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Texas Health and Human Services v. Marroney

Court of Appeals of Texas, Third District, Austin

May 24, 2019

Texas Health and Human Services Commission, Appellant
Anna Marroney, Appellee


          Before Justices Goodwin, Baker, and Smith



         This is a suit for judicial review of the Health and Human Services Commission's denial of a claim for Medicaid benefits filed on behalf of Anna Marroney following her debilitating stroke. The district court reversed the denial order and remanded Marroney's application for reconsideration by the Commission, which timely perfected this appeal. We will affirm.


         The relevant facts are largely undisputed. In July of 2015, Marroney was admitted to inpatient rehabilitative care at Mansfield Plaza after suffering a stroke. Her treating physician has described Marroney as "totally incapacitated and incompetent" and as lacking the ability to manage her affairs from the date of her admission to Mansfield Plaza through December 1, 2016, the only dates at issue in this appeal.

         A representative for Marroney filed the first application for Medicaid benefits in October of 2015, seeking coverage for the rehabilitative care Mansfield Plaza had provided and would continue to provide Marroney. To qualify for benefits, Marroney would have to show that her financial resources did not exceed $2, 000. See 1 Tex. Admin. Code § 358.321 (Tex. Health & Human Servs. Comm'n, General Treatment of Resources) (incorporating eligibility criteria set forth in 20 C.F.R. § 416.1205). After concluding that the cash value of Marroney's life insurance policies exceeded that amount, [1] the Commission denied the application. Marroney's representative requested a fair hearing-an appeal before one of the Commission's hearing officers-arguing that these assets should not be deemed "resources" given Marroney's incapacitated state and the fact that no one else could liquidate the insurance policies. The hearing officer ordered an accounting and ultimately denied the appeal in November of 2016, explaining that the assets would be classified as "resources" for eligibility purposes until a court found Marroney incompetent and appointed a representative to manage her finances.

         Meanwhile, Marroney's representative had petitioned a probate court to appoint a guardian over Marroney's person in May of 2016. The court appointed an attorney to assist Marroney. As the parties describe it, there was some ensuing confusion due to recent changes to the laws governing guardianship. See generally Act of May 29, 2015, 84th Leg., R.S., ch. 214, §§ 1-23, 2015 Tex. Gen. Laws 1291, 1291-1302 (codified in scattered sections of Estates Code). The revised law, effective beginning September 1, 2015, requires an attorney or guardian ad litem to explore "all alternatives to guardianship" upon the filing of a petition. See Tex. Est. Code §§ 1054.001 (requiring appointment of attorney ad litem); .004 (outlining duties of attorney ad litem); .051 (allowing appointment of guardian ad litem); .151 (requiring court-appointed investigation of alternatives to guardianship). The court may only grant the petition if clear and convincing evidence reveals that alternatives were explored and deemed not feasible. See id. § 1054.101. The court appointed a guardian ad litem in August to research alternatives.

         In November, shortly after the Medicaid hearing officer's ruling and with the petition for guardianship over the person still pending, the representative filed a petition for temporary guardianship over Marroney's estate. See id. § 1101.101(a)(2) (setting forth certain findings as prerequisites to appointment of guardian). Upon review of the guardian ad litem's conclusions, the probate court granted the petition for temporary guardianship of the estate. The court's order found that all statutory prerequisites to appointment were satisfied and that Marroney was incapacitated. The temporary guardian of the estate then liquidated the life insurance policies and used the resulting sum to pay Marroney's outstanding financial obligations. She subsequently filed a final accounting reflecting the exhaustion of all assets by November 30.

         With Marroney's assets now exhausted, and on the request of Marroney's representative, the Commission reopened the application for benefits and held a second fair hearing on January 4, 2017. The hearing officer determined that Marroney became eligible for benefits on December 1, 2016, but the officer sustained earlier determinations regarding her eligibility prior to that date. A motion for rehearing was denied by operation of law.

         Marroney timely filed suit for judicial review of the Commission's order under Section 2001.171 of the Administrative Procedure Act (APA). See Tex. Gov't Code § 2001.171 (providing cause of action to aggrieved persons where all administrative remedies are exhausted). Her representative argued that the order was unsupported by substantial evidence in that Marroney was incapacitated as of July 21, 2015, had no access to any financial resources thereafter, and should have been deemed eligible for benefits when the first application was filed in October of 2015. She argued in the alternative that the Commission had violated the Americans with Disabilities Act, 42 U.S.C. § 12132, by denying the requested benefits. The district court reversed the agency's order and remanded to the Commission for further proceedings without providing any specific basis for the reversal. Neither party requested findings of fact or conclusions of law.


         Congress implemented Medicaid to assist states in providing financial assistance to certain individuals "whose income and resources are insufficient to meet the costs of necessary medical services." Id. § 1396-1. Although most funding is provided by the federal government, each participating state "is responsible for determining eligibility for all individuals applying for or receiving benefits . . . and for [conducting] fair hearings" regarding any dispute over benefits. 42 C.F.R. § 431.10(b)(3). The Texas Legislature delegated that responsibility to the Commissioner of Health and Human Services, who promulgated rules adopting certain Social Security criteria to determine eligibility for Medicaid benefits. See Tex. Hum. Res. Code § 32.04242 (requiring Commissioner to adopt eligibility and reimbursement rules); 1 Tex. Admin. Code § 358.321 (Tex. Health & Human Servs. Comm'n, General Treatment of Resources) (incorporating eligibility criteria set forth in 20 C.F.R. § 416.1205).

         As relevant here, an applicant "is eligible for benefits . . . if his or her nonexcludable resources do not exceed [$2, 000.00] and all other eligibility requirements are met." See 20 C.F.R. § 416.1205. A resource is "cash or other liquid assets or any real or personal property that an individual (or spouse, if any) owns and could convert to cash to be used for his or her support and maintenance." Id. § 416.1201(a); see also 1 Tex. Admin. Code § 358.321 (Tex. Health & Human Servs. Comm'n, Ownership Interest and Legal Right to Access a Resource) (incorporating 20 C.F.R. § 416.1201(a)). An asset is included in the eligibility calculation "[i]f the individual has the right, authority[, ] or power to liquidate the property or his or her share of the property." 20 C.F.R. § 416.1201(a)(1). "If a property right cannot be liquidated, the property will not be considered a resource of the individual (or spouse)." Id. "If a person's countable resources exceed the resource limit as of ...

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