No. 00-952 

In the Supreme Court of the United States 

WISCONSIN DEPARTMENT OF HEALTH AND FAMILY 
SERVICES, PETITIONER 

v. 
IRENE BLUMER 

ON WRIT OF CERTIORARI 
TO THE COURT OF APPEALS OF WISCONSIN, DISTRICT IV 

BRIEF FOR THE UNITED STATES 
AS AMICUS CURIAE SUPPORTING PETITIONER 

ALEX AZAR II 

General Counsel 

SHEREE R. KANNER 

Chief Counsel 

Centers forMedicare & 
Medicaid Services 

HENRY R. GOLDBERG 

Deputy Chief Counsel 

Centers for Medicare & 
Medicaid Services 

CAROLE F. KAGAN 
DAVID R. SMITH 
MYRA K. ERHARDT 

Attorneys 

Department of Health and 

Human Services 
Washington, D.C. 20201 
THEODORE B. OLSON 
Solicitor General 

Counsel of Record 

STUART E. SCHIFFER 

Acting Assistant Attorney 

General 

EDWIN S. KNEEDLER 

Deputy Solicitor General 

JEFFREY A. LAMKEN 

Assistant to the Solicitor 

General 

WILLIAM KANTER 
BRUCE G. FORREST 

Attorneys 

Department of Justice 
Washington, D.C. 20530-0001 
(202) 514–2217 

QUESTION PRESENTED 

Through the Medicaid program, 42 U.S.C. 1396 et seq., the 
federal government provides funding to the States for the 
provision of medical services to eligible needy persons. This 
case arises out of a special statutory provision, 42 U.S.C. 
1396r-5 (1994 & Supp. V 1999), that establishes minimum 
requirements for determining the eligibility of a married 
individual who is institutionalized (such as in a nursing 
home), but who has a spouse (the “community spouse”) who 
is not. In particular, those provisions address the allocation 
of income and resources between such spouses for purposes 
of determining the institutionalized spouse’s Medicaid eligi- 
bility and the extent of medical assistance. The question 
presented is: 

Whether, in a “fair hearing” proceeding to consider 
whether to raise the community spouse’s resource allowance 
(CSRA) pursuant to 42 U.S.C. 1396r-5(e)(2)(C) in order to 
protect additional income-generating resources to meet 
the community spouse’s monthly maintenance needs, Wis- 
consin’s “income first” requirement, Wis. Stat. Ann. 
§ 49.455(8)(d) (West 1997), which treats excess income of the 
institutionalized spouse as available to the community 
spouse, is consistent with the federal statute, 42 U.S.C. 
1396r-5. 

(I) 

TABLE OF CONTENTS 

Page 

Interest of the United States ...................................................... 
1 

Statement ........................................................................................ 1 

Summary of argument .................................................................. 
11 

Argument: 

The Social Security Act permits consideration of 

income available from an institutionalized spouse 

when determining whether the community spouse 

resource allowance should be increased ............................ 

13 

A. The text, structure, history, and administrative 

interpretation of the MCCA establish that 

States may use the income-first methodology .......... 

15 

B. The Wisconsin Court of Appeals’ reasons for 

rejecting the Secretary’s construction are 

unpersuasive .................................................................... 21 

Conclusion ....................................................................................... 30 

Appendix A ..................................................................................... 
1a 

Appendix B ..................................................................................... 
25a 

TABLE OF AUTHORITIES 

Cases: 

Alcoa v. Central Lincoln Peoples’ Util. Dist., 

467 U.S. 380 (1984) ................................................................ 

21 

Batterton v. Francis, 432 U.S. 416 (1977) ..................... 

25, 26 

Boggs v. Boggs, 520 U.S. 833 (1997) .................................... 

28 

CFTC v. Schor, 478 U.S. 833 (1986) ................................... 

17 

Chambers v. Ohio Dep’t of Human Servs., 145 F.3d 

793 (6th Cir.), cert. denied, 525 U.S. 964 (1998) ....... 

4, 14, 22 

Chevron U.S.A. Inc. v. Natural Res. Def. Council, 

Inc., 467 U.S. 837 (1984) .................................................. 

20, 25 

Christensen v. Harris County, 529 U.S. 576 

(2000) ........................................................................................ 20 

Cleary v. Waldman, 167 F.3d 801 (3d Cir.), cert. 

denied, 528 U.S. 870 (1999) .................................................. 14 

(III) 

IV 

Cases—Continued: Page 

Golf v. New York State Dep’t of Soc. Servs., 697 

N.E.2d 555 (N.Y. 1998) ......................................................... 

14 

Haig v. Agee, 453 U.S. 280 (1981) ....................................... 

17 

Harris v. McRae, 448 U.S. 297 (1980) ................................ 

2 

Herweg v. Ray, 455 U.S. 265 (1982) .................................. 

3, 16 

Lukhard v. Reed, 481 U.S. 368 (1987) ............................ 

20, 25 

Morton v. Mancari, 417 U.S. 535 (1974) ............................ 

16 

Mourning v. Family Pubs. Serv., Inc., 411 U.S. 

356 (1973) ................................................................................. 

17 

Power Reactor Dev. Co. v. International 

Union of Elec., 367 U.S 396 (1961) .................................... 

21 

Saxbe v. Bustos, 419 U.S. 65 (1974) .................................... 

17 

Schweiker v. Gray Panthers, 453 U.S. 34 (1981) ......... 

2, 3, 4 

12, 14, 15 

Schweiker v. Hogan, 457 U.S. 569 (1982) ................ 
14, 21, 30 

Skidmore v. Swift & Co., 323 U.S. 134 (1944) ................... 

21 

Thomas v. Commissioner of the Div. of Med. Assis- 
tance, 682 N.E.2d 874 (Mass. 1997) ................................... 

14 

Udall v. Tallman, 380 U.S. 1 (1965) ............................... 

20, 21 

United States v. Mead Corp., 121 S. Ct. 2164 

(2001) .................................................................................... 

20, 21 

United States v. Wells, 519 U.S. 482 (1997) ...................... 

16 

Wilder v. Virginia Hosp. Ass’n, 496 U.S. 498 

(1990) ........................................................................................ 25 

Statutes and regulation: 

Medicare Catastrophic Coverage Act of 1988, 

Pub. L. No. 100-360, Tit. III, § 303(a)(1)(B), 102 
Stat. 754 ................................................................................... 
4 

42 U.S.C. 1396r-5 (1994 & Supp. V 1999) .................. 
4, 11, 

17, 22, 27 
42 U.S.C. 1396r-5(a)(3) ..................................................... 

22 

42 U.S.C. 1396r-5(b)(1) ....................... 
5, 12, 15, 22, 24, 25 

42 U.S.C. 1396r-5(b)(2) ...................................... 
5, 12, 24, 26 

42 U.S.C. 1396r-5(b)(2)(A)-(D) ........................................ 
25 

42 U.S.C. 1396r-5(b)(2)(A)(ii) .......................................... 24 

V 

Statutes and regulation—Continued: 
Page 

42 U.S.C. 1396r-5(b)(2)(A)(iii) ......................................... 
24 

42 U.S.C. 1396r-5(c)(1) ..................................................... 
7 

42 U.S.C. 1396r-5(c)(1)(A) ............................................... 
6 

42 U.S.C. 1396r-5(c)(2)(A) ............................................... 
6 

42 U.S.C. 1396r-5(c)(2)(B) ................................................ 
6 

42 U.S.C. 1396r-5(c)(4) ..................................................... 
7 

42 U.S.C. 1396r-5(c)(5) ..................................................... 
6 

42 U.S.C. 1396r-5(d) ................................................ 
5, 12, 26 

42 U.S.C. 1396r-5(d)(1)-(5) ............................................... 
25 

42 U.S.C. 1396r-5(d)(1)(A) ............................................... 
6 

42 U.S.C. 1396r-5(d)(1)(B) ..................................... 
6, 12, 17, 

22, 23, 26, 27 
42 U.S.C. 1396r-5(d)(1)(C) ........................................... 

6, 17 

42 U.S.C. 1396r-5(d)(1)(D) ............................................... 
6 

42 U.S.C. 1396r-5(d)(2) ................................ 
6, 12, 17, 23, 26 

42 U.S.C. 1396r-5(d)(3) ........................................... 
5, 16, 29 

42 U.S.C. 1396r-5(d)(4) ................................................... 
5, 29 

42 U.S.C. 1396r-5(e) .......................................................... 
7 

42 U.S.C. 1396r-5(e)(2) ..................................................... 
7 

42 U.S.C. 1396r-5(e)(2)(A) ............................................... 
7 

42 U.S.C. 1396r-5(e)(2)(C) ......................................... 
passim 

42 U.S.C. 1396r-5(f)(1) ...................................................... 
7 

42 U.S.C. 1396r-5(f)(2) .................................................. 
7, 18 

42 U.S.C. 1396r-5(f)(2)(A) ........................................ 
6, 7, 8 

42 U.S.C. 1396r-5(f)(2)(A)(ii) ........................................... 
10 

42 U.S.C. 1396r-5(f)(2)(A)(iii) .......................................... 
8 

42 U.S.C. 1396r-5(f)(2)(B) ................................................ 
8 

42 U.S.C. 1396r-5(g) .......................................................... 
7 

42 U.S.C. 1396r-5 note (§ 303(g)(1)(B), 102 Stat. 
763) ................................................................................. 20 

Social Security Act, ch. 531, 49 Stat. 620 (42 U.S.C. 
301 et seq.): 
42 U.S.C. 402(b)(2) ............................................................ 

28 

42 U.S.C. 402(c)(3) ............................................................. 
28 

42 U.S.C. 402(e)(2)(A) ...................................................... 
28 

42 U.S.C. 402(f)(3)(A) ....................................................... 
28 

Social Security Amendments of 1965, Pub. L. No. 89- 
97, Tit. XIX, 79 Stat. 343 (42 U.S.C. 1396 et seq.) ............ 2 

VI 

Statutes and regulation—Continued: 
Page 

42 U.S.C. 1396a(a)(17) ................................................ 
passim 

42 U.S.C. 1396a(a)(17)(B) ......................................... 
2, 14, 25 

42 U.S.C. 1396a(a)(17)(D) ................................................ 
15 

Social Security Amendments of 1972, Pub. L. No. 
92-603, 86 Stat. 1470, 42 U.S.C. 1382b (1994 & 
Supp. V 1999): 
42 U.S.C. 1382b(a) (1994 & Supp. V 1999) .................... 
6 

42 U.S.C. 1382b(b) ............................................................. 
6 

29 U.S.C. 1055(a) ....................................................................... 
28 

29 U.S.C. 1055(d)(1) .................................................................. 
28 

Wis. Stat. Ann. § 49.455(8)(d) (West 1997) ........................... 
10 

42 C.F.R. 435.723(d) (1980) ..................................................... 
4 

Miscellaneous: 

66 Fed. Reg. (2001): 

p. 46,763 ................................................................................... 

9 

p. 46,765 ........................................................................... 
9, 19, 21 

p. 46,766 ........................................................................... 
9, 16, 27 

H.R. Conf. Rep. No. 661, 100th Cong., 2d Sess. 
(1988) ................................................................................ 
3, 18, 24 

H.R. Rep. No. 213, 89th Cong., 1st Sess. (1965) .................. 
15 

H.R. Rep. No. 105, 100th Cong., 1st Sess. Pt. 2 
(1987) ........................................................................................ 
3, 4 

J. Thomas Oldham, Should the Surviving Spouse’s 

Forced Share Be Retained?, 38 Case W. Res. L. 
Rev. 223 (1988) ....................................................................... 

28 
S. Rep. No. 404, 89th Cong., 1st Sess. Pt. 1 (1965) ............ 
3, 15 

State Medicaid Manual (Oct. 1989) (available at http:// 
www.hcfa.gov/pubforms/pub45pdf/sm3260.pdf) .............. 20 

In the Supreme Court of the United States 

No. 00-952 
WISCONSIN DEPARTMENT OF HEALTH AND FAMILY 
SERVICES, PETITIONER 

v. 
IRENE BLUMER 

ON WRIT OF CERTIORARI 
TO THE COURT OF APPEALS OF WISCONSIN, DISTRICT IV 

BRIEF FOR THE UNITED STATES 
AS AMICUS CURIAE SUPPORTING PETITIONER 

INTEREST OF THE UNITED STATES 

Medicaid is a means-based medical care program adminis- 
tered by the States with federal financial assistance and 
subject to federal standards. This case involves the special 
eligibility requirements for Medicaid where one spouse 
resides in an institutional setting, such as a nursing home, 
and the other does not. At the Court’s invitation, the 
Solicitor General filed an amicus brief on behalf of the 
United States at the petition stage of this case. 

STATEMENT 

This case concerns the Medicaid eligibility of an applicant 
(the “institutionalized spouse”) who lives in a nursing facil- 
ity, while her husband (the “community spouse”) does not. 
In such circumstances, Medicaid protects a certain portion of 
the couple’s resources for the benefit of the community 
spouse and seeks to ensure that the community spouse has 
sufficient income to meet his monthly maintenance needs, 
without rendering the institutionalized spouse ineligible for 
Medicaid. The federal Medicaid statute establishes a special 
“fair hearing” procedure in which a State may consider 
whether to increase the amount of resources the statute 

(1) 

2 

protects for the benefit of the community spouse if such an 
increase is necessary to generate additional income to meet 
the community spouse’s monthly maintenance needs. 

The question in this case is whether, in determining 
whether to increase the amount of protected resources, a 
State may first consider whether the institutionalized spouse 
could transfer income to the community spouse and thereby 
bring his income up to the level set by statute to meet his 
monthly needs, making it unnecessary to protect additional re- 
sources. Under one calculation method, known as “income- 
first,” States may consider such potential income transfers. 
Under another method, known as “resources-first,” they 
may not. The Wisconsin Court of Appeals held that the 
Medicaid statute bars States from using the income-first 
method, notwithstanding the consistent position of the Sec- 
retary of Health and Human Services that the Medicaid 
statute permits that method. 

1. The Medicaid program, established in 1965 as Title 
XIX of the Social Security Act, Pub. L. No. 89-97, 79 Stat. 
343, as amended 42 U.S.C. 1396 et seq., “provid[es] federal 
financial assistance to States that choose to reimburse cer- 
tain costs of medical treatment for needy persons.” Harris 

v. McRae, 448 U.S. 297, 301 (1980). Under the program, 
“[e]ach participating State develops a plan containing ‘rea- 
sonable standards . . . for determining eligibility for and 
the extent of medical assistance.’ ” 
Schweiker v. Gray Pan- 
thers, 453 U.S. 34, 36 (1981) (quoting 42 U.S.C. 1396a(a)(17)). 
State standards must “provide for taking into account only 
such income and resources as are, as determined in accor- 
dance with standards prescribed by the Secretary, available 
to the applicant or recipient.” 42 U.S.C. 1396a(a)(17)(B); see 
Gray Panthers, 453 U.S. at 42-43. 

The income and resource calculations necessary to make 
eligibility determinations for married couples have proven to 
be a matter of great complexity. When Congress established 
the Medicaid program, Congress found it “proper to expect 

3 

spouses to support each other.” Gray Panthers, 453 U.S. at 
45 (quoting S. Rep. No. 404, 89th Cong., 1st Sess., Pt. 1, 78 
(1965)). Consistent with that judgment, “States adopted 
plans that considered the spouse’s income in determining 
Medicaid eligibility and benefits.” Id. at 37. States thus cal- 
culated the amount they “considered necessary to pay the 
basic living expenses of ” the non-applicant spouse “and 
‘deemed’ any of the spouse’s remaining income to be ‘avail- 
able’ to the applicant.” Id. at 38. In Gray Panthers, this 
Court concluded that such an approach is consistent with the 
text of the Social Security Act, the Act’s legislative history, 
and the Secretary’s regulations. Id. at 44-48. 

Before 1989, an individual in a nursing home (the “institu- 
tionalized spouse”) with a spouse living in the community 
(the “community spouse”) was often ineligible for Medicaid 
until the institutionalized spouse exhausted resources that 
were in her own name or were jointly held, without regard 
to the needs of the community spouse. Moreover, even when 
the institutionalized spouse became eligible for Medicaid, 
much of her income would be used to reduce the amount that 
Medicaid would pay for her institutional care, leaving the 
community spouse with little means of support if he had 
insufficient income of his own; States often reserved only 
$250 to $350 per month—sometimes less—of the institu- 
tionalized spouse’s income for the benefit of the community 
spouse. See H.R. Rep. No. 105, 100th Cong., 1st Sess., Pt. 2, 
68 (1987) (listing States). See also H.R. Conf. Rep. No. 661, 
100th Cong., 2d Sess. 258 (1988).1 The net effect of those 

1 In the program’s early years, some States apparently treated much 
of the community spouse’s income as available to pay for the care of the 
institutionalized spouse, even if the community spouse’s income was 
modest. In 1974, the Secretary promulgated regulations that placed time 
limits on the extent to which so-called “SSI States” (see H.R. Rep. No. 
105, Pt. 2, at 65-66) could deem the community spouse’s income to be 
available to the institutionalized spouse after the spouses no longer lived 
together. See Herweg v. Ray, 455 U.S. 265, 269-270 (1982). Under those 
regulations, SSI States generally had to disregard the community spouse’s 

4 

requirements was the “pauperization” of many community 
spouses. H.R. Rep. No. 105, Pt. 2, at 65. 

Congress sought to alleviate that hardship and close po- 
tential loopholes when it enacted the Medicare Catastrophic 
Coverage Act of 1988 (MCCA), Pub. L. No. 100-360, Tit. III, 
§ 303(a)(1)(B), 102 Stat. 754. See 42 U.S.C. 1396r-5 (1994 & 
Supp. V 1999). In particular, Congress “attempted to strike 
a balance between preventing impoverishment of the com- 
munity spouse by excluding minimum amounts of resources 
and income for that spouse from eligibility considerations, 
and preventing a financially solvent institutionalized spouse 
from receiving Medicaid benefits.” Chambers v. Ohio Dep’t 
of Human Servs., 145 F.3d 793, 798 (6th Cir.), cert. denied, 
525 U.S. 964 (1998). See H.R. Rep. No. 105, Pt. 2, at 65 (bill 
seeks to “end th[e] pauperization” of the community spouse 
“by assuring that the community spouse has a sufficient— 
but not excessive—amount of income and resources avail- 
able”). That balance is achieved through a complex set of 
minimum requirements for allocating income and resources 
between community and institutionalized spouses. 

a. Income. The MCCA separately addresses income allo- 
cation for initial Medicaid eligibility determinations and for 
post-eligibility determinations regarding the extent of assis- 
tance to be furnished to persons who have already been 
found eligible. 

For initial eligibility determinations, the MCCA imposes a 
single restriction regarding the attribution of income: “Dur- 
ing any month in which an institutionalized spouse is in the 

income in determining the institutionalized spouse’s eligibility in the first 
month following the month in which the spouses stopped living together; if 
both spouses were Medicaid eligible, the community spouse’s income had 
to be disregarded after six months. See Gray Panthers, 453 U.S. at 39-40 
(citing 42 C.F.R. 435.723(d) (1980)). So-called “Section 209(b)” States (see 
H.R. Rep. No. 105, Pt. 2, at 66), however, could treat the community 
spouse’s income as available to the institutionalized spouse, after the two 
ceased living together, to the extent the State did so on January 1, 1972. 
Id. at 40. 

5 

institution, * * * no income of the community spouse shall 
be deemed available to the institutionalized spouse.” 
42 U.S.C. 1396r-5(b)(1). Thus, subsection (b)(1) establishes a 
special rule that protects the income of the community 
spouse by excluding that income from consideration by the 
State when determining whether the institutionalized 
spouse is eligible for Medicaid. Subsection (b)(1), however, 
does not address whether, when States initially determine 
the eligibility of the institutionalized spouse, the institu- 
tionalized spouse’s income may be considered to be available 
to the community spouse for purposes of deciding whether 
the latter will have sufficient income and resources to meet 
his monthly maintenance needs. 

With respect to post-eligibility determinations regarding 
the extent of assistance, the MCCA provides more explicit 
guidance. For example, subsection (b)(2) provides that, if 
payment of income is made solely in the name of one spouse, 
that income is generally treated as available only to the 
named spouse. 42 U.S.C. 1396r-5(b)(2). That requirement is 
called the “name-on-the-check” rule. Subsection (d) in turn 
provides a number of exceptions to that rule to ensure that 
the community spouse has sufficient income to meet his basic 
monthly needs. Among other things, it establishes a “mini- 
mum monthly maintenance needs allowance” or “MMMNA.” 
42 U.S.C. 1396r-5(d)(3). The MMMNA for a community 
spouse is relatively generous: Although the MMMNA sup- 
ports only the community spouse while the other spouse is in 
an institution, it is set at 150% of the poverty line for a 
couple, plus an “excess shelter allowance” that reflects cer- 
tain housing expenses to the extent they consume more than 
30% of the 150% figure. 42 U.S.C. 1396r-5(d)(3) and (4). 

If the income of the community spouse (as determined un- 
der 42 U.S.C. 1396r-5(b)(2)) is less than the MMMNA, the 
amount of the shortfall is “deducted” from the income of the 
institutionalized spouse—reducing the amount of income that 
would otherwise be considered available for the institutional- 

6 

ized spouse’s care—so long as that income is actually avail- 
able to the community spouse. 42 U.S.C. 1396r-5(d)(1)(B) and 
(2). The amount of that deduction is the “community spouse 
monthly income allowance.” Ibid. The MCCA thus prevents 
money the community spouse receives from the institutional- 
ized spouse to meet his needs from also being considered 
available for the care of the institutionalized spouse; it there- 
by permits Medicaid to defray a greater portion of the costs 
of institutionalized care than it otherwise would.2 

b. Resources. The MCCA provides extensive rules re- 
garding the attribution of resources (e.g., assets). First, 
assets such as the family home, an automobile, and certain 
other forms of personal property are excluded from the 
definition of “resources” and thus are exempt from resource 
limits. See 42 U.S.C. 1396r-5(c)(5), 1382b(a) and (b). 

For initial eligibility determinations, the total of all of the 
couple’s resources (whether owned jointly or separately) is cal- 
culated as of the beginning of the institutionalized spouse’s 
first period of institutionalization. One half of that total (the 
“spousal share”) is allocated to each spouse. 42 U.S.C. 1396r- 
5(c)(1)(A). Nevertheless, as a general rule, all of the re- 
sources owned jointly by the couple or by either spouse sepa- 
rately are considered available for the care of the institu- 
tionalized spouse, 42 U.S.C. 1396r-5(c)(2)(A), but only to the 
extent the value of those resources exceeds the amount pro- 
tected under a special formula in Section 1396r-5(f )(2)(A). 
See 42 U.S.C. 1396r-5(c)(2)(B). By carving out that excep- 
tion, the MCCA limits the extent to which the couple’s re- 
sources must be exhausted before the institutionalized spouse 
becomes Medicaid eligible, and protects those resources for 
the benefit of the community spouse. The amount protected 
under Section 1396r-5(f )(2)(A) is the greatest of: (i) $12,000 

2 The State also must exclude a personal needs allowance, a family 
allowance for certain family members residing with the community 
spouse, and expenses incurred by the institutionalized spouse for (non- 
covered) medical or remedial care. 42 U.S.C. 1396r-5(d)(1)(A), (C) and (D). 

7 

or a State standard up to $60,000, indexed for inflation under 
subsection (g) (for 2001, the indexed ceiling amount is 
$87,000); (ii) the lesser of the spousal share (computed under 
subsection (c)(1)) or $60,000, indexed for inflation (now 
$87,000); (iii) the amount set at a “fair hearing” under 42 
U.S.C. 1396r-5(e)(2) (see pp. 7-9, infra); or (iv) the amount 
transferred pursuant to a court order. 42 U.S.C. 1396r- 
5(f )(2)(A). If the portion of the couple’s resources available 
to the community spouse is less than the protected amount 
under subsection (f )(2)(A), the institutionalized spouse may 
transfer the difference—known as the “community spouse 
resource allowance” or “CSRA”—to the community spouse. 
See 42 U.S.C. 1396r-5(f )(1) and (2). 

Once the institutionalized spouse is determined to be eligi- 
ble, the resources of the community spouse are not consid- 
ered in making post-eligibility determinations. 42 U.S.C. 
1396r-5(c)(4). 

c. The “fair hearing” requirement and the income-first 
and resources-first methods. Section 1396r-5(e) provides a 
mechanism through which an institutionalized or community 
spouse may challenge in a “fair hearing” the State’s deter- 
mination of any of a number of elements in the statutory 
formulae governing eligibility for or the extent of medical 
assistance, including the community spouse monthly income 
allowance and the CSRA. 42 U.S.C. 1396r-5(e)(2)(A). This 
case involves Section 1396r-5(e)(2)(C), which addresses the 
circumstances under which a State must replace the CSRA 
with a different sum—in effect, increasing the CSRA—dur- 
ing the “fair hearing.” 3 

Section 1396r-5(e)(2)(C) provides in relevant part: 

If either such spouse establishes that the community 
spouse resource allowance (in relation to the amount of 

3 Both the government and the courts have spoken of “increasing” or 
“raising” the CSRA. Technically, the statute provides for another allow- 
ance to be “substituted” for the CSRA. 42 U.S.C. 1396r-5(e)(2)(C). The 
difference in terminology is not material. 

8 

income generated by such an allowance) is inadequate to 
raise the community spouse’s income to the minimum 
monthly maintenance needs allowance, there shall be 
substituted, for the community spouse resource allow- 
ance * * * , an amount adequate to provide such a 
minimum monthly maintenance needs allowance. 

In essence, Section 1396r-5(e)(2)(C) requires a comparison 
between the income available to the community spouse, in- 
cluding any income generated by resources protected under 
subsection (f )(2)(A) for the benefit of the community spouse, 
with the “minimum monthly maintenance needs allowance” 
or MMMNA. If the former is less than the latter, the CSRA 
may be increased.4 Permitting the community spouse to re- 
tain (or obtain from the institutionalized spouse) additional 
income-generating resources helps enable the community 
spouse’s total income to meet the MMMNA. Absent an adjust- 
ment under subsection (e)(2)(C), those additional resources 
would be considered available to the institutionalized spouse 
in determining her Medicaid eligibility, and might have to be 
exhausted before the institutionalized spouse could become 
eligible. 

4 Although Section 1396r-5(e)(2)(C) speaks of replacing the “com- 
munity spouse resource allowance,” the CSRA technically is only one com- 
ponent of the total amount of resources protected under the MCCA. The 
MCCA defines the CSRA as the difference between the sums that can be 
protected (e.g., $60,000, adjusted for inflation) and “the amount of the 
resources otherwise available to the community spouse (determined 
without regard to such an allowance).” 42 U.S.C. 1396r-5(f )(2)(A) and (B). 
At the same time, however, the statute sometimes treats the phrase “com- 
munity spouse resource allowance” as a short-hand term for the total 
amount of protected resources under 42 U.S.C. 1396r-5(f )(2)(A). Accord- 
ingly, although Section 1396r-5(e)(2)(C) itself speaks in terms of increasing 
the CSRA, the Secretary has interpreted Section 1396r-5(e)(2)(C) as 
authorizing an increase in the resources protected by subsection (f)(2)(A). 
See Pet. App. 80a. That treatment comports with 42 U.S.C. 1396r- 
5(f )(2)(A)(iii), which provides that the total amount of resources that may 
be protected for a community spouse may be set at a fair hearing. 

9 

The issue in this case is what income a State may regard 
as available to the community spouse when determining 
whether to increase the CSRA under Section 1396r- 
5(e)(2)(C). There are two basic approaches. Under the 
“income-first” method, income of the institutionalized spouse 
that could be made available to support the community 
spouse is allocated to the community spouse for purposes of 
determining whether the community spouse has sufficient 
income to meet the MMMNA. The CSRA is not increased 
unless the community spouse’s income will not meet the 
MMMNA after taking into account any income that may be 
made available from the institutionalized spouse. In con- 
trast, under the “resources-first” approach, the CSRA is in- 
creased to the extent necessary to ensure that the com- 
munity spouse’s total income meets the MMMNA without 
first considering the extent to which income from the institu- 
tionalized spouse could be made available to the community 
spouse. In general, the income-first method makes it less 
likely that the CSRA will be increased; it thus tends to 
require couples to expend additional resources before the 
institutionalized spouse becomes Medicaid eligible. 

The Department of Health and Human Services (HHS) 
has stated in memoranda and letters that 42 U.S.C. 1396r- 
5(e)(2)(C) authorizes consideration of potential income trans- 
fers from the institutionalized spouse to the community 
spouse, so that States may adopt the income-first method. 
See Pet. App. 81a-90a (reproducing letters and memoranda); 
see also 66 Fed. Reg. 46,763, 46,765 (2001) (App., infra, 25a, 
32a) (Secretary has in the past “permitted States to employ 
income-first or other reasonable methodologies”). On Sep- 
tember 7, 2001, the Secretary issued a Notice of Proposed 
Rulemaking proposing regulations that would codify the Sec- 
retary’s policy of permitting States to use either methodol- 
ogy as a “reasonable” state-promulgated “standard[] * * * for 
determining eligibility for * * * medical assistance” under 42 
U.S.C. 1396a(a)(17). See 66 Fed. Reg. at 46,765, 46,766 

10 

(App., infra, 32a, 37a). The State of Wisconsin has, by 
statute, adopted the income-first method. Wis. Stat. Ann. 
§ 49.455(8)(d) (West 1997); Pet. App. 76a. A majority of 
other States have also adopted the income-first method. See 
U.S. Amicus Br. Pet. Stage at 11 n.4. 

2. Respondent Irene Blumer was admitted to a nursing 
facility in 1994 and applied for Medicaid through her hus- 
band, Burnett Blumer, in 1996. The Green County Depart- 
ment of Human Resources concluded that, as of respondent’s 
institutionalization in 1994, the couple had $145,644 in 
resources. The County calculated the amount of the couple’s 
resources that could be protected for Mr. Blumer to be half 
the couple’s resources, $72,822. See Pet. App. 28a; see also 
42 U.S.C. 1396r-5(f )(2)(A)(ii) (one measure of protected 
amount is lesser of spousal share or $60,000, as adjusted for 
inflation). Respondent, as the institutionalized spouse, was 
permitted to retain only $2000 in resources. The County 
determined that, as of the date of respondent’s application 
for Medicaid in 1996, the couple’s assets totaled $89,335. 
That was approximately $14,500 above the resource eligibil- 
ity threshold of $74,822 ($72,822 for Mr. Blumer and $2000 
for respondent). Pet. App. 24a-25a; see also id. at 2a. 
Respondent sought a fair hearing pursuant to 42 U.S.C. 
1396r-5(e)(2)(C). The hearing examiner concluded that, if re- 
spondent’s income (the income of the institutionalized spouse) 
were excluded from consideration, Mr. Blumer’s total monthly 
income would be $1702.45, approximately $25 less than the 
MMMNA of $1727. Pet. App. 25a, 30a; see also id. at 2a-3a. 
Accordingly, respondent argued that, under 42 U.S.C. 1396r- 
5(e)(2)(C), the CSRA should be raised to generate $25 per 
month in additional income for Mr. Blumer. Pet. App. 3a. 

The hearing examiner concluded that respondent had 
monthly income of $1262.71, and that the couple’s combined 
income therefore exceeded $2900 per month. Pet. App. 30a- 
31a. Using the income-first method required by Wisconsin 
law and permitted by HHS guidance, the hearing examiner 

11 

found that Mr. Blumer’s income could be raised to the 
MMMNA level by allocating $25 per month to him from the 
income of respondent. Id. at 31a; see also id. at 3a. 
Accordingly, the hearing examiner declined to increase the 
CSRA. Id. at 31a-32a. The effect of the decision was to 
defer respondent’s eligibility for Medicaid until the $14,500 
in excess resources were exhausted (on, for example, respon- 
dent’s care or Mr. Blumer’s needs). 

3. Respondent appealed, and the Green County Circuit 
Court affirmed. Pet. App. 19a-22a. The Wisconsin Court of 
Appeals, however, reversed. Id. at 1a-17a. In that court’s 
view, Section 1396r-5(e)(2)(C) unambiguously mandates the 
resources-first method, i.e., that the CSRA be adjusted up- 
ward to generate additional income to help Mr. Blumer meet 
the MMMNA, without considering whether respondent, his 
institutionalized spouse, could make income available to him. 
Id. at 11a. The Wisconsin Supreme Court denied the State’s 
petition for discretionary review. Id. at 18a. 

SUMMARY OF ARGUMENT 

States participating in the Medicaid program must estab- 
lish “reasonable standards * * * for determining eligibility for 
and the extent of medical assistance.” 42 U.S.C. 1396a(a)(17). 
This case concerns whether Wisconsin’s method for deter- 
mining Medicaid eligibility is permissible in light of the 
MCCA, 42 U.S.C. 1396r-5. Under 42 U.S.C. 1396r-5(e)(2)(C), 
a state examiner conducting a “fair hearing” may increase 
the community spouse resource allowance (CSRA) if the 
income generated by the CSRA otherwise would be “in- 
adequate” to raise the community spouse’s income to the 
minimum monthly maintenance needs allowance (MMMNA) 
set by statute. The Secretary has determined that States, in 
deciding whether to increase the CSRA, may count as part 
of the community spouse’s income any income the insti- 
tutionalized spouse could make available to the community 
spouse. That method is known as “income first.” 

12 

A. The Medicaid program permits use of the income-first 
method. When Congress established the Medicaid program, 
it incorporated the background principle that spouses are 
responsible for each others’ care. Schweiker v. Gray Pan- 
thers, 453 U.S. 34, 36 (1981). The MCCA establishes a lim- 
ited exception by precluding income of the community 
spouse from being treated as available to the institutional- 
ized spouse. 42 U.S.C. 1396r-5(b)(1). On the other hand, the 
MCCA nowhere prohibits income of the institutionalized 
spouse from being considered available to the community 
spouse when determining eligibility, as occurs under the 
income-first method invalidated by the Wisconsin court. The 
fact that Congress did not specifically prohibit that practice 
is strong evidence that the MCAA allows States to utilize it, 
and thus to adhere to the background principle that spouses 
may be expected to support each other. The legislative 
history of the MCCA also supports that conclusion, as does 
the Secretary’s longstanding construction of the Act. 

B. In rejecting that interpretation, the Wisconsin Court 
of Appeals relied on the fact that Congress expressly pro- 
vided for States, in post-eligibility determinations regarding 
the extent of assistance, to account for transfers of income 
made by the institutionalized spouse to help the community 
spouse achieve the MMMNA, 42 U.S.C. 1396r-5(d)(1)(B) and 
(2), but that Congress did not include that requirement for 
initial eligibility determinations. The fact that the MCCA 
specifically accommodates transfers of income from the insti- 
tutionalized spouse to the community spouse to bring the 
community spouse’s income up to the MMMNA for post- 
eligibility purposes, however, underscores the reasonable- 
ness of taking the possibility of such transfers into account 
when calculating the income available to the community 
spouse pre-eligibility. Moreover, almost all of the MCCA’s 
income-attribution rules are mandatory only for “post- 
eligibility income determination[s]” regarding the extent of 
assistance. 42 U.S.C. 1396r-5(b)(2) and (d). Under the court 

13 

of appeals’ approach, Congress’s failure to require States to 
use those income-attribution rules for initial eligibility deter- 
minations would bar the States from adapting them for that 
purpose. Yet the resources-first methodology preferred by 
the Wisconsin Court of Appeals itself borrows some of those 
post-eligibility rules for purposes of making initial eligibility 
determinations. 

The Wisconsin Court of Appeals also expressed concern 
that the income-first method might leave a community 
spouse with less income than he needs (or than the MMMNA 
provides) after the death of the institutionalized spouse. In 
most benefits and pension contexts, however, the surviving 
community spouse would be entitled to receive a significant 
portion of the payments that would otherwise have gone to 
the institutionalized spouse during her life. Moreover, the 
institutionalized spouse’s death eliminates the costs of her 
care—costs that previously absorbed much of her income. 
Consequently, the net effect following the institutionalized 
spouse’s death may often be an increase in the income avail- 
able to the community spouse. The MMMNA, in any event, 
is not the proper measure of the community spouse’s needs 
after the institutionalized spouse’s death, since it is set at a 
level appropriate to a couple. Finally, the court of appeals 
ignored the fact that increasing the resources protected for 
the community spouse necessarily diverts scarce Medicaid 
funds from potentially needier persons in order to benefit 
potentially wealthier community spouses. 

ARGUMENT 

THE SOCIAL SECURITY ACT PERMITS CONSID- 
ERATION OF INCOME AVAILABLE FROM AN INSTI- 
TUTIONALIZED SPOUSE WHEN DETERMINING 
WHETHER THE COMMUNITY SPOUSE RESOURCE 
ALLOWANCE SHOULD BE INCREASED 

In establishing the Medicaid program, Congress focused 
principally on assisting those “persons who were most im- 

14 

poverished.” Schweiker v. Hogan, 457 U.S. 569, 590 (1982). 
Under the program, “[e]ach participating State develops a 
plan containing ‘reasonable standards . . . for determining 
eligibility for and the extent of medical assistance,’ ” and an 
“individual is entitled to Medicaid if he fulfills the criteria 
established by the State in which he lives.” Schweiker v. 
Gray Panthers, 453 U.S. 34, 36-37 (1981) (quoting 42 U.S.C. 
1396a(a)(17)). State standards may “provide for taking into 
account only such income and resources as are, as deter- 
mined in accordance with standards prescribed by the Secre- 
tary, available to the applicant or recipient.” 42 U.S.C. 
1396a(a)(17)(B); Gray Panthers, 453 U.S. at 42-43. 

This case concerns whether the standards established by 
the State of Wisconsin are consistent with requirements 
added by the Medicare Catastrophic Coverage Act of 1988 
(MCCA). The fundamental difference between the two ap- 
proaches at issue—income-first and resources-first—is 
whether potential income transfers to the community spouse 
from the institutionalized spouse may be taken into account 
when deciding whether to increase the community spouse 
resource allowance (CSRA). Rejecting the views of the 
Secretary, Pet. App. 81a-91a, two federal courts of appeals, 
Cleary v. Waldman, 167 F.3d 801 (3d Cir.), cert. denied, 528 
U.S. 870 (1999); Chambers v. Ohio Dep’t of Human Servs., 
145 F.3d 793, 799 (6th Cir.), cert. denied, 525 U.S. 964 (1998), 
and the highest courts of two States, Golf v. New York State 
Dep’t of Soc. Servs., 697 N.E.2d 555 (N.Y. 1998); Thomas v. 
Commissioner of the Div. of Med. Assistance, 682 N.E.2d 
874 (Mass. 1997), the Wisconsin Court of Appeals held that 
the MCCA prohibits the income-first method used by most 
States, under which such potential income transfers are con- 
sidered. Instead, that court held, the MCCA unambiguously 
requires use of the resources-first method. In so holding, the 
court of appeals misconstrued the Act, inappropriately sub- 
stituted its own views for the reasoned and consistent ap- 
proach of the federal agency to which Congress entrusted 

15 

the statute for administration, and usurped the discretion 
that Congress afforded the States in this program of 
cooperative federalism. 

A. The Text, Structure, History, And Administrative 

Interpretation Of The MCCA Establish That States 

May Use The Income-First Methodology 

1. In enacting the Medicaid program, Congress pro- 
ceeded on the premise that “it is proper to expect spouses to 
support each other.” S. Rep. No. 404, 89th Cong., 1st Sess., 
Pt. 1, 78 (1965); see also H.R. Rep. No. 213, 89th Cong., 1st 
Sess. 68 (1965). Thus, Congress prohibited States from 
“tak[ing] into account the financial responsibility of any 
individual for any applicant * * * unless such applicant or 
recipient is such individual’s spouse” or minor child. 42 
U.S.C. 1396a(a)(17)(D) (emphasis added). In view of that 
statutory text, the Secretary and the States for decades 
deemed each spouse’s income and resources to be available 
for the care of the other, whether or not they were actually 
furnished, subject to such regulatory restrictions as might be 
adopted by the Secretary. See pp. 2-4 & note 1, supra. 
Upholding that construction in Gray Panthers, this Court 
concluded that “Congress treated spouses differently from 
most other relatives by explicitly authorizing state plans to 
‘take into account the financial responsibility’ of the spouse.” 
453 U.S. at 47 (quoting 42 U.S.C. 1396a(a)(17)(D)). 

In enacting the MCCA in 1988, Congress modified that 
general rule in part. The MCCA provides that, “[d]uring any 
month in which an institutionalized spouse is in the institu- 
tion, * * * no income of the community spouse shall be 
deemed available to the institutionalized spouse.” 42 U.S.C. 
1396r-5(b)(1). The MCCA thus forbids the community 
spouse’s income, even if potentially transferrable, from being 
deemed available to the institutionalized spouse. But it no- 
where precludes the Secretary or the States from treating 
excess income of the institutionalized spouse as available to 

16 

the community spouse in making initial eligibility determin- 
ations, as occurs under the income-first method. The most 
natural inference to be drawn from that omission is that 
Congress did not intend to preclude States from treating the 
income of institutionalized spouses as available to provide 
financial support for community spouses where that is nec- 
essary to raise the income of the community spouse to the 
minimum monthly maintenance needs allowance (MMMNA). 
See 66 Fed. Reg. at 46,766 (App., infra, 34a) (Secretary’s 
conclusion that omission “supports an inference that it is per- 
missible to consider all or some portion of the institutional- 
ized spouse’s income to be available to the community 
spouse”). The soundness of treating excess income of the 
institutionalized spouse as available for maintaining the 
household used by the community spouse is reinforced by 
the fact that the MMMNA is set at 150% of the poverty level 
for a couple. See 42 U.S.C. 1396r-5(d)(3). 

Moreover, when Congress revisited the general subject of 
spousal attribution in 1988 and adopted the specific income- 
attribution rules in the MCCA, it acted against a background 
that included not merely a longstanding agency construction 
and settled state practices of presuming or requiring spouses 
to support each other (subject only to certain limits set by 
the Secretary, see pp. 2-4 & note 1, supra), but also express 
statutory support for that approach and this Court’s deci- 
sions in Gray Panthers and Herweg v. Ray, 455 U.S. 265 
(1982), upholding it. Cf. United States v. Wells, 519 U.S. 482, 
495 (1997); Morton v. Mancari, 417 U.S. 535, 551 (1974). 
These circumstances make all the more compelling the con- 
clusion that Congress’s enactment of a specific prohibition 
against deeming the community spouse’s income to be avail- 
able to the institutionalized spouse, and its failure to adopt 
any reciprocal prohibition against considering the institu- 
tionalized spouse’s income as available to the community 
spouse, leaves the States free to apply the background prin- 
ciple of spousal support when deciding whether to protect 

17 

additional resources for the community spouse. See Saxbe v. 
Bustos, 419 U.S. 65, 74 (1974); CFTC v. Schor, 478 U.S. 833, 
846 (1986); Haig v. Agee, 453 U.S. 280, 297-298 & n.37 (1981). 

Indeed, for post-eligibility determinations regarding the 
extent of assistance, Congress expressly provided for the 
income of the institutionalized spouse to be used to support 
the community spouse. See 42 U.S.C. 1396r-5(d)(1)(C) and 
(2) (where community spouse’s income is less than MMMNA, 
difference is deducted from institutionalized spouse’s income 
for post-eligibility purposes, to the extent such amount is 
actually made available to the community spouse). It follows 
that a state standard that anticipates such transfers for eligi- 
bility purposes (when deciding whether to protect additional 
resources) is at least a “reasonable standard[] * * * for 
determining [Medicaid] eligibility,” 42 U.S.C. 1396a(a)(17) 
(emphasis added). Compare Mourning v. Family Pubs. 
Serv., Inc., 411 U.S. 356, 372-373 (1973). In determining 
whether to increase the CSRA in a fair hearing under sub- 
section (e)(2)(C)—where the task is to determine whether 
the community spouse has sufficient income to meet his 
needs—the State must determine what income is available 
to support the community spouse. It would be perverse to 
construe Section 1396r-5 to require the hearing officer to 
ignore the income of the institutionalized spouse in making 
that determination when another provision of the same 
enactment expressly contemplates that some portion of the 
institutionalized spouse’s income may be made available to 
the community spouse for that very purpose. 

The structure of the MCCA as a whole, in fact, suggests 
that transfers from institutionalized spouses to community 
spouses are the ordinary method of bringing the community 
spouse’s income up to the MMMNA. Congress provided an 
express and precise formula that can be used to account for 
such transfers for post-eligibility purposes without resort to 
a hearing. 42 U.S.C. 1396r-5(d)(1)(B) and (d)(2). In addition, 
Congress provided a precise formula for determining the ex- 

18 

tent resources may be protected through the CSRA. 42 
U.S.C. 1396r-5(f )(2). In contrast, increases in the community 
spouse’s income through an adjustment to the CSRA can be 
achieved only by invoking an exception to the statutory 
CSRA formula; the exception requires use of a hearing pro- 
cess; and the amount of any increase is not governed by a 
precise formula. It can be inferred from this structure that 
Congress anticipated that the community spouse ordinarily 
would “have his or her resources and income protected in the 
manner dictated by” the MCCA’s “precise and detailed for- 
mula[e],” and that departure from the statutory CSRA 
through “fair hearings” would occur only where those formu- 
lae cannot “provide the protection that Congress contem- 
plated.” See Pet. App. 81a (1993 HCFA memorandum). 

2. The legislative history supports the conclusion that 
the income-first method is permissible. Addressing the very 
provision at issue here, the Conference Report declares: 

If the State, after such a hearing, determines that the 
community spouse resource allowance is inadequate, the 
State must allow the community spouse to retain an ade- 
quate amount of resources to provide the minimum 
monthly maintenance needs allowance (taking into 
account any other income attributable to the community 
spouse), notwithstanding the amount of the State- 
established resource allowance. 

H.R. Conf. Rep. No. 661, 100th Cong., 2d Sess. 265 (1988) 
(emphasis added); see also id. at 267 (similar). The Confer- 
ence Report thus demonstrates that Congress understood 
that there might be “other income attributable to the com- 
munity spouse” that a State may consider when determining 
whether to raise the CSRA. 

3. Consistent with the foregoing analysis, the Secretary 
has long interpreted the MCCA as permitting States, in 
establishing “reasonable standards * * * for determining 
eligibility,” 42 U.S.C. 1396a(a)(17), to take into account 
income of an institutionalized spouse that may be made 

19 

available to the community spouse when deciding whether to 
increase the CSRA. In 1993, the Health Care Financing 
Administration (HCFA)—now known as the Centers for 
Medicare and Medicaid Services (CMS)—advised States that 
they may require “that the institutionalized spouse 

* * * first make available the maximum amount of income 
he or she can as a community spouse monthly income allow- 
ance * * * before being allowed to raise the [CSRA],” and 
that States “have the discretion to determine the maximum 
amount of income that the institutionalized spouse can afford 
to protect for the community spouse.” Pet. App. 81a; see 
also Pet. App. 86a (Mar. 1994) (“States have the option to use 
the ‘income first’ rule or to apply some other reasonable” 
methodology); Pet. App. 89a (July 1994) (same); Pet. App. 
90a (Mar. 1996) (Letter from Secretary Shalala stating that 
Ohio’s income-first policy is “legally permissible”). 

As the Secretary recently explained in proposing a regu- 
lation to formally codify that rule: 

We have previously issued policy memoranda and 
letters expressing our view that [42 U.S.C. 1396r- 
5(e)(2)(C)] authorizes a State to consider potential in- 
come transfers from an institutionalized spouse to a com- 
munity spouse, so that a State may adopt the income- 
first method or apply some other reasonable methodol- 
ogy * * *. In other words, consistent with the statutory 
requirement that State[s] utilize “reasonable standards” 
for determining eligibility and the amount of benefits as 
described in [42 U.S.C. 1396a](a)(17), we have permitted 
States to employ income-first or other reasonable meth- 
odologies. 

66 Fed. Reg. at 46,765 (App., infra, 31a-32a). Indeed, a 
provision of the State Medicaid Manual—issued days after 
the MCCA provisions became effective—explains that, in 
deciding whether to substitute another amount for (i.e., 
increase) the CSRA, “[t]here are no substitutions when insti- 
tutionalized spouses do not make available monthly income 

20 

allowances to community spouses.” State Medicaid Manual 
§ 3262.3 (Oct. 1989) (available at http://www.hcfa.gov/ 
pubforms/pub45pdf/sm3260.pdf)5; see also Pet. App. 85a- 
86a, 88a (HCFA memoranda discussing Manual § 3262.3). 

In construing an Act of Congress entrusted to an agency 
for administration, courts must give respectful consideration 
to the views of the agency when, as here, Congress has not 
itself “directly spoken to the precise question at issue.” 
Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 
U.S. 837, 842 (1984). See Udall v. Tallman, 380 U.S. 1, 16 
(1965); United States v. Mead Corp., 121 S. Ct. 2164, 2175 
(2001) (remanding court of appeals decision made without 
any regard to agency’s letter ruling). This Court, in fact, has 
accorded Chevron-like deference to the Secretary’s view on 
issues like this one, even when that view is expressed in 
informal memoranda and letters. In Lukhard v. Reed, 481 
U.S. 368 (1987), a majority of this Court agreed that the 
Secretary’s view—there, that the Social Security Act per- 
mits but does not require States to treat tort awards as in- 
come when determining eligibility—“is entitled to defer- 
ence,” even though that view was expressed only in letters 
and memoranda. Id. at 378 (plurality); id. at 383 (Blackmun, 
J., concurring) (emphasizing deference). See also Mead, 121 
S. Ct. at 2176 & n.17 (identifying cases in which agency 
views expressed in informal or non-binding formats were not 
given “Chevron-style” deference); Christensen v. Harris 
County, 529 U.S. 576, 586 (2000). 

In any event, considering “the degree of the agency’s care, 
its consistency, formality, and relative expertness, and * * * 
the persuasiveness of [its] position,” there can be little doubt 
that the agency’s longstanding views are entitled to substan- 

5 The Manual provision is dated “10-89.” The relevant provisions of 
the MCCA apply only where a spouse has been continuously institu- 
tionalized on or after September 30, 1989. Pub. L. No. 100-360, 
§ 303(g)(1)(B), 102 Stat. 763. 

21 

tial weight here. Mead, 121 S. Ct. at 2171. See Skidmore v. 
Swift & Co., 323 U.S. 134, 140 (1944). The Secretary’s views 
have been consistent. See 66 Fed. Reg. at 46,765 (App., 
infra, 31a-32a); Pet. App. 81a-90a. Respect is “[p]articularly 

* * * due when,” as here, “the administrative practice at 
stake ‘involves a contemporaneous construction of a stat- 
ute.’ ” Udall, 380 U.S. at 16 (quoting Power Reactor Dev. Co. 

v. International Union of Elec., 367 U.S. 396, 408 (1961)). 
And, in light of the extreme complexity of the Act’s inter- 
locking provisions, the need for the Secretary’s expertise is 
at its apogee. See Hogan, 457 U.S. at 571; Alcoa v. Central 
Lincoln Peoples’ Util. Dist., 467 U.S. 380, 390 (1984). 

B. The Wisconsin Court Of Appeals’ Reasons For Reject- 
ing the Secretary’s Construction Are Unpersuasive 

1. The Wisconsin Court of Appeals’ primary reason for 
rejecting the Secretary’s conclusion that the MCCA allows 
States to use the income-first approach was its view that the 
MCCA unambiguously forbids consideration of potential in- 
come transfers from the institutionalized spouse to the com- 
munity spouse when deciding whether to raise the CSRA. 
To support that view, the court of appeals relied on the fact 
that Section 1396r-5(e)(2)(C) “very specifically directs the 
increase” of the CSRA “to an amount sufficient to generate 
additional income to meet” the MMMNA. Pet. App. 11a. 
That observation, however, merely begs the question in this 
case. In deciding whether the unadjusted CSRA “is inade- 
quate * * * to raise the community spouse’s income” to the 
MMMNA for purposes of Section 1396r-5(e)(2)(C), the State 
necessarily must calculate “the community spouse’s income.” 
The MCCA does not define the phrase “community spouse’s 
income,” and it provides no rules regarding which potential 
income sources may be counted in determining that income’s 
adequacy. In particular, subsection (e)(2)(C) does not 
address whether, in determining the adequacy of the com- 
munity spouse’s income, it is permissible to consider poten- 

22 

tial income transfers from the institutionalized spouse to the 
community spouse. Contrast 42 U.S.C. 1396r-5(b)(1) (bar- 
ring consideration of community spouse income as available 
to the institutionalized spouse); pp. 15-17, supra. As one 
court has explained, the view adopted by the Wisconsin 
Court of Appeals fails to confront the question whether “a 
community spouse’s ‘income’ includes—or does not include 
—any transfer of income from the institutionalized spouse.” 
Chambers, 145 F.3d at 799. Whether such potentially “trans- 
ferred income is included” is what distinguishes between 
“the two possible approaches” (income-first and resources- 
first) “used to implement subsection (e)(2)(C).” Ibid. 

On that issue, the MCCA is silent. Chambers, 145 F.3d at 
802. In this context, that silence is fatal to the Wisconsin 
court’s analysis. In the MCCA, Congress included a provi- 
sion declaring that, “[e]xcept as [Section 1396r-5] specifi- 
cally provides,” the MCCA “does not apply to” a “determi- 
nation of what constitutes income or resources” or “the 
methodology and standards for determining and evaluating 
income and resources.” 42 U.S.C. 1396r-5(a)(3) (emphasis 
added). Section 1396r-5 nowhere “provides” that income 
from the institutionalized spouse may not “constitute[] in- 
come” of the community spouse when deciding whether to 
raise the CSRA, and it certainly does not do so “specifically.” 

2. The Wisconsin Court of Appeals also relied on the fact 
that the adjustment to the CSRA is a pre-eligibility deter- 
mination. Pet. App. 12a-13a. For post-eligibility determina- 
tions, the court observed, the MCCA provides specific rules. 
Under one such rule, if “the amount of monthly income 
otherwise available to the community spouse” is less than 
the MMMNA—and if the institutionalized spouse makes the 
difference available to the community spouse—that amount 
(the “community spouse monthly income allowance”) “shall 
be deducted from the [institutionalized] spouse’s monthly 
income” in determining the extent of assistance furnished to 
the institutionalized spouse. 42 U.S.C. 1396r-5(d)(1)(B) and 

23 

(2). The court read those provisions as “direct[ing] the 
institutionalized spouse to transfer income to the community 
spouse if the community spouse’s income falls short of the 
MMMNA.” Pet. App. 12a. Noting that Congress did not 
specifically provide for such a transfer in the case of initial 
eligibility determinations, the court inferred that such attri- 
bution is prohibited in that setting. It reasoned: “Because 
§ 1396r-5(d) (relating to transferring income) is limited to 
post-eligibility determination transfers, * * * then increas- 
ing the CSRA via resources is the only method by which a 
community spouse can be afforded more income for the 
MMMNA at the time [Medicaid] eligibility is being deter- 
mined for the institutionalized spouse.” Id. at 13a. 

The court of appeals proceeded from an erroneous prem- 
ise. Subsection (d)(1)(B) does not itself direct the institu- 
tionalized spouse to transfer income to the community 
spouse, and it does not address the question of whether a 
State may require the institutionalized spouse to do so. 
Rather, it provides that, if the community spouse’s income is 
less than the MMMNA, and if the difference (the community 
spouse income allowance) is transferred to the community 
spouse, then that amount is deducted from the institutional- 
ized spouse’s income for purposes of determining the extent 
of assistance the institutionalized spouse will receive. That 
provision in no way demonstrates that Congress intended to 
bar a State from treating a portion of the institutionalized 
spouse’s income as available to the community spouse for 
purposes of determining whether the community spouse’s 
income meets or exceeds the MMMNA. To the contrary, the 
very fact that Congress fashioned special rules accommodat- 
ing the transfer of such income to the community spouse 
when the transfer actually occurs post-eligibility strongly 
reinforces the conclusion that a State may regard such 
income as available to the community spouse in determining, 
at the initial eligibility stage, whether the income available 
to the community spouse falls short of the MMMNA (and, 

24 

accordingly, whether an increase in the CSRA is called for). 
Indeed, while the Wisconsin Court of Appeals posited (Pet. 
App. 11a) that Congress demonstrated an intent to prohibit 
imputing the institutionalized spouse’s income to the com- 
munity spouse when deciding whether to raise the CSRA by 
failing to include “direct or specific language” stating that 
such “imputation * * * should occur,” the legislative history 
shows the opposite to be true. As pointed out above (p. 18, 
supra), the Conference Report expressly contemplates that 
there might be “other income attributable to the community 
spouse” that can be considered when determining whether 
to increase the CSRA. 

The court of appeals’ reasoning also proves too much, be- 
cause Congress did not make any of the extensive income- 
attribution rules—except the prohibition on attributing com- 
munity spouse income to the institutionalized spouse, 42 
U.S.C. 1396r-5(b)(1)—applicable to initial eligibility deter- 
minations. See 42 U.S.C. 1396r-5(b)(2) (providing rules for 
“[a]ttribution of income” for “purposes of the post-eligibility 
income determination”); H.R. Conf. Rep. No. 661, at 262 (in- 
come-attribution requirements in Subsection (b)(2) “appl[y] 
only to post-eligibility treatment”). For example, “[i]n de- 
termining the income of an institutionalized or community 
spouse for purposes of the post-eligibility income determina- 
tion,” the MCCA provides that non-trust income “shall be 
considered only available to” the spouse in whose name the 
“payment of income is made.” 42 U.S.C. 1396r-5(b)(2). Thus, 
under the court of appeals’ analysis, the fact that Congress 
omitted any requirement that States follow that name-on- 
the-check rule in initial eligibility determinations would pre- 
clude States and the Secretary from following that rule in 
determining eligibility. Similarly, Congress’s provision of 
mandatory rules for allocating payments made in the names 
of both spouses or in the name of either spouse and a third 
party for post-eligibility decisions, 42 U.S.C. 1396r-5(b)(2)(A) 
(ii) and (iii), and its failure to require use of those rules in 

25 

making initial eligibility determinations, would preclude 
States from employing those rules in determining eligibility. 
That result would frustrate, not further, Congress’s intent. 

3. Ultimately, a comparison between the extensive rules 
that Congress established for attributing income post-eligi- 
bility, see 42 U.S.C. 1396r-5(b)(2)(A)-(D) and (d)(1)-(5), and 
the singular prohibition (against attributing community 
spouse income to the institutionalized spouse) that applies in 
making initial eligibility determinations, 42 U.S.C. 1396r- 
5(b)(1), proves just one thing—that Congress did not defini- 
tively resolve most of the complex issues concerning income 
attribution in the context of initial eligibility determinations. 
The statute thus presents a textbook example of a legislative 
“gap.” Cf. Chevron, 467 U.S. at 843. Consistent with the 
principles of cooperative federalism that undergird the Medi- 
caid program, Congress in 42 U.S.C. 1396a(a)(17) expressed 
its expectation that the States would establish “reasonable 
standards * * * for determining eligibility for and the 
extent of medical assistance.” Cf. Wilder v. Virginia Hosp. 
Ass’n, 496 U.S. 498, 506 (1990) (Medicaid provision requiring 
States to reimburse hospitals for “reasonable costs” is 
designed to afford “States some degree of flexibility to adopt 
their own methods”); Lukhard v. Reed, supra (upholding 
Secretary’s policy of permitting but not compelling States to 
treat personal injury awards as “income”). 

Moreover, in Section 1396a(a)(17)(B), Congress expressed 
its expectation that it would be the Secretary who would 
establish the boundaries of reasonableness. State plans, that 
Section declares, must “provide for taking into account only 
such income and resources as are, as determined in accor- 
dance with standards prescribed by the Secretary, available 
to the applicant or recipient.” 42 U.S.C. 1396a(a)(17)(B) (em- 
phasis added). This Court has recognized that Congress, by 
using such language, “expressly delegated to the Secretary 
the power to prescribe standards.” Batterton v. Francis, 432 
U.S. 416, 425 (1977). “In a situation of this kind, Congress 

26 

entrusts * * * the primary responsibility for” providing 
content to the statute “to the Secretary, rather than to the 
courts.” Ibid. See also id. at 421-422, 429-432 (because the 
statute permits the Secretary to “prescribe standards,” the 
Secretary may adopt a rule that permits States to choose 
among reasonable options). 

In this case, the Wisconsin court ignored Section 
1396a(a)(17)’s express vesting of authority in the States and 
the Secretary. Confronted with the MCCA’s failure to pro- 
vide extensive rules regarding income attribution between 
spouses in making initial eligibility determinations, and the 
absence of a definition of “community spouse’s income” for 
purposes of 42 U.S.C. 1396r-5(e)(2)(C), the court of appeals 
essentially invented its own. Thus, in announcing a 
resources-first requirement, the court of appeals borrowed 
the name-on-the-check rule from the post-eligibility context, 
so that any income in the community spouse’s name is 
deemed to be the community spouse’s alone, and income in 
the institutionalized spouse’s name is deemed to be the 
institutionalized spouse’s alone. 42 U.S.C. 1396r-5(b)(2). At 
the same time, the court refused to attach any significance to 
the exception to that rule contained in Section 1396r-5(d), 
also applicable post-eligibility, under which income of the 
institutionalized spouse may be transferred and attributed to 
the community spouse if the income “otherwise available to” 
the community spouse is less than the MMMNA. See 42 
U.S.C. 1396r-5(d)(1)(B) and (2). Such a pick-and-choose 
approach, given the statute’s complexity, may well yield a 
permissible means of implementing the MCCA. But it is 
hardly compelled by the statutory text. Rather, one would 
ordinarily think that, if a State may look to the post- 
eligibility name-on-the-check rule for guidance in making 
initial eligibility determinations, it may also consider the 
effect of exceptions to that rule. That has long been the Sec- 
retary’s view. As the Secretary explained in 1993, “[s]ince 
the institutionalized spouse must transfer the income 

27 

allowance to the community spouse to have it deducted in 
the post-eligibility calculation, the State should include this 
income as available to the community spouse when it counts 
that spouse’s own income.” See Pet. App. 83a. 

The Wisconsin Court of Appeals offered two reasons for 
declining to accord the Secretary’s views any weight. First, 
the court concluded that deference is inappropriate because 
the MCCA unambiguously forecloses the income-first ap- 
proach. Pet. App. 16a. As we have explained above, that 
conclusion is demonstrably incorrect. Second, the court be- 
lieved that HHS “has not interpreted the statute consis- 
tently.” Pet. App. 16a. Not so: HHS without exception has 
taken the position that the income-first rule is a permissible 
methodology. See pp. 18-21, supra. Indeed, HHS announced 
its view in the State Medicaid Manual days after the MCCA 
became effective. See pp. 19-20 & note 5, supra. That guid- 
ance has not been amended since its adoption, and the Wis- 
consin court pointed to no HHS document or pronouncement 
suggesting that the income-first rule is impermissible.6 

6 To the extent the agency has vacillated, it has been on whether 
resources-first—the alternative approach the state court imposed here— 
is similarly permissible. The agency policy statement issued in November 
1993 suggested that the agency was “requiring” income-first, i.e., “that the 
institutionalized spouse must first make available the maximum amount of 
income he or she can as a community spouse monthly income allowance 
under [42 U.S.C. 1396r-5(d)(1)(B)] before being allowed to raise the 
[CSRA].” Pet. App. 81a. Later, on March 3, 1994, HCFA issued a memo- 
randum stating that the November 1993 memorandum should not be read 
as requiring the income-first method. Id. at 85a, 88a. Rather, the agency 
left the States “the option to use the ‘income first’ rule or to apply some 
other reasonable” methodology “until we have issued final regulations 
which specifically address this issue.” Id. at 86a. Thus, HHS has never 
departed from its view that Section 1396r-5 permits States to use an 
income-first method. Rather, the agency has merely indicated that, in 
view of the ambiguity in the statute, the federal government would pay 
the resulting federal share of Medicaid benefits to States using either the 
income-first or resources-first method because each constitutes a “rea- 
sonable” standard for determining eligibility. See 66 Fed. Reg. at 46,766 
(App., infra, 32a). 

28 

4. Finally, the Wisconsin court’s judgment rested on a 
policy concern that the income-first method might leave 
community spouses with income that is less than the 
MMMNA if the institutionalized spouse dies before the 
community spouse does. Pet. App. 14a-15a. 

As an initial matter, that analysis rests on a dubious fac- 
tual assumption—that, as a general rule, when the institu- 
tionalized spouse dies, her income stream essentially disap- 
pears, rather than being transferred in large part to her 
spouse as a devisee or heir of her estate or as the recipient of 
survivor’s benefits under statutory or private pension ar- 
rangements. In most benefits and pension contexts, a sur- 
viving spouse is entitled to receive, on his spouse’s death, a 
substantial share of the benefits that were payable to the 
deceased spouse (or to the two spouses jointly) during her 
lifetime. For example, the Employee Retirement Income 
Security Act “requires that every qualified joint and survi- 
vor annuity include an annuity payable to a nonparticipant 
surviving spouse,” and that the survivor’s annuity be not 
“less than 50% of the amount of the annuity which is payable 
during the joint lives of the participant and spouse; * * * The 
statutory object * * * is to ensure a stream of income to 
surviving spouses.” Boggs v. Boggs, 520 U.S. 833, 842-843 
(1997) (citing 29 U.S.C. 1055(a) and (d)(1)). And the Social 
Security Act also makes provision for payment of increased 
old-age benefits to surviving spouses. 42 U.S.C. 402(b)(2) 
and (c)(3); 42 U.S.C. 402(e)(2)(A) and (f )(3)(A). See also J. 
Thomas Oldham, Should the Surviving Spouse’s Forced 
Share Be Retained?, 38 Case W. Res. L. Rev. 223, 242 (1988) 
(“Federal law provides that surviving spouses normally ‘in- 
herit’ certain important benefits from the decedent * * *. 
For example, a surviving non-employee spouse normally 
inherits the right to receive the monthly Social Security 
benefits that were paid to the decedent. In addition, the 
survivor normally will receive a survivor’s annuity from the 
employee’s pension plan.”) (footnote omitted). 

29 

Consequently, the institutionalized spouse’s death does 
not necessarily or even ordinarily cause her income stream 
to become altogether unavailable to the community spouse. 
In fact, the institutionalized spouse’s death often will in- 
crease the income available to the community spouse. Be- 
fore the institutionalized spouse’s death, much of her income 
must be dedicated to the substantial costs of her institutional 
and medical care; after her death, those costs disappear, and 
any Social Security, pension or other income becomes 
directly payable to the community spouse. 

The court of appeals was also incorrect to treat the 
MMMNA as the minimum amount the community spouse 
needs after the institutionalized spouse dies. The MMMNA 
is set at 150% of the poverty threshold for a couple, plus a 
shelter allowance where necessary. 42 U.S.C. 1396r-5(d)(3) 
and (4). It thus ensures that, while the institutionalized 
spouse is alive, the community spouse can maintain a domi- 
cile and lifestyle suitable to a couple. That provision affords 
important protection where the institutionalized spouse may 
return home at some point. Once the institutionalized 
spouse is deceased, however, the MMMNA ceases to be a 
proper measure of the community spouse’s needs. 

In any event, the income-first method ensures that com- 
munity spouses are more financially secure than, for 
example, spouses whose partners are never institutionalized. 
If a couple lives together continuously, the spouses may need 
to exhaust almost all of their resources before either of them 
can qualify for Medicaid; for the surviving spouse in such a 
relationship, no CSRA or MMMNA protected resources or 
income for his support. Yet the surviving spouse who lives 
with his Medicaid-eligible partner during their married life 
suffers no lesser loss of income upon her death than would 
the surviving spouse of an institutionalized partner. 

Finally, the Wisconsin court’s analysis wholly ignores 
competing policy considerations. As this Court has ex- 
plained, “the Federal Government cannot finance a program 

30 

that provides meaningful benefits in equal measure to every- 
one. Both federal and state funds available for such assis- 
tance are limited.” Hogan, 457 U.S. at 590. As a result, 
Medicaid is generally reserved for the Nation’s most needy. 
Ibid. The MCCA creates a generous exception to that rule, 
and to the general rule that spouses are expected to support 
each other. Under the MCCA, if one spouse is institu- 
tionalized, the couple need not exhaust its resources; some 
resources are protected through the CSRA. By requiring 
further increases in the CSRA for the benefit of community 
spouses, even though most other applicants (including other 
couples) may have much more limited resource allowances, 
the court of appeals’ approach necessarily decreases the 
funding available for potentially more needy persons in 
order to make additional dollars available to relatively less 
needy community spouses. Any policy rationale that may be 
thought to support such a result must be weighed against 
that competing concern. 

Accordingly, while the resources-first approach consti- 
tutes a “reasonable” and permissible method of implement- 
ing 42 U.S.C. 1396a(a)(17) and 1396r-5(e)(2)(C), that single 
approach is by no means compelled by the relevant policy 
considerations, much less by the text of the MCCA. The 
income-first approach also is a reasonable and permissible 
method of implementing the Act, as demonstrated by the 
structure of the Act as a whole, the legislative history of the 
MCCA, and the Secretary’s longstanding and consistent 
interpretation. 

CONCLUSION 

The judgment of the Wisconsin Court of Appeals should 
be reversed. 

Respectfully submitted. 

31 

ALEX AZAR II 

General Counsel 

SHEREE R. KANNER 

Chief Counsel 

Centers forMedicare & 
Medicaid Services 

HENRY R. GOLDBERG 

Deputy Chief Counsel 

Centers for Medicare & 
Medicaid Services 

CAROLE F. KAGAN 
DAVID R. SMITH 
MYRA K. ERHARDT 

Attorneys 

Department of Health and 

Human Services 
THEODORE B. OLSON 
Solicitor General 

STUART E. SCHIFFER 

Acting Assistant Attorney 

General 

EDWIN S. KNEEDLER 

Deputy Solicitor General 

JEFFREY A. LAMKEN 

Assistant to the Solicitor 

General 

WILLIAM KANTER 
BRUCE G. FORREST 

Attorneys 

SEPTEMBER 2001 

APPENDIX A 

1. Section 1902(a) of the Social Security Act, 42 U.S.C. 
1396a(a) (1994 & Supp. V 1999), provides in pertinent part: 

§ 1396a. 

State plans for medical assistance 

(a) Contents 

A State plan for medical assistance must— 

(1) provide that it shall be in effect in all political 
subdivisions of the State, and, if administered by them, 
be mandatory upon them; 

(2) provide for financial participation by the State 
equal to not less than 40 per centum of the non-Federal 
share of the expenditures under the plan with respect to 
which payments under section 1396b of this title are 
authorized by this subchapter; and, effective July 1, 1969, 
provide for financial participation by the State equal to 
all of such non-Federal share or provide for distribution 
of funds from Federal or State sources, for carrying out 
the State plan, on an equalization or other basis which 
will assure that the lack of adequate funds from local 
sources will not result in lowering the amount, duration, 
scope, or quality of care and services available under the 
plan; 

(3) provide for granting an opportunity for a fair 
hearing before the State agency to any individual whose 
claim for medical assistance under the plan is denied or is 
not acted upon with reasonable promptness; 

* * * * * 

(1a) 

2a 

(10) provide— 

(A) for making medical assistance available, in- 
cluding at least the care and services listed in para- 
graphs (1) through (5), (17) and (21) of section 1396d(a) 
of this title, to— 

(i) all individuals— 

(I) who are receiving aid or assistance under 
any plan of the State approved under subchapter 
I, X, XIV, or XVI of this chapter, or part A or part 
E of subchapter IV of this chapter (including in- 
dividuals eligible under this subchapter by reason 
of section 602(a)(37), 606(h), or 673(b) of this title, 
or considered by the State to be receiving such aid 
as authorized under section 682(e)(6) of this title), 

(II) with respect to whom supplemental secur- 
ity income benefits are being paid under sub- 
chapter XVI of this chapter (or were being paid as 
of August 22, 1996) and would continue to be paid 
but for the enactment of that section or who are 
qualified severely impaired individuals (as defined 
in section 1396d(q) of this title), 

(III) who are qualified pregnant women or 
children as defined in section 1396d(n) of this title, 

(IV) who are described in subparagraph (A) 
or (B) of subsection (l)(1) of this section and whose 
family income does not exceed the minimum in- 
come level the State is required to establish under 
subsection (l)(2)(A) of this section for such a 
family; 

(V) who are qualified family members as de- 
fined in section 1396d(m)(1) of this title, 

3a 

(VI) who are described in subparagraph (C) of 
subsection (l)(1) of this section and whose family 
income does not exceed the income level the State 
is required to establish under subsection (l)(2)(B) 
of this section for such a family, or 

(VII) who are described in subparagraph (D) 
of subsection (l)(1) of this section and whose family 
income does not exceed the income level the State 
is required to establish under subsection (l)(2)(C) 
of this section for such a family; 

(ii) at the option of the State, to any group or 
groups of individuals described in section 1396d(a) of 
this title (or, in the case of individuals described in 
section 1396d(a)(i) of this title, to any reasonable 
categories of such individuals) who are not individuals 
described in clause (i) of this subparagraph but— 

(I) who meet the income and resources re- 
quirements of the appropriate State plan de- 
scribed in clause (i) or the supplemental security 
income program (as the case may be), 

(II) who would meet the income and re- 
sources requirements of the appropriate State 
plan described in clause (i) if their work-related 
child care costs were paid from their earnings 
rather than by a State agency as a service ex- 
penditure, 

(III) who would be eligible to receive aid 
under the appropriate State plan described in 
clause (i) if coverage under such plan was as broad 
as allowed under Federal law, 

4a 

(IV) with respect to whom there is being paid, 
or who are eligible, or would be eligible if they 
were not in a medical institution, to have paid with 
respect to them, aid or assistance under the 
appropriate State plan described in clause (i), 
supplemental security income benefits under sub- 
chapter XVI of this chapter, or a State supple- 
mentary payment; 

(V) who are in a medical institution for a 
period of not less than 30 consecutive days (with 
eligibility by reason of this subclause beginning on 
the first day of such period), who meet the re- 
source requirements of the appropriate State plan 
described in clause (i) or the supplemental security 
income program, and whose income does not 
exceed a separate income standard established by 
the State which is consistent with the limit estab- 
lished under section 1396b(f)(4)(C) of this title, 

(VI) who would be eligible under the State 
plan under this subchapter if they were in a 
medical institution, with respect to whom there 
has been a determination that but for the pro- 
vision of home or community-based services de- 
scribed in subsection (c), (d), or (e) of section 1396n 
of this title they would require the level of care 
provided in a hospital, nursing facility or in- 
termediate care facility for the mentally retarded 
the cost of which could be reimbursed under 
the State plan, and who will receive home or 
community-based services pursuant to a waiver 
granted by the Secretary under subsection (c), (d), 
or (e) of section 1396n of this title, 

5a 

(VII) who would be eligible under the State 
plan under this subchapter if they were in a 
medical institution, who are terminally ill, and who 
will receive hospice care pursuant to a voluntary 
election described in section 1396d(o) of this title; 

(VIII) who is a child described in section 
1396d(a)(i) of this title— 

(aa) for whom there is in effect an adoption 
assistance agreement (other than an agreement 
under part E of subchapter IV of this chapter) 
between the State and an adoptive parent or 
parents, 

(bb) who the State agency responsible for 
adoption assistance has determined cannot be 
placed with adoptive parents without medical 
assistance because such child has special needs 
for medical or rehabilitative care, and 

(cc) who was eligible for medical assistance 
under the State plan prior to the adoption 
assistance agreement being entered into, or 
who would have been eligible for medical assis- 
tance at such time if the eligibility standards 
and methodologies of the State’s foster care 
program under part E of subchapter IV of this 
chapter were applied rather than the eligibility 
standards and methodologies of the State’s aid 
to families with dependent children program 
under part A of subchapter IV of this chapter; 

(IX) who are described in subsection (l)(1) of 
this section and are not described in clause (i)(IV), 
clause (i)(VI), or clause (i)(VII); 

6a 

(X) who are described in subsection (m)(1) of 
this section; 

(XI) who receive only an optional State 
supplementary payment based on need and paid 
on a regular basis, equal to the difference between 
the individual’s countable income and the income 
standard used to determine eligibility for such 
supplementary payment (with countable income 
being the income remaining after deductions as 
established by the State pursuant to standards 
that may be more restrictive than the standards 
for supplementary security income benefits under 
subchapter XVI of this chapter), which are avail- 
able to all individuals in the State (but which may 
be based on different income standards by political 
subdivision according to cost of living differences), 
and which are paid by a State that does not have 
an agreement with the Commissioner of Social 
Security under section 1382e or 1383c of this title; 

(XII) who are described in subsection (z)(1) of 
this section (relating to certain TB-infected in- 
dividuals); 

(XIII) who are in families whose income is less 
than 250 percent of the income official poverty line 
(as defined by the Office of Management and Bud- 
get, and revised annually in accordance with 
section 9902(2) of this title) applicable to a family 
of the size involved, and who but for earnings in 
excess of the limit established under section 
1396d(q)(2)(B) of this title, would be considered to 
be receiving supplemental security income (sub- 
ject, notwithstanding section 1396o of this title, to 
payment of premiums or other cost-sharing charges 

7a 

(set on a sliding scale based on income) that the 
State may determine); 

(XIV) who are optional targeted low-income 
children described in section 1396d(u)(2)(B) of this 
title; 

(XV) who, but for earnings in excess of the 
limit established under section 1396d(q)(2)(B) of 
this title, would be considered to be receiving sup- 
plemental security income, who is at least 16, but 
less than 65, years of age, and whose assets, re- 
sources, and earned or unearned income (or both) 
do not exceed such limitations (if any) as the State 
may establish; 

(XVI) who are employed individuals with a 
medically improved disability described in section 
1396d(v) (1) of this title and whose assets, re- 
sources, and earned or unearned income (or both) 
do not exceed such limitations (if any) as the State 
may establish, but only if the State provides 
medical assistance to individuals described in sub- 
clause (XV); 

(XVII) who are independent foster care ado- 
lescents (as defined in section 1396d(w)(1) of this 
title), or who are within any reasonable categories 
of such adolescents specified by the State; or 

(XVIII) who are described in subsection (aa) 
(relating to certain breast or cervical cancer pa- 
tients); 

* * * * * 

8a 

(17) except as provided in subsections (l)(3), (m)(3), 
and (m)(4) of this section, include reasonable standards 
(which shall be comparable for all groups and may, in 
accordance with standards prescribed by the Secretary, 
differ with respect to income levels, but only in the case 
of applicants or recipients of assistance under the plan 
who are not receiving aid or assistance under any plan of 
the State approved under subchapter I, X, XIV, or XVI, 
or part A of subchapter IV of this chapter, and with 
respect to whom supplemental security income benefits 
are not being paid under subchapter XVI of this chapter, 
based on the variations between shelter costs in urban 
areas and in rural areas) for determining eligibility for 
and the extent of medical assistance under the plan 
which (A) are consistent with the objectives of this 
subchapter, (B) provide for taking into account only such 
income and resources as are, as determined in 
accordance with standards prescribed by the Secretary, 
available to the applicant or recipient and (in the case of 
any applicant or recipient who would, except for income 
and resources, be eligible for aid or assistance in the form 
of money payments under any plan of the State approved 
under subchapter I, X, XIV, or XVI, or part A of sub- 
chapter IV, or to have paid with respect to him supple- 
mental security income benefits under subchapter XVI 
of this chapter) as would not be disregarded (or set aside 
for future needs) in determining his eligibility for such 
aid, assistance, or benefits, (C) provide for reasonable 
evaluation of any such income or resources, and (D) do 
not take into account the financial responsibility of any 
individual for any applicant or recipient of assistance 
under the plan unless such applicant or recipient is such 
individual’s spouse or such individual’s child who is under 
age 21 or (with respect to States eligible to participate in 

9a 

the State program established under subchapter XVI of 
this chapter), is blind or permanently and totally dis- 
abled, or is blind or disabled as defined in section 1382c of 
this title (with respect to States which are not eligible to 
participate in such program); and provide for flexibility 
in the application of such standards with respect to 
income by taking into account, except to the extent 
prescribed by the Secretary, the costs (whether in the 
form of insurance premiums, payments made to the State 
under section 1396b(f)(2)(B) of this title, or otherwise and 
regardless of whether such costs are reimbursed under 
another public program of the State or political sub- 
division thereof) incurred for medical care or for any 
other type of remedial care recognized under State law; 

* * * * * 

10a 

2. Section 1924 of the Social Security Act, 42 U.S.C. 
1396r-5 (1994 & Supp. V 1999), provides in pertinent part: 

§1396r-5. Treatment of income and resources for 

certain institutionalized spouses 

(a) Special treatment for institutionalized spouses 

(1) Supersedes other provisions 

In determining the eligibility for medical assistance of 
an institutionalized spouse (as defined in subsection 
(h)(1) of this section), the provisions of this section 
supersede any other provision of this subchapter 
(including sections 1396a(a)(17) and 1396a(f) of this title) 
which is inconsistent with them. 

(2) No comparable treatment required 

Any different treatment provided under this section 
for institutionalized spouses shall not, by reason of 
paragraph (10) or (17) of section 1396a(a) of this title, 
require such treatment for other individuals. 

(3) Does not affect certain determinations 

Except as this section specifically provides, this section 
does not apply to— 

(A) the determination of what constitutes income or 
resources, or 

(B) the methodology and standards for determining 
and evaluating income and resources. 

(4) Application in certain States and territories 

(A) Application in States operating under de- 
monstration projects 

In the case of any State which is providing medical 
assistance to its residents under a waiver granted 

11a 

under section 1315 of this title, the Secretary shall 
require the State to meet the requirements of this 
section in the same manner as the State would be 
required to meet such requirement if the State had in 
effect a plan approved under this subchapter. 

(B) No application in commonwealths and terri- 
tories 

This section shall only apply to a State that is one 
of the 50 States or the District of Columbia. 

(5) Application to individuals receiving services 
under PACE programs 

This section applies to individuals receiving insti- 
tutional or noninstitutional services under a PACE dem- 
onstration waiver program (as defined in section 1396u- 
4(a)(7) of this title) or under a PACE program under sec- 
tion 1936u-4 or 1395eee of this title. 

(b) Rules for treatment of income 

(1) Separate treatment of income 

During any month in which an institutionalized spouse 
is in the institution, except as provided in paragraph (2), 
no income of the community spouse shall be deemed 
available to the institutionalized spouse. 

(2) Attribution of income 

In determining the income of an institutionalized 
spouse or community spouse for purposes of the post- 
eligibility income determination described in subsection 
(d) of this section, except as otherwise provided in this 
section and regardless of any State laws relating to 
community property or the division of marital property, 
the following rules apply: 

12a 

(A) Non-trust property 

Subject to subparagraphs (C) and (D), in the case 
of income not from a trust, unless the instrument 
providing the income otherwise specifically pro- 
vides— 

(i) if payment of income is made solely in 
the name of the institutionalized spouse or the 
community spouse, the income shall be con- 
sidered available only to that respective 
spouse; 

(ii) if payment of income is made in the 
names of the institutionalized spouse and the 
community spouse, one-half of the income shall 
be considered available to each of them; and 

(iii) if payment of income is made in the 
names of the institutionalized spouse or the 
community spouse, or both, and to another 
person or persons, the income shall be con- 
sidered available to each spouse in proportion 
to the spouse’s interest (or, if payment is made 
with respect to both spouses and no such in- 
terest is specified, one-half of the joint interest 
shall be considered available to each spouse). 

(B) Trust property 

In the case of a trust— 

(i) except as provided in clause (ii), in- 
come shall be attributed in accordance with the 
provisions of this subchapter (including sec- 
tions 1396a(a)(17) and 1396p(d) of this title), 
and 

13a 

(ii) income shall be considered available 
to each spouse as provided in the trust, or, in 
the absence of a specific provision in the 
trust— 

(I) if payment of income is made 
solely to the institutionalized spouse or the 
community spouse, the income shall be con- 
sidered available only to that respective 
spouse; 

(II) if payment of income is made to 
both the institutionalized spouse and the 
community spouse, one-half of the income 
shall be considered available to each of 
them; and 

(III) if payment of income is made to 
the institutionalized spouse or the com- 
munity spouse, or both, and to another per- 
son or persons, the income shall be con- 
sidered available to each spouse in propor- 
tion to the spouse’s interest (or, if payment 
is made with respect to both spouses and 
no such interest is specified, one-half of the 
joint interest shall be considered available 
to each spouse). 

(C) Property with no instrument 

In the case of income not from a trust in which 
there is no instrument establishing ownership, sub- 
ject to subparagraph (D), one-half of the income shall 
be considered to be available to the institutionalized 
spouse and one-half to the community spouse. 

14a 

(D) Rebutting ownership 

The rules of subparagraphs (A) and (C) are 
superseded to the extent that an institutionalized 
spouse can establish, by a preponderance of the 
evidence, that the ownership interests in income are 
other than as provided under such subparagraphs. 

(c) Rules for treatment of resources 

(1) Computation of spousal share at time of 
institutionalization 

(A) Total joint resources 

There shall be computed (as of the beginning of 
the first continuous period of institutionalization 
(beginning on or after September 30, 1989) of the 
institutionalized spouse)— 

(i) the total value of the resources to the 
extent either the institutionalized spouse or 
the community spouse has an ownership in- 
terest, and 

(ii) a spousal share which is equal to 1/2 
of such total value. 

(B) Assessment 

At the request of an institutionalized spouse or 
community spouse, at the beginning of the first 
continuous period of institutionalization (beginning 
on or after September 30, 1989) of the institution- 
alized spouse and upon the receipt of relevant 
documentation of resources, the State shall promptly 
assess and document the total value described in 
subparagraph (A)(i) and shall provide a copy of such 
assessment and documentation to each spouse and 

15a 

shall retain a copy of the assessment for use under 
this section. If the request is not part of an appli- 
cation for medical assistance under this subchapter, 
the State may, at its option as a condition of pro- 
viding the assessment, require payment of a fee not 
exceeding the reasonable expenses of providing and 
documenting the assessment. At the time of pro- 
viding the copy of the assessment, the State shall 
include a notice indicating that the spouse will have a 
right to a fair hearing under subsection (e)(2) of this 
section. 

(2) Attribution of resources at time of initial 
eligibility determination 

In determining the resources of an institutionalized 
spouse at the time of application for benefits under this 
subchapter, regardless of any State laws relating to 
community property or the division of marital 
property— 

(A) except as provided in subparagraph (B), all the 
resources held by either the institutionalized spouse, 
community spouse, or both, shall be considered to be 
available to the institutionalized spouse, and 

(B) resources shall be considered to be available to 
an institutionalized spouse, but only to the extent 
that the amount of such resources exceeds the 
amount computed under subsection (f)(2)(A) of this 
section (as of the time of application for benefits). 

16a 

(3) Assignment of support rights 

The institutionalized spouse shall not be ineligible by 
reason of resources determined under paragraph (2) to 
be available for the cost of care where— 

(A) the institutionalized spouse has assigned to the 
State any rights to support from the community 
spouse; 

(B) the institutionalized spouse lacks the ability to 
execute an assignment due to physical or mental 
impairment but the State has the right to bring a 
support proceeding against a community spouse 
without such assignment; or 

(C) the State determines that denial of eligibility 
would work an undue hardship. 

(4) Separate treatment of resources after eligi- 
bility for benefits established 

During the continuous period in which an insti- 
tutionalized spouse is in an institution and after the 
month in which an institutionalized spouse is determined 
to be eligible for benefits under this subchapter, no 
resources of the community spouse shall be deemed 
available to the institutionalized spouse. 

(5) Resources defined 

In this section, the term “resources” does not include— 

(A) resources excluded under subsection (a) or (d) 
of section 1382b of this title, and 

(B) resources that would be excluded under section 
1382b(a)(2)(A) of this title but for the limitation on 
total value described in such section. 

17a 

(d) Protecting income for community spouse 

(1) Allowances to be offset from income of 

institutionalized spouse 

After an institutionalized spouse is determined or 
redetermined to be eligible for medical assistance, in 
determining the amount of the spouse’s income that is to 
be applied monthly to payment for the costs of care in 
the institution, there shall be deducted from the spouse’s 
monthly income the following amounts in the following 
order: 

(A) A personal needs allowance (described in 
section 1396a(q)(1) of this title), in an amount not less 
than the amount specified in section 1396a(q)(2) of 
this title. 

(B) A community spouse monthly income allowance 
(as defined in paragraph (2)), but only to the extent 
income of the institutionalized spouse is made 
available to (or for the benefit of) the community 
spouse. 

(C) A family allowance, for each family member, 
equal to at least 1/3 of the amount by which the 
amount described in paragraph (3)(A)(i) exceeds the 
amount of the monthly income of that family member. 

(D) Amounts for incurred expenses for medical or 
remedial care for the institutionalized spouse (as 
provided under section 1396a(r) of this title). 

In subparagraph (C), the term “family member” only 
includes minor or dependent children, dependent parents, 
or dependent siblings of the institutionalized or community 
spouse who are residing with the community spouse. 

18a 

(2) Community spouse monthly income al- 
lowance defined 

In this section (except as provided in paragraph (5)), 
the “community spouse monthly income allowance” for a 
community spouse is an amount by which— 

(A) except as provided in subsection (e) of this 
section, the minimum monthly maintenance needs 
allowance (established under and in accordance with 
paragraph (3)) for the spouse, exceeds 

(B) the amount of monthly income otherwise 
available to the community spouse (determined with- 
out regard to such an allowance). 

(3) Establishment of minimum monthly main- 
tenance needs allowance 

(A) In general 

Each State shall establish a minimum monthly 
maintenance needs allowance for each community 
spouse which, subject to subparagraph (C), is equal 
to or exceeds— 

(i) the applicable percent (described in 
subparagraph (B)) of 1/12 of the income official 
poverty line (defined by the Office of Manage- 
ment and Budget and revised annually in accor- 
dance with section 9902(2) of this title) for a 
family unit of 2 members; plus 

(ii) an excess shelter allowance (as defined 
in paragraph (4)). 

A revision of the official poverty line referred to in 
clause (i) shall apply to medical assistance furnished 
during and after the second calendar quarter that begins 
after the date of publication of the revision. 

19a 

(B) Applicable percent 

For purposes of subparagraph (A)(i), the “appli- 
cable percent” described in this paragraph, effective as 
of— 

(i) September 30, 1989, is 122 percent, 

(ii) July 1, 1991, is 133 percent, and 

(iii) July 1, 1992, is 150 percent. 

(C) Cap on minimum monthly maintenance 
needs allowance 

The minimum monthly maintenance needs allow- 
ance established under subparagraph (A) may not 
exceed $1,500 (subject to adjustment under subsections 
(e) and (g) of this section). 

(4) Excess shelter allowance defined 

In paragraph (3)(A)(ii), the term “excess shelter 
allowance” means, for a community spouse, the amount 
by which the sum of— 

(A) the spouse’s expenses for rent or mortgage 
payment (including principal and interest), taxes and 
insurance and, in the case of a condominium or 
cooperative, required maintenance charge, for the 
community spouse’s principal residence, and 

(B) the standard utility allowance (used by the State 
under section 2014(e) of Title 7) or, if the State does 
not use such an allowance, the spouse’s actual utility 
expenses, 

exceeds 30 percent of the amount described in paragraph 
(3)(A)(i), except that, in the case of a condominium or co- 
operative, for which a maintenance charge is included 
under subparagraph (A), any allowance under sub- 

20a 

paragraph (B) shall be reduced to the extent the mainte- 
nance charge includes utility expenses. 

(5) Court ordered support 

If a court has entered an order against an institu- 
tionalized 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. 

(e) Notice and fair hearing 

(1) Notice 

Upon— 

(A) a determination of eligibility for medical 
assistance of an institutionalized spouse, or 

(B) a request by either the institutionalized spouse, 
or the community spouse, or a representative acting 
on behalf of either spouse, 

each State shall notify both spouses (in the case 
described in subparagraph (A)) or the spouse making 
the request (in the case described in subparagraph 
(B)) of the amount of the community spouse monthly 
income allowance (described in subsection (d)(1)(B) of 
this section), of the amount of any family allowances 
(described in subsection (d)(1)(C) of this section), of 
the method for computing the amount of the com- 
munity spouse resources allowance permitted under 
subsection (f) of this section, and of the spouse’s right 
to a fair hearing under this subsection respecting 
ownership or availability of income or resources, and 
the determination of the community spouse monthly 
income or resource allowance. 

21a 

(2) Fair hearing 

(A) In general 

If either the institutionalized spouse or the 
community spouse is dissatisfied with a deter- 
mination of— 

(i) the community spouse monthly income 
allowance; 

(ii) the amount of monthly income other- 
wise available to the community spouse (as ap- 
plied under subsection (d)(2)(B) of this sec- 
tion); 

(iii) the computation of the spousal share 
of resources under subsection (c)(1) of this 
section; 

(iv) the attribution of resources under sub- 
section (c)(2) of this section; or 

(v) the determination of the community 
spouse resource allowance (as defined in 
subsection (f)(2) of this section); 

such spouse is entitled to a fair hearing described in 
section 1396a(a)(3) of this title with respect to such 
determination if an application for benefits under this 
subchapter has been made on behalf of the insti- 
tutionalized spouse. Any such hearing respecting the 
determination of the community spouse resource 
allowance shall be held within 30 days of the date of 
the request for the hearing. 

(B) Revision of minimum monthly maintenance 
needs allowance 

If either such spouse establishes that the com- 
munity spouse needs income, above the level other- 

22a 

wise provided by the minimum monthly maintenance 
needs allowance, due to 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. 

(C) Revision of community spouse resource 

allowance 

If either such spouse establishes that the com- 
munity spouse resource allowance (in relation to the 
amount of income generated by such an allowance) is 
inadequate to raise the community spouse’s income to 
the minimum monthly maintenance needs allowance, 
there shall be substituted, for the community spouse 
resource allowance under subsection (f)(2) of this sec- 
tion, an amount adequate to provide such a minimum 
monthly maintenance needs allowance. 

(f) Permitting transfer of resources to community 
spouse 

(1) In general 

An institutionalized spouse may, without regard to 
section 1396p(c)(1) of this title, transfer an amount equal 
to the community spouse resource allowance (as defined 
in paragraph (2)), but only to the extent the resources of 
the institutionalized spouse are transferred to (or for the 
sole benefit of) the community spouse. The transfer 
under the preceding sentence shall be made as soon as 
practicable after the date of the initial determination of 
eligibility, taking into account such time as may be neces- 
sary to obtain a court order under paragraph (3). 

23a 

(2) Community spouse resource allowance defined 

In paragraph (1), the “community spouse resource 
allowance” for a community spouse is an amount (if any) 
by which— 

(A) the greatest of— 

(i) $12,000 (subject to adjustment under 
subsection (g) of this section), or, if greater 
(but not to exceed the amount specified in 
clause (ii)(II)) an amount specified under the 
State plan, 

(ii) the lesser of (I) the spousal share 
computed under subsection (c)(1) of this sec- 
tion, or (II) $60,000 (subject to adjustment 
under subsection (g) of this section), 

(iii) the amount established under sub- 
section (e)(2) of this section; or 

(iv) the amount transferred under a court 
order under paragraph (3); 
exceeds 

(B) the amount of the resources otherwise available 
to the community spouse (determined without regard 
to such an allowance). 

(3) Transfers under court orders 

If a court has entered an order against an institu- 
tionalized spouse for the support of the community 
spouse, section 1396p of this title shall not apply to 
amounts of resources transferred pursuant to such order 
for the support of the spouse or a family member (as 
defined in subsection (d)(1) of this section). 

24a 

(g) Indexing dollar amounts 

For services furnished during a calendar year after 1989, 
the dollar amounts specified in subsections (d)(3)(C), 
(f)(2)(A)(i), and (f)(2)(A)(ii)(II) of this section shall be 
increased by the same percentage as the percentage increase 
in the consumer price index for all urban consumers (all 
items; U.S. city average) between September 1988 and the 
September before the calendar year involved. 

(h) Definitions 

In this section: 

(1) The term “institutionalized spouse” means an 
individual who— 

(A) is in a medical institution or nursing facility or 
who (at the option of the State) is described in section 
1396a(a)(10)(A)(ii)(VI) of this title, and 

(B) is married to a spouse who is not in a medical 
institution or nursing facility; 

but does not include any such individual who is not likely to 
meet the requirements of subparagraph (A) for at least 30 
consecutive days. 

(2) The term “community spouse” means the spouse of 
an institutionalized spouse. 

25a 

APPENDIX B 

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Part 431 

[CMS-2128-P] 

RIN 0938-AL06 

Medicaid Program; Continue to Allow States an Option 
Under the Medicaid Spousal Impoverishment Provi- 
sions to Increase the Community Spouse’s Income 

When Adjusting the Protected Resource Allowance 

AGENCY: Centers for Medicare & Medicaid Services 
(CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: Section 1924 of the Social Security Act 
(the Act) sets forth provisions designed to afford financial 
protection against impoverishment to a non-institutionalized 
spouse of an institutionalized individual. These provisions 
contain several formulas to provide this protection and 
specify how income and resources of spouses separated by 
institutionalization will be treated for purposes of deter- 
mining the institutionalized spouse’s Medicaid eligibility and 
calculating the amount the institutionalized spouse must 
contribute towards the cost of his or her institutional care. 
This proposed rule would implement certain provisions of 
section 1924 of the Act, which provides for fair hearings for 
an increase in the community spouse resource allowance. 

DATES: We will consider comments if we receive them at 
the appropriate address, as provided below, no later than 
5 p.m. on November 6, 2001. 

* * * * * 

26a 

FOR FURTHER INFORMATION CONTACT: 

Roy Trudel, (410) 786-3417. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: Comments received timely 
will be available for public inspection as they are received, 
generally beginning approximately 3 weeks after publication 
of a document, at the headquarters of the Centers for Medi- 
care & Medicaid Services, 7500 Security Boulevard, Balti- 
more, Maryland 21244, Monday through Friday of each week 
from 8:30 a.m. to 4 p.m. To schedule an appointment to view 
public comments, phone (410) 786-0626 or (410) 786-7195. 

I. Background 

A. Statutory Basis 

Title XIX of the Social Security Act (the Act) “provid[es] 
federal financial assistance to States that choose to reim- 
burse certain costs of medical treatment for needy persons.” 
Harris v. McRae, 448 U.S. 297, 301 (1980). Under section 
1902(a)(17) of the Act, each participating State must develop 
a plan containing “reasonable standards * * * for deter- 
mining eligibility for and the extent of medical assistance.” 
Schweiker v. Gray Panthers, 453 U.S. 34, 36 (1981). Section 
1902(a)(17)(B) of the Act states that those State standards 
must “provide for taking into account only such income and 
resources as are, as determined in accordance with stan- 
dards prescribed by the Secretary, available to the applicant 
or recipient.” 

Section 1924 of the Act requires a State with a Medicaid 
program to use special rules for the treatment of income and 
resources of married institutionalized individuals who have 
spouses who are not institutionalized. (Throughout this pre- 
amble, we use the term “institutionalized spouses” to mean 
married institutionalized individuals and the term “com- 

27a 

munity spouses” to mean spouses who are not institutional- 
ized.) These provisions are referred to as the “spousal 
impoverishment” provisions. The spousal impoverishment 
provisions govern the allocation of income and resources be- 
tween the spouses for determining Medicaid eligibility of the 
institutionalized spouse as well as allowing the States to 
determine how much income of the institutionalized spouse 
is available to be applied toward the cost of his or her insti- 
tutional care (“post-eligibility determinations”). 

B. Income and Resource Allocation 

Income and resource calculations for married persons 
have proved to be a matter of great complexity, particularly 
when one of the spouses is cared for in an institutional 
setting, such as a nursing home, but the other spouse is not 
institutionalized. Before 1989, the provisions governing the 
Medicaid eligibility of institutionalized spouses sometimes 
left the community spouse with income below the poverty 
level and with minimal resources as well. At that time, after 
the month of institutionalization, the income of the two 
spouses was considered separately in most States for pur- 
poses of determining an institutionalized spouse’s eligibility. 
However, very little of the institutionalized spouse’s income 
could be protected for use by the spouse in the community. 
This often left the community spouse with little income to 
live on. After the month of institutionalization, most States 
would consider the joint resources of the community spouse 
and the institutionalized spouse (subject to a limited ex- 
clusion), and any property owned solely by the institutional- 
ized spouse to be available for the care of the institutional- 
ized spouse. (Property owned solely by the community 
spouse was not considered.) Thus, depending on how re- 
sources were owned, many married couples would have to 
deplete almost all of their resources before the institutional- 
ized spouse would qualify for Medicaid. The net effect of 

28a 

those requirements in some cases was the “pauperization” of 
the community spouse. H.R. Rep. No. 105, 100th Cong., 1st 
Sess. Pt. 2, at 65 (1987). 

The Congress attempted to alleviate that spousal impov- 
erishment hardship in the Medicare Catastrophic Coverage 
Act (MCCA) of 1988, (Public Law 100-360, enacted on 
December 22, 1988.) The MCCA requires a State to use a 
complex set of requirements and exclusions when allocating 
income and resources between community and institutional- 
ized spouses, both when the State makes the initial eligibility 
determination, and later in post-eligibility determinations. 

In section 1924(a)(1) of the Act, it provides that the 
spousal impoverishment provisions “supersede any other 
provision” of the Medicaid statute that “is inconsistent with 
them.” However, the MCCA did not repeal the Secretary’s 
authority to prescribe standards (under section 1902(a)(17) 
(B) of the Act) for determining what income is “available” to 
a spouse, and the requirement for States to set reasonable 
standards for determining eligibility and amount of assis- 
tance. That section 1902(a)(17) authority may now only be 
exercised in a manner that does not contravene the specific 
requirements of the spousal impoverishment provisions. 

With respect to the allocation of income as part of an 
eligibility determination, the spousal impoverishment pro- 
visions impose only a single rule. Section 1924(b)(1) of the 
Act provides that during any month in which an insti- 
tutionalized spouse is in the institution, no income of the 
community spouse shall be deemed available to the insti- 
tutionalized spouse (subject to certain qualifications regard- 
ing income attribution). Thus, section 1924(b)(1) of the Act 
establishes a special rule that protects the income of the 
community spouse by excluding that income from considera- 
tion when determining whether the institutionalized spouse 
is eligible for Medicaid. Section 1924(b)(1) of the Act, how- 
ever, does not address the extent to which the State may 

29a 

consider the institutionalized spouse’s income available to 
meet the needs of the community spouse. 

With respect to income attribution after the State makes 
the initial eligibility determination, the spousal impoverish- 
ment provisions provide more extensive guidance and re- 
quirements. Specifically, section 1924(b)(2) of the Act 
provides that, if payment of income is made solely in the 
name of one spouse, that income is generally treated as 
available only to that spouse. Section 1924(d) of the Act 
provides a number of exceptions to that rule, which are 
generally designed to ensure that the community spouse has 
sufficient income to meet his or her basic monthly needs. In 
particular, section 1924(d) of the Act provides for the 
establishment of a minimum monthly maintenance needs 
allowance for each community spouse. The community 
spouse’s minimum monthly maintenance needs allowance is 
set at a level that is much higher than the official Federal 
poverty level. Once income is attributed to each of the 
spouses according to the general rules in section 1924(b) of 
the Act, the income attributed to the community spouse is 
compared to the community spouse’s minimum monthly 
maintenance needs allowance. Section 1924(d)(2) of the Act 
provides that if the community spouse’s income is less than 
the minimum monthly maintenance needs allowance, the 
amount of the shortfall can be deducted from the income of 
the institutionalized spouse that would otherwise be con- 
sidered available for the care of the institutionalized spouse. 
The amount of that deduction is referred to as the com- 
munity spouse monthly income allowance. 

The deduction of the community spouse monthly income 
allowance, in effect, prevents income the community spouse 
needs to meet basic living expenses from being considered 
available for the care of the institutionalized spouse. The 
deduction thus causes Medicaid to assume a greater portion 
of the costs of institutionalized care. The greater Medicaid 

30a 

payments for care of the institutionalized spouse would free 
up income to meet the minimum needs of the community 
spouse. The community spouse monthly income allowance, 
therefore, ensures that the community spouse’s basic month- 
ly maintenance needs can be met before the institutionalized 
spouse’s income is considered available to pay for the costs of 
his or her own institutional care. 

With respect to the attribution of resources between the 
institutionalized spouse and community spouse, the statute 
provides extensive rules for both initial and post-eligibility 
decisions. For initial eligibility determinations, each 
spouse’s share of resources is calculated as of the beginning 
of the institutionalized spouse’s first period of institution- 
alization. At that time, all of the institutionalized spouse’s 
and community spouse’s resources are tallied together, and 
one half of the total value is allocated to each spouse (the 
“spousal share”). Often, most of the resources allocated to 
the institutionalized spouse must be exhausted before the 
institutionalized spouse is eligible for Medicaid. In contrast, 
the community spouse’s share is protected from complete 
exhaustion. In particular, the community spouse’s resources 
are not considered available for the care of the institutional- 
ized spouse (and the institutionalized spouse can become 
Medicaid eligible) so long as the community spouse’s share 
does not exceed the community spouse resource allowance 
(CSRA). Thus, the CSRA limits the extent to which the 
spouses must exhaust resources before the institutionalized 
spouse becomes eligible for Medicaid. Section 1924(f)(2)(A) 
of the Act specifies that the CSRA is the greatest of 
(1) $12,000 or a State standard up to $60,000 (indexed for 
inflation; for 2001 the indexed amount is $87,000); (2) the 
lesser of the spousal share (approximately one-half of the 
spouses’ pooled resources) or $60,000 (indexed for inflation); 
(3) the amount set at a fair hearing under section 1924(e)(2) 
of the Act; or (4) the amount transferred under a court order. 

31a 

In allocating income and resources between spouses, 
States have employed two divergent methods. Under the 
method used by most States, known as the “income-first” 
method, the institutionalized spouse’s income (above the 
allowances specified in section 1924(d) of the Act) is allocated 
to the community spouse for purposes of determining the 
extent to which the community spouse has sufficient income 
to meet minimum monthly maintenance needs. Under the 
income-first method, the CSRA is increased only if the 
community spouse’s income will not reach his or her 
minimum monthly maintenance needs allowance after taking 
into account any income not protected under section 1924(d) 
that is available or potentially available from the institu- 
tionalized spouse. In contrast, under the other method, 
known as the “resources-first” method, the couple’s re- 
sources can be protected for the benefit of the community 
spouse to the extent necessary to ensure that the community 
spouse’s total income, including income generated by the 
CSRA, meets the community spouse’s minimum monthly 
maintenance needs allowance. Additional income from the 
institutionalized spouse that may be, but has not been, made 
available for the community spouse is not considered. 

C. Current Policy and Implementation of the New 

Provisions 

Section 1924(e)(2)(C) of the Act provides that if either 
spouse establishes that the CSRA (in relation to the amount 
of income generated by that allowance) is inadequate to raise 
the community spouse’s income to the minimum monthly 
maintenance needs allowance, there shall be substituted an 
amount adequate to provide a minimum monthly main- 
tenance needs allowance. 

We have previously issued policy memoranda and letters 
expressing our view that section 1924(e)(2)(C) of the Act 
authorizes a State to consider potential income transfers 

32a 

from an institutionalized spouse to a community spouse, so 
that a State may adopt the income-first method or apply 
some other reasonable methodology until we issue final 
regulations addressing the issue. Thus, under our present 
policy, States may clearly use the income-first method, and 
may be able to use other methods, such as resources-first. In 
other words, consistent with the statutory requirement that 
State’s utilize “reasonable standards” for determining eligi- 
bility and the amount of benefits as described in Section 
1902(a)(17), we have permitted States to employ income-first 
or other reasonable methodologies. In practice, no State has 
elected to use a method other than income-first or resources- 
first. The proposed regulation is therefore intended to 
codify and reflect longstanding State practices. 

However, the issue of which criteria may be employed 
during the fair hearing under section 1924(e)(2)(C) of the Act 
to determine whether, and if so by how much, to raise the 
CSRA has been the subject of some dispute. Permitting the 
community spouse to obtain a larger CSRA can give the 
community spouse additional income-generating resources to 
meet minimum monthly needs. Without an increase in the 
CSRA, the resources would be considered available to the 
institutionalized spouse and might have to be exhausted be- 
fore the institutionalized spouse would be Medicaid eligible. 
On the other hand, permitting the hearing officer to raise the 
CSRA when the institutionalized spouse has income which 
could be used to enable the community spouse to meet mini- 
mum monthly maintenance needs can, under some circum- 
stances, have unintended consequences for a State’s Medi- 
caid program. This policy can create an avenue for a couple 
to shelter almost limitless amounts of resources, provided 
these resources currently have minimal incoming-producing 
value. 

33a 

Indeed, the legality of the income first rule has been 
challenged in several courts. The United States Courts of 
Appeals for the Sixth and Third Circuits have upheld the 
income-first rule in Chambers v. Ohio Dep’t of Human 
Servs., 145 F.3d 793, 802 (6th Cir. 1998) and Cleary v. 
Waldman, 167 F.3d 801, 811-812 (3d Cir. 1999), respectively. 
Nevertheless, the Wisconsin Court of Appeals invalidated a 
Wisconsin statute, which adopted the income-first rule, 
holding that the spousal impoverishment provisions of the 
Medicaid program unambiguously preclude the use of an 
“income-first” methodology. The United States Supreme 
Court has granted the State of Wisconsin’s petition for 
review of this decision. See Wisconsin Department of 
Health and Family Services v. Blumer, No. 00-952. 

Because this subject has been a source of some contro- 
versy, we believe it is appropriate to codify provisions 
regarding the community spouse resource allowance before 
adopting regulations governing all of the spousal impoverish- 
ment protection provisions of section 1924 of the Act. 

II. Provisions of the Proposed Regulations 

We propose to allow States the threshold choice of using 
either the income-first or resources-first method when 
determining whether the community spouse has sufficient 
income to meet minimum monthly maintenance needs. 
Under our proposal, States would not be able to use different 
rules on a case-by-case basis, but must apply the same rule 
to all spouses. Under section 1902(a)(17)(B) of the Act, the 
Secretary has authority to prescribe appropriate standards 
for determining whether income is “available.” In the ex- 
ercise of that authority, and in view of the cooperative 
federalism considerations embodied in the Medicaid pro- 
gram, we have concluded that States may be in the best 
position to determine the type of protection to afford com- 
munity spouses and whether to require hearing officers to 

34a 

take into account any income of the institutionalized spouse 
before raising the CSRA. 

We believe that section 1924 of the Act does not specifi- 
cally address whether the income-first or resources-first 
method is appropriate in making the determination on 
raising the CSRA. Section 1924(e)(2)(C) of the Act directs 
the State to determine whether the community spouse’s 
income meets his or her minimum monthly maintenance 
needs. It also provides that, if the community spouse’s 
income falls short of meeting those needs, the CSRA should 
be increased by an amount that will generate sufficient 
income to bring the community spouse’s income to the 
minimum monthly maintenance needs level. However, this 
statutory guidance does not address whether the community 
spouse’s income may include the institutionalized spouse’s 
income that could be made available to the community 
spouse. 

In fact, while section 1924(b)(1) specifically prohibits the 
community spouse’s income from being considered available 
for the care of the institutionalized spouse, the statute does 
not preclude the Secretary nor the State from considering 
the institutionalized spouse’s income from being available to 
the community spouse for purposes of determining whether 
the community spouse’s needs will be met absent an increase 
in the CSRA. That supports an inference that it is per- 
missible to consider all or some portion of the institutional- 
ized spouse’s income to be available to the community 
spouse. In addition, the legislative history suggests that 
Congress contemplated the possibility that, in determining 
whether to raise the CSRA, States might take into account 
not only the community spouse’s own income but “other 
income attributable to the community spouse” consistent 
with the Secretary’s rules. H.R. Cong. Rep. No. 661, 100th 
Cong., 2d Sess 265 (1988). Accordingly, we believe that the 

35a 

statute permits an income-first rule and does not foreclose a 
resources-first rule. 

Because an income-first rule would conserve scarce 
resources that States may allocate towards their Medicaid 
programs, avoid sheltering of high value low income- 
producing resources, and generally affords the community 
spouse a significant degree of protection from impoverish- 
ment, States may prefer to employ this approach. On the 
other hand, the resources first rule may in certain cases 
afford greater protection to the community spouse, espe- 
cially after the death of the institutionalized spouse. While 
in our view, the statute certainly does not compel States to 
adopt the resources-first method, we believe it would be 
appropriate to afford the option of selecting a resources-first 
rule. 

Section 1924(a) of the Act provides that in determining 
the eligibility for medical assistance of an institutionalized 
spouse, its provisions supersede any other provision of title 
XIX of the Act, “which is inconsistent with them,” including 
section 1902(a)(17). Section 1902(a)(17)(B) of the Act pro- 
vides that the State plan for medical assistance shall “pro- 
vide for taking into account only the income and resources, 
as are, as determined in accordance with standards pre- 
scribed by the Secretary, available to the applicant or 
recipient * * * .” (Emphasis supplied.) In Schweiker v. 
Gray Panthers, 453 U.S. 34, 44, 101 S. Ct 2633, 2640 (1981), 
the Supreme Court held that the underscored language 
constituted a delegation of substantive rulemaking authority 
to the Secretary. Therefore, section 1902(a)(17)(B) of the 
Act gives the Secretary the authority to promulgate regu- 
lations on the matter of how much income and resources are 
available to applicants for, or recipients of, Medicaid for 
determining their eligibility and the amount of assistance 
they may receive. Furthermore, because our proposal to 
permit States to use either the income-first or resources- 

36a 

first method does not conflict with section 1924 of the Act, 
we can issue a proposed rule on this matter. 

As noted above, section 1924(e)(2)(C) of the Act authorizes 
either spouse to establish whether the community spouse 
resource allowance is inadequate to raise the community 
spouse’s income to the minimum monthly maintenance needs 
allowance. However, it does not specify whether in the pro- 
cess of establishing the inadequacy of the community spouse 
resource allowance, all of the institutionalized spouse’s 
income which could be made available to the community 
spouse must be taken into account before seeking this 
adjustment. Because section 1924(e)(2) of the Act is silent on 
this issue, it does not conflict with the Secretary’s authority 
under section 1902(a)(17)(B) of the Act to prescribe stan- 
dards for determining the amount of the institutionalized 
spouse’s income that would be available to the community 
spouse in determining whether it is appropriate to raise the 
community spouse resource allowance. This determination 
would have a corresponding impact on the institutionalized 
spouse’s Medicaid eligibility. 

Since our decision, under section 1902(a)(17)(B) of the Act, 
to permit States to use either the income-first or resources- 
first rule does not conflict with section 1924 of the Act, we 
are able to issue proposed regulations on this matter. In 
other words, because the statute does not require nor fore- 
close States from using either the income-first or resources- 
first method, we can use the rulemaking authority under 
section 1902(a)(17) of the Act to leave the choice of method to 
the States. (This approach is consistent with the Supreme 
Court’s decision in Batterton v. Francis, 432 U.S. 416 (1977), 
which upheld a regulation that permitted States to define 
“unemployed” either to include families participating in a 
labor strike or to exclude them.) In addition, Section 
1902(a)(17) contemplates that States will establish plans 
containing “reasonable standards” for determining eligibility 

37a 

consistent with the Act and our regulations. The statute 
thus contemplates that different States may establish 
different standards for determining eligibility, so long as all 
are “reasonable” and all are consistent with the Act and our 
regulations. Accordingly, as an exercise of our discretion, 
we propose to leave to the States the option to either use the 
income-first or resources-first method for purposes of a fair 
hearing under section 1924(e)(2)(C) of the Act to determine 
whether, and if so by how much, to raise the CSRA. 

As such, we propose to add a new § 431.260 to provide for 
fair hearings to raise the community spouse resource 
allowance. At § 431.260(a), we propose to define “institu- 
tionalized spouse” as an individual who is married to a 
person who is not in a medical institution or nursing facility 
and who is either likely to be in an institution or nursing 
facility or likely to be receiving services under a home and 
community-based waiver under section 1902(a)(10)(A)(ii)(VI) 
of the Act for at least 30 consecutive days. We propose to 
define the term “community spouse” as the spouse of an 
institutionalized individual. We would define the term 
“community spouse resource allowance” as the amount of a 
couple’s combined resources (held jointly and separately), 
allocated to the community spouse and considered unavail- 
able to the institutionalized spouse when determining his 
or her eligibility for Medicaid, as specified in section 
1924(f)(2)(A) of the Act. Additionally, we would define 
“minimum monthly maintenance needs allowance” as the 
minimum amount of an institutionalized spouse’s income that 
is protected for the community spouse. 

At § 431.260(b), we would specify that either spouse may 
request a hearing to establish that the community spouse 
resource allowance (in relation to the amount of income gen- 
erated by the allowance) is not adequate to raise the 
community spouse’s income to the minimum monthly main- 
tenance needs allowance. At § 431.260(c), we propose to 

38a 

provide that the State must choose to use either the income- 
first method or the resources-first method when determining 
whether to increase the community spouse resource allow- 
ance to ensure the community spouse has sufficient income 
to meet minimum monthly maintenance needs. We would 
provide that under the income-first method, the State re- 
quire that all income of the institutionalized spouse that 
could be made available to the community spouse after sub- 
tracting the allowances specified in section 1924(d) be 
considered to be available before additional resources are 
allocated to raise the community spouse’s income to meet the 
minimum monthly maintenance needs allowance. We pro- 
pose that under the resources-first method, the State 
allocate additional resources to raise the community spouse’s 
income to meet the minimum monthly maintenance needs 
allowance without regard to income of the institutionalized 
spouse that potentially could be made available to the 
community spouse, but has not been made available. 

III. Collection of Information Requirements 

Under the Paper Work Reduction Act (PRA) of 1995, we 
are required to provide 60-day notice in the Federal 
Register and solicit public comment if Office of Management 
and Budget review and approval is needed because a 
proposed regulation imposes a collection of information 
requirement. However, this proposed regulation does not 
impose any new collection of information requirements. 
Consequently, it need not be reviewed by the Office of Man- 
agement and Budget under the authority of the Paperwork 
Reduction Act of 1995. The proposed regulation only 
codifies the existing State practice of choosing whether to 
use income-first or resources-first, a matter we have left 
entirely to each State. We do not currently require States to 
formally notify us about which approach they take, and the 
proposed regulation similarly does not require this notifi- 

39a 

cation. Thus, the proposed rule imposes no new or different 
processes or information requirements on States. 

IV. Response to Comments 

Because of the large number of items of correspondence 
we normally receive on Federal Register documents pub- 
lished for comment, we are not able to acknowledge or 
respond to them individually. We will consider all comments 
we receive by the date and time specified in the DATES 
section of this preamble, and, if we proceed with a subse- 
quent document, we will respond to the major comments in 
the preamble to that document. 

V. Regulatory Impact Statement 

A. Overall Impact 

We have examined the impacts of this rule as required by 
Executive Order 12866 (September 1993, Regulatory Plann- 
ing and Review) and the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354). Executive Order 
12866 directs agencies to assess all costs and benefits of 
available regulatory alternatives and, if regulation is neces- 
sary, to select regulatory approaches that maximize net 
benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). 
A regulatory impact analysis (RIA) must be prepared for 
major rules with economically significant effects ($100 
million or more in any one year). This proposed 
rule would give States an option to use either an income-first 
method or resources-first method when determining 
whether the community spouse has sufficient income to meet 
minimum monthly maintenance needs. 

This proposed rule is 

not a major rule because it would not impose new costs on 
State governments or other entities. The proposed rule only 
codifies existing State practices, and in no way requires 

40a 

States to take any action that would increase or even change 
their current program costs. 

The RFA requires agencies to analyze options for regula- 
tory relief of small businesses. For purposes of the RFA, 
small entities include small businesses, nonprofit organi- 
zations, and government agencies. Most hospitals and most 
other providers and suppliers are small entities, either by 
nonprofit status or by having revenues of $25 million or less 
annually. Individuals and States are not included in the 
definition of a small entity. 

In addition, section 1102(b) of the Act requires us to 
prepare a regulatory impact analysis if a rule may have a 
significant impact on the operations of a substantial number 
of small rural hospitals. This analysis must conform to the 
provisions of section 603 of the RFA. For purposes of 
section 1102(b) of the Act, we define a small rural hospital as 
a hospital that is located outside of a Metropolitan Statistical 
Area and has fewer than 100 beds. This proposed rule would 
have no impact on small rural hospitals. 

Section 202 of the Unfunded Mandates Reform Act of 1995 
also requires that agencies assess anticipated costs and 
benefits before issuing any rule that may result in an 
expenditure in any one year by State, local, or tribal govern- 
ments, in the aggregate, or by the private sector, of $110 
million. The proposed rule would have no impact on the 
private sector. The rule would impose no requirements on 
State, local or tribal governments. The rule only codifies 
existing State practices, and thus requires no new or 
additional expenditures of funds by any entity, government 
or private. 

Executive Order 13132 establishes certain requirements 
that an agency must meet when it promulgates a proposed 
rule (and subsequent final rule) that would impose sub- 
stantial direct requirement costs on State and local govern- 
ments, preempts State law, or otherwise has Federalism 

41a 

implications. Because this proposed rule only codifies 
existing State practices, it would impose no requirements on 
governments, nor does it preempt State law or otherwise 
have Federalism implications. 

B. Anticipated Effects 

Because the proposed rule only codifies existing State 
practices, it will have no new effect on State governments, 
providers, or the Medicaid and Medicare programs. 
Therefore, we are not providing an impact analyses. 

C. Alternative Considered 

We considered imposing a requirement on all States to use 
the income-first methodology, or a requirement that all 
States use the resources-first methodology when deter- 
mining whether to raise the community spouse resource 
allowance. However, as explained in the preamble to this 
proposed rule, we do not believe the statute clearly requires 
the use of either of those alternatives to the exclusion of the 
other. Therefore, we believe, in the spirit of Federalism, 
that we should leave to States the decision as to which 
alternative to use. 

D. Conclusion 

For these reasons, we are not preparing analyses for 
either the RFA or section 1102(b) of the Act because we 
have determined, and we certify, that this rule will not have 
a significant economic impact on a substantial number of 
small entities or a significant impact on the operations of a 
substantial number of small rural hospitals. 

In accordance with the provisions of Executive Order 
12866, this regulation was reviewed by the Office of Man- 
agement and Budget. 

42a 

List of Sections Affected in 42 C.F.R. Part 431 

Grant programs-health, Health facilities, Medicaid, Pri- 
vacy, Reporting and recordkeeping requirements. 

For the reasons set forth in the preamble, the Centers for 
Medicare & Medicaid Services propose to amend 42 CFR 
part 431 as follows: 

PART 431—STATE ORGANIZATION AND GENERAL 

ADMINISTRATION 

1. The authority citation for part 431 continues to read as 
follows: 

Authority: Section 1102 of the Social Security Act (42 
U.S.C. 1302). 

§ 431.200 [Amended] 

2. Section 431.200 is amended by adding the sentence, 
“This subpart also implements section 1924(e)(2)(C) of the 
Act, which provides for a fair hearing regarding revision of 
the community spouse resource allowance[,]” at the end of 
the section. 

3. A new undesignated, centered heading, and new 
§ 431.260 are added to read as follows: 

Community Spouse Resource Allowance 

§ 431.260 Fair hearings to raise the community spouse 
resource allowance. 

(a) Definitions. For purposes of this section, the fol- 
lowing definitions apply: 

Community spouse means the spouse of an institutional- 
ized individual. 

Community spouse resource allowance means the amount 
of a couple’s combined jointly and separately-owned re- 

43a 

sources, as specified in section 1924(f)(2)(A) of the Act, 
allocated to the community spouse and considered unavail- 
able to the institutionalized spouse when determining his or 
her eligibility for Medicaid. 

Institutionalized spouse means an individual who meets 
all of the following criteria: 

(1) The individual is in a medical institution or nursing 
facility (or at the State’s option, is eligible for home and 
community-based waiver services under section 1902(a) 
(10)(A)(ii)(VI) of the Act). 

(2) The individual is likely to remain in a medical insti- 
tution or nursing facility (or satisfy the State option) for at 
least 30 consecutive days. 

(3) The individual is married to a person who is not in a 
medical institution or nursing facility. 

Minimum monthly maintenance needs allowance means 
the minimum amount of income, as determined under section 
1924(d)(3) of the Act, that is protected for the community 
spouse when determining the amount of the institutionalized 
spouse’s income that is to be applied to the cost of care. 

(b) Request for a hearing. Either spouse (or authorized 
representative) may request a hearing to establish that the 
community spouse resource allowance (in relation to the 
amount of income generated by the allowance) is not 
adequate to raise the community spouse’s income to the 
minimum monthly maintenance needs allowance. 

(c) Methodology for determining an increase in the com- 
munity spouse resource allowance. For purposes of con- 
ducting a hearing to determine whether it is appropriate to 
raise the community spouse resource allowance (and if so by 
how much) a State must elect either of the following 

44a 

methods, which must apply to all hearings of this type under 
the State’s Medicaid program: 

(1) Income-first method. The State considers that all 
income of the institutionalized spouse that could be made 
available to the community spouse, after deducting the 
allowances specified in section 1924(d) of the Act, has been 
made available before additional resources are allocated to 
raise the community spouse’s income to the minimum 
monthly maintenance needs allowance. 

(2) Resources-first method. The State allocates to the 
community spouse additional income-producing resources 
to raise the community spouse’s income to the minimum 
monthly maintenance needs allowance without first con- 
sidering all income of the institutionalized spouse that could 
be made available to the community spouse as if it has been 
made available. 

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program) 

Dated: August 28, 2001 

Thomas A. Scully, 

Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: August 30, 2001 

Tommy G. Thompson, 

Secretary. 

[FR Doc. 01-22605 
Filed 9-6-01; 8:45 a.m.] 

BILLING CODE 4120-01-P