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Paczko v. Ohio Department of Job and Family Services

Court of Appeals of Ohio, Eighth District, Cuyahoga

December 14, 2017


         Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-16-868294

          ATTORNEY FOR APPELLANT Richard A. Myers, Jr. Richard A. Myers, Jr. & Associates, L.L.C.

          ATTORNEYS FOR APPELLEE Michael DeWine Ohio Attorney General Rebecca L. Thomas Assistant Attorney General Health and Human Services Section

          BEFORE: Stewart, J., McCormack, P.J., and Blackmon, J.



         {¶1} Plaintiff-appellant Eleanor Paczko appeals from a decision of the court of common pleas that upheld an Ohio Department of Job and Family Services administrative decision not to include certain transferred resources when it recalculated her restricted Medicaid coverage period ("RCMP"). Finding no error in the trial court's decision, we affirm.

         {¶2} Although Medicaid is a program based on financial need, persons with substantial personal assets can make themselves eligible for benefits without first spending down their assets. One way of doing so is called the "half-loaf method. Under this method, a person needing nursing home care gifts all excess personal assets to heirs, applies for Medicaid, and is rejected for Medicaid because the gift occurred during the applicable look-back window (in this case, 60 months). This starts a penalty period in which the person is ineligible for Medicaid benefits. The person's heirs then gift back the amount of money needed to pay for the person's nursing home expenses that are not covered until the penalty period is over. Doing so cuts the penalty period in half and allows the heirs to keep any remaining funds.

         {¶3} Paczko used a reverse half-loaf method when applying for Medicaid benefits. The undisputed facts show that she applied for Medicaid benefits with the Ohio Department of Job and Family Services (the "agency")[1] on May 4, 2015. In her application, Paczko disclosed that she transferred $146, 122 to an irrevocable trust for her children during the look-back period. Considering this an improper transfer of assets during the look-back period, the agency found Paczko eligible for Medicaid benefits and determined an RMCP of 23.09 months, running from April 2015 through part of March 2017. During the RCMP, Paczko's children returned $89, 227.38 directly to Paczko. In May 2016, Paczko requested a recalculation of the RCMP based on the return of money. The agency granted a partial recalculation that changed the RCMP to 18.2 months, but declined to fully recalculate the RCMP because all of Paczko's funds had not been returned.

         {¶4} Importantly, the agency declined to consider the disposition of any funds returned after September 29, 2015. The agency noted that effective September 29, 2015, R.C. 5163.30(C)(3) had been amended to state:

no waiver of any part of the period of ineligibility shall be granted if the amount the individual or individual's spouse receives is less than the difference between what the individual or individual's spouse received for the assets and the fair market value of the assets.

         {¶5} Under the agency's interpretation of the amended statute, there was no longer a recalculation period for partial, returned funds - recalculation was allowed only if all of the improperly transferred funds had been returned, in effect, eliminating the half-loaf method.

         {¶6} Paczko appealed that decision. She acknowledged that R.C. 5163.30(C)(3) had been amended, but claimed that Ohio Adm.Code 5160:1-3-07(K)(3), which implemented amended R.C. 5163.30(C)(3), had not been amended until January 1, 2016. She argued that the administrative rule in place at the time amended R.C. 5163.30(C)(3) went into effect - former Ohio Adm.Code 5160:1-3-07(M)(4) - controlled over the statute. That rule stated that "[w]hen only part of the asset or its equivalent value is returned, a restricted medicaid coverage period can be modified but not eliminated." Paczko argued that the former version of the administrative rule in effect at the time she made her application for a recalculation of the RCMP should have applied.

         {¶7} A staff hearing officer denied the appeal, and that decision was upheld in a further appeal to the Ohio Department of Job and Family Services. The agency concluded:

While the Ohio Revised Code allows for the administrative agencies to create rules [sic] supplement the statutes and address activities that are numerous, technical and change so often that they cannot be effectively enforced by statute alone, that does not mean that a statute that is passed is not in effect until a subsequent rule is passed. The statute is in effect ...

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