the other, but all in their aggregate take their purport from the setting in which they are used." Tate & Lyle, Inc. v. CIR, 87 F.3d 99, 104-05 (3d Cir. 1996). Thus it is necessary to examine the origins and purposes of the MCCA as well as the structure and language of all of its provisions.
The Medicaid program, established in 1965 as Title XIX of the Social Security Act, is a joint federal-state program. One purpose is to enable the states to provide medical assistance to the aged "whose income and resources are insufficient to meet the costs of necessary medical services," including nursing home care. 42 U.S.C. § 1396, et seq. The states have considerable freedom to adopt standards for determining the extent of medical assistance, as long as such standards are reasonable and consistent with the objectives of the Act. Obviously no state can adopt programs which violate a mandate of the Act. Monmouth Medical Center v. State of New Jersey, 158 N.J. Super. 241, 249, 385 A.2d 1244 (App.Div. 1978), aff'd., 80 N.J. 299, 403 A.2d 487 (N.J.), cert. denied, 444 U.S. 942, 62 L. Ed. 2d 308, 100 S. Ct. 297 (1979). Thus it is not necessarily impermissible for some states to adopt an income first rule when adjusting resource allocation and for other states to adopt a resource first method.
The New Jersey Medical Assistance and Health Services Act, N.J.S.A. 30:4D-1, et seq., authorized New Jersey's participation in the Medicaid program.
The Secretary of the U.S. Department of Health and Human Services ("HHS"), through the Health Care Financing Administration ("HCFA"), administers the program at the federal level. At the state level, the administering agency is the Division of Medical Assistance and Health Services ("DMAHS") within the New Jersey Department of Human Services ("DHS"). N.J.S.A. 30:40D-4. The county welfare agencies assist DMAHS in processing applications for Medicaid and determining whether applicants have met the income and resource eligibility standards. N.J.S.A. 30:4D-7a; N.J.A.C. 10:71-3.15.
In order to be eligible for Medicaid, a person must not have available income or assets in excess of prescribed limits. Applicants with income or assets in excess of those limits must "spend-down" before becoming eligible. 42 U.S.C. § 1396(a)(10), (17).
Prior to 1988 the eligibility rules governing spouses forced a couple to liquidate virtually all of their joint resources in order to qualify one of them for Medicaid. Frequently the community spouse was left with nothing on which to live. Further, after the institutionalized spouse became eligible for Medicaid, most of the couple's income had to be used to offset the cost of the institutionalized spouse's nursing home care.
In 1988 Congress addressed the problem of the impoverishment of individuals whose spouses resided in a nursing home and who received Medicaid benefits. This was the origin of the MCCA. Its primary purpose was "to end the pauperization [of the community spouse] by assuring that [she] has a sufficient - but not excessive - amount of income and resources available" when the other spouse is institutionalized in a nursing home. H.R. Rep. No. 105 (II), supra, 1988 U.S.C.G.A.N. at 888.
At the same time, however, Medicaid remained a program to provide care for the indigent and it was still necessary to protect the public from diversion of public funds from this overriding purpose. Under prior eligibility programs, based on the legal title principle, a couple whose financial position would normally not qualify them for federal assistance could shelter a majority of the resources in the wife's name, while the husband received medical care paid for by public funds. The 1988 amendments closed this loophole by attributing a certain amount of a couple's combined resources to the institutionalized spouse for eligibility purposes, regardless of the legal title. A balance was sought designed to prevent the non-institutionalized spouse from becoming impoverished and at the same time ensuring that no one escape contributing a fair share to the costs of nursing home care.
Different methods have been adopted by the states when implementing the spousal impoverishment provisions in the situation where the institutionalized spouse has both income and assets; i) an income first method, ii) a resource first method, and iii) a hybrid method.
New Jersey has adopted the income first methodology whereby adjustments to the standard allocation of resources ($ 76,740 in the present case) in order to assure sufficient income for the community spouse can only be made after taking into account income transferred from the institutionalized spouse.
New Jersey regulatory provision governing "post-eligibility treatment of income" provides:
If either (spouse) can establish at the fair hearing that the community spouse's share of the couple's resources is inadequate to raise the community spouse's income (together with the community spouse maintenance deduction) to the maximum authorized level, additional resources . . . may be set aside for the community spouse. The amount of resources to be set aside shall be that amount that is determined sufficient to generate sufficient income to raise the community spouse's gross income to the maximum authorized level. (emphasis added)
Other states have adopted a resource first methodology, a methodology which plaintiffs contend is mandated by the MCCA. Under that procedure adjustments to the standard allocation of resources are made whenever the standard allocation generates insufficient income for the community spouse without regard to any permissible income transfer from the institutionalized spouse.
A hybrid approach used in some states leaves to the hearing officer's discretion whether to consider permissible income transfers before increasing the standard resource allocation.
Federal officials administering the Medicaid program have not adopted formal regulations interpreting the spousal impoverishment provisions, leaving to the states the decision whether to consider the institutionalized spouse's income, or solely his resources, in considering adjustments to the standard resource allowance. HCFA and the Secretary of HHS have stated in policy memoranda and in letters that subsection (e)(2)(C) permits consideration of potential income transfers in determining whether the monthly needs amount will be met. These letters also note that a resource first approach is permissible but not mandatory under the statute. This is consistent with the nature of Medicaid as a cooperative federal-state venture in which states operate programs of their own design subject to federal standards and regulations.
Plaintiffs rely on the plain language of subsection (e)(2)(C). The subsection states that if the resource allowance "is inadequate to raise the community spouse's income to the minimum monthly maintenance needs allowance" additional resources shall be allocated to the community spouse. Plaintiffs argue that a transfer of a portion of the institutionalized spouse's income cannot be considered the "community spouses's income."
Subsection (e)(2)(C) can be understood only in the context of all of the provisions of MCCA. The first step, therefore, is to examine the statute as a whole and to ascertain how its various parts fit together.
Subsection (a), entitled "Special treatment for institutionalized spouses", emphasizes in various ways the limited nature of MCCA and its application only to the eligibility for medical assistance of institutionalized spouses. It states that its provisions supersede any other provisions of the subchapter concerning grants to states for medical assistance programs. MCCA deals separately with the spouses' income and with the spouses' assets ("resources"). Care must be taken not to apply definitions and provisions dealing with income to definitions and provisions dealing with resources, and visa versa.
First, as to income: Subsection (b) concerns the treatment of income of each spouse. It governs the determination of "the income of an institutionalized or community spouse for the purposes of the post-eligibility income determinations described in subsection (d) " (emphasis added). In short-hand terminology it incorporates a "name on the check" rule. With respect to non-trust property this is accomplished by a provision reading:
(i) if payment of income is made solely in the name of the institutionalized spouse or in the community spouse, the income shall be considered available only to that respective spouse;