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Hutson v. Mosier

Court of Appeals of Kansas

September 8, 2017

Marcia Hutson, Appellant,
v.
Susan Mosier, M.D., in her official capacity as Secretary of Kansas Department of Health and Environment, Appellee.

         SYLLABUS

         1. The scope of judicial review of a state administrative agency action is defined by the Kansas Judicial Review Act (KJRA), K.S.A. 77-601 et seq. The party asserting the invalidity of an agency's action bears the burden of proving invalidity.

         2. Interpretation of a statute or an administrative regulation is a question of law over which appellate courts have unlimited review.

         3. The United States Congress created the Medicaid program to provide federal financial assistance to states that reimburse the costs of medical treatment for those in need. Because it is a cooperative federal and state program, both federal and state law govern Medicaid.

         4. Kansas has elected to participate in Medicaid and must comply with federal requirements for making eligibility determinations, collecting and maintaining information, and administering the program.

         5. Generally, trust funds are to be counted as assets in making Medicaid eligibility determinations.

         6. A person 65 or older may participate in a pooled supplemental or special needs trust under the provisions of 42 U.S.C. § 1396p(d)(4)(C) (2012). However, a person age 65 or older who transfers assets to a pooled supplemental or special needs trust is subject to the imposition of a transfer penalty under the rules of subsection 42 U.S.C. § 1396p(c)(1) if the transfer is for less than fair market value.

         7. Trusts established for disabled persons are exempt from application of the transfer of assets penalty provisions only when the disabled person is under the age of 65.

         8. The determination of the fair market value of property-whether real or personal-is generally a question of fact.

         Appeal from Douglas District Court; Paula B. Martin, judge.

          Molly M. Wood, of Stevens & Brand, L.L.P., of Lawrence, for appellant.

          Ron M. Landsman, of Ron M. Landsman, P.A., of Rockville, Maryland, and Craig Reaves, of Reaves Law Firm, P.C., of Kansas City, Missouri, for amicus curiae National Academy of Elder Law Attorneys, Inc.

          Karen H. Weber, of Law Offices of Karen H. Weber, of Overland Park, for amicus curiae Special Needs Alliance, Inc.

          Brian M. Vazquez, of Kansas Department of Health & Environment, for appellee.

          Before Bruns, P.J., McAnany, J., and Steven R. Ebberts, District Judge, assigned.

          BRUNS, J.

         In this judicial review action, Marcia Hutson appeals from the district court's decision affirming a final order issued by the Division of Health Care Finance State Appeals Committee arising out of a Medicaid eligibility determination. The district court upheld the imposition of a transfer penalty that significantly delayed Hutson's receipt of Medicaid benefits for her long-term care. The Kansas Department for Children and Families (DCF)-the state agency handling Medicaid eligibility processing at the time-imposed the penalty on Hutson because she transferred assets to a pooled supplemental needs trust when she was in her 70s. After an administrative law judge and the State Appeals Committee upheld the imposition of the transfer penalty, Hutson sought judicial review. The district court also upheld the penalty because it found that Hutson did not receive fair market value for her transfer.

         We find as a matter of law that transfers of assets by Medicaid applicants age 65 or older to a pooled supplemental needs trust are subject to a penalty period if the transfer is for less than fair market value. However, because we find that whether a particular transfer to a pooled supplemental needs trust is for less than fair market value is a question of fact, we vacate the part of the district court's order that found as a matter of law that Hutson "did not receive fair market value for her transfer." Accordingly, we affirm the district court's decision in part, we vacate it in part, and we remand this matter for further proceedings consistent with this opinion.

         Facts

         On August 10, 2015, Hutson-who resides in a nursing home facility in Eudora- transferred $59, 528.42 of assets to ARCare Trust II Pooled Trust. The trustee is ARCare, Inc., which is a not-for-profit corporation that established the irrevocable pooled supplemental needs trust in 1996 to help elderly and disabled people pay for living expenses not covered by needs-based public benefit programs. The assets that Hutson transferred to the pooled trust were funds that she received from the sale of her home as well as from life insurance following the death of her husband. At the time of the transfer of assets, Hutson was 72 years old.

         Under the terms of the Transfer-Joinder Agreement signed on June 19, 2015, ARCare, Inc. is to administer a sub-account within the pooled trust for the sole benefit of Hutson. Specifically, the funds in the sub-account are to be used to maintain Hutson's "health, safety and welfare . . . when, in the discretion of the [trustee], such requisites are not being provided by any public agency, office, or department of the state . . . or are not otherwise being provided by any other source of income available to [Hutson]." As the trustee of the pooled supplemental needs trust, ARCare, Inc. has a contractual obligation to pay for Hutson's needs in order to enhance her quality of life. Although ARCare, Inc. has absolute discretion to approve or disapprove requests for disbursements from Hutson's sub-account, it must act in good faith in administering the pooled trust.

         Furthermore, the terms of the pooled supplemental needs trust provide that upon Hutson's death, the trustee must reimburse the State for the total amount of Medicaid benefits paid on her behalf if there are available funds left in her sub-account. If any residual funds are left in Hutson's sub-account after the State has been reimbursed, these funds are to remain in the pooled supplemental needs trust to aid other trust beneficiaries, to assist other indigent people with disabilities, or to be used for other charitable purposes as determined by the trustee. Hutson's life expectancy is approximately 13 years based ...


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