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C.H. v. Division of Medical Assistance and Health Services


August 12, 2010


On appeal from a Final Agency Decision of the Division of Medical Assistance and Health Services, Docket No. 6626-08.

Per curiam.



Argued May 19, 2010

Before Judges Payne and Fasciale.

C.H., a seventy-two year old recipient of Medicaid who is presently receiving nursing home care, appeals from a final determination of the Director of the Division of Medical Assistance and Health Services (DMAHS) denying his petition for an increase in the minimum monthly maintenance needs allowance (MMMNA) paid out of C.H.'s income to C.H.'s spouse, L.H., who remains in the community, finding that C.H. had failed to meet his burden of demonstrating the "exceptional circumstances resulting in financial duress" that would have warranted such an increase.

The facts of this matter are largely uncontested. C.H. suffers from a form of hereditary motor and sensory neuropathy known as Charcot-Marie-Tooth disease. In October 2007, he was placed by L.H. in an assisted living facility, where he remained until April 2008. To pay for the cost of that facility, L.H. utilized C.H.'s $78,000 individual retirement account, incurring a tax liability as a result.

At some point, the couple obtained a negative amortization mortgage on their home to reduce mortgage payments. In accordance with that mortgage, they pay principal but not interest, and as a result, the loan amount increases rather than decreases. It was calculated that an additional payment of $254.35 would be required just to stay even. Although a claim was made that, at some point, the loan would be greater than the value of the house, it was not established when that circumstance would occur. In any event, L.H.'s equity in the house is eroding.

In April 2008, L.H. applied for Medicaid benefits for the care of C.H. In that month, C.H. was moved from the assisted living facility into a nursing home to facilitate the receipt of benefits. In June 2008, C.H. was approved for benefits, but not before L.H. had incurred an additional $15,000 in nursing home charges that she has been unable to pay. She has also borrowed $3,500 from a daughter that remains unpaid. Legal bills are also outstanding.

In connection with the Medicaid approval, the Camden County Board of Social Services (CCBSS) calculated the available amount of C.H.'s income and L.H.'s MMMNA, determining the latter to be $1644.23.*fn1 In addition to this amount, L.H. received approximately $1,153.40 as her own income. L.H. appealed the MMMNA calculation, and the matter was transmitted by the DMAHS to the Office of Administrative Law for a hearing before an administrative law judge (ALJ).

At the hearing, testimony was provided by John Kohler, a Human Services specialist IV employed by the CCBSS, by L.H. and by L.H.'s brother, a certified public accountant. At the conclusion of the hearing, counsel for L.H. submitted a summation in which he noted that, as the result of her receipt of an MMMNA of $1,645.12*fn2 and monthly income of $1,153.40, L.H. had total monthly available income of $2,798.52. He argued that her recurring monthly expenses in 2008 equaled $5,557.12. Analyzing further, counsel determined which of those expenses were "absolutely necessary to maintain a minimum standard of living," setting them forth on a monthly basis in a schedule*fn3 as follows:

Home expense$2,081.17 Automobile expense552.35 Food expense354.54 Medical and Pharmaceutical449.95 Clothing and grooming expense98.08 Credit card obligation338.96 Nonrecurring expense
legal fees $536.46
daughter's loan 291.67
2008 tax 61.08   889.21 TOTAL$4,764.26 Income of L.H. per Medicaid1,253.40 Deficiency3,610.86 Required from C.H.3,610.86

Tacitly agreeing in part with the arguments of L.H.'s counsel, the ALJ recommended a $1,125 increase in L.H.'s MMMNA. She held on the basis of the testimony introduced at the hearing that:

L.H. and her brother were credible in their detailing of L.H.'s expenses and financial situation and the CCBSS did not dispute any of the facts they set forth. Where it was appropriate, W.G. saw fit to increase C.H.'s income, such as when he removed the deduction for Medicare since he is now on Medicaid. I FIND from the evidence presented that the gross income available to the couple is $5,418 per month, which after allowable deductions for medical insurance and federal withholding, comes to $4,687. I further FIND that the total of the couple's monthly expenses is $5,557 per month. Therefore, in 2008, L.H.'s expenses were approximately $870 more than her income. Contributing to L.H.'s financial duress is the fact that the amount that she pays toward her mortgage, which the CCBSS used in its calculations, is insufficient to cover the interest on her loan, so that with each payment her mortgage debt actually grows, creating a situation of negative equity in the home. I FIND that in order to maintain the home and stop the growth of the mortgage debt, L.H. would have to add $254 to the mortgage balance, thereby bringing her total expense deficiency to $1,125 per month.

The ALJ therefore ordered the increase of L.H.'s MMMNA by $1,125 per month "consisting of $254 added to shelter costs for the mortgage and the remaining $871 as necessary personal expenses including repaying her daughter, paying legal fees, and trying to keep from going deeper into debt from the months of June 1, 2008 (the effective date of the allowance), as the amount adequate to provide such additional income as is necessary."

L.H. raised exceptions to the ALJ's decision based on the fact that, in determining the necessary increase to L.H.'s MMMNA, the ALJ assumed that L.H. was already receiving the couple's entire net income of $4,687. The $1,125 figure that she awarded was, in fact, the deficit that L.H. claimed she would incur even if that full income were allocated to her.

On appeal, the Director of the DMAHS reversed. The Director first found that L.H.'s brother and the ALJ had erred as a matter of law by increasing C.H.'s income in the amount of an alleged Medicare payment, stating that "[f]ederal law requires the deduction in Petitioner's available income of the Medicare premium as well as the $35 allocated for his personal needs." 42 C.F.R. § 436.832. Continuing, the Director stated: "Nor does [the brother] address the fact that the credit card statements show L.H. paying for trips to New York City, eating out, multiple newspaper and magazine[] subscriptions and tickets to various venues, not expenses normally incurred for someone facing financial duress." Further, the Director found that it was clear that "Congress did not intend for every expense to be covered." He found additionally that the record did not support the conclusion that the brother "remove[d] all luxuries to arrive at the deficiency figure," providing multiple examples of nonessential credit card expenses and taking issue with the brother as to the basis for his other expense calculations. Additionally, the Director noted that L.H. owned two cars, which he regarded as an unnecessary expense. The Director also noted an undocumented expense of $260.43 identified as an auto loan, which appeared improbable for cars of thirteen and nine years of age, respectively. Citing an unpublished opinion, the Director concluded that "[o]rdinary and regular expenses have been rejected as a basis to meet the exceptional circumstance threshold."

The process of setting aside additional income for the community spouse is not to function as financial and tax planning. It is to account for "exceptional circumstances resulting in financial duress." Petitioner has presented no exceptional circumstances to explain the financial situation facing L.H. There was no sudden onset or traumatic incident in this matter. Unfortunately, C.H.'s prior diagnosis of muscular dystrophy made it more than likely that he would need nursing home care.

There were no extraordinary repairs to the home or unforeseen emergencies to ratchet up the credit card balance. Paying taxes on income and property is not an "exceptional circumstance" but an everyday expense. Nor is there evidence that [L.H.] is in danger of losing her home. The fact that she may be losing equity value in the home does not equate to a pending foreclosure action. . . . L.H. has not cut back or scaled down as evidenced by the credit card charges and cash withdrawals and ha[s] failed to show that an increase in the spousal maintenance allowance is warranted under the statute.

The Director therefore ordered that the CCBSS determine the spousal maintenance allowance using normal calculations. This appeal followed.

On appeal, L.H. presents the following arguments:


A. The Director Erred As A Matter Of Law In His Application Of The "Exceptional Circumstances" Provision Of The Medicare Catastrophic Coverage Act of 1988 And Reached An Unreasonable Conclusion Concerning The Community Spouse's Request To Increase Her Spousal Allowance.

B. The Director's Finding That Petitioner Presented No Exceptional Circumstances To Explain The Financial Situation Facing The Community Spouse Is Not Based On Substantial Evidence In The Record.

We affirm.

"Medicaid was created to provide medical assistance to the poor at the expense of the public." Mistrick v. Div. of Med. Assistance & Health Servs., 154 N.J. 158, 165 (1998) (citing Atkins v. Rivera, 477 U.S. 154, 106 S.Ct. 2456, 91 L.Ed. 2d 131 (1986); L.M. v. Div. of Med. Assistance & Health Servs., 140 N.J. 480, 484 (1995)). To qualify for Medicaid coverage of nursing home care, a couple must spend down their resources. Initially, this resulted in the virtual impoverishment of the spouse remaining in the community. Cleary v. Waldman, 167 F.3d 801, 805 (3d Cir), cert. denied, 528 U.S. 870, 120 S.Ct. 170, 145 L.Ed. 2d 144 (1999). However, this circumstance was corrected in part with the passage, in 1988, of the Medicare Catastrophic Coverage Act (MCCA), a purpose of which 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 while the other spouse is institutionalized." H.R. Rep. No. 105 (II) 1988 U.S.C.C.A.N. at 888.

One of the difficulties in this case is the L.H. appears to have misunderstood the spend-down provisions of the MCCA. At present, it permits the community spouse to keep the lesser of one-half of the couple's total resources or the maximum amount set forth in N.J.A.C. 1:71-4.8(a)(1) (currently, $109,560, indexed annually) as a community spouse resource allowance.

L.H. spent down to a far greater extent. At the time of his application for Medicaid, the couple's resources consisted of a checking account in the amount of $12,292, a second checking account in the amount of $1,442, and an individual retirement account in the amount of $16,716.

The MCCA contains provisions that govern the attribution of income to the community and the institutionalized spouse. 42 U.S.C.A. § 1396r-5(b). In general, a community spouse's income is not available to the institutionalized spouse, and vice versa, 42 U.S.C.A. § 1396r-5(b)(2)(A), except to the extent that the institutionalized spouse's income is utilized to provide the community spouse's MMMNA. 42 U.S.C.A. § 1396r-5(d). An increase in the allowable MMMNA results in a decrease in the amount that the institutionalized spouse can contribute to the costs of his care, and thus to an increase in the amount that must be covered by Medicaid.

If a spouse is dissatisfied with a determination of the community spouse's MMMNA, the spouse is entitled to a fair hearing. 42 U.S.C.A. § 1396r-5(e)(2). Of crucial significance to this case is a statutory provision that states:

If either such spouse establishes that the community spouse needs income, above the level otherwise provided by the minimum monthly maintenance needs allowance, due to exceptional circumstances resulting in significant financial duress, there shall be substituted, for the minimum monthly maintenance needs allowance in subsection (d)(2)A) of this section, an amount adequate to provide such additional income as is necessary.

[42 U.S.C.A. § 13964-5(e)(2)(B).]

See also N.J.A.C. 10:71-5.7(e) (requiring proof of "exceptional circumstances resulting in financial duress."); M.E.F. v. A.B.F., 393 N.J. Super. 543, 559 (App. Div.), certif. denied, 192 N.J. 479 (2007) (recognizing exceptional circumstances and financial duress requirements).

The issue in this case is therefore whether L.H. has satisfied the dual statutory requirements. In our view, she has not. Although it is clear that L.H. suffers from financial duress, we cannot find from the evidence the "exceptional circumstances" that the statutory scheme also demands. In reaching this conclusion, we follow other courts in holding that the circumstance, not the expense, must be exceptional. See Elizabeth D. Lauzon, Annotation, Application Of "Spousal Impoverishment Provisions" of Medicare Catastrophic Coverage Act (42 U.S.C.A. § 1396r), 186 A.L.R. Fed. 437 § 12,13 (2003). Here, our review of the evidence fails to disclose exceptional circumstances other than L.H.'s financial duress. Thus to find exceptional circumstances, we would have to conflate the two separate requirements of the statute. We find no legal or grammatical justification for doing so.

We acknowledge that L.H. has suggested that she suffers from orthopedic problems, high blood pressure, urological problems and dental problems, and we note that the community spouse's medical condition is among the more frequent bases for finding exceptional circumstances. However, the statute requires a causal connection between the exceptional circumstances and the financial duress ("exceptional circumstances resulting in financial duress"). With the exception of the cost of lawn work and snow shoveling, L.H. has not established such a connection. Rather, the record suggests that L.H.'s present economic difficulties arose largely from what in retrospect appears to have been unfortunate financial planning prior to C.H.'s institutionalization.

Our review of the record, therefore, satisfies us that, in reaching his decision to deny an increase in L.H.'s MMMNA, the Director's decision was neither arbitrary nor unreasonable as that standard has been interpreted. Matter of Musick, 143 N.J. 206, 216 (1996); Campbell v. Dept. of Civil Serv., 39 N.J. 556, 562 (1963).


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