Needham v. Director of the Office of Medicaid

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14-P-182 Appeals Court

MAURICE NEEDHAM1 vs. DIRECTOR OF THE OFFICE OF MEDICAID.

No. 14-P-182.

Essex. January 14, 2015. - October 20, 2015.

Present: Katzmann, Sullivan, & Blake, JJ.

Medicaid. Administrative Law, Regulations, Agency's
interpretation of statute, Agency's interpretation of
regulation. Probate Court, Judgment, Trust. Trust,
Reformation.

Civil action commenced in the Superior Court Department on
December 28, 2012.

The case was heard by Maynard M. Kirpalani, J., on a motion
for judgment on the pleadings.

Elizabeth N. Dewar, Assistant State Solicitor, for the
defendant.
Peter J. Caruso for the plaintiff.

SULLIVAN, J. This is an appeal pursuant to G. L. c. 30A

from a judgment of the Superior Court reversing the denial of

long-term care benefits under the Commonwealth's Medicaid

1
Also known as Maurice E. Needham.
2

program. A judge of the Superior Court concluded that the

Director of the Office of Medicaid (MassHealth)2 was bound by an

order of a judge of the Probate and Family Court reforming a

trust, and was obligated to consider the reformed trust when

determining countable assets for purposes of Medicaid

eligibility for long-term care benefits. We conclude that

MassHealth is bound by Federal law in making eligibility

determinations, that Federal law prohibits recognition of the

reformation of the trust within the statutory look-back period,

and that MassHealth therefore could not be compelled to consider

the reformed trust in evaluating eligibility. Accordingly, we

reverse the judgment and remand for entry of judgment in favor

of MassHealth.

Background. The facts of the case are undisputed. In his

February 11, 2011, application for MassHealth long-term care

benefits, the plaintiff Maurice Needham3 disclosed two trusts,

one revocable and one irrevocable. The revocable trust held

only the family home valued at $412,400, and named the

irrevocable trust, of which Needham was also the settlor, as the

2
The Office of Medicaid, also known as MassHealth for the
Massachusetts Medicaid program it administers, see G. L.
c. 118E, § 9A, falls under the authority of the Secretary of the
Executive Office of Health and Human Services. See G. L. c. 6A,
§§ 16, 16B.
3
At the time Needham was over sixty-four and resided in a
nursing home.
3

sole beneficiary.4 MassHealth reviewed this and other financial

information for purposes of determining whether Needham met the

financial eligibility requirements for long-term care under the

Medicaid program. See 130 Code Mass. Regs. § 520.003(A)(1)

(2009) (setting an eligibility ceiling of $2,000 in countable

assets). The irrevocable trust, also valued at $412,400, was

deemed countable by MassHealth because a provision of the trust

instructed the trustee to accumulate principal and to use it for

the settlor's future needs without regard to the interest of the

remaindermen, his children.5 MassHealth concluded that Needham

was financially ineligible for services because he had countable

assets in excess of the $2,000 limit.

Pursuant to G. L. c. 118E, §§ 47, 48, a hearing officer

held an evidentiary hearing on Needham's subsequent

administrative appeal to the MassHealth board of hearings. At

Needham's request, the hearing was suspended in 2012 in order to

permit the filing of a complaint in the Probate and Family Court

to approve a stipulation between Needham, as beneficiary of the

4
The revocable trust was created in 1996, but the
designation of the irrevocable trust as beneficiary occurred in
1999, on the same day the irrevocable trust was created.
Needham's wife was also a settlor of each trust, but she passed
away in 2007. We refer to Needham as the settlor.
5
In MassHealth's view, this made the assets available to
the settlor. In addition, the settlor retained control over the
real estate held in trust because any sale of the real estate
required the settlor's consent.
4

irrevocable trust, and his children, the co-trustees of the

trust.6 The stipulation was meant to remove the provisions of

the irrevocable trust that rendered Needham ineligible for

MassHealth long-term care benefits. At the parties' request, a

judge of the Probate and Family Court approved the stipulation,

which stated that the reformation was effective ab initio.7 The

administrative hearing resumed and the judgment of May 25, 2012,

incorporating the approved stipulation was offered into

evidence.

The hearing officer, applying 42 U.S.C. § 1396p(d)(3)(B)(i)

(2012), and 130 Code Mass. Regs. § 520.023(C)(1)(a) (2009),8

concluded in his decision of December 5, 2012, that under the

original 1999 irrevocable trust, the assets remained available

to Needham, thus rendering him ineligible for benefits. The

hearing officer then applied the Federal and State statutes and

regulations that treat certain transfers of assets for less than

6
One of Needham's daughters, a remainderman and a plaintiff
in the case, signed the stipulation on Needham's behalf acting
under a power of attorney.
7
The complaint for declaratory relief and reformation
alleged that the reformation was a matter of form only, and that
reformation was requested to correct a scrivener's error and to
better effectuate the settlor's intent. The complaint did not
refer to the statutory or regulatory provisions governing
disqualifying transfers. MassHealth was not named as a party,
although Needham represents that it was notified.
8
All citations in this opinion to the United States Code
and the Massachusetts regulations are to the versions just
indicated.
5

fair market value made after February 8, 2006, as disqualifying

transfers if they occur within a sixty-month look-back period.

See Shelales v. Director of the Office of Medicaid, 75 Mass.

App. Ct. 636, 637-638 (2009); 42 U.S.C. § 1396p(c)(1)(A), (B);

130 Code Mass. Regs. §§ 520.019(B), 520.023(A)(1)(b)(3). He

assumed that the 2012 reformation would have rendered the assets

of the irrevocable trust noncountable, but concluded that the

reformation was itself a disqualifying transfer of assets into a

trust under 130 Code Mass. Regs. § 520.019(C), (F), because the

reformation was sought for purposes of qualifying for benefits

and the reformation fell within the prescribed look-back period.9

An appeal pursuant to G. L. c. 30A ensued. Ruling on

Needham's motion for judgment on the pleadings, a judge of the

Superior Court concluded that MassHealth, "as an arm of the

Commonwealth, is bound by [the Probate and Family] [C]ourt's

order," and that because the judgment of the Probate and Family

Court approved a stipulation reforming the trust ab initio, the

original trust had never existed. A Superior Court judgment

entered for Needham, ordering MassHealth to consider the issue

of his eligibility by reference to the trust "in its current

9
Under the applicable regulations, the look-back period
begins on the first date the individual is both in a nursing
facility and has applied for benefits. 130 Code Mass. Regs.
§ 520.019(B). There are also provisions for "cure," which are
not at issue in this appeal. See, e.g., 130 Code Mass. Regs.
§ 520.024(C).
6

form." Now before us is MassHealth's further appeal pursuant to

G. L. c. 30A.10

Discussion. Our review reduces to whether the hearing

officer's decision was based on an error of law. See G. L.

c. 30A, § 14(7)(c). On appeal, Needham does not contest that

the irrevocable trust, in its original form, contained countable

assets that would render him ineligible for Medicaid benefits.

See Doherty v. Director of the Office of Medicaid, 74 Mass. App.

Ct. 439, 442-443 (2009) (discussing similar trust). Rather,

Needham contends that MassHealth was required to consider the

reformed trust, and that the State regulations governing

disqualifying transfers are inapplicable because the original

trust ceased to exist upon reformation. We disagree.

Medicaid is a cooperative State and Federal program,

intended to provide medical assistance to certain persons "whose

income and resources are insufficient to meet the cost of

necessary medical services." 42 U.S.C. 1396-1. See Tarin v.

Commissioner of the Div. of Med. Assistance, 424 Mass. 743, 746

(1997); Lebow v. Commissioner of the Div. of Med. Assistance,

433 Mass. 171, 172 (2001). "The Medicaid Act, Title XIX of the

10
Although nominally a remand, the judgment was final in
all material ways with respect to the agency, and the judgment
is therefore a final, appealable disposition as to the agency.
See Cliff House Nursing Home, Inc. v. Rate Setting Commn., 378
Mass. 189, 191 (1979).
7

Social Security Act of 1965, operates to enable participating

states, through the use of federal funds, to provide medical

services to welfare recipients (the 'categorically needy') and

if the state chooses, to other needy recipients (the 'medically

needy'). See Beal v. Doe, 432 U.S. 438, 440 n.1 (1977); 42

U.S.C. 1396a(a)(10)(A), (C). Although a state's participation

in Medicaid is voluntary, if it chooses to adopt a plan it must

do so consonant with the requirements imposed by the Medicaid

Act. See Beal v. Doe, supra [] at 441." Preterm, Inc. v.

Dukakis, 591 F.2d 121, 124, cert. denied, 441 U.S. 952 (1979).

"In order to receive Federal funding, the State program

must be approved and meet all of the requirements of Title XIX

and the implementing regulations." Haley v. Commissioner of

Pub. Welfare, 394 Mass. 466, 467 (1985), citing Harris v. McRae,

448 U.S. 297, 301 (1980). Specifically, "a State is required to

base its assessment of financial need only on 'such income and

resources as are, as determined in accordance with standards

prescribed by the [United States] Secretary [of Health and Human

Services], available to the applicant or recipient'" (emphasis

omitted). Tarin v. Commissioner of the Div. of Med. Assistance,

supra at 746-747, quoting from 42 U.S.C. § 1396a(a)(17)(B). A

State is also required to comply with the disqualifying transfer

provisions of the Federal law. See 42 U.S.C. § 1396a(a)(18).
8

The Commonwealth has elected to provide long-term care

benefits to the medically needy, but must provide those benefits

in a manner consistent with Federal Medicaid requirements. See

G. L. c. 118E, § 9; id. § 15, inserted by St. 1993, c. 161, § 17

("The amount, duration and scope of the aforesaid care and

services shall be determined by the rules and regulations of the

[D]ivision [of Medical Assistance within the Executive Office of

Health and Human Services], provided such rules and regulations

are consistent with the provisions of this chapter and Title

XIX").11 The judgment of the Probate and Family Court represents

the judge's application of Massachusetts probate law, but it

does not constitute an interpretation or application of Federal

and State laws governing Medicaid eligibility, a matter over

which the Probate and Family Court has no jurisdiction. See

Young v. Department of Pub. Welfare, 416 Mass. 629, 633-634

(1993); G. L. c. 30A, § 14(1); G. L. c. 118E, § 48; G. L.

c. 215, §§ 3, 6.

Under the law governing financial eligibility for Medicaid

benefits, it is the fact of the reformation itself that

11
A statute or regulation violative of Title XIX would be
preempted under the Supremacy Clause of the United States
Constitution. See Boston Med. Center Corp. v. Secretary of
Exec. Office of Health and Human Servs., 463 Mass. 447, 461
(2012) ("The purpose of the Supremacy Clause is . . . to ensure
that, in a conflict with state law, whatever Congress says goes"
[citation omitted]).
9

constitutes the disqualifying event. Federal law requires that

individuals of means who apply for long-term care benefits, and

transfer assets for less than fair market value within the

sixty-month look-back period, face a period of ineligibility.

See 42 U.S.C. § 1396p(c)(1)(A), (B). The State statute and

regulations implement the Federal mandate. See G. L. c. 118E,

§ 28; 130 Code Mass. Regs. § 520.023(A)(1)(b)(3). The hearing

officer found that Needham had obtained the judgment of the

Probate and Family Court in an effort to satisfy Medicaid

eligibility requirements, thus placing this reformation squarely

within the ambit of the regulations governing disqualifying

transfers. See Gauthier v. Director of the Office of Medicaid,

80 Mass. App. Ct. 777, 786 (2011).

The issue before us is not whether the trust was reformed

as a matter of State law. The issue is whether MassHealth is

required to recognize a reformation as a matter of Federal law

when determining whether there has been a disqualifying

transfer. The answer to that question in this case is no. Were

the answer different, persons of means would be permitted to

enjoy otherwise countable assets held in trust throughout their

lives, transfer those assets for less than fair market value by

reforming the trust ab initio when their health declines, and

thereby obtain Medicaid payment for long-term nursing home care

without complying with the waiting period imposed by Federal
10

law.12 Needham's assertion that the Probate and Family Court

judgment renders the original trust nonexistent for purposes of

Medicaid eligibility does not withstand scrutiny when assessed

against the mandates of applicable State and Federal statutes

and regulations.13 "Congress has declared a contrary intent,

that Medicaid benefits be made available only to those who

genuinely lack sufficient resources to provide for themselves."

Doherty v. Director of the Office of Medicaid, 74 Mass. App. Ct.

at 443. See Cohen v. Commissioner of the Div. of Med.

Assistance, 423 Mass. 399, 403-404 (1996) (discussing

legislative history of Medicaid qualifying trust statute). In

this context, what "Congress says goes." Boston Med. Center

Corp. v. Secretary of Exec. Office of Health and Human Servs.,

463 Mass. 447, 461 (2012) (citation omitted).

We therefore conclude that the hearing officer committed no

error of law in determining Needham was ineligible for

MassHealth long-term care benefits. The judgment is reversed

12
The period of ineligibility is calculated in accordance
with 130 Code Mass. Regs. § 520.019(G).
13
Needham's reliance on the procedure employed in Bosch
litigation cases is inapt. See generally O'Connell v. Houser,
470 Mass. 1004, 1006 (2014). In Commissioner of Internal Rev.
v. Estate of Bosch, 387 U.S. 456, 465 (1967), the United States
Supreme Court held that the determination of a State's highest
court would be considered binding on matters of State law in
related Federal tax proceedings. Here we deal not with a
question of State law, but a question of eligibility governed by
Federal law, as supplemented by State statutes and regulations
that follow the Federal mandate.
11

and the case is remanded for entry of judgment affirming the

decision of the MassHealth board of hearings.

So ordered.