Isn’t It Unethical for a Governmental Lawyer Representing an Agency to Cite a Massachusetts Appeals Court Case for the Exact Opposite of What the Court Held?
For years, the Office of Medicaid has not been implementing federal Medicaid trust law correctly, and has stretched for legal arguments to make against irrevocable trusts. One of those arguments has been that a power to substitute assets (i.e., the power to reacquire trust assets by substituting assets of an equivalent value) is a way for the settlor of the trust to take the assets back, even though such a power is merely an option to purchase the assets at fair market value. The Agency ignores the fact that purchasing an asset for its fair market value means that the settlor achieves no profit from the transaction; the settlor and the trust merely end up with different assets of the same amount. In the decision of Heyn v. Director of the Office of Medicaid, 89 Mass. App. Ct. 312 (2016), the Massachusetts Appeals Court confirmed that point and criticized the Office of Medicaid for attempting to treat a power to substitute assets as a reason for treating an irrevocable trust as countable:
Even less persuasive is the hearing officer’s other rationale, which rested on the grantor’s reserved power to direct a transfer of assets out of trust in exchange for other assets of equivalent value. Such an exchange would be equivalent to a sale of trust assets, with the grantor in the role of purchaser and the proceeds of the sale nonetheless retained by the trust as principal. Such a transfer would not effect any distribution or diminution of trust principal, any more than a sale of trust assets to unrelated third parties, followed by a reinvestment of sale proceeds by the trust.
Thus, given all of the fair hearing decisions that had also concluded that the settlor of the trust could not benefit financially from such a power (see https://irrevocabletrust.info/category/fair-hearing-decisions/approval-at-fair-hearing/issue-power-to-substitute-assets/), for many of us it seemed that the issue could fairly be seen as settled.
Unfortunately, and as an Officer of the Court it pains me to be making this point, when we’re dealing with the Office of Medicaid, we may not always be dealing with lawyers who actually care about the law. In a January 20, 2017 fair hearing memo in MassHealth Appeal 1615211, Attorney Katherine “Katy” Schelong, representing the Agency, cited the Heyn decision for the exact opposite proposition, and, in an act that seems breathtakingly dishonest, she intentionally left out the above quote from the case and claimed that language in Heyn supports the position that a power to substitute assets held by the settlor of the trust is a valid reason for treating an irrevocable trust as countable:
[U]nder Paragraph B of the Second Article, the applicant reserved the personal right, irrespective of the Trustee and its discretion, to reacquire Trust assets by substituting assets of an equivalent value. This is an “any circumstance” under the Irrevocable Trust where the principal is available for the benefit of the applicant, by the applicant herself. 130 CMR 520.023(C)(l)(a). In a Medicaid eligibility determination, it is irrelevant whether the applicant needs to, wants to, or is able to exercise this authority. The fact that under the terms of the Trust such any such option exists renders the principal available and countable, which several Courts have acknowledged: “Under the post-1993 version of the statute, for purposes of determining eligibility for Medicaid benefits, “countable assets” include any portion of the trust principal that could “under any circumstances” be paid “to or for [the] benefit [of]” Roche. 7 Doherty, supra. Such circumstances need not have occurred, or even be imminent, in order for the principal to be treated as “countable assets”; it is enough that the amount could be made available to Roche under any circumstances. See Lebow, supra at 177-178, 740 N.E.2d 978.” Heyn v. Director of the Office of Medicaid, 48 N.E.3d 480, 483-484 (April 15, 2016).
How does an Agency lawyer validly cite Heyn for that point even though the Court completely and unambiguously ruled the exact opposite elsewhere in its opinion? It is as baffling as it is dishonest.
This is the problem that the elder law bar have been having when dealing with some of the Agency’s lawyers. Pseudologists such as Schelong, claiming they are lawyers representing the Agency during the fair hearing process but never actually attending any hearing, advise the MassHealth worker to issue a denial, but then, in an act that seems like only partial or convenient representation, do not advise the worker to give the reasons for the denial. These lawyers claim that their advice to issue the denial is protected by attorney-client privilege, but in actuality the MassHealth workers (who are at the very bottom of the administrative structure) are just doing what they are told to do by the Agency’s lawyers. We elder law attorneys then have to trudge to the fair hearing for no other purpose than to receive the reasons for the denial, because the worker does not provide the reasons for the denial despite our requests. (In what other area of law — other than, perhaps, national security — can it be considered proper for the appellant to not be given the detailed reasons for the legal proceeding until the time scheduled for the proceeding to begin?) The reasons are finally provided at the fair hearing via a lengthy memorandum prepared by the Agency’s lawyer, and often held by the MassHealth representative and kept outside of the appellant’s file. These memoranda are riddled with quotes such as the above one from Heyn that intentionally take cases out of context.
The complete misrepresentation of the Heyn case, while shocking in its own right, is what Schelong does in her memoranda on a regular basis. Her written works, never to my knowledge submitted to or published in any peer-reviewed journal, are misleading quote-fests, and she tries to hide these memoranda from public consumption by adding a confidentiality notice (as well as the MassHealth applicant’s Social Security number) so that they will be shielded from public records requests. (When I receive any of her memoranda, I post them at https://irrevocabletrust.info/category/fair-hearing-process/masshealth-memo-available/ .)
Note that Schelong and her ilk couldn’t take these steps without explicit or implicit approval from Chief MassHealth Counsel Sharon Boyle. It seems that, in her office, the ends justify the means. See this 2009 Schelong email to a MassHealth worker, instructing the worker to destroy Schelong’s memorandum that was already in the applicant’s file. The lawyers in the hierarchy above Schelong and Boyle in the Executive Office of Health and Human Services apparently approve of or condone such action, or are blissfully ignorant of this misbehavior. As citizens who pay their salaries, we should expect more integrity from all of them than we seem to be getting.