F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
MAY 15 2000
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
RODNEY H. KEITH, as representative
Plaintiff for CLANCY WAYNE
KEITH and SHIRLEY H. KEITH,
Plaintiffs - Appellants.
v. No. 99-1560
JAMES T. RIZZUTO, Executive
Director, Colorado Department of
Health Care Policy and Financing,
Defendant - Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 99-M-1673)
Bernard Algimantas Poskus (Jo Lauren Seavy, with him on the briefs), Pearson,
Milligan & Horowitz, P.C., Denver, Colorado, appearing for Plaintiffs-
Appellants.
Vivianne M. Chaumont, First Assistant Attorney General, State Services Section
(Ken Salazar, Attorney General, Barbara McDonnell, Chief Deputy Attorney
General, Michael E. McLachlan, Solicitor General, and Christine M. Arguello,
Deputy Attorney General, with her on the brief), Office of the Attorney General,
State of Colorado, Denver, Colorado, appearing for Defendant-Appellee.
Before TACHA, BALDOCK, and BRORBY, Circuit Judges.
TACHA, Circuit Judge.
Appellant Rodney Keith, representing his parents Clancy and Shirley Keith,
appeals from the district court’s order dismissing his claim. We exercise
jurisdiction pursuant to 28 U.S.C. § 1291 and affirm.
I.
Clancy Keith, a retiree, resides in a Colorado community care facility. He
suffers from dementia associated with Alzheimer’s disease and is expected to
require extensive care for the remainder of his life. Mr. and Mrs. Keith subsist
solely on Mr. Keith’s income, which consists of a civil service pension of $4800
gross ($3868.73 net) per month and a Veteran’s Administration pension of $67
per month.
In April 1999, Mr. Keith applied for Medicaid benefits from the Mesa
County Department of Social Services (“Department”). Shortly thereafter, he
executed an income trust in order to prevent his pension income from
disqualifying him from Medicaid eligibility. 1 The Department denied Mr. Keith’s
1
An income trust consists of its settlor’s unearned income. Colo. Rev. Stat.
Ann. § 15-14-409.7(3)(a). All funds remaining in the trust upon the settlor’s
death must be used to compensate the settlor’s state Medicaid program up to the
amount that the program has expended on the settlor’s behalf. Id. § 15-14-
409.7(3)(b). The Medicaid Act permits states to ignore such trusts in determining
an applicant’s Medicaid eligibility. See 42 U.S.C. § 1396p(d).
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application for Medicaid benefits pursuant to a regulation promulgated under
Colo. Rev. Stat. §§ 15-14-409.7 and 38-10-111.5 by appellee Rizzuto’s
department. 2 These provisions mandate that only those individuals whose
monthly incomes fall short of the average cost of nursing home care in the regions
where they reside may establish valid income trusts. In Mr. Keith’s region, the
average cost of nursing home care was $3034 per month. Because Mr. Keith’s
income exceeded this rate, the Department determined that his income trust was
invalid under Colorado law, and that he therefore was ineligible for Medicaid.
Appellant filed suit for declaratory and injunctive relief under 42 U.S.C. §
1983, arguing that Colorado law violates the federal guidelines for creation of a
valid income trust. Appellee filed a motion to dismiss under Fed. R. Civ. P.
12(b)(6). The district court granted the motion, finding that federal law does not
require states to recognize income trusts at all and thus that states are free to
place limits or conditions upon the recognition of such trusts.
II.
We review a 12(b)(6) dismissal de novo. Sutton v. Utah State Sch. for the
Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir. 1999). We accept all well pled
allegations in the complaint as true and view them in the light most favorable to
2
See 10 Colo. Code Regs. § 2505-10, 8.110.52, B, 2, b, 1). The regulation
implements the statutory requirements described below in substantially the same
terms as the statutes themselves.
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the nonmoving party. Id. “A 12(b)(6) motion should not be granted unless it
appears beyond doubt that the plaintiff can prove no set of facts in support of his
claim which would entitle him to relief.” Id. (internal quotation marks and
citation omitted).
Colorado has elected to participate in the Medicaid program through
enactment of the Colorado Medical Assistance Act, Colo. Rev. Stat. Ann. §§ 26-
4-101 to -904. To receive federal Medicaid dollars, Colorado must provide
specified medical services to certain classes of citizens through its state Medicaid
plan. See 42 U.S.C. §§ 1396 and 1396a(a)(10)(A)(i). Mr. Keith does not fall
within any of these classes. However, a state may opt to cover additional
individuals, such as Mr. Keith, who remain in medical institutions for periods in
excess of 30 days, provided that these persons’ incomes do not exceed a federally
specified ceiling. Id. § 1396a(a)(10)(A)(ii)(V). Colorado has elected
conditionally to cover such individuals through enactment of Colo. Rev. Stat.
Ann. § 26-4-301(1)(g).
42 U.S.C. § 1396a(a)(18) requires that state Medicaid plans comply with 42
U.S.C. § 1396p. Section 1396p(d) lays out the federal rules governing how trusts
should be counted in determining an individual’s income-eligibility for Medicaid.
If an individual who establishes a trust is able to revoke or benefit from the trust,
then the trust’s corpus and payments must be counted respectively as resources
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available and income accruing to that individual. Id. § 1396p(d)(3). However,
these rules do not apply to the following:
(B) A trust established in a State for the benefit of an individual if –
(i) the trust is composed only of pension, Social Security, and other
income to the individual (and accumulated income in the trust),
(ii) the State will receive all amounts remaining in the trust upon the
death of such individual up to an amount equal to the total medical
assistance paid on behalf of the individual . . . , and
(iii) the State makes medical assistance available to individuals
[pursuant to the optional extended care program allowed under 42
U.S.C. § 1396a(a)(10)(A)(ii)(V)].
Id. § 1396p(d)(4)(B) (emphasis added). Thus, § 1396p(d) does not apply to
income trusts.
Appellant contends that, since Colorado elected to provide optional
Medicaid coverage for nursing home care and to recognize income trusts for
purposes of determining eligibility for such coverage, it is barred from
conditioning that recognition on the amount of a settlor’s income. In support of
this contention, he argues first that § 1396p(d)(3) “allows” states to count trust
income and assets in determining Medicaid eligibility. Since § 1396p(d)(4)
exempts income trusts from § 1396p(d)(3), appellant concludes that states are not
allowed to count income trusts in determining Medicaid eligibility.
Appellant’s argument misapprehends the mandatory force of § 1396p(d)(3).
Section 1396p(d)(3) does not merely “allow” states to count trusts in determining
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Medicaid eligibility; it requires them to do so. 3 Section 1396p(d)(4) therefore
provides an exception to a requirement. States accordingly need not count income
trusts for eligibility purposes, but nevertheless may, like Colorado, opt to do so.
Appellant’s first argument is therefore without merit.
Appellant next argues that Colorado law is invalid under the doctrine of
conflict preemption. Congress may preempt state law under the Supremacy
Clause, U.S. Const. art. VI, cl. 2. Southwestern Bell Wireless Inc. v. Johnson
County Bd. of County Comm’rs, 199 F.3d 1185, 1189-90 (10th Cir. 1999).
Conflict preemption “occurs either when compliance with both the federal and
state laws is a physical impossibility, or when the state law stands as an obstacle
to the accomplishment and execution of the full purposes and objectives of
Congress.” Id. (internal indentation and citation omitted).
Appellant claims that it is impossible for Mr. Keith to comply with both
federal and state law because Mr. Keith complied with 42 U.S.C. § 1396p(d), but
cannot possibly comply with Colo. Rev. Stat. Ann. § 15-14-409.7. This claim is
without merit. The fact that it is possible to comply with one law while failing to
comply with another does not render compliance with both impossible. To the
3
Section 1396p(d)(3) provides that the corpus of a trust “shall be
considered resources available to the individual,” and that payments from the trust
“shall be considered income of the individual.” “It is a basic canon of statutory
construction that use of the word ‘shall’ indicates a mandatory intent.” United
States v. Myers, 106 F.3d 936, 941 (10th Cir. 1997).
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contrary, anyone who, unlike Mr. Keith, receives monthly pension income less
than the average monthly cost of nursing home care in his region will meet the
eligibility standards of both federal and Colorado law.
In addition, Colo. Rev. Stat. Ann. § 15-14-409.7 is not an obstacle to the
accomplishment and execution of the purposes and objectives of Congress. There
is a “strong presumption that the legislative purpose is expressed by the ordinary
meaning of the words used” in a statute. Ardestani v. INS, 502 U.S. 129, 136
(1991) (internal quotation marks and citation omitted). This presumption “is
rebutted only in rare and exceptional circumstances, when a contrary legislative
intent is clearly expressed.” Id. at 135-36 (internal quotation marks and citation
omitted); see also ABC Rentals of San Antonio, Inc. v. Commissioner, 142 F.3d
1200, 1206-07 (10th Cir. 1998) (“If the language is clear, the inquiry is over.”).
The legislative purpose behind § 1396 is clear from the language of the
statute. Congress required that states generally count trust assets and income for
purposes of determining Medicaid eligibility, but exempted income trusts from
that requirement. Thus, Congress left the states free to decide whether and under
what conditions to recognize such trusts. Appellant neither questions the clarity
of § 1396p(d)’s language nor directs us to any indications of contrary intent.
Thus, even accepting all allegations in appellant’s complaint as true and viewing
them in the light most favorable to him, we find that he can prove no set of facts
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in support of his claim which would entitle him to relief.
AFFIRMED.
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