D.W. v.
DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES
D.W.,
Petitioner-Appellant, v. DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES,
Respondent-Respondent.
Superior
Court of New Jersey, Appellate Division.
Submitted
November 2, 2015.
Decided
December 2, 2015.
Before Judges
Accurso and Suter.
NOT FOR
PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
PER CURIAM.
D.W. appeals
from a final decision of the Director of the Division of Medical Assistance and
Health Services (DMAHS) determining him ineligible for Medicaid because his
self-settled first-party trust was a countable, available resource exceeding
the Medicaid resource limit. Having considered the provisions of the trust
agreement in light of applicable law, we affirm.
The essential
facts are undisputed. D.W. is a twenty-nine-year-old developmentally disabled
man who resides in a group home. In compliance with Division of Developmental
Disabilities (DDD) requirements, see N.J.S.A. 30:4-25.9a(2); N.J.A.C.
10:46-1.1(b), he applied for Community Care Waiver Medicaid Only benefits
through DMAHS.1 DMAHS denied D.W.'s application based
primarily on the existence of a self-settled 2008 "Supplemental Benefits
Trust," which it found "does not meet the Special Needs Trust
Guidelines in accordance with Medicaid regulations."2
D.W.
requested a fair hearing, and DMAHS transmitted the matter to the Office of
Administrative Law. The administrative law judge (ALJ) determined that D.W.'s
trust, the "Irrevocable Declaration of Supplemental Benefits Trust and
Trust Agreement for [D.W.]," was established by court order in January
2008 and funded from the proceeds of D.W.'s personal injury recovery of
$278,389.28. The ALJ accepted D.W.'s argument that the trust was never intended
as a special needs trust but was designed as a supplemental benefits trust,
also known as a self-settled special needs trust. Notwithstanding, the ALJ
found that "however defined" a Medicaid-compliant self-funded trust
"must meet specific requirements," chief among them the inclusion of
a payback provision insuring "repayment to the State of an amount equal to
the total amount of medical assistance, if any, which is paid to D.W. under the
State Medicaid Plan."
Because
D.W.'s trust lacked a payback provision, the ALJ found it was not a compliant
special needs trust pursuant to 42 U.S.C.A. § 1396p(d)(4)(A), and thus DMAHS
was correct to deny D.W. Medicaid eligibility. The Director adopted the ALJ's
decision, finding the trust an available, countable resource for Medicaid eligibility
purposes pursuant to 42 U.S.C.A. § 1396p(d) and N.J.A.C. 10:71-4.11(e). This
appeal followed.
D.W. contends
the agency erred in classifying his trust as a countable resource for Medicaid
eligibility purposes. He argues that his trust is an irrevocable supplemental
benefits trust, which because it is irrevocable and he is without right to
compel distributions, does not require a payback provision and cannot be
considered an available resource for Medicaid purposes.
DMAHS
contends that D.W.'s trust does not qualify as a supplemental benefits trust
because it was funded with his own assets. It claims D.W.'s reliance on
statutes addressing irrevocable, discretionary trusts created by third parties
is misplaced as they have no applicability to self-funded trusts. DMAHS
maintains that D.W.'s trust, regardless of what it is called, is not a
supplemental benefits trust funded by a third party but a first-party
self-settled trust, which because it lacks a payback provision, is an available
resource by law.
DMAHS is
correct. Medicaid is a federally created, state-run program designed "to
provide medical assistance to the poor at the expense of the public."
Estate of DeMartino v. Div. of Med. Assistance & Health Servs., 373 N.J.Super. 210, 217 (App. Div. 2004)
(quoting Mistrick v. Div. of Med. Assist., 154
N.J. 158, 165 (1998)), certif. denied, 182
N.J. 425 (2005); see also Atkins v. Rivera, 477
U.S. 154, 156, 106 S.Ct. 2456, 2458, 91 L. Ed. 2d 131, 137 (1986).
Since 1986, Congress has taken steps to curb Medicaid applicants attempting to
shelter their assets in irrevocable trusts in order to take benefits from the
state while preserving their own assets for themselves and their heirs. See
Ramey v. Reinertson, 268 F.3d 955, 958-59 (10th Cir. 2001)
(discussing this phenomena and Congressional response in enacting 42 U.S.C.A. §
1396a(k) and its subsequent replacement with "another statute even less
forgiving of such trusts").
With the passage
of the federal Omnibus Budget Reconciliation Act of 1993 (OBRA '93), Pub. L.
No. 103-66, § 13611(b), 107 Stat. 312, 624-25 (codified as amended at 42
U.S.C.A. § 1396p(d)), Congress established that trusts would, as a general
rule, be counted as available assets subject to certain limited, defined
exceptions. For a self-settled trust, such as D.W.'s, to be excluded as an
available resource, it must meet specific requirements, most notably "that
the [State must `receive all amounts remaining in the trust upon the death' of
the trust beneficiary `up to an amount equal to the total medical assistance
paid on behalf of the individual under a State plan,'" the so-called
"pay-back provision." J.B. v. W.B., 215
N.J. 305, 323 (2013) (quoting 42 U.S.C.A. § 1396p(d)(4)(A)); accord
N.J.A.C. 10:71-4.11(g)1xii.
The critical
issue here "for Medicaid eligibility purposes is who established the
trust." In re Lennon, 294 N.J.Super. 303, 307, 310-11 (Ch. Div.
1996) (explaining how third-party supplemental benefits trusts meet N.J.A.C.
10:71-4.4(b)6, which excludes "the value of resources which are not
accessible to an individual through no fault of his or her own," but
self-settled trusts, by definition, cannot). Because there is no question but
that D.W.'s own assets recovered from a personal injury lawsuit were used to
fund the trust, the law is clear that his is a self-settled trust which must
comply with 42 U.S.C.A. § 1396p(d)(4)(A) and N.J.A.C. 10:71-4.11(g)1xii, to be
considered an excludable resource. Because D.W.'s trust admittedly lacks the
payback provision required by those enactments, the Director was correct to
conclude it is an available resource rendering him ineligible for Medicaid.3
Because we
conclude the Director correctly applied the law to the undisputed facts, we
affirm.
Affirmed.
FootNotes
1. DMAHS describes
Community Care Waiver as "a Medicaid waiver program for individuals with
developmental disabilities, to enable individuals to avoid institutionalization
and remain in the community."
2. DMAHS
identified other issues beyond the trust agreement in support of its denial.
Those issues are not part of this appeal.
3. D.W.
requests that if his trust is determined to be an available resource, we remand
to the agency to permit the trustee to reform the trust by adding the payback
provision and making any other changes necessary. We decline to do so because
reformation of the trust will likely require court approval. D.W. may reapply
for Medicaid when he has successfully reformed his trust to comply with all
Medicaid eligibility requirements. See 42 U.S.C.A. § 1396p(d)(4)(A) and
N.J.A.C. 10:71-4.11(g)1.
