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DALZIN v. BELSHE

November 14, 1997

JOSEPH DALZIN, et al, Plaintiffs,
v.
KIMBERLY BELSHE, in her official capacity as Director of the California Department of Health Services, et al, Defendants.



The opinion of the court was delivered by: WALKER

 Plaintiffs bring this action seeking a declaration that California's "proportionate share" system for the recovery of Medical funds violates federal law. Plaintiffs also seek an injunction enjoining the defendants from enforcing this system against them. Currently pending before the court are the parties' cross motions for summary judgment and plaintiffs' motion for a permanent injunction against the enforcement of the law. For the following reasons, plaintiffs' motions will be granted, and defendants' motion will be denied.

 I

 The facts of this case are undisputed. California participates in the Medicaid program, a program through which the federal government provides funding to participating states so they can in turn provide medical assistance to eligible low-income persons. Through its power to raise and spend revenue, Congress has imposed several restrictions on the ways in which the states can manage these programs.

 Federal law generally allows states to seek reimbursement from a person's estate for medical assistance provided to the decedent while he was alive. In some situations, however, the states cannot seek such reimbursement. Specifically, 42 USC § 1396p(b)(2) provides that any effort by the state to seek reimbursement from an individual's estate:

 
(1) may be made only after the death of the individual's [the decedent's] surviving spouse, if any, and only at a time -- (A) when he [the decedent] has no surviving child who is under age 21, or (with respect to states eligible to participate in the State program established under subchapter XVI of this chapter) is blind or permanently and totally disabled, or (with respect to States which are not eligible to participate in such program) is blind or disabled as defined in section 1382c of this title.

 California's Medicaid program is called Medi-Cal, and it is administered by the defendants, officials of the California Department of Health Services. California is eligible to participate in the state program referenced in the statute, and these federal restrictions govern the Medi-Cal program.

 California law generally permits the state to recover Medi-Cal expenses from the estates of people who received these benefits during their lives. In an effort to comply with the federal restrictions contained in 42 USC § 1396p(b)(2), the California legislature has limited the state's ability to recover from an estate in which the decedent is survived either by a spouse or by a child who is under 21, blind or disabled. See Cal Welf and Inst Code § 14009.5(b)(3); 22 Cal Code Regs § 50961(d). These laws, however, do not completely bar the state from seeking recovery from such estates. The laws only prevent the state from recovering the "proportionate share" of the estate left to the surviving spouse or disabled child. The laws therefore allow the state to seek recovery from the portion of the estate devised to surviving children who are not under 21, blind or disabled. See id.

 In November 1994, Lethea Larsen died leaving her entire estate in equal shares to her two sons, Paul Smith and Joseph Dalzin. Joseph Dalzin suffers from mental retardation and is disabled within the meaning of 42 USC § 1396p(b)(2). In February 1995, the state of California filed a creditor's claim against the Larsen estate for recovery of Medi-Cal benefits paid to Larsen during her lifetime. The state waived any claim it may have had to Dalzin's inheritance, but under the "proportionate share" scheme, the state pursued its claim against Smith and his share of the estate.

 Similarly, in August, 1995, Jane Longshore died leaving her entire estate in equal shares to her children, Camila Tausworthe, Shirley Herz, Jude Nichols, and Wells Longshore. Nichols and Wells Longshore suffer from multiple sclerosis and are disabled within the meaning of 42 USC § 1396p(b)(2). In May, 1996, the state waived its claims against Nichols and Wells Longshore but sought recovery from the portion of the estate devised to Tausworthe and Herz.

 II

 It is well settled that "State regulations which are inconsistent with federal law are invalid under the Supremacy Clause." Lewis v Hegstrom, 767 F.2d 1371, 1375 (9th Cir 1985). When "an act of Congress, fairly interpreted, is in actual conflict with the law of State," the state law must yield. Savage v Jones, 225 U.S. 501, 533, 56 L. Ed. 1182, 32 S. Ct. 715 (1912). Because California has chosen to participate in the federal Medicaid program, it must administer the Medi-Cal program in a manner consistent with federal law. See Bucholtz v Belshe, 114 F.3d 923, 925 (9th Cir 1997).

 Given this legal setting, the parties agree that the single issue presented by this case is whether California's "proportionate share" system is consistent with federal law. FRCP 56(c) provides for the granting of summary judgment if the moving party is entitled to judgment as a matter of law. It is axiomatic that questions of statutory interpretation are questions of law. See Jeldness v Pearce, 30 F.3d ...


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