Court Opinion

ID: 3215191
Source: CourtListenerOpinion
Date Created: 2016-06-21 14:09:29.864886+00
Date Added: 2024-06-11T07:39:37.826734
License: Public Domain

In the Missouri Court of Appeals
                        Eastern District
                                    DIVISION FOUR

SEDZIDA DOLIC,                )                  No. ED103726
                              )
      Petitioner/Appellant,   )                  Appeal from the Circuit Court
                              )                  of St. Louis County
v.                            )
                              )
MISSOURI DEPARTMENT OF SOCIAL )                  Honorable Gloria Clark Reno
SERVICES, FAMILY SUPPORT      )
DIVISION,                     )
                              )
      Respondent/Respondent.  )                  Filed: June 21, 2016

                                       Introduction

       Sedzida Dolic (Appellant) appeals from the decision of the St. Louis County

Circuit Court affirming the decision of the Director (Director) of Missouri Department of

Social Services, Family Support Division (Division) establishing a claim for

overpayment of MO HealthNet for Families (MHF or Medicaid) benefits in the amount

of $8,367.66. We dismiss in part, affirm in part, reverse in part, and remand with

directions.

                           Factual and Procedural Background

       On March 15, 2011, Appellant applied for MHF benefits for her infant daughter,

Edna Dolic (Edna). Appellant supplied the Division’s eligibility specialist with her 2010

federal income tax return. The Division worker advised Appellant that based on her

income, her daughter, Appellant, and her husband, Asmir, all qualified for coverage.
Relying upon the representation of the Division’s eligibility specialist, Appellant applied

for coverage for herself, her daughter, and her husband.

       On March 16, 2011, the Division sent Appellant a MO HealthNet Action Notice,

indicating her family had been approved for MHF coverage. Approximately one year

later, during an annual review, the Division discovered its representative had incorrectly

used Appellant’s adjusted gross income instead of gross income in determining Edna’s

eligibility for benefits and informing Appellant her entire family was eligible for benefits.

On April 23, 2012, the Division mailed Appellant a notice stating the Dolics’ MHF

coverage was discontinued effective April 20, 2012.

       On August 22, 2012, the Division mailed Appellant an Adverse Action Notice

seeking to establish a claim of $8,367.66 for public assistance the Dolics received from

March 2011 through April 2012. Appellant requested an administrative hearing.

       On November 26, 2013, a hearing was held before the Director, at which

Appellant represented herself. At the hearing, the Division was represented by Jim

Dieckmeyer (Dieckmeyer), a Program Integrity Unit employee, who offered twelve

exhibits to support the Division’s action. Appellant initially objected to the admission of

the Division’s exhibits but upon being told by the Director that Appellant would be able

to testify and ask questions about the exhibits after they were entered into evidence,

Appellant ceased objecting to the admission of the Division’s exhibits.

       Dieckmeyer did not present any testimony regarding how the Division determined

the amount of the alleged claim. Instead, he offered into evidence Exhibit 11, a computer

printout with additional handwritten entries, which he described as follows: “It’s a five

page exhibit. This is a report from state office giving the total amount of medical

                                             2
overpayment that occurred in the period of March 2011 through April 2012 of

$8,367.66.”

       Appellant presented the following testimony at the hearing:

                [Director]: Okay. [Appellant], tell me why you disagree with the
       decision of the Agency to establish a claim?
                [Appellant]: Because, first of all, I feel like I haven’t done
       anything wrong. All I’ve done is applied and don’t know what are the
       guidelines that they go by, so they – all they requested from [me] was a
       copy of my taxes in order to qualify. And I only applied for my child, my
       daughter, and they said based on looking at the income being so low that
       we both qualified, so she said we should just both – have you both
       applying because you qualify, so I don’t know what they did and how they
       counted it to come up with this and why they didn’t check this sooner that
       I’m not this far into debt. And another issue I have, once I went back and
       they told me what my actual income was taken in consideration, every
       time I spoke to a person at South County, everybody told me a different
       thing as far as what is allowed on my self-employed taxes and what is not.
       So, I don’t – I don’t even have no clue what they allow and what they
       don’t allow because one of the items on my taxes that they said that don’t
       – are not allowed, our actual business. It’s my husband is a truck driver –
                [Director]: uh-huh.
                [Appellant;] (indiscernible) a truck and we have trailer; that’s the
       whole business. Without the trailer, you don’t have a business. So, they
       said that that was not allowed because the way – where it was put in the
       line of the taxes. So, once – how they explained it to me up at the South
       County was it’s all what Missouri allows. And he said that it’s possible
       you went back and checked your taxes and see if there’s different ways
       that they can legally do them and see if it is allowed because it sounds – it
       all depends how tax person does them. He said there’s different ways that
       they do them and he might have just put your business cost at the spot
       where Missouri doesn’t allow it. So, (indiscernible) list of which lines of
       the taxes aren’t allowed for me, I could at least talked to my tax person
       and see if my taxes are properly done or it could be (indiscernible) check
       and see if my actual business equipment is allowed to be claimed.

       Following the hearing, the Director prepared a “Decision and Order” concluding

“the [Division’s] proposed establishment of a claim of overpayment of MHF benefits to

[Appellant] in the amount of $8,367.66 is AFFIRMED” and ordering the Division “shall

                                             3
undertake whatever actions are necessary to implement the above Decision in a timely

manner.”

       Appellant appealed the Director’s decision to the St. Louis County Circuit Court.

At the court’s request, the Division filed a document setting forth additional information

detailing the expenditures purportedly made by the State on behalf of the Dolic family.

The circuit court entered a judgment affirming the Division’s establishment of a claim for

recoupment against Appellant but modifying the amount of the claim to account for the

Division’s admission that Edna was, in fact, eligible for benefits during the applicable

time period. The circuit court ordered the Director to set the claim amount to $7,377.66

for recoupment of expenditures made on behalf of Appellant and Asmir Dolic. This

appeal follows.

                                     Points Relied On

       In her first point on appeal, Appellant argues the Division erred in collecting the

MHF overpayment through a means other than decreasing, suspending, or entirely

withdrawing future Medicaid benefits.

       In her second point on appeal, Appellant contends the Division erred in collecting

a MHF overpayment when the benefits were not received through misrepresentation or

nondisclosure of material facts or a failure to report any changes in status or correct

information with respect to property or income.

       In her third point on appeal, Appellant argues the Division violated the due

process requirements of the Medicaid Act and the Fourteenth Amendment to the United

States Constitution by issuing legally insufficient notice of the MHF overpayment claim

                                              4
and misleading Appellant regarding her eligibility and the circumstances in which she

would have to repay the Division for overpaid benefits.

                                   Standard of Review

       Article V, Section 18 of the Missouri Constitution establishes the standard of

judicial review of administrative actions. When reviewing an administrative action, this

Court reviews the determination of the agency, not the circuit court. Albanna v. State Bd.

of Registration for Healing Arts, 293 S.W.3d 423, 428 (Mo. banc 2009). This Court

reviews the agency action to determine whether the agency’s findings are supported by

competent and substantial evidence on the record as a whole; the decision is arbitrary,

capricious, unreasonable, or involves an abuse of discretion; or the decision is

unauthorized by law. M.A.H. v. Missouri Dept. of Soc. Services, 447 S.W.3d 694, 696-

97 (Mo. App. E.D. 2014). On review, we defer to the Commission’s findings of fact and

determinations of credibility. George v. Civil Serv. Comm’n of City of St. Louis, 318
S.W.3d 266, 269 (Mo. App. E.D. 2010). Questions of law are reviewed de novo.

Albanna, 293 S.W.3d at 428.

                                        Discussion

                   Point I – Method of Collection Not Ripe for Review

       In her first point, Appellant challenges the Division’s method of collection on the

alleged overpayment of Medicaid benefits. Appellant contends the Division is only

authorized to collect Medicaid overpayments through decreasing, suspending, or entirely

withdrawing future Medicaid benefits pursuant to Section 208.010 RSMo Supp. 2010,

and the Division may not seek restitution or recovery of the overpayment in any other

manner.

                                             5
         Section 208.010.2(3) RSMo Supp. 2010 provides in relevant part:

         2. Benefits shall not be payable to any claimant who:

         …

         (3) Has received, or whose spouse with whom he or she is living has received,
         benefits to which he or she was not entitled through misrepresentation or
         nondisclosure or material facts or failure to report any change in status or correct
         information with respect to property or income as required by Section 208.210. A
         claimant ineligible pursuant to this subsection shall be ineligible for such period
         of time from the date of discovery as the division of family services may deem
         proper; or in the case of overpayment of benefits, future benefits may be
         decreased, suspended or entirely withdrawn for such period of time as the division
         may deem proper[.]

         The Division correctly asserts, however, that Appellant’s Point I is not ripe for

review. It is clear from Appellant’s point she is not appealing the establishment of the

claim, but only the method of collection. At this point, the Division has only sought to

establish a claim for overpayment and has not yet attempted to execute on that claim in

any manner. Because the Division has not taken any action to collect on the claim, this

Court cannot review the propriety of the Division’s not-yet-determined method of

collection.1 Hassan v Division of Employment Sec., 389 S.W.3d 290, 293-94 (Mo. App.

W.D. 2013)(appeal dismissed because appellant was not appealing the commission’s

finding of an overpayment of benefits but the potential future method of collection).

Appellant’s Point I is dismissed.

                          Point II – Authority to Collect the Overpayment

         In her second point, Appellant contends the Division erred in collecting a

Medicaid overpayment when the benefits were not received due to any misrepresentation,

1
 This Court’s resolution of the collection issue on the basis of ripeness is not a bar to Appellant’s ability to
challenge any collection attempt by the Division in the future. See Prince v. Division of Family Services,
886 S.W.2d 68, 73 (Mo. App. W.D. 1994) (raising the defense of estoppel in the State’s collection action
for overpayment of public assistance benefits).

                                                       6
nondisclosure, or failure to report a change in status or correct information with respect to

property or income on her part. Although Appellant’s point on appeal suggests she is

challenging the “collection” of the overpayment similar to her first point, in substance

Appellant’s Point II challenges the Division’s authority to establish a claim of

overpayment of benefits when the overpayment was the result of the agency’s error.

Appellant contends Section 208.010.2(3) authorizes the Division to collect overpayment

of Medicaid benefits only from someone who received benefits he or she was not entitled

to “through misrepresentation or nondisclosure of material facts or failure to report any

changes in status or correct information with respect to property or income[.]” Appellant

maintains because the overpayment was a result of agency error and not due to a

misrepresentation or failure to disclose on her part, the Division has no statutory authority

to collect the overpayment from her.

       Section 207.020.1 RSMo Supp. 1993, sets forth the powers and duties of the

Division to administer public assistance programs. 13 C.S.R. 40-2.190, promulgated

pursuant to Section 207.020 and titled “Procedure for Collection of Overpayments”,

states “Restitution and recovery may be required if at any time it is determined that a

recipient has received benefits to which s/he was not entitled because of a state or federal

statutory or regulatory requirement.”

       Section 205.967.1 RSMo 1981 provides in relevant part:

       1. As used in this section:
          (1) “Public assistance benefits, programs and services” means anything of
              value, including…drugs and medicine, and any service, including medical
              care…provided pursuant to chapters 198, 207, 208, 209 and 660, or
              benefits, programs, and services provided or administered by the
              department of social services;
          (2) The term “person” means any individual…who received any form of
              public assistance benefit in any manner for any reason.

                                             7
       …

       5. If during the life or on the death of any person… it is found that the recipient
       was possessed of income or property in excess of the amount reported or
       ascertained at the time of granting assistance, and if it be shown that such
       assistance was obtained by an ineligible recipient, the total amount of the
       assistance may be recoverable by the director of the department of social services
       as a seventh class claim from the estate of the recipient or in an action brought
       against the recipient while living.

       Furthermore, Section 208.210.2, titled “Undeclared income or property – benefits

may be recovered by department of social services, when” states:

                Any benefits paid when the recipient or the recipient’s spouse is in
       possession of such undeclared property or income shall be recoverable by
       the department of social services as a debt due to the state. If during the
       life, or upon the death, of any person who is receiving or has received
       benefits, it is found that the recipient or the recipient’s spouse was
       possessed of any property or income in excess of the amount reported that
       would affect his or her needs or right to receive benefits, or if it be shown
       such benefits were obtained through misrepresentation, nondisclosure of
       material facts, or through mistake of fact, the amount of benefits, without
       interest, may be recovered from him or her or his or her estate by the
       department of social services as a debt due the state.

(Emphasis added.)

       Although there is no dispute the overpayment of benefits in this case was solely

the result of the Division’s actions, these statutes do not require the Division to prove

misconduct by the recipient for it to collect in the event of an overpayment of benefits.

Section 208.210.2 specifically states the amount of benefits may be recovered from any

person who received benefits due to a mistake of fact. The agency’s miscalculation of

Appellant’s income was a mistake of fact. Even though the agency’s actions, which

included encouraging Appellant to apply for benefits she was not seeking, resulted in the

agency’s extension of Medicaid benefits to Mr. and Mrs. Dolic despite their ineligibility,

Appellant has received an overpayment of benefits, which the State may recover. The

                                              8
agency may establish a claim for the overpayment of benefits even though the benefits

were not received due to Appellant’s misrepresentation, nondisclosure, or failure to

report a change in status or correct information with respect to property or income.

Appellant’s Point II is denied.

                                  Point III – Due Process

       In her third point, Appellant argues the agency violated her due process rights

because the Adverse Action Notice dated August 22, 2012, purporting to establish a

claim of $8,367.66 fails to comply with procedural due process, in that it does not fully

inform Appellant of the case against her in order for her to adequately contest the

Division’s action. Appellant argues neither the notice nor the record contains

information explaining how the Division determined the amount of the claim.

       “‘The due process clauses under the United States and Missouri constitutions

prohibit the taking of life, liberty, or property without due process of law.’” State ex rel.

Missouri Pipeline Co. v. Missouri Pub. Serv. Comm’n, 307 S.W.3d 162, 174 (Mo. App.

W.D. 2009), as modified (Feb. 2, 2010), quoting Colyer v. State Bd. of Registration for

the Healing Arts, 257 S.W.3d 139, 144 (Mo. App. W.D. 2008). “Due process requires

notice and a hearing; moreover, the adequacy of the notice and the hearing must be

evaluated in the context of the specific procedure at issue, in this case, an administrative

proceeding.” State ex rel. Missouri Pipeline Co., 307 S.W.3d at 174.

               “In an administrative proceeding, due process is provided by
       affording parties the opportunity to be heard in a meaningful manner. The
       parties must have knowledge of the claims of his or her opponent, [and]
       have a full opportunity to be heard, and to defend, enforce and protect his
       or her rights.” [Citation omitted] “A party to an administrative hearing
       must be given the opportunity to hear evidence submitted against him, to
       confront and cross-examine witnesses, and to rebut testimony of such
       witnesses by evidence on his own behalf.”

                                              9
Id. (internal citations omitted).

        The Division must maintain a hearing system that meets the due process standards

set forth in Goldberg v. Kelly, 397 U.S. 254, 267-68, 90 S. Ct. 1011, 1020, 25 L. Ed. 2d
287 (1970). 42 C.F.R. § 431.205(d). “‘The fundamental requisite of due process of law

is the opportunity to be heard.’” Goldberg, 397 U.S. at 267 (requiring hearing prior to

termination of some types of public assistance benefits), quoting Grannis v. Ordean, 234
U.S. 385, 394, 34 S. Ct. 779, 783, 58 L. Ed. 1363 (1914).

                The hearing must be ‘at a meaningful time and in a meaningful
        manner.’ Armstrong v. Manzo, 380 U.S. 545, 552, 85 S. Ct. 1187, 1191,
        14 L. Ed. 2d 62 (1965). In the present context these principles require that
        a recipient have timely and adequate notice detailing the reasons for a
        proposed termination, and an effective opportunity to defend by
        confronting any adverse witnesses and by presenting his own arguments
        and evidence orally. These rights are important in cases such as those
        before us, where recipients have challenged proposed terminations as
        resting on incorrect or misleading factual premises or on misapplication of
        rules or policies to the facts of particular cases.

Goldberg, 397 U.S. at 267-68.

        Goldberg further dictates the judgment must rest solely upon the legal rules and

evidence adduced at the hearing and states “where governmental action seriously injures

an individual, and the reasonableness of the action depends on fact findings, the evidence

used to prove the Government’s case must be disclosed to the individual so that he has an

opportunity to show that it is untrue.” Id. at 270-71.

        In addition to the constitutional requirements for a fair hearing outlined in

Goldberg, 397 U.S. 254, and its progeny, federal regulation 42 C.F.R. § 431.205

prescribes further procedural safeguards. 42 C.F.R. § 431.205(d) specifically requires the

hearing system to satisfy any additional standards specified by the federal regulations.

                                             10
Featherston v. Stanton, 626 F.2d 591, 593 (7th Cir. 1980). The requirements for “Fair

Hearings for Applicants and Beneficiaries” are outlined in 42 C.F.R §§ 431.200 to

431.250.

       The agency’s notice must be written and contain a statement of what action the

agency intends to take, the reasons for the intended action, the specific regulations that

support the action, and an explanation of the recipient’s right to request an administrative

hearing. 42 C.F.R. § 431.210. In this case, the Adverse Action Notice dated August 22,

2012, stated Appellant was required to repay pursuant to 13 C.S.R. 40-2.190(1),

$8,367.66 in MHF benefits she incorrectly received from March 2011 through April 2012

due to “an income budgeting error.” The Adverse Action Notice advised Appellant she

had the right to a hearing if she disagreed with the agency’s decision. This notice

satisfied the bare minimum requirements of due process as set forth in 42 C.F.R. §

431.210. However, the minimal notice combined with the subsequent actions of the

agency amounted to a denial of Appellant’s right to procedural due process.

       42 C.F.R. § 431.242, titled “Procedural rights of the applicant or beneficiary”

provides:

       The applicant or beneficiary, or his representative, must be given an
       opportunity to—
       (a) Examine at a reasonable time before the date of the hearing and during
       the hearing:
               (1) The content of the applicant’s or beneficiary’s case file; and
               (2) All documents and records to be used by the State or local
               agency or the skilled nursing facility or nursing facility at the
               hearing;
       (b) Bring witnesses;
       (c) Establish all pertinent facts and circumstances;
       (d) Present an argument without undue interference; and
       (e) Question or refute any testimony or evidence, including opportunity to
       confront and cross-examine adverse witnesses.

                                             11
42 C.F.R. § 431.242.

       On December 5, 2012, the agency sent Appellant a Notice of Administrative

Hearing advising Appellant of the time and place of her telephone hearing. Contrary to

the Division’s assertion at oral argument, the Notice of Administrative Hearing did not

notify Appellant that she could obtain copies of the pertinent documents prior to her

hearing. Instead, it advised Appellant she must arrive at the hearing “at least 30 minutes”

prior to the time of her scheduled hearing if she wanted to “review the proposed exhibits

prior to the hearing[.]”

       At the hearing, when the Division began offering its exhibits into the record,

Appellant initially objected to their admission. When Appellant objected to the

admission of Exhibit 1 because it contained incorrect income information, the Director

told Appellant, “Okay. And I’ll have you testify about that when it comes your turn to

testify.” When Appellant then objected to the admission of Exhibit 2 due to possible

inaccuracies because Appellant received conflicting information from agency employees

about the business income information contained therein, the Director again told

Appellant: “Okay. And you’ll be allowed to ask questions once these are entered [into

evidence.]” Following these exchanges Appellant ceased objecting to the admission of

the Division’s exhibits.

       On appeal, Appellant argues neither the notice nor the record explains how the

amount of the Division’s claim was determined because the Division presented no

testimony regarding its determination and the Division’s exhibit purporting to support its

determination, Exhibit 11, contains no explanation of the figures used in computing the

claim nor the Division’s rationale for including any of the figures in its computation of

                                            12
the claim. Appellant contends she does not know how the Division determined the sum

she allegedly owes, including whether the Division factored in Edna’s eligibility.

       Exhibit 11 is best described as a computer printout of an incomprehensible list of

dates and numbers. It contains no provider names and no service details other than

“Drug,” “Medical,” “Outpatient,” and “Capitation Payment.” It contains an unexplained

column of numbers under the heading “ICN” for which this Court cannot decipher any

sort of pattern or meaning. The printout appears to be solely for Appellant and contains

what appears to be a specific “DCN” number for Appellant. However, a great deal of the

exhibit appears to include charges for a different “DCN” number. The Division

attempted to rectify this deficiency by penciling in Asmir’s name next to this “DCN”

number on the first page of the exhibit. The exhibit also shows amounts not included on

the original printout penciled in by an unknown party.

       While the Division contends its judgment withstands scrutiny because Exhibit 11

contains dates and figures under a column marked “PAIDAMT,” when all of the figures

under the “PAIDAMT” column are added together it amounts to $7,377.66. The Director

concluded, however, that the Division had established a claim for $8,367.66. This

amount is reached only if one adds an additional $990, an amount presumably divined

from the unexplained calculations scribbled on the first page of the exhibit under the

handwritten heading “3 phh CHIP74.” The Division takes the position that this Court can

simply ignore the additional sums and modify the amount of the claim similar to the

circuit court. We disagree.

       This Court reviews the determination of the agency, not the circuit court, and

reviews the agency’s action to determine whether the agency’s findings are supported by

                                            13
competent and substantial evidence on the record as a whole. Albanna, 293 S.W.3d at

428; M.A.H., 447 S.W.3d at 696-97. In modifying the Director’s determination, the

circuit court relied on additional information submitted by the Division that was neither

before the agency nor properly before this Court. This includes documentary evidence

purporting to detail the expenditures made by the State on behalf of the Dolic family as

well as the Division’s admission that Edna was, in fact, eligible for coverage and it had

erred in adding an additional $990 to its claim. Federal constitutional due process

requires the judgment to rest solely upon the evidence adduced at the administrative

hearing. Goldberg, 397 U.S. at 270-71.

        When viewed in full, the sequence of events in this case demonstrates

Appellant’s due process rights were violated. While the Adverse Action Notice meets the

bare minimum requirements, the notice combined with the lack of adequate hearing

procedures violated Appellant’s due process rights. The notice provided by the Division

simply stated Appellant was required to repay $8,367.66 for the overpayment of benefits.

The Division did not provide Appellant with any information advising her how it

determined this amount. As noted by Appellant’s counsel during oral argument,

Appellant did not receive a cash benefit and there is no evidence suggesting Appellant

possessed any independent knowledge of the amounts allegedly paid on her behalf. It

appears the Division is seeking the repayment of funds the State paid to third-party

providers. The sole piece of evidence presented against Appellant at the hearing

purporting to support the amount of the agency’s claim lacks necessary information to

enable Appellant to contest the agency’s allegations. Without information regarding the

                                            14
providers allegedly paid or the services allegedly rendered, it is impossible for Appellant

to effectively dispute the agency’s evidence.

       Appellant was not afforded a reasonable time prior to the date of the hearing to

examine the documents the State intended to use as evidence against her, the Director

actively discouraged Appellant from objecting to the evidence presented against her, and

the Division failed to present evidence in support of its claim that contained the basic

information necessary for Appellant to refute the Division’s evidence. The agency’s

actions violated Appellant’s federal statutory due process rights as set forth in 42 C.F.R.

§ 431.242, including her rights to establish all pertinent facts and circumstances; present

an argument without undue interference; and question or refute the Division’s evidence

against her. Appellant is entitled to a new hearing that comports with state and federal

due process requirements.

       As an aside, the Division has acknowledged there is no federal or state mandate

requiring it to collect the overpayment of Medicaid benefits occasioned by governmental

error. Conferred with such discretion, the Division should exercise it in a way that

comports with common sense, equity, and fairness. In circumstances such as these,

where the state agency encouraged Appellant to apply for and collect Medicaid benefits;

Appellant was forthright, honest, and fair; and the State admits it was the impetus for the

overpayment, perhaps the State should consider whether collection against an individual

whose income is of such a nature that her daughter is, nevertheless, entitled to receive

medical benefits from the State, is the optimal use of its resources. The State might be

better served if those resources were allotted to efforts to improve the system which

caused this unnecessary error and expense.

                                             15
       For the reasons discussed herein, we reverse and remand to the Director for a

rehearing to establish the amount of the alleged overpayment of benefits to Appellant.

Appellant’s Point III is granted.

                                        Conclusion

       The judgment of the trial court is dismissed in part, affirmed in part, reversed in

part, and remanded with directions.

                                             SHERRI B. SULLIVAN, P.J.

Kurt S. Odenwald, J., and
Lisa P. Page, J., concur.

                                            16