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In re Estate of Vansach

Court of Appeals of Michigan

May 22, 2018

DEPARTMENT OF HEALTH AND HUMAN SERVICES, Respondent-Appellant. JOSEPH VANSACH JR., Petitioner-Appellee, In re ESTATE OF JEROME R. BOCKES. JEROME R. BOCKES, a Protected Person, Petitioner-Appellee,

          St. Clair Probate Court LC No. 13-023802-CA

          Eaton Probate Court LC No. 16-052766-PO

          Before: O'Connell, P.J., and Hoekstra and K. F. Kelly, JJ.

          PER CURIAM.

         In Docket No. 334732, respondent, the Department of Health and Human Services (DHHS), appeals as of right a protective order entered by the St. Clair Probate Court, which ordered that all of Joseph Vansach, Jr.'s income be paid to his wife, Ramona Fenner-Vansach, for the rest of Joseph's life. In Docket No. 336267, the DHHS appeals a similar protective order, entered by the Eaton Probate Court, directing that all income of Jerome R. Bockes be paid to his wife, Beverly Fay Bockes.[1] For the reasons explained in this opinion, we conclude that the probate courts have the authority to enter protective orders providing support for a community spouse whose institutionalized spouse is receiving Medicaid benefits.[2] However, we also conclude that the probate courts' authority to enter such support orders under the Estates and Protected Individuals Code (EPIC), MCL 700.1101 et seq. does not include the power to enter an order preserving the community spouse's standard of living without consideration of the institutionalized spouse's needs and patient-pay obligations under Medicaid. Given that the orders in this case were entered without consideration of Joseph's and Jerome's needs and patient-pay obligations under Medicaid, we find that the probate courts abused their discretion by entering the orders at issue in this case. We therefore vacate both support orders and remand for a reconsideration of Beverly's and Ramona's need for support under the proper framework.

         Both Joseph and Jerome are institutionalized individuals who receive Medicaid benefits to cover part of the costs of their health care. Their respective spouses-Ramona and Beverly- sought protective support orders under EPIC, claiming that they lacked sufficient income to meet their needs and that they were entitled to financial support from Joseph and Jerome. The DHHS opposed the petitions, asserting that Ramona and Beverly actually sought a judicial determination that they were entitled to larger community spouse monthly income allowances (CSMIA) under Medicaid, which would have the effect of decreasing the patient-pay amount that Joseph and Jerome contribute toward their care. According to the DHHS, the probate courts lacked the authority to make Medicaid determinations and to enter orders modifying the CSMIA. Nevertheless, in each case, the probate courts granted the petitions and entered support orders requiring payment of 100% of Joseph's and Jerome's monthly incomes to their respective spouses. The DHHS now appeals as of right in each case.

         Generally speaking, in light of the federal Medicaid statutes establishing a CSMIA for community spouses, these consolidated appeals ask us to consider whether, and under what circumstances, a community spouse whose institutionalized spouse is receiving Medicaid benefits may obtain a support order under EPIC. As a practical matter, the community spouse's purpose in seeking a support order under EPIC is to later use that order to obtain an increase in the CSMIA and a corresponding decrease in the institutionalized spouse's patient-pay amount under Medicaid. Under Medicaid, there exists an administrative remedy for challenging the CSMIA, and the DHHS's basic position on appeal is that this administrative process is the sole avenue by which a community spouse may seek a modification of the CSMIA. Alternatively, assuming that the probate court has the authority to enter support orders with potential Medicaid implications, the DHHS argues that Ramona and Beverly failed to establish the necessary prerequisites for a support order under EPIC and that the probate courts abused their discretion by stripping Joseph and Jerome of all income so that Ramona and Beverly could maintain their current lifestyles. To provide context for our analysis of these issues, we begin with a brief overview of Medicaid's spousal impoverishment provisions and the availability of a support order under EPIC.


         "The Medicaid program, 42 USC 1396 et seq., was established by Congress in 1965 as a cooperative federal-state program in which the federal government reimburses the state for a portion of the costs of medical care for needy individuals." Cook v Dep't of Social Servs, 225 Mich.App. 318, 320; 570 N.W.2d 684 (1997). "Participation in Medicaid is essentially need-based, with states setting specific eligibility requirements in compliance with broad mandates imposed by federal statutes and regulations."[3] Mackey v Dep't of Human Servs, 289 Mich.App. 688, 693; 808 N.W.2d 484 (2010). "To be eligible for Medicaid long-term-care benefits in Michigan, an individual must meet a number of criteria, including having $2, 000 or less in countable assets." Hegadorn v Dep't of Human Servs Director, 320 Mich.App. 549, 552-553; 904 N.W.2d 904 (2017), lv gtd 907 N.W.2d 578 (2018) (quotation marks and citation omitted). Even if eligible for benefits, Medicaid recipients have an obligation to contribute to the cost of their care to the extent that they are financially able as determined based on post-eligibility calculations of income. See 42 USC 1396a(a)(17); 42 USC 1396r-5(d)(1); 42 CFR 435.725; Kent Co v Dep't of Social Servs, 149 Mich.App. 749, 751-752; 386 N.W.2d 663 (1986). However, Medicaid "with all of its complicated rules and regulations, has also become a legal quagmire that has resulted in the use of several 'loopholes' taken advantage of by wealthier individuals to obtain government-paid long-term care they otherwise could afford." Mackey, 289 Mich.App. at 693-694.

         The rules governing Medicaid are particularly complicated in cases involving married couples, "who typically possess assets and income jointly and bear financial responsibility for each other." Wisconsin Dep't of Health & Family Servs v Blumer, 534 U.S. 473, 479; 122 S.Ct. 962; 151 L.Ed.2d 935 (2002). Historically, because the income of both spouses and any jointly held assets were considered available to the institutionalized spouse for Medicaid purposes, "[m]any community spouses were left destitute by the drain on the couple's assets necessary to qualify the institutionalized spouse for Medicaid and by the diminution of the couple's income posteligibility to reduce the amount payable by Medicaid for institutional care." Id. at 480. However, in some cases, by titling assets solely in a community spouse's name, "couples with ample means could qualify for assistance when their assets were held solely in the community spouse's name." Id.

         Congress sought to address these problems with the enactment of the "spousal impoverishment" provisions of the Medicare Catastrophic Coverage Act of 1988 (MCCA), 42 USC 1396r-5. Blumer, 534 U.S. at 477, 480. Specifically, "Congress sought to protect community spouses from 'pauperization' while preventing financially secure couples from obtaining Medicaid assistance." Id. at 480. In other words, the basic goal of these spousal impoverishment provisions was to assure that "the community spouse has a sufficient-but not excessive-amount of income and resources available." Id. (quotation marks and citation omitted). "To achieve this aim, Congress installed a set of intricate and interlocking requirements with which States must comply in allocating a couple's income and resources." Id.

         Relevant to the present case, in addition to other rules regarding allocation of resources, Medicaid provides various rules for allocation of income between spouses for purposes of determining Medicaid eligibility as well as post-eligibility income calculations that apply after an institutionalized spouse is "determined or redetermined" to be eligible for medical assistance. See §§ 1396r-5(b) and (d).

Income allocation is governed by §§ 1396r-5(b) and (d). Covering any month in which "an institutionalized spouse is in the institution, " § 1396r-5(b)(1) provides that "no income of the community spouse shall be deemed available to the institutionalized spouse." The community spouse's income is thus preserved for that spouse and does not affect the determination whether the institutionalized spouse qualifies for Medicaid. In general, such income is also disregarded in calculating the amount Medicaid will pay for the institutionalized spouse's care after eligibility is established.
Other provisions specifically address income allocation in the period after the institutionalized spouse becomes Medicaid eligible. Section 1396r-5(b)(2)(A) prescribes, as a main rule, that if payment of income is made solely in the name of one spouse, that income is treated as available only to the named spouse (the "name-on-the-check" rule). Section 1396r-5(d) provides a number of exceptions to that main rule designed to ensure that the community spouse and other dependents have income sufficient to meet basic needs. Among the exceptions, § 1396r-5(d)(3) establishes for the community spouse a "minimum monthly maintenance needs allowance, " or MMMNA. The MMMNA is calculated by multiplying the federal poverty level for a couple by a percentage set by the State. Since 1992, that percentage must be at least 150% . . . . [Blumer, 534 U.S. at 480-481.]

         In an effort to ensure that a community spouse has income that meets the MMMNA, Medicaid allows a community spouse to receive a CSMIA. Id. at 481. Ordinarily, the CSMIA is calculated as set forth in § 1396r-5(d)(2), which states:

In this section (except as provided in paragraph (5)), the "community spouse monthly income allowance" for a community spouse is an amount by which--
(A) except as provided in subsection (e) of this section, the minimum monthly maintenance needs allowance (established under and in accordance with paragraph (3)) for the spouse, exceeds
(B) the amount of monthly income otherwise available to the community spouse (determined without regard to such an allowance).

         Essentially, under this provision, if the community spouse's income is less than the amount of the MMMNA, the CSMIA equals the amount of the shortfall. Section 1396r-5(d)(2). If either spouse is dissatisfied with this calculation of the CSMIA, they may obtain an administrative hearing, § 1396r-5(e)(2)(A)(i), and attempt to establish that the community spouse needs income above the MMMMA due to "exceptional circumstances resulting in significant financial duress, " § 1396r-5(e)(2)(B). Central to the present case, aside from the calculation of the CSMIA under § 1396r-5(d)(2), as an alternative method for determining the CSMIA, § 1396r-5(d)(5) provides: "[i]f a court has entered an order against an institutionalized spouse for monthly income for the support of the community spouse, the [CSMIA] for the spouse shall be not less than the amount of the monthly income so ordered."

         Ultimately, once the CSMIA has been determined, this amount is deducted from the institutionalized spouse's income and reallocated to the community spouse. Blumer, 534 U.S. at 481-482. See also § 1396r-5(d)(1)(B). "The provision for this allowance ensures that income transferred from the institutionalized spouse to the community spouse to meet the latter's basic needs is not also considered available for the former's care. As a result, Medicaid will pay a greater portion of the institutionalized spouse's medical expenses than it would absent the CSMIA provision." Blumer, 534 U.S. at 482.


         In Michigan, laws concerning the affairs of protected individuals and legally incapacitated individuals are set forth in EPIC.[4] See MCL 700.1201(a). In particular, Article V of EPIC contains statutes governing the protection of individuals under a disability.[5] In re Conservatorship of Brody, 321 Mich.App. 332, 336; ___ N.W. ___ (2017). Under EPIC, probate courts clearly have the authority to enter protective orders, including the authority to enter orders providing money for "those entitled" to support from the incapacitated individual. MCL 700.5401(3)(b). See also MCL 700.5402(a) and (b). As a prerequisite to appointing a conservator or entering other protective orders, the probate court must make a finding of "cause" as provided in MCL 700.5401. In relevant part, this provision states:

(1) Upon petition and after notice and hearing in accordance with this part, the court may appoint a conservator or make another protective order for cause as provided in this section.
(3) The court may appoint a conservator or make another protective order in relation to an individual's estate and affairs if the ...

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