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Maas v. Sudders

Superior Court of Massachusetts, Suffolk

June 22, 2018

Jean MAAS
v.
Mary Lou SUDDERS et al. Henry Hirvi et al. Mary Lou Sudders, Secretary of the Executive Office of Health and Human Services et al.[1]

          OPINION

          Douglas H. Wilkins, Justice of the Superior Court

          The plaintiffs, Jean Maas ("Maas") and Henry and Eva Hirvi ("Hirvis") (collectively, "Plaintiffs") brought this declaratory judgment action against Marylou Sudders, Secretary of the Executive Office of Health and Human Services and Kim Larkin, Director of the Board of Hearings of the Office of Medicaid of the Executive Office of Health and Human Services (collectively, "Office" or "Defendants"). After the court consolidated the plaintiffs’ preliminary injunction motions with a hearing on the merits, the plaintiffs filed a "Memorandum in Support of Class Certification, Declaratory Judgment and Preliminary Injunction" ("Motion"), which the defendants have opposed. After hearing on May 30, 2018, the Motion is ALLOWED IN PART AND DENIED IN PART.

         BACKGROUND

         The Parties’ stipulation, court docket and the uncontested exhibits establish the following facts. Attached to the stipulation are copies of the notices of denial of eligibility that MassHealth mailed to the Plaintiffs, Jean Maas, Henry E. Hirvi and Eva E. Hirvi, notifying them of its determination that each of the plaintiffs had countable assets exceeding the federal and state mandated limits for Medicaid eligibility. Those denial notices are representative of the standardized denial notices that MassHealth mails to an applicant for coverage of long-term care services in a nursing facility, when MassHealth has determined that the applicant has more countable assets than federal and state Medicaid law permits for eligibility.

         In relevant part, the notice sent to Maas on October 12, 2017 states:

Important! This health-care benefits notice tells you the decisions we have made about certain programs that you may be eligible for. Please read the whole notice to find out about your health-care benefits.
MassHealth Long-Term Care Services in a Nursing Facility
MassHealth has reviewed your application for MassHealth long-term care services which you filed on 09/06/2017. You are not eligible for MassHealth long-term-care services for the following reasons.

         Reason and Manual Citation

You have more countable assets than MassHealth benefits allow. 130 CMR 520.003 520.004.

         What Happens Next?

You must spend $249, 796.96 of your assets. You can spend the excess assets on your needs, but you cannot give them away.
You must show MassHealth within the next 30 days that you have lowered your assets to $2, 000 ...

         The calculation page at the end of this notice shows how we counted your assets ...

* * *

         How We Counted your Assets

         MA Countable Assets

Life Insurance 0.00
FNA Account 100.00
Auto Value 0.00

Bank Account

125.00

Real Estate Value

0.00

Other

251,571.96

Total Asset Amount: 251,796.96
MA Asset Limit for Household (1): 2,000.00
Excess Asset Amount: 249,796.96

         The notice also contains a similar chart showing how the Office counted Maas’ income, a statement "how to ask for a fair hearing" and a "Fair Hearing Request Form." Maas appealed. On January 16, 2018, she filed this lawsuit.

         A thorough review of the trust and the denial notice reveals no distinction between the Mass. trust and the one in Daley v. Secretary of Executive Office of Health and Human Services, 477 Mass. 188, 189 (2017) ("We conclude that neither the grant in an irrevocable trust of a right of use and occupancy in a primary residence to an applicant nor the retention by an applicant of a life estate in his or her primary residence makes the equity in the home owned by the trust a countable asset for the purpose of determining Medicaid eligibility for long-term care benefits"). The Office apparently agreed, as it granted Maas’ application, after hearing, in a decision dated May 1, 2018. See Appeal Decision at 8, Def. Opp., Ex. J. ("MassHealth is jumping over a line of demarcation between income and principal in violation of the ruling of Daley.") It turns out, based upon the Office’s hearing brief dated February 13, 2018 (Comm. Opp., Ex. I) that the Office’s primary (though not sole) argument (at 8-10) was that, in practice, the trustee made principal available for the benefit of the applicant. It also tried to distinguish Daley and cited a specific provision of the Mass. Trust (paragraph 3(a)) not cited in the denial notice. Of note, the Office’s February 13, 2018 hearing brief came four months after the denial notice of October 12, 2017.

          The Hirvis’ notices followed the same format, although they have a figure of "347, 793.30" for "Other" assets and excess asset amounts of 386, 437.48 and 387, 920.71 for Henry and Eva Hirvi, respectively, reflecting differences in the amount in their respective bank accounts. Because the Hirvi matters are still pending before the Office, the record does not show what happened after the denial notice and appeal therefrom.

         In each case, the "Other" assets were trusts. After commencement of these lawsuits, the Office has amended its standard notices to show specific amounts for countable assets attributable to trusts.

         DISCUSSION

         I. Legal Sufficiency of the Notices

         a. Regulations

         The key Federal Medicaid regulation states:

A notice required under 42 C.F.R. § 431.206(c)(2) ... must contain:
(a) A statement of what action the agency ... intends to take and the effective date of such action;
(b) A clear statement of the specific reasons supporting the intended action;
(c) The specific regulations that support or the change in Federal or State law that requires, the action;
(d) An explanation of
(1) The individual’s right to request a local evidentiary hearing if one is available, or a State agency hearing;
or (2) in cases of an action based on a change in law, the circumstances under which a hearing will be granted; and
(e) an explanation of the circumstances under which Medicaid is continued if a hearing is requested.

42 C.F.R. § 431.210 (emphasis added) (the "regulation"). The referenced regulation applies "[a]t at the time the agency denies an individual’s claim for eligibility, benefits or services ..." 42 C.F.R. § 431.206(c)(2). See also 42 C.F.R. § 43.917(a), (b)(2) (Medicaid denial notices must be "timely and adequate" and must comply with 42 C.F.R. § 431.210). The Medicaid notice provisions are enforceable against a state Medicaid agency. See Murphy by Murphy v. Minnesota Dept. of Human Services, 260 F.Supp.3d 1084 (D.Minn. 2017); Guggenberger v. Minnesota, 198 F.Supp.3d 973, 1023 (D.Minn. 2016).

         Among other things, the Massachusetts regulations require advance written notice "to permit adequate preparation of the case." 130 Code Mass.Regs. 610.046(A).[2] Several federal and state statutes and regulations require proper and efficient administration of state Medicaid programs "in a manner consistent with simplicity of administration and the best interests of ...


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