Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Zackery D. Lewis By His Next Friends; Civil Action Richard Young v. Gary Alexander

August 22, 2011

ZACKERY D. LEWIS BY HIS NEXT FRIENDS; CIVIL ACTION RICHARD YOUNG; LYNN G. HAINER, ADMINISTRATRIX OF THE ESTATE OF ADDIE SMITH; SUSAN W. COLEMAN; KATHY A. BURGER; TRACY PALMER; KENNY ATKINSON BY HIS NEXT FRIEND; BERNICE TATE BY HER NEXT FRIEND; MARY WAGNER; MICHAEL BIDZILYA BY HIS NEXT FRIEND; WILLIAM ALGAR BY HIS NEXT FRIEND; ANTHONY GALE BY HIS NEXT FRIENDS; THE ARC COMMUNITY TRUST OF PENNSYLVANIA; AND THE FAMILY TRUST, ON THEIR OWN BEHALF AND : ON BEHALF OF ALL OTHER PERSONS SIMILARLY SITUATED, PLAINTIFFS,
v.
GARY ALEXANDER, IN HIS OFFICIAL CAPACITY AS SECRETARY OF THE DEPARTMENT OF PUBLIC WELFARE OF THE COMMONWEALTH OF PENNSYLVANIA; ERIC ROLLINS, IN HIS OFFICIAL CAPACITY AS EXECUTIVE DIRECTOR OF THE ERIE COUNTY ASSISTANCE OFFICE, DEFENDANTS.



The opinion of the court was delivered by: DuBOIS, J.

MEMORANDUM

Table of Contents

I. Introduction...................................3

II. Background...................................4

A. Procedural Background..........................4

B. Overview of Medicaid and Pennsylvania‟s Medical Assistance Program........6

C. Special or Supplemental Needs Trusts....................6

D. 62 Pa. Stat. Ann. § 1414 ("Section 1414")....................8

III. Standing and Ripeness............................10 -1-

A. Standing................................10

1. Legal Standard ..............................10

2. Discussion ...............................12

B. Ripeness................................18

1. Legal Standard ..............................18

2. Discussion ...............................20

IV. Standard of Review -- Motion for Summary Judgment.................23

V. Plaintiffs‟ Claims Under the Supremacy Clause..................24

VI. Preemption of Section 1414 by Federal Law..................26

A. Defendants‟ Preliminary Arguments on Preemption...............27

1. Defendants‟ Argument that Section 1414 is a Permissible Law Regulating State Trusts...........................27

2. Defendants‟ Argument that 42 U.S.C. § 1396p(d)(4) is Not Mandatory..28

B. Plaintiffs‟ Preemption Arguments...................29

1. Background of the No-More-Restrictive Rule.............29

2. Whether the No-More-Restrictive Rule Applies in the Context of Section 1396p(d)(4) Special Needs Pooled Trusts............30

3. Section 1414 is More Restrictive Than, and Conflicts with, Section 1396p(d)(4)...........................34

4. Summary -- Preemption........................42

VII. Plaintiffs‟ Motion for Class Certification......................46

A. Legal Standard............................46

B. Discussion................................48

1. Numerosity............................48

2. Commonality...............................48

3. Typicality..............................49

4. Adequacy..............................50

5. Requirements of Rule 23(b)(2)..................53

6. Scope of the Proposed Class......................54

7. Claims Subject to Class Treatment..................54

8. Appointment of Class Counsel.....................55

VIII. Conclusion.....................................55

I.INTRODUCTION

In this putative class action, plaintiffs challenge Section 9 of Pennsylvania Act 42 of 2005, 62 Pa. Stat. Ann. § 1414 (West 2010) ("Section 1414"). Plaintiffs allege that Section 1414 is inconsistent with the federal Medicaid Act and violates the Supremacy Clause, U.S. Const. art. VI, cl. 2, and their due process rights. The issue in the case is this: Does Section 1414 establish improper eligibility criteria for beneficiaries of pooled special needs trusts, a type of trust excluded in determining whether an individual‟s income and resources are sufficiently low to qualify for Medicaid?

The parties have stipulated to the relevant facts. Presently before the Court are the parties‟ cross motions for summary judgment and plaintiff‟s motion for class certification. For the reasons that follow the Court determines that plaintiffs have standing to challenge Section 1414, that their claims are ripe, and that subsections (b)(1), (b)(2), (b)(3)(ii), (b)(3)(iii), and (c) are preempted by federal law. Additionally, the Court certifies a class composed of the following:

All disabled individuals who are, or who will become, eligible for Medical Assistance and for whom pooled special needs trust accounts that comply in all respects with the federal Medicaid Act were established on or after January 1, 2000, or will be established in the future, but who have been or will be denied Medical Assistance, or who are subject to termination of their Medical Assistance benefits, as a result of the application of Section 1414, as well as trustees of pooled special needs trusts holding such accounts and other persons acting in a representative capacity on behalf of such disabled individuals.

II. BACKGROUND

A. Procedural Background

This putative class action seeking declaratory and injunctive relief was commenced on September 5, 2006 with the filing of a complaint by The Family Trust, the ARC Community Trust (collectively "the trust plaintiffs), and eight individuals holding pooled trust accounts in The Family Trust or ARC Community Trust (collectively "the individual plaintiffs"). The Complaint challenged several provisions of Section 1414 as inconsistent with the federal Medicaid Act, the Supremacy Clause, and the Due Process Clause of the Fourteenth Amendment. Named as defendants were nine Pennsylvania Commonwealth officials, including the Governor and the Secretary of Public Welfare.

Plaintiffs filed a First Amended Complaint on November 21, 2006. Soon after that, on January 17, 2007, defendants moved to dismiss. On February 13, 2007, while the motion to dismiss was pending, plaintiffs filed a motion to certify a class under Federal Rule of Civil Procedure 23(b)(2). On August 3, 2007, this Court issued a Memorandum and Order granting Defendants‟ Motion to Dismiss in part and denying it in part. Lewis v. Rendell, 501 F. Supp. 2d 671 (E.D. Pa. 2007). Specifically, the Court ruled that the federal law governing special needs trusts, 42 U.S.C. § 1396p(d)(4) ("Section 1396p(d)(4)"), creates rights that are enforceable under 42 U.S.C. § 1983, id. at 686-88, and that Section 1414, which became effective July 7, 2005, does not apply retroactively. Id. at 689-91. The Court further concluded that prospective application of Section 1414, including the application of Section 1414(c) to terminate entire trusts, is rationally related to the state‟s legitimate interest in limiting the use of scarce state MA resources, and, as such, does not violate plaintiffs‟ substantive due process rights. Accordingly, the Court dismissed Counts XI and XII of plaintiffs‟ First Amended Complaint.*fn1 Id. The Court also dismissed that portion of Count IX that alleged Section 1414 violates plaintiffs‟ procedural due process rights by depriving them of Medicaid benefits without adequate procedural protections, concluding that state and federal law provide adequate procedures with respect to termination of Medicaid benefits. Id. at 693. Finally, the Court dismissed all defendants except Estelle Richman, in her official capacity as Secretary of the Department of Public Welfare ("DPW") and Chuck Phillips, in his official capacity as Executive Director of Erie County Assistance Office ("Erie CAO").*fn2 Id. at 682-85.

On April 23, 2008, the parties filed a joint stipulation providing for a second amended complaint. The Second Amended Complaint added four individual plaintiffs who established pooled trust accounts with either The Family Trust or ARC Community Trust after the effective date of Section 1414, July 7, 2005.*fn3

The parties filed a joint stipulation of facts on May 9, 2008. Plaintiffs filed a motion for summary judgment on July 10, 2008. Defendants responded by filing a cross motion for summary judgment on August 14, 2008. On June 30, 2010, the Court ordered the parties to submit supplemental memoranda of law on the question "whether state Medicaid eligibility methodology must be "no more restrictive‟ than federal Supplemental Social Security ("SSI") methodology in the context of 42 U.S.C. § 1396(p)(4)(d) trusts." Those memoranda have been filed, and the cross motions for summary judgment are now fully briefed and ripe for review. Plaintiffs‟ motion for class certification is also fully briefed and ripe for review.

B. Overview of Medicaid and Pennsylvania‟s Medical Assistance Program

The Medicaid program "is a cooperative federal-state program under which the federal government furnishes funding to states for the purpose of providing medical assistance to eligible low-income persons." Pa. Pharmacists Ass‟n v. Houstoun, 283 F.3d 531, 533 (3d Cir. 2002) (citations omitted). Although states are not required to participate in the Medicaid program, "[i]f a state chooses to participate in the program, it must comply with the Medicaid Act and implementing regulations promulgated by the Secretary of Health and Human Services ("HHS‟)." Id. "Consequently, Medicaid is basically administered by each state within certain broad requirements and guidelines." Johnson v. Guhl, 166 F. Supp. 2d 42, 46 (D. N.J. 2001).

Pennsylvania participates in Medicaid by providing assistance to individuals whose resources are insufficient to cover the costs of their medical care through its plan, the Medical Assistance ("MA") program. See Frederick L. v. Dep‟t of Pub. Welfare, 157 F. Supp. 2d 509, 513 n.4 (E.D. Pa. 2001). Pennsylvania‟s MA program is administered by the DPW. Id.

C.Special or Supplemental Needs Trusts ("SNTs")

To be financially eligible for MA, a person must have income and resources below a threshold set by the Secretary of HHS. 42 U.S.C. § 1386a(a)(17). The treatment of trusts in this resource calculation is particularly complicated. As a general rule, trust assets are included in a person‟s resources for determining MA eligibility. See 42 U.S.C. § 1396p(d)(3). However, Congress has created an exception to this resource counting rule for trusts -- called variously special needs trusts, supplemental needs trusts, or SNTs -- that are established for disabled individuals and meet certain requirements. Section 1396p(d)(4)(A) sets forth the requirements for a special needs trust. "This section provides that disabled persons under the age of 65 remain eligible for ongoing Medicaid assistance (MA) in spite of funds or other property held in an SNT, and can use SNT funds as a supplement to enhance the quality of their lives." Norwest Bank of N.D., N.A. v. Doth, 159 F.3d 328, 330 (8th Cir. 1998).

This case concerns a particular type of special needs trust known as a pooled special needs trust. "A "pooled trust‟ is a special arrangement with a non-profit organization that serves as trustee to manage assets belonging to many disabled individuals, with investments being pooled, but with separate trust "accounts‟ being maintained for each disabled individual." Jan P. Myskowski, "Special Needs Trusts in the Era of the Uniform Trust Code," 46 N.H. Bar J. 16, 16 (2005).The federal Medicaid Act establishes the following requirements for pooled special needs trusts:

(i) The trust is established and managed by a non-profit association.

(ii) A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.

(iii) Accounts in the trust are established solely for the benefit of individuals who are disabled (as defined in section 1614(a)(3)) [42 U.S.C. § 1382c(a)(3)] by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court.

(iv) To the extent that amounts remaining in the beneficiary‟s account upon the death of the beneficiary are not retained by the trust, the trust pays to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State plan under this title [42 U.S.C. §§ 1396 et seq.].

42 U.S.C. § 1396p(d)(4)(C).

The primary benefit of pooled special needs trusts, as opposed to other trusts permitted under Section 1396p(d)(4), is that they allow disabled individuals to combine accounts, making it possible to create small trust accounts and reducing management fees compared to other types of trusts. See Joseph A . Rosenberg, "Supplemental Needs Trusts for People with Disabilities: The Development of a Private Trust in the Public Interest," 10 B.U. Pub. Int. L.J. 91, 128 (2000). Additionally, the non-profit organizations that run pooled special needs trusts can use funds left in a beneficiary‟s account after death -- so called "remainders" -- for the benefit of other pooled trust beneficiaries. Id. at 128-29.

D.62 Pa. Stat. Ann. § 1414 ("Section 1414")

Plaintiffs contend that Section 1414 impermissibly establishes additional requirements for the exclusion of trust assets from the MA eligibility calculation and violates their federal statutory and constitutional rights. That statute provides, in relevant part, as follows:

(b) A special needs trust shall comply with all of the following:

(1) The beneficiary shall be an individual under the age of sixty-five who is disabled, as that term is defined in Title XVI of the Social Security Act.

(2) The beneficiary shall have special needs that will not be met without the trust.

(3) The trust shall provide:

(i) That all distributions from the trust must be for the sole benefit of the beneficiary.

(ii) That any expenditure from the trust must have a reasonable relationship to the needs of the beneficiary.

(iii) That, upon the death of the beneficiary or upon the earlier termination of the trust, the department and any other state that provided medical assistance to the beneficiary must be reimbursed from the funds remaining in the trust up to an amount equal to the total medical assistance paid on behalf of the beneficiary before any other claimant is paid: Provided, however, That [sic] in the case of an account in a pooled trust, the trust shall provide that no more than fifty percent of the amount remaining in the beneficiary‟s pooled trust account may be retained by the trust without any obligation to reimburse the department.

(4) The department, upon review of the trust, must determine that the trust conforms to the requirements of Title XIX of the Social Security Act, this section, any other State law and any regulations or statements of policy adopted by the department to implement this section.

(c) If at any time it appears that any of the requirements of subsection (b) are not satisfied or the trustee refuses without good cause to make payments from the trust for the special needs of the beneficiary and, provided that the department or any other public agency in this Commonwealth has a claim against trust property, the department or other public agency may petition the court for an order terminating the trust. 62 Pa. Stat. Ann. § 1414.

It isplaintiffs‟ position that Section 1414 violates the Medicaid Act,the Supremacy Clause of the United States Constitution, and their due process rights under the Fourteenth Amendment. As a threshold matter, defendants argue that plaintiffs lack standing to challenge Section 1414 and that their challenges are not ripe. The Court will first address the standing and ripeness issues. It will then consider the cross motions for summary judgment and plaintiffs‟ motion for class certification.

III. STANDING AND RIPENESS

Defendants challenge both plaintiffs‟ standing to assert claims concerning Section 1414 and the ripeness of those claims. The Court will address the plaintiffs‟ standing first, and then turn to the ripeness of their challenges to the special needs and expenditure requirements of Section 1414.*fn4 As explained below, the Court ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.