Opinion ID: 2570824
Heading Depth: 1
Heading Rank: 4

Heading: Agency Hearing

Text: The Fischers requested a fair hearing pursuant to K.S.A. 75-3306 and K.S.A. 77-501 et seq. At the agency hearing, the attorney for the Fischers argued that SRS had cited no authority for changing the classification of the property from nonexempt countable (Fischer's application) to exempt (SRS's determination). The Fischers asserted that because SRS had no authority for reclassifying the property, the classification of the Fischers is assumed to be correct. SRS argued that the fact that the farm property was income producing satisfied the definition for exempt property; therefore, the property was exempt. Tim Schroeder, representing SRS, stated: If we had actually received an application in June 1996 when the long term care arrangements began, based on that spousal impoverishment rule, most likely, Mr. Fischer would have been eligible for assistance. All of these resources, the income producing whether it was passive or actively engaging in farming, doesn't really make any difference, if it's income producing then the provision states that it is exempt resources and if that's the case then, the community spouse could have owned that, that wouldn't effect eligibility, as resources, total resources were under the $16,000 limit. All of those could have been attributed to the community spouse and in June 1996, if we had gotten an application, Mr. Fischer probably would have been eligible. What happened in the interim, the exempt resources were liquidated and then turned into countable resources and then we got an application and the second point in time we look at is the actual point the application was filed and at that time those resources were now countable. ... Once again, when Mr. Fischer entered the nursing home in June 1996, he began the process of selling off his farm operations, selling off those assets. By the time he applied for medical in October 1998, he'd sold all his real and personal farm property and transferred into cash all his assets. Essentially, he turned his exempt resources which could have been owned by the community spouse, into nonexempt resources which have to be counted against the resource allowance. Neither party provided evidence of the fair market value of the farm property or the amount of income produced by the property, which are the two factors in K.A.R. 30-6-108(c)(3) for determining if real property is exempt. The hearing officer concluded that the farm property was used by [the Fischers] as passive rental landlords. It is difficult too see how one can own grain, hay, and cattle and rent out such items. Nevertheless, whether one is actively farming or passively renting farm property and equipment, either use of such property is indeed designed to generate income and as such is used for self-support. Because these items are used to generate income, they are resources that shall be excluded in determining the resources of an individual and his spouse. (Emphasis added.) The hearing officer did not apply the standards set out in K.A.R. 30-6-108(c)(3), income consistent with fair market value, to determine that the property was properly classified by SRS as exempt. The hearing officer concluded that because the items were used to generate income, they were exempt; therefore, SRS's determinations were correct, and Donald was not eligible for Medicaid. Donald appealed to the district court.