Hutcherson v. Arizona Health Care Cost Containment System Administration

                    FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

REBECCA G. HUTCHERSON,                    
                Plaintiff-Appellant,
                v.                                No. 10-16426
ARIZONA HEALTH CARE COST
CONTAINMENT SYSTEM                                 D.C. No.
                                               2:09-cv-00898-JAT
ADMINISTRATION, and THOMAS J.
                                                   OPINION
BETLACH, in his capacity as
Director of AHCCCS,
             Defendants-Appellees.
                                          
         Appeal from the United States District Court
                  for the District of Arizona
         James A. Teilborg, District Judge, Presiding

                   Argued and Submitted
         August 30, 2011—San Francisco, California

                      Filed January 27, 2012

   Before: Raymond C. Fisher and Johnnie B. Rawlinson,
           Circuit Judges, and Robert J. Timlin,
                  Senior District Judge.*

                    Opinion by Judge Timlin




  *The Honorable Robert J. Timlin, United States District Judge for the
Central District of California, sitting by designation.

                                 815
818         HUTCHERSON v. ARIZONA HEALTH CARE COST




                            COUNSEL

Eric K. Macdonald and Ryan K. Hodges (argued), Jackson
White, Mesa, Arizona, for the appellant.

Timothy D. Ducar (argued), Lorona Steiner Ducar, Ltd.,
Phoenix, Arizona, for the appellees.


                             OPINION

TIMLIN, Senior District Judge:

   Rebecca Hutcherson (“Appellant”) appeals the district
court’s judgment granting summary judgment to Arizona
Health Care Cost Containment System Administration and
Thomas Betlach (collectively “AHCCCS”). We hold that the
2006 amendment to 42 U.S.C. § 1396p(c)(1)(F)(i) creates a
right in the State to recover as a remainder beneficiary against
a community spouse’s annuity for an institutionalized
spouse’s medical costs. We further hold that the State’s recov-
ery is not limited to the amount it paid for the institutionalized
spouse’s medical costs as of the date of the community
spouse’s death. Accordingly, we affirm.

                                  I.

  Appellant is the daughter of John and Betty Hutcherson.1
At some point, Betty required long-term care in a nursing
  1
   For ease of reference, we will refer to John and Betty Hutcherson by
their first names.
           HUTCHERSON v. ARIZONA HEALTH CARE COST            819
home or similar facility. In June 2007, Betty applied for Med-
icaid assistance from AHCCCS. Betty did not qualify for
Medicaid assistance at that time because the Hutchersons’
assets exceeded the limit to qualify. In order for Betty to qual-
ify for Medicaid assistance, John “spent down” his assets by
purchasing an annuity in his name for $100,000. The annuity
paid a fixed monthly amount of $2,781.63 for 36 months.
AHCCCS was listed as the annuity’s remainder beneficiary in
the first position, as required by the Medicaid statute, and
Appellant was listed as the remainder beneficiary in the sec-
ond position.

   On April 5, 2008, John died. At that time, the annuity had
a remaining value of approximately $75,000. The annuity pro-
vided that, at the time of the annuitant’s death, the beneficiary
could choose to either be paid a lump sum or receive the
remaining monthly annuity payments as scheduled. AHCCCS
opted to receive the monthly payments from the annuity.

   At the time of John’s death, AHCCCS had paid $23,840.51
for Betty’s medical care. Following John’s death, AHCCCS
continued to pay for Betty’s care at a monthly cost of
$2,552.92. AHCCCS deducted this continuing monthly cost
from the monthly annuity payments it was receiving and
applied the remaining $228.71 to the $23,840.51 that it had
paid for Betty’s care prior to John’s death.

   Betty stopped receiving Medicaid assistance from AHC-
CCS in 2009. The annuity was then used by AHCCCS to pay
off the remaining balance of the $23,840.51 and AHCCCS
released its claim on the annuity. In total, AHCCCS received
$60,840.51 from the annuity before the remaining value was
paid to Appellant as the secondary remainder beneficiary.

   On April 29, 2009, Appellant filed a declaratory judgment
action seeking a declaration that AHCCCS had no right to
recover from John’s annuity at all or, alternatively, had no
right to recover for any costs incurred for the care Betty
820         HUTCHERSON v. ARIZONA HEALTH CARE COST
received after John’s death. The parties filed cross-motions
for summary judgment following discovery. The district court
granted AHCCCS’s motion, concluding that (1) 42 U.S.C.
§ 1396p(c)(1)(F)(i) was validly enacted by Congress and is
binding on Appellant; (2) AHCCCS could recover from the
annuity for costs it incurred on Betty’s behalf; and (3) AHC-
CCS could recover for amounts it spent on Betty’s care after
John’s death.

  Appellant timely filed this appeal.

                                  II.

   We have jurisdiction over this case pursuant to 28 U.S.C.
§ 1291. We review de novo a district court’s grant of sum-
mary judgment. City of Los Angeles v. San Pedro Boat Works,
635 F.3d 440, 446 (9th Cir. 2011).

                                 III.

   Medicaid is a cooperative program through which the fed-
eral government reimburses states for some costs they incur
in providing medical assistance to the poor. See Wisconsin
Dep’t of Health & Family Servs. v. Blumer, 534 U.S. 473, 479
(2002). Each state develops its own plan for determining
Medicaid eligibility based on standards established by the fed-
eral government, taking into account the income and assets of
the applicant. Id.

   Unique problems arose regarding Medicaid eligibility for
spouses given that they generally share income and assets. See
id. at 479-80. For example, states generally considered
income from either spouse and jointly-held assets in determin-
ing the Medicaid eligibility for the institutionalized spouse,
but did not consider assets held solely in the name of the com-
munity spouse. Id.2 As a result, some community spouses
  2
  “Community spouse” refers to the spouse of an institutionalized person
who continues to live at home. See Blumer, 534 U.S. at 478.
          HUTCHERSON v. ARIZONA HEALTH CARE COST            821
were left destitute so that the institutionalized spouse could
qualify for Medicaid assistance, while some wealthy couples
were able to qualify for assistance by simply holding their
assets solely in the name of the community spouse. Id. at 480.
Congress responded to this problem by passing the Medicare
Catastrophic Coverage Act of 1988 (“MCCA”), which had
the dual aim of ending the “pauperization” of community
spouses and preventing wealthy couples from qualifying for
Medicaid assistance by sheltering their assets. Id.; see also
J.P. v. Mo. State Family Support Div., 318 S.W.3d 140, 142
(Mo. Ct. App. 2010) (“In enacting the MCCA, Congress
sought to protect the community spouse from poverty, but it
also wanted to protect the Medicaid system from abuse.”).

   [1] One provision of the MCCA allows an institutionalized
spouse to qualify for Medicaid assistance while reserving for
the community spouse a capped amount of assets for the com-
munity spouse’s benefit, known as the “community spouse
resource allowance” or “CSRA.” Blumer, 534 U.S. at 482.
The CSRA is designed to ensure that the community spouse
can meet his or her minimum monthly maintenance needs.
See id. at 478. All assets above the CSRA must be spent
before the institutionalized individual can be eligible for Med-
icaid assistance. See id. at 483.

   Congress regulates the means by which couples may spend
down their assets to qualify an institutionalized individual for
Medicaid assistance. The Medicaid Act prevents wealthy cou-
ples from qualifying for Medicaid by imposing a penalty
when couples attempt to dispose of assets that could other-
wise be used to pay for the institutionalized spouse’s medical
care. If a couple disposes of any property for less than fair
market value during a five-year “look back” period, the insti-
tutionalized spouse is not eligible to receive coverage for an
amount of time equal to the “total, cumulative uncompensated
value of all assets transferred by the individual (or individu-
al’s spouse) . . . divided by . . . the average monthly cost to
a private patient of nursing facility services in the State.” 42
822       HUTCHERSON v. ARIZONA HEALTH CARE COST
U.S.C. § 1396p(c)(1)(A), (E). In other words, if either spouse
tries to give away assets, the institutionalized spouse will be
ineligible for Medicaid benefits for the length of time that
those assets could have covered the spouse’s medical costs.
The effect is to treat couples who dispose of assets as if those
assets were available to the couple to pay for medical care.

   [2] Congress has, however, provided specific ways that a
community spouse may spend down his or her assets without
affecting the institutionalized spouse’s eligibility for Medic-
aid. Of relevance here, the Medicaid statute allows the com-
munity spouse to purchase an annuity. See 42 U.S.C.
§ 1396p(c)(1)(F)(i). This provision protects the community
spouse from destitution by allowing the spouse to convert his
or her assets, which are considered in determining the institu-
tionalized spouse’s eligibility, to income, which is not consid-
ered. See 42 U.S.C. § 1396r-5(b)(1), (c)(1).

   In 2005, Congress passed the Deficit Reduction Act
(“DRA”), which sought to further close loopholes in the Med-
icaid Act. See, e.g., N.M. v. Div. of Med. Assist. & Health
Servs., 964 A.2d 822, 827-28 (N.J. Sup. Ct. App. Div. 2009)
(discussing the DRA’s legislative history); see also Mackey v.
Dep’t of Human Servs., ___ N.W.2d ___, 289 Mich. App.
688, 2010 WL 3488988, at *4 n.7 (Mich. Ct. App. Sept. 7,
2010) (“[W]hen signing into law the Deficit Reduction Act of
2005, President George W. Bush stated that the act “‘tightens
the loopholes that allowed people to game the system by
transferring assets to their children so they can qualify for
Medicaid benefits.”’ ”) (quoting Reif, A Penny Saved Can Be
A Penalty Earned: Nursing Homes, Medicaid Planning, The
Deficit Reduction Act of 2005, And The Problem of Transfer-
ring Assets, 34 NYU Review of Law & Social Change 339,
347 (2010)). The DRA added several requirements that must
be met before an annuity is exempt from the transfer penalty.
For instance, the annuity must (i) be irrevocable and nonas-
signable, (ii) be actuarially sound, and (iii) provide for pay-
ments in equal amounts with no deferral and no balloon
          HUTCHERSON v. ARIZONA HEALTH CARE COST           823
payments. Id. § 1396p(c)(1)(G)(ii). In addition, and of partic-
ular relevance to this case, the DRA originally provided that
the purchase of an annuity is allowable only where “the State
is named as the remainder beneficiary in the first position for
at least the total amount of medical assistance paid on behalf
of the annuitant.” 42 U.S.C. § 1396p(c)(1)(F)(i) (2005)
(emphasis added).

   [3] In 2006, Congress amended the language of
§ 1396p(c)(1)(F)(i). Under the amended language, spouses
may purchase an annuity to spend down their assets only if
“the State is named as the remainder beneficiary in the first
position for at least the total amount of medical assistance
paid on behalf of the institutionalized individual.” 42 U.S.C.
§ 1396p(c)(1)(F)(i) (2006) (emphasis added); see also Tax
Relief and Health Care Act of 2006, Pub. L. No. 109-432, 120
Stat. 2922, 2998 (2006).

                             IV.

   The issues raised on appeal turn on our interpretation of
§ 1396p(c)(1)(F)(i), as amended in 2006. In construing a stat-
ute, we first look to the plain meaning of that statute. See
Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 438 (1999).
If the plain meaning is clear, our analysis generally ends and
we apply that plain meaning. See id.; see also Arlington Cent.
School Dist. Bd. of Educ. v. Murphy, 548 U.S. 291, 296
(2006) (plain language of text controls so long as outcome is
not absurd). Interpretation of this provision “depends upon
reading the whole statutory text, considering the purpose and
context of the statute.” Kasten v. Saint-Gobain Performance
Plastics Corp., 131 S.Ct. 1325, 1330 (2011) (citation omit-
ted).

                              A.

  John purchased the annuity at issue in this case in 2007 to
enable Betty to qualify for Medicaid assistance. For the annu-
824       HUTCHERSON v. ARIZONA HEALTH CARE COST
ity to qualify as a permissible means of “spending down”
assets, John named the State as the remainder beneficiary in
the first position, as required by § 1396p(c)(1)(F). Appellant,
who was named as the second beneficiary, contends that
AHCCCS was not entitled to any reimbursement from the
annuity because AHCCCS’s recovery was limited to expenses
incurred on behalf of John, who was never institutionalized.
We disagree.

   [4] Section 1396p(c)(1)(F)(i) provides that spouses may
not “spend down” by purchasing an annuity unless “the State
is named as the remainder beneficiary in the first position for
at least the total amount of medical assistance paid on
behalf of the institutionalized individual.” 42 U.S.C.
§ 1396p(c)(1)(F)(i). By its plain terms, the provision allows
the State to recover the expenses incurred on behalf of “the
institutionalized individual,” in this case, Betty.

   Appellant observes that AHCCCS would not have been
entitled to recover Betty’s medical costs from the annuity
under the previous version of § 1396p(c)(1)(F)(i). She urges
us to ignore the plain meaning of the 2006 amendment
because Congress labeled the amendment as a “technical cor-
rection.” See Tax Relief & Health Care Act of 2006, Pub. L.
No. 109-432, 120 Stat. 2922, 2996 (2006). According to
Appellant, the “technical” character of the amendment indi-
cates that Congress was merely trying to “clarify” the law and
not to make substantive changes to the law. Thus, Congress
intended that we interpret “institutionalized individual” to
mean “annuitant” despite the different meanings of those
words.

   [5] We disagree. The best indicator of congressional intent
is the language of a statute itself. See Sedima, S.P.R.L. v.
Imrex Co., 473 U.S. 479, 495 n.13 (1985). The term “institu-
tionalized individual” is specifically defined by the statute to
mean “an individual who is an inpatient in a nursing facility,
who is an inpatient in a medical institution and with respect
             HUTCHERSON v. ARIZONA HEALTH CARE COST                       825
to whom payment is made based on a level of care provided
in a nursing facility, or who is described in section
1396a(a)(10)(A)(ii)(VI) of this title.” 42 U.S.C.
§ 1396p(h)(3). Here, that definition captures only Betty.

   That Congress labeled its amendment as a “technical cor-
rection” does not defeat the plain language of the statute. See
United States v. R.L.C., 503 U.S. 291, 305 n.5 (1992) (plural-
ity) (rejecting the contention that the usual tools of statutory
construction do not apply to technical amendments); see also
id. at 307 (Scalia, J., concurring) (“The Court begins its analy-
sis, quite properly, by examining the language of [the statute]
. . .”).3

   [6] We will give the plain meaning to the unambiguous
language in § 1396p(c)(1)(F)(i), which allows states to reach
a deceased community spouse’s annuity for costs incurred on
behalf of an institutionalized spouse. We therefore hold that
AHCCCS was entitled to recover as the primary remainder
beneficiary from John’s annuity for the amount of medical
costs it paid on behalf of Betty.

                                      B.

   Appellant argues in the alternative that AHCCCS’s interest
as a remainder beneficiary in the first position was limited to
the amount it had paid on behalf of Betty as of the date of
John’s death. Appellant’s argument again turns on the lan-
guage of the statute, which requires an annuitant to name the
State “as the remainder beneficiary in the first position
for at least the total amount of medical assistance paid on
behalf of the institutionalized individual.” 42 U.S.C.
  3
    Appellant also notes that the amendment’s retroactivity “is an indicia
of [its] technical nature.” Congress’s indication that the amendment should
apply retroactively does not alter our analysis in light of the statute’s plain
language. We express no opinion as to whether retroactive application of
the amendment would raise a due process issue.
826        HUTCHERSON v. ARIZONA HEALTH CARE COST
§ 1396p(c)(1)(F)(i). Appellant contends that the provision’s
use of “paid” in the past tense evidences a congressional
intent to cap a state’s recovery at the amount it had paid up
to the date of the annuitant’s death. Hence, any additional
amount from the annuity would be disbursed to the remainder
beneficiary in the second position even though the State con-
tinues incurring costs on behalf of the annuitant’s spouse.

   [7] We disagree. To begin with, nothing in the statutory
language is inconsistent with permitting AHCCCS to recover
from the annuity expenses incurred after John’s death. In
doing so, AHCCCS would be recovering the “medical assis-
tance paid on behalf of the institutionalized individual,” Betty,
as § 1396p(c)(1)(F)(i) permits. This interpretation is also the
most consistent with the statutory scheme and purpose. As
noted above, the provisions regarding transferring assets were
tailored to balance Congress’s desire to avoid impoverishment
of the community spouse, on the one hand, and closing loop-
holes that allowed wealthy couples to game the system, on the
other hand. The annuity payments to AHCCCS as a benefi-
ciary functioned precisely the way the statute was intended to
work. The Hutchersons were able to qualify Betty for Medic-
aid assistance, while ensuring that John did not become
impoverished. As part of that balance, AHCCCS was named
as the primary remainder beneficiary of John’s annuity so that
it could recoup its costs for the medical care that Betty
received in the event that John died before the annuity had run
its course.

   Accepting Appellant’s position that the state should not
recover and, instead, she should inherit what remained in
John’s annuity would frustrate the purpose of the Medicaid
statute. As we have noted above, Congress prevents the com-
munity spouse from disposing of assets that would otherwise
be available to pay for the institutionalized spouse’s medical
care. For instance, if John, instead of purchasing the annuity,
attempted to transfer funds to Appellant, Betty would have
been ineligible for Medicaid for the approximate length of
          HUTCHERSON v. ARIZONA HEALTH CARE COST          827
time that the funds could have covered Betty’s medical costs.
By purchasing an annuity, John avoided this transfer penalty.
Consistent with the Medicaid Act’s objective of protecting the
community spouse from destitution, John was entitled to col-
lect monthly payments from the annuity for as long as he
lived. When John died before the annuity ran its course, how-
ever, funds remained in the annuity that could have otherwise
been used to pay for Betty’s medical care. To limit AHCC-
CS’s recovery to the medical expenses incurred before John’s
death would allow the Hutchersons to keep money and trans-
fer money that would have otherwise made them ineligible for
Medicaid. The Medicaid Act, through the transfer penalty and
the DRA amendments to the annuity provision, reflect a clear
intent to prevent individuals from sheltering funds in this
manner.

  [8] We therefore conclude that AHCCCS could be reim-
bursed as the primary remainder beneficiary from John’s
annuity for the cost of the medical assistance it paid on
Betty’s behalf after John’s death.

                             V.

  Accordingly, we AFFIRM the judgment of the district
court granting summary judgment to AHCCCS and Betlach.