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Genesis Healthcare v. The Delaware Department of Health and Social Services

Superior Court of Delaware

June 22, 2018

GENESIS HEALTHCARE d/b/a SEAFORD CENTER, Authorized Medicaid Representative of RUTH JONES, Appellant,

          Submitted: March 1, 2018

         On Appellant's Appeal from the Department of Health and Social Services Division of Medicaid and Medical Assistance Hearing Officer: AFFIRMED

          Margaret F. England, Esquire, of GELLERT SCALI BUSENKELL & BROWN, LLC, Wilmington, Delaware, Attorney for Appellant.

          A. Ann Woolfolk, Esquire, of the STATE OF DELAWARE DEPARTMENT OF JUSTICE, Wilmington, Delaware, Attorney for Appellee.


          LeGROW, J.

         This an appeal from the Department of Health and Social Services ("DHSS") Hearing Officer's decision concerning Appellant's denial of long term care Medicaid benefits due to her statutorily-excessive income. The appeal presents four primary questions, namely whether: (i) this Court has jurisdiction to hear the appeal; (ii) DHSS properly closed Appellant's application due to excessive income; (iii) the application denial and Fair Hearing violated Appellant's due process rights; and (iv) DHSS violated the Americans with Disabilities Act ("ADA") when it denied Appellant's application.

         The issues in this appeal turn upon the eligibility requirements under Delaware's Medicaid program, specifically when income is considered "available" to an allegedly incapacitated applicant and whether Delaware's requirements comply with the requirements under Section 1396a of the federal Medicaid statute. Because I find DHSS properly denied Appellant's Medicaid application, I affirm the Hearing Officer's decision. My reasoning follows.


         On March 9, 2016, Appellant Ruth Jones was admitted to the Seaford Genesis Healthcare Center ("Genesis"). Genesis diagnosed Jones with Alzheimer's disease, hypertension, pulmonary disease, and dementia. Based on her diagnosis, Genesis determined Jones was incompetent and could not make financial decisions for herself. Although Jones first was admitted as a short-term patient, it quickly became apparent that she would need extended 24-hour care.

         On June 2, 2016, Genesis applied for Long Term Care Medicaid (the "LTC application") on Jones' behalf. That same day, Jones, along with her daughter Rosemarie Tell, attended an application interview with the Division of Medicaid and Medical Assistance ("DMMA"). Because DMMA had reason to believe, based on the LTC application, that Jones' gross income exceeded the statutory limit for LTC eligibility, DMMA explained Jones would need to establish a Miller Trust in order to become Medicaid eligible. During the interview and in the application, Tell presented herself inaccurately as Jones' legal guardian.[1] Although Tell filed shortly before or after the interview a petition with the Court of Chancery to be appointed Jones' legal guardian, that petition remained pending and Tell was not appointed guardian until October 14, 2016. During the interview, DMMA provided Genesis and Tell with the first "We Need" letter. This letter explained that Jones, or Tell, would need to provide verification of the Miller Trust's establishment and proof of legal guardianship by June 17, 2016, in order to keep Jones' LTC application open.

         On July 5, 2016, DMMA sent a second "We Need" letter to Tell because DMMA had not received the requested information. Tell's guardianship application, however, was "delayed," preventing her from establishing a Miller Trust on Jones' behalf.[2] There is no indication in the record that Appellant advised DHSS of these delays. On July 26, 2016, having received no response to its two letters requesting documentation, DHSS denied Jones' LTC application because her income exceeded the statutory limit and she failed to establish a Miller Trust.

         Jones reapplied for LTC benefits, and on November 29, 2016, DHSS received confirmation that Jones established a Miller Trust during the month of November 2016. DHSS then notified Jones that she was approved for benefits effective November 1, 2016. Because Jones' LTC application initially was denied, Genesis incurred over $43, 000 in costs caring for Jones between March and November 2016.

         On March 1, 2017, Jones, by and through Genesis, filed a request for a Fair Hearing to review DHSS's application denial from July 26, 2016. After several extensions and delays, the Fair Hearing took place on August 9, 2017. At the Fair Hearing, Genesis argued an incapacitated individual's income cannot be counted toward the statutory Medicaid eligibility limit because an incapacitated individual's income is not "available" to the individual under federal law. Genesis also argued that denying an incapacitated individual's LTC application violated the applicant's due process rights and constituted disability discrimination in violation of the ADA.

         In a written decision, the Hearing Officer ruled federal law did not prohibit counting an incapacitated individual's income, and that DMMA properly determined Jones' income legally was available to her. The Hearing Officer also held the July 26, 2016, application denial did not violate Jones' due process rights because, under the United States Supreme Court's decision in Goldberg v. Kelly, [3] due process only applies when an individual's public assistance benefits erroneously are discontinued. Because Jones never received LTC benefits, the Hearing Officer reasoned Jones' due process rights were not infringed.

         The Hearing Officer further ruled DHSS properly closed Jones' application because state agencies are obligated under federal law to determine an applicant's LTC eligibility within 90 days of receiving the LTC application. The Hearing Officer concluded that DMMA provided Jones with all the required notifications and requests for verification and processed her LTC application in a timely manner under applicable law. The Hearing Officer's decision did not address Genesis's ADA claim. On November 11, 2017, Genesis appealed the Hearing Officer's decision to this Court.


         On appeal, Genesis argues the Hearing Officer erred in finding Jones' income legally was available, contending DHSS should have held Jones' LTC application open until the Court of Chancery appointed a guardian. Genesis also asserts the Hearing Officer erred in holding Jones' due process rights were not violated by DHSS's denial of her LTC application. Additionally, Genesis renews its argument that DHSS's denial constituted disability discrimination in violation of the ADA.

         DHSS first argues this Court lacks jurisdiction to hear the appeal because Genesis's request for a Fair Hearing was untimely even though Genesis's appeal from the Hearing Officer's decision below was timely. Alternatively, DHSS contends it properly counted Jones' income as "available" in determining her LTC eligibility. DHSS also maintains due process was satisfied during the application denial and the Fair Hearing processes. Finally, DHSS argues Genesis's ADA argument is overly broad and unsupported by law.


         An appellate court's review of a Board decision is limited. The Court merely determines whether the decision was supported by substantial evidence and free of legal error.[4] Upon review of an administrative agency's findings, the Court "will not substitute its judgment for that of an administrative body where there is substantial evidence to support the decision and subordinate findings of the agency."[5] "Substantial evidence is that which 'a reasonable mind might accept as adequate to support a conclusion.' It is more than a scintilla, but less than a preponderance of the evidence. It is a low standard to affirm and a high standard to overturn. If the record contains substantial evidence, then the Court is prohibited from re weighing the evidence or substituting its judgment for that of the agency."[6] When reviewing the Board's conclusions of law, the Court's review is de novo.[7]

         A. DHSS waived its timeliness argument.

         DHSS argues Jones' March 1, 2017, request for a Fair Hearing was untimely and therefore the appeal before this Court is time-barred. DHSS argues the 90-day time limitation to request a Fair Hearing began to run when DHSS denied Jones' LTC application on July 26, 2016. DHSS contends the request for a Fair Hearing was filed approximately eight months after Jones's LTC application was denied, the request therefore was untimely, and this appeal by extension also is untimely. DHSS argues the appellate authority of this Court is jurisdictional and therefore cannot be waived by the parties.

         Under Delaware's Medicaid program, an LTC applicant may request a Fair Hearing within 90 days of the application's denial.[8] Applicants seeking review of a Hearing Officer's decision may file an appeal to the Superior Court within 30 days of the Hearing Officer's decision.[9]

Under the waiver rule, issues or arguments that are not raised to an administrative agency cannot be considered by a reviewing court.... [T]he waiver rule "furthers the goal of permitting agencies to apply their specialized expertise, correct their own errors, and discourage litigants from preserving issues for appeal."[10]

         Here, DHSS did not argue to the Hearing Officer that Jones' Fair Hearing request was untimely, [11] and that issue was not addressed in the Hearing Officer's decision. Because the timeliness issue was not raised to the Hearing Officer, DHSS has waived that argument on appeal. Although DHSS correctly argues that the Court's appellate jurisdiction cannot be waived, DHSS is not contesting the timeliness of Genesis's appeal to this Court. Rather, DHSS disputes the timeliness of the request for a Fair Hearing. That argument does not implicate this Court's appellate jurisdiction because there is no question Jones' appeal to this Court was timely. Accordingly, because DHSS waived the issue of timeliness during the hearing stage, it may not raise it on an appeal before this Court.[12]

         B. DHSS properly closed Jones' LTC application because Jones' income exceeded the statutory limit and she failed to establish a Miller Trust.

         Genesis argues it was improper for DHSS to close Jones' LTC application when DHSS knew Jones was incapacitated and had no legal guardian. Genesis argues this denial violated federal mandates protecting incapacitated LTC applicants. Additionally, Genesis argues DHSS erred by counting Jones' income toward the statutory limits because Jones' income legally was "unavailable" to her due to her incapacity.

         1. Substantial evidence shows DHSS reasonably believed Tell served as Jones' legal guardian when her LTC application was denied on July 26, 2016.

         Genesis argues the record shows DHSS knew Jones had no guardian because DHSS requested copies of Jones' guardianship verification documents in both the June 2, 2016, and July 5, 2016, "We Need" letters. In other words, Genesis argues DHSS's request for guardianship verification is an admission that DHSS knew Jones had no legal guardian.

         Jones' June 2, 2016, LTC application asks the applicant "[h]as anyone been appointed as applicant's Legal Guardian/Power of Attorney?"[13] Jones' LTC application contains a check-mark next to "Yes___" and lists "Rosemarie Tell" as the name of Jones' legal guardian. In the same text box, the application notes "You will need to provide copies of Guardianship and/or Power of Attorney papers.[14]

         In its June 2, 2016, and July 5, 2016, "We Need" letters, DHSS directed Tell to provide guardianship verification documents.[15] At the Fair Hearing, DHSS testified that Tell represented herself as Jones' legal guardian and, by her representation, assumed responsibility for completing the "We Need" letters.[16] Additionally, the Hearing Officer found Tell signed Jones' LTC application as Jones' legal guardian.[17]

         Here, the record supports the Hearing Officer's finding that DHSS believed Jones had a guardian based on Genesis's and Tell's representations in the LTC application. In view of Tell's representation, DHSS sent Tell two "We Need" letters requesting documents verifying her appointment as guardian. Genesis argues the "We Need" letters show DHSS knew Jones had no legal guardian because the letters were asking for guardianship verification. The request for verification, however, was made after Tell presented herself to DHSS as Jones' legal guardian. Jones' LTC application notes that a person presenting herself as the applicant's legal guardian must provide supporting documentation. In other words, checking the box and signing the application was not sufficient proof that Tell had authority to act on Jones' behalf. Sending requests for guardianship verification, therefore, is consistent with DHSS's alleged belief that Tell was Jones' legal guardian.

         Accordingly, substantial evidence shows DHSS had reason to believe Tell already had been appointed Jones' legal guardian at the time she filed the LTC application. This finding largely makes no difference, however, because even if DHSS knew Jones was incapacitated with no legal guardian, it properly applied federal and state regulations regarding Jones' Medicaid eligibility.

         2. Section 1396a does not prohibit a state from counting an allegedly incapacitated individual's income when determining her eligibility for Medicaid.

         Genesis argues DHSS erred by counting Jones' income in determining her LTC eligibility. Genesis argues federal law requires state Medicaid programs only to count income that legally is available to an applicant. Genesis cites 42 U.S.C. § l396a(a)(l7), which provides, in relevant part, "A State plan for medical assistance must . . . include reasonable standards ... for determining eligibility for and the extent of medical assistance under the plan which . .. provide for taking into account only such income and resources as are, as determined in accordance with standards prescribed by the Secretary, available to the applicant or recipient... ."[18]

         Genesis then argues federal law prohibits treating an incapacitated applicant's income as available to the applicant because the income cannot be liquidated. In support of this assertion, Genesis cites 20 C.F.R. § 416.1201(a)(1), which provides, in relevant part, "If a property right cannot be liquidated, the property will not be considered a resource of the individual . . . ."[19] Genesis contends the cited provisions create a federal mandate that prohibits states from taking into account an incapacitated applicant's income when determining the applicant's eligibility for Medicaid.

         Genesis, however, misconstrues the meaning of "available income" under Section l396a(a)(l7). Under that section, a state's standard for determining eligibility only must consider "available income" "in accordance with standards prescribed by the Secretary [of DHHS]."[20] Genesis cites no standard promulgated by the Secretary to define "available income." Instead, Genesis reaches to an unrelated provision of the federal register to suggest "available income" means liquid resources under 20 C.F.R. § 416.1202(a)(1).

         Section 416.1201, however, defines resources for the purpose of determining eligibility for supplemental security income ("SSI") for the aged, blind, and disabled.[21] Genesis's attempt to conflate "available income" for LTC benefits with a liquid "resource" under the SSI program fails for two reasons. First, Medicaid distinguishes between "income" and "resources" and has separate eligibility rules for each. The reference to a "liquid resource" is wholly distinct from income.

         Second, there is nothing in Section 1396a from which this Court may conclude Congress intended to incorporate a definition from the regulations defining the SSI program. Although Section 1396a does incorporate definitions from other titles of the federal code, such incorporation is done explicitly with references to the precise provision supplying the definition.[22] This Court is not at liberty to mix-and-match definitions from across the entire body of federal law when the statute explicitly grants the DHHS Secretary the interpretive power.

         Further, no provision in Section 1396a supports the assertion that income is not available to incapacitated individuals. Accordingly, neither Section 1396a nor Section 416.1202 prohibit states from taking into account the income of an incapacitated individual in determining their eligibility for LTC.

         3. DHSS properly counted Jones' income as legally "available" under ...

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