Emily Huff Prevails in Appeal, Inspires Special Needs Trust Legislation

By: Jan P. Myskowski

For several years, Wiggin & Nourie, P.A. has represented Emily Huff in her appeal of the denial of her Medicaid benefits. In 2004, the New Hampshire Department of Health and Human Services (“DHHS”) denied Emily’s Medicaid benefits by treating distributions made from her special needs trust as countable income for Medicaid purposes. The Trustee of Emily’s special needs trust made distributions from the trust to pay for services such as Emily’s attendance at a special needs summer camp. In treating those distributions as countable income, DHHS applied a state Medicaid regulation that was more restrictive than federal Medicaid law.

Emily appealed, contending that the state regulation was invalid due to the conflict with federal law. DHHS asserted that it was entitled to apply rules more restrictive than federal law under an antiquated grandfathering statute from 1972. Grandfathered states, known in Medicaid parlance as 209(b) states, are allowed to apply rules more restrictive than current federal law so long as those state rules are no more restrictive than what the state applied on January 1, 1972.

During the course of Emily’s appeal, which included review by the New Hampshire Supreme Court, Emily contended that the state regulation used to deny her benefits was invalid for a number of reasons, including an assertion that New Hampshire did not qualify as a 209(b) state because DHHS produced inadequate evidence of what its rules were on January 1, 1972. The Supreme Court agreed that the record of the 1972 state Medicaid plan was inadequate, and remanded the case for further review at the administrative level.

During the further administrative proceedings, and near the start of the fourth year of Emily’s appeal, Emily’s fight drew the attention of New Hampshire State Representative Ruth Bleyler, who introduced House Bill 273 for consideration during the 2007 legislative session. By amending RSA 167:4, House Bill 273 sought to cure the problem at stake in Emily’s appeal by requiring that DHHS apply current federal law with respect to the treatment of distributions from special needs trusts for Medicaid purposes. Current federal law disregards all distributions from special needs trusts except those that provide food or shelter to the trust beneficiary.

Having passed both houses and having been signed by Governor Lynch on June 18, 2007, HB 273 will become effective on November 1, 2007.

Although the federal rules mandated by HB 273 would exclude all of the distributions at stake in Emily’s appeal, because those distributions were made prior to the effective date of the bill, Emily was forced to continue prosecuting her appeal in order to pursue reinstatement of her 2004 benefits. After an August 3, 2007, order by the administrative judge squarely placed the burden on DHHS to produce additional evidence of its 1972 state Medicaid rules, DHHS finally offered to settle the appeal. DHHS reinstated Emily’s 2004 Medicaid eligibility on August 20, 2007 without ever having produced any additional evidence of its 1972 state Medicaid rules.

Contact Jan P. Myskowski (603-629-4560) or any member of the Wiggin & Nourie Trusts and Estates Group if you have questions about these and other trust and estates questions.

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