Colo.App.: State Definition of Community Spouse Preempted by Medicaid Statute

The intermediate appellate court in Colorado held that the federal Medicaid statute preempts a state regulation defining “community spouse” to exclude people receiving home and community based services (HCBS).  The state had utilized this definition to deny the plaintiff HCBS services.  The court repeatedly referenced states’ options under “cooperative federalism” but nevertheless concluded that the state’s definition of “community spouse” violated the “underlying intent” of federal law.  Koehler v. Colorado Dept. of Health Care Policy and Financing, __ P. 3d __, 2010 WL 5248584, No. 09CA1965 (Colo.App. Dec. 23, 2010).

Ruth Koehler’s husband resided in a nursing home, and he qualified for Medicaid.  Ruth’s income was so low that she received part of her husband’s Social Security benefits as a “community spouse monthly income allowance” (CSMIA) pursuant to the Medicaid Catastrophic Care Act (MCCA), 42 U.S.C. 1396r-5(d)(1)(B).  Ruth also qualified for HCBS, and was receiving those services.  Then the state agency adopted a regulation which contained a definition of “community spouse” that excluded people receiving HCBS.  This definition was adopted “primarily for fiscal reasons.”  The agency told Ruth that she could have either the CSMIA or HCBS services, but not both.  She chose to continue receiving the CSMIA, and the state terminated her HCBS benefit.  She appealed.  The district court affirmed the termination.

The intermediate appellate court reversed, holding that the agency’s definition of “community spouse” is preempted by federal law.  The court noted that the MCCA was enacted to prevent spousal impoverishment of the at-home spouse of an institutionalized person.  The court extensively discussed the important role of the states under Medicaid, which is a system of cooperative federalism, including the states’ power to choose among different options.  Nevertheless, the court held, “traditional preemption analysis still applies.”  The court found that the state regulation “conflicts with the intent of Congress because it precludes the at-home spouse of a person in a nursing facility from receiving a spousal allowance solely because the at-home spouse is receiving HCBS.”

The court noted that HCBS provides care specific to a recipient’s disabilities and does not cover basic needs, such as rent and food.  In contrast, the CSMIA is intended to help the community spouse pay for basic needs.  The court stated that when passing the MCCA, Congress intended to prevent the community spouse becoming financially destitute.  The court concluded that the regulation defining “community spouse” to exclude those receiving HCBS was “inconsistent with the Congressional intent in providing for a CSMIA” and therefore could not be applied.  The court ordered that her benefits be restored.

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