The U.S. Court of Appeals for the Second Circuit concludes that New York State's use of the "income first" rule, which attributes an institutionalized Medicaid recipient's income to an indigent community spouse, violates the Social Security Act's anti-alienation provisions.
Robert H. Robbins entered a nursing home in March 1997. Slightly less than one year later, his wife and attorney-in-fact, Nova H. Robbins, applied to the Monroe County Department of Social Services for Medicaid coverage for Mr. Robbins. At the time, Mrs. Robbins' income was below her minimum monthly maintenance needs allowance (MMMNA), although her assets exceeded the community spouse resource allowance by about $88,000. Mr. Robbins' Social Security and pension income, meanwhile, totaled nearly $3,000 a month. After accepting Mr. Robbins' Medicaid application, the Department demanded that Mrs. Robbins use her excess assets to contribute to the cost of her husband's care and threatened to sue her to recover the money it had already spent for Mr. Robbins' care if she refused.
Mrs. Robbins did not seek a fair hearing because New York State uses an "income first" approach in determining whether a shortfall in the MMMNA should be made up by increasing a community spouse resource allowance or by attributing a portion of an institutionalized spouse's income to the community spouse. This approach has been upheld by New York's highest court. Instead, Mrs. Robbins argued that the allocation of Mr. Robbins' pension and Social Security to her violates the anti-alienation provisions of the Employee Retirement Income Security Act (ERISA) and the Social Security Act. Mrs. Robbins contended that the state's policy of attributing or deeming income of an institutionalized spouse to a community spouse effectively alienates that income from the institutionalized spouse
The U.S. Court of Appeals for the Second Circuit concludes that the state's policies violate the Social Security Act but not ERISA. The Social Security Act provides that ". . . none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process. . ." 42 U.S.C. § 407(a). The court rules that implicit or explicit threats fall within the definition of "legal process," and that the deeming of Mr. Robbins' benefits to Mrs. Robbins that would occur in a fair hearing, as well as the Department's threat of a lawsuit, constitutes "other legal process" within the meaning of Section 407(a). Thus, the court finds that the income-first policy as applied to Social Security benefits violates Section 407. But the court rules that ERISA's anti-alienation provisions protect benefits "only while they are held by the plan administrator and not after they reach the hands of the beneficiary."
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