The Court of Appeals of Indiana affirmed a trial court’s ruling that the appellant was not entitled to judicial review of the Indiana Family and Social Services Administration’s (FSSA) Medicaid eligibility determinations and imposition of a transfer penalty. The court found that the appellant had failed to both exhaust his administrative remedies and state a cognizable claim that his federal civil rights had been violated by the FSSA’s determination that included trust assets subject to 42 U.S.C. § 1369p(c)(2)(C) as available resources for purposes of Medicaid eligibility. Zimmerman v. Indiana Family & Social Services Admin., No. 24A-PL-1281 (Ind. Ct. App. June 25, 2025).
In 2014, Ronald Zimmerman, 77, entered into a caregiver agreement with his son, David, under which David agreed to provide home healthcare services to Robert, and Robert agreed to pay David for healthcare and other expenses. In 2019, David created an irrevocable trust, and Robert transferred his farm and other assets to the trust. David was the trustee, and his siblings were beneficiaries.
In 2020, Robert was admitted to a nursing home. In 2021, David filed a Medicaid application on Robert’s behalf. The FSSA denied the application twice: first, on the basis that the value of Robert’s resources exceeded the Medicaid eligibility threshold, and second, because it determined that the irrevocable trust was invalid. The administrative law judge (ALJ) ultimately determined that the irrevocable trust was valid and directed the FSSA to redetermine Robert’s eligibility for Medicaid benefits, considering the caregiver contract and its impact on his eligibility. In addition, the ALJ directed the FSSA to examine a healthcare log of services with incorrect entries that Robert had submitted and to determine if the transfer of assets to the irrevocable trust should result in a transfer penalty.
The FSSA then notified Robert that, effective May 1, 2021, his application had been approved for full coverage except long-term care. However, it also determined that the caregiver agreement was invalid, the expenses Robert claimed in the healthcare log should be disallowed due to the absence of supporting documentation, and that resources valued at more than $1 million had been transferred to the irrevocable trust during the applicable look-back period. Because Robert had not supplied supporting documentation that the FSSA had notified him was necessary to show that the expenses under the caregiver agreement were adequate consideration for the transfers, the FSSA determined that a transfer penalty from May 1, 2021, to December 2, 2036, in the amount of $1,285,061.63 should be imposed.
On appeal, the ALJ determined that the caregiver agreement was valid and could serve as adequate consideration for the transfer of assets to the irrevocable trust, but that Robert must submit documentation to the FSSA supporting the expenses listed in his healthcare log to avoid the transfer penalty. However, Robert never submitted a revised healthcare log to the FSSA and appealed the ALJ’s decision to the FSSA for a final agency determination on the transfer penalty. After the FSSA affirmed the ALJ’s decision, Robert still did not submit the revised healthcare log. He appealed to the trial court, seeking judicial review of the ALJ's remand instructions requiring further action from Zimmerman and the FSSA and alleging that they were wrongful and arbitrary directives. Robert also asserted that the FSSA, the relevant county division, and the FSSA Secretary in his individual capacity had violated Robert’s federal civil rights by wrongfully including trust assets subject to 42 U.S.C. § 1396p(c)(2)(C) as available resources and denying him Medicaid nursing home assistance. The trial court dismissed Robert’s civil rights claim for failure to state a cognizable claim and denied the petition for judicial review because he had failed to exhaust his administrative remedies. Robert appealed.
The Court of Appeals of Indiana noted that Robert did not dispute that he had not submitted the revised healthcare log to the FSSA. It held that Robert had failed to comply with the requirement in Ind. Code § 4-21.5-5-4 that he must exhaust his administrative remedies, and thus he was not entitled to consideration of his petition for judicial review. In addition, it agreed with the trial court that Robert had not stated a federal civil rights claim under 42 U.S.C. § 1983 because he had failed to show an ongoing violation of federal law; 42 U.S.C. § 1396p(c)(2)(C) provided him with only the opportunity to satisfy his burden that a transfer penalty should not reduce his Medicaid benefits, and he had been afforded that opportunity. Further, it ruled that Robert could not enjoin the FSSA from exercising the discretion it was provided under state law. Therefore, the court affirmed the trial court’s ruling.
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