Roselyn Ford v. Department of Health and Human Services
503 Mich. 231
Mich.2019Background
- Three elderly married women (institutionalized spouses) entered nursing homes and shortly thereafter their husbands (community spouses) funded irrevocable "solely for the benefit of" (SBO) trusts with marital assets.
- The SBO trusts named only the community spouse as beneficiary during his lifetime and required actuarially sound distributions to deplete the trust over the beneficiary’s life; trustees (third parties) held legal title.
- The institutionalized spouses applied for Medicaid; the Department counted the trust principals as applicants’ countable assets and denied benefits.
- Administrative law judges and the Court of Appeals upheld the Department’s denials based on state policy (BEM 401) reading the federal trust rules to make the trusts countable whenever a trust could pay the community spouse.
- The Michigan Supreme Court reviewed whether federal Medicaid statutes (42 U.S.C. 1396r‑5 and 1396p(d)(3)(B)) require counting SBO trust principals as resources of the institutionalized spouse and vacated the ALJ decisions, reversing the Court of Appeals and remanding for application of the correct statutory test.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SBO trust principal is a countable resource for the institutionalized spouse’s initial Medicaid eligibility | Trust assets should not be countable because the trusts can only pay the community spouse; trust principal is held by trustee, not the spouses | Trust assets are countable because payments to the community spouse make principal effectively available to the applicant under federal and state policy | Reversed Court of Appeals: SBO principal is not per se countable; it is countable only if there are any circumstances under which payments from the trust could be made to or for the benefit of the institutionalized spouse under 42 U.S.C. 1396p(d)(3)(B) |
| Proper scope of the "any‑circumstances" rule in 42 U.S.C. 1396p(d)(3)(B) — who is "the individual"? | "The individual" is the Medicaid applicant (institutionalized spouse); the rule applies only if trust payments could be made to or for that applicant | The Department reads "the individual" broadly to include the community spouse, so payments to community spouse render the trust countable | Court held "the individual" refers to the Medicaid applicant (institutionalized spouse); payments solely to community spouse do not satisfy the any‑circumstances test unless they could be for the applicant’s benefit |
| Whether 42 U.S.C. 1396r‑5 preempts or already renders trust principal available | Plaintiffs: general resource rules (1396r‑5) don’t treat trust principal as held by spouses; specific trust rules govern | Dept: the spousal resource scheme and definitions in other provisions imply trust principal should be counted | Court harmonized statutes: 1396r‑5 does not automatically make trust principal available; 1396p(d) supplies the specific trust rules that control |
| Remedy and next steps after statutory interpretation error | Plaintiffs sought approval of applications | Dept defended denials under its policy and statutory reading | Court vacated administrative decisions and remanded for ALJs to apply the proper any‑circumstances test and make factual findings about whether trust payments could be made to or for the benefit of the institutionalized spouse |
Key Cases Cited
- Wis. Dep't of Health & Family Servs. v. Blumer, 534 U.S. 473 (2002) (explains spousal‑impoverishment scheme and CSRA calculation)
- In re Rovas Complaint Against SBC Mich., 482 Mich. 90 (2008) (administrative agency statutory interpretation entitled to respect but must follow plain meaning)
- Johnson v. Guhl, 357 F.3d 403 (3d Cir. 2004) (contrasting appellate decision holding similar community‑spouse trusts countable)
- Lewis v. Alexander, 685 F.3d 325 (3d Cir. 2012) (describing comprehensive nature of §1396p trust rules)