South Carolina              
Administrative Law Court
Edgar A. Brown building 1205 Pendleton St., Suite 224 Columbia, SC 29201 Voice: (803) 734-0550

SC Administrative Law Court Decisions

CAPTION:
Allen Corbett vs. SCDHHS

AGENCY:
South Carolina Department of Health and Human Services

PARTIES:
Appellant:
Allen Corbett

Respondents:
South Carolina Department of Health and Human Services
 
DOCKET NUMBER:
07-ALJ-08-0278-AP

APPEARANCES:
For the Appellant:
Patricia L. Harrison, Esquire

For the Respondent:
George R. Burnett, Esquire
 

ORDERS:

ORDER

STATEMENT OF THE CASE

The above-captioned matter is before the Administrative Law Court (“ALC” or “Court”) as an appeal pursuant to S.C. Code Ann. §§ 44-6-190 (2002) and 1-23-600(D) and (E) (as amended 2008).[1] Allen Corbett (“Appellant” or “Corbett”) challenges the final administrative decision (the “Decision”) by the South Carolina Department of Health and Human Services (“HHS” or “Department”).

In its Decision, the Department determined that certain expenditures from Appellant’s Income Trust (“Income Trust”) were not allowable under the State of South Carolina’s VENT Waiver program of Medicaid (“Waiver Program”).[2] Also, it ordered that the Trustee of Appellant’s Income Trust had to be replaced because the Trustee failed to make monthly payments towards the Cost of Care for services Appellant received under the Waiver Program. The Department further ordered that if the Trustee was not removed, Medicaid benefits paid to Appellant would be terminated.

Appellant challenges the Decision on the grounds that it was arbitrary, capricious, and erroneous as a matter of federal and state law. In response, the Department contends that under federal and state law, Appellant – as an Income Trust Beneficiary – is required to make monthly contributions to his Cost of Care if he retains any income after mandatory deductions from his countable income. Further, it contends that because Appellant failed to make these contributions to the state his Medicaid benefits should be terminated.

After timely notice to the parties, oral arguments were held on November 19, 2007 at the Court in Columbia, South Carolina. Based upon the record, the parties’ briefs and their oral arguments, as well as applicable law, I conclude that: (1) pursuant to the law of the State of South Carolina, the Trustee of the Income Trust may not be removed by the Department; (2) the Trustee is reinstated to perform his duties as Trustee for the Income Trust; and (3) all other findings in the Decision are affirmed, including the requirement that Appellant must make monthly contributions towards his Cost of Care.

BACKGROUND

Factual Background

Appellant became paralyzed and wheelchair-dependent at the age of ten when he contracted polio. Notwithstanding his disability, Appellant obtained a formal education and worked as a full-time professor at the University of South Carolina’s Darla Moore School of Business (“USC”). On August 2, 2003, he was involved in an automobile accident which resulted in his hospitalization for approximately six months. While hospitalized, Appellant suffered several complications, went into respiratory failure, and was placed on a ventilator for twenty-four hours daily. Also, Appellant developed several serious conditions during his hospitalization, including bed sores and the loss of use in his left hand. He received rehabilitation treatment for the disability to his left hand at the Charlotte Rehabilitation Institute. Presently, Appellant receives occupational therapy to maintain function in his left hand and requires the use of a ventilator eight or more hours each day.

When Appellant was released from the hospital, his wife (“Mrs. Corbett”) substantially reduced her hours of work (as a dietician at Providence Hospital in Columbia, South Carolina) so she could provide care for him in their home. However, Mrs. Corbett was subsequently diagnosed with cancer and this condition, made more difficult with treatment, has significantly diminished her ability to provide care for her husband. The care which has been provided to Appellant by his wife and various attendants, together with medical treatment and rehabilitation, has enabled him to continue his teaching at USC, albeit in a more limited manner.

Procedural Background

Appellant initially formed a Special Needs Trust to establish eligibility under the Waiver Program of Medicaid. However, Appellant turned 65 on April 17, 2004, and a Special Needs Trust only applies to disabled individuals under the age of 65. As a result, Appellant executed an Income Trust agreement on November 3, 2004, to maintain eligibility under the Waiver Program. Under the Waiver Program, income trust beneficiaries are allowed to retain certain funds from their countable income and any remaining income must be paid to the Department to be put towards the individuals’ Cost of Care for receiving those services under Medicaid.

On May 15, 2005 and June 15, 2006, the Department sent to the Appellant two letters which stated that he would be responsible for the payment of approximately $3,000.00 each month towards his Cost of Care.[3] In the June letter, the Department stated that if the payments for his Cost of Care were not paid, the Trustee would be replaced. Further, the letter stated that if either requirement was not complied with, the services provided to Appellant under the Waiver Program would no longer be provided to him.

After receipt of the letters, Mrs. Corbett made partial payments to the Department. Also, on July 15, 2006, she wrote a letter on behalf of Appellant to the Department in which she requested a fair hearing. In addition, Mrs. Corbett contacted Mrs. Donna Day, a supervisor with the Department, and expressed concerns about the June 16, 2006 letter. Thereafter, the Department reviewed Appellant’s file, determined that proper advance notice of the applicable monthly billing statements had not been provided to Appellant, and it waived all past due amounts. In August 2006, the Department began billing Appellant the sum of $3,343.28 each month.

An administrative hearing (“hearing”) was held by the Department’s employee, James S. Guignard (“Hearing Officer”), on October 17, 2006. Based upon the documentary evidence and testimony presented at the hearing, the Hearing Officer recessed the hearing and asked Department staff to determine if any of the additional documentation submitted during the hearing or Appellant’s diminished income would change Appellant’s Cost of Care determination. Also, he asked the staff to determine whether certain expenditures that were previously excluded should be covered by Medicaid. On January 23, 2007, the Hearing Officer resumed the hearing.

On May 4, 2007, the Hearing Officer issued the Decision and outlined each expenditure and disbursement the Trustee made on behalf of the Appellant. Further, he concluded that the Appellant had failed to produce evidence of any mistake of law or fact on the part of the Department. In addition, the Hearing Officer concluded that the Department’s application of the State’s Medicaid law, “which is formatted under and in conformity with Federal law,” has neither caused hardship nor discriminated against Appellant. (R. at 16).

On June 15, 2007, Appellant filed a Notice of Appeal with the Court, challenging the Department’s Decision.

STANDARD OF REVIEW

This Court’s appellate review of final decisions of the Department is governed by standards provided in S.C. Code Ann. § 1-23-380 (Act No. 334 of 2008, § 5 (effective June 16, 2008). Section 1-23-380 provides that this Court “may not substitute its judgment for the judgment of the [Respondent] as to the weight of the evidence on questions of fact.” § 1-23-380(5). However, this Court, pursuant to § 1-23-380(5),

may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions or decisions are:

(a) in violation of constitutional or statutory provisions;

(b) in excess of the statutory authority of the [Respondent];

(c) made upon unlawful procedure;

(d) affected by other error of law;

(e) clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or

(f) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.

Id.; see also Lark v. Bi-Lo, Inc., 276 S.C. 130, 276 S.E.2d 304 (1981) (stating “‘[s]ubstantial evidence’ is not a mere scintilla of evidence nor the evidence viewed blindly from one side of the case, but is evidence which, considering the Record as a whole, would allow reasonable minds to reach the conclusion that the administrative agency reached or must have reached in order to justify its action.” Id. at 135, 276 S.E.2d at 306. “The findings of the agency are presumed correct and will be set aside only if unsupported by substantial evidence.” Hull v. Spartanburg County Assessor, 372 S.C. 420, 424, 341 S.E.2d 909, 911 (Ct. App. 2007) (citing Kearse v. State Health and Human Servs. Fin. Comm'n, 318 S.C. 198, 200, 456 S.E.2d 892, 893 (1995). Accordingly, “[t]he ‘possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency’s finding from being supported by substantial evidence.’” Grant v. S.C. Coastal Council, 319 S.C. 348, 461 S.E.2d 388 (1995) (citing Palmetto Alliance, Inc. v. S.C. Pub. Serv. Comm., 282 S.C. 430, 432, 319 S.E.2d 695, 696 (1984)).

Further, an abuse of discretion occurs when an administrative agency’s ruling is based upon an error of law, such as application of the wrong legal principle; or, when based upon factual conclusions, the ruling is without evidentiary support; or, when the trial court is vested with discretion, but the ruling reveals no discretion was exercised; or, when the ruling does not fall within the range of permissible decisions applicable in a particular case, such that it may be deemed arbitrary and capricious. State v. Allen, 370 S.C. 88, 94, 634 S.E.2d 653, 656 (2006) (application of standard to circuit court) (citing Fontaine v. Peitz, 291 S.C. 536, 539, 354 S.E.2d 565, 566 (1987); see also Converse Power Corp, 350 S.C. 39, 47 564 S.E.2d 341, 345 (Ct. App. 2002) (quoting Deese v. State Bd. of Dentistry, 286 S.C. 182, 184-85, 332 S.E.2d 539, 541 (Ct. App. 1985) (“A decision is arbitrary if it is without a rational basis, is based alone on one's will and not upon any course of reasoning and exercise of judgment, is made at pleasure, without adequate determining principles, or is governed by no fixed rules or standards.”).

DISCUSSION

On this appeal, Appellant raises the following issues:

1. Did the Hearing Officer err as a matter of law in counting the payments made by the Trustee for medical expenses as “income”?

2. Did the Hearing Officer err as a matter of law in failing to deduct other allowable deductions?

3. Did the Hearing Officer err as a matter of law in refusing to allow deductions for income taxes and was his decision arbitrary and capricious?

4. Is the State prohibited from applying the post-eligibility rules to Mr. Corbett?

5. Are the deductions from income which are approved by the State, based on a reasonable assessment of need or are they arbitrary and capricious?

6. Does the Hearing Officer or the Department have the authority to remove a trustee?

7. Did the Hearing Officer exceed his constitutional authority by violating Appellant’s constitutional due process rights and the Supremacy Clause?

8. Is the decision of the Hearing Officer clearly erroneous in view of the reliable, probative and substantial evidence on the whole record?

Appellant raises a number of grounds on appeal which can generally be resolved into four broad categories: (1) whether the Department violated Appellant’s due process rights; (2) whether the Department erred in “counting” Appellant’s income in the post-eligibility rules; (3) whether the Department erred in its finding that the majority of Appellant’s expenditures/disbursements from

the Income Trust were not allowable under the Waiver Program; and, (4) whether the Department erred in removing the Trustee of the Income Trust based upon the expenditures and disbursements.

Medicaid (or the Medicaid Program) is a voluntary, federal-state program whereby the federal government provides financial assistance to participating states for medical assistance to needy individuals. 42 U.S.C. § 1396a; Doe v. Kidd, 501 F.3d 348, 351 (4th Cir. 2007); Pee Dee Health Care, P.A. v. Sanford, 509 F.3d 204, 206-7 (4th Cir. 2007). The federal agency responsible for administering the Medicaid program is the Centers for Medicare & Medicaid Services, Department of Health and Human Services (“CMS”). Participation by a state in the Medicaid program is not mandatory; however, if a state elects to participate in the program, it must comply with all federal Medicaid laws and regulations. Doe, 501 F.3d at 351; see also Antrican v. Odom, 290 F.3d 178 (4th Cir. 2002), cert. denied Odom v. Antrican, 537 U.S. 973, 123 S.Ct. 467 (2002) (“Although North Carolina may retain a special sovereignty interest in choosing whether to participate in the Medicaid program, once it elects to participate, it is not entitled to assert that interest to insulate itself from the requirements of the federal program.”). The agency given the responsibility to administer and supervise all Medicaid programs in South Carolina is the Department. S.C. Code Ann. § 44-6-30(1); Doe, 501 F.3d at 351. In order for the State of South Carolina to qualify as a Medicaid provider under this program, the Department must submit a plan to the CMS. The plan must describe the nature and scope of this state’s Medicaid program and it must provide assurance that it will be administered in conformity with federal laws and other applicable official issuances of CMS. 42 C.F.R. § 430.10; Pee Dee Health Care, P.A., 509 F.3d at 207.

Medicaid’s Waiver Program was created under 42 U.S.C. §1396n(c). This program allows a state to provide Medicaid services to individuals in their home or community rather than requiring them to receive those services in an institution. See Doe, 501 F.3d at 351 citing Bryson v. Shumway, 308 F.3d 79, 82 (1st Cir. 2002) (“[The program] allow[s] states to experiment with methods of care, or to provide care on a targeted basis, without adhering to the strict mandates of the Medicaid system.”). Further, the state must certify to CMS that the average per-person cost of care offered through the Waiver Program does not exceed the average cost of providing that care in an institutional setting. 42 U.S.C. § 1396n (c)(2)(D); 42 C.F.R. § 441.302(e). Services provided under the Waiver Program must comply with federal Medicaid law. See Antrican, 290 F.3d 178 (4th Cir. 2002).

South Carolina’s Waiver Program plan was submitted to CMS and was accepted as set forth in the “State Medicaid Manual” (“SMM” or the “Manual”). The Manual outlines the agreement between CMS and the State of South Carolina for the services which will be provided to qualified persons through the waiver – among other services – under the Home and Community Based Services.

Due Process Considerations

I. Promulgation of Regulations

First, Appellant asserts that the Manual contains policies (“Policies”) which the Department uses to determine whether an individual is entitled to services under federal Medicaid law. Further, he asserts that since these Policies are determinative of eligibility by disabled persons for medical assistance and care under the Waiver Program, they must be promulgated as regulations in this state; otherwise, Appellant argues they do not have the force and effect of law. Thus, Appellant maintains that these Policies, as enumerated in the Manual, are not binding and cites S.C. Code Ann. § 1-23-10(4) in support of his position:

‘Regulation’ means each agency statement of general public applicability that implements or prescribes law or policy or practice requirements of any agency. Policy or guidance issued by an agency other than in a regulation does not have the force or effect of law. . . .

Id. In response, the Department asserts that CMS approved this State’s Medicaid Plan on October 1, 2006, and that it is not necessary to promulgate regulations concerning the Waiver Program as provided for in the plan.[4]

S.C. Code Ann. § 1-23-10(1) defines “agency” or “state agency” as meaning “each state board, commission, department, executive department or officer, other than the legislature, the courts . . . authorized by law to make regulations or to determine contested cases.” § 1-23-10(1) (emphasis added). HHS is defined as a “department” in S.C. Code Ann. § 44-6-5(1) (Supp. 2007). Furthermore, it is authorized by statute to “[f]ormulate for consideration and promulgation criteria, standards, and procedures that ensure assigned programs are administered effectively, equitably, and economically and in accordance with statewide policies and priorities.” S.C. Code Ann. § 44-6-40 (emphasis added). This agency is subject to the State’s rule-making process contained in the APA. See §§ 1-23-10 through 1-23-160. The APA requires the Department to implement its policy statements in regulations which are promulgated for review and comment by the public and for review by our General Assembly.

In this matter, CMS’s approval of the State’s Medicaid Plan or Manual does not make it a binding document.[5] In order for a policy manual to create a “binding” rule it must be promulgated as a regulation.[6] Home Health Serv., Inc. v. S.C. Tax Comm’n, 312 S.C. 328, 440 S.E.2d 375 (1994). “[W]hether an agency’s action or statement amounts to a rule – which must be formally enacted as a regulation – or a general policy statement – which does not have to be enacted as a regulation – depends on whether the action or statement establishes a ‘binding norm.’” Sloan v. S.C. Bd. of Physical Therapy Exam’rs, 370 S.C. 452, 636 S.E.2d 598 (2006). In determining whether a policy statement establishes a “binding norm,” an important consideration is the extent to which the challenged policy leaves the agency free to exercise its discretion to follow or not follow the policy at issue in a particular situation. Home Health Serv. Inc. v. S.C. Tax Comm’n, 312 S.C. 324, 328, 440 S.E.2d 375, 378 (1994). If the policy at issue “so fills out the statutory scheme” that the agency will only look to whether the policy’s criteria are met in taking action or rendering a decision, the policy will be considered a “rule” or “regulation.” Id. As long as the agency remains free to consider the individual facts in taking action or rendering a decision, the policy at issue will not be considered a “binding norm.” Id. Thus, to determine whether a policy or guideline establishes a “binding norm,” courts look to the actions of the agency, not to the labels given by the agency.

The Manual has never been promulgated as a regulation yet the Department clearly treats it as a binding document. Because the Manual has not been promulgated as a regulation, it is not binding.[7] Notwithstanding, the Department is the agency in South Carolina that the General Assembly has granted the sole authority to ultimately resolve issues concerning the provisions of the Medicaid services at issue in this case. As such, the Department’s interpretation of Medicaid law and regulations is entitled to due respect and consideration. However, that respect and consideration is limited.[8] Accordingly, based upon applicable law, I conclude that the Manual is not a “binding” document and does not have the force and effect of law. Notwithstanding, the Court gives due respect and consideration to the Department’s interpretation of the applicable federal Medicaid law and finds that it is not contrary to any statute or regulation in this state.[9]

II. Length of Appeal Process

Secondly, Appellant argues that his due process rights were violated because the Department did not issue a final agency determination within the time constraints set forth in 42 C.F.R. § 431.244 (f)(1). In reply, the Department asserts that it issued its decision within a reasonable time. Further, the Department asserts that if the Court determines that the length of time it took to decide Appellant’s appeal was unreasonable, it must consider those actions by Appellant that contributed to the delay.

42 C.F.R. § 431.244(f)(1) does not mandate that the agency that conducts a fair hearing must issue the decision within ninety (90) days. Rather, it states that “ordinarily” the agency must take final administrative action within ninety days from the date the Appellant first files a request for a hearing. § 431.244 (f)(1) (emphasis added). This section simply gives a general guideline to the agency that hears these matters. Moreover, even if the Department violated the timeframe contained in § 431.244, Appellant has not shown that he was prejudiced by such failure. Appellant’s assertion is that “he has been forced to remain in a state of uncertainty for more than a year” due to the appeal. However, the record shows that his actions contributed to the Department’s delay in reaching a final determination.

On July 28, 2006, Appellant completed and submitted Form 3260 ME, Request for Fair Hearing for Medicaid Applicant/Beneficiary. By letter dated August 10, 2006, the Hearing Officer informed Appellant that a fair hearing was scheduled for August 30, 2006 and that the hearing was being scheduled with less than thirty days notice “in an effort to move [his] case along.” However, Appellant’s wife gave notice to the Hearing Officer on August 12, 2006 that this date was not acceptable and requested a date with at least thirty days notice. Thereafter, the hearing was rescheduled for October 17, 2006.

Appellant presented additional information during the hearing concerning his expenditures and disbursements from the Trust. Because this information had not been provided to the Department prior to the hearing, the Hearing Officer recessed the Hearing so Department staff could review the documentation. On January 23, 2007, the Hearing was resumed by the Hearing Officer after the Department had utilized the information provided by Appellant to recalculate the figures involved. On May 4, 2007, slightly more than three months after the conclusion of the final hearing, the Hearing Officer issued a final order.

Appellant cites Doe v. Kidd, 501 F.3d 348 (4th Cir. 2007) in support of his argument that the Department failed to timely issue a final order. In Doe, the Fourth Circuit Court of Appeals held that an individual may pursue an action against an agency pursuant to the provisions of 42 U.S.C. § 1983 if it fails to comply with the reasonable promptness provision of the Medicaid Act. Doe, 501 F.3d at 357. However, the Court of Appeals neither held that the agency violated the involved statute nor did it define the term “reasonable promptness.” See generally, Doe; 42 C.F.R. § 431.244(f)(1). Rather, the Court of Appeals simply held that an individual may pursue an action against the agency for a violation of § 431.244(f)(1).

Here, as referenced earlier, the Department and its Hearing Officer were presented with novel issues and massive amounts of documents pertaining to Appellant’s case. Both took the issues and documents under advisement to ensure that a fair and correct determination was reached in the matter. Given the complexity of matters involved in this case and the extraordinary amount of documents presented for review and consideration, the Court finds that the length of time the Hearing Officer took to conduct the hearing and issue a final decision in this matter was reasonable.

Post-Eligibility Treatment of Income

Thirdly, Appellant contends that the Department improperly considered income in his Trust as being available to him. To support his contention, he cites 42 U.S.C. § 1396p(d)(4)(B). In response, the Department asserts that it was proper to consider this income in determining the entire amount available to him as the Manual states that income placed in an Income Trust (also referred to as a Miller Trust) is subject to “post-eligibility rules.” The Manual defines the post-eligibility treatment of income, either included or not included in the Income Trust, at Section 3259.7 (C)(5). It reads:

Post-eligibility Treatment of Income. – All of the post-eligibility treatment of income rules in 42 CFR 435.725, 733, 735, and 832, as well as § 1924 of the Act, apply in cases involving Miller trusts, as follows.

a. Income Not Placed in a Miller Trust. – Income retained by the individual (i.e., not placed in a Miller trust) is income to the individual, according to SSI policy. Thus, such income is subject to the post-eligibility rules.

b. Income Placed in a Miller Trust. – Income placed in a Miller trust is income for SSI purposes although it is not counted as available in determining Medicaid eligibility. Thus, such income is also subject to the post-eligibility rules.

(emphasis in original).

Appellant misinterprets the language of 42 U.S.C. § 1396p(d)(4)(B). Income placed in an Income Trust is not considered “available” to him for determining his Medicaid eligibility; however, the income is considered income available to him for Supplemental Security Income (“SSI”) purposes. In his brief, Appellant cites a memorandum dated March 17, 1994 and a supplement to the memorandum dated May 25, 1994 to support his contention that the Department erred in considering income placed in his Trust as available to him. Appellant did not provide a copy of the memorandum and supplement (in its entirety) to the Court. It is unclear who authored the memorandum and supplement or for what reason they were issued: therefore, the Court ascribes no validity to this assertion.

In the alternative, Appellant asserts that if the post-eligibility rules are applicable, 42 C.F.R. § 435.726 does “not give the State absolute discretion in establishing limitations on medical and remedial care. The federal government only requires that the State set ‘reasonable limits.’” Appellant opines that the limits imposed by the Department are “patently unreasonable.” 42 C.F.R. 435.726 (c)(4) provides that a state may establish “reasonable limits” on the deductions allowed to an individual under the Medicaid program for medical or remedial care that is not subject to payment by a third party such as Medicare or other health insurance. Id. (emphasis added). In other words, the Department may place a cap on any deductions given to an individual participating in Medicare for medical care he or she received, if that individual’s supplemental health insurance does not cover the medical care. Further, these deductions must be allowed under state law but not covered under the state’s Medicaid plan. Id. The Department submitted its proposed reasonable limits to CMS, and CMS approved the proposal on October 1, 2006. The proposal is located at Attachment 2.6-A, Supplement 3 to the Manual. Although the Department has not promulgated the Manual as a regulation, this Court does give deference to its interpretation of federal Medicaid law. It seems unlikely that CMS would have approved the Department’s proposal if it had considered it “patently unreasonable,” as suggested by Appellant. The reasonableness of the Department’s proposal is determined by CMS, not by one individual. Accordingly, I affirm the finding of the Department in its Decision regarding this issue.

Income Trust Expenditures and Disbursements

Fourthly, Appellant asserts that the Department erred in its Order by finding that the majority of the disbursements and/or expenditures made by the Trustee from the Income Trust were not allowable under the Waiver Program. Appellant asserts that these expenditures are “medically necessary” and that it will create an “undue burden” on him if they are not provided. In response, the Department opines that these expenditures are neither covered by Medicaid nor by the state’s policy which allows “necessary medical or remedial care.”

Appellant seeks to have the following expenditures deemed permissible under the Waiver Program: personal attendant care, dental care, repairs made to his vehicle, rehabilitation services, legal services, real property and personal income taxes, and other miscellaneous services provided to him. The Department denied these expenditures as either unauthorized by the Waiver Program or because the services were provided by entities or individuals who were not approved under the Waiver Program. Appellant agrees that some, if not all, of the services or expenditures are not expressly authorized by the Waiver Program, or that the services were provided by individuals or entities not approved under the Wavier Program. Notwithstanding, Appellant contends that because of his unique and critical situation, these medically-necessary services should be provided under the “undue burden” provision of the Waiver Program which reads:

When application of the trust provisions discussed [above] would work an undue hardship those provision do not apply. . . . [The undue hardship] policy must be described in your Medicaid State Plan. [The state has] considerable flexibility in implementing an undue hardship provision. However, [the state’s] hardship provision must meet the requirements discussed below.

A. Undue Hardship Defined.—Undue hardship exists when application of the trust provision would deprive the individual of medical care such that his/her health or his/her life would be endangered. Undue hardship also exists when application of the trust provisions would deprive the individual of food, clothing, shelter, or other necessities of life.

(R. at 940).

This Court sits in an appellate capacity when reviewing matters appealed from the Department. It is required by law to affirm the final decision by the Department unless it is clearly erroneous in view of the reliable, probative, or substantial evidence in the record or is affected by an error of law. Byerly Hosp. v. S.C. State Health and Human Services Commission, 319 S.C. 225, 229, 460 S.E.2d 383, 385-86 (1995) (“[Appellate Court] must affirm administrative agency decision if decision is supported by substantial evidence, and Court may not substitute its judgment for that of agency upon questions as to which there is room for difference of intelligent opinion.”); Commissioners of Public Works v. S.C. Dep’t of Health and Envtl. Control, 372 S.C. 351, 358, 641 S.E.2d 763, 766-67 (Ct. App. 2007) (“[Appellate court] may not substitute its judgment for that of an [administrative agency] as to the weight of the evidence on questions of fact unless the [agency’s] findings are clearly erroneous in view of the reliable, probative and substantial evidence in the whole record.”); Smith v. Newberry County Assessor, 350 S.C 572, 577-78, 567 S.E.2d 501, 504 (Ct. App. 2002).

As noted by the Hearing Officer, Appellant has the burden of proof to show that the state’s Medicaid policies, with reference to the Waiver Program, create an undue burden or hardship upon him. S.C. Dep’t of Corrections v. Mitchell, Op. No. 4352 (S.C. Ct. App. filed March 10, 2008) (“[W]hen appealing an agency’s decision, the burden rests squarely on the appellant to prove that substantive rights were prejudiced based on one of six statutory criteria listed [in S.C. Code Ann. § 1-23-380(A)(6)].”) (citing Pressley v. Lancaster County, 343 S.C. 696, 704, 542 S.E.2d 366, 370 (Ct. App. 2001) (“The party challenging a governmental body’s decision bears the burden of proving the decision is arbitrary.”); Waters v. S.C. Land Res. Conservation Comm’n, 321 S.C. 219, 226, 467 S.E.2d 913, 917 (1996) (“The burden is on appellants to prove convincingly that the agency’s decision is unsupported by the evidence.”). The Hearing Officer based his decision upon the witnesses’ testimony and all documents presented during the administrative hearings. In his Decision, he concluded that the Department had deducted all qualifying expenditures from inclusion within Appellant’s countable income. He found that the Department had not placed an undue burden upon Appellant by excluding certain expenditures from his Income Trust Account. The substantial evidence in the record supports the Hearing Officer’s determination, and Appellant has simply not provided any evidence to this Court to show that the Department erred in reaching its Decision.

In addition, the Hearing Officer found that Appellant failed to use the services of providers approved by Medicaid. Rather, he “exercised his freedom of choice” be selecting providers that did not participate in the Waiver Program. See 42 U.S.C. § 1396a(a)(23) (stating that participants of the Medicaid program must seek care from Medicaid providers). The Court is certainly sympathetic to Appellant’s medical and physical conditions; however, the Court is constrained by the record in this matter. Appellant agreed to be bound by the limitations of the Waiver Program when he initiated the application for benefits of the program, and he must seek and use services provided by individuals or entities approved by Medicaid.

Removal of Trustee

Finally, Appellant asserted that neither the Hearing Officer nor the Department has the authority to remove the Trustee of his Trust. Rather, he contends that any action by the Department, which is the remainder beneficiary of his Trust, may be initiated by and determined by the Probate Court in this state. In support of this contention, Appellant cites S.C. Code Ann. § 62-7-201 (Supp. 2007) (“[T]he probate court has exclusive jurisdiction of proceedings initiated by interested parties concerning the internal affairs of trusts.”). The Court notes that the Department did not address this issue in its appellate brief.

In the Decision, the Hearing Officer held that Mrs. Corbett, in her capacity as Trustee of Appellant’s Trust, must be removed as Trustee because she failed to pay Appellant’s Cost of Care and she distributed funds from the Trust for expenses other than those allowed by the Department in its Order. He cited authority for such pursuant to SMM § 304.19.09 Non-Compliance with Terms of the Income Trust and § 304.19.12 Income Trust Dissolution. (R. at 17-18, 155).

As noted earlier herein, because the Manual has not been promulgated as a regulation and as such, it is not a binding document in South Carolina. The provisions of the Manual do not control the administration of trusts in South Carolina. The South Carolina Trust Code, codified at S.C. Code Ann. §§ 62-7-101 et seq., provides that the “probate court has exclusive jurisdiction of proceedings initiated by interested parties concerning the internal affairs of trusts.” § 62-7-201(a). § 62-7-201(a)(4) provides that these proceedings include the appointing or removing of a trustee.[10] The Hearing Officer has authority pursuant to regulation to preside over administrative hearings involving the Department. S. C. Code Ann. § 44-60-90 (Supp. 2007); S.C. Code Reg. 126-154 (Supp. 2007). However, no Hearing Officer with the Department has the authority to remove the trustee of a trust since jurisdiction over matters pertaining to the administration of trusts rests with the probate or circuit courts of the State.[11] In addition, the terms of Appellant’s Income Trust specifically provide that if any administration issues arise concerning the Trustee and his/her duties, “any interested party may, with notice to all beneficiaries, petition the probate court for appointment of a successor trustee.” (R. at 1246). This is the correct procedure to have Mrs. Corbett removed as Trustee and the Department, as a remainder beneficiary of the Trust, may initiate such action before the probate court. Accordingly, the Court finds that the provision in the Decision removing Mrs. Corbett as Trustee of Appellant’s Trust is reversed.

ORDER

For the reasons set forth above,

IT IS HEREBY ORDERED that Respondent’s Decision is AFFIRMED in part, and REVERSED in part.

IT IS FURTHER ORDERED that Mrs. Corbett must be reinstated as Trustee of Appellant’s Income Trust within thirty (30) days from the date of this Order.

AND IT IS SO ORDERED.

______________________________

Marvin F. Kittrell

Chief Judge

July 16, 2008

Columbia, South Carolina



[1] The Administrative Procedures Act (“APA”) was recently amended by R.413, H.3575, 117th Sess. (S.C. 2008); Act No. 334 of 2008, § 7 (effective June 16, 2008).

[2] This program provides assistance to certain qualified individuals reliant upon mechanical ventilation.

[3] During the hearing, Appellant and Mrs. Corbett testified that his income varies substantially from month to month depending upon his teaching contract with USC. Because of a variance in his monthly income, witnesses for the Department testified that the Department had to generate a new Cost of Care amount each time his monthly income changed. As a result, it submitted multiple Cost of Care forms to Appellant with varying amounts due.

[4] CMS transmitted a one page document to the Department which stated that it had approved the State’s Medicaid Plan.

[5] Neither party could direct the Court to any federal regulation or law which provides that an internal transmittal from CMS to the Department approving the State’s Medicaid Plan constitutes sufficient authority to exempt the Department from the requirement to promulgate regulations concerning the administration of standards and procedures relating to services and programs provided under Medicaid.

[6]In order to promulgate a regulation, the APA generally requires a state agency to give notice of a drafting period during which public comments are accepted on a proposed regulation; conduct a public hearing on the proposed regulation overseen by an administrative law judge or an agency’s governing board; possibly prepare reports about the regulation’s impact on the economy, environment, and public health; and submit the regulation to the Legislature for review, modification, and approval or rejection.” Sloan v. S.C. Bd. of Physical Therapy Exam’rs, 370 S.C. 452, 474, 636 S.E.2d 598, 609-610 (2006).

[7] It is incumbent that the Department promulgate regulations when mandated by the General Assembly. Rather than relying upon the courts to consistently adhere to its non-binding interpretations of the statutes, the Department can assure uniform application of its policies simply by promulgating regulations as set forth in Chapter 23 of Title 1.

[8] See Comm’r of Public Works v. S.C. Dep’t of Health and Envtl. Control, 372 S.C. 351, 641 S.E.2d 763, 767 (Ct. App. 2007) (“Generally, ‘the construction of a statute by the agency charged with its administration will be accorded the most respectful consideration and will not be overruled absent compelling reasons.’ Indeed, the courts will typically defer to agency interpretation. We note, however, ‘[t]he primary rule of statutory construction is that the Court must ascertain the intention of the legislature.’ Where the terms of the statute are clear, the court must apply those terms according to their literal meaning, without resort to subtle or forced construction to limit or expand the statute’s operation. Thus, the court will reject the agency’s interpretation where it is specifically contrary to the statute or regulation.”) (citations omitted).

[9] See e.g., S.C. Code Ann. § 1-23-330 (stating that in contested case hearings, an “agency’s experience, technical competence and specialized knowledge may be utilized in the evaluation of the evidence”). § 1-23-330(4).

[10] See also § 62-7-201(c)-(d) (providing that the probate court has concurrent jurisdiction with the circuit courts of the state for certain proceedings involving trusts).

[11] Administrative Law Judges do not have the authority to appoint or remove a trustee, either. See § 62-7-201.


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