Me. Pooled Disability Trust v. Hamilton
927 F.3d 52
| 1st Cir. | 2019Background
- Yvonne Richardson, age 87, a Maine nursing-home resident, had $38,500 deposited by her conservator into Maine Pooled Disability Trust (MPDT), a pooled special needs trust under 42 U.S.C. § 1396p(d)(4)(C).
- Maine DHHS notified Richardson that Medicaid long-term care coverage would be suspended for a 3.53-month penalty period because the deposit was an asset "transfer for less than fair market value" under 42 U.S.C. § 1396p(c).
- Richardson and MPDT sued; the district court dismissed MPDT’s § 1983 claim challenging application of the transfer penalty to pooled trusts and found standing and ripeness issues resolved for MPDT on appeal.
- Central statutory provisions: the Transfer Provision (§ 1396p(c)) imposes penalties for disposals of assets for less than fair market value within the look-back period; the Trust Provision (§ 1396p(d)) generally governs trust treatment but expressly exempts pooled special needs trusts from many trust-counting rules.
- Transfer Provision contains express exceptions for certain transfers to pooled special needs trusts only when the beneficiary is under 65 (§ 1396p(c)(2)(B)(iv)); Richardson was over 65 when funds were deposited.
- The First Circuit concluded that placing assets into a pooled special needs trust by someone aged 65 or older is a ‘‘disposition’’ that can trigger a Transfer Provision penalty, affirming the district court’s dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether transfers into pooled special needs trusts by persons ≥65 are "disposals" under §1396p(c) that can trigger a transfer penalty | MPDT: Transfers into qualifying pooled trusts are governed by the Trust Provision and thus are not subject to the Transfer Provision penalty | MDHHS: The Transfer Provision broadly treats dispositions to trusts as transfers; exemptions apply only as stated (e.g., beneficiaries <65) | Held: Transfers into pooled special needs trusts by persons ≥65 are disposals subject to the Transfer Provision unless an express exception applies |
| Whether the Trust Provision's exemption for pooled trusts precludes application of the Transfer Provision generally | MPDT: The Trust Provision comprehensively regulates trusts, so pooled trusts should be outside the Transfer Provision absent explicit overlap | MDHHS: (and statute) The Trust Provision exemptions do not immunize pooled trusts from the Transfer Provision except where the Transfer Provision itself provides an exception | Held: The Trust Provision does not create a blanket bar; Transfer Provision applies unless specific exception applies (e.g., trust for disabled person under 65) |
| Whether the Transfer Provision’s enumerated exceptions (c)(2)(B)(iii)-(iv) are surplusage under MDHHS’s reading | MPDT: If pooled trusts are not transfers, these exceptions would be superfluous, so statute should be read to avoid that result | MDHHS: The exceptions are meaningful—Congress exempted particular transfers (including those for beneficiaries under 65) | Held: Court rejects MPDT’s reading; treating transfers into pooled trusts as disposals gives effect to the exceptions rather than rendering them surplusage |
| Whether agency guidance (CMS bulletins, Transmittal 64, SSA Manual) supports MPDT’s view | MPDT: Points to some agency materials suggesting special trust rules | MDHHS: Agency guidance (including a 2008 CMS bulletin and SSA Manual) supports treating deposits by ≥65 as potentially penalizable; Transmittal 64 allows limited "fair market value" workaround but does not undercut statute | Held: Agency interpretations generally bolster the view that transfers by persons ≥65 may be subject to penalty; court gives respectful consideration to agency guidance but bases holding on statutory reading |
Key Cases Cited
- Lewis v. Alexander, 685 F.3d 325 (3d Cir. 2012) (describing pooled special needs trusts and their policy purpose)
- Sai Kwan Wong v. Doar, 571 F.3d 247 (2d Cir. 2009) (noting that subsection (d)(4) exempts trusts from (d)(3) but does not describe what replaces those rules)
- Ctr. for Special Needs Tr. Admin. v. Olson, 676 F.3d 688 (8th Cir. 2012) (rejecting argument that §1396p(c)(2)(B)(iv) applies only to third-party trusts)
- Community Health Ctr. v. Wilson-Coker, 311 F.3d 132 (2d Cir. 2002) (agency guidance in complex Medicaid context merits respectful consideration)
- Sony BMG Music Ent. v. Tenenbaum, 660 F.3d 487 (1st Cir. 2011) (avoid interpretations rendering statutory language surplusage)
- Lawless v. Steward Health Care Sys., LLC, 894 F.3d 9 (1st Cir. 2018) (statutory interpretation principles)
- Wis. Dep't of Health & Family Servs. v. Blumer, 534 U.S. 473 (2002) (recognizing CMS expertise in Medicaid administration)
- United States v. Mead Corp., 533 U.S. 218 (2001) (agency interpretations can merit Skidmore deference where expertise and detail exist)