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COA: Expenses apply under penalty period

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The Indiana Court of Appeals ruled in favor of a woman who wanted her out-of-pocket payments to a nursing facility allowed as a spend-down expense, finding the Indiana Family and Social Services Administration's denial of her request would penalize her twice.

In Bernice M. Reedy, by her next best friend Mentoria Headdy v. Indiana Family and Social Services Administration, No. 53A01-0806-CV-294, the Court of Appeals had to determine if Reedy's out-of-pocket nursing facility payments could be an allowable spend-down, or out-of-pocket expense, while she was serving out a transfer penalty period. Reedy entered a nursing home in 2005 and applied for Medicaid in 2006. For one year, her coverage wouldn't include payments for nursing facility services because she had improperly transferred money to become eligible for Medicaid; Reedy would have to pay for her care out-of-pocket during that time. Reedy also received medical assistance under Medicaid but was required to spend-down more than $3,000 a month before Medicaid would cover her other health-related services such as prescriptions.

The FSSA rejected Reedy's request to have her out-of-pocket nursing facility expenses applied toward her monthly spend-down, which was affirmed by an administrative law judge at a hearing.

The FSSA believed Reedy couldn't apply her out-of-pocket expenses while on a transfer penalty period, but there is no statute, administrative code provision, or case that addresses this issue, wrote Judge Michael Barnes. The appellate court's review of the administrative law judge's decision shows no statutory interpretation.

The Court of Appeals examined 405 Ind. Admin. Code 2-3-10(f), which defines which incurred medical expenses submitted to the county office will be credited toward the spend-down; nursing facility services and rehabilitative services are included on the list.

While under the transfer penalty, the spend-down only applies toward Medicaid's coverage of Reedy's non-nursing facility expenses, so the court "fails to see how applying the nursing facility expenses to Reedy's spend-down 'cancels out' the transfer penalty as the FSSA suggests," Judge Barnes wrote.

"Similarly, under the FSSA's approach, being subject to a transfer penalty subjects an individual to an additional punitive measure by effectively raising the spend-down to the amount of the calculated spend-down plus the individual's nursing facility expenses. The State points to no support for this double punishment, and without such we will not impose the extra burden on Reedy," he wrote.

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