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April 30, 1998


The opinion of the court was delivered by: SEYBERT


 SEYBERT, District Judge:

 Plaintiff Brian Sullivan brings this § 1983 action against defendants County of Suffolk, Suffolk County Police Department, Police Officer John Cahill and Police Officer Renee Buschor after defendant Cahill shot Sullivan, who was unarmed, in the back as Sullivan fled from the officers. As a result of this incident, the plaintiff was rendered a quadriplegic and will require a lifetime of medical assistance.

 In January 1997, the parties agreed before Magistrate Judge Michael Orenstein to settle the action for a confidential amount, provided that the Suffolk County Department of Social Services ("DSS") was placed on notice that a supplemental needs trust would be created to hold the settlement assets and to provide for the plaintiff's necessities throughout his life. At the time the settlement of this action was reached, the DSS held a Medicaid lien filed pursuant to New York Social Services Law § 104-b in the amount of $ 555,959.26 for plaintiff's medical assistance since his injury.

 On March 11, 1997, plaintiff's counsel sent a proposed order settling the action and a draft supplemental needs trust. The defendants' willingness to agree to the trust then changed in light of the March 25, 1997 decision of the New York State Court of Appeals in Cricchio v. Pennisi, 90 N.Y.2d 296, 683 N.E.2d 301, 660 N.Y.S.2d 679 (1997), which altered the ability of settling parties to create supplemental needs trusts without prepayment of any outstanding Medicaid liens. The decision of the Court of Appeals affected certain language in the proposed order and the supplemental needs trust, which provided that such payment of liens would not be made until the death of the beneficiary, Brian Sullivan.

 Because of the decision in Cricchio, the parties and the DSS entered into a stipulation, so ordered by the Court on July 9, 1997, agreeing that the Medicaid lien would be reduced and compromised to the amount of $ 200,000. The entire settlement amount would be placed in an interest bearing escrow account. From this account, all but the $ 200,000 would be transferred to provide the assets to the supplemental needs trust and to pay plaintiff's counsel for his legal fees and disbursements. The stipulation further. provided that the $ 200,000 would remain in escrow pending this Court's determination as to whether the lien must be satisfied for $ 200,000 prior to the establishment of the supplemental needs trust or whether reimbursement to the DSS for medical assistance benefits provided prior to the settlement be deferred until the death of the plaintiff. If the Court renders a decision favorable to the Department of Social Services, the parties agreed that the $ 200,000 would be paid to DSS to satisfy the Medicaid lien. The parties have fully briefed these legal issues.


 Under New York's Estates, Powers and Trust Law § 7-1.12, a "supplemental needs trust" is a discretionary trust established for the benefit of a person with a severe or persistent disability. N.Y. Est. Powers & Trusts L. (the "EPTL") § 7-1.12(a)(5) (McKinney Supp. 1998). The purpose of such a trust is to provide a supplemental source of income for the disabled to cover expenses not already covered by government assistance programs, such as Medicaid. See id. § 7-1.12(a)(5)(i). As such, the trust may not provide for the payment of items that are concurrently being paid for by other government programs, with the few exceptions for necessary food, clothing and shelter items. See id. § 7-1.12(a)(5)(ii). Section 7-1.12(b)(3) further provides that neither principal nor income of the trust are to be considered the beneficiary's resource for purposes of other government programs until an actual distribution is made. The State is entitled, however, to recoup amounts of all public assistance from the trust assets remaining upon the beneficiary's death. N.Y. Soc. Serv. L. § 366(2)(b)(2)(iii) (McKinney Supp. 1998).

 In this case, the Court faces the situation where the supplemental needs trust is to be created out of the settlement proceeds from the incident giving rise to the disability. The question has arisen, however, as to whether any outstanding Medicaid liens placed pursuant New York Social Services Law § 104-b have to be satisfied prior to transferring the settlement funds to the trust. Assuming that such satisfaction is not required, the parties to this action previously agreed to a deferred payment of the lien until the death of the plaintiff/beneficiary. After filing the proposed supplemental needs trust, such practice was expressly rejected in Cricchio v. Pennisi, 90 N.Y.2d 296, 683 N.E.2d 301 660 N.Y.S.2d 679 (1997).

 In Cricchio, the New York Court of Appeals determined that any outstanding Medicaid liens had to be repaid from settlement funds prior to the creation of a supplemental needs trust. Because Medicaid is a jointly funded federal and state medical assistance program, the court examined both federal and state laws regarding the power of the state agency administering Medicaid to recoup sums from third-parties owing some legal responsibility to pay for the medical assistance furnished under the state plan. Id. at 305, 683 N.E.2d at 303, 660 N.Y.S.2d at 681. As part of this scheme, federal and state law require Medicaid applicants to assign to the state agency their rights to seek reimbursement and collect from third-parties up to the amount of the medical assistance paid. See id. (citing 42 U.S.C. § 1396k[a][1][A]; 42 C.F.R. § 433.146[c]; N.Y. Soc. Serv. L. § 366[4][h][1]; 18 N.Y.C.R.R. § 360-7.4[a][6]).

 One of DSS' powers in seeking this recoupment is the ability under Social Services Law § 104-b to place a lien for public assistance on personal injury claims and suits against third parties to the extent of the expenditures made on the recipient's behalf. See id. at 306, 683 N.E.2d at 304, 660 N.Y.S.2d at 682. This lien may attach not only to any verdict, judgment or award, but to the proceeds of the settlement of any such action. See id. Moreover, notwithstanding the provision in § 369(2) of the Social Service Law providing that a Medicaid lien may not be imposed on the property of the recipient prior to his death, this section exempts recoveries under § 104-b's lien provisions on settlement funds. See id. at 306, 683 N.E.2d at 304, 660 N.Y.S.2d at 682. The court further found that these state laws are consistent with the congressional scheme whereby states are to collect funds from responsible third parties, satisfy the balance of medical assistance expenses and then transfer the remainder to the recipient. See id. at 307, 683 N.E.2d at 304, 660 N.Y.S.2d at 682.

 Based on the statutory scheme and Medicaid's role as a "payor of last resort," the Court of Appeals in Cricchio found that any Medicaid lien imposed under § 104-b had to be satisfied before the settlement funds could be transferred into a supplemental needs trust. In examining a similar scheme under Minnesota law, the district court for district of Minnesota reached the same conclusion. See Norwest Bank North Dakota, N.A. v. Doth, 969 F. Supp. 532, 534 (D. Minn. 1997). The Court is not aware of any other decisions addressing this issue at this time.

 In this case, the plaintiff argues that the federal supplemental needs trust provisions should be interpreted to require that the payback of the Medicaid lien be made upon his death. Plaintiff draws the substance of this argument from a section of the Medicaid Act, 42 U.S.C. § 1396p(d)(4)(A), which provides that trust assets are not considered available resources in computing eligibility for Medicaid. In addition, plaintiff points out that no Medicaid lien may attach to the recipient's property prior his death. See 42 U.S.C. § 1396p(a)(1); N.Y. Soc. Serv. L. § 369(2)(a). Rather, under the federal scheme, upon the death of the disabled individual, the remainder of the trust would revert to the state to pay off any past medical assistance paid for under Medicaid. 42 U.S.C. § 1396p(d)(4)(A). Plaintiff argues, therefore, that the plain meaning of this statute requires that any claim by the State be deferred until the death of the recipient and the federal statute does not provide for any reimbursement to the State prior to the creation of the trust fund. Thus, plaintiff argues that the statute requires that a total lifetime of medical assistance be reimbursed only once upon plaintiff's death.

 The Court rejects these arguments for substantially the same reasons they were rejected in Cricchio and Doth. First, § 1396p(d)(4)(A) refers to the eligibility for Medicaid and provides that eligibility will not be affected by the existence of a supplemental needs trust. Doth, 969 F. Supp. at 534. As noted in Doth, plaintiff's reading of § 1396p(d) would allow the Medicaid recipient to circumvent the lien law by placing settlement awards in a supplemental needs trust. Id. In addition, § 1396p(d)'s eligibility requirement is consistent with the legislative purposes of the state statute creating supplemental needs trust. See N.Y. E.P.T.L. § 7-1.12 (purpose of trust is to supplement rather than supplant funds available from government programs). Nothing in the eligibility requirements for Medicaid ...

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