                                                                                 FILED
                                                                             Jan 17 2019, 8:34 am

                                                                                 CLERK
                                                                             Indiana Supreme Court
                                                                                Court of Appeals
                                                                                  and Tax Court




      ATTORNEYS FOR APPELLANT                                    ATTORNEYS FOR APPELLEE
      Curtis T. Hill, Jr.                                        Dennis K. Frick
      Attorney General of Indiana                                Emma L. Douglas
      Aaron T. Craft                                             Indiana Legal Services, Inc.
      Patricia C. McMath                                         South Bend, Indiana
      Deputy Attorneys General
      Indianapolis, Indiana


                                                   IN THE
          COURT OF APPEALS OF INDIANA

      Indiana Family and Social                                  January 17, 2019
      Services Administration,                                   Court of Appeals Case No.
      Appellant-Defendant,                                       18A-PL-925
                                                                 Appeal from the Henry Circuit
              v.                                                 Court
                                                                 The Honorable Kit C. Dean Crane,
      Lance Patterson,                                           Judge
      Appellee-Plaintiff.                                        Trial Court Cause No.
                                                                 33C02-1703-PL-19



      Mathias, Judge.


[1]   This case requires us to once again delve into what we have previously referred

      to as the “unfortunately convoluted and complex” and “Byzantine” Medicaid

      system. Legacy Healthcare, Inc. v. Barnes & Thornburg, 837 N.E.2d 619, 622 & n.2

      (Ind. Ct. App. 2005), trans. denied; see also Schweiker v. Gray Panthers, 453 U.S.

      Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019                            Page 1 of 29
      34, 43 (1981) (referring to the Social Security Act, of which the Medicaid

      system is a part, as having a “Byzantine construction” that “makes the Act

      ‘almost unintelligible to the uninitiated.’”) (quoting Friedman v. Berger, 547 F.2d

      724, 727, n. 7 (2d Cir. 1976)).

[2]   At issue here is how to determine the portion of nursing home costs required to

      be paid by Lance Patterson (“Patterson”), a Medicaid recipient whose limited

      income is subject to a garnishment order due to a rather substantial child

      support arrearage. The Indiana Family and Social Services Administration

      (“the FSSA”) determined that the garnished portion of Patterson’s income

      should be included when determining Patterson’s portion of the cost of his care.

      Patterson challenged this decision by filing a claim for judicial review in Henry

      Circuit Court. The trial court entered judgment in favor of Patterson,

      determining that the garnished portion of Patterson’s income should be

      excluded when determining Patterson’s share of nursing home costs because

      Patterson did not actually receive this income. The FSSA appeals the trial

      court’s decision, arguing that the trial court erred in granting Patterson’s

      petition because the FSSA’s decision was consistent with federal and state law

      and was neither arbitrary nor capricious. Because we agree with the FSSA, we

      reverse.




      Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019       Page 2 of 29
                                         The Medicaid System

      A. Medicaid Overview

[3]   Before we address the specific facts of this case, we first present a relatively brief

      explanation of the Medicaid system. Title XIX of the Social Security Act,

      referred to as “Medicaid,” was enacted by the United States Congress in 1965.

      Legacy Healthcare, 837 N.E.2d at 622 (citing Sullivan v. Day, 681 N.E.2d 713, 715

      (Ind. 1997)). The purpose of Medicaid “is 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) (citing Ind. Family & Soc. Servs. Admin. v.

      Thrush, 690 N.E.2d 769, 771 (Ind. Ct. App. 1998), trans. denied).


[4]   “The Medicaid statutes create a comprehensive cooperative federal-state

      program for medical care under which participating states are federally financed

      for their medical assistance programs if they submit a state plan which

      comports with federal requirements.” Legacy Healthcare, 837 N.E.2d at 622

      (citing 81 C.J.S. Social Security & Public Welfare § 247 (2004)). Thus, the

      Medicaid program operates through a combined scheme of state and federal

      statutory and regulatory authority. Brown, 45 N.E.3d at 1236. Although a

      state’s participation in Medicaid is voluntary, once a state chooses to

      participate, as Indiana has, that state must comply with the federal statutes and

      regulations governing the program. Legacy Healthcare, 837 N.E.2d at 622 (citing

      81 C.J.S. at § 247); see also Schweiker, 453 U.S. at 43–44 (stating that states


      Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019           Page 3 of 29
      participating in Medicaid must “grant benefits to eligible persons ‘taking into

      account only such income and resources as are, as determined in accordance

      with standards prescribed by the Secretary [of Health and Human Services],

      available to the applicant.’”) (citing 42 U.S.C. § 1396a(a)(17)(B)).


[5]   States that elect to participate in the Medicaid program and receive federal

      funds must make Medicaid available to all persons who are deemed

      “categorically needy.” Lazzell v. Ind. Family & Soc. Servs. Admin., 775 N.E.2d

      1113, 1117 (Ind. Ct. App. 2002) (citing Sullivan, 681 N.E.2d at 715); see also 42

      C.F.R. § 435.4 (defining “categorically needy.”). Whether a person is

      “categorically needy” is determined by reference to eligibility for certain other

      programs, including supplemental security income (“SSI”). See id.; see also 42

      U.S.C. § 1396a(a)(10)(A)(i)(II)(aa);1 42 C.F.R. § 435.120.


[6]   States may also opt to provide Medicaid available to the “optional categorically

      needy.”2 That is, states may, at their option, cover other categorically needy

      groups of people. See 42 U.S.C. § 1396a(a)(10)(A)(ii); 42 C.F.R. § 435.201;

      Herweg v. Ray, 455 U.S. 265, 268–69 (1982). Indiana has chosen to provide

      Medicaid coverage to certain institutionalized, disabled individuals whose



      1
       A citation as complex as section “1396a(a)(10)(A)(i)(II)(aa)” calls to mind Judge Friendly’s comment that
      “a draftsman who has gotten himself into a position requiring anything like this should make a fresh start.”
      Friedman, 547 F.2d at 727 n.7. We further agree that “[s]uch unintelligibility is doubly unfortunate in the case
      of a statute dealing with the rights of poor people.” Id.
      2
       States are permitted, but not required to offer Medicaid to those deemed “medically needy,” which is
      defined as “individuals whose income or resources were too great to qualify for categorically needy assistance
      but were unable to pay for necessary medical expenses.” Lazzell, 775 N.E.2d at 1117 (citing Roloff v. Sullivan,
      975 F.2d 333, 335 (7th Cir. 1992)). Indiana has chosen not to provide Medicaid to the medically needy. Id.

      Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019                                Page 4 of 29
      monthly income is too high to otherwise qualify as categorically needy, so long

      as the individual’s monthly income does not exceed the special income level of

      300 percent of the maximum payable SSI benefit. See 405 I.A.C. 2-1.1-5(g); see

      also 42 U.S.C. § 1396a(a)(10)(A)(ii)(V); 42 C.F.R. § 435.1005.


      B. Medicaid Eligibility Determination

[7]   States participating in Medicaid must establish reasonable standards for

      determining eligibility, including the reasonable evaluation of an applicant’s

      income and resources. Brown, 45 N.E.3d at 1236. To qualify for Medicaid, an

      applicant must meet both an income-eligibility test and a resources-eligibility

      test. Id. 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.


[8]   The federal Department of Health and Human Services (“HHS”) has

      promulgated regulations establishing financial eligibility requirements for

      Medicaid applicants and recipients. A state may opt to use a less restrictive

      income methodology, so long as its methods do not result in granting Medicaid

      benefits to those whose income, as calculated using SSI standards, exceeds the

      “special income level.” See 42 U.S.C. § 1382a; 42 U.S.C. § 1396a(r)(2); 42

      C.F.R. § 435.601(d)(1)(ii), (d)(2). A state’s plan must specify whether it will use

      the relevant federal standard or a less-restrictive standard. 42 C.F.R. §

      435.601(f). Indiana has adopted the federal rule, not a less-restrictive option.

      Specifically, 405 Indiana Administrative Code section 2-1.1-5(a) states,

      “Individuals declared eligible for benefits by reason of age, disability, or


      Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019         Page 5 of 29
       blindness are subject to the income definition and exclusions set forth in 42

       U.S.C. 1382a and 20 CFR Part 416, Subpart K Income.”3

[9]    A disabled person who has been continuously institutionalized for at least thirty

       days is eligible for Medicaid under federal standards if his or her monthly

       income, as determined under 42 U.S.C. § 1382a, does not exceed 300 percent of

       the maximum SSI benefit. 42 U.S.C. §§ 1396a(a)(10)(A)(ii)(V), 42 C.F.R. §§

       435.236(a), 435.1005. In 2016, the maximum payable SSI benefit for an

       individual was $733 monthly in 2016. It increased to $735 in 2017, and to $750

       in 2018. See SSI Federal Payment Amounts https://www.ssa.gov/oact/COLA/

       SSIamts.html.


[10]   An individual’s includible income includes gross earnings, net rental income,

       net self-employment income, and all gross unearned income except SSI

       benefits. 405 I.A.C. 2-1.1-5(g)(2). In determining Medicaid eligibility, the Act

       requires the State to “tak[e] into account only such income and resources as are,

       as determined in accordance with standards prescribed by the Secretary,

       available to the applicant or recipient[.]” 42 U.S.C. § 1396a(a)(17)(B) (emphasis

       added).


[11]   Pursuant to 42 U.S.C. § 1382a(a), “income” includes “both earned income and

       unearned income[.]” “Earned income” includes wages, and “unearned income”




       3
           20 C.F.R. Part 416, Subpart K encompasses 20 C.F.R. §§ 416.1100 through 416.1182.

       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019                     Page 6 of 29
       including disability benefits. Id. at § 1382a(a)(1)(A), (a)(2)(B). As explained in

       the Code of Federal Regulations section entitled “What is earned income”:

               Earned income may be in cash or in kind. We may include more
               of your earned income than you actually receive. We include
               more than you actually receive if amounts are withheld from
               earned income because of a garnishment or to pay a debt or
               other legal obligation, or to make any other payments. . . .


       20 C.F.R. § 416.1110 (emphasis added).

[12]   A similar provision applies to unearned income:


               (b) Amount considered as income. We may include more or less
               of your unearned income than you actually receive.

                                                         ***

                    (2) We also include more than you actually receive if amounts
                    are withheld from unearned income because of a
                    garnishment, or to pay a debt or other legal obligation, or to
                    make any other payment such as payment of your Medicare
                    premiums.


       20 C.F.R. § 416.1123(b)(2).

[13]   In the present case, neither party makes any argument regarding Patterson’s

       Medicaid eligibility; they both agree that Patterson is eligible for Medicaid. The

       question is, even though Patterson is eligible for Medicaid, how much of his

       income must he still contribute to the cost of his care, and how is this amount to

       be determined.



       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019        Page 7 of 29
       C. Post-Eligibility Income Determination

[14]   A disabled person who is in an institution and who qualifies for Medicaid must

       still contribute some of his or her income to the cost of his or her institutional

       care, and Medicaid pays for the remaining costs at the Medicaid reimbursement

       rate. Medicaid Program Payments to Institutions, 53 Fed. Reg. 3586, 3586

       (Feb. 8, 1988) (explaining 42 C.F.R. § 435.725). A state Medicaid agency must

       “reduce its payment to an institution . . . by the amount that remains after

       deducting the amounts specified in paragraphs (c) and (d) of this section, from

       the individual’s total income.” 42 C.F.R. § 435.725(a)(1). States have the option

       of using either the individual’s “total income received” or a projected “monthly

       income for a prospective period not to exceed 6 months.” 42 C.F.R. §

       435.725(e)(1).


[15]   Once the agency identifies the recipient’s total income, it must then apply the

       deductions in paragraphs (c) and may apply the items listed in paragraph (d). 42

       C.F.R. § 435.725(c), (d). The five mandatory deductions are: (1) a personal-

       needs allowance; (2) maintenance needs of spouse; (3) maintenance needs of

       family; (4) qualified medical expenses not subject to third-party payment; and

       (5) the full amount of SSI benefits. 42 C.F.R. § 435.725(c).4 The recipient’s total

       income less these deductions constitutes his Medicaid liability—i.e., what he




       4
         A state agency may also deduct an amount for maintenance of the recipient’s home, so long as there is a
       reasonable likelihood that the person will return home within six months. 42 C.F.R. § 435.725(d).

       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019                             Page 8 of 29
       must pay for his nursing home care and what Medicaid will not cover. 42

       C.F.R. § 435.725(a).

[16]   In Indiana, 405 I.A.C. 2-1.1-7(a) addresses the portion of costs that a Medicaid

       recipient, such as Patterson, must pay toward the costs of his or her care. The

       FSSA first determines the “recipient’s total income that is not excluded by

       federal statute.” 405 I.A.C. 2-1.1-7(a)(2). It then makes five deductions: (1) a

       statutory-minimum personal-needs allowance; (2) an increased personal-needs

       allowance; (3) an amount for health insurance premiums; (4) certain medical

       expenses for necessary or remedial care; and (5) federal, state, and local income

       taxes. 405 I.A.C. 2-1.1-7(a)(3)–(7). “The resulting amount is the amount by

       which the Medicaid payment to the facility shall be reduced,” and which must

       be covered by the Medicaid recipient. 405 I.A.C. 2-1.1-7(a). The parties refer to

       this as the recipient’s “liability,” i.e., the portion of the costs of care that must

       be borne by the recipient. It is this amount, and its calculation, that is at issue

       here.


                                    Facts and Procedural History
[17]   The historical facts underlying this case appear to be relatively undisputed. At

       the time of the trial court’s decision, Patterson was sixty-two years old and a

       resident of Miller’s Merry Manor nursing home (“Miller’s”) in Middletown,

       Indiana. Patterson resides in Miller’s as a result of his chronic heart failure,

       diabetes, and various other medical issues.




       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019           Page 9 of 29
[18]   Patterson’s only income comes from a Social Security Disability Insurance

       (“SSDI”) benefit of $1,236 per month. Patterson is unmarried but has a thirty-

       two-year-old daughter from a prior marriage. Due to his failure to pay child

       support during his daughter’s minority, Patterson accumulated a large child

       support arrearage of more than $56,000 in Minnesota.5 As a result of this

       arrearage, a Minnesota court issued a garnishment order. Pursuant to this

       garnishment order, the Social Security Administration (“the SSA”) withholds

       $730.80 from each of Patterson’s monthly SSDI checks. The SSA also deducts

       $2.60 from Patterson’s benefit check for monthly health plan premiums. Thus,

       only $502.60 each month is actually deposited in Patterson’s bank account.

[19]   The FSSA determined that Patterson was eligible for Medicaid in October

       2016; Patterson’s income level of $1,236 was less than the “special income

       level” of $2,199, which represented three times the 2016 maximum payable

       Supplemental Security Income benefit of $733. The FSSA further determined

       that Patterson’s liability for his nursing home care was $1,181. The FSSA

       determined Patterson’s liability by subtracting from Patterson’s total income a

       $52 personal-needs allowance and $2.60 for health care premiums. The FSSA

       did not take into consideration that only $502.60 each month was actually

       deposited in Patterson’s bank account, as it considered the whole of Patterson’s




       5
        This amount represents the arrearage as of December 2016, when the trial court issued its order. The
       arrearage had been as high as $94,000 in 2011.

       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019                            Page 10 of 29
       SSDI benefit as income, without deducting the $730.80 garnished from his

       check to pay toward the child support arrearage.

[20]   On November 1, 2016, the FSSA notified Patterson by mail that, as of that

       date, he would be responsible for paying $1,181 per month to his nursing home.

       Patterson administratively appealed the FSSA’s determination, arguing that the

       $730.80 garnished for his child support arrearage should not have been included

       in determining his Medicaid liability. On December 16, 2016, an

       Administrative Law Judge (“ALJ”) held a hearing on the issue. At the time of

       this hearing, Patterson owed the nursing home $8,890. On January 20, 2017,

       the ALJ affirmed the FSSA’s initial determination. Patterson then appealed to

       the FSSA, which on March 2, 2017, issued a final agency action affirming the

       decision of the ALJ.


[21]   Patterson then sought judicial review of the FSSA’s decision, filing a complaint

       for judicial review on March 31, 2017.6 The trial court held a hearing on

       February 21, 2018, and issued findings of fact and conclusions of law on March

       21, 2018, reversing the FSSA’s determination. The FSSA now appeals.


                                            Standard of Review
[22]   The FSSA appeals from the trial court’s grant of Patterson’s complaint for

       judicial review of an agency decision. Pursuant to the Indiana Administrative




       6
        Patterson’s complaint included counts for declaratory and injunctive relief under 42 U.S.C. section 1983.
       The parties later agreed to dismiss the section 1983 claims.

       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019                            Page 11 of 29
       Order and Procedures Act (“AOPA”), “[t]he burden of demonstrating the

       invalidity of agency action is on the party to the judicial review proceeding

       asserting invalidity.” Ind. Code § 4-21.5-5-14(a). A court may set aside an

       agency action only if it is:


               (1) arbitrary, capricious, an abuse of discretion, or otherwise not
               in accordance with law;

               (2) contrary to 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. at § 14(d). Patterson argued, and the trial court agreed, that the FSSA’s

       income determination was “arbitrary, capricious, an abuse of discretion, or

       otherwise not in accordance with law” under subsection 14(d)(1).


[23]   Both a trial court and an appellate court review the decision of an

       administrative agency with the same standard of review. Gray v. Med. Licensing

       Bd. of Ind., 102 N.E.3d 917, 921 (Ind. Ct. App. 2018). When reviewing a

       challenge to an administrative agency’s decision, a court may not re-try “the

       facts de novo nor substitute its own judgment for that of the agency.” Jay

       Classroom Teachers Association v. Jay School Corp., 55 N.E.3d 813, 816 (Ind. 2016).

       Instead, a court must defer to an agency’s findings if they are supported by

       substantial evidence. Id.

       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019         Page 12 of 29
[24]   In contrast to our deference to an agency’s factual findings, it has been held that

       a court may review an agency’s conclusions of law de novo. Id. But despite this

       “de novo” review, a court is to give “great weight” to the agency’s interpretation

       of the law. Id. (citing West v. Office of Ind. Sec’y of State, 54 N.E.3d 349, 353 (Ind.

       2016)). “In fact, ‘if the agency’s interpretation is reasonable, we stop our

       analysis and need not move forward with any other proposed interpretation.’”

       Id. This is true even if the opposing party presents an equally reasonable

       interpretation. Id.


[25]   Patterson argues that our usual deference to an agency’s interpretation should

       not apply because the FSSA is interpreting a federal regulation. Patterson also

       notes that our supreme court has cited with approval the proposition that

       “‘[c]ourts will give no special deference to interpretation by one agency of

       another agency’s rules.’” LTV Steel Co. v. Griffin, 730 N.E.2d 1251, 1257 (Ind.

       2000) (quoting Charles H. Koch, Jr., Administrative Law and Practice § 11.26, at

       140 (2d ed. 1997)). But the two agencies at issue in LTV Steel were two separate

       state-level agencies: the State Ethics Commission and the Indiana Board of

       Safety Review. The LTV Steel court held that the Board of Safety Review’s

       interpretation and enforcement of the State Ethics Code was in excess of the

       Board’s jurisdiction. Id. at 1258.


[26]   In contrast, the Medicaid program is, as discussed above, a cooperative federal-

       state program. And Indiana is required to comply with the federal statutes and

       regulations governing the program. Legacy Healthcare, 837 N.E.2d at 622. Thus,

       we will give great weight to the FSSA’s interpretation of federal Medicaid
       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019          Page 13 of 29
       statutes, rules, and regulations. See Assateague Coastkeeper v. Maryland Dep’t of

       Env’t, 28 A.3d 178, 206 (2011) (holding that when a state agency is charged

       with the day-to-day responsibility for enforcing and administering a federal

       regulation, courts should give deference to the agency’s interpretation of that

       regulation if the language of the agency’s regulation is unclear and susceptible

       to different reasonable interpretations and the agency’s interpretation of the

       regulation is reasonable) (citing In re Cities of Annandale & Maple Lake

       NPDES/SDS Permit Issuance for the Discharge of Treated Wastewater, 731 N.W.2d

       502, 515 (Minn. 2007). Accordingly, we will defer to the FSSA’s factual

       findings and only determine if its interpretation of the Medicaid statutes and

       regulations are reasonable.


                                       Discussion and Decision
[27]   As noted above, the parties do not dispute that Patterson is eligible for

       Medicaid; both agree that he is. Patterson also does not deny that, when

       determining eligibility for Medicaid, the FSSA is required to include all of his

       income, including the portion thereof subject to garnishment. Instead, Patterson

       notes that there are two, discrete income calculations at issue here. The first one

       is used in determining Medicaid eligibility; the second, post-eligibility

       determination is used in determining the Medicaid recipient’s liability for a

       portion of his or her care.

[28]   In this post-eligibility determination, the FSSA argues that Patterson’s income

       is still calculated to include even that portion of his income that is subject to the


       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019         Page 14 of 29
       garnishment order. Patterson claims that, even though the garnished portion of

       his income is included when determining his eligibility for Medicaid, it is to be

       excluded when determining his liability for his care. Thus, the question before

       us is how to calculate Patterson’s income for the purposes of determining the

       portion of his health care expenses Patterson is required to pay himself.


[29]   The applicable FSSA regulation, entitled “Post-eligibility treatment of income,”

       provides in relevant part as follows:


                This subsection applies to individuals in institutions.

                   (1) Except as provided in 405 IAC 2-3-17, the following
                   procedure shall be used to determine the amount of income to
                   be paid to an institution for an applicant or recipient who has
                   been determined eligible under section 5(g) of this rule and
                   who is residing in an institution as defined in 405 IAC 2-1-1(e).

                   (2) Determine the applicant’s or recipient’s total income that
                   is not excluded by federal statute, which includes amounts
                   deducted in the eligibility determination under section 5(g)(3)
                   of this rule.[7]

                   (3) Subtract the minimum personal needs allowance specified
                   in IC 12-15-7-2.

                   (4) Subtract an amount for increased personal needs as
                   allowed under Indiana’s approved Medicaid state plan. The
                   increased personal needs allowance includes, but is not limited
                   to, court ordered guardianship fees paid to an institutionalized




       7
        405 I.A.C. section 2-1.1-5(g)(3) provides that “[a]ny income from another financially responsible relative
       described under 405 IAC 2-3-4 will not be included when determining whether an individual falls below the
       special income level.” There is no indication that Patterson has “another financially responsible relative.”

       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019                             Page 15 of 29
                   applicant or recipient’s legal guardian, not to exceed thirty-five
                   dollars ($35) per month. Guardianship fees include all services
                   and expenses required to perform the duties of a guardian, as
                   well as any attorney’s fees for which the guardian is liable.

                   (5) Subtract the amount of any health insurance premiums.

                   (6) Subtract an amount for expenses incurred for necessary or
                   remedial care recognized by state law but not covered under
                   the state plan, subject to any reasonable limits set forth in
                   Indiana’s approved Medicaid state plan.

                   (7) Subtract an amount for federal, state, and local taxes owed
                   and paid by the applicant or recipient. This deduction is
                   limited to one (1) calendar month per year.

               The resulting amount is the amount by which the Medicaid
               payment to the facility shall be reduced.


       405 I.A.C. § 2.1.1-7(a). Notably, there is no provision for the subtraction of

       wages that are subject to garnishment.


[30]   The federal regulation regarding the post-eligibility determination of income is

       42 C.F.R. § 435.725. This rule, entitled “Post-eligibility treatment of income of

       institutionalized individuals in SSI States: Application of patient income to the

       cost of care,” provides in relevant part as follows:

               (a) Basic rules.
                     (1) The agency must reduce its payment to an institution, for
                     services provided to an individual specified in paragraph (b)
                     of this section, by the amount that remains after deducting
                     the amounts specified in paragraphs (c) and (d) of this
                     section, from the individual’s total income,



       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019         Page 16 of 29
              (2) The individual’s income must be determined in
              accordance with paragraph (e) of this section.
              (3) Medical expenses must be determined in accordance
              with paragraph (f) of this section.

        (b) Applicability. This section applies to the following individuals
        in medical institutions and intermediate care facilities.

              (1) Individuals receiving cash assistance under SSI or AFDC
              who are eligible for Medicaid under § 435.110 or § 435.120.

              (2) Individuals who would be eligible for AFDC, SSI, or an
              optional State supplement except for their institutional status
              and who are eligible for Medicaid under § 435.211.

              (3) Aged, blind, and disabled individuals who are eligible for
              Medicaid, under § 435.231, under a higher income standard
              than the standard used in determining eligibility for SSI or
              optional State supplements.

        (c) Required deductions. In reducing its payment to the
        institution, the agency must deduct the following amounts, in the
        following order, from the individual’s total income, as
        determined under paragraph (e) of this section. Income that was
        disregarded in determining eligibility must be considered in
        this process.

              (1) Personal needs allowance. A personal needs allowance
              that is reasonable in amount for clothing and other personal
              needs of the individual while in the institution. This
              protected personal needs allowance must be at least—

                   (i) $30 a month for an aged, blind, or disabled
                   individual, including a child applying for Medicaid on
                   the basis of blindness or disability;

                                                     ***



Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019         Page 17 of 29
                   (iii) For other individuals, a reasonable amount set by
                   the agency, based on a reasonable difference in their
                   personal needs from those of the aged, blind, and
                   disabled.

              (2) Maintenance needs of spouse. . . .

                                                     ***

              (3) Maintenance needs of family. . . .

                                                     ***

              (4) Expenses not subject to third party payment. Amounts
              for incurred expenses for medical or remedial care that are
              not subject to payment by a third party, including—

                   (i) Medicare and other health insurance premiums,
                   deductibles, or coinsurance charges; and

                   (ii) Necessary medical or remedial care recognized under
                   State law but not covered under the State’s Medicaid
                   plan, subject to reasonable limits the agency may
                   establish on amounts of these expenses.

              (5) Continued SSI and SSP benefits. The full amount of SSI
              and SSP benefits that the individual continues to receive
              under sections 1611(e)(1)(E) and (G) of the Act.

        (d) Optional deduction: Allowance for home maintenance. . . .

                                                     ***

        (e) Determination of income—

              (1) Option. In determining the amount of an individual’s
              income to be used to reduce the agency’s payment to the
              institution, the agency may use total income received, or it
              may project monthly income for a prospective period not to
              exceed 6 months.

Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019          Page 18 of 29
                     (2) Basis for projection. The agency must base the projection
                     on income received in the preceding period, not to exceed 6
                     months, and on income expected to be received.

                     (3) Adjustments. At the end of the prospective period
                     specified in paragraph (e)(1) of this section, or when any
                     significant change occurs, the agency must reconcile
                     estimates with income received.

               (f) Determination of medical expenses—

                     (1) Option. In determining the amount of medical expenses
                     to be deducted from an individual’s income, the agency may
                     deduct incurred medical expenses, or it may project medical
                     expenses for a prospective period not to exceed 6 months.

                     (2) Basis for projection. The agency must base the estimate
                     on medical expenses incurred in the preceding period, not to
                     exceed 6 months, and on medical expenses expected to be
                     incurred.

                     (3) Adjustments. At the end of the prospective period
                     specified in paragraph (f)(1) of this section, or when any
                     significant change occurs, the agency must reconcile
                     estimates with incurred medical expenses.


       42 C.F.R. § 435.725 (emphases added).


[31]   The FSSA contends that the amount of the costs of medical care that Patterson

       is required to pay—his liability—is determined as set forth in subsection (a) of

       42 C.F.R. section 435.725. That is, the FSSA must reduce its payment to the

       nursing home “by the amount that remains after deducting the amounts

       specified in paragraphs (c) and (d) of [section 435.725] from [Patterson]’s total

       income.” Id. at § 435.725(a) (emphasis added). The FSSA argues that


       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019        Page 19 of 29
       Patterson’s total income includes the amount subject to the Minnesota court’s

       garnishment order. Otherwise, the FSSA argues, Medicaid would effectively be

       subsidizing Patterson’s child support delinquency.


[32]   Patterson argues that that portion of his income that is subject to garnishment

       should not be counted toward his income because subsection (e) refers to “total

       income received.” Id. at § 435.725(e). Patterson argues that he does not

       “receive” that portion of his income that is subject to the garnishment order,

       and that this amount should therefore not be included when determining his

       income for purpose of calculating his liability for his medical care.


[33]   We agree that the references to “total income” in subsection 435.725(a) and

       “total income received” in subsection 435.725(e) render this section ambiguous.

       That is, they are subject to two different, reasonable interpretations: one

       includes all income, the other only income that is “received.” But this is all the

       more reason for us to defer to the FSSA’s interpretation of this rule.


[34]   More importantly, the HHS has indicated that it interprets the income

       calculation set forth in 42 C.F.R. section 435.725 to include the same income

       calculation that is used in determining Medicaid eligibility, which calculation

       includes income that is subject to garnishment. When issuing an amendment to

       42 C.F.R. section 435, the HHS Secretary commented that, regarding the issue

       of interest and dividends, “[t]he post-eligibility process is based on a

       consideration of all income considered in the eligibility process.” Medicaid

       Program Payments to Institutions, 53 Fed. Reg. 3586, 3587 (Feb. 8, 1988).


       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019        Page 20 of 29
[35]   Thus, the HHS has determined that the post-eligibility income calculation for

       determining a recipient’s liability includes “all income” considered in the initial

       eligibility determination.8 And it is abundantly clear that the initial eligibility

       income calculation includes income subject to garnishment. See 20 C.F.R. §

       416.1110; Supplemental Security Income for the Aged, Blind, and Disabled;

       How We Count Earned and Unearned Income; Funds Used to Pay

       Indebtedness, 56 Fed. Reg. 3209 (Jan. 29, 1991) (“These final rules clarify the

       regulations to reflect a longstanding Social Security Administration (SSA)

       policy that amounts withheld from earned and unearned income for payment of

       a debt or other legal obligation are included in income for the purpose of

       determining eligibility and payment amount under the Supplemental Security

       Income (SSI) program.”). This is directly contrary to Patterson’s position that

       income should be calculated differently depending upon whether the agency is

       determining eligibility or post-eligibility recipient liability.


[36]   Moreover, the FSSA’s interpretation is not unreasonable because it

       acknowledges that Patterson still receives the benefit of the money that is

       garnished. By having the garnishment applied to his outstanding child support

       arrearage, Patterson has received a benefit from the garnishment—his debt is

       reduced. In fact, if we were to agree with Patterson, the result would be that




       8
         In fact, 42 C.F.R. section 435.725(c) provides that, in the post-eligibility income determination, “[i]ncome
       that was disregarded in determining eligibility must be considered in this [post-eligibility] process.”
       Accordingly, the post-eligibility determination is, if anything, more inclusive of income than the eligibility
       determination.

       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019                               Page 21 of 29
       Medicaid would be effectively subsidizing his child support arrearage. This can

       hardly have been the intent of the Medicaid program. See Peura ex rel. Herman v.

       Mala, 977 F.2d 484, 490 (9th Cir. 1992) (noting that excluding the full amount

       of a child support obligation from the “available” income of a Medicaid

       recipient would lead to unintended subsidization of a disproportionate amount

       of health care benefits); Cervantez v. Sullivan, 963 F.2d 229, 235 (9th Cir. 1992)

       (noting that excluding garnishment from calculation of income would give

       claimants an incentive to fail to pay their debts and await garnishment, thereby

       shifting the cost of repayment to the SSI program), as amended on denial of reh’g;

       see also 56 Fed. Reg. 3209, 3211 (“It is not the purpose of the SSI program to

       subsidize any types of indebtedness whether that indebtedness results from a

       debtor/creditor relationship or from an obligation imposed by public policy.”).

[37]   In short, the FSSA’s interpretation of the applicable statutes and regulations is

       reasonable. Because the FSSA’s interpretation of the regulations is reasonable,

       “we must stop our analysis and need not move forward with any other

       proposed interpretation.” Jay Classroom Teachers Ass’n, 55 N.E.3d at 816 (citing

       West, 54 N.E.3d at 353). Accordingly, the trial court erred in determining that

       the FSSA’s interpretation was arbitrary, capricious, an abuse of discretion, or

       otherwise not in accordance with the law.

[38]   We find support for our conclusion in Ussery v. Kansas Department of Social &

       Rehabilitation Services., 899 P.2d 461 (Kan. 1995). In that case, as here, there was

       no question that Ussery was entitled to Medicaid benefits. Rather, the issue was

       the extent of his “patient liability,” i.e., “the amount that the individual is

       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019        Page 22 of 29
       required to pay towards the cost of care which the individual receives in an

       institutional arrangement.” Id. at 464. Ussery argued that his court-ordered

       support for his ex-wife should be excluded from his income when determining

       his liability. Because neither federal nor state regulations contained an

       exemption for such support payments, the court rejected Ussery’s contention

       and held that the Kansas Medicaid agency’s calculation, which included his

       support payment, was part of Ussery’s available income. Id. at 466–67.


[39]   A similar conclusion was reached in Tarin v. Commissioner of the Division of

       Medical Assistance, 678 N.E.2d 146 (Mass. 1997). The state Medicaid agency

       determined that Tarin’s court-ordered child support payments should be

       included in his available income when determining his patient liability. On

       appeal, the court affirmed the agency’s determination, noting that the

       regulations concerning income exemptions for Medicaid recipients do not

       provide for any exemption for child support payments when the recipient is not

       living with a spouse. 678 N.E.2d at 151. The court concluded that the HHS

       Secretary “has made it clear that income ‘available’ to a divorced Medicaid

       recipient may include income used to make court-ordered child support

       payments.” Id. The court also noted that:


               Three United States Circuit Courts of Appeals that have
               considered the matter all have upheld the disallowance of
               deductions for court-ordered child support payments for a
               Medicaid income availability determination. See Himes v. Shalala,
               [999 F.2d 684, 690–691 (2d Cir.1993)] (inclusion of child support
               payments in “available” income is “reasonable attempt to
               interpret and apply all sections of the statute”; Secretary's

       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019         Page 23 of 29
                interpretation “is not at odds with the plain meaning of the
                statute, is reasonable, and should therefore be accorded the usual
                deference”); Peura v. Mala, 977 F.2d 484, 491 (9th Cir. 1992)
                (“high degree of deference” is owed to Secretary's
                determination); Emerson v. Steffen, [959 F.2d 119, 123 (8th Cir.
                1992)] (“[a]lthough not directly defining the term ‘available,’ the
                regulations make it plain that . . . states do not have to exclude
                [child support] payments from income when determining
                Medicaid eligibility . . . .”).


       Tarin, 678 N.E.2d at 152.9


[40]   Patterson relies heavily on Mulder v. South Dakota Department of Social Services.,

       675 N.W.2d 212 (S.D. 2004). In Mulder, the South Dakota Medicaid agency

       determined that Mulder was eligible for Medicaid, but when determining his

       liability for his care, the agency did not exclude from his monthly income $180

       that was withdrawn to pay his alimony obligation. Mulder appealed, and a

       three-justice majority of the South Dakota Supreme Court agreed with him that




       9
        Patterson argues that the cases cited by the Tarin court, and by the FSSA in the present case, dealt with
       determining income for the purposes of Medicaid eligibility only, not for post-eligibility patient liability
       purposes. The Tarin court rejected a similar argument, stating:
                We recognize that in both Himes and Emerson the courts were reviewing the Secretary’s
                determination of a recipient’s “available” income for the purpose of establishing only
                eligibility for Medicaid, and not benefit levels, the issue in this case. However, in Peura, the
                plaintiff, like Tarin, challenged a State’s determination of required payments for nursing
                home costs. In upholding the Secretary’s determination, the United States Court of Appeals
                for the Ninth Circuit concluded that it was “of little import” that the Secretary’s
                determination regarding Peura’s child support obligations came “in the context of a post-
                eligibility determination.” Peura, supra at 487 n.4. See Ussery v. Kansas Dep’t of Social &
                Rehabilitation Servs., 258 Kan. 187, 899 P.2d 461 (1995), upholding the inclusion of court-
                ordered spousal support payments in a Medicaid recipient’s “available” income in
                establishing benefit levels.
       678 N.E.2d at 153. As discussed above, we agree with the Tarin court’s reasoning on this matter.

       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019                                 Page 24 of 29
       the alimony should not be included in his income. See id. at 217 (“[T]he

       Department’s determination that Mulder’s alimony payments constitute

       “available income” was not reasonable). We simply disagree with the Mulder

       court and decline to follow it.

[41]   Patterson makes a sound policy argument that the FSSA’s decision leaves him

       in the lurch. That is, even though he qualifies for Medicaid, the FSSA’s

       inclusion of the garnished portion of his income in determining his liability

       means that he is stuck owing the nursing home more money than he has access

       to. This means that either the nursing home must continue to care for him at a

       loss, or he must come up with another source of income, which is unlikely.

       Hopefully, Patterson can find care at a less expensive facility, or at least one

       that is willing to accept that portion of his care that Medicaid is willing to pay

       for.


[42]   Despite the merits of Patterson’s argument, it is not the role of this court to

       determine Medicaid policy. That role belongs to the FSSA and the HHS. The

       only question before us is whether the FSSA’s interpretation of the relevant

       state and federal regulations is reasonable, and we cannot say that the FSSA’s

       interpretation is unreasonable.


                                                   Conclusion

[43]   Because the FSSA is responsible for implementing the cooperative state-federal

       Medicaid system in Indiana, we give its interpretation of these statutes and

       regulations great weight. And since the FSSA’s interpretation is reasonable, our

       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019       Page 25 of 29
       analysis stops there. The trial court’s analysis should have stopped there too.

       We therefore reverse the judgment of the trial court.

[44]   Reversed.


       Bailey, J., concurs with opinion.

       Bradford, J., concurs.




       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019     Page 26 of 29
                                                    IN THE
           COURT OF APPEALS OF INDIANA
       Indiana Family and Social                                  Court of Appeals Case No.
       Services Administration,                                   18A-PL-925

       Appellant-Defendant,

               v.

       Lance Patterson,
       Appellee-Plaintiff.



       Bailey, Judge, concurring.


[45]   I agree that the trial court erred, although I do so reluctantly. “Medicaid is a

       cooperative State and Federal program designed to provide health care to needy

       individuals.” Mulder v. South Dakota Dept. of Social Serv., 675 N.W.2d 212, 214

       (S.D. 2004) (emphasis added). Patterson is, without dispute, a needy individual

       based upon his limited resources and his institutionalized status. Yet, the FSSA

       position would leave him evicted from his care facility or necessitate that the

       facility continuously and substantially subsidize Patterson – something not

       uniformly required of other providers participating in the Medicaid program.

       At the end of the process (whereby eligibility is determined in step one and

       financial liability is calculated in step two), payment allocation is to be made
       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019                    Page 27 of 29
       between government funding and what the impoverished individual can afford

       to pay. There is no onus upon a provider to subsidize the patient beyond the

       provision of services at an already-discounted rate.


[46]   Unearned income, such as Patterson’s disability payments, may include

       garnished sums. 20 C.F.R. § 416.1123(b)(2). Patterson meets eligibility

       requirements even with garnished sums, and step two, the financial liability

       calculation, incorporates the garnished sums as part of Patterson’s income. As

       for Patterson’s ability to pay, however, he simply does not have access to funds

       to satisfy the liability assigned to him. Given the humanitarian purposes of

       Medicaid, I would expect that “received” should be understood with reference

       to what one has with which to pay and not a factual or legal fiction.

       Nevertheless, the establishment of public policy is a legislative function. There

       are certainly competing policies here: we require parents to support their

       children, we do not insist that private enterprise subsidize an individual’s non-

       payment, and we do not abandon desperately ill and destitute individuals

       without care.


[47]   True, Patterson did not pay his child support in full. He should have done so if

       able, given his chronic health conditions. Yet Medicaid is not restricted to

       those who have acted only legally and wisely. It is plain to me that unwise

       choices may lead to or contribute to impoverishment (for example, substance

       abuse, incarceration, or leaving employment). But ultimately, Medicaid

       applicants are not categorically excluded for past lifestyle choices. Nor are they

       uniformly penalized for having dependents. Indeed, familial obligations are

       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019     Page 28 of 29
       taken into account in similar contexts. 42 U.S.C. § 435.725 permits a spousal

       allowance and a family allowance for certain dependent family members living

       in the home.


[48]   I do not condone a voluntary decision not to pay child support. Yet I find it

       ironic that, were Patterson imprisoned for felony non-support, he would be

       provided with the care he desperately needs. In the convergence of

       circumstances present here – total disability requiring institutionalization,

       impoverishment, and a state-enforced action for child support arrearage – there

       is no optimal outcome with equity for all concerned. I understand the trial

       court’s attempt to exercise compassion. However, because the trial court found

       invalidity of agency action where there was none, I concur in the reversal.




       Court of Appeals of Indiana | Opinion 18A-PL-925 | January 17, 2019      Page 29 of 29
