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State May Use Income First Method in Medicaid Eligibility for Nursing Home Patient - Wisconsin Dept. of Health and Family Services v. Blumer, No. 00-952 (U.S. 2002)

This case deals with the construction of a Medicaid statute designed to ameliorate the problem that if one partner in a marriage wanted to be eligible for a Medicaid nursing home bed, the couple had to spend all their community assets, leaving the remaining spouse (community spouse in the statute) destitute.  Congress passed a law allowing the community spouse to retain some assets and a minimum income.  If the community spouse's income was below the minimum, the institutionalized spouse could transfer some of her income to the support of the community spouse.  The law was intended to preserve enough assets to support the community spouse, both because this was more humane and because it would probably save the state money in the long run by keeping the community spouse out of the nursing home.  At the same time, the states were concerned that couples with adequate assets not be allowed to claim Medicaid funds and thus reduce the pool of support for more needy couples.

Most of the states construe the law as allowing them to consider the post eligibility finances of the community spouse in the initial eligibility hearing, thus including effect of income transferred from the institutionalized spouse in the determination of whether the community spouse has adequate support.  This is termed the income first model.  Plaintiff argues that the law demands that the state use a resources first model that looks only at the situation at the time of the eligibility hearing.  In this case, the using the resources first model would allow the community spouse to retain $89,335, while the income first model would allow only $74,822.

This is a classic administrative law case that turns on how much deference the court wants to give to the agency's determination of the meaning of the law.  The statute itself is ambiguous, the best evidence of which is the differing interpretation by the majority and dissenting opinions.  The case arose from a ruling by a Wisconsin state court finding the state's medicaid eligibility rules in conflict with the federal statute, which was then appealed to the United States Supreme Court.  The majority opinion explains its rationale in adopting the state's construction of the statute and bolsters this with a discussion of the importance of allowing the states discretion to run the Medicaid program so as to best use the available resources.  The majority also points to a letter from the Secretary of HHS supporting the state's interpretation.  The dissent points out that this position is in conflict with an earlier decision in which the court explained why it would not defer to the agency's interpretation of the law at issue.  (See United States v. Mead Corp., 533 U. S. 218 (2001)) Both the majority and the dissent explain why their view is the true expression of Congressional will.  In the end, the states get to keep using the income first method as a matter of deference in the interpretation of an ambiguous statute.

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