GLORIA TJADEN, By and Through Stanley Tjaden, Her Agent, Plaintiff-Appellee, (No. 4-12-0768)
THE STATE OF ILLINOIS, Acting Through THE DEPARTMENT OF HUMAN SERVICES and MICHELLE R.B. SADDLER, Its Secretary; and THE DEPARTMENT OF HEALTHCARE AND FAMILY SERVICES and JULIE HAMOS, Its Director, Defendants-Appellants. WILLARD GREER, By and Through John Greer, His Special Representative, Plaintiff-Appellee, (No. 4-12-0918)
THE STATE OF ILLINOIS, Acting Through THE DEPARTMENT OF HUMAN SERVICES and MICHELLE R.B. SADDLER, Its Secretary; and THE DEPARTMENT OF HEALTHCARE AND FAMILY SERVICES and JULIE HAMOS, Its Director, Defendants-Appellants. GLORIA TJADEN, By and Through Stanley Tjaden, Her Agent, Plaintiff-Appellee, (No. 4-12-1087)
THE STATE OF ILLINOIS, Acting Through THE DEPARTMENT OF HUMAN SERVICES and MICHELLE R.B. SADDLER, Its Secretary; and THE DEPARTMENT OF HEALTHCARE AND FAMILY SERVICES and JULIE HAMOS, Its Director, Defendants-Appellants
Appeal from Circuit Court of Sangamon County. No. 11MR188. Honorable, John Schmidt, Judge Presiding.
Appeal from Circuit Court of Sangamon County. No. 10MR405. Honorable, Leslie J. Graves, Judge Presiding.
In actions arising from the financial transactions plaintiffs made in the course of applying for Medicaid benefits when they entered into nursing homes, the decisions of the Department of Healthcare and Family Services and the Department of Human Services imposing penalty periods for long-term-care services based on the Departments' refusal to recognize partially returned gifts made to children and life insurance contracts purchased to fund burial expenses were improperly reversed by the trial courts involved in the consolidated appeals, since the Departments were not required to provide plaintiffs with partial credit for partially returned gifts, the life insurance contracts plaintiffs purchased were not supported by actual burial contracts, and plaintiffs failed to show that they received fair market value for their purchases.
Lisa Madigan, Attorney General, of Chicago (Michael A. Scodro, Solicitor General, and Carl J. Elitz (argued), Assistant Attorney General, of counsel), for appellants.
Duane D. Young (argued), of Labarre, Young & Behnke, of Springfield, for appellees.
JUSTICE POPE delivered the judgment of the court, with opinion. Justices Knecht and Steigmann concurred in the judgment and opinion.
[¶1] These consolidated appeals arise from judgments entered by the circuit courts reversing the final administrative decisions of defendants, the Department of Healthcare and Family Services (HFS) and the Department of Human Services (DHS) (collectively, the Departments) granting plaintiffs, Gloria Tjaden's and
Willard Greer's, applications for Medicaid assistance while imposing penalty periods of noneligibility due to certain nonallowable asset transfers. The courts reversed the administrative decisions with regard to those penalty periods.
[¶2] The Departments appeal, arguing the penalty periods imposed were proper where (1) the Departments were not required to recognize partially returned gifts for credit and (2) no exempt burial contracts were purchased. We reverse the circuit courts' judgments and affirm the administrative decisions.
[¶3] I. BACKGROUND
[¶4] A. Gloria Tjaden (Nos. 4-12-0768, 4-12-1087)
[¶5] In April 2009, Tjaden purchased a life insurance policy for $12,000. The proceeds of the policy were assigned to create an irrevocable trust. The trust agreement required the trustee to pay Tjaden's funeral and burial expenses if a bill was presented within 45 days of her death. After those 45 days, however, the trustee was prohibited from authorizing any payment of expenses. Instead, the funds would pass, condition-free, to the residual beneficiary, i.e., Tjaden's son.
[¶6] In May 2009, Tjaden transferred $4,202.79 to her son. In June 2009, Tjaden applied for Medicaid assistance. In July 2009, Tjaden's son wrote her a check for $100.
[¶7] On September 23, 2009, the Departments approved Tjaden's application but determined she was ineligible for Medicaid funding for a four-month period. The Departments determined the $4,202.79 transfer to Tjaden's son was nonallowable and assessed a one-month penalty. Tjaden was also assessed an additional three-month penalty because the Departments determined Tjaden did not receive fair market value for the $12,000 insurance policy purchase. The penalty period ran from April 2009 through July 2009.
[¶8] Tjaden appealed, and an administrative hearing was held on July 7, 2010. During the hearing, Tjaden argued the estimate from the funeral home for anticipated goods and services was sufficient to show she received fair market value for the insurance purchase. Tjaden also argued because her son returned $100 to her in July 2009 the May 2009 transfer was really $4,101.79, not $4,202.79, which was less than the $4,140 private-pay rate for the nursing home. Tjaden contended she should receive a " zero-month" penalty, i.e., not be penalized, for May 2009 because the partial repayment was less than Tjaden's private pay rate.
[¶9] On April 25, 2011, the Departments issued a joint final administrative decision, which found the following:
" Regarding [Tjaden's] transfer of $12,000.00 in April 2009 to purchase a life insurance policy which was then placed in an irrevocable trust[:] the Department's policy states that a burial contract is required for burial funds to be considered as exempt. Department policy does not provide an exemption for burial funds without a burial contract. In this case, [Tjaden] presented no burial contract. In fact, although [Tjaden] provided an estimate showing that the cost for services would be $12,004.12, absent a burial contract with a funeral home, or other guarantee that the full amount of the transferred assets will be used solely for the intended purpose, the Department cannot determine if fair value was received. Therefore, the determination by the Department that the transfer of $12,000.00 was non-allowable and subject to the imposition of a penalty period will be upheld. ***
Regarding the May 2009 transfer of $4,202.79, again [Tjaden] received no compensation for these funds. Therefore, this transaction was a non-allowable transfer of assets. Although [Tjaden] argued that $100.00 was subsequently returned to [Tjaden] by her son in July 2009, and that the amount of the transfer was effectively reduced to less than one month at the private pay rate of $4,140.00, the Department's policy cited above does not provide for consideration of a partial repayment of a non-allowable transfer. Moreover, while the State Medicaid Manual allows states to modify the penalty period if partial payment of an asset is returned, it does not mandate that such modifications be adopted by the states. Therefore, the determination by the local office that the May 2009 transfers were non-allowable transfers resulting in an additional one month penalty period will be upheld."
[¶10] On May 5, 2011, Tjaden filed a complaint in the circuit court seeking administrative review of the Departments' decision.
[¶11] Following a July 16, 2012, hearing, the circuit court affirmed the Departments' decision to disallow Tjaden credit for the partial gift return but set aside the Departments' determination regarding the insurance policy purchase.
[¶12] On August 14, 2012, the Departments filed their notice of appeal regarding the circuit court's July 16, 2012, ruling reversing the administrative decision regarding the insurance policy purchase. That appeal was docketed as appellate court case No. 4-12-0768.
[¶13] That same day, Tjaden filed a motion to reconsider the portion of the circuit court's judgment affirming the Departments' administrative decision to disallow the partial gift return. In her motion, Tjaden argued the Departments had published a new administrative rule on November 14, 2011, regarding partial returns of gifts, which provided the following:
" For transfers occurring prior to January 1, 2012, if only parts of transferred assets are returned, a penalty period shall be reduced but not eliminated . For example, if only half the value of the asset is returned, the penalty period shall be reduced by one half." (Emphasis added.) 89 Ill. Adm. Code 120.388(m)(6)(A), added at 35 Ill. Reg. 18645 (eff. Jan. 1, 2012).
We note the parties appear to concede the amended rule is not controlling in this case as the Departments' administrative decisions were made prior to the amendment's effective date. However, Tjaden contends this language is a clear declaration of what had been the Departments' " long-standing policy."
[¶14] On October 2, 2012, Tjaden filed a supplement to her brief in support of the motion to reconsider. Tjaden asked the circuit court to take judicial notice of In re J. Carl Smith (Appeal All-011 493-MANG (Sept. 20, 2012)), another administrative decision by the Departments, which cited the new administrative rule and recognized partial gift returns. According to Tjaden, to allow the Departments " to hold and apply two contradictory interpretations of the same rule violates due process of law under both the U.S. and Illinois constitutions." The Departments objected to the introduction of the new evidence, noting that case was itself on administrative review in the circuit court and arguing the court's review was limited to the evidence submitted during the administrative hearing. See 735 ILCS 5/3-110 (West 2012) (court on administrative review is limited to consideration of the evidence submitted in the administrative hearing and may not hear additional evidence); Pisano v. Giordano,
106 Ill.App.3d 138, 140, 435 N.E.2d 899, 901, 62 Ill.Dec. 101 (1982) (" judge sitting in an administrative review proceeding is expressly forbidden to go outside the record in rendering a decision" ).
[¶15] In its October 11, 2012, order, the circuit court stated it took judicial notice of the administrative decision tendered by Tjaden and found the following:
" [T]he court now has the benefit of the [Departments'] own interpretation of the applicable rule including the amended rule issued by the [Departments] in the Department's Policy Manual 07-02-20-b, as amended effective July 2, 2012. *** Based on the interpretation of the rule in question by the [Departments], as set forth in the appeal of J. Carl Smith, Appeal All-011 493-MANG, and giving deference to that interpretation, the Motion to Reconsider should be granted."
[¶16] On November 13, 2012, the Departments filed their notice of appeal from the circuit court's October 11, 2012, order. That appeal was docketed as appellate court case No. 4-12-1087. (Because the trial court's rulings underlying case Nos. 4-12-0768 and 4-12-1087 amount to a net reversal of the Departments' administrative decision, we will treat the issues in those cases as a single appeal for purposes of this disposition.)
[¶17] B. Willard Greer (No. 4-12-0918)
[¶18] On August 29, 2008, Greer entered a long-term-care facility. That same day Greer applied for Medicaid benefits.
[¶19] In the months prior to his August 29, 2008, application for Medicaid benefits, Greer wrote six checks to his son. Each check was for $4,500.
[¶20] In September 2008, while Greer's application was being processed, Greer's son wrote six checks, for $2,019 each (a total of $12,114), to Greer. The memo on each check indicated the payments were intended as partial returns of the $4,500 gifts made in March, April, May, June, July, and August 2008. Also in September 2008, Greer purchased a $12,000 life insurance policy. The proceeds of the policy were assigned to create an irrevocable trust. The terms of the trust required the trustee to pay Greer's funeral and burial expenses as long as evidence of those expenses was presented to the trustee within 45 days of Greer's death. After ...