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STEINER v. DOWLING

May 31, 1995

FRANCES STEINER, on behalf of herself and all others similarly situated, Plaintiff, against MICHAEL DOWLING, Commissioner, New York State Department of Social Services, Defendant. HAROLD OTIS, RAMON VARGAS, DONALD MILLER, ALFRED BULSON, EMMETT CONNALLY, MADELINE MONTARIO and FRANCES HICKOK, Plaintiffs, -against- MICHAEL DOWLING, Commissioner, New York State Department of Social Services, Defendant.


The opinion of the court was delivered by: CHOLAKIS

 Presently before the Court is a motion for partial summary judgment brought by the various plaintiffs in these two companion cases, and a cross-motion for summary judgment on behalf of the common defendant, Michael Dowling, Commissioner, New York State Department of Social Services.

 In these two cases, plaintiffs contend that 18 NYCRR § 360.4-4(c)(2)(iii)(c) was in violation of the federal Medicaid law, 42 U.S.C. § 1396p(c)(1), as that section of the federal Medicaid law existed during the thirteen month time period of September 9, 1992 (the effective date of 18 NYCRR § 360-4.4(c)(2)(iii)(c)) through August 10, 1993 (the effective date of the 1993 amendments to 42 U.S.C. § 1396p(c)(1)). At issue is New York's method of calculating the period of Medicaid ineligibility for an individual who has made a prohibited transfer of assets (i.e. a transfer which otherwise made that individual eligible for Medicaid assistance by decreasing that person's financial assets -- thus making them "artificially destitute").

 Specifically relevant to the application of the State's regulations, federal Medicaid law imposes guidelines, under 42 U.S.C. § 1396a(a)(10)(A)(ii)(V), upon states that elect to offer medical assistance to individuals residing in a medical institution for a period of not less than thirty consecutive days. Prior to August 10, 1993, these guidelines provided that:

 
The State plan must provide for a period of ineligibility for nursing facility services ... in the case of an institutionalized individual ... who, or whose spouse at any time during or after the 30-month period immediately before the date the individual becomes an institutionalized individual ... or ... the date the individual applies for such assistance while an institutionalized individual disposed of resources for less than fair market value. The period of ineligibility shall begin with the month in which such resources were transferred and the number of months in such period shall be equal to the lesser of --
 
(A) 30 months, or
 
(B)(i) the total uncompensated value of the resources so transferred, divided by (ii) the average cost, to a private patient at the time of the application, of nursing facility services in the State or, at State option, in the community in which the individual is institutionalized.

 42 U.S.C. § 1396p(c)(1) (emphasis added).

 42 U.S.C. § 1396p(c)(4) further provides that:

 
[A] state ... may not provide for any period of ineligibility for an individual due to transfer of resources for less than fair market value except in accordance with this subsection.

 Prior to the enactment of the subsection at issue in this case, i.e., (c)(2)(iii)(c), it appears that the application of the then existing State regulation resulted in concurrent periods of ineligibility for multiple transfers of assets. By way of example: An applicant who lived in a county where the regional nursing home rate was $ 3,000 per month and who transferred $ 60,000 in a single month was ineligible for a period of 20 months (i.e., $ 60,000 divided by $ 3,000 equals 20). However, if that applicant had, instead, transferred half of those resources in one month, and the other half the following month, two separate 10-month periods of ineligibility were the result; and these periods of ineligibility would have each begun with the month of transfer. As a result, because the transfers were only a month apart, the periods of ineligibility overlapped by nine months and the total period of ineligibility was only 11 months rather than the 20 months which occurred under a single transfer. See Defendant's Memorandum of Law, p.7.

 Plaintiffs contend that this methodology -- used by New York to provide for concurrent periods of ineligibility -- was in accordance with § 1396p(c)(1), as required § 1396p(c)(4). In essence, plaintiffs contend that § 1396p(c)(1) specified the use of a methodology which would result in concurrent periods of ineligibility in the case of multiple transfers.

 On or about October 9, 1990, the United State Department of Health and Human Services ("HHS"), issued Medicaid State Operations Letter # 90-87 as, inter alia, a

 
clarification of the method to be used in determining the period of ineligibility for persons who transfer resources without receiving fair market value more than once during a 30-month period. The question is whether such periods should be treated separately and any periods of ...

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