-1- 

### STATE OF MICHIGAN

COURT OF APPEALS

BETTY JENSEN, by JASON JENSEN, personal representative,

Petitioner-Appellee, UNPUBLISHED February 19, 2015

v No. 319098 Muskegon Circuit Court DEPARTMENT OF HUMAN SERVICES, LC No. 12-048738-AA

Respondent-Appellant.

Before: B ECKERING , P.J., and B ORRELLO and G LEICHER , JJ.

P ER C URIAM

. We granted leave to appeal to consider a circuit court’s appel late review of an administrative decision. Were we permitted to review the facts de novo, we likely would have reached a different decision than the Department of Human Servi ces (DHS) regarding the petitioner’s Medicaid eligibility. However, we are only permit ted to review de novo the circuit court’s interpretation of the administrative policies underlyin g the DHS’s decision. And the DHS followed the plain language of the applicable policies in r endering its decision. Accordingly, we are bound to conclude that the circuit court di d not apply correct legal principles in applyi ng a different policy interpretation. We t herefore reverse.

I. BACKGROUND

Betty Jensen was an elderly woman with dementia. She lived in her home without assistance until May 2011. At that time, Jensen’s concerned gr andson, Jason Jensen, acted on Jensen’s behalf and hired a non-relative, Teresa Alexander, to serve as Jensen’s home health aide. Alexander was hired thr ough an informal agreement and no contract entered. Between May 2011 and March 21, 2012, Jason paid Alexander biweekly for her time, using nearly $19,000 of Jensen’s assets.

By March 21, 2012, Jensen’s condition had worsened and she ent ered a nursing home. At some point thereafter, Jense n executed a written contract wi th Jason agreeing to reimburse him for mileage he accumulated while managing her affairs for t he past year. Jensen then remitted $1,400 to Jason.

On April 30, 2012, Jason applied for Medicaid benefits on Jens en’s behalf. As described in Mackey v Dep’t of Human Serv , 289 Mich App 688, 693; 808 NW2d 484 (2010), participation-2- in Medicaid is “needs-based.” Acco rdingly, the Department of H uman Services (DHS) reviewed Jensen’s assets, income, and expenditures to determine if she q ualified for benefits. While Jensen was eligible, the DHS penalized her for “divesting” fund s. Specifically, the DHS found that the payments to Alexander, the mileage reimbursement to Ja son, and a $28,128 gift to Jason were “divestments.” 1 As a result of these divestments, the DHS delayed Jensen’s Me dicaid benefits for 7 months and 2 days. Jensen died on August 28, 20 12, before Medicaid began covering her nursing home expenses.

Jason concedes that his grandm other’s $28,128 gift to him was a divestment under Medicaid policies. He challenged before an administrative law judge (ALJ) and then in a circuit court appeal that Jensen’s payments to Alexander and mileage re imbursement to him should not be treated as divestments under the “Home Caretaker & Personal Care Contracts” provision of BEM 405—the applicable policy upon w hich the DHS relied. That policy states:

[¶ 1] A contract/agreement that p ays prospectively for expenses such as repairs, maintenance, property taxes, homeowner’s insurance, heat and ut ilities for real property/homestead or that provides for monitoring health care, securing hospitalization, medical treatment , visitation, entertainment, travel and/or transportation, financial management or shopping, etc. would be considered a divestment. Consider all payments for care and services which the client made during the look back period as divestment.

[¶ 2] Note: The preceding are examples and should not be considered an all inclusive or exhaustive list.

[¶ 3] Relatives who provide assistance or services are presumed to do so for love and affection, and compensation for past assistance or services shall create a rebuttable presumption of a trans fer for less than fair market value. A relative is anyone related to the client by blood, marriage or adoption.

[¶ 4] Such contracts/agreements shall be considered a transfer for less than fair market value unless the compen sation is in accordance with all of the following:

• The services must be performed after a written legal contract/agreement has been executed between the client and provider. The service s are not paid for until the services have been provided. The contract/a greement must be dated and the signa tures must be notarized; and

• At the time of the receipt of the services, the client is not r esiding in a nursing facility, adult foster care home, institution for menta l diseases, inpatient hospital, intermediate care facility for mentally ret arded or

1 A “divestment” is a transfer made for less than fair market va lue within a specified “look back period” that is made to qualify or remain eligible for Medicaid benefits. Bridges Eligibility Manual (BEM) 400, Januar y 1, 2015, p 1; BEM 405, April 1, 2012, p 1.-3- eligible for home and community based waiver, home health or ho me help; and

• At the time services are received, the services must have been recommended in writing and signe d by the client’s physician as necessary to prevent the transfer of the client to a residential care or nursing facility. Such services cannot include t he provision of companionship; and

• DHS will verify the contract/agreement by reviewing the written instrument between the client and the provider which must show the type, frequency and duration of such services being provided to the c lient and the amount of consideration (money or property) being received by the provider, or in accordance with a service plan approved by DHS. If the amount paid for services is above fair market value, then the c lient will be considered to have transferred th e asset for less than fair mar ket value. If in question, fair market value of the services may be determine d by consultation with an area busine ss which provides such services ; and

• The contract/agreement must be signed by the client or legally authorized representative, such as an age nt under a power of attorney, gua rdian, or conservator. If the agreement is signed by a representative, t hat representative cannot be the pr ovider or beneficiary of the contract/agreement.

[¶ 5] Assets transferred in exchange for a contract/agreement f or personal services/assistance or expenses of real property/homestead prov ided by another person after the date of applica tion are considered available a nd countable assets. [BEM 405, April 1, 2012, pp 6-7 (n umeration added by circuit co urt, emphasis in original).]

The ALJ upheld the DHS’s treatment of these transfers as dives tments. The transfers were made under personal care agreements, the ALJ reasoned, and were therefore presumed to be divestments under ¶ 1 unless they conformed to the requireme nts of ¶ 4. Jason admitted that neither transfer occurred under circumstances that rebutted the presumption.

On appeal, the circuit court re versed the rulin g in relation t o Jensen’s payments to Alexander. The court interpreted BEM 405 differently, concludi ng that ¶ 1 applies only to arrangements where the applicant pays up front for services, re ndering an assessment of fair market value impossible. The elements to rebut a divestment pr esumption located in ¶ 4, the court ruled, apply only to agreements with relatives as contemp lated in ¶ 3. Under this reading, Jensen’s contemporaneous payments to Alexander, a non-relative, for her services could not be characterized as divestments.

We subsequently granted the DHS’s application for leave to app eal the circuit court’s judgment. Jensen v Dep’t of Human Serv , unpublished order of the C ourt of Appeals, entered April 30, 2014 (Docket No. 319098).-4- II. ANALYSIS

The circuit court inaccurately interpreted BEM 405 and therefo re exceeded the scope of its authority in reve rsing the ALJ. This C ourt recently outlin ed the standards governing appellate review of an administrative decision in Nat’l Wildlife Federation v Dep’t of Environmental Quality , 306 Mich App 369, 372-373; 856 NW2d 394 (2014):

The circuit court’s task was to review the administrative deci sion to determine if it was authorized by law and supported by competen t, material, and substantial evidence on the whole record. Const 1963, art 6, § 28; MCL 24.306(1). An agency decision is not authorized by law if it v iolates constitutional or statutory provisions, lies beyond the agency’ s jurisdiction, follows from unlawful procedures resulting in material prejudic e, or is arbitrary and capricious. Northwestern Nat’l Cas Co v Comm’r of Ins , 231 Mich App 483, 488; 586 NW2d 563 (1998).

“[W]hen reviewing a lower court’s review of agency action, thi s Court must determine whether the lower court applied correct legal pr inciples and whether it misapprehended or gro ssly misapplied the substantial evidence test to the agency’s factual findings.” Boyd v Civil Serv Comm , 220 Mich App 226, 234; 559 NW2d 342 (1996). “This latter standard is indistinguishable from the clearly erroneous standard . . . . [A] finding is clearly erroneous wh en, on review of the whole record, this Cour t is left with the definite and firm con viction that a mistake has been made.” Id. at 234-235.

A tribunal’s interpretation of a statute is subject to review de novo. In re Complaint of Rovas , 482 Mich 90, 102; 754 NW2d 259 (2008). Likewise a tribunal’s interpretation of an administrative rule. Aaronson v Lindsay & Hauer Int’l Ltd , 235 Mich App 259, 270; 597 NW2d 227 (1999). A tribunal’s evidentiary decisions are reviewed for an abuse of discretion. See Price v Long Realty, Inc , 199 Mich App 461, 466; 502 NW2d 337 (1993).

The rules of statutory construction apply with equal force when interpreting administrative rules. Great Wolf Lodge of Traverse City, LLC v Public Serv Comm , 489 Mich 27, 37; 799 NW2d 155 (2011).

Looking at the plain language of BEM 405, it is clear that the circuit court incorrectly interpreted ¶ 1:

A contract/agreement [1] that pays prospectively for expenses such as repairs, maintenance, property taxes, homeowner’s in surance, heat and utilities for real property/homestead or [2] that provides for monitori ng health care, securing hospitalization, medical treatment, vis itation, entertainment, travel and/or transportation, financial m anagement or shopping, etc. would be considered a divestment. Consider all payments for care and services which the client made during the look back period as di vestment. [Alterations added. ]-5- The first sentence opens with a subject noun “a contract/agree ment.” That subject noun is modified by two separate clauses, each beginning with the wo rd “that” and separated by the conjunction “or”. “That” is a “defining, or restrictive pronou n.” Strunk & White, The Elements of Style (3d ed, 1979), p 59. Accordingly, items [1] and [2] define th e subject noun “a contract/agreement.” “The term ‘or’ is ‘used to connect words, phrases, or clauses representing alternatives.’” People v Williams , 288 Mich App 67, 75; 792 NW2d 384 (2010), quoting Random House Webster’ s College Dictionary (1997). This sentence therefore refers to two separate categories of “contract [s]/agreement[s].” The first c ategory is contracts where the client pays for services up front, befo re any work is done: “a contrac t/agreement that pays prospectively.” The second category is any contract or agreeme nt that provides for services essentially encompassing a home health aide: “a contract/agreem ent that provides for monitoring health care, securing hospitalization, medical treatment, visit ation, entertainment, travel and/or transportation, financial manage ment or shopping, etc.” Prospe ctive payment is not required to fit into the second category.

Notably, this paragraph does not describe the service provider . By failing to use the term relative or non-relative, the DHS made the paragraph applicable to anyone who pr ovides services to the elderly applicant. Also, the first paragraph creates a “presumption” even though that word is not used in this section. T he second sentence provides: “Co nsider all payments for care and services which the client made during the look back period as d ivestment.” Accordingly, in applying ¶ 1, one must lead with the presumption that the payme nt was a divestment. Therefore, there must be a mechanism to rebut that presumption, which is ¶ 4 as noted below.

Paragraph 3 of BEM 405 provides a rebuttable presumption that “[r]elatives who provide assistance or services are presumed to do so for love and affec tion,” and do not expect compensation. If an elderly applicant suddenly compensates a r elative for services provided in the past, the DHS will presume that this was not a fair market trade of money for services. Accordingly, any payment made t o the relative is presumed to be a divestment.

Paragraph 4 begins: “Such contr acts/agreements shall be consid ered a transfer for less than fair market value unless the compensation is in accordance with all of the following[.]” As noted by the DHS, ¶ 4 must be connected with ¶ 1. Only ¶ 1 ref ers to contracts and agreements. If ¶ 4 does not modify ¶ 1, a claimant would have no way to reb ut the presumption in ¶ 1. The contracts and agreements in ¶ 1 can be made with anyone, includ ing a relative. There is simply a heightened presumption when the s ervices are provi ded by a rela tive. Paragraph 4 lays the groundwork for rebutting the presumption first stated in ¶ 1 re garding prospectively-paid contracts/agreements and personal service contracts and emphasi zed in ¶ 3 in relation to relatives.

Accordingly, to overcome the presumptions stated in ¶ 1 and ¶ 3 that a contract or agreement amounted to a divestment, the claimant must establish that the contract or agreement meets the five elements outlined in ¶ 4. Jason conceded below that neither the arrangement with Alexander nor the mileage reimbursement contract satisfied ¶ 4. In relation to the payments to Alexander, no “written legal contract/agreement” was ever draft ed, let alone signed and notarized. Accordingly, all the services were performed before , not after, such a document was executed. Although Jensen’s doctor noted in a medical record t hat she was doing better with the benefit of meals on wheels and a home health aide, the doctor n ever “recommended in writing”-6- that such services were “necessary to prevent transfer of the c lient to a residential care or nursing facility.” Under the plain langu age of BEM 405, Jensen’s payme nts to Alexander do not meet the necessary criteria to rebut the presumption identified in ¶ 1. Accordingly, this compensation was a divestment. 2 Similarly, Jason admitted the mileage reimbursement contract was entered despite the absence of a doctor’s recommendation and after the services were rendered. The contract did not “show the type, frequency and duration of such services being provided to the client” as described in the f ourth element of ¶ 4. Accordingly , the mileage payment to Jason also qualified as a divestment and the circuit court should have aff irmed the ALJ.

Jason raised alternative grounds to overturn the ALJ’s decisio n, all of which the circuit court rejected. He now revives those arguments as alternative grounds to affirm the circuit court’s decision. We agree with t he circuit court, however, th at these grounds are without merit.

First, Jason contends that under the common law a person can e nter an implied contract with another to provide services. If the services are provided under such an oral agreement, the services must be compensated. T herefore, Jason asserts, BEM 40 5 violates common-law implied-contract principles. Yet, BEM 405 does not prevent any one from entering oral contracts for services or prevent the service provider from getting paid. Rather, if the service falls within the realm of BEM 405, and the applicant paid enough to sound a red flag for the DHS employee adjudging the client’s Medicaid eligibility, the compensation p aid under that oral contract may be treated as a divestment. Thi s argument is simply out of pla ce.
Jason argues that BEM 405 is more restrictive than federal Soc ial Security law, rendering it invalid. However, 42 USC 1396n( d)(1) provides that a state plan must include coverage for an elderly person’s “home or commun ity-based services” geared towa rd allowing that person to remain in his or her home and specifically limits that coverage to situations where the services “are provided pursuant to a writt en plan of care.” Requiring a doctor recommendation is consistent with this requirement, as is requiring a contract wi th specific details of the services to be provided.

Finally, Jason revives his argument that BEM 405 violates the Americans with Disabilities Act by forcing elde rly people to forego in-home ca re and accept premature “institutionalization.” However, BEM 405 doe s not force elderl y people into nursing homes. An elderly person is free to hire a home health care aide. The ap plicant must prove that he or she

2 We note, however, that it does not appear from the factual rec ord that Jensen overpaid for Alexander’s services, or hired Alexander unnecessarily. If we were not bound by the plain language of BEM 405, and were we permitted de novo review of th e lower tribunals’ factual considerations, we would reac h quite a different result.-7- did not fritter away his or her money for unnecessary services simply in order to become eligible for Medicaid. An elderly person who truly needs assistance in the home can secure proof of that need through his or her doctor.

We reverse.

/s/ Jane M. Beckering /s/ Stephen L. Borrello /s/ Elizabeth L. Gleicher