The Appellate Court of Maryland ruled that an administrative law judge (ALJ) erred in denying an elderly married woman’s application for a Medicaid Community Options (CO) waiver based on the couple’s countable resources as of the first day of the month in which the wife’s application was submitted rather than six months after submitting her application as required by the applicable law and regulations. In re Lunn, No. C-03-CV-23-000973 (Md. App. Ct. July 10, 2026).
A married woman, Renate Lunn, was diagnosed with ataxia in 1990. In September 2014, Renate secured a place on Maryland’s Service Registry to await an invitation from the Maryland Department of Health (Department) to apply for a CO waiver, a Medicaid benefit that would allow her to receive healthcare in her home or the community similar to what she would receive in an institutional setting such as a nursing home or assisted living facility. She was institutionalized in a short-term rehabilitation facility from December 2014 to February 2015. Seven years later, the Department invited her to apply for a CO waiver. On June 28, 2022, Renate submitted her application. The Department evaluated her financial eligibility as of June 1, 2022, the first day of her application month. On June 1, 2022, Renate submitted her application. The Maryland Medicaid Eligibility Determination Division (EDD) denied her application in September 2022.
Renate challenged the denial in a hearing before an ALJ. Although Renate and her husband had countable resources of $68,135.14 on June 1, 2022, the snapshot date of her application, Renate established at the hearing that as of November 1, 2022, their countable resources totaled $24,605.32. The ALJ concluded that Renate was not entitled to the spousal resource allowance because she was not institutionalized in a facility but lived at home with her spouse. Applying only the $2,000 individual resource allowance, the ALJ found her countable resources exceeded that limit and upheld the EDD's denial. In addition, the ALJ found that the EDD had correctly determined that June 1, 2022, was the date on which her financial eligibility should be evaluated and that she was not financially eligible as of that date. The circuit court affirmed the ALJ’s decision. Renate died in June 2024 at age 83, and her personal representative filed a timely notice of appeal.
The Court of Appeals of Maryland rejected the Department’s argument that the appeal was moot because of Renate’s death, ruling that Renate’s personal representative may have the right to corrective payments if the court concluded that the Department had erred in denying Renate’s application.
Further, the court noted that the Department conceded that the ALJ had erred in concluding that Renate was not entitled to the spousal resource allowance on the grounds that she was not institutionalized. As set forth in 42 U.S.C. § 1396r-5(h)(1), a married applicant who lives in the community but might otherwise be institutionalized is deemed to be an institutionalized spouse. Consequently, Renate was an institutionalized spouse who was entitled to the spousal resource allowance and was subject to a resource limit of $36,057.57 (one half of the couple’s countable resources plus the $2,000 individual resource allowance).
Note: The Department asserted that the applicable resource limit was $36,057.57 — one-half of the couple's countable resources plus the $2,000 individual resource allowance — though that figure appears to reflect a $10 arithmetic error. The correct sum is $36,067.57.
The court found that the ALJ had also erred in concluding that Renate did not qualify for the CO waiver because her and her husband’s resources exceeded the resource limit, even accounting for the spousal resource allowance, on June 1, 2022, the first day of the month of her application. The Department did not cite a statute or regulation permitting or requiring it to evaluate a CO waiver only on the first day of the month in which the applicant is invited to apply. It relied principally on its internal policy manual, which did not have the force or effect of law and did not fully support its position. The court instead pointed to the Department’s regulations, which stated that the “[c]urrent eligibility shall have a period of consideration of a 6-month period beginning with the month of application for Medical Assistance.” In re Lunn, No. C-03-CV-23-000973, at 5 (citation omitted). In addition, the Department’s internal policy manual similarly stated “[c]urrent eligibility for institutionalized persons is determined for the initial period under consideration as well as the succeeding 6-month period under consideration.” Id. at 6 (citation omitted).
The court further noted that, in 2022, the Maryland legislature had amended section 15-132(e)(1)(ii) of the Maryland Health General Code to require the Department to send a notice informing applicants that they have six months after submitting their applications to meet eligibility requirements. The court determined that the 2022 amendment did not create a new right giving applicants six months to meet eligibility requirements but rather required the Department to inform applicants of a pre-existing right to satisfy those requirements within six months.
Therefore, the court found that Renate and her husband had six months from June 1, 2022, to meet the financial-eligibility requirements of a CO waiver and had successfully done so on November 1, 2022. The court reversed the circuit court’s judgment and remanded for further proceedings consistent with its opinion.
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