Appeals court rules for FSSA in health care transfer penalty dispute

Rulings on motions to dismiss a lawsuit brought by the Indiana Family and Social Services Administration and other entities against a now-deceased woman in a transfer penalty dispute were partially reversed Thursday by the Indiana Court of Appeals.

Several years before entering a nursing home, Bonnie Anderson executed a family contract for home healthcare authorizing reimbursement for family members who provided her with care.

After she transitioned to a nursing home, the Anderson Family Supplemental Needs Trust was established for Anderson’s benefit and was funded by her farm property. The trust was an irrevocable trust and was to preserve any governmental assistance Anderson was currently receiving or for which she may have been eligible.

Following her death, the Indiana Family and Social Services Administration sent notice that a transfer penalty was being imposed upon Anderson’s Medicaid benefits from Feb. 1, 2016 through March 27, 2019 on the basis that property had been transferred for the purpose of rendering her eligible for benefits. But an administrative law judge later reversed the imposition of the transfer penalty.

Anderson’s attorney demanded $80,000 of reimbursement that the trust had been forced to pay to the nursing home because the FSSA incorrectly considered the trust as an available resource of Anderson’s, and the FSSA eventually withdrew its request for agency review of the ALJ’s decision.

Then Anderson’s counsel filed a petition for judicial review challenging the ALJ’s decision and complaint seeking damages under 42 U.S.C. § 1983, and the trial court subsequently denied the FSSA’s motion to dismiss.

In an interlocutory appeal, FSSA first contended that their motion to dismiss should have been granted because Anderson lacked standing to seek judicial review of the ALJ’s decision.

But the Indiana Court of Appeals found the trial court did not err in denying the motion to dismiss on those grounds, concluding that Anderson hardly received complete relief despite the ALJ’s reversal of the imposition of the transfer penalty.

“The ALJ’s decision, however, omitted any determination or direction to the FSSA regarding treatment of the property and the trust such that the FSSA ‘included the trust estate of the Anderson Family Supplemental Needs Trust as available resources of [Anderson] to determine . . . [t]hat [Anderson]’s resources exceed acceptable limits,’” Senior Judge Ezra Friedlander wrote for the appellate court.

Neither did Anderson fail to exhaust her administrative remedies, the appellate court concluded in Indiana Family & Social Services Administration, et al. v. Bonnie K Anderson, et al., 19A-PL-03039.

“It is unclear why the agency did not address Anderson’s submission, but once it issued the dismissal and stated it would take no further action, Anderson had exhausted her administrative remedies. The trial court did not err by denying the Appellants’ motion to dismiss on this basis,” it wrote.

However, the appellate court found it was error for the trial court to deny the Appellants’ motion to dismiss Anderson’s complaint for damages setting out a § 1983 action because “such action may not be maintained against the FSSA, the Bartholomew County Division of Family Resources, or (FSSA Secretary Jennifer) Walthall in her official capacity.”

The appellate court therefore affirmed in part and reversed in part.