State's Delay Prevents Reconsideration of Elderly Woman's Transfer into Pooled Trust

In a case involving Michigan ElderLawAnswers member Michele Fuller, the Michigan Court of Appeals rules that the state Department of Human Services (DHS) is not entitled to a favorable reconsideration of a Medicaid appeal involving the funding of a pooled trust because the state waited too long to request reconsideration and failed to provide the applicant with any notice of its request.  Smelser v. Department of Human Services (Mich. Ct. App., No. 312802, Feb. 27, 2014).

David Smelser, acting with court approval as conservator for his 80-year-old mother, Doris Smelser, funded a pooled trust account with $50,895 and a parcel of real estate worth $9,000.  The next day Ms. Smelser, who lived in a nursing home, filed for Medicaid.  DHS ruled that Ms. Smelser was subject to a divestment penalty because she was over age 65 when she made the transfers into the pooled trust.  On December 27, 2010, Ms. Smelser requested a fair hearing challenging the adverse decision, and a telephone hearing was held on March 31, 2011.  On May 19, 2011, a hearing officer ruled in favor of Ms. Smelser.  The hearing officer's decision stated that "rehearing or reconsideration could be ordered if requested within 30 days" and also stated that DHS "will not order a rehearing or reconsideration on the Department's motion where the final decision cannot be implemented within 90 days of the filing of the original request."

Michigan Medicaid regulations clearly state that final action on hearing requests must take place within 90 days of when the applicant requested the hearing, and in this case, the 90-day period had already expired when Ms. Smelser received her favorable ruling. Despite the regulations, DHS filed a request for reconsideration on June 14, 2011, but it did not send notice of the request to Attorney Fuller or to Ms. Smelser.  On September 15, 2011, a hearing officer granted DHS's request for reconsideration, but, again, no one notified Attorney Fuller or Ms. Smelser. Finally, on January 12, 2012, a third hearing officer issued a reconsideration ruling overturning the first hearing officer's decision and re-imposing the divestment penalty.  When Ms. Smelser received notice of this adverse decision, she filed an action for judicial review and the trial court ruled in her favor, finding that DHS failed to comply with its own standard of promptness by issuing the final decision over a year after Ms. Smelser's original request for a hearing.  DHS appealed.

The Michigan Court of Appeal rules in favor of Ms. Smelser, stating that although the 90-day period is not technically binding, "[g]iven that DHS commenced reconsideration proceedings contrary to state and federal timeframes and the original hearing decision and that DHS failed to provide notice of the reconsideration request and the grant of reconsideration, we conclude that DHS effectively precluded itself or was equitably estopped from obtaining a decision on reconsideration; the original hearing decision must stand." [emphasis in original]

To read the full text of this decision, click here. 

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