Courts Get Tough With Medical Assistance Benefits

According to the opinion from the Supreme Court case, Shaak v. Department of Public Welfare, PICS Case No. 00-0555 (Pa. March 27, 2000), Elizabeth Shaak created an irrevocable trust on April 6, 1998, into which she transferred ownership of her Lebanon home to her children. Shaak reserved the right to live in the home as long as she was able.



The trustees were given the power to retain, lease or sell the property 90 days after Shaak vacated the home.



Two years after the agreement was executed, Shaak entered a nursing home. The costs of her care were offset by medical assistance payments. Neither Shaak nor the trustees made the existence of the trust known at the time Shaak entered the home or when she was later transferred to a different home.



On April 24, 1992, the trustees sold the house and deposited the proceeds into a bank account.



Two years later, an income-maintenance caseworker from the Lebanon County Assistance Office requested information about Shaak’s assets. One of the trustees disclosed that the home had been sold and $76,894 in proceeds remained in the account.



A CAO caseworker notified Shaak several months later that she was ineligible for MA since the value of the trust was considered “excess countable resources” pursuant to 55 Pa. Code ?178.121 and the Omnibus Budget Reconciliation Act of 1993.



An individual is eligible for MA if his or her resources total $2,400 or less.



Shaak appealed to DPW, claiming that neither statute applied. DPW agreed but said that under 55 Pa. Code ?178.4, the eligibility determination was correct.



?178.4 states that resources held in a trust established before July 30, 1994 should be considered resources to be used for the recipient’s food, shelter, clothing and medical care.



When the Commonwealth Court considered Shaak’s appeal, it found that Section 178.4 requires a two-step process before an asset can be defined as an “available resource.”



First, the court said, DPW must determine whether the item is a resource under a subsection of the statute and then it must assess whether that resource is available.



DPW had not considered whether Shaak’s trust was available because it had not assessed whether she owned the principal of the trust.



Section 178.4 states that “establishing the type of ownership is required to determine the availability and the value of the applicant/recipient’s resources.”



Relying on a 1987 state Supreme Court case, Lang v. DPW, 528 A.2d 1335 (Pa. 1987), the court said “availability” could not be determined simply by Shaak’s status as a trust beneficiary. The case was remanded to DPW for a determination of ownership.



On appeal to the Supreme Court, Newman said Shaak had argued that no statute applied to the trust because it was created before Section 178.4 and OBRA 93 were created.



DPW’s position was that Section 178.4 governed the issue.

High Court Precedent

Newman said she could see why there could be confusion on the parties’ part, but nonetheless the Commonwealth Court ignored precedent.



“These opposing views are understandable because Medicaid law regarding the treatment of trusts has undergone significant transformation during the past ten to fifteen years. Nonetheless, we hold that the Commonwealth Court erred because it ignored our holding in Rosenberg v. Department of Public Welfare, [PICS Case No. 96-6911 (Pa. July 18, 1996) Flaherty, J. (13 pages)], which controls the disposition of this matter” Newman said.



“The matter before us is virtually indistinguishable from the facts of Rosenberg and Mrs. Shaak has not presented any argument or cited any authority to urge us to deviate from our finding there.”



In that case, Mary Rosenberg’s husband, Louis, left her $157,000 outright when he died in 1976, as well as $65,000 in a trust, with her son John as trustee. Rosenberg’s health forced her to go into a nursing home in 1987, the opinion said.



Between 1987 and 1992, Rosenberg exhausted the $157,000 paying for her own care. She applied for Medicaid in February 1992. DPW denied her application on the grounds that the $55,000 remaining in trust was available to her.



The trust was set up solely for Rosenberg’s benefit, and the trustee was instructed to pay her the net income quarterly. The trustee was also authorized, in his discretion, to use the principal for “the comfort, welfare, and maintenance and support, for educational requirements, medical and surgical expenses, and other unusual needs of” Rosenberg.



Upon Rosenberg’s death, the principal remaining in the trust was to pass to her children and grandchildren.



The state Supreme Court found that without specific language included in the trust, it could not be inferred that the husband intended the trust funds be held for grandchildren and other family members instead of paying for his wife’s long-term medical care, despite a trustee’s claims to the contrary.



The court noted that the trust did not include other lifetime beneficiaries and that the woman wasn’t receiving any public benefits at the time her husband established the trust.



The justices said the most important factor was to determine the settlor’s intent.



In addition to Lang, the Rosenberg court studied Snyder v. DPW, 528 Pa. 491, 598 A.2d 1283 (1991) and Commonwealth Bank and Trust Co. v. DPW, 528 Pa. 482, 598 A.2d 1279 (1991).



In Lang and in Snyder, a trust was set up by a parent for the benefit of a disabled child along with other children. Because the trusts in Lang and Snyder had multiple beneficiaries and the disabled beneficiaries were receiving public assistance while the settlor was still alive, an intention could be inferred on the part of the settlor that such benefits would continue.



But the Rosenberg court said the Commonwealth Bank case was “virtually indistinguishable”.



In Commonwealth Bank, the trust document gave the trustee discretion to use the principal for the welfare of a sole beneficiary. The justices presumed that the settlor intended that the principal be an available resource.



Newman said Shaak’s case should follow in the footsteps of Rosenberg and Commonwealth Bank.



“Mrs. Shaak clearly intended that the trust be used for her benefit during her lifetime. The document specifically provides that the trust estate is ‘for the primary benefit of the settlor’ and allows principal ‘without limit as to amount’ to be distributed for ‘the maintenance, welfare, comfort and happiness of the settlor,’” Newman wrote.



“Further, akin to Rosenberg, Mrs. Shaak is the sole beneficiary of the trust and did not receive public assistance at the time the trust was created.”



And, like Rosenberg, Shaak’s trust was created before the effective date of OBRA 93, but after OBRA 93′s predecessor statute was enacted.



“The only real differences between this case and that of Rosenberg is that the trust at issue in Rosenberg was a testamentary trust created in 1976, rather than the 1988 inter vivos trust at issue here,” Newman said.



“We have not found that these two factors are of such significance that we are compelled to reach a different result and Mrs. Shaak has made no argument that these two factors distinguish this case from Rosenberg.”

Comatose Beneficiary