STATE OF MICHIGAN
COURT OF APPEALS
MARY ANN HEGADORN, UNPUBLISHED
June 1, 2017
Plaintiff-Appellee,
v No. 329508
Livingston Circuit Court
DEPARTMENT OF HUMAN SERVICES LC No. 2014-028394-AA
DIRECTOR,
Defendant-Appellant.
ESTATE OF DOROTHY LOLLAR, by
DEBORAH D TRIM, Personal Representative,
Plaintiff-Appellee,
v No. 329511
Livingston Circuit Court
DEPARTMENT OF HUMAN SERVICES LC No. 2014-023895-AA
DIRECTOR,
Defendant-Appellant.
ROSELYN FORD,
Plaintiff-Appellee,
v No. 331242
Washtenaw Circuit Court
DEPARTMENT OF HEALTH AND HUMAN LC No. 15-000488-AA
SERVICES,
Defendant-Appellant.
Before: M. J. KELLY, P.J., and STEPHENS and O’BRIEN, JJ.
PER CURIAM.
-1-
The Department of Health and Human Services and its Director (“the Department”)
appeal by leave granted circuit court orders reversing administrative decisions that affirmed its
denial of three individuals’ applications for Medicaid benefits. Hegadorn v Dep’t of Human
Servs Dir, unpublished order of the Court of Appeals, entered December 22, 2015 (Docket No.
329508); Lollar v Dep’t of Human Servs Dir, unpublished order of the Court of Appeals, entered
December 22, 2015 (Docket No. 329511); Ford v Dep’t of Health and Human Servs,
unpublished order of the Court of Appeals, entered April 27, 2016 (Docket No. 331242). The
legal question presented in each case is relatively straightforward: Are assets placed by an
institutionalized individual’s spouse into a “Solely for the Benefit of” Trust (“SBO Trust”)
countable assets for determining whether the institutionalized individual is eligible for Medicaid
benefits? We answer that question in the affirmative.
“To be eligible for Medicaid long-term-care benefits in Michigan, an individual must
meet a number of criteria, including having $2,000 or less in countable assets.” Mackey v Dep’t
of Human Servs, 289 Mich App 688, 698; 808 NW2d 484 (2010). This criteria—requiring that
the individual have $2,000 or less in countable assets—is consistent with the purpose of Title
XIX of the Social Security Act, commonly known as the Medicaid Act, 42 USC 1396 et seq.,
which “created a cooperative program in which the federal government reimburses state
governments for a portion of the costs to provide medical assistance to low-income individuals.”
Ketchum Estate v Dep’t of Health & Human Servs, 314 Mich App 485, 488; 887 NW2d 226
(2016) (citation and internal quotation marks omitted). “Participation in Medicaid is essentially
need-based[.]” Mackey, 289 Mich App at 693. As this Court has previously recognized,
however, “[t]he act, with all of its complicated rules and regulations, has also become a legal
quagmire that has resulted in the use of several ‘loopholes’ taken advantage of by wealthier
individuals to obtain government-paid long-term care they otherwise could afford.” Id. at 693-
694. That is precisely the concern that the Department expresses in this case.
Mary Ann Hegadorn (“Mrs. Hegadorn”), the plaintiff in Docket No. 329508, began
receiving long-term care at the MediLodge Nursing Home in Howell, Michigan, on December
20, 2013. Approximately one month later, on January 23, 2014, her husband, Ralph D.
Hegadorn (“Mr. Hegadorn”), established the “RALPH D. HEGADORN IRREVOCABLE
TRUST NO. 1 (SOLE BENEFIT TRUST)” (“Hegadorn Trust”), which provided that it was
intended to be “a ‘Solely for the Benefit Of’ trust.” On April 24, 2014, approximately four
months after beginning long-term care and three months after her husband had established the
Hegadorn Trust, Mrs. Hegadorn applied for Medicaid benefits. The Department denied Mrs.
Hegadorn’s application on August 14, 2014, determining that her countable assets, including the
assets that were placed in the Hegadorn Trust, exceeded the applicable eligibility limit.
Dorothy Lollar (“Mrs. Lollar”), who is the plaintiff in Docket No. 3295111, began
receiving long-term care at the MediLodge Nursing Home in Howell, Michigan, on May 1, 2014.
Less than two months later, on June 19, 2014, Mrs. Lollar’s husband, Dallas H. Lollard (“Mr.
Lollar”), established the “DALLAS H. LOLLAR IRREVOCABLE TRUST” (“Lollar Trust”),
which provided that it was intended to “be a ‘Solely for the Benefit of’ trust.” On July 21, 2014,
approximately three months after beginning long-term care and one month after Mr. Lollar
established the Lollar Trust, Mrs. Lollar applied for Medicaid benefits. The Department denied
Mrs. Lollar’s application on August 29, 2014, determining that her countable assets, including
the assets that were placed in the Lollar Trust, exceeded the applicable eligibility limit.
-2-
Roselyn Ford (“Mrs. Ford”), the plaintiff in Docket No. 331242, began receiving long-
term care at the Saline Evangelical Nursing Home in Saline, Michigan, on December 5, 2013.
Approximately one month later, on January 10, 2014, Mrs. Ford’s husband, Herbert W. Ford
(“Mr. Ford”), established the “HERBERT FORD IRREVOCABLE TRUST” (“Ford Trust”),
which provided that it was intended to be “a ‘solely for the benefit of’ trust.” On January 30,
2014, almost two months after beginning long-term care and less than one month after Mr. Ford
established the Ford Trust, Mrs. Ford applied for Medicaid benefits. The Department denied
Mrs. Ford’s application on September 29, 2014, determining that her countable assets, including
the assets that were placed in the Ford Trust, exceeded the applicable eligibility limit.
In each case, the plaintiffs appealed the Department’s determination, and a consolidated
hearing before Administrative Law Judge (ALJ) Landis Y. Lain was held in Docket Nos. 329508
and 329511 with respect to Mrs. Hegadorn and Mrs. Lollar. ALJ Lain affirmed the
Department’s determination with respect to Mrs. Hegadorn and Mrs. Lollar, explaining, in
pertinent part, as follows:
In this case, the Ralph D. Hegadorn Trust [with respect to Mrs. Hegadorn
or the “Dallas Lollar” Trust with respect to Mrs. Lollar] meets all of the criteria of
a Medicaid trust. The person whose resources were transferred to the trust is
someone whose assets or income must be counted to determine MA eligibility,
and MA post-eligibility patient pay amount, a divestment penalty or an initial
asset amount. The trust was established by the Claimant’s spouse. The trust was
established/amended on or after August 11, 1993. The trust was not established
by will. The trust does not meet the condition of an exception A, special needs
trust; or exception B, pooled trust as described in BEM, Item 401.
* * *
In conducting the initial asset assessment the Department must count both
Claimant’s and his spouse’s total combined assets which were in existence as of
December 20, 2013 [with respect to Mrs. Hegadorn or May 1, 2014 with respect
to Mrs. Lollar], when Claimant entered long-term care. Claimant’s spouse did not
place assets into an irrevocable trust until January 23, 2014 [or June 19, 2014].
The spouse’s transfer of assets to an irrevocable trust does not undo the initial
asset assessment amount. The initial amount of combined assets was $487,755.33
[with respect to Mrs. Hegadorn or $62,500 with respect to Mrs. Lollar]. The
protected spousal amount limit was $115,920.00 [with respect to Mrs. Hegadorn
or $31,267 with respect to Mrs. Lollar] leaving Claimant with total countable
assets as of long-term care entry date of $371,835.33 [with respect to Mrs.
Hegadorn or $47,184 with respect to Mrs. Lollar]. Thus, the entire amount must
be counted for purposes of Medicaid eligibility determination.
* * *
The Department is to count as the person’s countable asset the value of the
trust’s countable income if there is any condition under which the income could
be paid to or on behalf of the person. Individuals can keep income made off of
-3-
property and the money goes to the individual not the trust. Property cannot be
taken out of the trust.
* * *
In an application for LTC for an individual, the assets of both spouses are
calculated when determining if there are excess assets. The couple is permitted to
retain $2,000 for the application spouse plus the amount calculated as the Spousal
Protected Resource amount. Medicaid is the joint state/federal program that
provides payment for covered health care services for eligible indigent
individuals. Medicaid is a means tested program. If Medicaid applicants have
sufficient assets, income or insurance to pay for health care they do not qualify for
the Medical Assistance program. Federal law allows a community spouse to
retain a certain amount of assets, income or insurance to pay for health care they
do not qualify for the Medical Assistance program. Federal law allows a
community spouse to retain a certain amount of assets. Any assets retained by the
applicant or community spouse which exceed those allowed by law are
necessarily countable. Transfers from the client’s spouse to another SBO
irrevocable trust are not divestment. Department policy requires that the
distributions to the community spouse be counted for the applicant’s eligibility.
The trust requires that the assets be distributed back to the beneficiary community
spouse during his/her lifetime. Therefore, there is a condition under which the
principal could be paid to or on behalf of the person, which makes the assets
countable.
In this case, the community spouse’s attempt to circumvent both federal
law and policy by creating a SBO trust to shelter excess personal assets is an
attempt to retain assets which are in addition to/exceed the amounts allowed by
policy and law. Such an attempt must fail. The claimant’s spouse cannot retain
assets in excess of that allowed by law and policy. Claimant and spouse are not
indigent. They, at all times relevant to this application, retained assets to pay
claimant’s LTC, and in fact, retained excess assets for purposes of Medical
Assistance benefit eligibility. The department’s determination must be upheld.
[Citations omitted.]
Similarly, a hearing before ALJ Alice C. Elkin was held in Docket No. 331242 with respect to
Mrs. Ford. ALJ Elkin reached the same conclusion as ALJ Lain:
Under its terms, [Mr. Ford]’s SBO Trust requires the annual distribution
of funds from the Trust to Spouse with the expectation that the entire principal of
the Trust property would be distributed to Spouse over his expected lifetime based
on life expectancy tables. The conditions for distributions of all income and
principal from the SBO Trust to Spouse are more likely to be satisfied than the
conditions leading to disbursement in the State Medicaid Manual example above
where funds are disbursed to the beneficiary only in the event the beneficiary
needs a heart transplant. Because there is a condition or circumstance for
payment of the entire SBO Trust principle to [Mr. Ford], the SBO Trust is a
-4-
countable asset under the State Medical Manual, with a value equal to the full
value of the countable assets in the SBO Trust.
* * *
The fact that the trustee controls distribution of the Trust assets does not
affect the assessment of whether the Trust is a countable asset. As discussed
above, the Department’s conclusion that the SBO Trust is a countable asset,
despite the fact that the trustee controls the distribution of assets, is supported by
federal law, Department policy, and the Stated Medicaid Manual and POMS.
Furthermore, under § 1396p(d)(2)(C), the determination of a countable asset
under § 1396p(d)(3)(B) is not dependent on whether the trustee has or exercises
any discretion to make payments. In fact, in in In re Rosckes, 783 NW2d 220,
225 (Minn App, 2010), the court held that, where the trust allowed the trustee to
pay the beneficiary income and principal at such times and in such portions as he
deemed advisable, all of the trust income and principal could have been paid to
the beneficiary in some capacity and was, thus, available to the beneficiary under
§ 1396p(d). Any argument that the assets in the SBO Trust are unavailable is
further undermined by BEM 400, p. 9, which states that the determination of
whether the asset is available for purposes of determining whether it is countable
does not apply when the asset is a trust, and BEM 401, p. 10, which states that an
asset is not considered unavailable because it is owned by the Medicaid trust
rather than a person.
Therefore, Spouse’s SBO Trust is, in accordance with Department policy
and consistent with federal law, a countable asset valued at the full amount of the
value of the assets in the trust corpus at the time of application. Claimant’s
counsel does not dispute that, when the value of the Claimant’s assets includes
Spouse’s SBO Trust, the difference between the value of those assets and the
applicable PSA exceeds the $2000 MA asset limit applicable to Claimant’s MA
asset eligibility. Therefore, the Department acted in accordance with Department
policy and federal law when it denied Claimant’s MA application on the basis that
the value of her countable assets exceeded the limit for MA eligibility.
In each case, the plaintiffs appealed the ALJs’ decisions to the circuit court. In Docket
Nos. 329508 and 329511, Livingston Circuit Judge Michael P. Hatty reversed ALJ Lain’s
decisions to affirm the Department’s denial of Mrs. Hegadorn’s and Mrs. Lollar’s applications.
Specifically, Judge Hatty’s order provided as follows: “ALJ Lane’s opinion determining that the
SBO trust assets were countable in determining eligibility is hereby reversed and benefits shall
commence at the date of initial application for the reasons placed on the record. Request by [the
Department] for stay denied.” Judge Hatty explained his decision, in pertinent part, as follows:
The situation is basically that the appellants have put -- or have had assets in a --
in a trust, so-called a SBO trust. And whether or not those assets are deemed
countable to the recipient, to the person who is in the institution. And as of the
date of the filing of the request for benefits, the assets were not countable to the
institutionalized spouse. And while it may have changed afterwards but I -- I
-5-
think I’m gonna rely on what the state of law was at the time that these two
appellants applied. One applied June of 2014, the other applied in April of 2014.
So it was clearly before that -- that date where -- the August date where the
Department of Human Services made a change in policy that effected how these
citizens positions will be put in a worst position than had the policy in effect at the
time of their filing had placed them in. I -- I look to a case that -- that speaks --
here. It’s called Hughes v McCarthy, it’s 734 F.3d 473 at 480, it’s a Sixth Circuit
case of -- that came out in 2013. It looks to me to be controlling. And Hughes
sort of stood for the proposition we had a annuity that was in place that had no
restriction on how it could be distributed to the community spouse that was not
countable to the -- to the institutionalized spouse. I don’t know how you would
favor a purchased annuity over a valid trust when they both would be -- appear to
be provided for under the law.
So I’m going to grant the appeal of the petitioners on both counts and I’m
gonna set aside the order of the Administrative Law Judge on both files. I further
think that the applicants’ position is supported by -- by -- supported by Section
1396p(c)(A)(A) and 1396p(c)(2)(B). So -- ‘cause that defines what assets are and
I think that it supports appellants’ position here. So that’s -- in conclusion I don’t
think that those -- the assets in question are -- I believe them to be non-countable
assets. I do believe -- them to be countable assets when working throughout this
formula. For those --
* * *
-- reasons I grant the appeal of the petition on both -- both files.
Thus, to use the lower court’s own summary, it “reversed ‘em and the benefits would be
available back to the date of the application . . . .” In Docket No. 331242, Washtenaw Circuit
Judge Timothy P. Connors also reversed the ALJ’s decision to affirm the Department’s denial of
Ford’s application, relying entirely on Judge Hatty’s decision in Docket Nos. 329508 and
329511. Judge Connors’s order provided as follows: “The relief requested by the Appellant,
Roselyn Ford, is hereby granted based upon the reasons contained in the record and stated on the
record.” These appeals followed.
“A final agency decision is subject to court review but it must generally be upheld if it is
not contrary to law, is not arbitrary, capricious, or a clear abuse of discretion, and is not
supported by competent, material, and substantial evidence on the whole record.” Vanzandt v
State Employees’ Retirement Sys, 266 Mich App 579, 583; 701 NW2d 214 (2005). “This Court
reviews a lower court’s review of an administrative decision to determine whether the lower
court applied correct legal principles and whether it misapprehended or misapplied the
substantial evidence test to the agency’s factual findings, which is essentially a clearly erroneous
standard of review.” Id. at 585. Because we conclude that the circuit courts did not apply the
correct legal principles in these appeals, we reverse the circuit court’s orders and reinstate the
decisions reached by the ALJs.
-6-
At the outset, it is undisputed that each trust at issue in this case was, in fact, a Medicaid
trust. See Bridges Eligibility Manual (“BEM”) 401, p 7. “How much of the principal of a trust
is a countable asset depends on” “[t]he terms of the trust, and” “[w]hether any of the principal
consists of countable assets or countable income.” BEM 401, p 11. BEM 401, p 12, provides, in
pertinent part, as follows with respect to irrevocable trusts: “Count as the person’s countable
asset the value of the countable assets in the trust principal if there is any condition under which
the principal could be paid to or on behalf of the person from an irrevocable trust.” Thus, the
issue before us is whether “there is any condition under which the principal could be paid to or
on behalf of the person from an irrevocable trust.” We conclude that there is.
In Docket No. 329508, the Hegadorn Trust provided, in pertinent part, as follows:
2.2 Distribution of Resources. During each fiscal year of the Trust,
Trustee shall from time to time during the fiscal year pay or distribute to me, or
for my sole benefit, during my lifetime such part of all of the net income and
principle (“Resources”) of the Trust as Trustee determines is necessary in order to
distribute the resources in an actuarially sound basis. In determining an
actuarially sound basis for distribution, Trustee shall use the life expectancy table
attached hereto as Exhibit 1, to determine the appropriate portion of Resources to
be distributed in any fiscal year. During my lifetime, no Resources of the Trust
can be used for anyone other than me. Notwithstanding anything contained
herein to the contrary, Trustee shall distribute the Resources of the Trust at a rate
that is calculated to use up all of the Resources during my lifetime. The
Resources of the Trust shall be valued on the 1st day of January of each fiscal year
of the Trust, except in the first year of the Resources of the Trust shall be valued
as of the date of their contribution to the Trust.
Likewise, in Docket No. 329511, the Lollar Trust provided, in pertinent part, the same:
2.2 Distribution of resources. During each fiscal year of the Trust,
Trustee shall from time to time during the fiscal year pay or distribute to me, or
for my sole benefit, during my lifetime such part or all of the net income and
principal (“Resources”) of the Trust as Trustee determines is necessary to
distribute the resources in an actuarially sound basis; provided, however, during
the fiscal year of the Trust, the distribution shall not be made to me until after
such time as Medicaid eligibility has been determined for my spouse, but in no
event later than May 31, 2015. In determining an actuarially sound basis for
distribution, Trustee shall use the life expectancy table attached as exhibit A, to
determine the appropriate minimum portion of Resources to be distributed in any
fiscal year. During my lifetime, no Resources of the Turst can be used for anyone
other than me, except for Trustee fees. Notwithstanding anything contained
herein to the contrary, Trustee shall distribute the Resources of the Trust at a rate
that is calculated to use up all of the Resources during my lifetime. The
Resources of the Trust shall be valued on the first day of June 1st of each fiscal
year of the Trust, except that in the first fiscal year, the Resources of the Trust
shall be valued as of the date of their contribution to the Trust.
-7-
Similarly, in Docket No. 331242, the Ford Trust provided the same as well:
2.2 Distribution of resources. During each fiscal year of the Trust,
Trustee shall from time to time during the fiscal year pay or distribute to me, or
for my sole benefit, during my lifetime whatever part of the net income and
principal (the Resources) of the Trust that Trustee determines is necessary to
distribute the resources on an actuarially sound basis. However, during the fiscal
year of the Trust, the distribution shall be made to me after August 1, 2014, but
before December 1, 2014. In determining an actuarially sound basis for
distribution, Trustee shall use the life expectancy table attached to this Agreement
as Exhibit A, to determine the appropriate minimum portion of the Resources of
the Trust may be used for anyone other than me, except for Trustee fees.
Notwithstanding anything in this Agreement to the contrary, Trustee shall
distribute the Resources of the Trust at a rate that is calculated to use up all of the
Resources during my lifetime. The Resources of the Trust shall be valued on the
first day of July each fiscal year of the Trust, except that in the first year the
Resources of the Trust shall be valued as of the date of their contribution to the
Trust.
Generally, this Court’s goal in interpreting trust language is to determine and give effect
to the settlor’s intent. In re Maloney Trust, 423 Mich 632, 639; 377 NW2d 791 (1985). In doing
so, we first look to the language of the trust itself, and, if unambiguous, we interpret it according
to its plain and ordinary meaning. Id. As is apparent from the plain and ordinary meaning of the
language above, all of the assets that were placed into each trust shortly before the Medicaid
applications were filed are to be “use[d] up” during the husbands’ lifetimes. Similarly, all three
trusts include language that instructs the trustees to distribute the assets “on an actuarially sound
basis,” which means that the “spending must be at a rate that will use up all the resources during
the party’s lifetime.” BEM 405, p 12. Thus, because there was a “condition under which the
principal could be paid to or on behalf of the person from an irrevocable trust,” the assets in the
trusts were properly determined to be countable assets by the Department. BEM 401, p 12.
This conclusion is consistent with applicable authority other than that of the BEM. Most
importantly, it is consistent with the statutory requirements set forth in 42 USC 1396p.
Specifically, 42 USC 1396p(d)(3)(B) provides, in pertinent part, as follows:
(B) In the case of an irrevocable trust--
(i) if there are any circumstances under which payment from the trust could be
made to or for the benefit of the individual, the portion of the corpus from which,
or the income on the corpus from which, payment to the individual could be made
shall be considered resources available to the individual, and payments from that
portion of the corpus or income--
(I) to or for the benefit of the individual, shall be considered income of the
individual, and
-8-
(II) for any other purpose, shall be considered a transfer of assets by the
individual subject to subsection (c) of this section; and
(ii) any portion of the trust from which, or any income on the corpus from
which, no payment could under any circumstances be made to the individual shall
be considered, as of the date of establishment of the trust (or, if later, the date on
which payment to the individual was foreclosed) to be assets disposed by the
individual for purposes of subsection (c) of this section, and the value of the trust
shall be determined for purposes of such subsection by including the amount of
any payments made from such portion of the trust after such date.
The circuit courts’ decisions to the contrary appear to have been premised on what Judge
Hatty perceived as a change “of law”—“I think I’m gonna rely on what the state of law was at
the time that these two appellants applied”—or “a change in policy”—“the August date where
the Department of Human Services made a change in policy that effected how these citizens
positions will be put in a worst position than had the policy in effect at the time of their filing had
placed them in.” Similarly, plaintiffs argue that the Department impermissibly changed its
policy to their detriment. We disagree.
The basis for the circuit courts’ and plaintiffs’ position in this regard is an August 20,
2014 memorandum by the Department that “advised that all SBO trust assets are deemed
countable pursuant to BEM 401, page 11 regarding Medicaid irrevocable trusts[.]” According to
the circuit courts and the plaintiffs, this decision—the decision to begin treating, or at least
consistently treat, SBO trust assets as countable assets—constituted an impermissible change of
law or policy, but we are unable to find any legal authority to support such a position. We are
unable to find any law or policy—including the applicable federal statutes, any provisions of the
BEM, or any other relevant authority—that was unilaterally and impermissibly changed by the
Department. Indeed, the Department expressly acknowledges that it did, in fact, “clarify” the
way it had treated SBO trust assets for Medicaid-eligibility purposes, explaining that the change
was required in order to comply with federal mandates, but that is not a change in law or policy.
We thus disagree with the circuit courts’ conclusions and the plaintiffs’ arguments that this
change was legally impermissible.
Relatedly, plaintiffs argue that, even if this change was legally permissible, it is
nevertheless inapplicable to them because the change cannot be retroactively applied. While we
appreciate the concerns raised by the plaintiffs and the Elder Law and Disability Rights Section
of the State Bar of Michigan (“amicus”), Hegadorn v Dep’t of Human Servs, unpublished order
of the Court of Appeals, entered September 14, 2016 (Docket Nos. 329508, 329511, 331242), in
this regard, we ultimately feel compelled to disagree. First, as identified by the Department,
there could be severe consequences statutorily imposed on the Department should it choose not
to comply with the federal requirements. See 42 USC 1396c; see also Nat’l Fed of Independent
Business v Sebelius, ___ US ___; 132 S Ct 2566; 183 L Ed 2d 450 (2012). Furthermore, the
plaintiffs and amicus do not cite, and we are unable to find, any authority to support the
proposition that individuals who are not entitled to Medicaid benefits should nevertheless receive
them based on an alleged change in interpretation of applicable state and federal authority.
While they do cite to cases involving the retroactive application of benefits in somewhat similar
scenarios, it appears that those cases generally involve situations where a person was denied
-9-
benefits that they were entitled to, not situations where a person was denied benefits that they
were not entitled to. See, e.g., Tompkins v Dep’t of Social Servs, 97 Mich App 218; 293 NW2d
771 (1980). Accordingly, we see no reason to retroactively apply the previous interpretation
under the facts and circumstances of this case.
Nevertheless, the plaintiffs’ primary arguments on appeal focus more on the validity of
the change itself, i.e., whether the change in interpretation is correct, than the timing of the
change itself. Specifically, they argue that the term “person” in BEM 401 and “individual” in 42
USC 1396p, when reviewed in context, refer only to the Medicaid applicant, i.e., the
institutionalized spouse, not the Medicaid applicant’s spouse, i.e., the community spouse.
Because the SBO trusts at issue in this case were solely for the benefit of the husbands, i.e., the
community spouses, the plaintiffs claim, the trusts’ assets are not countable as a matter of law.
We disagree.
This dispute, which essentially asks us to interpret and apply federal statutes and related
administrative manuals, is a question of law that is reviewed de novo. Walters v Nadell, 481
Mich 377, 381; 751 NW2d 431 (2008). “When interpreting a federal statute, [o]ur task is to give
effect to the will of Congress . . . . To do so, [w]e start, of course, with the statutory text, and
[u]nless otherwise defined, statutory terms are generally interpreted in accordance with their
ordinary meaning.” Id. at 381-382 (citations and internal quotation marks omitted; alterations in
original). This is true even when reviewing interpretations and applications made by
administrative agencies. Mericka v Dep’t of Community Health, 283 Mich App 29, 36; 770
NW2d 24 (2009). “Principles of statutory interpretation apply to the construction of
administrative rules.” City of Romulus v Mich Dep’t of Environmental Quality, 260 Mich App
54, 65; 678 NW2d 444 (2003).
Applying those rules to the authority at issue in this case, we are of the view that the
trusts’ assets, despite being for the sole benefit of the husbands according to the trusts’ language,
were correctly determined to be countable assets for purposes of the plaintiffs’ Medicaid
eligibility. There are a plethora of federal statutory provisions that support this view. For
example, 42 USC 1396r-5(c)(2) provides as follows:
(2) Attribution of resources at time of initial eligibility determination
In determining the resources of an institutionalized spouse at the time of
application for benefits under this subchapter, regardless of any State laws
relating to community property or the division of marital property--
(A) except as provided in subparagraph (B), all the resources held by
either the institutionalized spouse, community spouse, or both, shall be considered
to be available to the institutionalized spouse, and
(B) resources shall be considered to be available to an institutionalized
spouse, but only to the extent that the amount of such resources exceeds the
amount computed under subsection (f)(2)(A) of this section (as of the time of
application for benefits).
Similarly, 42 USC 1396p(h)(1) provides as follows:
-10-
(h) Definitions
In this section, the following definitions apply:
(1) The term “assets”, with respect to an individual, includes all income
and resources of the individual and of the individual’s spouse, including any
income or resources which the individual or such individual’s spouse is entitled to
but does not receive because of action—
(A) by the individual or such individual’s spouse,
(B) by a person, including a court or administrative body, with legal
authority to act in place of or on behalf of the individual such individual’s spouse,
or
(C) by any person, including any court or administrative body, acting at
the direction or upon the request of the individual or such individual’s spouse.
42 USC 1396d(d)(2)(A)(i)-(ii) likewise provides, in pertinent part, as follows:
(d) Treatment of trust amounts
* * *
(2)(A) For purposes of this subsection, an individual shall be considered
to have established a trust if assets of the individual were used to form all of part
of the corpus of the trust and if any of the following individuals established such
trust other than by will:
(i) The individual.
(ii) The individual’s spouse.
In our view, it is apparent from this clear legislative language that Congress intended that
when making an initial eligibility determination, states are to consider assets held by the
institutionalized spouses—in this case, the plaintiffs—and the community spouses—in this case,
the plaintiffs’ husbands. 42 USC 1396r-5(c)(2). The Legislature has clearly indicated that an
institutionalized individual’s assets includes not only those that he or she has, but also those that
his or her spouse has, 42 USC 1396p(h)(1), and that remains true even when those assets are
placed into a trust by the spouse, 42 USC 1396d(d)(2)(A)(i)-(ii). That is precisely the case here.
While we appreciate that there are several statutory subsections that, when reviewed in isolation,
could arguably support the plaintiffs’ claim that SBO Trust assets in these types of situations
should not be considered, we are simply not willing to overlook what is, in our view, a clear
indication by Congress to the contrary.
Accordingly, because we agree with the Department’s and ALJs’ conclusion that assets
placed by an institutionalized individual’s spouse into an SBO Trust are countable assets for
-11-
determining whether an individual is eligible for Medicaid benefits, we reverse the circuit courts’
orders providing otherwise and reinstate the decisions reached by the ALJs.
Reversed.
/s/ Michael J. Kelly
/s/ Cynthia Diane Stephens
/s/ Colleen A. O'Brien
-12-
Roselyn Ford v. Department of Health and Human Services
Combined Opinion