In Sable v. Velez, applicants were denied Medicaid because of promissory notes owned by the applicants. Each note was properly signed, and contained a specified interest rate and repayment schedule. Medicaid found the promissory notes to be countable after determining that the notes qualified as a “trust-like device.”
In their suit in federal court under 42 U.S.C. §1983, the applicants alleged that the notes had no value because they could not be sold, and that the State violated federal law by counting the notes as trust-like devices. They asked the court to enjoin the State from denying their Medicaid applications.
After the District Court denied the preliminary injunction in 2009, the Federal Court of Appeals for the Third Circuit vacated that order, finding that it improperly analyzed the notes as trust-like devices, without first undertaking the proper “regular SSI” analysis of the promissory notes. As a result, the appellate court remanded the case to the lower court for further proceedings.
However, in December 2010, the District Court found that, under the regular SSI resource-counting rules, the notes did not qualify as cash loans or promissory notes because the plaintiffs failed to meet their burden of showing that the notes were not the product of a “bad-faith arrangement,” and reaffirmed its earlier denial of the injunction based on the “trust-like device” analysis. This time, the Third Circuit affirmed, finding that the lower court had properly concluded that the instrument did not qualify as a cash loan or promissory note, and that the agency did not err in considering the notes to be trust-like devices.
The Third Circuit’s opinion is annexed here – Sable v. Velez (Non-Precedential), Docket No. 10-4647 (3d Cir. July 12, 2011).
(I blogged about the prior federal opinions in this long-running case here – Federal Court Rules That Promissory Notes May Be Countable Resources)