## Facts

- Four plaintiffs, acting as legal representatives for aged, infirm, mentally incompetent women needing nursing-home care, sought Medicaid coverage in Colorado.
- The women’s monthly income exceeded Colorado’s Medicaid income cap but was insufficient to pay full nursing-home costs, placing them in a coverage “gap” where they were denied any Medicaid assistance rather than allowed partial payment with Medicaid covering the remainder.
- Colorado state courts, acting for the incompetent women, imposed discretionary trusts under Colo. Rev. Stat. § 15-14-409, directing that the women’s income be paid into the trusts.
- The trust terms limited distributions to the beneficiaries so that distributions would remain below the state’s monthly Medicaid income-eligibility standard.
- The Colorado Department of Social Services treated trust income as “available” to the beneficiaries, denied Medicaid eligibility, and upheld denials in administrative proceedings.
- The Department also characterized the trust funding as a transfer of assets without fair consideration and/or the creation of “Medicaid qualifying trusts.”

## Issues

1. Whether income placed into court-imposed trusts under Colo. Rev. Stat. § 15-14-409 was “available” income for Medicaid eligibility under 42 U.S.C. § 1396a(a)(17) and implementing state rules.
2. Whether the court-ordered placement of income into such trusts constituted a transfer of assets without fair consideration warranting Medicaid ineligibility or penalty.
3. Whether these court-imposed trusts qualified as “Medicaid qualifying trusts” such that trust assets or income must be treated as available to the beneficiaries.

## Decision

- The court granted summary judgment for the plaintiffs and denied the defendant’s contrary request for summary judgment.
- The court declared that income held in the court-imposed trusts was not “available” to the beneficiaries for Medicaid income-eligibility purposes.
- The court enjoined the state agency from treating income held in such trusts as available income when determining Medicaid eligibility.
- The court rejected the agency’s theories that trust funding was a transfer without fair consideration or that the trusts were Medicaid qualifying trusts.

## Legal Principles

- Under 42 U.S.C. § 1396a(a)(17), Medicaid eligibility determinations must consider only income and resources that are actually available to the applicant under governing legal standards.
- Income is not “available” where the applicant lacks legal authority to access, control, or compel distribution of the funds.
- A court-imposed trust established for an incompetent person, with discretionary distribution limits and spendthrift-like constraints, can render income legally unavailable for Medicaid eligibility purposes.
- Court-ordered placement of income into trust for an incompetent beneficiary is not treated as a voluntary transfer by the applicant for purposes of transfer-of-assets disqualification or penalty.
- A trust is not a Medicaid qualifying trust where it is not established by the individual applicant, but instead is imposed by a court acting on behalf of an incompetent person.

## Conclusion

The court required Colorado to disregard income paid into court-imposed discretionary trusts for incompetent nursing-home residents when determining Medicaid eligibility, holding the income was not legally available and that the trusts neither constituted disqualifying transfers nor fell within federal Medicaid qualifying trust rules.


Miller v. Ibarra, 746 F. Supp. 19 (D. Colo. 1990)