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DOKOS v. MILLER

June 17, 1981

ANGELINE DOKOS, ET AL., PLAINTIFFS,
v.
JEFFREY C. MILLER, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Shadur, District Judge.

MEMORANDUM OPINION AND ORDER

Angeline Dokos ("Dokos") and Katherine Malenk ("Malenk") (collectively "plaintiffs"), acting both for themselves and for a putative class, sue the Illinois Department of Public Aid ("IDPA") and its Director Jeffrey Miller ("Miller")*fn1 challenging the validity of Ill.Rev.Stat. ch. 23, § 3-1.3 (the "transfer of assets rule" or simply the "rule"). That rule applies to otherwise Medicaid-eligible aged, blind or disabled persons who have, before filing their Medicaid applications, transferred assets for less than fair market value. It presumptively excludes such persons from any Medicaid eligibility for a period of five years, measured from the date of such transfer. Since the decision in Drogolewicz v. Quern, 74 Ill. App.3d 862, 30 Ill.Dec. 865, 393 N.E.2d 1212 (1st Dist. 1979), however, defendants have been required to limit, and have limited, the presumed ineligibility in terms of the actual value of the transferred asset rather than for a full five years.

Plaintiffs claim the rule (1) violates their rights under the Fourteenth Amendment and (2) conflicts with federal law in violation of the Supremacy Clause. IDPA and plaintiffs have filed cross-motions for partial summary judgment on the latter issue. Alternatively plaintiffs seek a preliminary injunction enjoining IDPA from enforcing the rule and requiring it to reprocess Medicaid applications of the last five years on which aid has been denied under the rule. Finally plaintiffs have moved for class certification. For the reasons stated in this memorandum opinion and order:

  1. Plaintiffs' motion for summary judgment is
     granted.
  2. Plaintiffs' motion for class certification is
     continued pending further submissions, if desired,
     by the parties.

Facts

IDPA administers the Medical Assistance ("Medicaid") program under Article V of the Illinois Public Aid Code, Ill.Rev.Stat. ch. 23, §§ 5-1 et seq. Medicaid provides medical care for several classes of persons if they are unable to pay for such care themselves: aged, blind and disabled persons and dependent children and their families. Its program is funded jointly by state money and by federal money provided under Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. Under 42 U.S.C. § 1396a IDPA is required to administer Medicaid in accordance with federal law.

Persons are eligible to receive Medicaid if they are either "categorically" or "medically" needy. Those receiving cash welfare payments under Aid to Families with Dependent Children ("AFDC") and Supplemental Security Income ("SSI") are, with a limited exception, "categorically needy" — meaning simply that they automatically qualify for Medicaid. Persons who do not receive cash welfare payments but demonstrate an inability to pay medical bills are deemed "medically needy" and are eligible for Medicaid to the extent such bills exceed their ability to pay.

Illinois' transfer of assets rule applies to all categorically and medically needy Medicaid applicants except for persons whose potential eligibility is as families with dependent children. In order to receive Medicaid:

  The person shall not have made, at any time within 5
  years immediately prior to the filing of his
  application, a voluntary or involuntary assignment or
  transfer of any legal or equitable interest in real
  or personal property, whether vested, contingent or
  inchoate, for the purpose of qualifying for or
  increasing his need for aid under this Article.
  Any assignment or transfer of property made without
  consideration, or for a consideration which is not
  paid, or which does not approximate the fair, cash
  market value of the property shall, prima facie, be
  deemed made for the purpose of qualifying for or
  increasing the need for aid. Unless and until
  evidence sufficient to prove the contrary is
  submitted, or the property is reassigned or
  retransferred to the applicant, or its equivalent
  value returned, he shall be ineligible for aid under
  this Article for 5 years following the date of the
  transfer or assignment.
  If aid has been granted as a result of a failure to
  disclose any transfer or assignment of property or to
  report any change in status with respect to property
  or income, as required by Section 11-18 and 11-19 of
  Article XI, the aid may at any time be cancelled or
  suspended or the amount thereof varied.

In November 1977 Dokos applied for and was denied Medicaid because assets transfers within the previous five years to her daughter-in-law, grandson and a creditor of her deceased son rendered her ineligible under the rule. Malenk applied for and began receiving Medicaid payments in July 1977. Several months later IDPA terminated payments when it discovered she had sold a house in 1975 and allegedly had received inadequate consideration for the sale. Termination of Malenk's benefits was subsequently upheld by an IDPA Board that heard her administrative appeal.*fn2

On January 27, 1978 plaintiffs filed this action under 42 U.S.C. § 1983, 28 U.S.C. § 2201 and 2202 for declaratory and injunctive relief. Specifically they charge the transfer of assets rule is unlawful because:

  1. it violates the Constitution by denying plaintiffs
     and the putative class members equal protection
     and due process under the law;
  2. it "takes into account" in determining Medicaid
     eligibility financial resources other than those
     "currently available" to the applicants in
     violation of 42 U.S.C. § 1396a(a)(10) and
     (17);
  3. it applies a more restrictive eligibility standard
     to aged, blind or disabled persons than to
     families with dependent children in violation of
     42 U.S.C. ยง 1396a(a)(17) ...

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