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Machunis v. Rhode Island Department of Human Services

Superior Court of Rhode Island

January 9, 2017


         Providence County Superior Court

          For Plaintiff: Henry H. Katz, Esq.

          For Defendant: Gregory Hazian, Esq.


          TAFT-CARTER, J.

         The matter before the Court is an appeal from a decision of the Department of Human Services (DHS) affirming the denial of Catherine T. Machunis' (Mrs. Machunis) application for Medical Assistance. The DHS Hearing Officer found that Mrs. Machunis does not qualify for Medical Assistance benefits because the value of the Trust Indenture (Trust) exceeds the $4000 resource limit set forth in the DHS Medical Assistance Policy Manual. Mrs. Machunis requests that this Court reverse the decision of the DHS Appeals Office; remand the matter to the DHS Appeals Office for entry of a decision granting the appeal; or allow Mrs. Machunis to qualify for Medical Assistance as of December 1, 2014. For the reasons set forth below, this Court affirms the DHS decision. Jurisdiction is pursuant to G.L. 1956 § 42-35-15.

         I Facts and Travel

         Mrs. Machunis applied for Long Term Care with the DHS in December of 2014. (Admin. Hr'g (Hr'g) Decision 4, Jan. 19, 2016). The application, known as a DHS-2 Statement of Need, requires an applicant to set forth all assets held individually or in a trust. The application was completed and it documented that Mrs. Machunis was the beneficiary of a Trust executed on August 29, 1991. (Trust 1, Agency Ex. 9). The Trust held certain assets, including bank accounts. DHS ruled the assets held in the Trust totaled $78, 149.57. (Hr'g Decision 4). On September 9, 2015, DHS sent a notice denying Mrs. Machunis' application for Medical Assistance benefits because the resources available to her were in excess of the DHS resource limit of $4000. (Hr'g Decision 4; Agency Ex. 4, Denial Notice).

         Following the Agency's notice of denial, Mrs. Machunis filed a timely request for a formal hearing (Request for a Hearing, Oct. 7, 2015, Agency Ex. 1). A hearing was convened on December 3, 2015 (Hr'g Decision 4). The issues discussed at the hearing concerned the following three sections of the Executive Office of Health and Human Services Medicaid Code of Administrative Rules (MCAR): 0382.05.50 Trust Established Prior to 8/11/93; 0382.50.05.05 Evaluating a Medicaid Qualifying Trust; and 0382.50.15 Trust Evaluation Process. The issue before the Hearing Officer was whether the Trust should be counted as a qualifying resource in determining Mrs. Machunis' eligibility for Medical Assistance.

         Mrs. Machunis appeared through her counsel and presented testimony. (Hr'g Transcript (Tr.) 1, Agency Ex. 15). DHS representatives also appeared at the hearing. Id. at 2. DHS presented evidence that the Trust is a Medicaid Qualifying Trust established before August 11, 1993; the amount available for distribution to Mrs. Machunis from the principal is a resource; and, the amount available to Mrs. Machunis as income is the amount that could have been distributed to the beneficiary from the income. Id. at 9. Mrs. Machunis' sole dispute with DHS was the consideration of any money held in the Trust as a countable resource. Id. at 14, 15.

         Evidence was submitted to the Hearing Officer by Mrs. Machunis. The evidence included a copy of a letter from Navigant Credit Union listing three accounts that are associated with Mrs. Machunis' Trust, and copies of banking statements that detail interest accrued and notice of certificate of maturity. Other exhibits included copies of the Medical Assistance denial notice, the Trust, a Quit-Claim Deed, and a copy of the response from DHS legal counsel to the Long Term Care Administrator.

         The Trust authorizes the Trustee to pay for the needs and expenses of Mrs. Machunis during her lifetime. (Trust 3, Agency Ex. 9). The Trust further provides, in the event that Mrs. Machunis becomes physically or mentally disabled due to an illness, that the Trustee has the sole discretion to distribute the amount that is deemed best for her care, support, and education. Id. at 3, 4-5. Upon the death of Mrs. Machunis, the Trustee would settle all estate expenses and make equal payments of $5000 to each of Mrs. Machunis' three grandchildren. Id. at 4.

         Following the hearing, the Hearing Officer denied Mrs. Machunis' request for relief based on her finding that the Trust assets are a countable resource in excess of the resource limit of $4000. (Hr'g Decision 5, 6). Prior to making her determination, the Hearing Officer reviewed the testimony of DHS and Mrs. Machunis' attorney. Id. at 4. The Hearing Officer also analyzed the Trust, Mrs. Machunis' Medical Assistance denial notice, DHS Senior Legal Counsel's referral, and MCAR 0382.50.05 and 0382.50.05.05. Id. In doing so, the Hearing Officer concluded that DHS was correct in determining that Mrs. Machunis was ineligible because the assets held in her Trust were over the resource level for Medical Assistance. Id. at 6.

         After review of MCAR 0382.50.05, the Hearing Officer established that the MCAR supported the proposition that a trust established prior to August 11, 1993 is considered a Medicaid Qualifying Trust, may be irrevocable or revocable, and does not have use limitations on the funds. (Hr'g Decision 5). The Hearing Officer noted that MCAR 0382.50.05 establishes the procedure to properly evaluate a Medicaid Qualifying Trust when determining Medical Assistance eligibility. Id. Specifically, the Hearing Officer found that the maximum amount which the Trustee may distribute from a Medicaid Qualifying Trust is to be counted as an available resource. The maximum amount is the amount the Trustee could disburse if the Trustee exercised his or her full discretion under the terms of the Trust. The Hearing Officer further noted that under a Medicaid Qualifying Trust, distributions are available to an individual who established the Trust, whether or not the distributions are actually made. Id. Therefore, the Hearing Officer concluded that the Trustee had the full authority to disburse the assets held in the Trust to Mrs. Machunis. Id.

         The Hearing Officer further noted that the Trust authorizes the Trustee to "generally do all things in relation to the Trust Estate which the Settlor could do if living and this Trust had not been created." Id. Although Mrs. Machunis' attorney argued that the Trust was not created to allow discretion to give money to Mrs. Machunis but to withhold money, the Hearing Officer disagreed. Id. at 6. Rather, the Hearing Officer found that even though the Trust gives the Trustee discretion to withhold money, it also does not prevent the Trustee from giving money to Mrs. Machunis for her benefit. Id. Therefore, the Hearing Officer denied Mrs. Machunis' request for relief and deemed Mrs. Machunis ineligible for Medical Assistance. Id.

         Mrs. Machunis filed a timely appeal from the Hearing Officer's decision to this Court pursuant to § 42-35-15(b). On appeal, Mrs. Machunis argues that the Hearing Officer's decision is in violation of constitutional or statutory provisions; is in excess of their statutory authority; is made upon unlawful procedure; is affected by other error or law; is clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or is arbitrary or capricious or characterized by abuse of discretion, or is a clearly unwarranted exercise of discretion. Additionally, Mrs. Machunis contends that since she is a Long Term Care patient and is disabled, the Trustee is limited to distributions only from the principal income and cannot distribute any portion of the principal to her or for her benefit. Therefore, Mrs. Machunis argues the assets held in her Trust are not countable resources when determining Medical Assistance eligibility

         In response, DHS contends that the Hearing Officer properly denied Mrs. Machunis' application for Medical Assistance. DHS argues that Mrs. Machunis is the beneficiary of a revocable trust that was created prior to August 11, 1993. Further, DHS avers that Mrs. Machunis presented no evidence that her Trust falls under any exceptions that would render the assets in her Trust as not countable. Therefore, DHS argues that the proceeds of the Trust are countable resources under the MCAR and Mrs. Machunis is ineligible for Medical Assistance benefits.

         II Standard of Review

         The court reviews a contested administrative decision pursuant to the Administrative Procedures Act, § 42-35-15(g). This section provides that:

The court shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact. The court may affirm the decision of the agency or remand the case for further proceedings, or it may reverse or modify the decision if substantial rights of the appellant have been prejudiced ...

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