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Mistrick v. Division of Medical Assistance and Health Services

June 08, 1998


The opinion of the court was delivered by: Stein, J.

Argued March 3, 1998

On certification to the Superior Court, Appellate Division, whose opinion is reported at 299 N.J. Super. 76 (1997).

The critical issue presented by this appeal is whether an individual retirement account (IRA) in the name of a husband must be included as a resource for purposes of determining his wife's Medicaid eligibility when the wife enters a nursing home but the husband remains in the community. With greater life expectancy significantly increasing the percentage of our population that eventually may require institutional care, we appreciate that resolution of the issue posed may have a substantial financial effect on many families. A decision that an asset is included as a resource for determining Medicaid eligibility may have the effect of precluding eligibility, or postponing eligibility until the asset in question has been "spent down" to pay for medical expenses. See N.J.S.A. 30:4D-3i(15)(c). We also acknowledge that judicial authority in resolving such issues is tightly circumscribed by the myriad of federal and state statutes and regulations that control virtually every aspect of Medicaid eligibility.


Respondent Sophie Mistrick and Joseph Mistrick were married on November 15, 1952. In October 1994, Sophie was admitted into Wayne View Convalescent Center. At the time of Sophie's institutionalization, the couple owned the following assets: their home in Wayne; an International Security Products GAFCAP 401(k) account in Joseph's name with a balance of $118,809.47; a Vanguard IRA in Joseph's name with a balance of $23,783.25; a savings account in Joseph's name with a balance of $10,251.35; a savings IRA in Joseph's name with a balance of $9,253.62; a credit union account in Joseph's name with a balance of $23,294.90; life insurance in Joseph's name with a total cash surrender value of $15,565.37; and a savings account in Sophie's name with a balance of $34,075.98.

In April 1995, subsequent to Sophie's institutionalization, Joseph retired from his employment at International Specialty Products. During his employment, International Specialty Products had not offered a company pension plan but had established the GAFCAP 401(k) program that Joseph used as a retirement account. As a condition of his retirement, Joseph rolled over the GAFCAP 401(k) into his existing Vanguard IRA account. At his retirement, Joseph received monthly income as follows:

$1,220 from Social Security; $178 from an unidentified pension fund; and $1,060 from his IRA.

In August 1995, Joseph made an application on Sophie's behalf to appellant Passaic County Board of Social Services (Board) for institutional Medicaid benefits. Joseph supplied the Board with the necessary documentation concerning assets owned by the couple and assets owned by Sophie and Joseph individually. Prior to applying for Medicaid benefits, the couple conducted a private resource "spend-down" that substantially diminished their net worth. Joseph retained the house, a community spouse resource allowance, so called by the Medicaid regulations, totaling approximately $24,000, and his Vanguard IRA. The Board denied Sophie's Medicaid application, concluding that Sophie was ineligible for Medicaid benefits because Joseph's IRA was an includable resource for the purpose of determining Medicaid eligibility and that therefore Sophie's available resources exceeded the $2000 eligibility limit.

Sophie requested a hearing to contest the denial of Medicaid benefits. Appellant Division of Medical Assistance & Health (Division) referred the matter to the Office of Administrative Law. An administrative law Judge (ALJ) held a plenary hearing and concluded that Joseph's 401(k), which was rolled over into an IRA that was in "a current pay status," was not an available resource and therefore should not have been included in the determination of Medicaid eligibility. The ALJ recommended that the couple's resources be redetermined to exclude the 401(k) that was rolled over into an IRA account held in Joseph's name.

The Board filed exceptions to the ALJ's decision. Sophie filed cross-exceptions. The Director of the Division filed a final decision, in which she adopted the ALJ's findings of fact but did not adopt the ALJ's Conclusions of law. The Director concluded that Joseph's IRA was an includable resource for the purpose of determining Sophie's Medicaid eligibility.

Sophie appealed the Director's decision. The Appellate Division reversed and remanded the matter for calculation of the couple's resources without including Joseph's IRA. Mistrick v. Division of Med. Assistance & Health Servs., 299 N.J. Super. 76, 84 (App. Div. 1997).

The Appellate Division reviewed the Medicaid system, describing the cooperative program between the federal government and participating states that provides medical assistance at public expense to needy persons. Id. at 79. The court noted that state participation requires state Medicaid compliance with Title XIX of the Social Security Act, 42 U.S.C.A. §§ 1396-1396v, which provides that participating states must make assistance available to "categorically needy" persons, a term that includes persons receiving categorical aid, such as Aid to Families with Dependent Children (AFDC) and Supplemental Security Income (SSI). Id. at 79-80. The federal statute also authorizes states to provide assistance to other classifications of needy persons, "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." Id. at 80 (citing 42 U.S.C.A. § 1396a(a)(10)(C) and 42 U.S.C.A. § 1396d(a)). "This group is known as the 'medically needy.'" Ibid. The court noted that New Jersey has elected to participate in the federal Medicaid program and has elected "to provide assistance to medically needy individuals consistent with federal guidelines." Ibid. (citing N.J.S.A. 30:4D-3i(8)).

The Appellate Division referred to 42 U.S.C.A. § 1396a(a) (10)(C)(i)(III), which requires that states providing assistance to the medically needy must prescribe a single standard for determining income and resource eligibility for medically needy individuals, and that the methodology used to determine eligibility must be "no more restrictive" than the methodology used under the SSI program. Id. at 80-81. The court considered whether the methodology referred to in 42 U.S.C.A. § 1396a(a) (10)(C)(i)(III) "includes the determination of which assets may be included in calculating resource eligibility," stating that if that determination is a matter of methodology, "then it is at once evident that under the 'no more restrictive' proviso, assets which may not be included by the State for determining resource eligibility for SSI may also not be included by the State for determining resource eligibility for medically-needy participants." Id. at 81-82.

The court observed that for purposes of SSI, or categorically-needy eligibility, 20 C.F.R. § 416.1202(a) specifically excludes from consideration in the eligibility determination pension plans and IRAs in the name of the spouse of the person seeking medical assistance. Id. at 82. Thus, the court determined that if Sophie had applied for SSI benefits, Joseph's IRA would not be includable when determining her SSI eligibility. Ibid. The court concluded that the SSI "methodology" referred to by § 1396a(a)(10)(C)(i)(III) encompasses the determination of includable and excludable assets. Accordingly, the court held "that the State is precluded by the Supremacy Clause of the United States Constitution from imposing a more restrictive exclusion for the medically needy than for the categorically needy," ibid., and that IRAs are not included for purposes of determining eligibility of a medically needy person because of the "no more restrictive" methodology provision. Ibid.

In reaching its Conclusion, the court relied on the United States Supreme Court's interpretation of the "same methodology" in Atkins v. Rivera, 477 U.S. 154, 106 S. Ct. 2456, 91 L. Ed. 2d 131 (1986). Id. at 82-83. The Atkins Court held that the "same methodology" requirement mandated that states "treat components of income . . . similarly for both medically and categorically needy individuals." Atkins, supra, 477 U.S. at 163, 106 S. Ct. at 2461, 91 L. Ed. 2d at 141. Finding components of income and components of resources congruent, the Appellate Division held that assets excludable when calculating resources for the categorically needy were necessarily excludable when calculating resources for the medically needy. Mistrick, supra, 299 N.J. Super. at 83. The Appellate Division noted the Atkins Court's explanation of the impetus behind § 1396a(a)(10)(C)(i)(III): to allow the states to set different income and resource levels for medically needy applicants, but to prevent states from using eligibility standards unrelated to those used to determine the eligibility of the categorically needy. Ibid. (citing Atkins, supra, 477 U.S. at 165, 106 S. Ct. at 2462, 91 L. Ed. 2d at 142). Although the New Jersey Medicaid regulations do not specifically exclude a community spouse's pension plans and IRAs from the eligibility determination, the court nevertheless held that pension plans and IRAs were required to be excluded from the determination because of the "no more restrictive methodology" provision. Ibid. The court concluded that "[t]he whole point of [the "no more restrictive" provision] is to require the same treatment for the medically needy as for the categorically needy in respect of the methods by which their respective eligibilities are determined. Excludability of assets is part of that method. There may be no disparity." Id. at 84.

The Appellate Division denied the Division's motion for reconsideration. We granted the Division's petition for certification. 151 N.J. 469 (1997). After oral argument we learned that Sophie Mistrick had died, rendering moot the underlying legal issue. Although ordinarily we decline to decide moot appeals, we occasionally will rule on such matters where they are of substantial importance and are capable of repetition, yet evade review. Zirger v. General Accident Ins. Co., 144 N.J. 327, 330 (1996); Division of Youth & Family Servs. v. J.B., 120 N.J. 112, 118-19 (1990); In re J.I.S. Indus. Serv. Co. Landfill, 110 N.J. 101, 104-05 (1988). The issue before us is of significant public importance and is capable of repetition whenever a county social services board ...

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