Vague Medicaid Denial Notice in Massachusetts Violates Due Process

Vague Medicaid Denial Notice in Massachusetts Violates Due Process

The Superior Court of Massachusetts ruled that overly vague state Medicaid denials violated due process. The court discussed federal regulations which apply to all state Medicaid agencies and addressed what explanations of denial would be sufficient under federal and Massachusetts law.

Emily Beekman

On June 22, 2018, the Superior Court of Massachusetts addressed the issue of whether a state Medicaid agency gave adequate notice to Medicaid applicants in their notices of denial of eligibility.  Maas v. Sudders, 35 Mass.L.Rptr. 150 (2018) and Hirvi v. Sudders, SUCV2018845D were consolidated for this case.  This decision is instructive to other states because it discusses the federal regulations which apply to all state Medicaid agencies, their treatment of Notices of Denial, and what explanations are sufficient in these Notices pursuant to federal and Massachusetts law.

            In these cases, the denials notify the plaintiffs that they had countable assets exceeding the federal and state mandated limits for MassHealth eligibility (in Massachusetts, Medicaid and the Children's Health Insurance Program (CHIP) are combined into one program called MassHealth).  The denial notices were representative of the standardized denial notices that MassHealth mails to applicants for coverage of long-term care services in a nursing facility (nursing home coverage).  In each case, the “other” assets were trusts.  Up to now, MassHealth’s standard practice has been to issue a denial notice that simply states that the applicant has too much in countable assets in order to qualify for MassHealth coverage.  However, no reasons or explanations are given for why the assets are being deemed “countable,” especially when they are owned by an irrevocable trust that – based on applicable law – would seem to render them non-countable.

            The key federal Medicaid regulation states, in relevant part, that proper notice must contain “a clear statement of the specific reasons supporting the intended action.”  42 C.F.R. §431.206(c)(2) (emphasis added) (the “regulation”).  The referenced regulation applies “[a]t the time the agency denies an individual’s claims for eligibility, benefits or services.”  42 C.F.R. §431.206(c)(2).  The denial notices must be timely and adequate and must comply with the regulation.  The Medicaid notice provisions are enforceable against every state Medicaid agency.  See Murphy by Murphy v. Minnesota Dept. of Human Services, 260 F.Sup.3d 1084 (D.Minn. 2017); Guggenberger v. Minnesota, 198 F.Sup.3d 973, 1023 (D.Minn. 2016).  The Massachusetts regulations require advance written notice “to permit adequate preparation of the case.”  130 CMR 610.046(A).  Several federal and state statutes and regulations require proper and efficient administration of state Medicaid programs “in a manner consistent with simplicity of administration and the best interests of the recipients.”  42 U.S.C. §1396a(a)(19); 42 C.F.R. 435.902; G.L.c. 118E, §12.

            In these cases, MassHealth’s standard form of notice denying benefits because of trust assets does not provide “[a] clear statement of the specific reasons supporting the intended action” and therefore violates 42 C.F.R. §431.210.  The notice simply states that the applicants are not eligible because they “have more countable assets than MassHealth benefits allow” and then lists the dollar amount by which they exceed it.  More explanation is required; they fail to give any reason as to why the trust is a countable asset.  Stating what, but not why, falls short of 42 C.F.R. §431.210 requirements.  Without the notice required in the regulation, an applicant cannot sufficiently prepare the case.  130 Code Mass. Regs. 610.046(A).

            The Court discussed whether the Office must follow the same notice practices employed for notices in the Supplemental Security Income (“SSI”) program but ultimately does not decide on this issue.  The plaintiffs acknowledge that the Program Operations Manual System of the Social Security Administration, §S01121.202(A)(1)(g), entitled “Manual notices” illustrates a lawful approach in a trust asset case: “When applicable, issue a manual notice for trusts established after an individual’s assets on or after 1/1/2000… For such notices, specify using free-form text each reason the trust is countable (that is, why it does not meet the relevant exception(s) or requirements).  In the notice, you must cite: the applicable section of the trust (or any joinder agreement, if applicable) containing the problematic language or issue; and the Program Operations Manual System (POMS) citation that contains the policy requirements on that subject.”  This manual provides a sensible way to give a clear statement of the specific reasons for including a trust as countable assets, even though it is merely dicta.  The Court suspended judgment on whether or not the SSI approach is the only lawful one under C.F.R. §431.210(b) and instead leaves MassHealth the opportunity to formulate a different approach to comply with the regulation and how to conform with the law.

            It is common for Medicaid agencies in many states to deny MassHealth eligibility with no reason provided in the notice.  Sometimes the denial notices explain only that the applicant has excess resources but does not specify which asset(s).  Other times, the denial notices state that there were transfers in violation of the state law without identifying what is being treated as a transfer.

            These Massachusetts cases apply to MassHealth denials based only on excess trust assets, and not a wider universe of denial notices.  The decision is especially relevant to those who have undertaken estate planning and long-term care panning with irrevocable income only trusts and other types of irrevocable trusts.  The Court did not state the exact approach that MassHealth must take to comply with its order.  Instead, that is a next step in the proceedings.  These vague MassHealth denial notices violate due process and hopefully will lead to Massachusetts and other states improving clarity in the Medicaid application process for those with trust assets, as well as ideally more structured procedure (like POMS) for future applicants to comply with.