WISCONSIN DEPARTMENT OF HEALTH AND FAMILY SERVICES v. BLUMER
The spousal impoverishment provisions of the Medicare Catastrophic Coverage Act of 1988 (MCCA) permit a spouse living at home to reserve certain income and assets to meet the minimum monthly maintenance needs he or she will have when the other spouse is institutionalized, usually in a nursing home, and becomes eligible for Medicaid. The MCCA's resource allocation rules provide that, in determining the institutionalized spouse's Medicaid eligibility, a portion of the couple's resources, called the "community spouse resource allowance" (CSRA), shall be reserved for the benefit of the community spouse. The MCCA allows an increase in the standard allowance if either spouse shows, at a state-administered hearing, that the community spouse will not be able to maintain the statutorily defined minimum level of income on which to live after the institutionalized spouse gains Medicaid eligibility. In 1996, after entering a Wisconsin nursing home, Irene Blumer applied for Medicaid through her husband Burnett and ultimately sought a higher CSRA. Under the "income- first" method for determining whether the community spouse is entitled to a higher CSRA, which Wisconsin uses, the State considers first whether potential income transfers from the institutionalized spouse will suffice to enable the community spouse to meet monthly needs once the institutionalized spouse qualifies for Medicaid. Subsequently, an examiner denied Blumer's request. The Court of Appeals affirmed, but the Wisconsin Court of Appeals reversed, concluding that the State's income-first statute conflicted with the MCCA, which, the appeals court held, unambiguously mandates the resources-first method.
Is the income-first method of determining whether a community spouse is entitled to a higher community spouse resource allowance consistent with the Medicare Catastrophic Coverage Act of 1988?
Legal provision: 42 U.S.C. 1396
Yes. In a 6-3 opinion delivered by Justice Ruth Bader Ginsburg, the Court held that the income-first method qualified as a permissible interpretation of the MCCA. The Court reasoned that neither the text not the structure of the MCCA barred Wisconsin's use of the income-first method. Among the Court's findings were that that income-first method did not render meaningless the MCCA's key prohibition against deeming income of the community spouse available to the institutionalized spouse and that the Secretary of Health and Human Services, who possessed the authority to prescribe standards relevant to the issue at hand, had declared in a proposed rule that the Federal Government ought to leave to states the decision whether to use the income-first method or the resources-first method. Justice John Paul Stevens, joined by Justices Sandra Day O'Connor and Antonin Scalia, dissented.
ORAL ARGUMENT OF MAUREEN M. FLANAGAN ON BEHALF OF THE PETITIONER
Chief Justice Rehnquist: We'll hear argument first this morning in Number 00-952, the Wisconsin Department of Health and Human Services v. Irene Blumer.
Mr. Flanagan: Mr. Chief Justice, and may it please the Court:
In 1988, Congress enacted the spousal impoverishment protections of the Federal Medicaid Act, 42 U.S. Code section 1396r-5, to accomplish two competing purposes.
First, Congress sought to protect spouses living at home from impoverishment when the other spouse is institutionalized and requires long-term nursing home care.
Secondly, Congress sought to ensure that married couples seeking medicaid bear a fair share of the cost of such care.
This case concerns whether States have the discretion to achieve those competing goals by taking into account at the time medicaid eligibility is determined available income which the nursing home spouse is permitted to use after eligibility to support the at-home spouse.
When the nursing home spouse applies for medicaid, section 1396r-5 permits the community spouse to retain certain income and resources to meet his own monthly maintenance needs.
The statute permits an increase in the standard resource allowance, however, if the at-home spouse can show at a fair hearing that the allowance will be inadequate to provide him with income at the State-protected level once the nursing home spouse qualifies for medicaid.
When making this determination, Wisconsin, like more than 30 other States, first considers whether income available to the at-home spouse from the nursing home spouse will be sufficient to ensure the protected level of income once medicaid eligibility occurs.
This method of determining whether to increase or to substitute the standard resource allowance is called the income-first rule.
Unidentified Justice: And what do the other States do?
Mr. Flanagan: The remaining States use a methodology called resource first, in which they look first to the additional resources above the standard resource allowance.
These cases only arise where the couple has resources above the standard allowance.
In this case--
Unidentified Justice: It would be very helpful to me if, right at this point, you pointed the statutory... pointed out the statutory provision that authorizes the State to transfer income at this stage.
Mr. Flanagan: --The statutory provision, I think, specifically is found in 42 U.S. Code 1396a(a)(17), which deals with State standards for eligibility and the Secretary's authority to set standards for determining availability.
Unidentified Justice: Do you have a handy reference in the brief somewhere to the, where we can see that?
Mr. Flanagan: It's in the Attorney... the Solicitor General's appendix at... the first thing in their appendix is the codified statute, 30... 1396r-5, the one we are discussing primarily, and... no, I'm sorry, 1396a is in... the first thing in the Solicitor General's appendix.
Unidentified Justice: Page 1a?
Mr. Flanagan: Yes, and (a)(17)--
Unidentified Justice: That's 8a.
It looks like 7--
Mr. Flanagan: --Yes, Your Honor, it is.
It is correct.
Unidentified Justice: --Then where in number (17) is the language that you're answering Justice Stevens with?
Mr. Flanagan: Okay, a(a)(17) provides that the Secretary shall include reasonable standards, and then you skip the one parenthetical, for determining eligibility for and the extent of medical assistance under the State plan, and then under (b), 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, et cetera.
Unidentified Justice: Well, and let me ask you a question on this point, if I may.
There is a section, 5(b)(1), r-5(b)(1) of section 1396 that says that pre-eligibility, none of the income of the community spouse shall be deemed available to the institutionalized spouse, right?
Mr. Flanagan: That's right.
Unidentified Justice: And you're talking now about post eligibility?
Mr. Flanagan: We're talking about a determination made at the point of eligibility, but which concerns income available post eligibility.
Unidentified Justice: Well, it says pre-eligibility none of the income of the community spouse shall be deemed available to the institutionalized spouse.
Mr. Flanagan: That's right.
Unidentified Justice: And that provision wouldn't make sense if income of the community spouse itself included income of the institutionalized spouse.
Mr. Flanagan: Well, I think, Your Honor, the--
Unidentified Justice: Would it?
It wouldn't make any sense?
Mr. Flanagan: --I think you have to take into account that you're talking about income being calculated at different points in the temporal spectrum for different purposes.
Unidentified Justice: Well, you're... you seem to be arguing that the phrase, community spouse's income in (c)... in (e)(2)(c) includes income from the institutionalized spouse--
Mr. Flanagan: I think--
Unidentified Justice: --and yet it can't under that section I read, I think.
I don't understand how you get there.
Mr. Flanagan: --No, that particular section (b)(1) refers only to prohibiting income of the community spouse from being deemed available to the nursing home--
Unidentified Justice: Right, but Justice O'Connor's point is undoubtedly correct that income of the community spouse there means income of the community spouse alone, not any attributed income from the institutionalized spouse, right?
Isn't that right?
It has to mean only the income of the community spouse.
Mr. Flanagan: --I think you have to look at--
Unidentified Justice: In that section--
Mr. Flanagan: --what's available at that point.
Unidentified Justice: --I understand.
Do you have any other section in the act in which the phrase, income of the community spouse, means not just the income of the community spouse alone, but also income that has been attributed from the institutionalized spouse?
Mr. Flanagan: Under the definition of community spouse, income maintenance allowance, I believe... which is under subsection (d) to (b)--
Unidentified Justice: (d) to what?
Mr. Flanagan: --(d) to (b), refers--
Unidentified Justice: Can you tell us where in the SG's appendix that is?
It's on 59a of your cert petition.
Mr. Flanagan: --At any rate, that particular section refers to monthly income otherwise available to the community spouse, and the... our position is that this evidences a recognition of the fact, as medicaid has long recognized, that spouses are required to support one another, and that this is a background rule.
Unidentified Justice: Ms. Flanagan, it might help if... I think one of the main features of this legislation was that income from the community spouse was never to be attributed to the institutionalized spouse, but vice versa, there is no such prohibition.
Mr. Flanagan: That's right, and that's--
Unidentified Justice: None of this makes sense unless you appreciate that that was an absolute prohibition.
Now, tell us where that is in this statute, that says, income from the community spouse is not to be attributed to the institutionalized spouse.
Mr. Flanagan: --It's in subsection (b)(1), 1396r-5(b)(1), and that was referred to--
Unidentified Justice: That was the section I read to you--
Mr. Flanagan: --Right.
Unidentified Justice: --in my question.
Mr. Flanagan: Yes.
Unidentified Justice: Could I have an answer to my question?
The section you just referred me to is still not another section other than the one at issue here in which the simple phrase, income of the community spouse, is used in a sense that means the community spouse's own income plus any income attributed to the community spouse from the institutionalized spouse.
You say that that's the way it's used in the provision at issue here.
My question is, where else in the entire statute is it used in that fashion?
Mr. Flanagan: I don't believe it's used anywhere else.
That's why the difficulty in this case arose, is to try to figure out what that means.
Unidentified Justice: Well, no, I think that rather solves the difficulty, frankly.
Mr. Flanagan: I--
Unidentified Justice: I would normally think that income of the community spouse means income of the community spouse, and you say it means no, the community spouse's income plus attributed income.
I don't know anywhere else in the statute that it's used in that fashion, just in this one section where you say we should interpret it that way.
There are other sections where it clearly means only the community spouse's income.
Mr. Flanagan: --With respect, Your Honor, the medicaid statute has long considered available income as part of the income of the person to which it's referring, and we--
Unidentified Justice: I mean, where it does that, that's all I'm asking for.
If it's long done that, just give me another section where income of the community spouse means what you say it means here.
The phrase is used a lot, I'm sure.
Mr. Flanagan: --That particular phrase is not used frequently in this statute.
That's part of the problem.
It's only used--
Unidentified Justice: And isn't it true that the situation you're talking about we're deeming in the other direction, where they deem the community spouse income to be attributable to the institutionalized spouse, not vice versa?
Mr. Flanagan: --Well, Your Honor, Justice Stevens, the background rule which I referred to which this Court clearly articulated in Gray Panthers case is that spouses are expected to support one another.
That's a two-way street.
Unidentified Justice: That was for purposes of determining how much of the community spouse's income should be deemed to belong to the institutionalized spouse.
Mr. Flanagan: That's right.
I'm just saying that spousal support obligations are a two-way street, and the Court clearly recognized that.
Unidentified Justice: In this case, we have the unusual circumstance where Congress sought to provide additional protection to the community spouse to reverse the prior deeming rule which permitted States to take income from the community spouse and require it to be used for the cost of care.
In this case, in the spousal impoverishment provisions and this provision specifically, Congress is trying to protect the community spouse by making available to the at-home spouse income that is specifically contemplated to be made available as soon as eligibility occurs.
But it is clear, is it not, that the resource-first rule gives greater protection to the community spouse than the income-first rule?
Mr. Flanagan: The result is that it permits the... in general it frequently permits the at-home spouse to retain a greater share of the couple's joint resources than would be the case under the State-defined standard resource allowance, and in that sense, yes, that's definitely correct.
Unidentified Justice: Ms. Flanagan, am I right in thinking that the, neither the act we're talking about nor the SSI actually define community spouse's income?
Mr. Flanagan: No, it doesn't.
That's the exact problem in this case.
There is no definition, and our position is that community spouse's income means income possessed by the community spouse, income that the spouse has a right to, and income that is available to the spouse at the particular point when it's being considered.
Unidentified Justice: Was the income-first rule in Wisconsin adopted by the legislature, or by a State agency?
Mr. Flanagan: It was initially adopted as a matter of policy by the State agency immediately after passage of the statute.
Then in 1993 the legislature amended the statute to have an express income-first requirement.
Unidentified Justice: So then your State court, I take it, under prevailing Wisconsin rules, could not ignore the legislature's determination unless it found that the Federal statute was unambiguous.
Mr. Flanagan: That... well, that is what they did, yes, Your Honor.
They interpreted the Federal statute as being unambiguous.
They concluded that the State law conflicted with the plain terms of the Federal statute and therefore could not be enforced.
Unidentified Justice: Ms. Flanagan, as I understand it, there's a provision... and these have been referred to this morning, but there's a provision that forbids attribution from the community spouse to the institutionalized spouse, period, no qualifications on that.
Mr. Flanagan: During institutionalization.
Unidentified Justice: That's right, yes.
There's also a provision which recognizes the possibility of transferring income from the institutionalized spouse to the community spouse after eligibility has been determined, but does not require any such transfer.
It simply in effect says how you do it, is that basically correct?
Mr. Flanagan: It doesn't explicitly require the transfer.
There are, however, powerful incentives in the statute to basically require them to do it.
Unidentified Justice: But it doesn't, that latter provision doesn't make any reference to the period before eligibility, and I guess my question is, why don't we infer some kind of a negative inference... when the provision refers totally to the post eligibility period, why don't we find some negative implication that it was not expected in the pre-eligibility period?
Mr. Flanagan: Well, the fact is that the calculation that the hearing officers ask to be made here concerns the post eligibility period.
The question is, is the at-home spouse going to have sufficient income in the post eligibility period, or does the resource allowance need to be jacked up in order to provide that additional income, so in that context, the hearing officer is looking at the same period of time when the standard resource allowance goes into effect, the same period of time when the transfer provisions go into effect--
Unidentified Justice: So basically the answer is, the fair hearing has got to take place before eligibility is determined, and that's in effect the answer to my question.
Mr. Flanagan: --That's right.
If the calculation is looking ahead, if there are no--
Unidentified Justice: Ms.... I have one further question.
Mr. Flanagan: --Okay.
Unidentified Justice: And if you can't give me an answer right away, maybe you can when you come back.
It's sort of the flip side of the question I asked earlier.
Do... can you give us at least some other portions of the statute where income of the institutionalized spouse is clearly used to mean the institutionalized spouse's own income plus... plus income attributed to the institutionalized spouse from the community spouse?
Mr. Flanagan: Well, that really doesn't arise because of subsection (b)(1), which expressly precludes that.
Unidentified Justice: Okay.
Mr. Flanagan: Thank you, Your Honor.
Unidentified Justice: Thank you, Ms. Flanagan.
We'll hear from you, Mr. Lamken.
Mr. Lamken, you've heard the questions, and it is difficult, looking at the text of the statute, to figure out what supports the petitioner's view, although, as I understand it, that is also the view of the Federal Government here.
That income-first rule is okay.
ORAL ARGUMENT OF JEFFREY A. LAMKEN ON BEHALF OF THE UNITED STATES, AS AMICUS CURIAE, SUPPORTING THE PETITIONER
Mr. Lamken: Yes, Your Honor.
Unidentified Justice: Now, are there proposed regulations of HHS that would allow either resource-first or income-first rules?
Mr. Lamken: --Yes, Your Honor.
There's currently a pending rulemaking before HHS, and the Secretary in the notice of proposed rulemaking has determined that States should be permitted to decide whether to use the income-first methodology or the resource-first--
Unidentified Justice: How far along is that process?
When is that going to be adopted?
Mr. Lamken: --The comment period closed on November 6.
There's been a little bit of a delay because there's concern that many comments might have been quarantined in the Brentwood facility.
However, we are hoping the Secretary can proceed and complete that process with all due speed.
Unidentified Justice: Can I ask what authority the Secretary has to say that the statute is ambiguous, so it can mean either one?
We don't even let Federal agencies do that under Chevron.
I mean, we didn't say in Chevron that a Federal agency can either say that a bubble means this, or say that a bubble means the other, willy nilly.
We said, since it can mean one or the other, we'll go along with whichever one the Federal agency says it means, but here we have a Federal agency that says, we have ambiguous language, so hey, do whatever you like.
I mean, it may be ambiguous, but surely it was intended to mean one thing or the other.
How can the Secretary come off just telling the States, it's ambiguous, you know, do it either way, we don't care?
Mr. Lamken: Justice Scalia, I think the answer comes in two parts.
The first is, one doesn't have to think that the statute means two different things at once in order to accept the Secretary's view.
Community spouse's income can have a meaning, but there may be different methodologies, all of which are reasonable, for determining and calculating what is the community spouse's income.
In addition, this Court has... and the States have liberties in order to decide to choose among those reasonable methodologies, because under section 17 on page 8a of our, of the appendix to our brief they are to establish reasonable methodologies consistent with the Secretary's regulations.
Unidentified Justice: You could say that about every ambiguity, I mean, that there are two different methodologies.
You could have said the same thing with Chevron.
Now, could the Secretary in Chevron have... there are two different methodologies of deciding what's... what is it, point of emission, or... point source, yes, point source of emission.
Mr. Lamken: --In fact, Justice Scalia, this Court has upheld precisely that type of regulation issued by the Secretary.
In a case called Batterton v. Francis, and again in a case called Lukar v. Reed, in which you wrote the opinion for the Court, when the statute did not clearly preclude one methodology or another, the Secretary, because the Secretary has quasi-legislative authority to set standards in this area, may adopt standards that permit variations from State to State.
In Batterton v. Francis, it was under AFDC, and the question is, what was unemployment?
Did it include striking workers, or did it not, and the Secretary said, States, you may determine that based on your own State law.
In Lukar v. Reed, the question was whether or not a tort judgment would be considered income or resources.
The Secretary threw guidance to all the States that they had the option of choosing it as income or resources because both are reasonable.
This Court in Lukar v. Reed again held that decision, so in this particular area, where States have the principal responsibility of establishing standards, the Secretary may establish the boundaries, the reasonable boundaries within which those standards may be established, but unless the, and so long as the standards established by the State are not contradicted by the statute, are not contradicted by the Secretary's regulations, and are reasonable--
Unidentified Justice: But Mr. Lamken, isn't this a little different, because in this statute, if I understand it correctly, there is express statutory authorization for the resource-first method, whereas the income-first method is drawn by inference from what you consider ambiguities?
Mr. Lamken: --No, Your Honor.
I believe that neither methodology is particularly compelled or expressly authorized by the statute.
The statute simply does not speak to the issue of whether when a spouse, a community spouse is going to have a shortfall in income you make that up first by paying additional money to the person in the nursing home so that she may support the spouse at home, which is the income-first methodology, or whether first you raise the resource allowance so that she may... so that the person at home has additional income from resources.
I think I should probably go back and answer Justice O'Connor's and Justice Scalia's question about the meaning of community spouse's income in section (b)(1), because there has been a suggestion about necessarily includes only the income paid directly to the community spouse.
It is in our view a subtle legal tradition that the community spouse's income, or one spouse's income may include income from another spouse that is deemed to be income of the community spouse in contemplation of law, and so in (b)(1) community spouse's income could include income from the institutionalized spouse that the institutionalized spouse can make available.
That's consistent with the presumption of spousal support, and it's consistent with, for example, existing regulations such as those in--
Unidentified Justice: Would you go over that a little more slowly for me?
Mr. Lamken: --I'm... I apologize.
Unidentified Justice: How do you read (b)(1)--
Mr. Lamken: (b)(1) says--
Unidentified Justice: --to cover reverse deeming as well as deeming?
Mr. Lamken: --Right.
All it says is that income of the community spouse shall be... shall not be deemed available to the institutionalized spouse.
Unidentified Justice: Correct.
Mr. Lamken: The inference to be drawn from that is that there is no prohibition in deeming income of the institutionalized spouse--
Unidentified Justice: But even if there's no prohibition, where is your authorization for doing this?
That's what I don't find in the statute.
Mr. Lamken: --Your Honor, it was... it's a--
Unidentified Justice: If you start from a background rule of the name on the check as a background rule for the whole SSI program, how can you change that rule without authorization?
Mr. Lamken: --That's the mistake, Justice--
Unidentified Justice: Pardon me?
Mr. Lamken: --That's the mistake, Justice Stevens.
You don't start with the presumption of the name-on-the-check rule.
You start from the presumption that the income of one spouse may be deemed the income of another spouse because the general rule is that spouses may be expected to support--
Unidentified Justice: Where in the statute does it say that?
Mr. Lamken: --The statute doesn't but Congress said it when it enacted the Medicaid Act in the first instance, and that was the established rule under the Secretary's policies at the time that this statute was enacted.
If you look at the Secretary's regulations that existed when Congress enacted this, it said the income--
Unidentified Justice: That was deeming, not reverse deeming.
Mr. Lamken: --I'm sorry.
Unidentified Justice: That was deeming, not reverse deeming.
Mr. Lamken: No, Your Honor.
In fact, deeming did occur... reverse deeming did occur, or could occur under the prior policies, particularly in section 209(b) States.
Now, in those situations... well, first for post eligibility determinations, States did set aside a certain amount of money of the institutionalized spouse's income for the support of the community spouse, and they treated that money as unavailable to the spouse in the nursing home so that it could be available to the spouse at home.
That is this situation which you have called reverse deeming.
Second, even at the eligibility stage, particularly in section 201(b) States, it would be permissible to deem the income of the institutionalized spouse to be income of the community spouse.
Now, it might not often come up, but it would come up when, for example, both were applicants, in which case that would be permissible, so the settled background principle that existed at the time Congress acted is that spouses support each other mutually, and Congress eliminated one of those presumptions on a going forward basis in (b)(1) and said, no, the community spouse's income shall not be deemed available to institutionalized spouses, but left in place the background principle that an institutionalized spouse, if they have the funds, can support the spouse--
Unidentified Justice: You can leave that background principle in place, and we can all concede that it's in place, without thereby coming to the belief that when you say income of the community spouse, you mean, income of the community spouse plus whatever is deemed attributable to the community spouse.
I mean, I don't contest the principle, but I don't... that's just not a reasonable way to use language.
I agree it can be deemed, but you should say... it would have been very easy to say, income of the community spouse including any attributed income.
Mr. Lamken: --Your Honor, it would be the Secretary's... or the regulations that existed at this time, when they discussed what we count as your income, as your applicant for SSI, for example, it said, we count as your income your income plus income from other people, so that it treated it as the individual's income, and that is consistent with the background principle that each spouse's income is income to the other spouse, and when States may establish reasonable standards--
Unidentified Justice: I'm sorry, what did it mean, income from other people?
Mr. Lamken: --The--
Unidentified Justice: Money given you by your children on a regular basis, and things of that sort?
Mr. Lamken: --Well, actually attributed income, Justice Scalia, actual income that's passed over you don't need a deeming rule, because that's actually--
Unidentified Justice: Right.
Right, you don't mean that.
Mr. Lamken: --But for responsible individuals there were categories, such as spouses, such as parents, such as... there is another category I can't remember the name of, but where somebody had the responsibility for supporting you, their income was deemed to be your income for determining your eligibility.
Unidentified Justice: But I take it the only thing that you've got express in the record anywhere to indicate that really is what Congress had in mind is the statement in the legislative history that is quoted in the briefs that refers to other income attributed, is that right?
That's the only thing in black and white.
Mr. Lamken: That is the only thing in black and white, other than the fact that the settled background principles the Secretary operated under before the enactment would treat the income of one spouse as available to the other.
It was not merely deeming from the to community spouse to the institutionalized spouse, but deeming in the other direction occurred.
Unidentified Justice: Thank you, Mr. Lamken.
Mr. Hagopian, we'll hear from you.
Counsel, would you mind telling us why it matters which rule is followed by a State, resource first or income first, not just in an individual case, but overall?
Who saves what in terms of money if you do one thing or the other?
ORAL ARGUMENT OF MITCHELL HAGOPIAN ON BEHALF OF THE RESPONDENT
Mr. Hagopian: Yes, Justice O'Connor.
Under the resource-first rule the applicant, the community spouse of the applicant, of the institutionalized spouse, is the person who gets the money, and they get the money in the form of an expanded community spouse resource allowance that then generates income that brings the monthly... the community spouse's actual income up to or as close to the monthly need amount that's set by the State.
Under income first, the income is fictionally imputed from the institutionalized spouse to the community spouse, but it doesn't actually go to the community spouse.
That would not ever happen until after eligibility had actually been determined.
So in the aggregate, the resource-first rule allows community spouses who would not adequately be protected by the formula community spouse resource allowance, because that does not generate income up to the monthly need amount and because they have no other income, or not enough income to bring them up to that level, it allows them to actually have resources that will generate that income and protect them even after the institutionalized spouse passes away.
Unidentified Justice: Doesn't it also make possible the payments, the actual payments start earlier?
I mean, the reason this was of such concern is that the institutionalized spouse would not be eligible monthly for checks, so that the immediate effect was she could pay down more rapidly what was her excess resources before she qualified.
Isn't that the primary effect?
It's that the payments under medicaid start earlier?
Mr. Hagopian: Yes.
If I understand your question correctly, Justice Ginsburg, the income-first rule requires that those assets be spent down.
Is that the answer to your question?
Unidentified Justice: Yes, so that... Justice O'Connor asked you what the effect of--
Mr. Hagopian: Yes.
Unidentified Justice: --And I think the immediate effect of, she starts to collect medicaid sooner and doesn't use the spousal resources.
Mr. Hagopian: Oh, now I understand your question.
No, that's not true.
Under income first, the institutionalized spouse does not become eligible.
Only under resource first does the institutionalized spouse become eligible, and then that allows the payments post eligibility to actually occur to the community spouse.
Unidentified Justice: Maybe I am not making myself clear.
I thought the principle of that is to the couple, of using your resource rather than the income first... resource first, is that the institutionalized spouse, it pays down quicker, and is therefore eligible for medicaid money sooner.
That's what your position achieves, is that not so?
Mr. Hagopian: Yes, that's correct.
Unidentified Justice: Yes.
But doesn't that assume your case and not the more typical case, the more typical case, given statistical projections, is that the husband will be the institutionalized person, and so in the typical case it will not work to the advantage of the couple?
Mr. Hagopian: Well, I would agree with you, Justice Kennedy, that the typical case is statistically that is the husband that goes into the nursing home first, and we don't have that case here today, but I believe I disagree with you as to the effect that this has.
First of all the sex of the spouses doesn't necessarily matter, as is indicated by this case.
It's possible for a male spouse to be the community spouse and have exactly what happened here happen.
Unidentified Justice: Mr.... I'm sorry.
Are you finished with that?
I didn't want to cut off your answer.
Mr. Hagopian: I don't think I answered your question, Justice Kennedy.
But the institutionalized spouse, if it is the... are you asking me whether, if the institutionalized spouse has a higher income, that what happened here won't happen?
Is that the question, or--
Unidentified Justice: Yes.
I assume in many cases the husband is the first to be hospitalized, and he is the one with the greater income.
Mr. Hagopian: --That's correct, so in many cases the income first rule will have a worse effect when the husband is the one that goes in first.
Because his income will be higher, there will be more income that will be attributed to the community spouse in this pre-eligibility determination, and that will prevent her from having income of her own that would raise her to the minimum monthly needs allowance.
If resource-first was used in that case, she would be able to retain assets that would generate actual income to her that would meet the monthly need allowance.
Unidentified Justice: Mr. Hagopian--
--Well, if States cannot follow this income-first rule, maybe they would just respond by reducing the minimum monthly maintenance needs allowance and adjust it that way.
Mr. Hagopian: Yes.
Unidentified Justice: Or adjust downward the resources protectable for the community spouse.
Mr. Hagopian: Yes.
Yes, Justice O'Connor, that could happen.
That is where the flexibility in the spousal impoverishment provisions exists for the States.
Unidentified Justice: How many States are using income first?
Mr. Hagopian: We don't exactly know.
According, I believe, to the petition, the State estimated that it's in the neighborhood of 30 to 35 States.
Unidentified Justice: Of course, I suppose a really hard-nosed State could do both, right, could use the income-first rule plus adjust downward the other... I mean, the two don't go with each other.
Mr. Hagopian: That's correct.
Unidentified Justice: You either adjust downward or use the income first.
I have this question.
You maintain that the statute is not ambiguous, if they--
Mr. Hagopian: That's correct, Your Honor.
Unidentified Justice: --do it this way.
What is your burden if it is ambiguous?
If it is ambiguous, do you lose, do you acknowledge that you lose?
Mr. Hagopian: Oh, absolutely not, Justice Scalia.
Unidentified Justice: Do you think the ambiguity has to be resolved, or can the Secretary just leave the ambiguity floating out there?
Mr. Hagopian: Well, that's essentially what they've decided to do in the proposed rule--
Unidentified Justice: Right.
Mr. Hagopian: --is to leave it floating.
I don't think that's the proper method to do it.
Unidentified Justice: By proper, you mean lawful?
Mr. Hagopian: Lawful, that's correct.
Unidentified Justice: They are not permitted to do that?
Mr. Hagopian: That's right.
I agree, actually, with the way you framed it in your questions to the petitioner, and that is that it just is illogical to assume that Congress, when they enacted this particular protection, which we believe is a fail-safe protection for those few couples who would not adequately be protected by the formula resource allowance, that to have these two wildly divergent interpretations spring from the exact same language seems totally unreasonable.
Unidentified Justice: Well, what did it do with a case like Batterton v. Francis, then?
Mr. Hagopian: Well, Your Honor, I believe that in a case like Batterton v. Francis, we have a different set of rules here.
First of all, I believe that was an AFDC case.
Unidentified Justice: Well, but you know, it's still the general same ball park.
Mr. Hagopian: Well, we believe that the enactment in the Medicare Catastrophic Coverage Act of the no-more-restrictive rule under SSI resolved that whole issue for us, and that is that with 1396a(r), which is found at the appendix to our brief... it's the only page in the appendix... that the question is actually resolved by the application of the SSI methodologies.
Unidentified Justice: Well, you say the question is resolved.
Do you mean by that that the Secretary does not have any discretion to decide that a State is free to follow either (a) or (b)?
Mr. Hagopian: Yes, Your Honor.
Unidentified Justice: And how does that follow?
Mr. Hagopian: Well, there's a couple of... first of all, the authority that the Secretary has relied on to issue its proposed rule and apparently from which its authority to develop the rule at all is 1396a(a)(17)(B).
Now, it is our position initially that that... that 1396a(a)(17) was actually superseded by operation of 1396r-5(a)(1).
Unidentified Justice: This is very difficult to take in aurally.
Mr. Hagopian: I believe that.
Unidentified Justice: But go ahead anyway.
Mr. Hagopian: It's almost as difficult to say it.
But the spousal impoverishment provisions, one of the main things that they did was supersede the authority that the State and the United States have relied upon to issue the rule and to engage in this so-called reverse deeming, so... and at the same time that they superseded that rule, they also enacted 1396a(r).
Now, this rule... what this rule did, and this rule was actually... I want to back up.
Another provision of the spousal impoverishment enactment was 1396r-5(1)(C), and this provision retained the SSI methodologies, or any existing methodologies that were not specifically overridden by the spousal impoverishment enactments.
Now, the one thing that was left untouched by these spousal impoverishment provisions was the way that income was determined for eligibility purposes.
Now, that brings us to 1396a(r), and that provision is the provision of the Medicaid Act mandates that the SSI methodologies apply to income and resource determinations for all the eligibility groups that were relevant in these cases, and that statute does allow States and HCFA, or CMS or the Secretary to issue rules that deviate from those SSI methodologies, but those rules, if they're going to do a rule that deviates from that methodology, the rule has to have the effect of making more people eligible for medicaid, not fewer people, and this rule, the income-first rule, fails that test.
What it does is... because under the SSI program, if the SSI methodologies were strictly applied, the income of the two spouses is separated and is never commingled, and so because under SSI this would not happen, a rule which allows it to happen in medicaid is considered to be no more restrictive and not... I'm sorry, more restrictive than the SSI methodologies, and is not permitted by that statute.
Unidentified Justice: May I ask you a question?
I know a case is easier if you don't look at the legislative history, and so it's probably easier for my colleague than for me.
But would you explain to me how you interpret the parenthetical phrase that's quoted on page 18 of the Government's brief, and the... it says taking into account any other income attributable to the community spouse.
I find that kind of a puzzling parenthetical.
How do you read that?
Mr. Hagopian: Well, I've two responses to that, Justice Stevens.
First, within the spousal impoverishment enactment, the term, attribute, or attributable is used in two different fashions.
When it's used in... to describe resources, it has the effect of commingling the resources and pooling them.
When it's used in conjunction with the term, income, it has the effect of separating the income between the two spouses.
So it's my initial position that income attributable to the other... other income attributable to the community spouse merely confirms the way it was done SSI statutes, and that is consistent with the way it is done, where income is talked about at all, in the spousal impoverishment provisions, and I think there is actually a reason for that to be in there, and that is that it would be possible in some cases for a community spouse to attempt to get an expanded resource allowance by coming into the hearing and saying, I have income, and it's in my name right now.
Typical would be, maybe it's from employment, and at this date when I'm trying to establish eligibility, or my institutionalized spouse is trying to establish eligibility, I have that income, but I don't believe you should count that income to me because it's going to end next month when my job ends.
So I think that is what they were talking about, trying to foreclose that type of argument at a hearing, and so I believe that the real effect of that parenthetical phrase is to confirm the separate treatment of the income.
The reason it isn't in the statute and it's in the legislative history is because the SSI mandate under 1396(a)(R) accomplished that purpose precisely.
Every other part of that legislative history essentially becomes 1396r-5(e)(2)(C).
That phrase is missing.
Unidentified Justice: In that particular provision, to retain an adequate amount of resources, all that any other income attributable to the community spouse need mean is income attributable to him from sources other than interest on his resources.
I mean, that phrase could include his actual wages, couldn't it?
Mr. Hagopian: The institutionalized spouse's wages, or the--
Unidentified Justice: The community spouse's wages.
Mr. Hagopian: --Oh, yes, absolutely.
It would... I think it does.
Unidentified Justice: I mean--
Mr. Hagopian: Yes, I believe that it does--
Unidentified Justice: --resource allowance is the resources that provide income, which means, you know, stocks or whatever, and all that phrase there may mean is something, any other income attributable to him from something other than his stocks.
Mr. Hagopian: --Right.
Unidentified Justice: Such as his wages, right?
Mr. Hagopian: Exactly.
Unidentified Justice: You... your argument in the event that we find ambiguity I guess boils down simply to the fact that for a variety of reasons it would frustrate the congressional policy behind the act itself if we held against you, and yet in a way, haven't you provided an answer to that, a counter to that argument in your answer to the question a few moments ago?
You said, and I think have to say, that if the States lose on the particular issue before us here, the States as a practical matter can get to the same kind of rough dollar and sense results simply by adjusting the amount of resources, that is the baseline amount for the community spouse to retain and the amount of income which is thought to be necessary for the community spouse to live decently, so it almost seems as though it doesn't very much matter, necessarily, to the enactment of whatever policy Congress had, whether the flexibility comes in income versus resource first, or whether it comes in setting the allowances for income and assets.
What's your answer to that?
Mr. Hagopian: Well, I think that the answer to that is that the resource-first allowance, resource-first rule was placed in a provision that is what we call the fail safe provision.
This was a provision that was supposed to be applicable to all the States and allow those few couples... and I want to stress that this is not going to affect a lot of people.
A few couples would not be adequately protected by those formula allowances, and so... because the policy of the statute was to defeat spousal impoverishment.
That was certainly one of the primary purposes behind it, and the vast majority of cases the formula resource allowance was going to adequately serve that interest, but in--
Unidentified Justice: So you're saying this is kind of an exceptional case kind of mechanism, regardless of how you set income and resources.
Mr. Hagopian: --Absolutely.
Unidentified Justice: And as an exceptional case mechanism, it's only going to work if it works the way you say, on a resource-first basis?
Mr. Hagopian: That's right, and to stress the exceptional case component of it, you have to remember how you get one of these hearings.
This is not an easy matter.
This is not something that's accomplished by the local agency for every single applicant who walks through the door.
You have to have... know that you're in excess... have resources in excess of this formula resource allowance.
You have to go to your local welfare office.
You have to apply for benefits knowing that your application is going to be denied.
You get denied, and then you have to request a hearing, go to the hearing, prove up the need with all sorts of mathematical calculations for this.
This is not something that people... the faint of heart are going to be doing on purpose, so it is an exceptional procedure.
Unidentified Justice: Have you read the notice of the proposed rulemaking?
Mr. Hagopian: Yes, I have, Justice Ginsburg.
Unidentified Justice: And I suppose your argument is to the effect that that's just not a permissible interpretation of the statute?
Mr. Hagopian: Yes, that's certainly one of our arguments against it.
We also believe, though, that the statutory authority that the Secretary is using for promulgating it, which is 1396a(a)(17)(B) has been superseded in spousal impoverishment, so the rule itself is probably promulgated pursuant to invalid authority.
Unidentified Justice: Do we owe any deference to the agency here in its interpretation?
Mr. Hagopian: Well, because our position is that the position they are taking is totally unreasonable, no, you don't owe any deference to the agency.
Unidentified Justice: Does the income-first rule mean that at the end of the day less Federal money is spent on medicaid care?
Mr. Hagopian: Not necessarily.
In the immediate... the effect of denying an application based on income first would at that moment prevent someone from being eligible for medicaid, but... and so therefore would save Federal dollars, no question about that, but you have to remember that the resources that the couple is required to spend in order to become eligible, there's no requirement that those resources be spent on the nursing home, and so it's possible that those resources could be spent for some other purpose, and then the person could immediately become eligible for medicaid, you know, within a short time after the initial application was denied.
And the important thing about that point is that, if that happens, if those resources are gone, and the income that's generated from them is gone, then when you get to the post eligibility determination, the less of the institutionalized spouse's income is going to be able to be used to defray the cost to the medicaid program, because more of it is going to have to be used to increase the allowance to the institu... or, the community spouse, so in the short run it may be... save the Federal Government.
In the long run, it does not.
Unidentified Justice: Would you comment on one of the questions I asked Mr. Lamken, whether the background rule is the name-on-the-check rule, or as he puts it, the better view is the background rule is one of deeming, and so that we should start from the premise that it's okay to treat one spouse's income as part of the other spouse.
Mr. Hagopian: Well, I beg to differ with Mr. Lamken's presentation of the background rule.
I don't believe that there is any precedent for the reverse deeming that he's talking about in any of the background rules.
The deeming that was permitted was strictly from the nonapplicant spouse to the applicant spouse, and it was for the purpose of denying that person eligibility.
The one rule he talked about where there was some reverse deeming was, was also... was a post eligibility rule.
Under the old rules pre-MCCA, the nursing home spouse could allocate a small amount of money to the community spouse, usually just enough to bring that community spouse above the local welfare threshold so that they wouldn't have to support that person on welfare, but that was a post eligibility deeming, it was not an eligibility, and in the SSI program, which is what... we believe where the methodologies occur that dictate how income is to be determined, there is no deeming from the applicant spouse back to the nonapplicant spouse.
Unidentified Justice: Well, even under this program, as I understand it, in the post eligibility determination income can be transferred from the institutionalized spouse to the community spouse.
Mr. Hagopian: Yes.
Unidentified Justice: Yes.
I might ask one question.
Examples help a lot for me in these cases.
I couldn't understand them without them, and the amicus briefs were filled with them, which was helpful, but the example I'm carrying around in my head is that we have, say, a woman in an institution who has about $200,000 or $300,000 in assets, and maybe a small pension of $8,000 or $10,000, and her husband's at home, and he has a pension coming in, maybe of $10,000 to $12,000, and so he's lacking about $6,000 or $7,000 or $8,000 or $9,000 or $10,000 to bring himself up to the $24,000 level.
Now, if you're right, what we'll do is, we'll take the $300,000 the wife has, and we give it to the husband.
It generates about, I don't know, $10,000, $12,000, and eventually that $300,000 goes to the children, and if you're right, she doesn't have to spend it down, and if you're wrong, by the way, if that money goes to the husband, later on, when her pension comes in, and there's about 8 or $10,000 coming in, that money goes right to the institution to pay for the health care.
She doesn't get to keep it.
So that's one way.
Now, the other way is that she keeps... she spends down the $300,000.
She has to spend down the $300,000, maybe that money goes to the institution, maybe it goes to fix the roof, but then when the income comes in, it goes right to the husband.
So I don't know, you know, I mean, it's sort of what... the Government seems to think that it's better off financially by making her spend the money down, but I guess that depends on whether the alternative is to pay the $300,000 to the doctors or pay it to get the roof fixed, so when I end up thinking that, I haven't a clue.
And so therefore I'd say, well, if I were writing this statute, I guess I'd leave it up to the Secretary, and if the Secretary wants to leave it up to the States, that's his business, so I look at the language, and the language there seems not to solve the problem, and... okay, what's the response?
Mr. Hagopian: That was a question?
Unidentified Justice: I was putting the thing because--
Mr. Hagopian: Yes, I--
Unidentified Justice: --I want you to see that at the moment I think, well, I can't figure it out, but I'm working with those examples, and since I can't, I say, leave it up to the Secretary, leave it up to a State, leave it up to somebody else, as long as the statute allows that.
I wanted to expose that to you, because I want you to have a chance to say no, you're wrong, your example is wrong, your reasoning's wrong, everything's wrong, so go ahead.
Mr. Hagopian: --I concur with everything you just said, Justice Breyer.
I think your first example was the wrong one, the one that oddly enough is bad for me, and that's because I think you're assuming that the resources that are going to be protected for the care of the spouse will be transferred on death to the children.
That's possible, but if the community spouse outlives the nursing home spouse, that resource pool, because for whatever reason there isn't an independent stream of income available to that community spouse, it's going to be that resource fund that creates the income stream for that community spouse.
If it's protected, and not have to be spent down to medicaid eligibility, that community spouse is much more likely to retain it, not spend it on things that he doesn't need in order to preserve that income stream so that he can take care of himself, hopefully, not in a nursing home but perhaps in some sort of noninstitutional setting that he would prefer over that.
So that's my response to your question.
Unidentified Justice: You make a big point of that.
What happens if you lose and the institutionalized spouse dies, and that is a problem.
I don't know why the Government doesn't, as a matter of policy, make a pretty strong case, but the... I guess the response will be, well, you know, everybody knows this.
Everybody, no matter how well-educated or badly educated, or... they all know, when they get that pension choice, that if you either take it all for yourself, or you say, when I die I want my spouse to get some, and so... they've all made that conscious choice, and if they make it to protect the spouse, that's up to them, and they probably will.
I mean, that will be the response, I think, to that argument.
Mr. Hagopian: It would be.
The problem, when you... my understanding... I'm not a pension expert by any means, but when you exercise an option that protects the surviving spouse, you so deflate the value of the pension that it's economically a poor decision to make.
Unidentified Justice: I would have thought that your response would be the statutory language requires the result you're urging, but you don't make that argument, apparently.
Mr. Hagopian: No, no, we do make that argument--
Unidentified Justice: Oh, you do--
Mr. Hagopian: --Justice O'Connor.
Unidentified Justice: --Okay.
Mr. Hagopian: Yes.
The statutory language definitely does require--
Unidentified Justice: I just didn't hear that in response to the question.
Mr. Hagopian: --Well, it was in the opening that I didn't get a chance to make, so--
Unidentified Justice: In your response to Justice Breyer, isn't it so, or am I... counsel, am I--
Mr. Hagopian: Pardon me.
Unidentified Justice: --wrong in thinking that under ERISA there is a requirement to provide for the surviving spouse, it isn't the option of the insured individual?
Mr. Hagopian: Well, I'm no expert on ERISA, but I believe that there is a notice requirement and a sign-off requirement in ERISA.
If the community spouse does sign off for her rights, then it doesn't necessarily happen.
It's not a mandated... it can't be overcome by activity by the surviving spouse.
Unidentified Justice: But it's not the insured's election in the first place.
Of course, if the surviving... if the spouse wants to cooperate and says, I don't want anything--
Mr. Hagopian: Right.
Unidentified Justice: --But it isn't the wageearner's choice--
Mr. Hagopian: No.
Unidentified Justice: --to say, I don't want, usually her, to be any part of it.
Mr. Hagopian: That's right, but I think those decisions are made at a time when long-term care is not necessarily in the immediate offing, and maybe... usually at age 65 or thereabouts, long before nursing home stays may be inevitable, and so the couple is making an informed choice about how best to maximize their income stream.
I mean, nobody is ready for nursing home stays, and to plan for that, you know, based at the time that you make your pension election would be counter to, I think, human nature.
Unidentified Justice: Mr. Hagopian, I want to come back to the snippet from legislative history that is referred to on page 18 of the Government's brief.
I guess if you believe that legislative history, then it would have to be done the way the Government says it need only may be done.
I mean, if you believe the Government's interpretation of that legislative history, it certainly doesn't say the Secretary has the option.
It either says what you think it means, or it requires the Secretary to use the income-first method, no?
Mr. Hagopian: I think I frankly agree with you, Justice Scalia.
Unidentified Justice: Thank you, Mr. Hagopian.
Ms. Flanagan, you have 3 minutes left.
REBUTTAL ARGUMENT OF MAUREEN M. FLANAGAN ON BEHALF OF THE PETITIONER
Mr. Flanagan: Thank you, Your Honor.
I would like to talk about the impact of what the resource-first rule is.
I think there have been questions on that.
The impact of the resource-first rule is to devote limited medical assistance funds to couples who have resources substantially above the Federal maximum set levels and that, in turn, necessarily means, since we have limited pots of income, that that deprives States of money needed to serve--
Unidentified Justice: Why is that?
I mean, he just said on that that... and it certainly was in the briefs, that if you say they have to spend down the $300,000, they're not going to give it to the doctors in the institution.
They'll fix the roof, they'll pay off the mortgage, they'll figure out one of 50 other things, so the State will actually end up with less money, because they won't get that $300,000 as a set-off and, moreover, they lose the income coming in later as a set-off.
Mr. Flanagan: --Well, neither of us have any statistics on that.
I'm sure that people do pay off their long-term financial obligations, but they also have to pay for the nursing home, and that bill doesn't go away after a month, so if they're not eligible, they're going to have to be providing for that in some way, so while the statute doesn't force them to devote their resources to that, there are powerful practical reasons why people are going to do that.
Another part of the impact that I'm concerned about is touched on by Mr. Hagopian, who says that States can just lower their resource standards and lower their income maintenance standards.
Well, what that says is, States, you should serve fewer people.
You should serve fewer elderly so that you can have money to serve people who happen to have resources in excess, and in many cases substantially in excess of the standard resource limits.
The Cleary case, which is cited in the briefs, is a good example of that kind of potential situation.
That was a situation in which the nursing home spouse had something in the neighborhood of a $1/4 million of excess resources, but because of the income of the... set-up of the spouses it would have taken that... those resources to make up that income, even though that particular spouse, as I recall, also would have had money.
Chief Justice Rehnquist: Thank you, Ms. Flanagan.
The case is submitted.
Argument of Speaker
Mr. Speaker: The opinion of the court No. 00-952, Wisconsin Department of Health and Family Services versus Blummer will be announced by Justice Ginsburg.
Argument of Justice Ginsburg
Mr. Ginsburg: This case concerns the spousal impoverishment provisions of the Medicare Catastrophic Coverage Act of 1988, a complex set of instructions made part of the Federal Medicaid Statute.
The provisions at issue concerned couples who must live apart when one spouse is confined in a care institution usually a nursing home and the other spouse remains at home in the community.
The Act allows the spouse living at home called the community spouse to reserve certain income and assets to meet the minimum monthly needs he or she will have when the other spouse called the institutionalized spouse becomes eligible for Medicaid.
Essential to this controversy is the amount of assets the Act shelters from free eligibility diminution called the community spouse resource allowance.
Either spouse may seek an increase in the standard resource allowance.
To gain an increase, the applicant must show at a State-administered hearing that the community spouse will otherwise fall short of the statutorily defined minimum level of income on which to live after the institutionalized spouse gains Medicaid eligibility.
In determining whether the community spouse may be granted a higher resource allowance in other words, whether he or she may shelter additional assets Wisconsin, like most States, uses an income-first method.
Under that method, the State considers first whether potential post eligibility income transfers from the institutionalized spouse, transfers the Act expressly permits, will unable the community spouse to meet monthly needs.
Respondent, Irene Blummer who lives in a nursing home applied for Medicaid assistance from petitioner, Wisconsin Department of Health and Family Services.
Her application was denied because the Blummer’s assets have not yet been reduced to an amount low enough to render Irene Medicaid eligible.
Irene thereafter sought a hearing to increase the community spouse resources allowance reserved for her husband per net.
The hearing examiner have found no increase warranted.
Because Irene could transfer some of her income to Burnett once she became Medicaid eligible, the examiner explained, Wisconsin’s income-first method bought a larger resource allowance for Burnett.
The Blummers were therefore obliged to spend resources.
Irene preferred to shield for Burnett before Wisconsin will declare Irene Medicaid eligible.
In State Court, Irene challenged Wisconsin’s income-first Method as inconsistent with the Federal Acts Provision an upward revision of the resource allowance.
The Wisconsin Court of Appeals ruled in her favor.
We now reversed that Court's judgment.
For reasons stated at some length in the opinion, we conclude that neither the Act's text nor its structure forbids the income-first method Wisconsin follows.
Consistent with the position advanced by the Secretary of Health and Human Services, we hold Wisconsin’s method a permissible interpretation of the Act.
Justice Stevens has filed a dissenting opinion in which Justice O’Connor and Justice Scalia join.