Ruling Allows State To Seek Contributions
May 2008
The Illinois Supreme Court recently held that, despite language in the federal Medicare Catastrophic Coverage Act stating that no income of the spouse of an individual in a nursing home is to be ''deemed available to the institutionalized spouse,'' the State of Illinois is not prohibited from seeking a contribution for the institutionalized person's care from his or her spouse. Poindexter v. State of Illinois, 2008 Ill. Lexis 307 (April 3).
The plaintiffs, who consisted of several non-institutionalized or ''community'' spouses, were represented by Duane D. Young and Dawn D. Behnke of LaBarre, Young & Behnke of Springfield. Assistant Attorney General Carl J. Elitz represented the defendants, which included the state and its Department of Human Services.
The case involved interpretation of Medicaid-related legislation. Medicaid is a cooperative federal-state program that provides medical services to both the categorically needy and the medically needy. Until 1988, a couple needed to deplete nearly all of their assets before either one could satisfy Medicaid eligibility requirements, leaving the spouse who remained in the community in a financially precarious position. Congress sought to address this problem with the Medicare Catastrophic Coverage Act of 1988, 42 U.S.C. § 13964-5, which provides a formula for allowing the institutionalization of one spouse, while keeping the other in the community some distance from the poverty line.
Another goal of the MCCA, however, is preventing financially secure couples from obtaining Medicaid assistance. It does so by preventing the institutionalized spouse from qualifying for Medicaid by transferring his or her interest in assets to the community spouse.
To balance these two goals, the state agency administering the program takes a ''snapshot'' of the couple's total current and forecasted resources and income as of the beginning of the first continuous period of institutionalization. On the income side, the institutionalized spouse's income cannot exceed the maximum level set by the state, and the community spouse's income is not attributed to the institutionalized spouse in determining eligibility.
In addition, the couple's total resources must be below a prescribed level, referred to as the ''Community Spouse Resource Allowance.'' To avoid having to ''spend down'' the entirety of a couple's assets to qualify the institutionalized spouse for Medicaid and thus impoverish himself or herself in the process, the community spouse is allowed to keep the CSRA.
The MCCA also provides diversion procedures regarding the couple's income to prevent spousal impoverishment. Once eligibility is reached, the state agency reexamines the ailing spouse's income to determine how much must be contributed toward nursing home costs and whether any of it should be left available to the community spouse. If the community spouse's income falls below the ''minimum monthly maintenance needs allowance,'' (MMMNA) the agency allocates a portion of the institutionalized spouse's income to the community spouse.
Under Article X of the Illinois Public Aid Code, 305 ILCS 5/10-1 et seq., the state may seek recovery of nursing home costs from the community spouse once the institutionalized spouse begins receiving benefits, unless the community spouse's income is under the MMMNA. The regulations under Article X establish a formula for the amounts that may be collected from the community spouse above the MMMNA.
In this case, the state sought contributions from the community spouses of institutionalized spouses and, in some cases, obtained administrative judgments for payment. The plaintiffs thereupon filed suit in circuit court claiming that the state's attempt to collect contributions under Article X of the Code violated section 13964-5(b)(1) of the MCCA, which provides: ''During any month in which an institutionalized spouse is in the institution … no income of the community spouse shall be deemed available to the institutionalized spouse.''
The plaintiffs sought a declaration that Illinois' spousal support provisions under Article X violate the MCCA and, therefore, the supremacy clause of the U.S. Constitution. In response to the complaint, the defendants filed a motion to dismiss based on the plaintiffs' failure to exhaust their administrative remedies. The circuit court rejected that argument and held for the plaintiffs, enjoining the defendants from seeking any support from community spouses for any month in which the institutionalized spouse was receiving Medicaid. The appellate court reversed, with one dissent, and the plaintiffs petitioned for leave to appeal, which was allowed.
In an opinion by Justice Thomas R. Fitzgerald, the Supreme Court affirmed the appellate court. He first addressed the exhaustion issue. In support of their position, the defendants relied on a Code provision, 305 ILCS 5/10-11, and the Administrative Review Law, 735 ILCS 5/3-102, for the requirement that the plaintiffs must exhaust their administrative remedies before seeking judicial relief.
Fitzgerald observed that the purpose of the exhaustion doctrine is to allow administrative bodies to develop a factual record and to permit them to apply the special expertise they possess. When one challenges the validity of a statute on its face, however, the party is not required to exhaust administrative remedies. A facial attack, said Fitzgerald, presents purely legal questions and is not dependent on an administrative record. Since there was no allegation here that the defendants misapplied a statute or regulation, this case fell within the category of a facial attack and no exhaustion therefore was required.
Fitzgerald then reviewed the standards for federal preemption of state law under the supremacy clause. He noted that preemption can occur when the express language of a federal statute so provides, when the scope of a federal regulation is sufficiently pervasive, and when state law actually conflicts with federal law. The plaintiffs here focused on the third circumstance for their preemption claim, arguing that section 1396r-5(b) (1) of the MCCA prohibits the defendants from collecting spousal support under Article X.
Fitzgerald, however, construed the language of section 1396r-5(b) (1) — ''no income of the community spouse shall be deemed available to the institutionalized spouse'' — in light of the previous subsection, section 5(a) (1), which indicates that the purpose of the provision is for determining the eligibility of institutionalized spouse to receive care, and not to prohibit a state from obtaining reimbursement.
Thus, the only purpose of section 1396r-5(b) (1) is to prevent a state agency from looking at a community spouse's income to bar the receipt of benefits by an ailing spouse. It is not directed at spousal support laws, such as Article X, where the community spouse may be required to reimburse the state for some of the cost of care provided to the institutionalized spouse. According to Fitzgerald, after the institutionalized spouse has received benefits, the state may seek recovery of costs from the community spouse, an arrangement that some states refer to as a ''pay and chase'' system.
The court therefore concluded that the MCCA does not preempt Article X of the Code, and that the appellate court correctly reversed the trial court's grant of declaratory, injunctive and other relief to the plaintiffs.
