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Sams v. Department of Public Welfare

Commonwealth Court of Pennsylvania

August 21, 2013

Dustin C. Sams, an incapacitated person, by Julie L. Raybuck, guardian, Petitioner
Department of Public Welfare, Respondent

Submitted: May 31, 2013




Dustin C. Sams (Sams), by his guardian and mother, Julie L. Raybuck (Raybuck), petitions for review of the November 15, 2012 final administrative action order of the Department of Public Welfare (DPW) affirming the determination of an administrative law judge (ALJ) that Sams is ineligible for Medicaid/Home and Community Based Service Long Term Care (HCBS-LTC)[1] from July 1, 2012, to November 22, 2014, because he transferred an asset, valued at $232, 474.15, for less than fair market value. For the reasons that follow, we affirm.

On July 16, 2006, Sams was driving a motorcycle when he was struck by a vehicle driven by Walter C. Slaugenhoup (Slaugenhoup). (Reproduced Record (R.R.) at 2a.) Allstate Insurance Company (Allstate Insurance) insured Slaugenhoup. (Id.) Sams sustained a brain injury and Raybuck was appointed his legal guardian. (Sams's brief at 4-5.) Sams filed a lawsuit in the Court of Common Pleas of Clarion County against the operator of the motor vehicle who caused the accident and settled his personal injury case with Allstate Insurance on November 26, 2008, in the amount of $380, 000.00. (R.R. at 2a, 5a.) From this sum, Sams received a cash payment in the amount of $147, 525.85 to pay for attorney's fees, expenses, and a DPW lien, and he agreed to a structured settlement annuity for the remainder of the settlement proceeds in the amount of $232, 474.15. (ALJ's op. at 7.) Beginning February 13, 2012, Sams received monthly payments of $967.23, payable at an annual interest rate of 3% for 360 months to continue for the remainder of Sams's life. (R.R. at 6a-7a.) The settlement agreement provided that Allstate Insurance would make a qualified assignment of its obligation to make payments to Allstate Assignment Company (Allstate Assignment), thereby releasing Slaugenhoup and Allstate Insurance from the obligation of periodic payments. (R.R. at 8a.) Further, the settlement agreement stated that either Allstate Insurance or its assignee would purchase an annuity from Allstate Life Insurance Company (Allstate Life) to fund the monthly payments and that Allstate Insurance or its assignee would be the sole owner of the annuity. (R.R. at 9a.) (Sams does not own the annuity.)

Allstate Insurance funded this obligation with a payment of $232, 474.15 to Allstate Assignment in order to purchase an annuity from Allstate Life. (ALJ's Finding of Fact No. 4; R.R. at 8a-9a.) Raybuck is the primary beneficiary and Rachel Raybuck, Sams's sister, is the secondary beneficiary of the annuity. (R.R. at 13a.) Prior to receiving the monthly annuity payments, Sams received Supplemental Security Income (SSI) and HCBS-LTC. (ALJ's Finding of Fact No. 7.) The SSI stopped when Sams started receiving the monthly annuity payments. (Id.) Additionally, because of these monthly payments, Sams had to reapply for HCBS-LTC. (ALJ's Finding of Fact No. 8.)

By letter dated May 22, 2012, the Clarion County Assistance Office (CAO) informed Sams that he was eligible for medical assistance effective May 1, 2012. However, the CAO also determined that Sams disposed of a total of $233, 474.00 in assets without receiving fair market value, which resulted in the CAO imposing a period of ineligibility for the payment of HCBS-LTC from July 1, 2012, to November 22, 2014. (R.R. at 23a.)

Sams appealed to DPW and an ALJ held a hearing on August 8, 2012. Amy Oritz (Oritz), an income maintenance caseworker for DPW, testified regarding Sams's settlement and medical assistance benefits. Oritz also testified regarding the CAO's determination of Sams's medical assistance eligibility, stating that the CAO determined that Sams's annuity did not meet the requirements of the Deficit Reduction Act of 2005 (DRA)[2] because it did not have equal monthly payments over his life expectancy and it did not list DPW as the primary beneficiary. (Notes of Testimony (N.T.) at 7-8, DPW's exhibits 1-3.)

DPW found that Sams disposed of $233, 474.00 by purchasing a non-DRA compliant annuity with proceeds from the settlement of his personal injury case. Specifically, by order dated November 9, 2012, the ALJ denied Sams's appeal, because the ALJ found that Sams agreed to an annuity that is not DRA-compliant, as payments were deferred from November 2008, until February 2012, and DPW is not the primary beneficiary as required by section 1917(c)(1)(F), (G) of the Social Security Act.[3] (ALJ's op. at 8.) Thus, the ALJ concluded that the CAO correctly determined that the purchase of the annuity was a transfer of assets for less than fair market value and correctly imposed a penalty period for the HCBS-LTC.[4] (ALJ's op. at 8.) By final administrative action order entered November 15, 2012, DPW's Chief ALJ affirmed the decision of the ALJ.

On appeal, [5] Sams argues that the record does not establish that he had actual or constructive receipt or possession of the $232, 474.15 to purchase the annuity, and, thus, DPW erred by concluding that he transferred an asset for less than fair market value. Sams asserts that the only consideration that he received from the settlement agreement was a promise to receive a monthly payment of $967.23.



Initially, we must determine whether Sams had an asset to transfer. DPW regulations define "assets" as follows:

Income and resources of the individual . . . including income or resources which the individual . . . is entitled to but does not receive ...

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