Respondent was born with Down syndrome in 1964 and began receiving medical assistance under the State Medicaid plan on July 1, 1992. On July 14, 1997, he suffered an injury during corrective spinal injury surgery, which resulted in his partial paralysis such that he was no longer able to ambulate. A Lawyer said that, a medical malpractice action was commenced by respondent’s sister on his behalf against the hospital where the surgery was performed and several Long Island doctors. Respondent continued to receive medical assistance from the DSS, and the DSS filed a lien pursuant to Social Services Law § 104-b (hereinafter the Medicaid lien) for recovery from any award made in the medical malpractice action, for such assistance for which the third-party tortfeasor was found to be liable.
A assistant said that, the parties to the medical malpractice action reached a settlement. Based upon the proposed settlement, the DSS agreed to accept the sum of $102,423.56 to settle the Medicaid lien. The amount necessary to settle the Medicaid lien was premised on a letter from the DSS stating that it would accept that amount on the Medicaid lien against the proceeds of the personal injury lawsuit, based on the proposed settlement of the lawsuit for the sum of $1,600,000. The letter further provided that the DSS reserved the right to collect any unpaid balance of the Medicaid lien if Ruben reached a further settlement that provided additional proceeds or if he should receive funds from another source such as the lottery; neither of those circumstances eventuated.
A reporter said that, the settlement of the medical malpractice action was approved by the Supreme Court, Kings County, in an amended order dated August 23, 2002, with the direction that payment be made to the DSS in the amount of $102,423.56, in full satisfaction of the Medicaid lien to the date of the order. Pursuant to regulation, the Medicaid lien was required to be satisfied or otherwise resolved in order for the remaining funds received by Respondent. To be disregarded, for purposes of eligibility to continue receiving Medicaid benefits, by placement in a supplemental needs trust. As will be discussed herein, the Medicaid lien was limited to the medical assistance respondent received as a result of the third-party tortfeasor’s negligence. The lien was not and could not have been asserted in connection with any medical assistance provided to respondent as a result of his Down syndrome condition; whether such assistance was provided prior to or subsequent to the medical malpractice. The settlement of the medical malpractice action and settlement of the lien did not in any way address the other assistance that had been correctly paid to respondent.
The issue on this case dwells on the scope of entitlement of the Department of Social Services of the City of New York (hereinafter the DSS) to recovery, from the trust corpus of a supplemental needs trust, for the medical assistance provided by Medicaid to respondent the beneficiary of the supplemental needs trust, over the course of his lifetime.
The Court said that the DSS claims that it was entitled, pursuant to the statutorily-required language of the supplemental needs trust, to recovery of the total medical assistance provided to respondent over the course of his lifetime and not just the medical assistance provided to him after the creation of the supplemental needs trust.
New York adopted Estates, Powers and Trusts Law § 7-1.12 to allow for the creation of what have come to be called supplemental needs trusts. Those trusts were primarily intended to foster effective future care planning for disabled individuals whose basic needs were primarily met through government benefits or assistance programs.
The supplemental needs trust created for respondent contained a provision, as required by federal and state law, that upon his death, the State would receive all amounts remaining in the trust up to the total value of “all medical assistance” provided to him. On September 22, 2003, The Queens respondent died. In her amended final accounting, the trustee took the position that the State was only entitled to reimbursement of the amount of medical assistance provided to respondent after the creation of the trust, January 15, 2003, until his death, the sum of $50,226.63. The DSS asserted that it was entitled to recover the sum of $632,714.22 pursuant to the terms of the trust, representing the total of all medical assistance provided to respondent over the course of his lifetime. The DSS sought to recover the medical assistance provided to him, as a result of his Down syndrome for the five years prior to the medical malpractice that further incapacitated him; to recover that portion of the medical assistance provided to him during the five years preceding the settlement of the medical malpractice action that was not previously recovered with the resolution of the Medicaid lien addressed to the medical assistance for which the tortfeasor was liable; and to recover the total medical assistance provided after the August 23, 2002 settlement of the medical malpractice action, not just the portion provided after the creation of the supplemental needs trust. The Supreme Court held that the DSS was entitled to recover only the sum of $50,226.63, for the period after the creation of the supplemental needs trust.
The DSS’s claim to recovery of the total medical assistance provided to respondent over the course of his lifetime is based on the language which is required to be included in all exception trusts. The state and federal provisions both require that a qualifying trust contain a provision that the State will receive, upon the death of the beneficiary, all amounts remaining in the trust up to the total value of “all medical assistance” paid on behalf of the beneficiary. The DSS’s argument would be persuasive if that language were read alone and apart from the rest of the medical assistance statutes. However, the referenced language is just part of provisions relating to the treatment of trust assets on consideration of eligibility for benefits. Those provisions are part of extensive provisions governing the medical assistance program, which include specific provisions restricting the scope of recovery of medical assistance correctly paid. An application of the trust language in the manner proposed by the DSS would be in direct contravention of the recovery restrictions.
The Court said that as a condition of the receipt of Federal program funding, State Medicaid plans must conform with the statutory standards established by Federal law and the regulations promulgated by the Secretary of Health and Human Services. The requirements that a state plan must include are set forth in 42 USC § 1396a. Paragraph (a) (18) of that section provides that the state plan must: “comply with the provisions of section 1396p of this title with respect to liens, adjustments and recoveries of medical assistance correctly paid, transfers of assets, and treatment of certain trusts.
Paragraph (b) of 42 USC § 1396p addresses the adjustment or recovery of medical assistance correctly paid. That paragraph begins with the statement: “No adjustment or recovery of any medical assistance correctly paid on behalf of an individual under the State plan may be made”. The section then continues with limited exceptions to the no-recovery rule: specific instances where the state is required to make an adjustment or recovery for medical assistance correctly paid to certain individuals.
The exceptions include: (1) assistance provided to an individual who is an inpatient at a nursing facility, intermediate care facility for the mentally retarded or other medical institution, if the individual is required to pay all but a minimum of his income for such care; (2) an individual who the state determines, after notice and an opportunity to be heard, cannot reasonably be expected to be discharged from the medical institution and return home; (3) an individual who was 55 years of age or older who received specified services, or at the option of the state any services; and (4) an individual who received benefits or was entitled to receive benefits from a long term care policy and received medical assistance payments for nursing facility and other long term care services. Respondent’s receipt of medical assistance does not fall within any of these four specified categories of exceptions to the no-recovery of medical assistance correctly paid mandate.
The New York State provisions governing the recovery of medical assistance correctly paid, as required by 42 USC § 1396a (a) (18), are contained in Social Services Law § 369 (2) (b) (i): “Notwithstanding any inconsistent provision of this chapter or other law, no adjustment or recovery may be made against the property of any individual on account of any medical assistance correctly paid to or on behalf of an individual under this title”. That subparagraph then continues with specified exceptions where recovery or adjustment of medical assistance correctly paid is required. Those specific exceptions essentially parallel the federal exceptions. Again, respondent’s receipt of medical assistance does not fall within any of the New York statutory exceptions.
In addition to the referenced exceptions, special provision is made for assistance provided to an individual to the extent the assistance is provided as a result of an injury incurred as the result of a third party’s negligence. The federal provisions set forth the requirements of a state plan, relating to the liability of third parties to pay for care and services. The State will take all reasonable measures to ascertain the legal liability of third parties to pay for care and services available under the plan (B) that in any case where such a legal liability is found to exist after medical assistance has been made available on behalf of the individual and where the amount of reimbursement the State can reasonably expect to recover exceeds the costs of such recovery, the State or local agency will seek reimbursement for such assistance to the extent of such legal liability.
New York’s compliance with that requirement is contained in Social Services Law § 104-b and is an exception to the no-recovery provision of Social Services Law § 369. “Nothing contained in this subdivision shall be construed to alter or affect the right of a social services official to recover the cost of medical assistance provided to an injured person in accordance with the provisions of section one hundred four-b of this chapter”. The New York regulations governing medical assistance liens and recoveries are set forth in 18 NYCRR 360-7.11. The regulations repeat the standard that no adjustment or recovery for medical assistance correctly paid may be made except in accordance with specific exceptions. The exceptions specified in the regulations correspond to those in the statute.
As there is no specific authorization for recovery of medical assistance correctly paid to respondent prior to August 23, 2002 apart from the Medicaid lien, to allow such recovery would be in direct contravention of the federal and state statutes. The DSS does not address the no-recovery provisions of the federal and state statutes, apart from an assertion in its brief that the Omnibus Budget Reconciliation Act of 1993 (gave the government a broader right of recovery from a supplemental needs trust remainder than from estates, referencing 42 USC § 1396p (b) (1). The only basis for the claim of the DSS to such recovery is the language required to be placed in a supplemental needs trust.
Accordingly, the order is modified, on the law, by deleting the provision thereof denying that branch of the motion of the DSS which was for reimbursement of the amount of medical assistance provided by Medicaid to respondent from August 24, 2002 through September 22, 2003, and substituting therefore a provision granting that branch of the motion; as so modified, the order is affirmed insofar as appealed from, and the matter is remitted to the Supreme Court, Kings County, for a determination of the amount of medical assistance provided by Medicaid to respondent from August 24, 2002 through September 22, 2003 that was not previously reimbursed, and for entry of an appropriate judgment.