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NEW YORK STATE BAR ASS'N v. RENO

April 7, 1998

NEW YORK STATE BAR ASSOCIATION, Plaintiff,
v.
JANET RENO, in her official capacity as Attorney General of the United States of America, Defendant.



The opinion of the court was delivered by: MCAVOY

 Plaintiff, the New York State Bar Association ("NYSBA"), seeks to enjoin the Attorney General of the United States from enforcing section 4734 of the Balanced Budget Act of 1997, which was incorporated into section 217 of the Health Insurance Portability and Accountability Act of 1996, 42 U.S.C. § 1320a-7b(a). Plaintiff asserts that section 4734 violates the First and Fifth Amendments to the United States Constitution.

 I. BACKGROUND

 A. Statutory Background

 Before Congress enacted section 217 of the Health Insurance Portability and Accountability Act of 1996, certain transfers of assets up to 36 months prior to an application for Medicaid benefits and certain transfers to trusts up to 60 months prior to application, could result in a period of ineligibility for Medicaid benefits. 42 U.S.C. § 1396p(c). In enacting section 217, Congress left the ineligibility period intact, but added certain criminal penalties. Essentially, section 217 made it a crime to dispose of assets in order to become eligible for Medicaid benefits if the disposition of assets "resulted in the imposition of a period of ineligibility." § 1320a-7b(a)(6) (sometimes referred to as the "Granny Goes to Jail Act"). Violators were subject to fines of up to $ 25,000 or imprisonment for up to 5 years, or both. Id.

 A number of organizations lobbied for the repeal of section 217, including the NYSBA. Rather than repeal the Granny Goes to Jail Act, Congress amended section 217 by enacting section 4734 of the Balanced Budget Act of 1997. Section 4734, which became effective August 5, 1997, struck the former language and added a provision making it illegal to counsel or assist an individual to dispose of certain assets to qualify for Medicaid:

 
Criminal penalties for acts involving Federal health care programs
 
(a) Making or causing to be made false statements or representations
 
Whoever--
 
* * *
 
(6) for a fee knowingly and willfully counsels or assists an individual to dispose of assets (including by any transfer in trust) in order for the individual to become eligible for medical assistance under a State plan under subchapter XIX of this chapter, if disposing of the assets results in the imposition of a period of ineligibility for such assistance under section 1396p(c) of this title, shall . . . (ii) in the case of such a statement, representation, concealment, failure, conversion, or provision of counsel or assistance by any other person, be guilty of a misdemeanor and upon conviction thereof fined not more than $ 10,000 or imprisoned for not more than one year, or both.

 42 U.S.C. § 1320a-7b(a).

 While section 4734 was in conference, *fn1" the Congressional Research Service ("CRS") prepared a memorandum, dated July 11, 1997, analyzing the legal and constitutional issues raised by the proposed language of section 4734. CRS expressed concern that the language would infringe the First Amendment, noting: "To the extent that the provision would prohibit counseling about legal activities, a court would seem likely to declare it unconstitutional." (Witmer Aff., Ex. F at 2).

 Congress nevertheless passed the provision without modification, and the President signed ...


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