MEMORANDUM OPINION AND ORDER
CARRIGAN, District Judge.
The legal representatives of four aged, infirm and mentally incompetent women commenced this lawsuit in an effort to extricate their charges from the "Utah Gap." That is the popular nomenclature for a "Catch 22" in state health care policy that deprives many senior citizens of Medicaid payments for nursing home expenses to which they are otherwise entitled. When their incomes are too low to enable them to pay their own nursing home costs, but too high to qualify for Medicaid benefits, these claimants are ensnared in a trap created by the interaction of highly technical federal and state statutes and regulations. They are not allowed to pay as much as they can, and have Medicaid pay the balance, but instead are totally disqualified for any Medicaid assistance.
Plaintiff L. Jeanette Miller, as representative plaintiff for Lottie Bernice Ham, and intervenors Susan Turtness Adams, as representative plaintiff for Marie Louise Turtness,
Currently pending are a motion for summary judgment filed by the plaintiff L. Jeanette Miller,
The parties have fully briefed the issues and further oral argument would not materially assist my decision. Jurisdiction exists under 28 U.S.C. § 1331.
A. Lottie Bernice Ham.
Lottie Bernice Ham, who died March 20, 1989, spent the last eight and one-half years of her life in a nursing home. She suffered from Parkinson's Disease and complications following numerous strokes. She was completely paralyzed except for eye movements and had no ability to communicate. Skilled nursing care was required because: (1) she had to wear a catheter that required daily irrigation; (2) she was fed by inserting a syringe between her clenched jaws; (3) her esophagus had to be cleared of food with a special apparatus to prevent choking; and (4) she had to be turned in bed every two hours because of a decubitus ulcer on her coccyx.
Until her death, Lottie Ham resided in the Bear Creek Nursing Center, Morrison, Colorado. She received Medicaid benefits to pay nursing home costs for over four years of the time she resided in nursing homes. After her husband's death in July 1987, she became eligible for a survivor's pension. The pension placed her income above the limits for Medicaid eligibility, and therefore her medicaid benefits were terminated. Subsequently, she was forced to exhaust all her remaining assets, and her daughter, L. Jeanette Miller, had to spend over $40,000 to pay for her mother's nursing care.
On September 19, 1988, the district court of Jefferson County, Colorado, ordered that Lottie Ham's income be placed in trust and appointed L. Jeanette Miller as trustee. Although the trust instrument gave the trustee some discretion to pay Lottie Ham's living expenses, it specifically stated:
Subsequent to creation of the trust, L. Jeanette Miller applied for Medicaid benefits on behalf of her mother. Her application was denied by the Colorado Department of Social Services and the denial was upheld by Colorado State Administrative Law Judge Thomas R. Moeller. The Bear Valley Nursing Center still sends L. Jeanette Miller collection notices for the unpaid balance owing for Lottie Ham's care. This balance includes charges for the last six months of Lottie Ham's life after denial of her application for Medicaid benefits.
B. Marie Louise Turtness.
Marie Turtness suffers from Alzheimer's dementia, hypothyroidism and chronic skin ulcerations. She is totally incapacitated, both physically and mentally, and will require extended care and maintenance for the remainder of her life. She resides in the North Shore Manor Nursing Home, Loveland, Colorado.
On May 5, 1989, the district court of Larimer County, Colorado, created a trust for the benefit of Marie Turtness and required that all her income be converted to trust assets. The terms of this trust are identical to those of the Lottie Ham trust, i.e., the trustee may not distribute more than $20.00 less than the maximum income
C. Mary D. Cummings.
Mary Cummings suffers from complications caused by congestive heart failure, bilateral hip fractures, cataracts and diverticulitis. She has been immobile for several years, wears a colostomy bag, suffers incontinence of the bladder, and has poor vision. She requires continuous nursing care.
On August 4, 1989, the District Court of Boulder County, Colorado authorized Mary J. Henry to create a trust for the benefit of Mary Cummings. The operative terms of this trust are identical to those of the Lottie Ham and Marie Turtness trusts. On August 21, 1989, the Boulder County Department of Social Services denied Mary Cummings Medicaid benefits.
Mary Henry appealed to Colorado State Administrative Law Judge Thomas R. Moeller who reversed the denial of Medicaid benefits. Judge Moeller ruled that Mary Cummings' income was not "available" for medicaid eligibility purposes because the income was subject to the trust. He also ruled that creation of the trust was not a voluntary property transfer by Mary Cummings.
Pursuant to Colo.Rev.Stat. § 24-4-105(14) (1988),
D. Maria S. Tasei.
Maria Tasei is completely incapacitated by multiple sclerosis, and unable to care for herself or her affairs. She has resided in a nursing home for the last ten years. Presently, she lives at the Bear Creek Nursing Center, Morrison, Colorado. She lacks sufficient income or other financial resources to pay for her care.
Her nursing home charges $2,220.00 per month for housing and medications, but her income totals only $1,618.97 per month. This income is derived from a state retirement program and a Veteran's Administration benefit. Larry Tasei, Maria Tasei's son, has paid for her care for the last two and one-half years; i.e., from the time her assets were depleted. However, he is unable to continue paying for his mother's care.
On February 9, 1990, the district court of Jefferson County, Colorado, authorized Larry Tasei to create a trust for the benefit of Maria Tasei. The terms of this trust are identical to those of the Lottie Ham, Marie Turtness and Mary Cummings trusts. On March 15, 1990, the Jefferson County Department of Social Services denied Maria Tasei Medicaid benefits.
On March 21, 1990, as a result of Larry Tasei's inability to pay, and before he was able to appeal the denial of his mother's benefits to an ALJ,
Department of Health, State of California v. Secretary of Health and Human Services, 823 F.2d 323 (9th Cir.1987), addressing the Medicaid statute, declared:
Colorado has elected to participate in the Medicaid program by enacting the Colorado Medical Assistance Act. See Colo.Rev. Stat. § 26-4-101 et seq. (1989). The Colorado State Board of Social Services has promulgated rules and regulations for implementation of the Medicaid program. 10 Colo.Code Regs. §§ 8.00 et seq. (1978). Additionally, Colorado has elected to participate in the optional Medicaid program designed to offer medical assistance to persons residing in medical institutions for not less than thirty consecutive days. 10 Colo. Code Regs. § 8.110.30 et seq. (1988). To be eligible, an applicant must meet certain financial resource limitations, and have income not exceeding 300% of the Supplemental Security Income (SSI) benefit rate established under Title XVI of the Social Security Act. 42 U.S.C. § 1396a(a)(10)(A)(ii)(V).
As stated, both the defendant and the plaintiff L. Jeanette Miller have filed motions for summary judgment. The issues involved arise out of the parties' divergent interpretations of the federal and state Medicaid statutes and regulations outlined
These issues will be addressed in the stated order.
A. Standard for Summary Judgment.
Under Rule 56(c), Fed.R.Civ.P., summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Celotex Corp v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In Catrett the Court held that Rule 56 mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Id. at 322, 106 S.Ct. at 2552. The Court explained:
Because the issues before me present only questions of law summary judgment is appropriate.
B. Would improper denial of Medicaid benefits be actionable under 42 U.S.C. § 1983?
Defendant asserts in her motion for summary judgment that the plaintiffs' sole remedy is circumscribed in Title XIX of the Social Security Act at 42 U.S.C. §§ 1396a(a)(3) and 1396c. Section 1396a(a)(3) requires all state plans to: "provide for granting an opportunity for a fair hearing before the State agency to any individual whose claim for medical assistance under the plan is denied or is not acted upon with reasonable promptness." Section 1396c allows the Secretary of Health and Human Services to withhold federal payments from a state department of social services if that state's plan does not comply with federal requirements. Defendant contends that because § 1396a(a)(3) requires state plans to provide an opportunity for a hearing, Congress intended to foreclose other avenues of relief.
Defendant relies on Northwest Airlines v. Transport Workers Union, 451 U.S. 77, 101 S.Ct. 1571, 67 L.Ed.2d 750 (1981) where the Court stated:
Defendant also asserts that "[e]fforts to conjure up 42 U.S.C. § 1983 causes of action under similar federal legislative schemes have been rejected by other federal courts." (Defendant's motion for summary judgment, at 6) (citing Tyler v. Pasqua and Toloso, 748 F.2d 283 (5th Cir. 1984)). Defendant argues that because Tyler
However the defendant's reliance on Tyler is clearly misplaced in light of Wright v. Roanoke Redevelopment and Housing Authority, 479 U.S. 418, 107 S.Ct. 766, 93 L.Ed.2d 781 (1987), where the Court stated: "if there is a state deprivation of a `right' secured by a federal statute, § 1983 provides a remedial cause of action unless the state actor demonstrates by express provision or other specific evidence from the statute itself that Congress intended to foreclose such private enforcement." Id. at 423, 107 S.Ct. at 771. On the basis of Wright, the Fifth Circuit expressly overruled Tyler. See Victorian v. Miller, 813 F.2d 718 (5th Cir.1987). Victorian held that § 1983 actions for improper food stamp denial are not barred because the remedial scheme in the Food Stamp Act did not demonstrate a Congressional intent to preclude § 1983 actions as remedies for such denials. Id. at 723-24.
Nothing in § 1396a(a)(3) or § 1396c indicates a Congressional intent to bar § 1983 claims. Further, the defendant has failed to demonstrate "by express provision or other specific evidence from the statute itself that Congress intended to foreclose such private enforcement." Wright, supra, 479 U.S. at 423, 107 S.Ct. at 771. For these reasons, I conclude that the plaintiffs may invoke § 1983 to challenge denial of Medicaid benefits. Therefore, the defendant's motion for summary judgment on this ground is denied.
C. Availability of trust income in determining Medicaid eligibility.
As stated, Colorado has elected to participate in the optional Medicaid program designed to offer medical assistance to patients residing in medical institutions. 9 Colo.Code Regs. § 8.110.30 et seq. To be eligible, an individual must meet certain financial resource limitations, and have income not exceeding 300% of the Supplemental Security Income (SSI) benefit rate established by Title XVI of the Social Security Act. 42 U.S.C. § 1396a(a)(10)(A)(ii)(V). To determine eligibility for and the extent of Medicaid assistance, state plans are allowed to take into account only income that is actually "available" to the claimant. 42 U.S.C. § 1396a(a)(17)(B). Colorado regulations state that:
Plaintiffs assert that creation of the instant trusts divested them of all ownership rights in the trust corpora. They contend that Colorado law governs characterization of the nature and extent of their interests in the trust assets. (Plaintiffs' brief in support of motion for summary judgment, at 5 (citing Cannuni v. Schweiker, 740 F.2d 260, 264 (3d Cir.1984)). Plaintiffs argue that the trustees, not the beneficiaries, have legal title to the trust property. According to the plaintiffs:
Additionally, the plaintiffs assert that spendthrift trusts are recognized in Colorado as restricting the rights of beneficiaries to trust proceeds. Snyder v. O'Conner, 102 Colo. 567, 81 P.2d 773, 774 (1938). Finally, the plaintiffs argue that because a beneficiary has no present ownership of or lien upon the assets of the trust (citing Colby v. Riggs National Bank, 92 F.2d 183, 199 (D.C.Cir.1937)), and a spendthrift trust is not terminable by the beneficiaries (citing 76 Am.Jur.2d, Trusts, § 76 (1975)), the trust property should not be considered "available" to the plaintiffs. (Plaintiffs' brief in support of motion for summary judgment, at 7-8).
Defendant does not directly address the "availability" issue. Instead, the defendant argues that creation of the trusts violates federal and state law prohibiting transfers for less than fair market value and without fair consideration. Such violations, the defendant contends, render the plaintiffs ineligible for Medicaid benefits. These contentions will be addressed after examining the plaintiffs' arguments concerning availability.
Because federal law requires that Medicaid eligibility be determined using the same methodology for the treatment of resources as is applicable to the SSI program, reference to SSI regulations is appropriate. Those regulations define "resources" to be counted, for purposes of determining SSI eligibility, as follows:
Although there is no direct discussion of trusts in the federal regulations,
Colorado regulations addressing availability of resources and income held in trust state:
Lastly, other jurisdictions have ruled on the availability of trust funds in determining Medicaid eligibility. See Zeoli v. Commissioner of Social Services, 179 Conn. 83, 425 A.2d 553, 558-59 (1979) (trust funds subject to trustee's sole discretion not available for Medicaid purposes under 42 U.S.C. § 1396(a)(17)(B)); Tidrow v. Director, Missouri Division of Family Services, 688 S.W.2d 9, 13-14 (Mo.App.1985) (trust funds subject to spendthrift clause, and clause giving trustee discretion to disburse funds for beneficiaries' "reasonable comfort," held not available for Medicaid purposes under 42 U.S.C. § 1396a(a)(17)(B)); Oddo v. Blum, 83 A.D.2d 868, 442 N.Y.S.2d 23, 24 (1981) (trust assets not considered in determining
As stated, the trusts here involved give the trustees full discretion to disburse funds up to a level $20.00 below the applicable Medicaid maximum income eligibility level, but the trust funds may be used only to supplement other benefits received by the beneficiaries and not to supplant them. The trusts were created by the various probate courts to protect the plaintiffs' assets because courts found the plaintiffs incompetent. Furthermore, because applicable federal and state laws dictate that income and resources may only be considered available for consideration in determining Medicaid eligibility when the applicant has actual ownership, I find and conclude that the plaintiffs' income subject to the trusts is not "available" within the meaning of 42 U.S.C. § 1396a(a)(17)(B) and 9 Colo.Code Regs. § 3.200.21. The state district courts of Boulder, Jefferson and Larimer Counties removed all vested property interests the plaintiffs had in their respective incomes.
Lastly, I conclude that each plaintiffs' annual income, for purposes of determining Medicaid eligibility in accordance with the SSI program, is the maximum amount the trustees of that plaintiff's trust can distribute, assuming the full exercise of discretion on the part of each trustee. As stated, this amount is $20.00 less than the applicable income level for Medicaid eligibility. Therefore, the plaintiffs are entitled to summary judgment on the issue of availability.
D. Creation of the trusts as transfers for less than fair market value under 42 U.S.C. § 1396p(c) or transfers without fair consideration under 9 Colo.Code Regs. § 3.210.31 (1979).
Defendant contends that before a county department of social services undertakes determination of a Medicaid applicant's income availability, pursuant to the methodology set out above, it must ascertain whether that applicant has violated the transfer of resources rules set out in 42 U.S.C. § 1396p(c)(1) and 9 Colo.Code Regs. § 3.210.21.
As noted previously, Medicaid is a cooperative program sharing responsibility between state and federal governments. Although Medicaid is largely financed by the federal government, states bear the primary responsibility for administering it. The spirit in which state modifications of federally financed, but state administered, assistance programs should be interpreted is exemplified in Deel. There the Fourth Circuit stated:
One purpose evident in the federal and state Medicaid laws, like their counterparts in the programs of Aid to Families with Dependent Children, is to prevent abuse of the Medicaid system. For example, federal and state laws provide for periods of ineligibility when individuals attempt to become eligible for Medicaid benefits by disposing of assets.
Congress' concern in enacting the federal limitations on transfers of assets was to prevent the wealthy from disposing of assets in order to become eligible for Medicaid benefits to which they would otherwise not be entitled. See 42 U.S.C. § 1396a(k) (medicaid qualifying trusts)
In response to this requirement in § 1396p(c)(1), Colorado regulations provide:
Under Colorado law, a transfer without fair consideration is "a property transaction
Colorado regulations also provide a method of determining the period of ineligibility. They state:
Defendant maintains that the creation of each of the instant trusts constituted a transfer that violated these federal and state rules. Specifically, the defendant argues: (1) that the purpose behind creating the trusts was clearly to qualify the plaintiffs for Medicaid benefits; (2) that the transfer of assets to the trusts "was made without any consideration and thus necessarily was made without `fair' consideration;" (3) that the transfers were made voluntarily even though undertaken by the plaintiffs' personal representatives; and (4) that, as noted by the administrative law judge who upheld the Jefferson County Department of Social Services' denial of benefits to Lottie Ham, the trusts were merely devices intended to create fictional barriers to consideration of the plaintiffs' income in determining Medicaid eligibility. (Defendant's brief in support of motion for summary judgment, at 8-9).
Plaintiffs contend that the Colorado and federal transfer of asset regulations, availability principles notwithstanding, do not apply to creation of the instant trusts. First, the plaintiffs assert that the Colorado regulations do not apply because the transfers at issue were not voluntary.
Zybach v. Nebraska, Department of Social Services, 226 Neb. 396, 411 N.W.2d 627
Additionally, under Colorado law the creation of a conservatorship is not a transfer. Colo.Rev.Stat. § 15-14-420(4) provides that:
Moreover, Colorado regulations defining transfers without fair consideration include an irrevocable trust as such a transfer only if
For these reasons and because a Colorado probate court must make a finding of incompetence pursuant to Colo.Rev.Stat. § 15-14-101(1) before it may order the creation of a trust pursuant to Colo.Rev.Stat. § 15-14-409, I find and conclude that the instant trusts were not created voluntarily by these plaintiffs.
2. Whether Creation of Trusts Constituted Transfers by Plaintiffs.
Plaintiffs contend that the defendant's assertion that creation of the trusts should be considered transfers imputed to the plaintiffs considers neither the factual realities that prompted the probate courts to order creation of the trusts, nor the legal effect of incompetency proceedings. According to the plaintiffs:
It must be emphasized, however, that a probate court must make certain findings before creating a trust. First, the court must make a finding of incompetence. Colo.Rev.Stat. § 15-14-401(3) (1987). Second, the incompetent person must have property subject to a threat of being dissipated or wasted, or funds must be needed for support, care and welfare of the person. Id. Third, the creation of the trust must be in the best interest of the incompetent person. Colo.Rev.Stat. § 15-14-409(2) (1987). When these three elements are present, the probate court must exercise its authority in the best interest of the incompetent person.
In the case of the plaintiff Lottie Ham, it is clear from the language used by the probate court that it made the necessary
Defendant asserts that because the probate courts have authority to exercise all the powers the plaintiffs (absent incompetence) could exercise for themselves, I should treat the creation of the trusts as transfers by the plaintiffs. Although it is true that probate courts can act in the best interest of the plaintiffs pursuant to Colo. Rev.Stat. § 15-14-401 and § 15-14-409, such courts do not act as the plaintiffs themselves. Instead, these courts are governed by an objective best interest standard. That a court has authority to act in a person's best interest does not indicate that that person has competence to perform the same act on her own behalf. Indeed, the fact that court action is justified or necessary indicates the opposite. Thus the state's argument undermines its premise.
Additionally, the defendant asserts that federal Department of Health and Human Services guidelines applicable to Medicaid qualifying trusts are persuasive authority supporting her contention that the trusts should be treated as transfers by the plaintiffs. The cited guidelines provide:
These guidelines, however, have never been promulgated as regulations even though issued in May 1989. Because they were not promulgated in accordance with the Administrative Procedure Act, 5 U.S.C. § 500 et seq., and the agency has not acted on them for over fourteen months, they are not binding here.
Finally, the plaintiffs argue that their position that creation of the instant trusts did not constitute voluntary transfers is strengthened by the results of a recent Colorado Department of Social Services board meeting. On May 4, 1990, the Colorado Board of Social Services considered a proposed amendment to a regulation that would have expressly defined creation of the instant trusts as transfers by the plaintiffs. The proposed amendment provided:
This proposed amendment, however, was voted down.
For the above stated reasons, I conclude as to each trust that its creation was neither a voluntary transfer on the part of the plaintiff/beneficiary nor a transfer that can be imputed to that plaintiff.
3. Income versus Resources.
As additional support for their contention that Colorado and federal law do not apply
The regulations, in 20 C.F.R. § 416.1207(d), further provide:
Plaintiffs contend that the previously quoted Colorado and federal statutes prohibiting transfers without fair consideration prohibit only the transfer of resources or corpus, not income. See 9 Colo.Code Regs. § 3.210.31; and 42 U.S.C. § 1396p(c)(1). Furthermore, the plaintiffs point out that the only assets placed in the instant trusts are various types of monthly income payments.
The clear distinction between resources and income recognized by both the Colorado and federal regulations indicates that these regulations were intended to prohibit transactions other than those here in question. Congress sought to discourage wealthy individuals from transferring their assets to irrevocable trusts in order to qualify for Medicare so that they could preserve their estates for their heirs, rather than being required to exhaust personal assets for medical and nursing home care.
Defendant has not provided, and my research has not produced, any evidence that the statutes and regulations prohibiting the transfer of resources were meant to apply to the circumstances here presented. Here, the probate courts created the trusts in the interest of the plaintiffs, not the plaintiffs' heirs. Colo.Rev.Stat. § 15-14-409(2). Any funds accumulating in these trusts will be transferred to the Colorado Department of Social Services upon the plaintiffs' deaths. Plaintiffs' heirs will never receive any assets or payments from the trusts.
Furthermore, the penalty provisions in the federal and Colorado regulations that bar transfers without fair consideration, calculate a period of ineligibility by dividing the value of the
Finally, because I conclude that the payments placed in trust for the plaintiffs are not resources, and therefore the federal and state statutes and regulations barring transfers without fair consideration do not apply, my decision is not inconsistent with that of the Fourth Circuit in Deel v. Jackson, 862 F.2d 1079 (4th Cir.1988). Deel correctly concluded that Virginia's transfer of asset regulations are not in conflict with availability principles. Deel, however, addressed a fact pattern where the applicant had transferred "a 59 acre parcel of land to her daughter and son-in-law for less than fair market value two days prior to applying for AFDC benefits." Id. at 1081. Thus Deel, is distinguishable, for in the instant case only income payments have been placed in trust for the plaintiffs. Nor did these plaintiffs, as in Deel, transfer resources to their heirs, to qualify for Medicaid. Therefore, Deel is not dispositive because it is distinguishable on its facts.
E. Creation of the Trusts as Medicaid Qualifying Trusts — 42 U.S.C. § 1396a(k).
In addition to intending to prohibit transfers for less than fair market value, Congress intended to forbid the creation of medicaid qualifying trusts to meet income eligibility requirements. The applicable statute, 42 U.S.C. § 1396a(k), states:
Additionally, § 1396a(k)(1) dictates what portions of income from medicaid qualifying trusts should be considered "available" to an applicant for purposes of determining Medicaid eligibility. This subsection states that:
Plaintiffs argue that, as with the federal and state laws governing transfers without fair consideration, in enacting the section on medicaid qualifying trusts, Congress only intended "to prevent voluntary transfers for the purpose of enabling the person making the transfer to qualify for Medicaid benefits. [Plaintiffs' brief in opposition to the defendant's motion for summary judgment, at 15 (citing legislative history of 42 U.S.C. § 1396a(k), H.R.Rep. No. 3101, 99th Cong., 2d Sess., pt. II, at 71 (1985))]. If Congress had intended to prohibit involuntary transfers made to protect the interest of an incompetent person, rather than his or her heirs, it certainly could have used clearer language to accomplish that goal.
Examination of 42 U.S.C. § 1396a(k) indicates that this section does not invalidate the trusts here at issue. The definition of the forbidden trusts requires that they be created by the individual applying for Medicaid benefits or that person's spouse. 42 U.S.C. § 1396a(k)(2). For the same reasons stated above in discussing transfers without fair consideration, I hold that the trusts were not created by the plaintiffs.
Similarly, the defendant, at the July 17, 1990 hearing, argued that Hatcher v. Department of Health and Rehabilitative Services, 545 So.2d 400 (Fla.App.1989) requires that I find that these trusts were created by the incompetent Medicaid claimants. Hatcher held that a trust created by an incompetent's guardian was a Medicaid qualifying trust despite the language in 42 U.S.C. § 1396a(k)(2). That court, however, relied on Florida law to reach the conclusion that the guardian was merely acting in place of the incompetent person. Id. at 402. The court stated:
Apparently, the term "property of the ward" refers to principal or capital assets, not mere income. Here there is no principal, but only a stream of income. Here Colorado law governs and I conclude that it does not consider the creation of a trust pursuant to Colo.Rev.Stat. § 15-14-409(1) to be a transfer by the incompetent party on whose behalf the trust was created. Additionally, the trust created by the incompetent's guardian in Hatcher is distinguishable from the instant trusts. The
Further, Hatcher is distinguishable because, as the court noted in the portion of the opinion quoted above, the guardian had a duty under Florida law to preserve the incompetent person's assets, not only for that person, but also for "the person lawfully entitled to them," presumably a remainderman. As noted above, under Colorado law and the facts of the instant case, the trustees managing the instant trusts are not preserving even trust income for any person other than the plaintiffs, and thus there is no corpus or principal to be handed over to an heir or remainderman. Any remnants from the income flow remaining in the trusts after the plaintiffs' deaths will be transferred to the Colorado Department of Social Services. Therefore, applying Colorado law, I conclude that Hatcher is distinguishable. In any event, as an opinion on Florida law by that state's intermediate appellate court, Hatcher would have little precedential value here.
Even had I concluded that Hatcher does apply to the instant trusts and that these trusts were medicaid qualifying trusts, the plaintiffs would not be rendered ineligible for Medicaid benefits by 42 U.S.C. § 1396a(k). If a trust falls within the definition of a medicaid qualifying trust, 42 U.S.C. § 1396a(k)(1) requires the "maximum amount of payments that may be permitted under the terms of the trust to be distributed to the grantor, assuming the full exercise of discretion by the trustee" be considered available to the applicant when determining Medicaid eligibility. Under the terms of the trusts at issue, assuming full exercise of discretion by the trustees, they cannot distribute more than an amount $20.00 less than the Medicaid income eligibility level. Therefore, even if considered to be Medicaid qualifying trusts, (a conclusion I reject) these trusts would not render the plaintiffs ineligible for Medicaid.
The Congressional purpose for prohibiting Medicaid qualifying trusts is the same as that behind banning transfers without fair consideration. Congress sought to prevent wealthy individuals, otherwise ineligible for Medicaid benefits, from making themselves eligible by creating irrevocable trusts in order to preserve assets for their heirs. As discussed above, this clearly was not the motive for creating the instant trusts. For these reasons, the plaintiffs are entitled to summary judgment on this issue.
This opinion should not be perceived as an attempt to eliminate or alleviate the hardship imposed by the Utah Gap. That is a matter for the legislative branch of government. These plaintiffs constitute only a small fraction of Colorado's senior citizens who have become trapped in the Utah Gap. Most of the other victims are not incompetent. Ironically the very competence that disqualifies them from the remedy invoked in this case no doubt renders their predicament even more cruel, for they can fully understand the harsh technicality of their exclusion from benefits to which they feel equitably entitled.
Interestingly, a federal program available to states electing to participate provides funds to bridge the Utah Gap. As observed in Department of Health, State of California v. Secretary of Health and Human Services, 823 F.2d 323, 325 (9th Cir.1987):
Colorado is one of only fifteen states that has not elected to participate in this program.
In their supplemental briefs, the parties have addressed the hardship provisions found in the sections of the Medicaid Act that deal with transfers for less than fair
Nevertheless, I note that apparently Colorado has not defined what constitutes "undue hardship." This too is clearly a question for the Colorado General Assembly and the Department of Social Services. Colorado could lighten the onerous burden imposed on many of its senior citizens by either participating in the "medically needy" program or by defining "undue hardship."
IT IS ORDERED that: