, they are simply not as forceful.237 Hence, it appears that the July 2008 CMS
interpretive memos do not deserve Chevron deference according to the application of Christensen.238
Having established that the CMS interpretive memo should not receive Chevron style deference
(considerable weight standard), we must now look to Skidmore to determine how it should be treated.
When regulations (or an interpretation) are not reached because of the interpreter hearing adversarial
proceedings in which he finds facts from evidence and reaches conclusions of law from findings of fact,
they do not constitute an interpretation of statute nor do they bind a court.239
According to Skidmore, the CMS interpretive memo is a product of a body of experience and
litigants and the courts may be guided by the opinions.240 Further, the Skidmore test requires a review of
the opinion’s “thoroughness of consideration, validity of its reasoning, consistency with earlier and later
pronouncements, and all those factors which give it power to persuade, if lacking power to control.”241
For litigants in the circuits, which have applied Chevron deference to CMS interpretations, the
argument must hinge upon the unambiguousness of the federal statute. While CMS’s letter
acknowledges that § (d)(4)(C) itself does not contain an age restriction, CMS must argue that the statute
is ambiguous in order to have Chevron deference applied. It is clear that CMS will argue that the
subsection’s silence as to age is either a mistake in drafting by Congress or is an issue covered by a
preceding subdivision, and is therefore ambiguous; CMS would then have the authority to fill the
interpretive gap.
The over 65 litigant must prove that the secretary’s interpretation conflicts with Congress’s explicit
intent. In support of this, a potential litigant should look to the Detsel court which said, “our role is not
to speculate on what congress ‘actually ha[d] an intent.’”242 Thus, was Congress’s explicitness about an
age limitation in (d)(4)(A) an indication that it explicitly did not include that language in (d)(4)(C)?
Further, when Congress creates an unambiguous statute like § 1396p(d), it must be presumed that if they
want to distinguish it, Congress would do so explicitly.
235
529 U.S. 585 (2000).
236
Id., at 587.
237
Id.
238
Id.
239
Skidmore v. Swift, 323 U.S. 134, at 140 (1944).
240
Id., at 139.
241
Id., at 140.
242
Detsel by Detsel v. Sullivan, 895 F.2d 58, at 63 (2nd Cir. 1990).
Still a better argument for this situation is that a court should not apply any deference to the CMS
memo. Like the facts in Westmiller, a plaintiff will claim that the Secretary’s enforcement of the
interpretive memo, which interprets the Medicaid statute, contravenes more than 15 years of
“uninterrupted federal toleration of and acquiescence” and violates the Medicaid Act.243 Moreover, like
the court found in Westmiller, the memo here violates the spirit and the letter of the Medicaid act.244
The safe harbor provisions in (d)(4) were established to be consistent with the spirit of the Medicaid
law, particularly that disabled individuals are the intended recipients of the aid, and special needs trusts
are designed to supplement a disabled individual’s needs and maintain their dignity, while maintaining
Medicaid eligibility. The CMS interpretive memo at issue here seeks to divest a disabled individual
from his or her right to the safe harbor provision based solely on his or her age.
Furthermore, the CMS interpretation of (d)(4)(C) should not be afforded deference because the
interpretation was not made contemporaneously with the enactment of the statute, and it contradicts the
position of the agency had taken from 1993, when the pooled trust statute was passed, to 2008, when the
CMS memo communicated a shift in policy.245 As a result, the July 2008 CMS memo should be given
no deferential weight.246
B. Finding a clear interpretation of 42 USCA 1396p through limited treatment by federal courts
In Ramey v. Reinertson,247 the court explained that Congress structured the Medicaid program to
direct limited funds to those who were most impoverished.248 Historically, individuals would shelter
their assets in an irrevocable trust, thereby maximizing their income without having available assets, i.e.
maintaining Medicaid eligibility.249 Congress condemned the use of irrevocable trusts, reiterating its
intent that “Medicaid was designed to provide basic medical care for those without sufficient income or
resources to provide for themselves.”250 This statement may be the clearest indication of what Congress
believes is the “spirit” of the Medicaid program, and is a response to abuse of the system using
“Medicaid Qualifying Trusts.”251 Congress recognized, however, that not all irrevocable trusts were
abusive, and that if the Medicaid program was intended to benefit those who could not care for
243
Westmiller v. Sullivan, 729 F.Supp. 260, 262 (W.D.N.Y. 1990).
244
Id., at 263.
245
Id.
246
Id., at 266.
247
268 F.3d 955 (10th Cir. 2001).
248
Id., at 958, quoting Mattingly v. Heckler, 784 F.2d 258, 266 (7th Cir. 1986).
249
Id.
250
Id.
251
Id.
themselves, disabled individuals should be able to shelter some assets for their supplemental needs.252
After all, it makes little sense to refuse a disabled individual basic medical care until they spend all of
the assets they own. Supplemental or Special Needs Trusts allow a disabled individual who is very
likely to receive Medicaid benefits for their entire life to retain some assets to supplement and dignify
their existence. Thus, Congress passed OBRA ’93 which effectively ended the use of Medicaid shelter
trusts, but included the safe harbor provisions at (d)(4).253 It is evident from the history that Congress
intended special needs trusts to be exceptions to the rules prohibiting the use of irrevocable trusts, as the
inclusion of (d)(4) was in response to disability advocates’ concern and pressure.254
In Wong v. Daines,255 the court illuminated the purpose of special needs trusts, stating, “They arose
in order to provide support for permanently and severely disabled persons.”256 However, the court’s
analysis as it pertains to subsection (d)(4) as a whole ends there. In fact, most of the federal treatment of
special needs trusts deal with (d)(4)(A) trusts, and rarely examine the nature of the exceptions found
within the subsection.257
To prove that not all courts are in agreement as to how Congress intended special needs trusts to be
treated, recall Hobbs v. Zenderman,258 which stated that notwithstanding the exceptional language of (d)
(4), states are not required to exempt special needs trusts when determining Medicaid eligibility.259
C. The Invisible Age Requirement for Pooled Trusts
The Wong court stated that 42 U.S.C. § 1396p(d)(4) was unambiguous.260 Section (d)(4)(A)
includes an age restriction.261 Neither sections (d)(4)(B) nor (d)(4)(C) (the pooled trust provision)
include an age restriction.262 If Congress wanted to impose an age restriction on pooled trusts, one can
only assume they would have done so as they did in subsection (d)(4)(A); yet it is important to note
what the effect an age restriction would have on (d)(4)(C) as an excepting provision. CMS’s
interpretive memo suggests that Congress intended for assets in a pooled trust to be exempt from
252
The existence of 42 U.S.C. § 1396p(d)(4), as an exception to the general rules prohibiting the use of trusts to shelter
assets, supports this statement.
253
Pooled Supplemental Needs Trusts Help Keep Wolves From Senior’s Doors, 21 ME. B..J. 28, 30-31 (2006).
254
Wong v. Daines, 582 F.Supp.2d 475 (S.D.N.Y. 2008).
255
Id.
256
Id., at 479.
257
See, e.g. Norwest Bank of North Dakota, N.A. v. Doth, 159 F.3d 328 (8th Cir. 1998); Hobbs v. Zenderman, 579 F.3d
1171 (10th Cir. 2009); DeJesus, 770 F.2d 316; Wong, 582 F.Supp.2d 475 (S.D.N.Y 2008)
258
579 F.3d 1171 (10th Cir. 2009).
259
Id., at 1181.
260
582 F.Supp.2d at 483.
261
42 U.S.C. §1396p(d)(4)(A)
262
42 U.S.C. §1396p(d)(4)
countability, but Congress intended to penalize the transfers to the trust.263 Whether you count the assets
or impose a transfer penalty, the individual is not eligible for Medicaid, according to the CMS
interpretive memo.
D. Disabled individuals have a right created within 42 USCAp(d)(4) enforceable by a claim under 42
USCA 1983
It is important first to establish whether there exists a right actionable under § 1983 in order to
enforce (d)(4)(C) trusts. The CMS opinion letter of July 2008 inevitably discourages the use of pooled
trusts by individuals over the age of 65. Notwithstanding these individuals’ full compliance with the
provisions of (d)(4)(C), the mere fact that they are 65 is being used to disqualify them from receiving
Medicaid benefits.
An individual over 65 years of age has an individual right in the exemptions found in 42 U.S.C. §
1396p(d)(4). To be sure, Congress certainly intended (d)(4)(C) to benefit a disabled individual (as the
statute explicitly states so); that a disabled individual’s right to utilize the safe harbor was not vague and
amorphous; and that the provision is mandatory.264 Disallowing disabled individuals from utilizing
pooled trusts because they are over 65 years of age is not merely a violation of the law, but an unfair and
unfounded violation of disabled people’s rights,265 and as such gives rise to a § 1983 action.
According to Gonzaga, in order for Congress to have established a private right, the statute by its
terms must grant that right to an identifiable class.266 Clearly, (d)(4)(C) identifies a class – the disabled
– and noticeably excludes an age qualification for that class. Applying the logic of various circuits
across the country as it pertains to (d)(4)(A) and other Medicaid issues, 42 U.S.C. § 1396p(d)(4)(C)
indeed grants a right actionable under § 1983.267
E. SCOTUS should make clear to ensure disabled individuals don’t “outlive” their rights
The circuit split that now exists, particularly between the tenth and third circuits, regarding the
viability of a § 1983 claim is cause for the high court’s clarification.268 Particularly, when one considers
263
See Levin, Susan H. Letter, supra n. 46.
264
Infra, n. 195.
265
Infra, n. 196.
266
Infra, n. 197.
267
See, e.g. Lewis v. Rendell, 501 F.Supp.2d 671 (E.D.Pa. 2007); Sabree ex rel. Sabree v. Richman, 367 F.3d 180 (2004);
Harris v. Olszewski, 442 F.3d 456 (6th Cir. 2006); Ball v. Rodgers 492 F.3d 1094 (9th Cir. 2007); S.D. v. Hood, 391 F.3d 581
(5th Cir.2004); Bryson v. Shumway, 308 F.3d 79 (1st Cir.2002); Doe 1-13 v. Chiles, 136 F.3d 709 (11th Cir.1998); Okla.
Chapter of Am. Acad. of Pediatrics v. Fogarty, 366 F.Supp.2d 1050 (N.D.Okla.2005)..
268
See Hobbs v. Zenderman; Lankford v. Sherman; Lewis v. Rendell;
that a § 1983 plaintiff in a claim to enforce their rights under (d)(4)(C) will likely be over the age of 65,
years of litigation in addition to a disabled and elderly individual’s medical costs are prohibitive to the
achievement of justice.
If the circuit split remains in place, one could imagine an exodus of disabled elderly from non-
friendly jurisdictions to those that embrace the safe harbor Congress provided over 15 years ago.
VI. CONCLUSION
A. CMS has already appropriately addressed this issue.
The federal agency responsible for the administration of the Medicaid program has already
addressed the improper transfer issue as it pertains to (d)(4)(B) trusts, and its own logic in dealing with
that problem should be applied to pooled trusts.269 The agency’s original position is perhaps the greatest
indication that the interpretive memos of 2008 are founded in policy concerns rather than a genuine
concern for the attainment of Congressional intent: “to avoid interpreting a provision of the statute as a
nullity, we believe that we must give precedence to section 1917(d)(4)(B)….Congress clearly
intended….transfer of assets penalties will not apply to income placed in a [(d)(4)(B)] trust.”270
Notwithstanding its clarification of transfer penalties as they pertain to (d)(4)(B) trusts, CMS has done
what it sought to avoid fourteen years ago: “…interpreting a provision of the statute as a nullity.”271
B. States need Federal Guidance on Special Needs Trusts in order to administer Congressional intent
via state laws and regulations.
Probate courts across the country who oversee guardianships of many elderly disabled deserve some
assurance that, being the grantor of a pooled trust, the trust will not be subject to collateral attack
through an administrative appeal or by another court. Thus, judicial guidance from the federal courts –
and the Supreme Court – is required if Probate courts are to adequately protect their wards.
Further, the resources spent on administrative appeals, state-court litigation, and eventually federal
litigation places undue hardship on cash-strapped individuals and state administrative agencies facing
unprecedented budget concerns. Clarity in the law, eliminating redundant and widespread litigation of
the same issue over every county of every state of this country, would undoubtedly serve the public
interest far beyond the economic savings the shift in policy was meant to achieve.
269
HCFA Memorandum dated March 17, 1994, Sally K. Richardson, Director of Medicaid Bureau for HCFA
270
Id.
271
Id.; See also, US Dept. of Health & Human Serv. CMS Chicago Regional State Letter 08-03 July 2008.
C. The Spirit of the Medicaid Act
The Medicaid Act was born out of the Great Society legislation, and is founded on the principle that
those in our society who are blind, aged or disabled have a right to medical insurance if they cannot
provide it for themselves. While Congress has taken great steps to limit the use of trusts to artificially
create Medicaid eligibility, Congress clearly made three exceptions for special needs trusts. The
common thread in all three trusts under 42 U.S.C. § 1396p(d)(4) is disability; and when Congress
wanted age to be a determinative factor for the exception, it clearly stated so in (d)(4)(A).
As the nation debates an increased role for the government in the healthcare industry as a whole, the
CMS interpretive memos of 2008 regarding pooled trusts should serve as an important warning of the
power a federal agency can wield over rights explicitly granted to individuals by Congress.

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AGE HAS NOTHING TO DO WITH IT: SENIOR CITIZENS, MEDICAID

ELIGIBILITY & POOLED TRUSTS

I. INTRODUCTION: WHO IS INTERPRETING THE LAW?

II. HISTORY AND BACKGROUND

A. A Brief Overview of Medicaid

B. Federal Interpretation and Implementation

III. RECENT DEVELOPMENTS

A. Common Practice & Utilization of Pooled Trusts

A. Deference Owed to CMS

B. Is there an age requirement for special needs trusts?

The plain language of 43 U.S.C. § 1396p(d)(4)(C) is unambiguous as it pertains to an age

D. Federal Interpretation of (d)(4)

C. The Invisible Age Requirement for Pooled Trusts

A. CMS has already appropriately addressed this issue.

C. The Spirit of the Medicaid Act

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