Hobbs v. Zenderman (10th Cir., No. 08-2099, Sept. 1, 2009)

Confirming its 2000 decision in Keith v. Rizzuto (212 F.3d 1190, 10th Cir. 2000), the 10th Circuit Court of Appeals rules that Congress left states free to count (d)(4)(A) and (d)(4)(C) trusts as available resources for Medicaid purposes. Hobbs v. Zenderman (10th Cir., No. 08-2099, Sept. 1, 2009).

After being seriously injured in a car crash, Steffan Hobbs received a $2.5 million settlement, $1.1 million of which was placed into a trust for his benefit. Pursuant to 42 USC § 1396p(d)(4)(A), the trust contained Medicaid payback language and granted the trustee complete discretion to make payments for Steffan's special needs. Steffan received SSI and Mediciad benefits for several years before applying for benefits under New Mexico's Medically Fragile Medicaid Waiver Program. At that point, the state determined that Steffan's trust was not being used for his sole benefit because his mother was being paid more than $2,000 a month from the trust as his caregiver, and the trust had purchased property for his family and had taken out life insurance policies on his parents' lives. The state counted the trust assets as available and denied Steffan's application for benefits. Shortly thereafter, Steffan's SSI and Medicaid benefits were terminated.

Steffan filed a civil rights action against the state in 2006, alleging violations of due process, equal protection, and rights conferred by the Medicaid statutes. The trial court granted summary judgment in favor of the state, and Steffan appealed. On appeal, Steffan did not pursue an argument about the use of his trust funds, but instead argued that his trust met the requirements of a (d)(4)(A) trust, thus excluding its funds from consideration for Medicaid eligibility. He also argued that the state rendered ad hoc eligibility determinations that did not comport with federal law.

The U.S. Court of Appeals for the Tenth Circuit upholds the trial court's grant of summary judgment. Reaffirming its earlier decision in Keith v. Rizzuto, the court holds that "[w]e are compelled to conclude that 1396p(d)(4)(A) does not require States to exempt special needs trusts from Medicaid eligibility determinations . . . It follows that the subsection confers no binding obligation of the States to exclude special needs trusts from Medicaid eligibility consideration." Because the state has no binding obligation to exclude the trusts, the court reasons that § 1396(d)(4)(A) does not confer a mandatory right that can be asserted through a civil rights lawsuit, making summary judgment in favor of the state appropriate in this case.