N.S., who was 87 years old and residing in a nursing home, submitted an application for Medicaid benefits through his authorized representative, L.P. Prior to his admission to the nursing home, N.S. resided with his wife, D.S., who was 86 years old.

For months after the application was filed, the Medicaid caseworker requested additional documents from N.S. regarding income, other business dealings and information about D.S.’s income. Although L.P. was able to obtain many of the documents, D.S. failed to cooperate and refused to produce the requested documents. As a result, the nursing home’s attorney sent a letter to the Medicaid agency requesting that N.S.’s application be processed without regard to D.S.’s income and resource information. The letter stated that “42 U.S.C. § 1396r-5, known as the ‘spousal refusal provision,’ prohibits the denial of Medicaid coverage to individuals whose spouses refuse to cooperate with the state.” The letter provided that L.P. had been unable to obtain D.S.’s information through no fault of her own, having sent three letters requesting financial information to D.S. which were returned as unclaimed. The letter also argued that “[a]ny denial of [N.S.]’s application because of his spouse’s refusal to provide information would . . . cause an undue hardship on [N.S.]” under 42 U.S.C. § 1396r-5(c)(3).

Thereafter, the Medicaid agency sent three notices directly to D.S. requesting the needed information. D.S. did not respond to any of the requests. Later, the agency sent L.P. a letter advising that the application could not be processed without D.S.’s information because N.S. and D.S. were legally married, were not estranged and had been living together before N.S. was admitted to the nursing home. Eventually, N.S.’s application was denied for failure to provide necessary documentation. Soon thereafter, both N.S. and D.S. died.

L.P. appealed, requesting a hearing. After the hearing, the administrative law judge (ALJ) issued a decision affirming the denial of Medicaid benefits. The ALJ found that the Medicaid agency properly denied N.S.’s application for benefits because L.P. failed to provide all the information requested by the CWA. The ALJ also rejected N.S.’s argument that the Medicaid agency acted arbitrarily and capaciously in failing to process the requests for a spousal waiver since there was no break in marital ties, estrangement or evidence that D.S. was suffering from any illness which prevented her from providing the requested information. The Division of Medical Assistance and Health Services (DMAHS), the state Medicaid agency, issued a final agency decision adopting the ALJ’s decision.

L.P. again appealed, this time to the Superior Court of New Jersey, Appellate Division.

On appeal, N.S. argued that DMAHS’ decision was arbitrary and capricious, and should be reversed. N.S. contended that DMAHS misapplied 42 U.S.C. § 1396r-5 by failing to accept N.S.’s assignment of support to the state in his Medicaid application as a basis for a spousal waiver. N.S. also contended that a spousal waiver should be granted when the community spouse is uncooperative because of his or her own health and age, and not only when the spouses were estranged prior to the ill spouse’s admission to the nursing home.

The appeals court agreed with N.S., reversed the final agency decision and held that DMAHS’ denial of a spousal waiver was arbitrary, capricious, and unreasonable. The court found that DMAHS’ estrangement requirement for a spousal waiver was overly restrictive. The court found it significant that DMAHS cited “no authority, or even informal guidance, expressing the requirement that spouses be estranged in order to receive a spousal waiver for an undue hardship under 42 U.S.C. § 1396r-5(c)(3)(C).” The court also found that the ALJ’s findings, that there were outstanding items regarding N.S.’s business and assets, were not supported by substantial evidence. The court directed the agency to process N.S.’s application for benefits based upon the information and documents that had already been submitted.

The case is annexed here – N.S. v. Division of Medical Assistance and Health Services

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