Marcia Hauenstein filed suit in federal court challenging the Oklahoma Department of Human Services’s (OKDHS) decision that she was ineligible for Medicaid benefits. The District Court of the Western District of Oklahoma ruled that Hauenstein is Medicaid eligible after finding that she had a legal claim that she could assert against Oklahoma state officials under 42 USC § 1983 in its application of Ex parte Young. Hauenstein ex rel. Switzer v. Oklahoma ex rel. Oklahoma Dept. of Human Services, No. CIV–10–940–M, 2011 WL 1900398 (W.D.Okla., May 19, 2011).
Hauenstein had a fourth interest in her father Henry Eck’s trust after his death, which was held in trust by her two of her three sisters, Kathy Switzer and Gloria Jean Fast. In 2006, Switzer and Fast, as trustees, sold Hauenstein’s interest, which had $151,215.36 in capital, for $90,729.22, to themselves as individuals. The purchase amount of $90,729.22 was transferred to the newly established Hauenstein Family Revocable Trust, of which Switzer and Fast were also trustees.
In December 2008, Hauenstein moved to a nursing home, and an application was filed in March 2009 to the OKDHS to have the Oklahoma Medicaid program pay for Hauenstein’s nursing home expenses. OKDHS denied the application in April 2009, and its director, Howard Hendrick, affirmed this denial in July 2010. Hendrick found that sale of Hauenstein’s fourth interest “constituted a transfer of resources without receipt of fair market value in return” and that she would not be eligible for until her “countable resources” totaled $2,000 or less. Hauenstein challenged this decision, alleging, among other things, that her fourth interest in the Henry Eck Trust was not a countable resource. The named defendants were State of Oklahoma, OKDHS, Hendrick in individual and official capacity, the Oklahoma Health Care Authority, and its director Mike Fogarty, also in individual and official capacity.
In the instant case, Defendants moved for summary judgment on four grounds, the most important of which was that Hauenstein did not stated any legal claims under 42 USC § 1983. The Plaintiff did not respond to Defendants’ § 1983 arguments for qualified immunity for Hendrick and Fogarty in their individual capacities, leaving the question of whether they could be sued in their official capacities.
To determine whether the Eleventh Amendment protected Hendrick and Fogarty’s decisions, the Court applied the Tenth Circuit’s four-part test for applying Ex parte Young, following Elephant Butte Irrigation Dist. of N.M. v. Dep’t of the Interior, 160 F.3d 602, 609 (10th Cir. 1998). The first step, whether “the plaintiff is suing state officials, rather than the state itself,” was satisfied because the suit named Hendrick and Fogarty as defendants. The second step, whether “the plaintiff has alleged a non-frivolous violation of federal law,” was met because the plaintiff alleged violations of 42 U.S.C. § 1382b and 42 U.S.C. § 1396p(c), relating to what are countable resources for the purposes of Medicate eligibility. Third, whether “the plaintiff seeks prospective equitable relief, rather than retroactive monetary relief from the state treasury,” was fulfilled because the plaintiff sought to be certified as eligible for Medicaid coverage.
The final step, whether “the suit does not implicate ‘special sovereignty interests,’” was satisfied. It quoted J.B. ex rel. Hart v. Valdez, 186 F.3d 1280, 1287 (10th Cir. 1999), which stated that “[a] state’s interest in administering a welfare program at least partially funded by the federal government is not such a core sovereign interest,” and applied the principal to Oklahoma’s Medicaid program. Accordingly, the Court allowed the case to proceed against Hendrick and Fogarty, acting in their official capacities.
OKDHS argued that it had “followed federal law in denying Hauenstein’s application for Medicaid benefits.” Both sides agreed that whether Hauenstein’s trust-related resources were countable depended on whether Hauenstein’s fourth interest in her father trust counted as a different trust from the Henry Eck Trust that was established during his lifetime. Thus, the Court interpreted the text of the First and Second Amendments to the Revocable Living Trust of Henry R. Eck and determined that Hauenstein’s fourth interest was a new trust after her father’s death. As a result, it was not a countable resource, and the Court ruled that Hauenstein must be certified as eligible for Medicaid.
The Court rejected one of the Defendants’ other grounds for summary judgment, that Hauenstein had based her suit on an incorrect factual allegation, after reading of Hauenstein’s complaint to find otherwise. The final ground, that the “plaintiff fails to plead with sufficient specificity facts setting forth a Supremacy Clause argument,” was not reached because the Court ruled in Hauenstein’s favor.
Meanwhile, the Court dismissed OKDHS and the Oklahoma Health Care Authority under the Eleventh Amendment, and it dismissed the State of Oklahoma because the Plaintiff stated that she did not sue the state.