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Mistrick v. Division of Medical Assistance and Health Services

March 24, 1997


On appeal from the Division of Medical Assistance and Health Services.

Approved for Publication March 24, 1997.

Before Judges Pressler, Stern and Wecker. The opinion of the court was delivered by Pressler, P.j.a.d.

The opinion of the court was delivered by: Pressler

The opinion of the court was delivered by


This is a Medicaid eligibility case. The sole legal issue before us is the correctness of the final decision of the Director of the respondent Division of Medical Assistance and Health Services holding that for purposes of determining one spouse's resource-eligibility for institutional Medicaid, the individual retirement account (IRA) of the other spouse is an includable resource. We are satisfied that this Conclusion is incorrect as a matter of law, and we therefore reverse the Division's decision, which affirmed the ineligibility determination of respondent Passaic County Board of Social Services.

The facts are not in dispute. In October 1994, petitioner Sophie Mistrick, the so-called institutional spouse, was institutionalized at Wayne View Convalescent Center, where she has resided ever since. At that time, she had been married to Joseph Mistrick, the so-called community spouse, for forty-two years. They remain married. There is no question that at the time of commencement of the institutional spouse's residence at Wayne View, the couple's income and resources exceeded Medicaid eligibility limitations. Thus in 1994, Joseph Mistrick was still employed by his long-time employer, International Specialty Products, which, since it did not offer a company pension plan, had designated his GAFCAP 401(k) program as his retirement account. The employer had made regular contributions to the 401(k) which had a face value of $118,800 in October 1994. In addition, at that time the couple owned their marital residence; the community spouse had an additional Vanguard IRA account with a balance of some $23,783, savings accounts totalling some $42,800, and life insurance having a cash surrender value of some $15,500; the institutional spouse had a savings account in her own name with a balance of some $34,000.

The community spouse retired in April 1995. As a condition of his retirement, he was required to roll the 401(k) plan over into an IRA account, which he did. His monthly income then totalled about $2,400, consisting of social security, payments from the IRA, and a small monthly pension payment of $178 from an unidentified source.

This application for institutional Medicaid benefits to respondent Passaic County Board of Social Services was made in April 1995 after the couple had "spent down" *fn1 their available assets for the institutional spouse's medical expenses. At that time, petitioner had no actual resources left, and the community spouse had remaining only the marital residence, the IRAs, and what is referred to under Medicaid regulations as the community spouse's resource allowance in the amount of some $23,800. *fn2 The application was denied on the ground that the community spouse's IRAs were an includable resource, bringing the total remaining resources over the eligibility level. Petitioner appealed to the Division, which referred the matter to the Office of Administrative Law as a contested case. The administrative law Judge (ALJ) rendered an initial decision concluding that the IRAs were excludable resources. The Director of the Division accepted the ALJ's factual findings but disagreed as to the includability of the IRAs as countable resources. Petitioner appeals.

In considering the Division's decision, we are mindful of the general proposition that the interpretation by an agency of the statute and regulations it is obliged to administer and implement is entitled to considerable weight. See, e.g., Matter of Musick, 143 N.J. 206, 217, 670 A.2d 11 (1996); Kletzkin v. Borough of Spotswood Bd. of Educ., 136 N.J. 275, 278, 642 A.2d 993 (1994). Nevertheless, it is also well-settled that the appellate court is not bound by the agency's interpretation or by its determination of questions of law. We are, moreover, satisfied that the agency's decision here respecting the includability of the community spouse's retirement funds is based on a misreading of controlling federal and state legislation.

While we recognize the interpretive difficulty involved in navigating through federal legislation and regulation governing the administration of social-benefit programs, we view the issue before us as an essentially simple and straightforward one.

We start with the well-settled proposition that Medicaid is a cooperative program between the federal government and those states that choose to participate by which needy persons are afforded medical assistance at public expense. State participation requires, moreover, the compliance by state Medicaid plans with Title XIX of the Social Security Act, 42 U.S.C.A. §§ 1396-1396(v), and the regulations adopted pursuant thereto. See generally Atkins v. Rivera, 477 U.S. 154, 157, 106 S. Ct. 2456, 2458, 91 L. Ed. 2d 131, 137 (1986); Schweiker v. Gray Panthers, 453 U.S. 34, 36-37, 101 S. Ct. 2633, 2636, 69 L. Ed. 2d 460, 465 (1981); Harris v. McRae, 448 U.S. 297, 301, 100 S. Ct. 2671, 2680, 65 L. Ed. 2d 784, 795 (1980); L.M., (supra) , 140 N.J. at 484-485. New Jersey has chosen to cooperate by enactment of the Medical Assistance and Health Services Act, N.J.S.A. 30:4D-1 to -19.1. Federal law requires that if a state chooses to participate, it must make medical assistance available to all so-called categorically needy persons, that is, persons receiving categorical aid, such as aid to families with dependent children (AFDC) and supplemental security income (SSI). *fn3 42 U.S.C.A. § 1396a(a)(10)(A)(i). In addition, 42 U.S.C.A. § 1396a(a)(10)(C) authorizes a state to elect to provide assistance to other classifications of needy individuals, defined with specificity by 42 U.S.C.A. § 1396d(a), including those persons whose income and resources are too low to meet their medical expenses yet too high to qualify them for cash assistance under SSI or AFDC, and who otherwise meet the nonfinancial eligibility requirements for those programs. This group is known as the "medically needy." See Atkins v. Rivera, (supra) , 477 U.S. at 157-158, 106 S. Ct. at 2459, 91 L. Ed. 2d at 137-138; L.M., (supra) , 140 N.J. at 487-488. New Jersey has also chosen to provide assistance to medically needy individuals consistent with federal guidelines. N.J.S.A. 30:4D-3i(8).

When a state has elected to provide medically-needy benefits, it must comply with 42 U.S.C.A. § 1396a(10)(C)(i)(III), which requires, in pertinent part, that the state plan for such persons include a description of the "single standard" for determining income and resource eligibility for all covered groups of medically needy individuals and a description of

the methodology to be employed in determining such eligibility, which shall be no more restrictive than the methodology which would be employed under the ...

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