FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MAINE [Hon. John A. Woodcock, Jr., U.S. District Judge]
Landsman, with whom Landsman Law Group, Rene H. Reixach, Jr.,
Woods, Oviatt, Gilman, LLP, Richard L. O'Meara, and
Murray, Plumb & Murray were on brief, for appellant.
Thaddeus A. Heuer, with whom Dean Richlin, Jeremy W.
Meisinger, and Foley Hoag, LLP were on brief, for National
Academy of Elder Law Attorneys and Guardian Community Trust,
Scott Hamilton and Dennis M. Sandoval, APLC on brief for
Special Needs Alliance, amicus curiae.
Christopher C. Taub, Assistant Attorney General of Maine,
with whom Janet T. Mills, Attorney General of Maine, and
Susan P. Herman, Deputy Attorney General of Maine, were on
brief, for appellee.
H. Hunt, Assistant Attorney General, Halsey B. Frank, U.S.
Attorney, Alisa B. Klein, Attorney, Civil Division, Appellate
Staff, Casen B. Ross, Attorney, Civil Division, Appellate
Staff, Robert P. Charrow, General Counsel, U.S. Department of
Health and Human Services, Janice L. Hoffman, Associate
General Counsel, U.S. Department of Health and Human
Services, Susan Maxson Lyons, Deputy Associate General
Counsel for Litigation, U.S. Department of Health and Human
Services, David L Hoskins, Attorney, U.S. Department of
Health and Human Services, W. Charles Bailey, Jr., Attorney,
U.S. Department of Health and Human Services, on brief for
the United States of America, amicus curiae.
Thompson, Kayatta, and Barron, Circuit Judges.
KAYATTA, CIRCUIT JUDGE.
case concerns transfers of assets by individuals age
sixty-five or older into what are called "pooled special
needs trusts." The issue posed is whether such transfers
are among those transfers that the Medicaid statute counts
against eligibility for long-term care benefits. The district
court held that they are. For the following reasons, we
pertinent facts are straightforward and materially
R. Richardson is an elderly resident of St. Joseph's
Manor nursing facility in Portland, Maine. At the time of the
complaint, Richardson was eighty-seven years old and
receiving Medicaid benefits to help pay for the cost of her
long-term care. See generally 42 U.S.C. §
1396p(c)(1)(C)(i)(I) (listing covered long-term care
benefits, including nursing facility services). In January
2017, Richardson's conservator, Barbara Carlin, deposited
$38, 500 of the proceeds from the sale of Richardson's
former home into an account with Maine Pooled Disability
Trust ("MPDT"), a pooled special needs trust
established pursuant to 42 U.S.C. § 1396p(d)(4)(C).
special needs trusts allow disabled individuals with
relatively small amounts of money to pool their resources for
investment and management purposes. Lewis v.
Alexander, 685 F.3d 325, 333 (3d Cir. 2012). They are
designed to "provide for expenses that assistance
programs such as Medicaid do not cover." Id.
(quoting Sullivan v. County of Suffolk, 174 F.3d
282, 284 (2d Cir. 1999)). Richardson hoped to use her MPDT
funds to pay for "modest expenditures" not covered
by Medicaid "that would greatly improve her quality of
life," such as large-print word-search and crossword
puzzle books, new clothing, sweets, manicures, magazines, and
a radio. She also intended to hire a private caregiver who
could take her on excursions outside the nursing facility.
Richardson's deposit of funds into her MPDT account, the
Maine Department of Health and Human Services
("MDHHS") issued a notice threatening to suspend
Medicaid coverage for her care at St. Joseph's Manor for
"3.53 months" because "[a]ssets were
transferred" and she "did not get something of
equal value" in exchange. See 42 U.S.C. §
1396p(c)(1)(A) (penalizing an institutionalized
individual's "dispos[al] of assets for less than
fair market value"). In response, Richardson requested
an administrative hearing. She and MPDT also filed this
lawsuit in federal court challenging MDHHS's decision to
suspend her Medicaid coverage. The hearing officer
subsequently stayed state administrative proceedings pending
resolution of the lawsuit. Richardson will continue to
receive Medicaid benefits until the administrative review of
MDHHS's decision is complete.
and MPDT's complaint included two counts, but only the
second is at issue here. That count asserts a claim under 42
U.S.C. § 1983, seeking a declaration and injunction
predicated on the assertion that Richardson's transfer of
assets into a pooled special needs trust is not a transfer
that affects Medicaid eligibility. The district court
dismissed the complaint under Federal Rule of Civil Procedure
12(b)(6). Richardson, 2018 WL 1077275, at *18.
doing, the district court ruled that Richardson had standing
to challenge the decision to suspend her Medicaid coverage,
but her claim was not yet ripe because "[a]ny penalty
(and related adverse impact on [Richardson's] benefits)
ha[d] been stayed pending her administrative appeal,"
such that her claims "lack[ed] sufficient finality and
definiteness" for judicial review. Id. at
*4-5. The district court determined that
MPDT had associational standing and that MPDT's
contention that MDHHS's ruling was currently causing MPDT
to lose both enrollees and funds rendered its claim ripe for
adjudication. Finally, the district court ruled that MDHHS
correctly applied the governing statute in considering
transfers to pooled special needs trusts in determining
alone filed a timely notice of appeal. No party disputes that
MPDT has standing or that its claim is ripe. Nor do we see
any reason to question either standing or ripeness sua
sponte. As the district court observed, because
"(1) one of MPDT's members, [Richardson], has
standing to [sue]; (2) the interests at stake . . . are
germane to MPDT's purpose; and (3) the relief requested
does not require the participation of other MPDT
beneficiaries in this litigation," id. at *9,
MPDT has standing to bring its claims on behalf of its
beneficiaries. See Council of Ins. Agents & Brokers
v. Juarbe-Jiménez, 443 F.3d 103, 108 (1st Cir.
2006). And as to ripeness, no one cites any reason to doubt
that, as the district court found, MDHHS's ruling
currently harms MPDT. We therefore proceed to the merits of
the order granting MDHHS's motion to dismiss Count II,
which we review "de novo, applying the same criteria as
the district court." Germanowski v. Harris, 854
F.3d 68, 71 (1st Cir. 2017) (quoting Carrero-Ojeda v.
Autoridad de Energía Eléctrica, 755 F.3d
711, 717 (1st Cir. 2014)).
is a "health insurance program for low-income
individuals . . . funded by both the federal government and
state governments." Massachusetts v. Sebelius,
638 F.3d 24, 26 (1st Cir. 2011) (citing 42 U.S.C.
§ 1396 et seq.). Medicaid is supposed to be a
"payer of last resort," id. (quoting
Ark. Dep't of Health & Human Servs. v.
Ahlborn, 547 U.S. 268, 291 (2006)), and Medicaid
eligibility criteria generally take an applicant's income
and wealth into account, see Lewis, 685 F.3d at 332.
Medicaid's prior asset-counting rules, inventive
"lawyers and financial planners . . . devised various
ways to 'shield' wealthier [applicants']
assets," including by placing assets in trusts.
Johnson v. Guhl, 357 F.3d 403, 405 (3d Cir. 2004).
So, Congress amended the Medicaid scheme, aiming, as a
general matter, to treat trusts as assets available to
beneficiaries, thus counting against Medicaid eligibility.
Lewis, 685 F.3d at 333; see also Omnibus
Budget Reconciliation Act of 1993, Pub. L. No. 103-66, 107
Stat. 312 (1993) ("OBRA").
state participation in Medicaid is voluntary, participating
states must adopt plans that meet certain requirements that
federal statutes and regulations impose. See Armstrong v.
Exceptional Child Ctr., Inc., 135 S.Ct. 1378, 1382
(2015). Failure to comply may jeopardize federal funds.
See 42 U.S.C. § 1396a(a). Among these
requirements, states must "comply with the provisions of
section 1396p . . . with respect to . . . transfers of assets
. . . and [the] treatment of certain trusts." 42 U.S.C.
§ 1396a(a)(18). This case turns on the relationship
between two particular provisions of section 1396p: The Trust
Provision and the Transfer Provision.
Trust Provision, section 1396p(d), sets forth several general
rules addressing the treatment of assets held in trust (the
trust corpus) and the treatment of payments out of trusts.
Assets in revocable trusts are considered resources available
to the applicant for purposes of determining his or her
entitlement to benefits. Id. § 1396p(d)(1),
(3)(A)(i). Payments from such trusts are considered either
income of the applicant or assets disposed of by the
applicant under the Transfer Provision. Id. §
1396p(d)(3)(A)(ii), (iii). Assets in irrevocable trusts are
also considered available resources to the extent that
payments could be made from such trusts for the
applicant's benefit. Id. §
1396p(d)(3)(B)(i). And payments from these trusts are
likewise considered either income or transferred assets.
Id. § 1396p(d)(3)(B)(i)(I), (II). Further,
portions of irrevocable trusts from which no payment could be
made to the applicant are considered transferred assets, and
the value of the trust for purposes of the Transfer Provision
is determined by including the amount of any payments made
from such portion of the trust. Id. §
rules governing the treatment of trust corpuses and payments
out of trusts do not apply universally. The 1993 OBRA
amendments exempted three types of trusts for disabled
individuals -- special needs trusts, Medicaid income trusts,
and pooled special needs trusts -- from the eligibility rules
set out in the Trust Provision. See id. §
1396p(d)(4)(A), (B), (C). This case concerns pooled special
pooled special needs trust "contain[s] the assets of an
individual who is disabled (as defined in [42 U.S.C. §
1382c(a)(3)])." Id. § 1396p(d)(4)(C). To