                                                                              FILED
                                                                          Jun 30 2020, 7:30 am

                                                                              CLERK
                                                                          Indiana Supreme Court
                                                                             Court of Appeals
                                                                               and Tax Court




      ATTORNEY FOR APPELLANT                                     ATTORNEYS FOR APPELLEE
      Ralph C. Melbourne                                         Curtis T. Hill, Jr.
      Church Langdon Lopp & Banet, LLC                           Attorney General
      New Albany, Indiana
                                                                 Benjamin M. L. Jones
                                                                 Deputy Attorney General
                                                                 Indianapolis, Indiana


                                                   IN THE
          COURT OF APPEALS OF INDIANA

      Randy L. Hotmer,                                           June 30, 2020
      Appellant-Petitioner,                                      Court of Appeals Case No.
                                                                 19A-PL-2694
              v.                                                 Appeal from the Clark Circuit
                                                                 Court
      Indiana Family and Social                                  The Honorable William A.
      Services Administration,                                   Dawkins, Magistrate
      Appellee-Respondent                                        Trial Court Cause No.
                                                                 10C02-1807-PL-82



      Crone, Judge.


                                               Case Summary
[1]   Randy L. Hotmer purchased two irrevocable annuities; pursuant to the

      annuities’ contract documents, the monthly payments were made to his wife.

      Hotmer, who was in a nursing home, applied for Medicaid benefits with the


      Court of Appeals of Indiana | Opinion 19A-PL-2694 | June 30, 2020                           Page 1 of 8
      Indiana Family and Social Services Administration (FSSA). FSSA ruled that

      because Hotmer was the owner of the annuities, the income from the annuities

      must be attributed to him, and because that income resulted in Hotmer

      exceeding the income limit for Medicaid eligibility, FSSA denied his

      application. Hotmer petitioned for judicial review of FSSA’s ruling, and the

      trial court affirmed. Hotmer now appeals, arguing that FSSA erred in

      attributing the annuity income to him and in denying his application. We agree

      and therefore reverse and remand for further proceedings.


                                   Facts and Procedural History
[2]   The relevant facts are undisputed. Hotmer was born in 1948. In April 2017, he

      entered a nursing home for long-term care. Over the next few months, he filled

      out applications for and ultimately purchased two eight-year annuities, one

      from Elco Mutual and one from NGL. On the applications, Hotmer directed

      that the monthly checks be made out to his wife as payee, and he also named

      her as the primary beneficiary who would be entitled to receive any remaining

      payments after his death. The annuity contract documents list Hotmer as the

      annuitant, or the owner, of the annuities, and state that the applications are part

      of the contracts. The Elco Mutual contract states, “Annuity payments will be

      made to the Owner, or as otherwise directed by the Owner, beginning on the

      Annuity Date.” Appellant’s App. Vol. 3 at 40. The contract further states,

      “This contract is irrevocable. It may not be transferred, assigned, surrendered

      or commuted during Your lifetime.… Neither the Annuitant nor the

      Beneficiary may be changed.” Id. at 41. The NGL contract states, “[NGL] will

      Court of Appeals of Indiana | Opinion 19A-PL-2694 | June 30, 2020         Page 2 of 8
      make annuity payments to the Annuitant commencing on the Annuity Date.”

      Id. at 45. The contract further states, “This Contract is irrevocable. It may not

      be altered, transferred, assigned, surrendered or commuted during Your

      lifetime.… Neither the Annuitant nor any Beneficiary may be changed.” Id. at

      47.


[3]   In October 2017, Hotmer applied for Medicaid benefits with FSSA, which

      administers the Medicaid program in Indiana. The local FSSA office

      determined that the annuity payments belonged to Hotmer as the owner of the

      annuity, and it denied his application on the basis that those payments boosted

      his monthly income above the applicable eligibility limit. 1 Hotmer petitioned

      for administrative review of that decision. An administrative law judge (ALJ)

      overturned the denial based on 42 U.S.C. § 1396r-5(b)(2)(A)(i) (Section 1396r-

      5), which states,


              in the case of income not from a trust, unless the instrument
              providing the income otherwise specifically provides[,] if
              payment of income is made solely in the name of the
              institutionalized spouse [Hotmer] or the community spouse [his
              wife], the income shall be considered available only to that
              respective spouse[.]




      1
        Absent the annuity payments, Hotmer’s monthly income is approximately $200 below the limit. Each of
      the annuity payments exceeds $200.

      Court of Appeals of Indiana | Opinion 19A-PL-2694 | June 30, 2020                            Page 3 of 8
      The ALJ concluded that because the annuity payments were made solely in the

      name of Hotmer’s wife, they were considered available only to his wife, and

      therefore Hotmer’s income did not exceed the limit.


[4]   FSSA petitioned for review of the ALJ’s decision. FSSA’s ultimate authority

      remanded to the ALJ with instructions to examine the evidence and Section

      1396r-5 in their entirety, further address the issue of income, and provide

      findings and conclusions to support her decision. On remand, the ALJ found

      that Hotmer’s annuities,


              of which he is the owner/annuitant, is [sic] being paid directly to
              [his wife] for her benefit only. [Hotmer] does not have access to
              the monthly income. [His wife] is the recipient of the monthly
              payments which are deposited into her account for her use only.
              Therefore the annuity income is not countable under [Hotmer’s]
              countable monthly income.


      Appellant’s App. Vol. 2 at 49.


[5]   FSSA again petitioned for review, and FSSA’s ultimate authority issued a

      decision that reads in relevant part,


              After review of the evidence, it is clear that [Hotmer] is the
              owner of the annuities and as owner the income source must be
              attributed to him regardless of who he has assigned as a payee.
              [Hotmer’s] income must be used for his care since he applied for
              Medicaid. 42 CFR 435.608 states, “(a) As a condition of
              eligibility, the agency must require applicants and beneficiaries to
              take all necessary steps to obtain any annuities, pensions,
              retirement, and disability benefits to which they are entitled,
              unless they can show good cause for not doing so.” The State’s

      Court of Appeals of Indiana | Opinion 19A-PL-2694 | June 30, 2020              Page 4 of 8
              original decision to deny Medical Assistance to the Aged to
              [Hotmer] for the application dated October 20, 2017 is sustained.


      Id. at 21. Hotmer petitioned for judicial review of the decision pursuant to the

      Indiana Administrative Orders and Procedures Act (the Act). After a hearing,

      the trial court affirmed FSSA’s decision. Hotmer now appeals.


                                      Discussion and Decision
[6]   In an appeal involving an administrative agency’s decision, our standard of

      review is governed by the Act, and we are bound by the same standard of

      review as the trial court. Walker v. State Bd. of Dentistry, 5 N.E.3d 445, 448 (Ind.

      Ct. App. 2014), trans. denied. “We do not try the case de novo and do not

      substitute our judgment for that of the agency.” Id.


              We will reverse the administrative decision only if it is: (1)
              arbitrary, capricious, an abuse of discretion, or otherwise not in
              accordance with law; (2) contrary to a constitutional right,
              power, privilege, or immunity; (3) in excess of statutory
              jurisdiction, authority, or limitations, or short of statutory right;
              (4) without observance of procedure required by law; or (5)
              unsupported by substantial evidence.


      Id. (citing Ind. Code § 4-21.5-5-14). “A decision is arbitrary and capricious

      when it is made without consideration of the facts and lacks any basis that may

      lead a reasonable person to make the decision made by the administrative

      agency.” Ind. Real Estate Comm’n v. Martin, 836 N.E.2d 311, 313 (Ind. Ct. App.

      2005), trans. denied (2006).



      Court of Appeals of Indiana | Opinion 19A-PL-2694 | June 30, 2020               Page 5 of 8
[7]   “[A] court may not overturn an administrative determination merely because it

      would have reached a different result.” Walker, 5 N.E.3d at 448. “An

      interpretation of statutes and regulations by an administrative agency charged

      with the duty of enforcing those regulations and statutes is entitled to great

      weight unless this interpretation would be inconsistent with the law itself.” Id.

      “Although an appellate court grants deference to an administrative agency’s

      findings of fact, no such deference is accorded to its conclusions of law.” Id.

      “The burden of demonstrating the invalidity of the agency action is on the party

      who asserts the invalidity.” Id. at 449.


[8]   For background purposes, we note that Congress established Medicaid in 1965

      “to provide medical assistance to needy persons whose income and resources

      are insufficient to meet the expenses of health care.” Brown v. Ind. Family & Soc.

      Servs. Admin., 45 N.E.3d 1233, 1236 (Ind. Ct. App. 2015). “The program

      operates through a combined scheme of state and federal statutory and

      regulatory authority. States participating in the Medicaid program must

      establish reasonable standards for determining eligibility, including the

      reasonable evaluation of an applicant’s income and resources.” Id. (citation

      omitted). “To qualify for Medicaid, an applicant must meet both an income-

      eligibility test and a resources-eligibility test. If either the applicant’s income or

      the value of the applicant’s resources is too high, the applicant does not qualify

      for Medicaid.” Id. (citation omitted).


[9]   In this case, we are concerned only with Hotmer’s income eligibility. Hotmer

      notes that, pursuant to 42 U.S.C. § 1396p(c)(2)(B)(i), an individual who has

      Court of Appeals of Indiana | Opinion 19A-PL-2694 | June 30, 2020             Page 6 of 8
       applied for Medicaid benefits “shall not be ineligible for medical assistance …

       to the extent that … assets” – such as annuity payments 2 – “were transferred to

       the individual’s spouse … for the sole benefit of the individual’s spouse.” Here,

       it is undisputed that Hotmer transferred the annuity payments to his wife for

       her sole benefit. And because those payments are made solely in her name, the

       income shall be considered available only to her pursuant to Section 1396r-5. 3

       According to FSSA, Hotmer is entitled to those payments as the owner of the

       annuities and failed to “take all necessary steps to obtain” them pursuant to 42

       C.F.R. § 435.608, and therefore that income must be attributed to him. 4


[10]   We disagree. The annuity contracts, which include the annuity applications on

       which Hotmer named his wife as payee, are irrevocable, i.e., “[u]nalterable;

       committed beyond recall.” BLACK’S LAW DICTIONARY (11th ed. 2019).

       Consequently, Hotmer could not change the payee and make the payments




       2
         See 42 U.S.C. § 1396p(h)(1) (defining “assets” in pertinent part as “all income and resources of the
       individual and of the individual’s spouse”), -(2) (providing that “income” has meaning given in 42 U.S.C. §
       1382a, which defines “income” as “both earned income and unearned income[,]” the latter of which includes
       “any payments received as an annuity”).
       3
         FSSA’s ultimate authority did not contradict the ALJ’s finding that Hotmer’s wife deposits the payments
       into an account for her use only.
       4
         FSSA cites Section 2805.15.00 of the Indiana Health Coverage Program Policy Manual, which reads in
       pertinent part, “The individual who has title to the proceeds of a payment or property is the individual who
       ‘owns’ the income. If the income is received by an individual’s legal representative or guardian, the
       individual still owns the income.” There is no indication that Hotmer’s wife is his legal representative or
       guardian, and to the extent that this policy conflicts with Section 1396r-5, it is invalid. See Knox Cty. Ass’n for
       Retarded Citizens, Inc., 100 N.E.3d 291, 300 (Ind. Ct. App. 2018) (invalidating state regulation that conflicted
       with federal law), aff’d on reh’g, 107 N.E.3d 1111.

       Court of Appeals of Indiana | Opinion 19A-PL-2694 | June 30, 2020                                       Page 7 of 8
       available to him without breaching the contracts. 5 We therefore conclude that

       FSSA’s denial of Hotmer’s application for Medicaid benefits was arbitrary and

       capricious, and we reverse and remand for further proceedings consistent with

       this decision. 6


[11]   Reversed and remanded.


       Bailey, J., concurs.


       Altice, J., concurs in result without opinion.




       5
        On appeal, at least, FSSA has not specifically argued that Hotmer was obligated to make the annuity
       payments available to himself before he applied for Medicaid benefits. Accordingly, we do not address
       Hotmer’s contention that such an argument is meritless.
       6
        Consequently, we need not address Hotmer’s argument that FSSA deprived him of due process by citing 42
       C.F.R. § 435.608 as a basis for denying his application for the first time in its final decision. We do note,
       however, that the regulation requires that an applicant be given an opportunity to make a good-cause
       showing, and it is questionable whether Hotmer was given that opportunity below.

       Court of Appeals of Indiana | Opinion 19A-PL-2694 | June 30, 2020                                 Page 8 of 8
