Title: Phyllis A. Tannler v. Wisconsin Department of Health and Social Services
Citation: N/A
Docket Number: 1996AP000118
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: June 24, 1997

SUPREME COURT OF WISCONSIN 
 
 
Case No.: 
96-0118 
 
 
Complete Title 
of Case: 
 
 
Phyllis A. Tannler,  
          Petitioner-Respondent- 
          Petitioner, 
     v. 
Wisconsin Department of Health and Social  
Services,  
          Respondent-Appellant. 
  
 
ON REVIEW OF A DECISION OF THE COURT OF APPEALS 
Reported at:  206 Wis. 2d 385, 557 N.W.2d 434 
 
 
 
(Ct. App. 1996) 
 
 
 
PUBLISHED 
 
 
 
Opinion Filed: 
June 24, 1997 
Submitted on Briefs: 
 
Oral Argument: 
May 30, 1997 
 
 
Source of APPEAL 
 
COURT: 
Circuit 
 
COUNTY: 
Green 
 
JUDGE: 
David G. Deininger 
 
 
JUSTICES: 
 
Concurred: 
Abrahamson, C.J., concurs (opinion filed) 
 
Dissented: 
 
 
Not Participating:  
 
 
ATTORNEYS: 
For the petitioner-respondent-petitioner, there 
was a brief by Scott Thompson and Kittelsen, Barry, Ross, 
Wellington and Thompson, Monroe and oral argument by Scott 
Thompson. 
 
 
 
 
 
 
For the respondent-appellant the cause was argued 
by Maryann Sumi, assistant attorney general, with whom on the 
brief was Steven E. Tinker, assistant attorney general and James 
E. Doyle, attorney general. 
 
 
 
No.  96-0118 
 
 
1 
 
NOTICE 
This opinion is subject to further editing and 
modification.  The final version will appear in 
the bound volume of the official reports. 
 
 
No. 96-0118 
 
STATE OF WISCONSIN               :        
        
 
 
 
 
IN SUPREME COURT 
 
 
Phyllis A. Tannler, 
 
  
Petitioner-Respondent-Petitioner, 
 
 
v. 
 
Wisconsin Department of Health and Social 
Services, 
 
 
Respondent-Appellant. 
 
FILED 
 
JUN 24, 1997 
 
Marilyn L. Graves 
Clerk of Supreme Court 
Madison, WI 
 
 
 
 
 
 
Review of a decision by the court of appeals.  Affirmed. 
¶1 
DONALD W. STEINMETZ, J.   The issue in this case is 
whether an institutionalized person's failure to assert a claim 
against 
his 
or 
her 
deceased 
"community 
spouse's"
1 
estate 
constitutes a divestment under the Medical Assistance ("MA") 
program.  We conclude that the failure to make a spousal 
election  is an "action" for purposes of determining MA 
eligibility under Wis. Stat. § 49.453
2 as defined by 42 USC § 
                     
1 A "community spouse" is a person who is married to an 
institutionalized person but is not himself or herself an 
institutionalized 
person. 
 
HSS 
§ 
103.065(3)(b); 
Medical 
Assistance Handbook, Section 23.2.1. 
2 Wis. Stat. § 49.453 provides as follows: 
 
 
No.  96-0118 
 
 
2 
1396p(e)(1).
3  We therefore hold that the failure of an 
institutionalized spouse to assert a claim against the estate of 
his or her deceased spouse constitutes a divestment for purposes 
of determining MA eligibility.
4 
¶2 
The 
relevant 
facts 
are 
not 
in 
dispute. 
 
The 
petitioner, Phyllis Tannler ("Tannler"), lives in a nursing 
                                                                  
[I]f an institutionalized individual or his or her 
spouse, or another person acting on behalf of the 
institutionalized individual or his or her spouse, 
transfers assets for less than fair market value on or 
after the institutionalized individual's look-back 
date, the institutionalized individual is ineligible 
for medical assistance. . . . 
Wis. Stat. § 49.453(2).   
The statute further provides in relevant part that "[i]n 
this section . . . '[a]ssets' has the meaning given in 42 USC 
1396p(e)(1)."  Wis. Stat. § 49.453(1)(a).  
3 
42 
USC 
§ 
1396p(e)(1) 
provides 
as 
follows:            
   The term "assets", with respect to an individual, 
includes all income and resources of the individual 
and of the individual's spouse, including any income 
or resources which the individual or such individual's 
spouse is entitled to but does not receive because of 
action— 
 
(A) by the individual or the individual's spouse 
 
(B) 
by 
a 
person, 
including 
a 
court 
or 
administrative body, with legal authority to act in 
place of or on behalf of the individual or such 
individual's spouse, . . . . 
4 
We 
stress 
that 
the 
ultimate 
determination 
of 
MA 
eligibility lies with the Department of Health and Social 
Services.  This court is not in a position to determine what 
assets, if any, would be available to pay for Phyllis Tannler's 
medical care.  The Department will have to examine the assets 
available in Mr. Tannler's estate to conclude what assets, if 
any, Phyllis Tannler could have selected or elected. 
 
 
No.  96-0118 
 
 
3 
home.
5  She has received MA since early in 1993.  Tannler's 
husband, Adolph Tannler, died in 1994 leaving a will that 
bequeathed all of his assets, both real and personal property, 
to his grandson and his grandson's wife.  Adolph left nothing to 
his wife.  Tannler, represented by a guardian ad litem in the 
estate of her deceased husband, did not contest the will, nor 
did she file any elections or select any property passing under 
her husband's will.
6  
¶3 
Tannler continued to receive MA benefits until 1995 
when the respondent, Department of Health and Social Services 
("DHSS"), 
informed 
Tannler 
that 
it 
was 
terminating 
her 
eligibility.  DHSS asserted that Tannler's failure to contest, 
select, or elect against the will constituted a divestment of 
assets which rendered her ineligible for MA.  A hearing on the 
matter was held April 12, 1995, and the hearing examiner issued 
a proposed decision that Tannler remain eligible for MA.  DHSS 
rejected this proposal and modified the decision.  It concluded 
as follows: 
 
1. The petitioner's acceptance of her husband's will 
transferring to a third person assets to which she was 
entitled under law was a disposal or a transfer of an 
asset. 
                     
5 Phyllis Tannler is an "institutionalized person" under the 
DHSS definition found in HSS 103.065(3)(d) and the Medical  
Assistance Handbook, Section 10.4.0, because she has resided in 
a medical institution for 30 or more consecutive days.    
6 Wisconsin law provides that a surviving spouse may elect 
up to one-half of his or her deceased spouse's deferred and 
augmented marital property.  See Wis. Stat. §§ 861.02 -.03.  
Additionally, the surviving spouse has the right to "select" 
other personal property of his or her deceased spouse, including 
items such as an automobile, jewelry, and furnishings.  See Wis. 
Stat. § 861.33.     
 
 
No.  96-0118 
 
 
4 
2.  The petitioner divested herself of an asset.  
The Matter of Phyllis A. Tannler, DHSS Decision, August 17, 
1995. 
¶4 
Tannler appealed.  The Green County Circuit Court, 
Judge David G. Deininger, ordered that DHSS's action terminating 
Tannler's MA be set aside.  The circuit court found that DHSS 
erroneously interpreted 42 USC § 1396p(e)(1).   
¶5 
DHSS appealed from the circuit court order.  The court 
of 
appeals 
reversed. 
 
According 
due 
weight 
to 
DHSS's 
interpretation, the court held that the failure to make a 
spousal election was an "action" constituting divestment that 
resulted in MA ineligibility.  Tannler v. Department of Health 
and Social Servs., 206 Wis. 2d 385, 557 N.W.2d 434 (Ct. App. 
1996). 
 ¶6 This case involves the interpretation of Wis. Stat. 
§ 49.453 and 42 USC § 1396p(e)(1).   Interpretation of a statute 
and its application to undisputed facts are questions of law 
which this court reviews de novo.  Local No. 695 v. LIRC, 154 
Wis. 2d 75, 82, 452 N.W.2d 368 (1990).  This court is not bound 
by an agency's conclusions of law.  See Kelley Co., Inc. v. 
Marquardt, 172 Wis. 2d 234, 244, 493 N.W.2d 68 (1992).  However, 
this court defers to agency decisions in certain instances.  See 
MCI Telecommunications Corp. v. State, No. 95-0915, op. at 7 (S. 
Ct. May 13, 1997). 
¶7 
In reviewing agency interpretations, this court has 
applied three distinct levels of deference:  great weight, due 
weight, and de novo review.  Id., citing Harnischfeger Corp. v. 
LIRC, 196 Wis. 2d 650, 659-60, 539 N.W.2d 98 (1995). In order to 
 
 
No.  96-0118 
 
 
5 
accord great weight deference, a court must conclude that: 1) 
the agency was charged by the legislature with the duty of 
administering the statute; 2) the interpretation of the agency 
is one of long-standing; 3) the agency employed its specialized 
knowledge or expertise in forming the interpretation; and 4) the 
agency's interpretation will provide consistency and uniformity 
in the application of the statute.  Id., citing Jicha v. DILHR, 
169 Wis. 2d 284, 290, 485 N.W.2d 256 (1992). 
¶8 
If an agency conclusion does not meet all of the 
criteria necessary to accord it great weight deference, this 
court may give "due weight" deference to the agency conclusions. 
 Jicha, 169 Wis. 2d at 290-91.  Due weight deference, the middle 
level of review, is appropriate "if the agency decision is 'very 
nearly' one of first impression."  Id. at 291.  However, if the 
case is one of first impression for the agency and the agency 
lacks any special expertise, then the court must review the 
agency's conclusion de novo.  Id.   
¶9 
As the court of appeals noted, the Medical Assistance 
Handbook produced by DHSS provides guidance on the issue 
presented by this case.  The court stated that "[b]ecause the MA 
Handbook is designed to assist state and local agencies to 
implement the federal-state MA program, we conclude that its 
provisions are persuasive in resolving disputes such as the one 
before the court."  Tannler, 206 Wis. 2d at 391. Tannler claims 
that this case presents an issue of first impression that should 
be subject to de novo review by this court.  While it appears 
from the lack of agency precedent that this case is one of first 
impression, the language found in the handbook indicates that 
 
 
No.  96-0118 
 
 
6 
the agency possesses a specialized knowledge on the issue of 
whether the failure to contest a will constitutes divestment for 
purposes of determining MA eligibility.  Consequently, like the 
court of appeals, we also conclude that the findings of DHSS 
should be accorded due weight.  Due weight deference means that 
this court will give some deference to the agency, but if a more 
reasonable interpretation exists, this court will adopt that 
interpretation. 
¶10 Wisconsin Statutes § 49.45(10) authorizes DHSS to 
"promulgate such rules as are consistent with its duties in 
administering medical assistance."  Pursuant to this provision, 
DHSS instituted Wis. Admin. Code §§ HSS 101-108.
7  Section HSS 
103.065(4) states that an applicant who disposes of a "resource" 
at less than fair market value within 30 months of his or her 
application for MA is deemed to have "divested."  According to 
the code provisions and the statutes, divestment renders a party 
ineligible for MA.  Wis. Admin. Code § HSS 103.065(4); Wis. 
Stat. § 49.453(2).   
¶11 In 
rendering 
its 
decision 
in 
this 
case, 
DHSS 
considered the language, purposes, and policies of the federal 
and state legislation regarding the MA program.  It also looked 
to 
language 
found 
in 
the 
MA 
Handbook 
for 
guidance.  
Specifically, DHSS relied on an example found in the section of 
                     
7 Chapter HSS 101, et seq., have been renumbered Chapter HFS 
101, et seq., effective January, 1997.  However, the relevant 
events 
in 
this 
case 
occurred 
prior 
to 
January, 
1997.  
Consequently, we use the "HSS" designation throughout this 
opinion. 
 
 
No.  96-0118 
 
 
7 
the Handbook covering divestment.  The example provides as 
follows: 
 
It is also divestment if a person takes an action to 
avoid receiving income or assets s/he is entitled to. 
 Actions which would cause income or assets not to be 
received include: 
. . . . 
6) Refusing to take action to claim the statutorily 
required portion of a deceased spouse's or parent's 
estate.  Count the action as a divestment only if:   
a. The value of the abandoned portion is clearly 
identified, and 
 
b. There is certainty that a legal claim action will 
be successful. 
 
This includes situations in which the will of the 
institutionalized 
person's 
spouse 
precludes 
any 
inheritance for the institutionalized person.  Under 
Wisconsin law, a person is entitled to a portion of 
his/her spouse's estate.  If the institutionalized 
person does not contest his/her spouse's will in this 
instance, the inaction may be divestment.   
MA Handbook, Section 14.2.1 (emphasis added).   
¶12 DHSS explains in its decision that even though the 
statutes speak in terms of "action" while the Handbook refers to 
"refusal to take action," the distinction is one without a 
difference.  DHSS concludes that the statutes and the Handbook 
are consistent because both seek to terminate MA eligibility 
where a recipient or spouse somehow dispose of or avoid 
acceptance of an available asset.  In accepting the will, DHSS 
concludes, Tannler acted in concert with her deceased husband in 
completing the divestment, and, therefore, she is ineligible for 
further MA benefits according to Wis. Stat. § 49.453(2). 
 
¶13 Tannler asserts that reliance on the MA Handbook is 
misplaced.  Tannler claims that the relevant provisions of this 
handbook should not be applied in this case because it is in 
conflict with the provisions of the controlling federal and 
 
 
No.  96-0118 
 
 
8 
state legislation.  Specifically, Tannler objects to the 
Handbook's use of the phrase "refusal to take action" in light 
of the fact that the statutes use the term "action."  Because 
"action" is an unambiguous term, Tannler argues, this court must 
enforce the plain meaning of the term.   
¶14 We reject Tannler's arguments.  This court concludes 
that the MA Handbook used by DHSS is consistent with the federal 
and state legislation regarding medical assistance.  We further 
conclude that the term "action" as it is used in 42 U.S.C. § 
1396p(e)(1) is an ambiguous term because there is more than one 
reasonable interpretation of the term.
8 
¶15 The Department may use policies and guidelines to 
assist in the implementation of administrative rules provided 
they are consistent with state and federal legislation governing 
MA.  As long as the document simply recites policies and 
guidelines, 
without 
attempting 
to 
establish 
rules 
or 
regulations, use of the document is permissible.  DHSS's MA 
Handbook is a policy manual that is consistent with controlling 
                     
8 "Action" in this statute may be interpreted to mean an 
affirmative act, as suggested by Tannler.  However, consistent 
with other areas of the law, "action" may also be interpreted to 
mean an inaction or a conscious failure to act.  See, e.g., 
Rockweit v. Senecal, 187 Wis. 2d 189-90, 522 N.W.2d 575 (1994) 
(imposing liability for failure to extinguish hot embers in a 
fire pit);  State v. Williquette, 125 Wis. 2d 86, 90, 370 N.W.2d 
282 (Ct. App. 1985) (omission may constitute aiding and abetting 
in the abuse of a child).  Both interpretations are reasonable 
because regardless of whether the party affirmatively or 
passively disclaims his or her share of property, the ultimate 
effect will be the same.   
 
 
No.  96-0118 
 
 
9 
legislation, both state and federal.  Wis. Stat. § 49.45(34).
9  
In fact, the portion of the MA Handbook that is relied on here 
is based on the federal model as it appears in the federal 
handbook.
10  This is evident when one examines the United States 
Department of Health and Human Services' ("DHHS") State Medicaid 
Manual.  Like the state's handbook, the federal manual also 
lists several "actions" that would cause income not to be 
received and may result in MA ineligibility.   Many of these 
"actions" are technically an inaction or refusal to act.  The 
following excerpt is taken directly from the federal manual: 
 
The following are examples of actions which could 
cause income or resources not to be received: 
 
º  Irrevocably waiving pension income; 
 
º  Waiving the right to receive an  inheritance; 
 
º  Not accepting or accessing injury settlements; 
 
º Tort settlements which are diverted by the 
defendant into a trust or similar device to be held 
for the benefit of an individual who is a plaintiff; 
and 
 
º Refusal to take legal action to obtain a court 
ordered payment that is not being paid, such as child 
support or alimony. 
                     
9 Wis. Stat. § 49.45(34) provides in part that "[t]he 
department shall prepare a medical assistance manual that is 
clear, comprehensive and consistent with this subchapter and 42 
USC 1396a to 1396u. . . ."   
10 The attorney for DHSS made it clear at oral argument in 
this case that the state handbook is based on the federal 
manual.  The following exchange demonstrates this: 
Justice Crooks:  What does the Department base that 
handbook on?  Do they have a model from the federal 
government? 
Attorney Sumi: There is a federal model.  And perhaps 
this is a good time to inform the court that the 
federal manual does provide for this situation.  It 
does say that waiver of an inheritance is an example 
of an action that could constitute divestment. 
 
 
No.  96-0118 
 
 
10
State Medicaid Manual, Section 3257(3) (emphasis added).  Both 
the federal and state handbooks conclude that it is an "action" 
to refuse to take action to receive income to which one is 
entitled even if the refusal is merely a failure to act.   
¶16 This court is satisfied that DHSS's reliance on the MA 
Handbook in this situation is authorized by the statutes and 
that the Handbook is consistent with both state and federal 
legislation regarding medical assistance.  As demonstrated, the 
handbook used by the state is actually based on the federal 
model provided by the United States DHHS manual.  As such, we 
conclude that the use of the MA Handbook for guidance on the 
issue involved in this case is appropriate. 
¶17 Under Wisconsin law, a person is entitled by statute 
to a portion of his or her spouse's estate.  See Wis. Stat. 
§§ 861.02, 861.03, 861.33.  See generally Wis. Stat. Chs. 851 to 
882.  If the institutionalized person does not make a claim 
against his or her community spouse's estate, this failure to 
contest, or inaction, is a conscious act that constitutes 
divestment.  See Wis. Stat. § 49.453; Wis. Admin. Code HSS § 
103.065(4).  See also MA Handbook, Section 14.2.1.  Divestment 
results in MA ineligibility.  Wis. Stat. § 49.453(2).   
¶18 Phyllis Tannler is an institutionalized person.  Her 
husband died 
in 1994 
leaving her 
nothing 
in 
his 
will.  
Nonetheless, pursuant to Wisconsin law, Tannler is entitled to a 
portion of her husband's estate.  Through her guardian, Tannler 
could have contested the will of her husband or affirmatively 
elected or selected certain property to which she is entitled.  
Through her guardian, Tannler made no claims against the estate. 
 
 
No.  96-0118 
 
 
11
 She accepted the will and chose to elect or select nothing.  
For purposes of determining MA eligibility, this "refusal to 
take 
action" 
is 
a 
conscious 
act 
that 
results 
in 
MA 
ineligibility.  To conclude otherwise would be contrary to the 
purposes of the divestment provisions of the MA legislation. 
¶19 When interpreting a statute with an ambiguous term 
like "action" in this instance, this court looks to the purpose 
of the statute.  Medical assistance is a joint federal and state 
program aimed at ensuring medical care for the poor and needy.  
See 42 U.S.C. § 1396, et seq.  As the court of appeals in 
Tannler noted, the divestment portions of this legislation are 
designed to prevent those who, but for their divestment, are 
able to pay for their own medical needs.  Tannler, 206 Wis. 2d 
at 392.  DHSS's interpretation of the term "action" to include a 
"refusal to take action" to claim property to which one is 
entitled is consistent with the purposes of the divestment 
provisions of this legislation.  If one renounces rights to his 
or her assets that may be used to pay for his or her own medical 
needs, then the taxpayers are unnecessarily made to bear the 
burden of supplying MA for that person.  Consequently, this 
inaction is, in effect, no different from an affirmative action 
to disclaim.  Both the state and federal manuals rely on this 
proposition in determining MA eligibility.   
¶20 The practical effect of Tannler's inaction is that 
persons other than the community spouse or the institutionalized 
spouse will receive the financial benefits of the conscious act 
to reject her share of the estate.  The result will be that the 
taxpayers of this state will bear the burden of supporting 
 
 
No.  96-0118 
 
 
12
Tannler while she resides in the nursing home and receives 
medical assistance.  If Tannler had not rejected her share of 
her spouse's estate, then those assets would have been available 
to provide for her maintenance and health care without burdening 
the taxpayers.             
¶21 Giving due weight to DHSS's final decision and order, 
we conclude that Tannler's failure to file a claim against her 
deceased husband's estate is an "action" within the meaning of 
Wis. Stat. § 49.453 and 42 USC § 1396p(e)(1).  We uphold the 
decision of the Department finding Tannler ineligible for MA 
benefits 
because 
we 
hold 
that 
the 
failure 
of 
an 
institutionalized spouse to assert a claim against the estate of 
his or her deceased spouse constitutes a divestment for purposes 
of determining MA eligibility. 
By the Court.—The decision of the court of appeals is 
affirmed.   
 
 
               
 
      
 
 
No. 96-0118.ssa 
 
1 
¶22 SHIRLEY S. ABRAHAMSON, CHIEF JUSTICE (concurring). I 
join the majority opinion. I write to address the underlying 
policy of the statutes.  
¶23 Anyone who works with medical assistance statutes 
begins by appreciating that the federal and state statutes are 
extremely 
complex 
and 
may 
fairly 
be 
described 
as 
incomprehensible.
11 The statutes are characterized by ambivalence 
and ambiguity, by a confusing mix of means-tested programs and 
entitlements, and by uneasy compromises among different and 
often 
conflicting 
policies. 
This 
case 
illustrates 
the 
difficulties posed by the legislative compromises made in this 
difficult field.  
¶24 To 
be 
eligible 
for 
medical 
assistance 
an 
institutionalized person must have limited assets. Thus persons 
may have to spend down, that is, divest themselves of assets, to 
qualify 
for 
medical 
assistance. 
Certain 
divestments 
are 
acceptable; others are not.  
¶25 Although 
Congress 
requires 
divestment, 
it 
has 
recognized that elderly persons should not be forced into 
impoverishment in order to qualify an institutionalized spouse 
for medical assistance. Thus Congress has determined that 
spouses of those who need long-term care should not be driven by 
the government into poverty. The Medicare Catastrophic Coverage 
Act of 1988 addressed the issue of spousal impoverishment by 
                     
11 See Jan Ellen Rein, Misinformation and Self-Deception in 
Recent Long Term Care Policy Trends, 12 J.L. & Pol. 195, 212 
(1996). 
 
 
No. 96-0118.ssa 
 
2 
protecting some resources of the non-institutionalized spouse 
(referred to as the community spouse) from the debts of the 
institutionalized spouse.
12 
¶26 The case at bar involves the interplay of the 
divestment and spousal impoverishment provisions. Under the 
court's interpretation the community spouse retains the freedom 
to make testamentary gifts; yet at the community spouse's death 
the assets available by law to the institutionalized spouse are 
used for the care of that spouse. The court's interpretation of 
the statutes attempts to fit the congressional plan of enabling 
the community spouse to keep and dispose of his or her own 
assets while requiring an institutionalized person to use his or 
her assets for self care. Thus the holding of the court attempts 
to comport with the spousal impoverishment provisions as well as 
the divestment goals.  
¶27 I join the opinion of the court for the reasons 
stated. 
 
 
                     
12 See Jeanette C. Schreiber, Medicaid Financial Planning 
After the Medicare Catastrophic Coverage Act of 1988: Essential 
Changes Governing Eligibility and Transfer of Assets, 63 Conn. 
B.J. 211 (1989). See also Harry R. Moody, The Return of the 
Repressed: The Ethics of Assets and Inheritance, in Institute 
for Health Services Research, U. Minn., Who Owes Whom What? 
Personal, Family, and Public Responsibility for Paying Long-Term 
Care 20 (1994) ("[W]hat Congress did in 1988 was to create a 
protection against spousal impoverishment, not a protection 
against" the impoverishment of testamentary beneficiaries.).