Cook v. Glover, 295 Ga. 495 (2014)

The Georgia Supreme Court granted certiorari to consider whether the Court of Appeals properly interpreted 42 USC § 1396p with respect to whether a Medicaid applicant’s purchase of an annuity was subject to an asset transfer penalty. In this case, the Georgia Department of Human Services, Family and Children Services (“DFCS”) granted appellee Jerry L. Glover’s application for Medicaid benefits but imposed a multi-month asset transfer penalty on him pursuant to § 2339 of DFCS’s Georgia Economic Support Services Manual (the “Eligibility Manual”) due to his refusal to name the State as the remainder beneficiary on an annuity. The Court of Appeals reversed DCH’s decision.

On appeal, the Georgia Supreme Court reversed a Court of Appeals. It held that an annuity does not comply with 42 USC § 1396p(c)(1) if it complies with subsection (F) or (G), but not both.

In reviewing the provisions of the federal Medicaid statute at issue, we disagree with the Court of Appeals’ conclusion that the statutory language is plain and unambiguous and the congressional intent clear. Here, 42 USC § 1396p(c)(1) does not indicate whether subsections (F) and (G) are independent requirements each of which must be satisfied to exempt an annuity from the penalty or, alternatively, if the requirement provided in (F) only applies to an annuity when the annuity fails the exception provided in (G). Nor do we find corresponding language in other provisions of the statute to be especially illuminating. As the statute is silent with respect to the relationship between (F) and (G) and Congress has not otherwise directly addressed the precise question at issue, we find the intended relationship between these provisions to be ambiguous, at best.

Thus, it is necessary for this Court to determine what deference, if any, should be accorded DCH’s decision, and concomitantly, the deference due the CMS statutory interpretation on which DCH’s decision was based. “Where statutory provisions are ambiguous, courts should give great weight to the interpretation adopted by the administrative agency charged with enforcing the statute.” Schrenko v. DeKalb County School Dist., 276 Ga. 786, 791, 582 S.E.2d 109 (2003). As the Georgia legislature has charged DCH with developing and implementing the policies necessary to meet Medicaid requirements, we will defer to that agency’s interpretation so long as it comports with legislative intent and is reasonable. See Center for a Sustainable Coast v. Coastal Marshlands Protection Committee, 284 Ga. 736, 741, 670 S.E.2d 429 (2008); Georgia Real Estate Commission v. Accelerated Courses in Real Estate, Inc., 234 Ga. 30, 32-33, 214 S.E.2d 495 (1975). See also Georgia Dept. of Community Health v. Medders, 292 Ga. App. 439, 664 S.E.2d 832 (2008) (in case involving Medicaid claimant’s appeal of DCH decision imposing transfer of asset penalty, Court of Appeals determined it was required to defer to the agency’s reasonable conclusion that, under applicable Medicaid regulations, a renounced inheritance constituted the disposal of an asset). Moreover, the level of deference this Court gives state administrative agency decisions interpreting ambiguous statutes is in accord with that identified by the United States Supreme Court in Chevron as appropriate for the judicial review of a federal administrative agency’s statutory interpretation. See Chevron, supra at 844 (when reviewing an agency’s construction of a statute it administers, the court must give effect to the unambiguously expressed intent of congress; however, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute). Although not directly confronted with a challenge to the validity of CMS’s interpretation of the relevant statutory provisions in this case, we nonetheless will consider the reasonableness of CMS’s interpretation as adopted by DCH and incorporated in DCH’s policy § 2339. Given that the deference Georgia courts accord state administrative agency interpretations is comparable to Chevron-style deference, we find no reason to accord a lesser level of deference to DCH’s interpretation

The Georgia Supreme Court found “based on our review of the statutory provisions, we find DCH’s interpretation of § 2339, which is consistent with CMS’s interpretation of the statute, to be reasonable and entitled to deference. Accordingly, we hold the Court of Appeals erred in finding the language of 42 USC § 1396p(c)(1) to be plain and unambiguous and erred in failing to defer to DCH’s decision upholding the transfer of asset penalty in this case.” Thus, an annuity must comply with both subsections or the asset transfer penalty rules apply.

The end result is that a long-term annuity is a poor planning tool. Instead, annuities payable to a Community Spouse should pay out all principal and income as rapidly as possible to avoid having any remainder paid the the State.

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