United States Court of Appeals For the First Circuit

No. 18-1223

MAINE POOLED DISABILITY TRUST;

Plaintiff, Appellant,

YVONNE R. RICHARDSON, by her Conservator Barbara Carlin,

Plaintiff,

v.

RICKER HAMILTON, in his official capacity as Commissioner of Maine Department of Health and Human Services,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE

[Hon. John A. Woodcock, Jr., U.S. District Judge]

Before

Thompson, Kayatta, and Barron, Circuit Judges.

Ron M. Landsman, with whom Landsman Law Group, Rene H. Reixach, Jr., Woods, Oviatt, Gilman, LLP, Richard L. O'Meara, and Murray, Plumb & Murray were on brief, for appellant. Thaddeus A. Heuer, with whom Dean Richlin, Jeremy W. Meisinger, and Foley Hoag, LLP were on brief, for National Academy of Elder Law Attorneys and Guardian Community Trust, amicus curiae. David Scott Hamilton and Dennis M. Sandoval, APLC on brief for Special Needs Alliance, amicus curiae. Christopher C. Taub, Assistant Attorney General of Maine, with whom Janet T. Mills, Attorney General of Maine, and Susan P. Herman, Deputy Attorney General of Maine, were on brief, for appellee. Joseph H. Hunt, Assistant Attorney General, Halsey B. Frank, U.S. Attorney, Alisa B. Klein, Attorney, Civil Division, Appellate Staff, Casen B. Ross, Attorney, Civil Division, Appellate Staff, Robert P. Charrow, General Counsel, U.S. Department of Health and Human Services, Janice L. Hoffman, Associate General Counsel, U.S. Department of Health and Human Services, Susan Maxson Lyons, Deputy Associate General Counsel for Litigation, U.S. Department of Health and Human Services, David L Hoskins, Attorney, U.S. Department of Health and Human Services, W. Charles Bailey, Jr., Attorney, U.S. Department of Health and Human Services, on brief for the United States of America, amicus curiae.

June 20, 2019 KAYATTA, Circuit Judge. This case concerns transfers of

assets by individuals age sixty-five or older into what are called

"pooled special needs trusts." The issue posed is whether such

transfers are among those transfers that the Medicaid statute

counts against eligibility for long-term care benefits. The

district court held that they are. For the following reasons, we

agree.

I.

The pertinent facts are straightforward and materially

undisputed.

Yvonne R. Richardson is an elderly resident of

St. Joseph's Manor nursing facility in Portland, Maine. At the

time of the complaint, Richardson was eighty-seven years old and

receiving Medicaid benefits to help pay for the cost of her long-

term care. See generally 42 U.S.C. § 1396p(c)(1)(C)(i)(I)

(listing covered long-term care benefits, including nursing

facility services). In January 2017, Richardson's conservator,

Barbara Carlin, deposited $38,500 of the proceeds from the sale of

Richardson's former home into an account with Maine Pooled

Disability Trust ("MPDT"), a pooled special needs trust

established pursuant to 42 U.S.C. § 1396p(d)(4)(C).

Pooled special needs trusts allow disabled individuals

with relatively small amounts of money to pool their resources for

investment and management purposes. Lewis v. Alexander, 685 F.3d

- 3 - 325, 333 (3d Cir. 2012). They are designed to "provide for

expenses that assistance programs such as Medicaid do not cover."

Id. (quoting Sullivan v. County of Suffolk,

(2d

Cir. 1999)). Richardson hoped to use her MPDT funds to pay for

"modest expenditures" not covered by Medicaid "that would greatly

improve her quality of life," such as large-print word-search and

crossword puzzle books, new clothing, sweets, manicures,

magazines, and a radio. She also intended to hire a private

caregiver who could take her on excursions outside the nursing

facility.

Following Richardson's deposit of funds into her MPDT

account, the Maine Department of Health and Human Services

("MDHHS") issued a notice threatening to suspend Medicaid coverage

for her care at St. Joseph's Manor for "3.53 months" because

"[a]ssets were transferred" and she "did not get something of equal

value" in exchange. See 42 U.S.C. § 1396p(c)(1)(A) (penalizing an

institutionalized individual's "dispos[al] of assets for less than

fair market value"). In response, Richardson requested an

administrative hearing. She and MPDT also filed this lawsuit in

federal court challenging MDHHS's decision to suspend her Medicaid

coverage. The hearing officer subsequently stayed state

administrative proceedings pending resolution of the lawsuit.

Richardson will continue to receive Medicaid benefits until the

administrative review of MDHHS's decision is complete.

- 4 - Richardson and MPDT's complaint included two counts, but

only the second is at issue here.1 That count asserts a claim

under

, seeking a declaration and injunction

predicated on the assertion that Richardson's transfer of assets

into a pooled special needs trust is not a transfer that affects

Medicaid eligibility. The district court dismissed the complaint

under Federal Rule of Civil Procedure 12(b)(6). Richardson,

, at *18.

In so doing, the district court ruled that Richardson

had standing to challenge the decision to suspend her Medicaid

coverage, but her claim was not yet ripe because "[a]ny penalty

(and related adverse impact on [Richardson's] benefits) ha[d] been

stayed pending her administrative appeal," such that her claims

"lack[ed] sufficient finality and definiteness" for judicial

review.

at *4–5. The district court determined that MPDT had

associational standing and that MPDT's contention that MDHHS's

ruling was currently causing MPDT to lose both enrollees and funds

rendered its claim ripe for adjudication. Finally, the district

1 The district court dismissed Count I, which alleged that Richardson and "others similarly situated" in fact "receive fair market value from the expenditures the [MPDT] can make on their behalf" and therefore should incur no transfer penalty, because it was premised on two provisions of the Medicaid statute that the court found to be unenforceable under

. Richardson ex rel. Carlin v. Hamilton, No. 2:17-CV-00134-JAW,

, at *1, 13 (D. Me. Feb. 27, 2018). On appeal, MPDT does not contest that ruling.

- 5 - court ruled that MDHHS correctly applied the governing statute in

considering transfers to pooled special needs trusts in

determining eligibility.

MPDT alone filed a timely notice of appeal. No party

disputes that MPDT has standing or that its claim is ripe. Nor do

we see any reason to question either standing or ripeness sua

sponte. As the district court observed, because "(1) one of MPDT's

members, [Richardson], has standing to [sue]; (2) the interests at

stake . . . are germane to MPDT's purpose; and (3) the relief

requested does not require the participation of other MPDT

beneficiaries in this litigation,"

, MPDT has standing to

bring its claims on behalf of its beneficiaries. See Council of

Ins. Agents & Brokers v. Juarbe-Jiménez,

(1st

Cir. 2006). And as to ripeness, no one cites any reason to doubt

that, as the district court found, MDHHS's ruling currently harms

MPDT. We therefore proceed to the merits of the order granting

MDHHS's motion to dismiss Count II, which we review "de novo,

applying the same criteria as the district court." Germanowski v.

Harris,

(1st Cir. 2017) (quoting Carrero-Ojeda v.

Autoridad de Energía Eléctrica,

(1st Cir. 2014)).

II.

Medicaid is a "health insurance program for low-income

individuals . . . funded by both the federal government and state

governments." Massachusetts v. Sebelius,

(1st

- 6 - Cir. 2011) (citing

et seq.). Medicaid is supposed

to be a "payer of last resort,"

(quoting Ark. Dep't of Health

& Human Servs. v. Ahlborn,

(2006)), and Medicaid

eligibility criteria generally take an applicant's income and

wealth into account, see Lewis, 685 F.3d at 332.

Under Medicaid's prior asset-counting rules, inventive

"lawyers and financial planners . . . devised various ways to

'shield' wealthier [applicants'] assets," including by placing

assets in trusts. Johnson v. Guhl,

(3d Cir.

2004). So, Congress amended the Medicaid scheme, aiming, as a

general matter, to treat trusts as assets available to

beneficiaries, thus counting against Medicaid eligibility. Lewis,

685 F.3d at 333; see also Omnibus Budget Reconciliation Act of

1993, Pub. L. No. 103–66,

(1993) ("OBRA").

Although state participation in Medicaid is voluntary,

participating states must adopt plans that meet certain

requirements that federal statutes and regulations impose. See

Armstrong v. Exceptional Child Ctr., Inc.,

(2015). Failure to comply may jeopardize federal funds. See 42

U.S.C. § 1396a(a). Among these requirements, states must "comply

with the provisions of section 1396p . . . with respect

to . . . transfers of assets . . . and [the] treatment of certain

trusts." 42 U.S.C. § 1396a(a)(18). This case turns on the

- 7 - relationship between two particular provisions of section 1396p:

The Trust Provision and the Transfer Provision.

A.

The Trust Provision, section 1396p(d), sets forth

several general rules addressing the treatment of assets held in

trust (the trust corpus) and the treatment of payments out of

trusts. Assets in revocable trusts are considered resources

available to the applicant for purposes of determining his or her

entitlement to benefits. Id. § 1396p(d)(1), (3)(A)(i). Payments

from such trusts are considered either income of the applicant or

assets disposed of by the applicant under the Transfer Provision.

Id. § 1396p(d)(3)(A)(ii), (iii). Assets in irrevocable trusts are

also considered available resources to the extent that payments

could be made from such trusts for the applicant's benefit. Id.

§ 1396p(d)(3)(B)(i). And payments from these trusts are likewise

considered either income or transferred assets. Id.

§ 1396p(d)(3)(B)(i)(I), (II). Further, portions of irrevocable

trusts from which no payment could be made to the applicant are

considered transferred assets, and the value of the trust for

purposes of the Transfer Provision is determined by including the

amount of any payments made from such portion of the trust. Id.

§ 1396p(d)(3)(B)(ii).

These rules governing the treatment of trust corpuses

and payments out of trusts do not apply universally. The 1993 OBRA

- 8 - amendments exempted three types of trusts for disabled individuals

-- special needs trusts, Medicaid income trusts, and pooled special

needs trusts -- from the eligibility rules set out in the Trust

Provision. See id. § 1396p(d)(4)(A), (B), (C). This case

concerns pooled special needs trusts.

A pooled special needs trust "contain[s] the assets of

an individual who is disabled (as defined in [42 U.S.C.

§ 1382c(a)(3)])." Id. § 1396p(d)(4)(C). To qualify, such trusts

must meet the following conditions:

(i) The trust is established and managed by a nonprofit association.

(ii) A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.

(iii) Accounts in the trust are established solely for the benefit of individuals who are disabled . . . by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court.

(iv) To the extent that amounts remaining in the beneficiary's account upon the death of the beneficiary are not retained by the trust, the trust pays to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State plan under this subchapter.

Id. No one disputes on this appeal that MPDT satisfies these

conditions.

- 9 - B.

The Transfer Provision, section 1396p(c), also sets

forth a broad general rule: If an applicant or that person's

spouse "disposes of assets for less than fair market value on or

after the look-back date," the applicant is ineligible for

services, including long-term nursing care, for a period of time

based on the value of the assets disposed. Id. § 1396p(c)(1)(A).

For an institutionalized individual, the look-back date is a date

up to sixty months before the first date as of which the individual

is both institutionalized and has applied for benefits. Id.

§ 1396p(c)(1)(B)(i)–(ii). Essentially, this means that if a

person disposes of assets for less than fair market value while

receiving benefits or shortly before applying for benefits, the

disposition will postpone eligibility. In short, you can't make

yourself eligible for Medicaid faster by disposing of your assets

unless you act before the look-back date. Here, there is no

dispute that Richardson's transfer of assets occurred after the

look-back date.

The Transfer Provision also contains a list of

exceptions to its general rule governing the disposition of assets.

Especially relevant here are the two exceptions provided by

subsections 1396p(c)(2)(B)(iii) and (iv). First, subsection (iii)

applies to assets transferred to trusts, including pooled special

needs trusts, established for an applicant's disabled child.

- 10 - Second, subsection (iv) applies to assets "transferred to a trust

(including a trust described in subsection (d)(4) of this section)

established solely for the benefit of an individual under 65 years

of age who is disabled." Id. § 1396p(c)(2)(B)(iv) (emphasis

added). While we assume that MPDT is a trust "described in

subsection (d)(4)," and that Richardson's MPDT account was

established for her own benefit, she was not younger than sixty-

five when her conservator deposited the funds in the trust.

III.

We consider first the breadth of the general rule set

forth by the Transfer Provision: That general rule applies, as

relevant here, when a putative beneficiary "disposes of assets for

less than fair market value." Id. § 1396p(c)(1)(A). The statute

does not define "dispose," so we assume the word carries its

ordinary meaning. Merriam Webster defines "dispose," in relevant

part, as "to transfer to the control of another." Merriam

Webster's Collegiate Dictionary (10th ed. 1993). The Sixth Edition

of Black's Law Dictionary defines "dispose of" as "to alienate or

direct the ownership of property . . . to pass into the control of

someone else; to alienate, relinquish, or get rid of." Dispose

of, Black's Law Dictionary (6th ed. 1990). The statute's text

equates "dispose" with "transfer." Likewise, the Ninth Edition of

Black's defines "transfer" as "[a]ny mode of disposing of or

parting with an asset or interest in an asset." Transfer, Black's

- 11 - Law Dictionary (9th ed. 2009). Trust law, in turn, regards a

transfer or conveyance of property as necessary to create a valid

trust. 76 Am. Jur. 2d Trusts § 47 (2018).

In short, all principal resources strongly indicate that

when a person places her property into a trust (and most certainly

an irrevocable trust), thereby surrendering control of the

property to the trustee, she has disposed of the property. In the

absence of some reasonably specific instruction to the contrary,

it follows that the Transfer Provision's general rule covers the

conveyance of property to a trust, including a pooled special needs

trust like MPDT. That the Transfer Provision includes exceptions

for transfers to pooled special needs trusts in two circumstances

reinforces this conclusion. See 42 U.S.C. § 1396p(c)(2)(B)(iii)–

(iv). The presence of specifically enumerated exceptions also

indicates that Congress likely intended to make no other exceptions

apart from those specified. See Sony BMG Music Entertainment v.

Tenenbuam,

(1st Cir. 2011) (citing Tenn. Valley

Auth. v. Hill, 437 U.S 152, 188 (1978)).

MPDT characterizes the foregoing textual analysis as

unduly myopic. MPDT correctly observes that we must rest our

analysis on the statute as a whole, giving due weight to the

context in which the text at issue appears. When we do this, MPDT

contends, we should conclude that the Transfer and Trust Provisions

are "cognate subsections" with their "own area[s] of operation"

- 12 - that do not overlap except as "explicitly specified." Under this

view, the Trust Provision "broadly and comprehensively regulates

the impact on Medicaid eligibility of trusts created or funded by

the individuals seeking Medicaid benefits." And since nothing in

the Trust Provision states that a transfer of assets into a pooled

special needs trust will affect eligibility, MPDT reasons, that is

the end of the matter.

To underpin this view of how the two provisions interact,

MPDT and its supporting amici point to the treatment of irrevocable

trusts in subsection 1396p(d)(3)(B). Subsection 1396p(d)(3)(B)(i)

specifies that the portion of the trust corpus from which payments

could be made to the individual will be deemed available to the

individual, and payments from an irrevocable trust for any purpose

other than to or for the benefit of the individual "shall be

considered a transfer of assets by the individual subject to [the

Transfer Provision]." Subsection 1396p(d)(3)(B)(ii) further

provides that any portion of an irrevocable trust from which no

payment could be made to the individual "shall be considered, as

of the date of establishment of the trust . . . to be assets

disposed of by the individual for purposes of [the Transfer

Provision]." MPDT and amici argue that these commands to treat

certain parts of the corpus of or payments from an irrevocable

trust as subject to the transfer penalty give rise to a negative

- 13 - inference that establishing an irrevocable trust not penalized

under these subsections incurs no transfer penalty.

It appears that the Centers for Medicare and Medicaid

Services ("CMS"), the arm of the Department of Health and Human

Services ("HHS") that interprets the Medicaid statute, might have

shared the view that the specific commands of the Trust Provision

can take priority over the more general commands of the Transfer

Provision. We say "might" because CMS seemed to invoke this view

only when necessary to avoid a potential double penalty (e.g.,

penalizing the same transfer of assets twice). State Medicaid

Manual, Health Care Financing Administration Pub. 45–3,

Transmittal 64, § 3259.6(G) (Nov. 1994) ("To avoid such a double

penalty, application of one provision must take precedence over

application of the other provision." (emphasis added))

[hereinafter "Transmittal 64"]. In any event, even assuming this

view to be correct, MPDT and amici run into trouble in the very

next subsection. Subsection 1396p(d)(4) states that the entire

Trust Provision (including those portions of

subsection 1396p(d)(3) upon which MPDT relies to draw a negative

inference precluding application of the Transfer Provision in some

instances) does not apply to pooled special needs trusts. As the

Second Circuit has observed, "[S]ubparagraph (d)(4) exempts

qualifying trusts from the rules in (d)(3) but is silent about the

- 14 - nature or scope of the rules the agency should apply in their

stead." Sai Kwan Wong v. Doar,

(2d Cir. 2009).

MPDT would nevertheless have us conclude that the

exemption of pooled special needs trusts from the commands of the

Trust Provision leaves such trusts, for present purposes, exempt

as well from the Transfer Provision's general rule. But, like the

Second Circuit, we are "not inclined to infer from statutory

silence a congressional intent to have no rules whatsoever apply

to income placed in qualifying (d)(4) trusts."

Furthermore,

as we have already explained, the Transfer Provision broadly

applies to any disposition of assets to a trust (at least when not

overridden by the specific treatment of the Trust Provision).

Moreover, were MPDT correct that a transfer of assets to a pooled

special needs trust is not a disposition subject to the Transfer

Provision, that Provision's express exceptions for certain such

trusts in subsections 1396p(c)(2)(B)(iii) and (iv) would be

entirely irrelevant. Lawless v. Steward Health Care Sys., LLC,

(1st Cir. 2018) ("[C]ourts should try to avoid

interpretations that render statutory language mere surplusage.").

In an effort to parry the notion that its reading renders

subsections 1396p(c)(2)(B)(iii) and (iv) superfluous, MPDT argues

that the Transfer Provision only applies to transfers of assets to

third-party trusts -- not to so-called "self-settled" trusts

created for the benefit of the individual who created them. MPDT

- 15 - contends that the four exceptions to the general transfer rule

laid out in subsections 1396p(c)(2)(B)(i) through (iv) all involve

trust transactions for the benefit of someone other than the

applicant. Those subsections exempt assets transferred: (i) to

the individual's spouse or to another for the benefit of the

spouse, (ii) from the individual's spouse to another for the

benefit of the spouse, (iii) to the individual's child or to a

trust for the individual's child, and (iv) to a trust, including

a trust of the kind described in 42 U.S.C. § 1396p(d)(4),

established for the benefit of a disabled individual under age

sixty-five. If the exemptions only deal with transfers to or for

the benefit of third parties, the argument goes, the relative

comprehensiveness of the Trust Provision becomes more apparent --

and we may overlook the Transfer Provision's apparently clear

application to the transfer at issue here.

This argument requires a more creative reading of the

text of subsection 1396p(c)(2)(B)(iv) than we are willing to

undertake. MPDT would have us hold that "for the benefit of an

individual under 65 years of age who is disabled" means for the

benefit of such an individual other than the applicant. But, as

the Eighth Circuit explained in rejecting this same contention,

"the plain language of this paragraph does not address, let alone

restrict, the creator of the trust." Ctr. for Special Needs Tr.

Admin. v. Olson,

(8th Cir. 2012). If Congress

- 16 - intended subsection 1396p(c)(2)(B)(iv) to apply only to trusts

benefiting disabled individuals other than the applicant, we would

expect a clearer indication of that intent than the use of the

article "an" rather than "the" before the word "individual." As

the subsection stands, the phrase "an individual" includes the

applicant herself. Moreover, "[b]y referencing

'subsection (d)(4),' paragraph 1396p(c)(2)(b)(iv) necessarily

includes trusts created by the beneficiary, because

subsection (d)(4)(C) includes trusts created by the beneficiary."

Finally, even if we were to read the Transfer Provision's

exceptions as limited to trusts established for other persons, we

would have simply limited the scope of the exceptions without

limiting the scope of that Provision's general rule.

MPDT also puts forward a redundancy argument. To advance

this claim, MPDT points again to subsection 1396p(d)(3)(B)(ii) of

the Trust Provision. MPDT reasons that this subsection would be

unnecessary if the Transfer Provision already, by its own force,

classified the transfer of assets to a trust, unless excepted, as

grounds for an eligibility penalty. But this claimed redundancy

says nothing about the impact of the Transfer Provision on exempt

trusts, like MPDT, as subsection 1396p(d)(3)(B)(ii) does not apply

to funds placed in these trusts. See 42 U.S.C. § 1396p(d)(4).

Moreover, as we have already explained, MPDT's alternative reading

would itself treat as surplusage subsections 1396p(c)(2)(B)(iii)

- 17 - and (iv), which expressly exempt from the Transfer Provision

certain transfers into pooled special needs trusts, but not others.

Given a choice between two potential redundancies, we are inclined

to opt for the one that does not require us to ignore the most

natural reading of the text of the Transfer Provision's general

rule.

Properly returning its focus to that general rule, MPDT

and amici also claim that no transfer or disposal of assets

occurred at all in this case because the funds were "given to the

trustee of a self-settled trust." Citing

subsection 1396p(d)(3)(B)(i), MPDT maintains that such assets

remain "available" to beneficiaries, albeit not in the case of

pooled special needs trusts. MPDT cites no authority for its

assertion that assets transferred to self-settled pooled special

needs trusts "still belong to the applicant," such that "they have

not been transferred." Rather, as MDHHS avers, the conveyance at

issue here constituted an "irrevocable transfer" of legal title to

a trustee with "sole and uncontrolled discretion" to make

distributions for the benefit of the beneficiary. As we have

already explained, the customary meaning of the statutory word

"disposes" in the general transfer rule fairly encompasses such a

conveyance. Indeed, MPDT points to no definition of the term that

would not encompass such a conveyance. We therefore cannot agree

with MPDT that the entire Transfer Provision is inapplicable when

- 18 - a putative beneficiary transfers her assets to a self-settled

pooled special needs trust.

Taking an alternative track, MPDT seems to suggest that

our reading of the statute actually leaves CMS no room to allow

the Trust Provision's specific mandates to, in some situations,

override the Transfer Provision's general rule. And because,

without this latitude, reasons MPDT, double penalties (for

ineligibility and availability or for two transfers) would

necessarily occur, our reading must be incorrect. But, as we noted

earlier, Transmittal 64 seems to state that the Trust Provision

should be "given precedence" when a transfer of assets into a

nonexempt trust would be otherwise penalized twice.

Transmittal 64, § 3259.6(G). MPDT never explains why CMS would

not still have this leeway under our reading or even how frequently

(and unavoidably) such double penalties might occur. Furthermore,

as we have already observed, the entirety of the Trust Provision

does not apply to pooled special needs trusts. So, any carve-out

from the transfer rules that the Trust Provision might create would

have no application to the trust at issue in this case.

In light of the complexity of the foregoing discussion,

we summarize our reading of the statute: Subsection 1396p(c)(1)(A)

of the Transfer Provision plainly and broadly treats as an

eligibility-delaying transfer any disposition of beneficiary

assets to a trust for less than fair market value;

- 19 - subsection 1396p(c)(2)(B)(iv) of the Transfer Provision creates an

exception from that general rule for certain transfers to pooled

special needs trusts established for the benefit of the

beneficiary, but only when the beneficiary is under sixty-five

years of age; and subsection 1396p(d)(3)(B) of the Trust Provision

may also implicitly except from that general rule certain transfers

to irrevocable trusts, but that subsection does not apply to pooled

special needs trusts, which are exempted from the whole of the

Trust Provision under subsection 1396p(d)(4)(C). So, when a

beneficiary who is age sixty-five or older gives up her assets for

less than fair market value to a pooled special needs trust, there

has been a transfer that triggers a temporary period of

ineligibility.

Our reading is consistent with the holdings and dicta of

other courts that have considered the issue. See Olson,

("By the omission of an age limit in the 'C' paragraph of

subsection (d), Congress's intent was to permit disabled persons

over age 65 to participate in 'C' pooled trusts."); Cox v. Iowa

Dep't of Human Servs.,

(Iowa 2018)

(distinguishing "between an individual's participation in a pooled

special needs trust and the individual's temporary

disqualification from Medicaid long-term care benefits based on

that participation"); In re Pooled Advocate Trust,

(S.D. 2012) (noting that the Medicaid statute

- 20 - "differentiate[s] between participation in a pooled trust and

subsequent penalty periods and delays in eligibility for transfers

to the trust" (citing Olson,

)).

So too, agency interpretations of the Trust and Transfer

Provisions bolster our understanding of the statutory language.

The U.S. Supreme Court has recognized that "even relatively

informal" CMS guidance "'warrant[s] respectful consideration' due

to the complexity of the [Medicaid] statute and the considerable

expertise of the administering agency." Cmty. Health Ctr. v.

Wilson-Coker,

, 138 (2d Cir. 2002) (quoting Wis. Dep't

of Health & Family Servs. v. Blumer,

(2002)).

Here, the district court, the parties, and amici focus on three

separate agency interpretations of the relevant provisions: State

Agency Regional Bulletin No. 2008-05 (the "Bulletin"),

sections 3257 through 3259 of the State Medicaid Manual

("Transmittal 64"),2 and the Social Security Administration's

Program Operations Manual ("SSA Manual").

As we have already explained, Transmittal 64 can indeed

be read as stating that the specific commands of the Trust

Provision take precedence over the Transfer Provision's general

rule, at least when necessary to avoid a potential double penalty.

2Updates to the State Medicaid Manual are known as "transmittals." CMS issued Transmittal 64 shortly after OBRA was passed in 1993.

- 21 - But Transmittal 64 also makes clear that, while certain trusts are

exempt from both the Trust and Transfer Provisions, "a special

needs trust established for a disabled individual who is age 66

could be subject to a transfer penalty." Transmittal 64

§ 3259.7(B). MDHHS also correctly notes that there is no prospect

of a double penalty in this case. That is, while a transfer of

assets to a pooled special needs trust may be subject to a penalty

period under the transfer rule, funds in pooled special needs

trusts are not considered available -- and therefore are not

"penalized" for eligibility purposes -- under the Trust Provision.

So, although Transmittal 64 states that "the trust provisions are

given precedence in dealing with assets placed in trusts" to avoid

such a double penalty, this guidance is irrelevant here because

assets placed in pooled special needs trusts are never subject to

a double penalty. Id. § 3259.6(G).

The CMS Boston Regional Office's 2008 Bulletin

explicitly supports our reading of the Medicaid statute, stating,

in no uncertain terms: "A pooled trust established by an

individual age 65 or older is not exempt from the transfer of

assets provisions." Ctrs. for Medicare & Medicaid Servs., State

Agency Reg'l Bull. No. 2008-05, Medicaid Eligibility --

Application of Transfer of Assets Penalty for Pooled Trust (2008).

It further provides:

- 22 - Although a pooled trust may be established for beneficiaries of any age, funds placed in a pooled trust established for an individual age 65 or older may be subject to penalty as a transfer of assets for less than fair market value. When a person places funds in a trust, the person gives up ownership of those funds. Since the individual generally does not receive anything of comparable value in return, placing funds in a trust is usually a transfer for less than fair market value. The statute does provide an exception to imposing a transfer penalty for funds that are placed in a trust established for a disabled individual. However, only trusts established for a disabled individual age 64 or younger are exempt from application of the transfer of assets penalty provisions . . . .

Id.

The Social Security Administration reaches the same

conclusion in its Program Operations Manual, "the publicly

available operating instructions for processing Social Security

Claims." In re Pooled Advocate Trust,

(quoting

Wash. State Dep't of Soc. & Health Servs. v. Guardianship Estate

of Keffeler,

(2003)). The SSA Manual

acknowledges that, while "[t]here is no age restriction under [the

Trust Provision's] exception," it also states that "a transfer of

resources to a trust for an individual age 65 or over may result

in a transfer penalty." Soc. Sec. Admin., Program Operations

Manual System, Exceptions to Counting Trusts Established on or

after 1/1/00, SI 01120.203(B)(2)(a); see also Social Sec. Admin,

Program Operations Manual System, Exceptions - Transfers to a

- 23 - Trust, SI 01150.121(A)(3) ("The period of ineligibility does not

apply to an individual who transfers a resource to a trust

established for the sole benefit of an individual including himself

or herself who is under age 65 and is blind or disabled.").

Amici argue that the Bulletin's interpretation must be

legally incorrect because it would "nullif[y]" the exemption of

pooled special needs trusts from section 1396p(d). But, as MDHHS

counters, "application of the Transfer Provision to the funding of

pooled special needs trusts does not prevent the Trust Provision

from conferring real and tangible benefits." Rather, assets in

pooled special needs trusts are never counted as available

resources or income under the Trust Provision, and transfers into

such trusts by applicants before they reach the age of sixty-five

are not subject to a penalty period at all. See In re Pooled

Advocate Trust,

(noting the need to

"differentiate between being denied Medicaid long-term care

assistance and being subject to a delay in eligibility for Medicaid

long-term care assistance via a penalty period" and explaining

that "[t]he applicant may . . . qualify for medical-only coverage

during the penalty period[,] . . . and after the penalty period

expires, the applicant may thereafter be eligible for long-term

care assistance."). Although the impact of a penalty period on

eligibility for long-term care benefits is certainly not

- 24 - negligible, neither are the potential benefits that remain from

participation in timely-created pooled special needs trusts.

It is true that CMS recognized in Transmittal 64 that

applying the Transfer Provision to so-called Miller trusts would

render them ineffective, so CMS allows certain Miller trusts to

avoid a transfer penalty. See Transmittal 64 § 3259.7(B)(2). MPDT

contends that such an allowance conflicts with CMS's view that the

Transfer Provision applies to some exempt (d)(4) trusts, like MPDT,

signaling that this interpretation must be incorrect. But

Transmittal 64 provides only that a transfer penalty is not

triggered when "resources placed in [a] trust are used to benefit

the individual, and the trust purchases items or services for the

individual at a fair market value." Id. Of course, if the

disposition of assets is indeed for fair market value, the Transfer

Provision -- by its plain terms -- does not apply.3

To the extent that MPDT further asserts that the plain-

text interpretation of the Trust and Transfer Provisions runs

against the congressional purpose motivating their enactment, it

discounts Congress's clear intent to ensure that individuals

"exhaust their own resources before turning to the public for

assistance." Lewis, 685 F.3d at 332–33; see also Sai Kwan Wong,

3 As noted above, and as Judge Barron's concurring opinion explains in detail, MPDT does not argue on this appeal that Richardson received fair market value in the form of the expenditures MPDT would make on her behalf.

- 25 -

(noting "Congress's general instruction that

individuals must contribute their available income to the cost of

their institutional care"). As the United States asserts,

"Congress sought to ensure that state resources would be available

for the low-income individuals who are most in need."

IV.

In the end, we need not and do not decide that MPDT's

interpretation of the statute lacks reason. Rather, we hold that

the district court's judgment granting MDHHS's motion to dismiss

rests on a more reasonable interpretation of the statute. That

judgment is therefore affirmed.

- Concurring Opinion Follows -

- 26 - BARRON, Circuit Judge, concurring. I join in full our

opinion affirming the District Court's dismissal of Maine Pooled

Disability Trust's ("MPDT") claim that "no statute imposes a

transfer of assets penalty for transfers to an exempt pooled

special needs trust such as the MPDT." I think it important to

emphasize, though, one point that our opinion notes: MPDT failed

to make any developed argument to us that the Maine Department of

Health and Human Services ("MDHHS") violated its statutory right

to operate a pooled special needs trust pursuant to 42 U.S.C.

§ 1396p(d)(4)(C) by not recognizing the settlement of such a trust

as a transfer of assets for "fair market value." 42 U.S.C.

§ 1396p(c)(1)(A).

In consequence of that failure, we have no occasion to

address that distinct legal contention. See United States v.

Zannino,

(1st Cir. 1990). But, in future cases,

settlors of pooled special needs trusts, and perhaps the trusts

themselves, may well seek to argue in support of their § 1983 suits

against states seeking to impose the transfer penalty that no such

penalty may be imposed, because the settlor receives "fair market

value" for the funds used to create the trust from the expenditures

that the trust makes for the settlor's benefit. And, in the event

that argument is pressed in such future cases,4 they may well bring

4For reasons not relevant here, the District Court determined below that it had no jurisdiction to hear the settlor's § 1983

- 27 - to the fore an issue that we bypass here, but that may bear on how

these technical statutory provisions should be construed: whether

the Centers for Medicare & Medicaid Services ("CMS") is of the

view that the settlement of a pooled special needs trust may

constitute a transfer of assets for "fair market value" within the

meaning of 42 U.S.C. § 1396p(c)(1)(A)?

I thus write separately to explain why that issue may

matter, in hopes of clearing away some possible confusion down the

line. For, whether CMS considers the settlor of a pooled special

needs trust to have received "fair market value" from the

expenditures that the trust makes on the settlor's behalf may very

claim. See Richardson ex rel. Carlin v. Hamilton, No. 2:17-CV- 00134-JAW,

, at *5 (D. Me. Feb. 27, 2018). The District Court also concluded that the trust itself -- MPDT -- was not positioned to argue, under § 1983, that it had an enforceable right that had been violated by MDHHS, insofar as MPDT sought to premise that enforceable right on 42 U.S.C. § 1396p(c) (the "Transfer Provision"). See id. at *12-13. MPDT does not challenge that ruling and thus makes no contention that, even if the transfer rule does apply, no transfer penalty may be imposed because its "fair market value" condition has been met. See 42 U.S.C. § 1396p(c)(1)(A). There is precedent to suggest, however, that settlors of such trusts -- and perhaps the trusts themselves -- may sue states under § 1983 for subjecting deposits into such trusts to the transfer penalty in circumstances where, although the rule applies, the terms of the rule have been complied with such that no penalty should be imposed. See, e.g., Dultz v. Velez,

(D.N.J. 2010) ("conclu[ding] that § 1396p(c)(1) creates an individually enforceable right"); Aplin v. McCrossen, No. 12-CV-6312FPG,

, at *20 (W.D.N.Y. Aug. 26, 2014) ("[C]ompliance with the federal transfer of assets statute is mandatory on the States and is enforceable under

."); cf. Johnson v. Guhl,

(D.N.J. 2000) (holding that "§ 1396p(c)(2)(D) provides for a cause of action under § 1983").

- 28 - well affect the persuasiveness of a contention by a future settlor

of such a trust -- or by the trust itself -- that no transfer

penalty should be imposed. After all, this body of law is quite

technical, and the case for according deference to a persuasive

interpretation of it by CMS would seem to me to be quite strong.

See United States v. Mead Corp.,

(2001) ("There

is room . . . to raise a Skidmore claim . . . where the regulatory

scheme is highly detailed, and [the agency] can bring the benefit

of specialized experience to bear on the subtle questions in th[e]

case." (citing Skidmore v. Swift & Co.,

(1944)).

I.

CMS's state Medicaid eligibility manual, Transmittal 64,

provides that no transfer penalty should be imposed on the

settlement of an exempt trust if "resources placed in the trust

are used to benefit the individual, and the trust purchases items

and services for the individual at fair market value." State

Medicaid Manual, Health Care Financing Administration Pub. 45–3,

Transmittal 64, § 3259.7(B)(2) (Nov. 1994) [hereinafter

"Transmittal 64"]. MPDT -- like MDHHS -- appears to be of the

view that CMS created this "fair market value" workaround only for

so-called Miller trusts, see 42 U.S.C. § 1396p(d)(4)(B), and not

for pooled special needs trusts. I say that because MPDT advances

an argument in service of its contention that the transfer rule

- 29 - does not apply to exempt trusts that necessarily proceeds on that

assumption.

But, contrary to MPDT's apparent view, the text of

Transmittal 64 seems most naturally read to treat the rules

concerning the "fair market value" workaround as applying to all

exempt trusts, pooled special needs trusts among them. The

subsection of Transmittal 64 that sets forth the eligibility rules

for pooled special needs trusts states, in no uncertain terms,

that "[r]esources placed in an exempt trust for a disabled

individual are [not] subject to imposition of a [transfer]

penalty . . . [if] the resources placed in the trust are used to

benefit the individual, and the trust purchases items and services

for the individual at fair market value." Transmittal 64

§ 3259.7(B)(2) (emphasis added).

That subsection does direct us to "[s]ee subsection

C" -- which is, in turn, titled "Miller-Type or Qualifying Income

Trusts (QIT)" -- "for the rules concerning application of the

transfer of assets provisions to assets placed in an exempt trust."

Id. (emphasis added). But, the subsection goes on to state that

"[t]hese rules apply to . . . resources placed in the exempt

trusts discussed in this section," which include pooled special

needs trusts. Id. (emphasis added).

Some states -- including Maine -- appear to share MPDT's

view that CMS does not treat the deposit of funds into a pooled

- 30 - special needs trust as a transfer for fair market value, even if

the trust makes purchases on the settlor's behalf. The states

appear to base that understanding on a subsequent bulletin that

CMS issued in 2008 on the treatment of pooled special needs trusts

(the "2008 Bulletin"), which does not mention this "fair market

value" workaround for that type of trust. See Ctrs. for Medicare

& Medicaid Servs., State Agency Reg'l Bull. No. 2008-05, Medicaid

Eligibility -- Application of Transfer of Assets Penalty for Pooled

Trust (May 12, 2008).

But, while the 2008 Bulletin does instruct state

agencies that, pursuant to 42 U.S.C. § 1396p(c)(2)(B)(iv), "only

[pooled] trusts established for a disabled individual age 64 or

younger are exempt from application of the transfer of assets

penalty provisions," 2008 Bulletin at 1 (emphasis added), that

statement is not necessarily at odds with the view that I glean

from Transmittal 64. Even if the Transfer Provision does apply to

pooled special needs trusts, a transfer penalty may only be imposed

under that provision where the settlor "disposes of assets for

less than fair market value." 42 U.S.C. § 1396p(c)(1)(A) (emphasis

added).5 Thus, the fact that the 2008 Bulletin states that "funds

5 The 2008 Bulletin does state that "[w]hen a person places funds in a trust, the person gives up ownership of those funds. Since the individual generally does not receive anything of comparable value in return, placing funds in a trust is usually a transfer for less than fair market value." 2008 Bulletin at 1 (emphasis added). But, read in context, that appears to be a

- 31 - placed in a pooled trust established for an individual age 65 or

older may be subject to penalty as a transfer of assets for less

than fair market value" actually suggests -- contrary to the views

of some states -- that CMS may still recognize, as it appeared to

in Transmittal 64, that such a disposal of assets may escape a

transfer penalty if it is for "fair market value." 2008 Bulletin

at 1 (emphasis added).

Notably, the United States's amicus brief on behalf of

CMS is silent on this very point. That fact only serves to

underscore for me the possibility that CMS is still of the view

that it seemingly espoused in Transmittal 64: that the settlor of

a pooled special needs trust can be deemed to receive fair market

value for settling the trust from the purchases that the trust can

make on her behalf. Consistent with that suspicion, the United

States's amicus brief even emphasizes that "for purposes of this

appeal, it is undisputed that [the settlor] did not receive fair

market value in disposing of [her] assets [to MPDT]."

II.

Insofar as CMS does hold such a view, there remains the

question of how the "fair market value" workaround would work.

Transmittal 64 provides that "an individual is considered to have

received fair market value for funds placed in a[n] [exempt] trust"

general statement about trusts, and not a statement specific to pooled special needs trusts.

- 32 - from certain payments "out of the trust." Transmittal 64

§ 3259.7(C)(3). The payments include those made "out of the trust

for medical care provided to the individual," which "purchased

care at fair market value" and "any other payments made from the

trust which are for the benefit of the individual and which reflect

fair payments for any items or services which were purchased."

Id. The items or services purchased are, in turn, described as

including trust fees, "food or clothing for the individual, or

mortgage payments for the individual's home." Id.

Given that the workaround is based on purchases that the

trust makes after funds have been placed in the trust, it runs

into a potential statutory problem. The transfer rule imposes an

eligibility penalty only if an applicant "disposes of assets for

less than fair market value" within the look-back period. 42

U.S.C. § 1396p(c)(1)(A). The statute does not define "dispose[]"

or "fair market value." But, as our opinion explains, and as

Transmittal 64 itself reflects, the ordinary meaning of

"dispose[]" encompasses a deposit of funds into a trust -- even an

exempt trust -- because "[a]n individual placing an asset in a

trust generally gives up ownership of the asset to the trust."

Transmittal 64 § 3259.6(G).

Read in light of the entire statutory phrase, then, the

relevant inquiry for determining whether a disposal of assets is

"for less than fair market value" would seem to be whether "the

- 33 - individual . . . receive[s] fair compensation in return" for the

assets at the time of their disposal. Id. And, consistent with

that understanding, Transmittal 64 itself defines "fair market

value" as "an estimate of the value of an asset, if sold at the

prevailing price at the time it was actually transferred." Id.

§ 3258.1(A)(1) (emphasis added).6 Hence, the potential problem

with the workaround: At the actual time of the transfer into the

trust, the settlor usually receives nothing tangible -- at least,

nothing that could be said to constitute "fair market

value" -- immediately in return, even if the trust is set up in a

manner that obligates the trust to make future purchases of

services or goods (at fair market value) for the settlor's benefit.

Transmittal 64 appears to recognize the potential

statutory problem that arises from the mismatch between the timing

of the settlor's deposit and the trust's expenditures, and it thus

appears to propose a solution to the seeming problem. It provides

that "[a]n individual cannot be considered to have received fair

market value for funds placed in a trust until payments for some

item or service are actually made." Transmittal 64 § 3259.7(C)(3)

6 Consistent with Transmittal 64's definition, MDHHS's policy manual defines "fair market value" as "compensation received for the asset . . . in a tangible form with intrinsic value that is equivalent to or greater than the value of the transferred asset" and provides that "[f]air market value must be received by the individual and not delivered at a future date." Maine Dep't of Health and Human Services, 10-144 Chapter 332, MaineCare Eligibility Manual, § 1.5 (Apr. 17, 2019) (emphasis added).

- 34 - (emphasis added). "Thus," according to Transmittal 64, "funds

cannot be allowed to accumulate indefinitely in a[n] [exempt] trust

and still avoid transfer of assets penalties." Id.

Transmittal 64 in this way seems to contemplate that a

retroactive adjustment of the transfer penalty would need to be

made after "payments [out of the trust] for some item or service

are actually made." Id. Transmittal 64 says little about how

such a retroactive adjustment could be made. But, Transmittal 64

does note that the Transfer Provision separately provides that no

transfer penalty should be imposed when "all assets transferred

for less than fair market value have been returned to the

individual." See 42 U.S.C. § 1396p(c)(2)(C)(iii); Transmittal 64

§ 3258.10(C)(3). And, with respect to that separate statutory

exception, Transmittal 64 explains that "[w]hen a penalty has been

assessed and payment of services denied, a return of assets

requires a retroactive adjustment, including erasure of the

penalty, back to the beginning of the penalty period." Transmittal

64 § 3258.10(C)(3). Transmittal 64 further provides, in

explaining how that retroactive adjustment may be made, that

"[w]hen only part of an asset or its equivalent value is returned,

a penalty period can be modified but not eliminated. For example,

- 35 - if only half the value of the asset is returned, the penalty period

can be reduced by one-half." Id.

III.

There is a case to be made, then, that CMS is of the

view that the Medicaid statute permits this retroactive "fair

market value" workaround for pooled special needs trusts that I

have just described. And thus, a settlor of a pooled special needs

trust, or such a trust itself, may be well positioned to assert in

a future case both that no transfer penalty may be imposed on

deposits into such a trust even if the transfer rule does -- as we

now hold -- apply and that CMS itself holds that same view.

Having CMS as an ally in such a suit obviously could be

quite helpful. After all, the statute itself does not define

"dispose[]" or "fair market value." CMS's expertise in

interpreting those key statutory terms in such a highly technical

regulatory regime thus would seem to "warrant[] respectful

consideration." Wis. Dep't of Health & Family Servs. v. Blumer,

(2002) (noting CMS's "significant

expertise . . . in the context of a complex and highly technical

regulatory program" (internal quotation marks and citations

omitted)); see also Mead,

.

We are not confronted here, however, with any such

contention by MPDT. It argues that no transfer penalty should

have been imposed on the settlor only because it asserts that the

- 36 - transfer rule itself does not apply. I thus fully agree that the

decision below must be affirmed, as we face only a case in which

CMS contends that the transfer rule does apply and in which the

pooled special needs trust at issue has made no argument that it

has been established in such a way that its settlor should be

deemed to comply with that rule's "fair market value" condition.

- 37 -