RECORD IMPOUNDED

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-5798-11T1

R.S.,

Petitioner-Appellant, APPROVED FOR PUBLICATION

v. January 23, 2014

APPELLATE DIVISION DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES AND UNION COUNTY BOARD OF SOCIAL SERVICES,

Respondents-Respondents. ———————————————————————————————————————

Argued October 2, 2013 – Decided January 23, 2014

Before Judges Sapp-Peterson,1 Lihotz and Hoffman.

On appeal from the Department of Human Services, Division of Medical Assistance and Health Services, and Union County Board of Social Services.

Eugene S. Rosner argued the cause for appellant (Fink, Rosner, Ershow-Levenberg, LLC, attorneys; Mr. Rosner, on the brief).

Kay R. Ehrenkrantz, Deputy Attorney General, argued the cause for respondent Division of Medical Assistance and Health Services (John J. Hoffman, Acting Attorney General, attorney; Melissa H. Raksa, Assistant Attorney General, of counsel; Ms. Ehrenkrantz, on the brief).

1 Judge Sapp-Peterson did not participate in oral argument. She joins the opinion with the consent of counsel. R. 2:13-2(b). Respondent Union County Board of Social Services has not filed a brief.

The opinion of the court was delivered by

HOFFMAN, J.A.D.

In this appeal, we are asked once again to address "the

continuing tension between the State's effort to conserve

Medicaid resources for the truly needy and the legal ability of

institutionalized Medicaid recipients to shelter income for the

benefit of their non-institutionalized spouses." H.K. v. Div.

of Med. Assistance & Health Servs.,

(App. Div. 2005). Petitioner R.S. appeals from a final agency

decision of the Division of Medical Assistance and Health

Services (Division) finding that the community spouse monthly

income allowance (CSMIA) for his wife, D.S., should be

calculated in accordance with 42 U.S.C.A. § 1396r-5(e)(2)(B) and

N.J.A.C. 10:71-5.7(e), rather than pursuant to a separate

maintenance order entered by the Family Part. Following our

review, we conclude the Division, when determining the

institutionalized spouse's obligation for his nursing home care,

is not bound to abide by the terms of a Family Part non-

dissolution separate maintenance order, entered in a non-

contested proceeding, without notice to the Division, because

the Order was designed to circumvent the regulations governing

2 A-5798-11T1 the CSMIA. We affirm, concluding the Order "transgressed the

permissible limits of Medicaid planning[.]"

.

I.

R.S. and D.S. were married on September 9, 1978. As a

result of physical and mental ailments, R.S. began residing at

the Kessler Rehabilitation Center on November 1, 2010.

Thereafter, R.S. moved to the Cornell Hall Nursing and

Rehabilitation Center for further rehabilitation and long-term

custodial care, which he will require for the rest of his life.

Since November 1, 2010, R.S. and D.S. have been living

separately, with D.S continuing to reside in the marital home.

On November 4, 2010, D.S. filed a complaint for separate

maintenance wherein she requested a judgment compelling R.S. to

pay her support equaling the amount of R.S.'s Social Security

income, asserting R.S.'s income is necessary for D.S. "to meet

her basic expenses to remain in the marital home . . . [and]

maintain a reasonable approximation of the marital standard of

living enjoyed prior to the separation of the parties." In the

complaint, D.S. claimed R.S. had "separated himself from [D.S.]

and ha[d] refused and neglected to support [D.S.] within the

meaning of N.J.S.A. 2A:34-24." D.S. attached to her complaint a

Family Part case information statement (CIS) detailing her

3 A-5798-11T1 income, expenses, assets and liabilities, in which she disclosed

she was employed and earning an annual salary of $22,679.

On November 24, 2010, R.S.'s attorney accepted service of

the complaint. Neither the Union County Board of Social

Services (Board) nor the Division received notice of the Family

Part proceedings, even though D.S.'s complaint stated she was

"about to file a[n] application for . . . Medicaid benefits

pursuant N.J.S.A. 30:4D et seq. and N.J.A.C. 10:71 et seq." on

R.S.'s behalf, and further alleged that R.S. "meets the

financial and medical criteria for eligibility."

R.S. did not oppose his wife's action nor is there evidence

a hearing was held. An order issued by the court on December

10, 2010 required R.S. to pay D.S. "an amount equal to [R.S.'s]

net Social Security benefit; that is, after the deduction of the

Medicare premium, supplemental insurance premium and the

Medicaid 'Personal Needs Allowance,' for her support." The

order was retroactive to November 2010. Because D.S.

inadvertently omitted income R.S. received from a worker's

compensation award, on March 30, 2011, the judge issued an

amended order (the Order) including this additional income as

part of R.S.'s support obligation. Therefore, the Order

required R.S. to pay D.S. $3460.20 per month in spousal support,

consisting of his monthly social security and worker's

4 A-5798-11T1 compensation income benefits, less the designated offsets for

R.S.'s personal allowance and health insurance premiums.

On May 12, 2011, the Board received a Medicaid application

for R.S.2 On September 20, 2011, the Board determined R.S.

eligible for Medicaid as a "medically needy" recipient,

effective April 1, 2011. The Board did not recognize the Order

in its "Statement of Available Income for Medicaid Payment."

Rather, the Board decided, D.S. was entitled to a CSMIA3 of

$1514.93 per month, allowing her to meet her minimum monthly

maintenance needs amount (MMMNA), as calculated pursuant to

N.J.A.C. 10:71-5.7(c).

R.S. appealed the Board's determination at a hearing before

the Office of Administrative Law (OAL), claiming that N.J.A.C.

10:71-5.7(f) required the allocation of R.S.'s income consistent

with the Order rather than in accordance with the CSMIA

calculated by the Board. R.S. further sought an award of

2 Appellant's brief indicates that D.S. made the application on R.S.'s behalf; however, the application bears the signature of Irene Quesada, designated as R.S.'s "authorized representative." According to respondent's brief, Ms. Quesada is a legal assistant employed by Fink, Rosner, Ershow-Levenberg, LLC, who represented D.S. in the initial family court matter and R.S. on this appeal. 3 42 U.S.C.A. § 1396r(D)(2) uses the term "community spouse monthly income allowance," while N.J.A.C. 10-71:5.7(c) refers to this amount as "community spouse's maintenance deduction." For purposes of clarity and consistency, we use the former (CSMIA).

5 A-5798-11T1 attorney's fees and costs under

and 1988,

alleging the Board's findings, as adopted by the Division,

denied his rights under federal and state law.

Administrative Law Judge Caridad Rigo (ALJ) rejected R.S.'s

contentions in an initial decision issued on April 5, 2012. The

ALJ noted the Board was not provided notice of the Family Part

proceedings nor did it have an opportunity to be heard; further,

"the issue in Superior Court was not the community spousal

support in relation to Medicaid[,] but rather spousal support in

relation to the Family Law statutes and regulations." Relying

on H.K., Judge Rigo found the appeal represented an attempt to

use a support order "to circumvent the Medicaid regulations

concerning . . . spousal allowance[,]" and concluded "this case

does not exhibit the requisite medical and financial duress or

any exceptional circumstances where an increase of spousal

maintenance allowance is required [or] justified."

On July 2, 2012, the Division adopted the ALJ's decision

agreeing D.S.'s "ordinary and regular expenses" did not meet the

"exceptional circumstances threshold" required for an increase

in the CSMIA, pursuant to 42 U.S.C.A. § 1396r-5(e)(2)(B). In

declining to give effect to the amended support order, the

Division noted:

A review of the record indicates that the wife's action in family court was not

6 A-5798-11T1 adversarial and was chosen to avoid following the Medicaid spousal impoverishment rules so as to "protect" income for her monthly expenses such as: $150 for hair care or $1,800 yearly; . . . $50 for unspecified contributions or $600 a year; $100 for life insurance or $1,200 a year.

After reviewing the legislative history of 42 U.S.C.A. § 1396r-

5(d)(5), the Division emphasized that R.S.'s wife "has not

claimed any 'special circumstances' in this matter or before the

family court" that would warrant enforcement of the amended

support order. Appellant appeals from this final agency

decision.

II.

Established by Title XIX of the Social Security Act, the

Medicaid program is a joint federal-state program in which the

federal government provides "financial assistance to states that

choose to reimburse certain costs of medical treatment for needy

persons." Harris v. McRae,

,

,

(1980); see also

.

Simply put, Medicaid "provide[s] medical assistance to the poor

at the expense of the public." Mistrick v. Div. of Med.

Assistance & Health Servs.,

(1998). Although

participation is optional, states that do participate must

adhere to the requirements of Title XIX. Harris, supra,

, 100 S Ct. at 2680,

.

7 A-5798-11T1 Participating states must develop a plan including "'reasonable

standards . . . for determining eligibility for and the extent

of medical assistance . . . [that is] consistent with the

objectives' of the Medicaid program." L.M. v. Div. of Med.

Assistance & Health Servs.,

(1995) (alteration

in original) (quoting 42 U.S.C.A. § 1396a(a)(17)(A)).

New Jersey elected to participate in the Medicaid Program

by adopting the New Jersey Medical Assistance and Health

Services Act (the Act). N.J.S.A. 30:4D-1 to -19.5. The

Division is the "'single [s]tate agency' responsible for

administering New Jersey's Medicaid program." In re A.N., 430

N.J. Super 235, 243 (App. Div. 2013); see also N.J.S.A. 30:4D-7

(authorizing commissioner to issue through the Division "all

necessary rules and regulations and administrative

orders . . . to secure for the State of New Jersey the maximum

federal participation that is available with respect to a

program of medical assistance”). In administering New Jersey's

Medicaid program, the Division has promulgated comprehensive

regulations delineating the program's scope and procedures.

See, e.g., N.J.A.C. 10:71-2.1 to -2.16 (establishing application

process); N.J.A.C. 10:71-3.1 to -3.16 (establishing eligibility

factors). County welfare agencies, such as the Board, "assist

[the Division] in processing applications for Medicaid and

8 A-5798-11T1 determining whether applicants have met the income and resource

eligibility standards." Cleary v. Waldman,

(D.N.J. 1997), aff’d,

(3d Cir.), cert. denied,

(1999).

Among the objectives of Medicaid is to "provide[] medical

assistance to needy persons who are institutionalized in nursing

homes as a result of illness or other incapacity." M.E.F. v.

A.B.F.,

(App. Div. 2007), certif.

denied,

(2007). Before 1988, couples would "spend

down" their assets so an institutionalized spouse could qualify

for Medicaid assistance to defray the cost of his or her care.

This practice often rendered the spouses who remained in

the community impoverished.

In response to this trend, Congress incorporated "spousal

impoverishment provisions" in the Medicare Catastrophic Coverage

Act of 1988 (MCCA). 42 U.S.C.A. § 1396r-5(a) to (h).

Generally, Medicaid-eligible individuals pay part of the cost of

their care and "the remainder is paid by the State and Federal

governments through Medicaid."

n.2 (quoting H.R. Rep. No. 100-105(II), at 66 (1987),

reprinted in 1988 U.S.C.C.A.N. 857, 899 (1987)). Furthermore,

these provisions provide that certain allowances must be made

from the institutional spouse's income before determining how

9 A-5798-11T1 much of the monthly income is applied to the cost of care in the

institution. 42 U.S.C.A. § 1396r-5(d). One such allowance is

made for the CSMIA. 42 U.S.C.A. § 1396r-5(d)(1)(B).4

The CSMIA is "the amount by which the community spouse's

needs in the form of a minimum monthly maintenance needs

allowance (MMMNA), established by each state in compliance with

federal standards, exceeds the community's spouse's income."

(citing 42 U.S.C.A. §

1396r-5(d)(2)-(3)). "The provision for this allowance ensures

that income transferred from the institutionalized spouse to the

community spouse to meet the latter's basic needs is not also

considered available for the former's care." Wis. Dep't of

Health & Family Servs. v. Blumer,

,

,

(2002). Consequently, Medicaid

pays a greater share of the institutionalized spouse's costs of

care than it would without the CSMIA provisions.

The MCCA also revises the minimum monthly maintenance needs

allowance by providing:

If either such spouse establishes that the community spouse needs income, above the level otherwise provided by the minimum monthly maintenance needs allowance, due to

4 Congress repealed the MCCA through the Medicare Catastrophic Coverage Repeal Act of 1989, but the spousal impoverishment prevention provisions remain in effect.

Stat. 1979;

n. 1.

10 A-5798-11T1 exceptional circumstances resulting in significant financial duress, there shall be substituted, for the minimum monthly maintenance needs allowance in subsection (d)(2)(A) of this section, an amount adequate to provide such additional income as is necessary.

[42 U.S.C.A. § 1396r-5(e)(2)(B).]

Pursuant to its grant of authority in the Act, the Division

issued parallel regulations. The State's CSMIA regulation

reads:

There shall be deducted from the institutionalized individual's income an amount for the maintenance of the community spouse. Except as specifically provided below, the deduction for the maintenance of the community spouse shall not exceed $1,821.25 per month . . . . In arriving at the amount that may be deducted for the maintenance of the community spouse, the deductions authorized by this section shall be reduced by the gross income of the community spouse. The community spouse deduction is authorized only to the extent that the income deducted is actually made available to (or for the benefit of) the community spouse.

[N.J.A.C. 10:71-5.7(c).]

Similar to the federal statute, the New Jersey regulations

provide for a fair hearing to contest a determination of the

deduction. N.J.A.C. 10:71-5.7(e).

Both the MCCA and the New Jersey regulations allow for

recognition of court orders for spousal support in determining

the CSMIA. Further, the MCAA provides "[i]f a court has entered

11 A-5798-11T1 an order against an institutionalized spouse for monthly income

for the support of the community spouse, the community spouse

monthly income allowance for the spouse shall be not less than

the amount of the monthly income so ordered." 42 U.S.C.A. §

1396r-5(d)(5). The analogous New Jersey regulation states:

If a court has entered an order against an institutionalized spouse for monthly income for the support of a community spouse and the amount of the order is greater than the amount of the community spouse deduction, the amount so ordered shall be used in place of the community spouse deduction.

[N.J.A.C. 10:71-5.7(f).]

Guided by the applicable legislation, we note our review of

administrative agency decisions is limited. Karins v. City of

Atl. City,

(1998). An administrative agency's

decision will be upheld "unless there is a clear showing that it

is arbitrary, capricious, or unreasonable, or that it lacks fair

support in the record." Russo v. Bd. of Trs., Police and

Firemen's Ret. Sys.,

(2011) (quoting In re

Herrmann,

(2007)). The judicial role focuses

on three inquiries:

(1) whether the agency action violates the enabling act's express or implied legislative policies; (2) whether there is substantial evidence in the record to support the findings upon which the agency based application of legislative policies; and (3) whether, in applying the legislative policies to the facts, the agency clearly

12 A-5798-11T1 erred by reaching a conclusion that could not reasonably have been made upon a showing of the relevant factors.

[H.K., supra,

(quoting Pub. Serv. Elec. v. N.J. Dep't of Envtl. Prot.,

, 103 (1985)).]

"Deference to an agency decision is particularly

appropriate where interpretation of the Agency's own regulation

is in issue." I.L. v. N.J. Dep't of Human Servs., Div. of Med.

Assistance & Health Servs.,

(App. Div.

2006); see also Estate of F.K. v. Div. of Med. Assistance &

Health Servs.,

(App. Div.) (indicating

that we give "considerable weight" to the interpretation and

application of regulations by agency personnel within the

specialized concern of the agency), certif. denied,

(2005). On the other hand, an appellate court is "in no way

bound by the agency's interpretation of a statute or its

determination of a strictly legal issue." Mayflower Sec. Co. v.

Bureau of Sec. in Div. of Consumer Affairs of Dep't of Law &

Pub. Safety,

(1973).

III.

R.S. argues that the final agency decision, declining to

enforce the Order, violates the plain language of the Medicaid

law and regulations. Specifically, R.S. contends the Division

ignored the clear and unambiguous language of N.J.A.C. 10:71-

13 A-5798-11T1 5.7(f) and 42 U.S.C.A. § 1396r-5(d)(5), by refusing to give

effect to the Order in determining the CSMIA for D.S. We reject

this argument. Not only does R.S.'s rigid construction ignore

the context of the Medicaid Program provisions he seeks to

apply, but also abrogates the well-defined policies of the

program and would lead to an absurd result. We conclude the

Division's determination declining to follow the Order was

neither arbitrary nor capricious.

A.

The first issue is one of statutory construction. R.S.

argues for a strict application of the canons of statutory

interpretation, contending the Board and the Division

disregarded the mandatory language of 42 U.S.C.A. § 1396r-

5(d)(5) and N.J.A.C. 10:71-5.7(f). R.S. contends the

regulations' plain language directs the Order to control the

Board's review. Such a crabbed construction cannot stand as it

abrogates the clear intent and purpose of the statute and

obviates the Division's role in safeguarding limited Medicaid

resources.

Our Court has emphasized repeatedly "when interpreting an

enabling statute or any other law, a court's obligation is to

determine and give effect to the Legislature's intent." N.J.

Ass'n of School Adm'rs v. Schundler,

(2012).

14 A-5798-11T1 "The primary task for the Court is to effectuate the legislative

intent in light of the language used and the objects sought to

be achieved." Mun. Council v. James,

(2005)

(internal citations omitted) (quoting Merin v. Maglaki,

(1992)). Our Legislature expressly articulated the

Medicaid program's goal of providing assistance to the medically

needy, declaring:

the intent of the Legislature . . . to provide medical assistance, insofar as practicable, on behalf of persons whose resources are determined to be inadequate to enable them to secure quality medical care at their own expense, and to enable the State, within the limits of funds available . . . to obtain all benefits for medical assistance provided by the Federal Social Security Act[.]

[N.J.S.A. 30:4D-2.]

Another provision authorizes the Commissioner of the

Division to issue "all necessary rules and regulations and

administrative orders . . . to secure for the State of New

Jersey the maximum federal participation that is available with

respect to a program of medical assistance, consistent with

fiscal responsibility and within the limits of funds available

for any fiscal year[.]" N.J.S.A. 30:4D-7. The Legislature's

intention is to align New Jersey's rules and regulations with

federal objectives and assure effective use of limited

resources. See ibid.; N.J.S.A. 30:4D-2; see also

15 A-5798-11T1

(quoting A.K., supra, 350 N.J. Super. at

180) ("[W]hen discussing Medicaid regulations concerning

resource allocation . . . the New Jersey regulations

'essentially track the federal statute.'"). Also, in deciding

whether a particular agency action is authorized, a reviewing

court "may look beyond the specific terms of the enabling act to

the statutory policy sought to be achieved by examining the

entire statute in light of its surroundings and objectives."

N.J. Ass'n of School Adm'rs, supra,

.

The legislative history of the MCCA reflects Congress'

concern for proper allocation of financial resources. The New

Jersey Supreme Court reviewed the legislative history of the

"spousal impoverishment" provisions of the MCCA and explained:

Those provisions were intended to end the pauperization of the community spouse by allowing that spouse to protect a sufficient, but not excessive, amount of income and resources to meet his or her own needs while the institutionalized spouse was in a nursing home at Medicaid expense. Congress also recognized that because the allocation of resources depended wholly on whether a resource was in the name of one spouse or the other, couples could shelter their resources in the name of the community spouse while the institutionalized spouse would receive Medicaid coverage. MCCA closed this loophole by considering a couple's resources in their entirety, regardless of the name in which the resources were held.

16 A-5798-11T1 [Mistrick, supra,

(internal citations omitted).]

Congress enacted the MCCA to "assure that the community

spouse . . . has income and resources sufficient to live with

independence and dignity."

-53 (quoting H.R. Rep. No. 100-105(II) (1988), reprinted in

1988 U.S.C.C.A.N. 857, 892).

Legislative history concerning 42 U.S.C.A. § 1396r-5(d)(5)

also supports a finding that Congress sought to strike a balance

between the maintenance of the community spouse and the

preservation of limited resources:

[I]ndividuals now can have their unique financial circumstances reviewed on a case by case basis in state court to determine the institutionalized spouse's financial responsibility to the community spouse. In this way, special circumstances can be accounted for that might otherwise not be foreseen by federal regulations. Under [the] proposed legislation, state Medicaid agencies would be required to recognize such support orders.

[M.E.F., supra,

n.8 (quoting 132 Cong. Rec. H 11437 (October 17, 1986) (statement of Rep. Mikulski)).]

Those provisions protecting community spouses "place strict

limits on the amount of a Medicaid recipient's income that can

be used for the community spouse allowance."

(citing

,

,

). Finally, this

17 A-5798-11T1 concern for community spouses is reflected in 42 U.S.C.A. §

1396r-5(e)(2)(B), which allows for an adjustment of the MMMNA

"due to exceptional circumstances resulting in significant

financial distress[.]"

We conclude the Division's decision comports with the

legislative policies. The decision is consistent with the broad

federal and state goals of preventing the impoverishment of

community spouses, while ensuring limited Medicaid resources are

allocated prudently among those most in need.

In H.K., supra,

, we affirmed a

Division decision refusing to give effect to a support order

obtained in a divorce from a "bed and board" proceeding, entered

after the institutionalized spouse applied for Medicaid. This

court concluded the agency's decision was "consistent with the

language and purpose of the Medicaid statute,"

, and

noted holding otherwise would invite collusive agreements to

divert an institutionalized spouse's income to the community

spouse in a manner contrary to the intent underlying Medicaid.

(citing Estate of G.E. v. Div. of Med. Assistance & Health

Servs.,

(App. Div. 1994)) ("We have

previously disapproved such potentially unlimited transfers of

income from an institutionalized spouse to the community

spouse.").

18 A-5798-11T1 Thus, R.S.'s invocation of the canons of statutory

interpretation fails to adequately account for the complexity of

the Medicaid statutes and regulations, the policies underlying

Medicaid, the legislative history regarding 42 U.S.C.A. § 1396r-

5(d)(5), and the significant deference accorded agency decisions

in the Medicaid context. As the Federal District Court for the

District of New Jersey observed:

The Medicaid Act contains complex, interrelated provisions, and it would be foolhardy to impute a plain meaning to any of its provisions in isolation. A statute must be read as a whole; words depend upon context; they have only a communal existence; and not only does the meaning of such interpenetrate the other, but all in their aggregate take their purport from the setting in which they are used.

[Cleary, supra,

(internal quotation marks omitted).]

B.

R.S. next contends the agency's decision was unsupported

and must be set aside. In considering whether a reviewing

"court owes substantial deference to the agency's expertise and

superior knowledge of a particular field[,]" a key inquiry is

"whether the record contains substantial evidence to support the

findings on which the agency based its action."

(citation omitted). As demonstrated by

our review of the statutory context and legislative history, the

19 A-5798-11T1 claimed "plain language" reading suggested by R.S. is unfounded.

N.J. Dep't of Envtl. Prot. v. Exxon Mobil Corp.,

(App. Div. 2011) (quoting DiProsopero v. Penn,

(2005)) ("A reviewing court 'may also resort to

extrinsic evidence if a plain reading of the statute leads to an

absurd result or if the overall statutory scheme is at odds with

the plain language.'"). As noted in H.K., an interpretation of

N.J.A.C. 10:71-5.7(f) "permit[ting] a community spouse to obtain

an unlimited increase in the spousal allowance by obtaining a

court order for support . . . would nullify the statutory and

regulatory limitations on the community spouse allowance."

.

The Division's findings are supported by calculations of

R.S. and D.S.'s income and expenses, and its decision is further

supported by R.S.'s failure to allege any special circumstances

necessitating enforcement of the Order. Moreover, strict

enforcement of the amended support order would produce the

absurd result of providing D.S. with a monthly spousal allowance

$1945.27 greater than her MMMNA, while depleting the limited

resources available to provide for other individuals in need.

We conclude the record supports the Division's adoption of the

Board's sound methodology, which is consistent with the policies

of New Jersey's Medicaid program, specifically, N.J.A.C. 10:71-

20 A-5798-11T1 5.7(c) (providing for calculation of CSMIA) and N.J.A.C. 10:71-

5.7(e) (providing for an increase in CSMIA upon demonstration of

exceptional circumstances resulting in financial distress).

Using D.S.'s actual shelter costs, including a mortgage of $2320

per month, and other preset standards, the Board determined

D.S.'s MMMNA (labeled "total community deduction standard" on

the community spouse deduction worksheet) to be $3972.19. The

Board then subtracted $2457.26, D.S.'s monthly total gross

income, to calculate her CSMIA as $1514.93.

Pursuant to N.J.A.C. 10:71-5.7(c) and U.S.C.A. § 1396r-

5(d)(3), the Board determined that this "total community

deduction" (the CSMIA) would be deducted from R.S.'s total

monthly income of $3597.27. After accounting for minor

deductions including the personal needs allowance ($35.00) and

health insurance premiums ($102.07), R.S.'s remaining monthly

income, totaling $1945.27, would be paid toward the costs of his

care. If the March 2011 award were given effect, that $1945.27

would have been paid to D.S., making her net monthly income

$5917.46 (comprised of all of her earned income and almost all

of R.S.'s unearned income). To give effect to the amended

support order would cause the CSMIA for D.S. to more than

double, despite the absence of exceptional circumstances

resulting in financial duress. Such a result demonstrates the

21 A-5798-11T1 arbitrariness of isolating the language of N.J.A.C. 10:71-

5.7(f), as R.S. contends. Indeed, the obvious intent of the

Order was to maintain D.S.'s lifestyle prior to R.S's

institutionalization at the expense of the Medicaid program.

C.

R.S. asserts that we should defer to the Order citing the

Appellate Division's deference to the special expertise of the

Family Part in dealing with family matters. However, this

argument is inappropriately broad. Rather, in our review of a

trial court's order, we grant substantial deference to the trial

court's findings of facts following a hearing in which the court

is able to assess the evidence. Cesare v. Cesare,

(1998). This deference is specifically appropriate when

the trial court "hears the case, sees and observes the

witnesses, [and] hears them testify," because "it has a better

perspective than a reviewing court in evaluating the veracity of

witnesses."

(alteration in original) (internal

quotation marks omitted) (quoting Pascale v. Pascale,

(1988)). Further, the Court has held that "an

appellate court should not disturb the 'factual findings and

legal conclusions of the trial judge unless [it is] convinced

that they are so manifestly unsupported by or inconsistent with

the competent, relevant and reasonably credible evidence as to

22 A-5798-11T1 offend the interests of justice.'"

(alteration in

original) (quoting Rova Farms Resort, Inc. v. Investors Ins.

Co.,

(1974)).

In this case, the Family Part Judge did not hold a fact-

finding hearing to which we owe deference. The Order was not

supported by "adequate, substantial, credible evidence[;]"

rather, the evidence presented does not support the Order and

thus, we need not defer to the Order. Moreover, the incongruity

between the regulatory CSMIA calculations and those factors

considered by the Family Part in awarding support orders further

demonstrates the potential for an absurd result in applying the

plain language of N.J.A.C. 10:71-5.7(f). While the MCCA

provisions on the whole focus on preventing the pauperization of

community spouses, the family courts have latitude to

contemplate factors that are irrelevant in calculation of CSMIA,

such as "[t]he standard of living established in the marriage or

civil union and the likelihood that each party can maintain a

reasonably comparable standard of living." N.J.S.A. 2A:34-23.

Here, the record clearly indicates the Order was entered to

allow for the payment of all of D.S.'s living expenses,

including monthly expenses of $150 for hair care, $100 for life

insurance, and $50 for unspecified contributions. Diverting

income toward payment of these expenses reflects a paradigm of

23 A-5798-11T1 maintaining a spouse's lifestyle, rather than the more modest

goal of ensuring personal needs. As noted by the Division, the

difference would be at the taxpayer's expense.

The record also contains substantial evidence to support

the Board's treatment of R.S.'s income. R.S. attempts to limit

relevant evidence to the proceedings in the Family Part,

including D.S.'s complaint and CIS, and the two support orders.

Because agency discretion must accord with express and implied

legislative policies, the Division was not required to divert

all income to a community spouse without considering whether

there are "exceptional circumstances" warranting the payment.

Additionally, R.S.'s own application for medical assistance, the

Board's eligibility decision, and the community spouse deduction

worksheet are all relevant in determining the post-eligibility

treatment of his income; without these forms, R.S would not be

deemed eligible for Medicaid in the first instance.

We also address R.S.'s argument the ALJ and the Division

improperly undertook an "exceptional circumstances" analysis.

However, R.S. sought relief in a letter dated September 21,

2011, specifically requesting a "Fair Hearing" pursuant to

N.J.A.C. 10:71-5.7(e), which allows for a fair hearing to

determine whether an increase is warranted due to "exceptional

circumstances." Therefore, the appropriate standard was applied

24 A-5798-11T1 according to R.S.'s requested relief. However, we will still

address this issue.

Our review asks "whether, in applying the legislative

policies to the facts, the agency clearly erred by reaching a

conclusion that could not reasonably have been made upon a

showing of the relevant factors."

(quoting Pub. Serv. Elec., supra, 101 N.J. at 103). The

Division relied on the factual findings of the ALJ which

appropriately considered R.S.'s financial information submitted

to calculate the CSMIA in accordance with N.J.A.C. 10:71-5.7(c)

and U.S.C.A. § 1396r-5(d)(3).

The record clearly supports the Board's calculation of

D.S.'s CSMIA and accordingly, the primary question at the fair

hearing, and in the Division's subsequent review of the hearing,

was whether or not D.S. was entitled to a revision of her CSMIA

based upon "exceptional circumstances resulting in financial

duress[.]" N.J.A.C. 10:71-5.7(e). Relying on the contents of

the record, the ALJ found that R.S. had averred no such

circumstances:

D.S. does not qualify for an increase in the community spouse monthly maintenance allowance based on exceptional circumstances. D.S. does not claim any medical/physical impairments of her own. She is gainfully employed. There is no showing that the community spouse needs specialized medical care or attention. The

25 A-5798-11T1 instant case does not involve the type of long-term health and financial problems as contemplated in the term "exceptional circumstances." In sum, D.S. has not demonstrated the requisite level of significant financial duress to justify an increase above the $1,514.93 she has already received from the respondent.

After reviewing all documents in the record, including those

submitted to the Family Part, the Division similarly found that

D.S.'s CSMIA should not be increased to cover her "ordinary and

regular expenses." The Director further found "interesting[]

[that] even without her husband in the household, her monthly

expenses remain nearly the same ($5,827 vs. $5,651)."5 This

meager $176 decrease in monthly expenses upon

institutionalization of R.S. reasonably led to the skepticism of

the Division in considering D.S.'s calculations concerning her

expenses. In reviewing the record for any possible "exceptional

circumstances," the Division recognized the credit card debt of

R.S. may warrant an increase in income for D.S. "depending on

the circumstances such as when and how the charges were incurred

and if the expenses were charged for the couple's sole use."

Considering the foregoing in light of the implied and

express legislative policies and legislative history discussed

above, the Director's decision was well-reasoned and made in

5 D.S. made this representation in her CIS.

26 A-5798-11T1 reliance on relevant guiding principles and a sufficient factual

record. To conclude, the Division's decision was not arbitrary,

capricious or unreasonable, having passed muster under the

three-pronged test.

D.

R.S. makes additional arguments, also rejected by the

Division, which we find lack sufficient merit to warrant

extensive discussion. R.S. asserts that the Division engaged in

improper rule-making by imposing an "exceptional circumstances"

criterion for post-eligibility treatment of a recipient's income

and by imposing a requirement that R.S. give "notice" to

Medicaid on the support action. This argument lacks merit. In

Metromedia, Inc. v. Dir., Div. of Taxation,

(1984), the Supreme Court held, for due process reasons, that an

administrative agency must conduct formal rulemaking before

imposing new standards upon those it regulates. Six factors

guide our analysis of when such formal rulemaking is necessary:

(1) [the decision] is intended to have wide coverage encompassing a large segment of the regulated or general public, rather than an individual or a narrow select group; (2) is intended to be applied generally and uniformly to all similarly situated persons; (3) is designed to operate only in future cases, that is, prospectively; (4) prescribes a legal standard or directive that is not otherwise expressly provided by or clearly and obviously inferable from the enabling statutory authorization; (5)

27 A-5798-11T1 reflects an administrative policy that (i) was not previously expressed in any official and explicit agency determination, adjudication or rule, or (ii) constitutes a material and significant change from a clear, past agency position on the identical subject matter; and (6) reflects a decision on administrative regulatory policy in the nature of the interpretation of law or general policy.

[Id. at 331.]

These factors, "either singly or in combination," determine

whether agency action amounts to the promulgation of an

administrative rule.

. Having considered each of the

six enumerated Metromedia factors, we are satisfied that the

decision to apply an "exceptional circumstances" criterion for

post-eligibility treatment of a recipient's income was an

unassailable exercise of the agency's pre-existing authority.

R.S.'s argument is based on a misreading of the

administrative decisions of the ALJ adopted by the Division. In

her decision, Judge Rigo referred to the language of 42 U.S.C.A.

§ 1396r-5(e)(2)(B), which expressly allows for revision of the

MMMNA "in exceptional circumstances resulting in significant

financial distress," and N.J.A.C. 10:71-5(e), which allows for

revision if the community spouse or recipient establishes at a

fair hearing that "exceptional circumstances resulting in

financial duress" exist. Relying on the record and the express

language of the Medicaid law and regulations, Judge Rigo

28 A-5798-11T1 concluded an increase in the MMMNA was not warranted. This was

not rule-making, but the application of the criterion already

established in 42 U.S.C.A. § 1396r-5(e)(2)(B) and N.J.A.C.

10:71-5.7(e).

Next, regarding the alleged creation of a "notice"

requirement, when Judge Rigo considered the Order, she noted

that the Board had not been provided notice or an opportunity to

be heard. Judge Rigo did not, however, adopt a rule; rather,

she analogized the facts of this case to those of H.K.,

ultimately concluding, based on the record, that R.S.'s

"obtaining the court order was an attempt to circumvent the

Medicaid regulations concerning the levels of spousal

allowance." Similarly, in its final agency decision, the

Division adopts this finding, noting "[n]either [R.S.] nor his

wife appears to have informed the court of the true

ramifications of the support order on Medicaid[.]" Although

this was a circumstance relevant to the Division in deciding not

to give effect to the amended support order, it did not amount

to formulating a rule.

Furthermore, R.S. further contends that the outcome of this

appeal is controlled by our decision in

. In M.E.F., the community spouse who "received $576

per month from Social Security as her sole source of independent

29 A-5798-11T1 income," was allocated a community spouse allowance of

approximately $445 upon a determination of her institutionalized

spouse's Medicaid eligibility.

. Dissatisfied with

this amount, the community spouse sought relief from the Family

Part in the form of separate maintenance, pursuant to N.J.S.A.

2A:34-24.

.

At issue was whether the administrative hearing and the

Family Part constitute alternative avenues to seek relief from

the determination of an allegedly inadequate CSMIA, as well as

what standard applied in such a review.

. We

reached our decision on procedural grounds, reasoning that

"M.E.F.'s effort to obtain [a support] order, perfected only

after her MMMNA had been reconsidered and increased, albeit not

to her satisfaction, constituted parallel litigation and a form

of forum shopping of a sort that we are unwilling to recognize

as valid."

. We added that the "present appeal does

not require [a] decisive construction of the effect of the court

ordered support provision[.]"

We explained:

An award of support entered against an institutionalized spouse prior to Medicaid eligibility would clearly be governed by the standards articulated in N.J.S.A. 2A:34-23. We see no principled reason why those standards would change simply because the spouse was found to be eligible for Medicaid and subject to the spousal income protection provisions of the Act. We do note, however, that the standards for calculating support,

30 A-5798-11T1 set forth in N.J.S.A. 2A:34-23, permit consideration of spousal "actual need," ability to pay, and "[a]ny other factors which the court may deem relevant." N.J.S.A. 2A:34-23b(1) and (13). The dual purposes of the MCCA — to ensure that the community spouse has sufficient, but not excessive, income and to ensure that individuals not be permitted to avoid payment of their own fair share for long- term care — are certainly relevant considerations in this regard.

[Id. at 557-58.]

Thus, we were concerned with preserving the standards of

the family proceedings and ensuring that such proceedings

consider the goals of the Medicaid program when relief is sought

by a community spouse.

While this quote regards the

standard to be applied in Family Court proceedings, it envisions

a flexibility that should be extended to the Division to allow

for deviations from the statutorily calculated MMMNA where the

circumstances warrant special consideration.

R.S. next asserts the "forum shopping" found in

, is absent here, since D.S.

obtained her support order prior to R.S.'s Medicaid application;

however, M.E.F. is otherwise distinguishable. There, the

community spouse's sole source of independent income was monthly

payments of $545 from Social Security.

. In

contrast, D.S. earns $2457.26 in monthly income. Importantly,

there was a hearing held by the Family Part in M.E.F., as

31 A-5798-11T1 opposed to the record here, which indicates an uncontested

application decided on the papers.

We find

, more on point.

There, an institutionalized spouse qualified for Medicaid "even

though he had Social Security and pension income of

approximately $4,500 per month and his wife worked full-time and

earned over $2,000 per month."

. Because the

community spouse's monthly income was too high to entitle her to

an allowance, the couple "attempted to invoke the 'court order'

exception of N.J.A.C. 10:71-5.7(f), by obtaining a divorce from

'bed and board' with a property settlement agreement providing

for support to be paid to [the community spouse] from the

[institutionalized spouse's] pension."

. The

Division adopted the decision of the ALJ not to give effect to

the court-ordered spousal support obligation, reasoning that

"giving effect to the divorce judgment would be contrary to the

purpose and intent of the [MCCA]."

(internal

quotation marks omitted).

We agreed, reasoning that, "given the facts of [the] case,

the agency's decision is consistent with the language and

purpose of the Medicaid statute."

. Additionally,

accepting the petitioner's position in that case "would nullify

the statutory and regulatory limitations on the community spouse

32 A-5798-11T1 allowance[,]" thereby yielding an "absurd result."

.

We further stated that

[t]his is not a situation where a court has held an evidentiary proceeding and determined independently that the community spouse is in need of support or that she has "special circumstances." Nor was the court that entered the order even notified that [the institutionalized spouse] was receiving Medicaid benefits. This is also not a case where there was an existing support obligation that pre-dated the Medicaid application and was entered at a time when such application was not anticipated. Rather, the property settlement agreement in this case was an undisguised attempt to circumvent the Medicaid regulations concerning the appropriate level of spousal allowance.

[Id. at 329.]

Supporting this conclusion was our observation that the

proceeding in the Family Part in H.K. was not "genuinely

adversarial" because the State Medicaid program had not been

provided notice; further, "no factual record was made to support

the alimony award, and the court that entered the order did not

determine whether the award was justified in light of the

countervailing interests of the State[.]"

.

The record here similarly lacks any evidence that R.S.

contested D.S.'s allegations or computations of financial needs

asserted in her complaint. Because R.S. did not file any

opposition to D.S.'s application, the entire record in the

33 A-5798-11T1 Family Part proceeding consisted of D.S.'s verified complaint

and CIS, the acknowledgment of service, and two orders. In sum,

as the Division noted, "[a] review of the record indicates that

the wife's action in family court was not adversarial and was

chosen to avoid following the Medicaid spousal impoverishment

rules[.]" "Generally, an appellate court does not substitute

its judgment of the facts for that of an administrative agency."

Campbell v. N.J. Racing Comm'n,

(2001).

These circumstances raise the concern noted in H.K. and

echoed in the final agency decision that spouses may collude and

use support orders "to circumvent the Medicaid regulations

concerning the appropriate level of the spousal allowance."

. As the Division noted:

The instant matter shows how one couple could obtain legal counsel to seek judicial fiat to circumvent the spousal impoverishment rules. . . . [y]et another couple, without income or wherewithal to hire counsel, would have to abide by the statutory calculation and the statutory remedy to have additional income set aside for the community spouse.

In light of the substantial deference afforded agency decisions,

the express and implied legislative policies underlying

Medicaid, and the circumstances of this case, we affirm the

Division's approval of D.S.'s CSMIA determined in accordance

with N.J.A.C. 10:71-5.7(c) and 42 U.S.C.A. § 1396r-5(d).

34 A-5798-11T1 R.S. finally claims entitlement to attorney's fees pursuant

to

, 1988, alleging the Division's refusal to

enforce the amended support order amounted to an arbitrary and

capricious violation of established law and his civil rights.

Because R.S. failed to prevail on any issue in the litigation,

his claim for attorney's fees clearly lacks merit. See Singer

v. State,

, cert. denied,

,

,

(1984).

Affirmed but without prejudice as to any reconsideration by

the Division of a potential adjustment to the MMMNA concerning

the extensive credit card balances of R.S.

35 A-5798-11T1