Connecticut

Warning: The following opinion is provided for purposes of discussion only. We have not Shepardized™ this opinion, and do not know the subsequent disposition of this case nor whether the effect of the opinion has been overruled or superceded by other law.

Mildred F. Ahern v. Joyce Thomas,
733 A.2d 756 (Conn. 05/18/1999)

248 Conn. 708;
733 A.2d 756

MILDRED F. AHERN v. JOYCE THOMAS, COMMISSIONER OF SOCIAL SERVICES

(SC 15845)

SUPREME COURT OF CONNECTICUT

248 Conn. 708;733 A.2d 756

October 27, 1998, Argued
May 18, 1999, Officially Released

PRIOR HISTORY: [*1] Appeal from a decision by the defendant denying the plaintiff's application for medicaid benefits, brought to the Superior Court in the judicial district of Hartford-New Britain at Hartford and tried to the court, DiPentima, J.; judgment sustaining the plaintiff's appeal, from which the defendant appealed.

DISPOSITION: Affirmed.

COUNSEL: Patrick B. Kwanashie, assistant attorney general, with whom were Maite Barainca, assistant attorney general, and, on the brief, Richard Blumenthal, attorney general, and Richard J. Lynch, assistant attorney general, for the appellant (defendant).

George B. Bickford, with whom, on the brief, was Neil W. Kraner, for the appellee (plaintiff).

JUDGES: Callahan, C. J., and Borden, Berdon, Norcott, Katz, Palmer and McDonald, Js. In this opinion BORDEN, NORCOTT, KATZ, PALMER and MCDONALD, Js., concurred. BERDON, J., dissenting.

OPINIONBY: CALLAHAN

OPINION:

CALLAHAN, C. J. Title XIX of the Social Security Act; 42 U.S.C. § 1396 et seq.; provides that a determination of eligibility for medicaid benefits may be based on "only such income and resources as are . . . available to the applicant . . . ." n1 In 1990, the plaintiff, Mildred F. Ahern, established and funded a trust. The [*2] sole issue in this administrative appeal is whether the principal of that trust is a resource "available" to the plaintiff for purposes of determining her eligibility to receive benefits under the medicaid program. We conclude that it is not available to her.

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n1 42 U.S.C. § 1396a (a) (17) (B).

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The following facts and procedural history are undisputed. The plaintiff, a ninety-two year old woman, has resided at St. Mary Home (home), a nursing facility located in West Hartford, since January, 1990. On October 6, 1990, she established and funded a trust. The trust instrument directs, inter alia, that the trustees n2 "shall pay or apply the net income of the trust estate to or for the benefit of the [plaintiff] during [her] lifetime."

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n2 The trust instrument names as trustees the plaintiff's daughter, Carol Ahern, and Connecticut National Bank, now Fleet Bank.

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From the time of her admission to the home until November, 1994, to pay for her care, the plaintiff utilized her income as well as assets that had not been transferred to the trust. Those assets, however, were depleted by November, 1994. Thereafter, the income the plaintiff has received from the trust has been applied toward the cost of her care at the home. The plaintiff's other income, which includes social security and pension benefits, also has been used to pay for that care. The cost of her care, however, exceeds the plaintiff's total income. On November 16, 1994, the plaintiff applied to the department of social services (department) for medicaid benefits n3 seeking financial assistance for the cost of her care in excess of her total income. n4

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n3 The plaintiff's application for medicaid benefits was filed more than forty-eight months after she established the trust. For trusts established prior to August 11, 1993, the "look back period" for eligibility for medicaid benefits is thirty months. See 42 U.S.C. § 1396p (c) (1988). Consequently, the plaintiff's transfer of assets to the trust in 1990 did not interfere with her eligibility for medicaid benefits. For trusts established on or after August 11, 1993, the look back period is sixty months. See 42 U.S.C. § 1396p (c) (1994). [*4]

n4 When an individual who receives medicaid benefits is a resident of a nursing facility, federal law requires that the state reduce the payments made under the medicaid program to the nursing facility by the amount of the individual's income that remains after certain deductions, such as a personal needs allowance, have been made. See 42 C.F.R. §§ 435.725, 435.733, 435.832 and 436.832. Thus, nursing home residents are required to apply their income, minus certain allowances, to the cost of the nursing home care.

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In July, 1995, the department determined that under the terms of the trust instrument, not only the net trust income but also the trust principal, which at that time was $ 637,937, were "available" to the plaintiff for purposes of determining her medicaid eligibility. Consequently, the department concluded that the plaintiff's "available" resources exceeded the $ 1600 resource limit for medicaid eligibility set forth in Connecticut's state medicaid plan; see General Statutes §§ 17b-264 and 17b-80 (c); n5 see also Department of Social Services, Uniform Policy Manual (1993) § 4005.10 [*5] (Uniform Policy Manual); and, on that basis, denied her application.

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n5 General Statutes § 17b-264 provides in relevant part: "All of the provisions of sections . . . 17b-79 to 17b-103 . . . are extended to the medical assistance program . . . ."

General Statutes § 17b-80 (c) provides in relevant part: "No person shall be eligible . . . whose assets as defined by the commissioner exceed sixteen hundred dollars . . . ."

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The plaintiff then exercised her right to an administrative appeal before a fair hearing officer. See General Statutes § 17b-66. n6 The hearing officer also concluded that the plaintiff's "available" resources exceeded the $ 1600 eligibility limit and denied her medicaid application. Thereafter, the plaintiff appealed from the hearing officer's decision to the Superior Court pursuant to General Statutes §§ 17b-65 and 4-183. n7 On appeal to that court, the plaintiff maintained that the hearing officer improperly had included the trust principal in the calculation of her "available" resources. [*6] The trial court agreed and reversed the fair hearing officer's decision.

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n6 General Statutes § 17b-66 provides: "Any applicant or beneficiary aggrieved by a decision of the commissioner made without a fair hearing may request a hearing in accordance with the provisions of section 17b-60."

n7 General Statutes § 17b-65 (a) provides in relevant part: "The . . . hearing officer shall render a final decision based upon all the evidence introduced before him and applying all pertinent provisions of law, regulations and departmental policy. . . . Such decision after hearing shall be final except that the applicant for such hearing, if aggrieved, may appeal therefrom in accordance with section 4-183. . . ."

General Statutes § 4-183 (a) provides in relevant part: "A person who has exhausted all administrative remedies available within the agency and who is aggrieved by a final decision may appeal to the Superior Court . . . ."

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The defendant, Joyce Thomas, the commissioner of the department, appealed from the [*7] trial court's judgment to the Appellate Court. We transferred the appeal to this court pursuant to Practice Book § 65-1 and General Statutes § 51-199 (c).

On appeal, the defendant maintains that the trial court improperly determined that the plaintiff's "available" resources did not exceed the $ 1600 medicaid eligibility limitation. See General Statutes §§ 17b-264 and 17b-80 (c); Uniform Policy Manual, supra, § 4005.10. Specifically, the defendant claims that, pursuant to the medicaid qualifying trust provisions set forth at 42 U.S.C. § 1396a (k) (1988), n8 the entire trust principal is an asset "available" to the plaintiff, and that the trust principal, therefore, properly should be included in the calculation of the plaintiff's eligibility for medicaid benefits. See 42 U.S.C. § 1396a (a) (17) (B). n9 We disagree.

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n8 "[A] 'medicaid qualifying trust' is a trust . . . established (other than by will) by an individual . . . under which the individual may be the beneficiary of all or part of the payments from the trust and the distribution of such payments is determined by one or more trustees who are permitted to exercise any discretion with respect to the distribution to the individual." 42 U.S.C. § 1396a (k) (2) (1988). The amount of principal and income of a medicaid qualifying trust considered "available" to an applicant "is the maximum amount of payments that may be permitted under the terms of the trust to be distributed to the grantor, assuming the full exercise of discretion by the trustee or trustees for the distribution of the maximum amount to the grantor. . . ." 42 U.S.C. § 1396a (k) (1) (1988). [*8]

n9 Title 42 of the United States Code, § 1396a (a) (17) (B) provides in relevant part that in determining eligibility for medicaid benefits, the department may "[take] into account only such income and resources as are . . . available to the applicant . . . ."

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I

Our analysis begins with an overview of the medicaid program. The program, which was established in 1965 as Title XIX of the Social Security Act and is codified at 42 U.S.C. § 1396 et seq. (medicaid act), is a joint federal-state venture providing financial assistance to persons whose income and resources are inadequate to meet the costs of, among other things, medically necessary nursing facility care. Atkins v. Rivera, 477 U.S. 154, 156, 106 S. Ct. 2456, 91 L. Ed. 2d 131 (1986); Harris v. McRae, 448 U.S. 297, 301, 100 S. Ct. 2671, 65 L. Ed. 2d 784 (1980); State v. Tuchman, 242 Conn. 345, 347-48, 699 A.2d 952 (1997); Burinskas v. Dept. of Social Services, 240 Conn. 141, 148, 691 A.2d 586 (1997). The federal government shares the costs of medicaid with those states that elect to participate in the [*9] program, and, in return, the states are required to comply with requirements imposed by the medicaid act and by the secretary of the Department of Health and Human Services. Atkins v. Rivera, 477 U.S. at 156-57. Specifically, participating states are required to "'develop a plan, approved by the secretary of health and human services, containing reasonable standards . . . for determining eligibility for and the extent of medical assistance'" to be provided. Burinskas v. Dept. of Social Services, supra, 148; Ross v. Giardi, 237 Conn. 550, 555, 680 A.2d 113 (1996); see also 42 U.S.C. § 1396a (a) (17).

Connecticut has elected to participate in the medicaid program and has assigned to the department the task of administering the program. General Statutes § 17b-2; n10 see Burinskas v. Dept. of Social Services, supra, 240 Conn. 148; Ross v. Giardi, supra, 237 Conn. 555-56. Pursuant to General Statutes §§ 17b-262 and 17b-10, n11 the department has developed Connecticut's state medicaid plan and has promulgated regulations that govern its administration. See Uniform Policy Manual, supra.

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n10 General Statutes § 17b-2 provides in relevant part: "The Department of Social Services is designated as the state agency for the administration of . . . ( the Medicaid program pursuant to Title XIX of the Social Security Act . . . ." [*10]

n11 General Statutes § 17b-262 provides in relevant part: "The Commissioner of Social Services may make such regulations as are necessary to administer the medical assistance program. . . ."

General Statutes § 17b-10 (a) provides in relevant part: "The Department of Social Services shall prepare and routinely update state medical services and public assistance manuals and general assistance policy manuals . . . containing all departmental policy regulations and substantive procedure. . . ."

Section 17b-10-1 of the Regulations of Connecticut State Agencies provides in relevant part: "Pursuant to section 17b-10 of the Connecticut General Statutes, the Department of Social Services has prepared, and routinely updates, a state eligibility Policy Manual containing all departmental policy regulations and substantive procedures which affect the rights or procedures available to the public. In particular, the Policy Manual outlines the policies and procedures used by the department to implement and enforce federal and state laws for all of the programs which it administers. . . ."

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The medicaid act [*11] requires that a state's medicaid plan make "medical assistance" available to qualified individuals. 42 U.S.C. § 1396a (a) (10). "The term 'medical assistance' means payment of part or all of the cost of . . . care and services . . . [including] nursing facility services . . . ." 42 U.S.C. § 1396d (a); see Catanzano v. Wing, 103 F.3d 223, 229 (2d Cir. 1996). Participating states are required to provide coverage to certain groups and are given the option to extend coverage to various other groups. The line between mandatory and optional coverage primarily is drawn in 42 U.S.C. § 1396a (a) (10) (A): mandatory coverage is specified in 42 U.S.C. § 1396a (a) (10) (A) (i); and optional coverage is set forth in subsection (a) (10) (A) (ii). In medicaid parlance, individuals who qualify for medicaid benefits pursuant to those subsections are referred to as the "categorically needy" because, in general, they are eligible for financial assistance under Titles IV-A (Aid to Families with Dependent Children) n12 or XVI (Supplemental Security Income for the Aged, Blind, and Disabled) n13 of the Social Security Act.

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n12 See 42 U.S.C. § 601 et seq. [*12]

n13 See 42 U.S.C. § 1381 et seq.

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Under the medicaid act, states have an additional option of providing medical assistance to the "medically needy" -- persons who, like the plaintiff, lack the ability to pay for their medical expenses but do not qualify as "categorically needy" solely because their income exceeds the income eligibility requirements of the applicable categorical assistance program. n14 Atkins v. Rivera, supra, 477 U.S. 157-58; Schweiker v. Gray Panthers, 453 U.S. 34, 37, 101 S. Ct. 2633, 69 L. Ed. 2d 460 (1981); Forsyth v. Rowe, 226 Conn. 818, 824, 629 A.2d 379 (1993); Matarazzo v. Rowe, 225 Conn. 314, 319, 623 A.2d 470 (1993). The "medically needy" become eligible for medicaid, if the state elects to cover them, by incurring medical expenses in an amount sufficient to reduce their incomes below the income eligibility level set by the state in its medicaid plan. See 42 U.S.C. § 1396a (a) (17) (in determining eligibility, state must take "costs . . . incurred for medical care" into account); see also 42 C.F.R. § 435.301. "Only when they 'spend [*13] down' the amount by which their income exceeds that level, are [medically needy persons] in roughly the same position as [categorically needy] persons . . . [because then] any further expenditures for medical expenses . . . would have to come from funds required for basic necessities." Atkins v. Rivera, supra, 158. Connecticut has chosen to cover the medically needy. Forsyth v. Rowe, supra, 824.

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n14 42 U.S.C. § 1396a (a) (10) (C); 42 C.F.R. §§ 435.300 through 435.350.

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The medicaid act, furthermore, requires participating states to set reasonable standards for assessing an individual's income and resources in determining eligibility for, and the extent of, medical assistance under the program. 42 U.S.C. § 1396a (a) (17); see also Forsyth v. Rowe, supra, 226 Conn. 824. The resources standard set forth in Connecticut's state medicaid plan for categorically needy and medically needy individuals is $ 1600. General Statutes §§ 17b-264 and 17b-80 (c); Uniform Policy Manual, supra, § [*14] 4005.10; see also Forsyth v. Rowe, supra, 824. Consequently, a person who has "available" resources; see 42 U.S.C. § 1396a (a) (17) (B); in excess of $ 1600 is not eligible to receive benefits under the Connecticut medicaid program even though the person's medical expenses cause his or her income to fall below the income eligibility standard.

Prior to 1986, however, the "availability" requirement of 42 U.S.C. § 1396a (a) (17) (B) provided a loophole by which individuals anticipating the need for expensive long-term nursing facility care could impoverish themselves and qualify for medicaid assistance while preserving their resources for their heirs. An individual could establish an irrevocable trust that permitted, but did not require, the trustee to disburse the income, but not the principal, of the trust to the individual. The trustee would pay the income from the trust to the grantor until the medicaid transfer "look back period" had expired and the grantor's transfer of assets to the trust, therefore, would no longer affect his eligibility for medicaid benefits. Thereafter, the trustee would exercise his discretion to withhold payments of trust income from the grantor. [*15] As a result, neither the trust principal nor the trust income would be resources "available" to the grantor within the meaning of § 1396a (a) (17) (B), and the grantor would qualify for medicaid assistance. See H.R. Rep. No. 99-265, pt. 1, pp. 71-72 (1985); see also Forsyth v. Rowe, supra, 226 Conn. 829.

Congress, however, tightened the "availability" loophole provided by § 1396a (a) (17) (B) of the medicaid act by enacting the medicaid qualifying trust provisions set forth at 42 U.S.C. § 1396a (k) (1988). See H.R. Rep. No. 99-265, pt. 1, pp. 71-72 (1985); see also Forsyth v. Rowe, supra, 226 Conn. 829. "[A] 'medicaid qualifying trust' is a trust . . . established (other than by will) by an individual . . . under which the individual may be the beneficiary of all or part of the payments from the trust and the distribution of such payments is determined by one or more trustees who are permitted to exercise any discretion with respect to the distribution to the individual." n15 (Emphasis added.) 42 U.S.C. § 1396a (k) (2) (1988). The amount of a medicaid qualifying trust considered "available" to an applicant for purposes of determining eligibility for medicaid [*16] benefits "is the maximum amount of payments that may be permitted under the terms of the trust to be distributed to the grantor, assuming the full exercise of discretion by the trustee or trustees for the distribution of the maximum amount to the grantor. . . ." (Emphasis added.) 42 U.S.C. § 1396a (k) (1) (1988); see Forsyth v. Rowe, supra, 825. Thus, pursuant to § 1396a (k) (1), all possible distributions that a medicaid applicant is capable of receiving from a trust (i.e., trust assets that actually are distributed to the grantor and trust assets that could be, but are not, distributed to the grantor) are considered in determining eligibility for medicaid benefits.

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n15 "Contrary to what the term implies, a finding of a 'medicaid qualifying trust' makes one ineligible for medicaid benefits. The term refers to a trust that is deemed to have been created in order to qualify for medicaid benefits and, for policy reasons, is considered an available asset to an applicant." Forsyth v. Rowe, supra, 226 Conn. 820 n.1; see generally J. Krauskopf, R. Brown, K. Tokarz & A. Bogutz, Elderlaw: Advocacy for the Aging (1993 & Sup. 1998) § 11.43.

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II

Before turning our attention to the provisions of the plaintiff's trust instrument that, in the defendant's view, grant the trustees discretion to distribute trust principal "to the grantor" within the meaning of § 1396a (k) (1), we note that the analytical framework for construction of federal statutes set forth by the United States Supreme Court in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843-45, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984) (Chevron), is applicable to the medicaid act. See Sullivan v. Everhart, 494 U.S. 83, 89, 110 S. Ct. 960, 108 L. Ed. 2d 72 (1990); Connecticut Dept. of Income Maintenance v. Heckler, 471 U.S. 524, 530-31 n.16, 532, 105 S. Ct. 2210, 85 L. Ed. 2d 577 (1985). Under the Chevron analysis, we first must determine "whether the intent of Congress is clear as to the precise question at issue. . . . If, by employing traditional tools of statutory construction . . . we determine that Congress' intent is clear, that is the end of the matter . . . ." (Citations omitted; internal quotation marks omitted.) Regions Hospital v. Shalala, 522 U.S. 448, 457, 118 S. Ct. 909, 139 L. Ed. 2d 895 (1998); Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. at 842-43. "If a statute's meaning is plain, the [agency that administers the program] and reviewing courts must give effect to the unambiguously expressed intent of Congress." (Internal quotation marks omitted.) Holly Farms Corp. v. National Labor Relations Board, 517 U.S. 392, 398, 116 S. Ct. 1396, 134 L. Ed. 2d 593 (1996); Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. at 842-43.

"If [however] the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute. . . . If the agency's reading fills a gap or defines a term in a reasonable way in light of [Congressional] design, we give that reading controlling weight, even if it is not the answer the court would have reached if the question initially had arisen in a judicial proceeding." (Citation omitted; emphasis added; internal quotation marks omitted.) Regions Hospital v. Shalala, supra, 522 U.S. 457; Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., supra, 467 U.S. 843. "We must sustain the [agency's] approach so long as it is based on a permissible construction of the statute." (Internal quotation marks omitted.) Auer v. Robbins, 519 U.S. 452, 457, 117 S. Ct. 905, 137 L. Ed. 2d 79 (1997); Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. at 843. "When the legislative prescription is not free from ambiguity . . . courts . . . must respect the judgment of the agency empowered to apply the law to varying fact patterns . . . even if the issue with nearly equal reason [might] be resolved one way rather than another . . . ." (Citations omitted; internal quotation marks omitted.) Holly Farms Corp. v. National Labor Relations Board, supra, 517 U.S. 398-99.

"We accord deference to agencies under Chevron, not because of a presumption that they drafted the provisions in question, or were present at the hearings, or spoke to the principal sponsors; but rather because of a presumption that Congress, when it left ambiguity in a statute meant for implementation by an agency, understood that the ambiguity would be resolved, first and foremost, by the agency, and desired the agency (rather than the [*20] courts) to possess whatever degree of discretion the ambiguity allows." Smiley v. Citibank (South Dakota), N. A., 517 U.S. 735, 740-41, 116 S. Ct. 1730, 135 L. Ed. 2d 25 (1996); Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., supra, 467 U.S. 843-44. "Judicial deference to an agency's interpretation of ambiguous provisions of the statutes it is authorized to implement reflects a sensitivity to the proper roles of the political and judicial branches." Pauley v. BethEnergy Mines, Inc., 501 U.S. 680, 696, 111 S. Ct. 2524, 115 L. Ed. 2d 604 (1991). Deference, moreover, is particularly warranted in cases in which we are required to interpret the medicaid act, a statutory scheme that "is among the most intricate ever drafted by Congress." Schweiker v. Gray Panthers, supra, 453 U.S. 43; Ross v. Giardi, supra, 237 Conn. 564. "In a statutory area as complicated as this one, the administrative authorities are far more able than [the courts] to determine congressional intent in the light of experience in the field." (Internal quotation marks omitted.) Ross v. Giardi, supra, 564; Lukhard v. Reed, 481 U.S. 368, 383-84, 107 S. Ct. 1807, 95 L. Ed. 2d 328 (1987) (Blackmun, J., concurring); Mowbray v. Kozlowski, 914 F.2d 593, 598-99 (4th Cir. 1990).

III

Before turning our attention to the terms of the trust instrument in order to ascertain whether it provides the trustees with any discretion to distribute trust principal "to the grantor"; (emphasis added) 42 U.S.C. § 1396a (k) (1) (1988); we also note what this case does not involve. It does not involve the construction or application of the trust treatment provisions set forth at 42 U.S.C. § 1396p (d) of the medicaid act. Those provisions were enacted in 1993 in an effort to further tighten the "availability" loophole of 42 U.S.C. § 1396a (a) (17). Specifically, § 1396p (d) (3) (B) (i) provides in relevant part: "If there are any circumstances under which payment from the trust could be made to or for the benefit of the [grantor], the portion of the corpus from which . . . payment to the individual could be made shall be considered resources available to the [grantor] . . . ." (Emphasis added.) The health care financing administration and the department have promulgated rules and regulations that implement § 1396p (d). Section [*22] 3259.6 (B) of the State Medicaid Manual, a publication of the Department of Health and Human Services that explains to the states how the health care financing administration applies statutory and regulatory provisions in administering the medicaid program; see Dept. of Medical Assistance v. Shalala, 8 F.3d 1565, 1570 (11th Cir. 1993); provides that "where there are any circumstances under which payment can be made to or for the benefit of the [grantor] from all or a portion of the trust . . . the portion of the corpus that could be paid to or for the benefit of the [grantor] is treated as a resource available to the [grantor] . . . . Payments . . . from the corpus that are made but not to or for the benefit of the [grantor] are treated as a transfer of assets for less than fair market value." (Emphasis added.) Department of Health and Human Services, Health Care Financing Administration, State Medicaid Manual (January-May, 1998) § 3259.6 (B) (State Medicaid Manual). Section 4030.80 (F) of the Uniform Policy Manual similarly provides that "the Department considers the portion of the corpus of a trust . . . to be an available asset . . . if there are [*23] any circumstances under which a payment from the trust could be made to or on behalf of the individual. . . . The department considers [such] payments to be . . . the individual's income, if the payments are to or for the benefit of the individual; and . . . a transfer of assets by the individual . . . if the payments are for any other purpose. . . ." (Emphasis added.)

Although the transfer provisions set forth at § 1396p (d) of the medicaid act supersede the medicaid qualifying trust provisions set forth at 42 U.S.C. § 1396a (k) (1988), the transfer provisions apply only to trusts established after August 11, 1993, and do not apply to trusts, such as the one at issue in the present case, established prior to that date. See State Medicaid Manual, supra, § 3259.2; see also Uniform Policy Manual, supra, § 4030.80 (C) and (D). Because the medicaid act specifically provides that states may base eligibility determinations only on income and resources that are "available" to the applicant within the meaning of the act; see 42 U.S.C. § 1396a (a) (17) (B); and because § 1396p (d) does not apply to the trust at issue in the present case, the regulations and guidelines [*24] that implement § 1396p (d) also are not applicable to the trust at issue in the present case. Thus, we are not required to determine whether there are "any circumstances" under which the trust instrument provides the trustees with discretion to make payments of trust principal "for the benefit of" or "on behalf of" the plaintiff. Instead, all that we must determine is whether the trust instrument provides the trustees with discretion to distribute trust principal "to the grantor" within the meaning of § 1396a (k) (1). (Emphasis added.) See State Medicaid Manual, supra, § 3259.2 (trusts established before August 11, 1993 are governed by medicaid qualifying trust provisions rather than by transfer provisions); see also Uniform Policy Manual, supra, § 4030.80 (C) (same).

IV

We turn our attention now to the medicaid qualifying trust provisions set forth at 42 U.S.C. § 1396a (k) (1988). Our point of departure is the language employed by Congress, for "if the intent of Congress is clear, that is the end of the matter." (Internal quotation marks omitted.) Good Samaritan Hospital v. Shalala, 508 U.S. 402, 409, 113 S. Ct. 2151, 124 L. Ed. 2d 368 (1993); Chevron U.S.A. Inc. [*25] v. Natural Resources Defense Council, Inc., supra, 467 U.S. 842-43. Section 1396a (k) (1) provides that the portion of a medicaid qualifying trust considered "available" to an applicant for purposes of determining eligibility for medicaid benefits "is the maximum amount of payments that may be permitted under the terms of the trust to be distributed to the grantor, assuming the full exercise of discretion by the trustee or trustees for the distribution of the maximum amount to the grantor. . . ." (Emphasis added.) The plaintiff argues that the statutory language is clear: in her view, the language "payments . . . distributed to the grantor" must be read to mean only distributions of trust assets that may be made directly to the grantor and cannot be read also to mean distributions that may be made to procure a benefit for the grantor. The defendant, however, argues to the contrary that the language "payments . . . distributed to the grantor" in § 1396a (k) (1) refers not only to payments of trust assets that may be made directly to the grantor but also to payments of trust assets that indirectly benefit the grantor. In our view, the language of § 1396a (k) does not itself [*26] clearly settle the issue.

The legislative history of § 1396a (k), moreover, is also inconclusive with respect to congressional intent regarding whether the phrase "payments . . . distributed to the grantor" in § 1396a (k) (1) was intended to encompass payments of which the grantor is an indirect beneficiary. See H.R. Rep. No. 99-265, pt. 1, p. 72 (1985) ("The . . . bill provides that for the purposes of determining Medicaid eligibility, the amounts deemed available to a grantor . . . is the maximum amount of payments permitted to be distributed . . . to the grantor. . . . What is determinative is the maximum amount that a trustee could . . . distribute to [the] grantor . . . ." [Emphasis added.]); H.R. Rep. No. 99-453, p. 539 (1985) (medicaid qualifying trust is trust "under which the [grantor] is the beneficiary . . . of the payments from the trust" [emphasis added]); H.R. Rep. No. 99-453, p. 539 (1985) ("amount deemed available to the beneficiary is the maximum amount of payments that may be permitted under the terms of the trust" [emphasis added]). Although the reference to the grantor as a "beneficiary . . . of payments" supports a construction of § [*27] 1396a (k) (1) that includes payments indirectly benefiting the grantor, because the legislative history of § 1396a (k) also refers to payments to the grantor, it does not conclusively rule out a construction of § 1396a (k) as encompassing only payments made directly to the grantor. We conclude, therefore, that Congress did not speak precisely, either through the language or legislative history of § 1396a (k), to the question of whether, in determining the extent to which the assets of a medicaid qualifying trust are "available" to a grantor, it intended that "payments . . . distributed to the grantor" encompass not only payments directly to the grantor but also payments of which the grantor is an indirect beneficiary.

Because Congress has not spoken conclusively on the meaning of the language "payments . . . distributed to the grantor" in § 1396a (k) (1), we proceed to the second step of the Chevron analytical framework: agency interpretation of § 1396a (k). Congress has assigned responsibility for administering the eligibility requirements of the medicaid program to the secretary of the Department of Health and Human Services. 42 U.S.C. § 1396a (a) (17) (B). n16 In [*28] particular, Congress has delegated to the secretary the responsibility for prescribing standards for determining an applicant's "available" income and resources. 42 U.S.C. § 1396a (a) (17) (B). The secretary, in turn, has delegated the responsibility for administration of the medicaid program to the health care financing administration of the Department of Health and Human Services. See 42 U.S.C. § 1302; Visiting Nurse Assn. of North Shore, Inc. v. Bullen, 93 F.3d 997, 999 n.1 (1st Cir. 1996), cert. denied, 519 U.S. 1114, 117 S. Ct. 955, 136 L. Ed. 2d 842 (1997). Consequently, a determination of whether, and to what extent, a trustee has discretion to distribute trust principal "to the grantor" within the meaning of § 1396a (k) (1) is guided by the regulations and interpretive guidelines that have been adopted by that agency. Visiting Nurse Assn. of North Shore, Inc. v. Bullen, 93 F.3d at 1002; Himes v. Shalala, 999 F.2d 684, 688-89 (2d Cir. 1993). The task that confronts us is to decide, not whether the agency's interpretation of the phrase "payments . . . distributed to the grantor" in § 1396a (k) (1) represents the best construction of the statute, but whether [*29] it represents a reasonable one. See Atlantic Mutual Ins. Co. v. Commissioner of Internal Revenue, 523 U.S. 382, 118 S. Ct. 1413, 1418, 140 L. Ed. 2d 542 (1998); Cottage Savings Assn. v. Commissioner of Internal Revenue, 499 U.S. 554, 560-61, 111 S. Ct. 1503, 113 L. Ed. 2d 589 (1991); see also Vanscoter v. Sullivan, 920 F.2d 1441, 1449 and n.14 (9th Cir. 1990) ("reasonable" interpretation of statute by Department of Health and Human Services accorded deference); St. Mary's Hospital of Troy v. Blue Cross & Blue Shield Assn./ Blue Cross & Blue Shield of Greater New York, 788 F.2d 888, 890 (2d Cir. 1986) ("interpretive guides" regarding medicare and medicaid entitled to be given weight).

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n16 Title 42 of the United States Code, § 1396a (a) (17) (B) provides in relevant part that the state medicaid plan shall "provide for taking into account only such income and resources as are, as determined in accordance with standards prescribed by the [secretary of the Department of Health and Human Services], available to the applicant . . . ."

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The health care financing administration's interpretive guidelines n17 regarding medicaid qualifying trusts established prior to August 11, 1993, are found at § 3215 of the State Medicaid Manual. See State Medicaid Manual, supra, §§ 3215 and 3259. Section 3215.1 of the State Medicaid Manual specifically provides that "the terms of [a medicaid qualifying] trust may be written so that the trustee may make payments directly to the health care provider for medical services. Thus, although payments from the trust are not directly paid to the beneficiary, he is in fact receiving benefits from the payments. . . ." (Emphasis added.) Consequently, § 3215.1 of the State Medicaid Manual clearly indicates that, in the view of the health care financing administration, in order to constitute a payment "to the grantor" within the meaning of 42 U.S.C. § 1396a (k), a payment need not be made directly to the grantor.

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n17 The health care financing administration has not promulgated regulations regarding the medicaid qualifying trust provisions of 42 U.S.C. § 1396a (k) (1). See generally 42 C.F.R.

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The medicaid act, moreover, generally requires that a "medically needy" individual's eligibility for medicaid benefits be determined in accordance with the methodology and financial criteria applicable to the determination of a "categorically needy" person's eligibility for benefits under the Supplementary Security Income (SSI) program. 42 C.F.R. §§ 435.401, 435.601, 435.831 and 435.845. n18 The regulations governing eligibility for SSI benefits provide in relevant part that "income is anything you receive in cash or in kind that you can use to meet your needs for food, clothing, and shelter. . . . In-kind income is not cash, but is actually food, clothing, or shelter, or something you can use to get one of these." 20 C.F.R. § 416.1102. Taken together, the relevant regulations governing eligibility for SSI benefits and § 3215.1 of the State Medicaid Manual therefore indicate that a trustee need not disburse funds directly to a grantor in order for the disbursement to constitute a payment "to the grantor" within the meaning of § 1396a (k) (1); payments that are made to a third party who then provides equivalent "in kind" income to the grantor -- food, clothing or shelter for the [*32] grantor or something that could be used to obtain food, clothing or shelter for the grantor -- also constitute payments "to the grantor" for purposes of § 1396a (k) (1).

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n18 Under what has become known as the § 209 (b) option, states may elect to provide medicaid assistance only to those individuals who would have been eligible to receive such assistance under the financial criteria of the state medicaid plan in effect on January 1, 1972. States thus become either SSI states or § 209 (b) states. Connecticut has elected the § 209 (b) option. Ross v. Giardi, supra, 237 Conn. 556-57. The defendant does not dispute that Connecticut's status as a § 209 (b) state is not relevant to this appeal.

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Section 3215.3 of the State Medicaid Manual, moreover, provides that "the amount from the trust that is deemed to be available to the [grantor] is the maximum amount that could have been distributed to the [grantor] under the terms of the trust in an applicable budget period, n19 provided the trustee exercised [*33] his full discretion under the terms of the trust to distribute the maximum amount to the [grantor]. The maximum distributable amount deemed available includes only amounts which can be but are not distributed from either the income (interest) or principal of the trust. . . . The maximum distributable amount counts as resources. . . ." (Emphasis added.) Thus, the State Medicaid Manual directs the states to deem available as a resource any amount that could have been, but was not, distributed during the applicable budget period directly to the grantor, or paid to a third party in exchange for "in kind" income to be provided to the grantor.

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n19 Section 435.831 (a) (1) of the Code of Federal Regulations provides in relevant part that states "must use budget periods of not more than 6 months to compute income" of medically needy individuals.

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The health care financing administration's interpretation of the medicaid qualifying trust provisions of § 1396a (k) accords with the Congressional purpose of precluding [*34] individuals from using discretionary trusts as a mechanism to qualify for medicaid benefits while preserving their assets for their heirs. There is nothing unreasonable about an interpretation of § 1396a (k) (1) that treats trust assets that a trustee could, but does not, distribute either directly or indirectly to a grantor during an applicable benefit period as resources that become "available" to the grantor during that period. We conclude, therefore, that in order for trust principal, or a portion thereof, to become a resource "available" to a grantor pursuant to § 1396a (k) (1): (1) the trustee must have authority during an applicable benefit period to disburse trust assets directly to the grantor, or to a third party who provides equivalent "in kind" income to the grantor; and (2) the trustee must decline to exercise that authority. n20

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n20 Thus, trust assets that actually are distributed to the grantor are treated as income to the grantor and are evaluated under the applicable income eligibility rules. Trust assets that could be distributed to the grantor, but are not, are treated as resources available to the grantor and are evaluated under the resource eligibility rules.

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V

The defendant maintains that the trust instrument provides the trustees with discretion to make payments of trust principal that, for purposes of § 1396a (k) (1), are payments "to the grantor" and that consequently the entire trust principal properly may be included in the calculation of the plaintiff's eligibility for medicaid.

We begin our analysis of the trust instrument by noting that "we cannot rewrite . . . a trust instrument. The expressed intent must control, although this is to be determined from reading the instrument as a whole in the light of the circumstances surrounding the . . . [grantor] when the instrument was executed, including the condition of [her] estate, [her] relations to [her] family and beneficiaries, and their situation and condition. The construing court will put itself as far as possible in the position of the . . . [grantor], in the effort to construe . . . [any] uncertain language used by [her] in such a way as shall, conformably to the language, give force and effect to [her] intention. . . . But the quest is to determine the meaning of what the . . . [grantor] said and not to speculate upon what [she] meant to say.'" (Citation [*36] omitted; emphasis added; internal quotation marks omitted.) Connecticut Bank & Trust Co. v. Lyman, 148 Conn. 273, 278-79, 170 A.2d 130 (1961).

A

The defendant first claims that article I of the trust instrument provides the trustees with discretion to distribute the entire trust principal "to the grantor" within the meaning of § 1396a (k) (1). To support her claim, the defendant relies on the following language in article I of the trust instrument: "Upon the death of the [plaintiff], the [trustees] shall distribute any remaining trust principal to . . . such person or persons . . . upon such conditions and terms, as the [plaintiff] shall direct and appoint by a Will expressly referring to and exercising this power . . . provided, however, that this power shall not be exercisable to any extent for the benefit of the [plaintiff], [her] estate, [her] creditors or the creditors of [her] estate. Any trust principal not effectively so appointed shall be disposed of pursuant to Article II."

In trusts and estates parlance, the provision of article I on which the defendant relies commonly is referred to as a testamentary power of appointment. The Internal Revenue Code [*37] provides that, when a transfer of assets is subject to such a power of appointment, the transfer is an "incomplete" gift and consequently does not subject the transferor to imposition of transfer taxes (i.e., gift taxes) at the time of the transfer. See 26 U.S.C. §§ 2501 and 2511; see also 26 C.F.R. § 25.2511-2 (b). n21 Instead, even if title to assets has been transferred irrevocably to the trust, the transferred assets still are considered part of the transferor's gross taxable estate for federal estate tax purposes. See 26 U.S.C. § 2036 (a) (2). Generally, if a grantor reserves a testamentary power of appointment, the transfer of assets to the trust does not become "complete" for tax purposes until the death of the transferor and the subsequent distribution of the assets to the remaindermen. At that point, transfer taxes (i.e., estate taxes) n22 are levied on the transferor's gross taxable estate. n23 Such testamentary powers of appointment commonly are used to preserve trust principal during the lifetime of a grantor and thereby maximize the amount of income the trust provides to the grantor. n24

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n21 Section 2501 of the Internal Revenue Code imposes a tax on the transfer of property by gift, and § 2511 sets forth the transfers to which the tax is applicable. A transfer is complete, and, therefore, subject to imposition of gift tax, if the donor retains no power to change the disposition of the property. 26 C.F.R. § 25.2511-2 (b). If the donor retains any power over the property's disposition, however, the gift may be wholly incomplete or partially complete and partially incomplete. 26 C.F.R. § 25.2511-2 (b). In particular, a gift is incomplete "if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves . . . ." 26 C.F.R. § 25.2511-2 (c). [*38]

n22 The United States Supreme Court has defined the federal estate tax as "an excise imposed upon the transfer of . . . property at death." United States Trust Co. v. Helvering, 307 U.S. 57, 60, 59 S. Ct. 692, 83 L. Ed. 1104 (1939).

n23 A single tax rate schedule applies to the cumulative total of a decedent's lifetime and testamentary taxable transfers. 26 U.S.C. § 2001 (c); see generally J. Price, Contemporary Estate Planning (1992) § 2.3.

n24 Because a testamentary power of appointment maximizes the amount of income the trust provides to the grantor, it also maximizes the amount that a medically needy person must "spend down" before becoming eligible for medicaid benefits.

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Nothing in the language of the trust instrument before us suggests that the testamentary power of appointment contained in article I was intended to serve any purpose other than to forestall the imposition of transfer taxes until after the plaintiff's death. In fact, the trust instrument specifically provides that the power of appointment cannot be exercised by the trustees for the benefit of the plaintiff, [*39] her estate, her creditors or the creditors of her estate. That restriction unequivocally demonstrates that the power of appointment was not intended to provide the trustees either with the authority to pay trust principal directly or indirectly to the plaintiff or with discretion to withhold such payments of trust principal.

The defendant, moreover, does not maintain that the power of appointment provides the trustees with authority or discretion to disburse trust principal directly or indirectly to the plaintiff during an applicable budget period. Instead, the defendant contends that the power of appointment allows the trustees, on the plaintiff's death, to pay trust principal, not to the plaintiff, but to the remaindermen on behalf of the plaintiff. In the defendant's view, such a payment to the remaindermen after the plaintiff's death constitutes a payment "to the grantor" under § 1396a (k) (1) because it indirectly benefits the plaintiff by furthering her estate planning objectives. The defendant apparently asks us to import into § 1396a (k) (1) the provisions of § 1396p (d) regarding the existence of "any circumstances" under which payments may be made "on behalf of" the [*40] grantor. n25 This we cannot do. In order for a trustee to have discretion to make a payment "to the grantor" within the meaning of § 1396a (k) (1), the trust instrument must provide the trustee with authority to disburse trust funds during an applicable budget period either directly to the grantor or to a third party in exchange for "in kind" income to be provided to the grantor, and the trust instrument must also provide the trustee with discretion to withhold such payments of trust principal. Because any disbursement of trust principal to third party remaindermen pursuant to the power of appointment contained in article I of the trust instrument would not take place in an applicable budget period and would not be made in exchange for "in kind" income to be provided to the plaintiff by the remaindermen, such a disbursement cannot constitute a payment "to the grantor" within the meaning of § 1396a (k) (1).

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n25 We express no opinion regarding whether payments of trust principal to remaindermen after a grantor's death constitute payments for the "benefit of" or payments "on behalf" of the grantor within the meaning of 42 U.S.C. § 1396p (d).

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Furthermore, if, at the time of her death, the plaintiff has not exercised her power of appointment, article II of the trust instrument directs the trustees to distribute the trust principal to certain named remaindermen. The defendant does not claim that such payment to the designated remaindermen constitutes a payment "to the grantor" within the meaning of § 1396a (k) (1), perhaps because if such disbursements were to constitute payments "to the grantor," the entire principal of every medicaid qualifying trust would constitute a resource "available" to the grantor, effectively eliminating the concept of medicaid qualifying trusts altogether. The fact that, subsequent to the enactment of the medicaid qualifying trust provisions of § 1396a (k), Congress enacted the transfer provisions of § 1396p (d) of the medicaid act to restrict further the use of trusts as vehicles for qualifying for medicaid benefits while preserving assets for a grantor's heirs is indisputable evidence that distributions of trust principal to remaindermen after the grantor's death do not constitute payments "to the grantor" within the meaning of § 1396a (k) (1). We can discern no reason to distinguish a payment [*42] of trust principal that is made upon a grantor's death to remaindermen identified in the trust instrument itself and a payment of trust principal that is made upon a grantor's death to remaindermen identified in the grantor's will.

We conclude, therefore, that the testamentary power of appointment contained in article I of the trust instrument does not provide the trustees with either authority or discretion to distribute trust principal "to the grantor" within the meaning of § 1396a (k) (1). Consequently, article I of the trust instrument does not provide a basis for treating the trust principal as a resource "available" to the plaintiff for purposes of determining her eligibility for medicaid benefits.

B

The defendant next claims that article VI (B) of the trust instrument provides the trustees discretion to distribute trust principal "to the grantor" within the meaning of § 1396a (k) (1). Article VI (B) provides in relevant part that "if any income tax or taxes shall be levied, assessed or imposed on the [plaintiff] as a result of any sale by the [trustees] of any principal asset of the trust . . . the [trustees] shall pay to the [plaintiff], out of the trust, [*43] such cash sum or sums as [she] shall request in writing for the purpose of paying such tax or taxes . . . . Such payment shall be made to the [plaintiff] upon the presentation to the [trustees] of a copy of the income tax return setting forth such payment . . . and the amount of such tax." (Emphasis added.)

A brief review of the law regarding taxation of trusts is helpful to our resolution of this claim. The "grantor trust" provisions of the Internal Revenue Code are found at 26 U.S.C. §§ 671 through 678. Those provisions enumerate circumstances in which the general rule that a trust is taxed as a separate entity is not followed on the theory that to apply the rule would improperly permit the grantor to escape tax on income that rightfully should be taxed to him. See 26 C.F.R. §§ 1.671-2 (a) and (d) and 1.671-3 (a).

Under the grantor trust provisions of the Internal Revenue Code, a grantor may be liable for income tax not only on the ordinary income of a grantor trust; see 26 U.S.C. § 677; n26 see also 26 C.F.R. § 1.671-3 (b) (1) (ordinary trust income included in grantor's taxable income by reason of grantor's interest in such income); but also on capital gains realized [*44] by the trust. See 26 U.S.C. § 671 (grantor treated as owner of trust corpus to extent of retained interest in trust corpus); n27 see also 26 C.F.R. § 1.671-3 (b) (2). In particular, 26 U.S.C. § 674 (a) n28 of the Internal Revenue Code provides that "the grantor shall be treated as the owner of any portion of a trust in respect of which the beneficial enjoyment of the corpus . . . is subject to a power of disposition, exercisable by the grantor . . . ." (Emphasis added.) See 26 C.F.R. § 1-674 (a)-1. Thus, pursuant to § 674 (a), a grantor who retains a power of appointment over trust principal generally is treated as the owner of that principal, and any taxable gain realized by the trust generally is included in the grantor's taxable income. Section 674 (b) of the Internal Revenue Code, however, further provides in relevant part that § 674 (a) "shall not apply to . . . [a] power exercisable only by will, other than a power in the grantor to appoint by will the income of the trust where the income is accumulated for such disposition . . . ." (Emphasis added.)

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n26 Title 26 of the United States Code, § 677 (a), of the Internal Revenue Code, provides in relevant part: "(a) General rule

"The grantor shall be treated as the owner of any portion of a trust . . . whose income . . . may be --

"(1) distributed to the grantor . . . ." [*45]

n27 Title 26 of the United States Code, § 671, of the Internal Revenue Code, provides in relevant part: "Where it is specified in [ §§ 671 through 678] that the grantor . . . shall be treated as the owner of any portion of a trust, there shall then be included in computing the taxable income . . . of the grantor . . . those items of income, deductions, and credits against tax of the trust which are attributable to that portion of the trust . . . ."

n28 Title 26 of the United States Code, § 674, of the Internal Revenue Code, provides in relevant part: "(a) General Rule

"The grantor shall be treated as the owner of any portion of a trust in respect of which the beneficial enjoyment of the corpus or the income therefrom is subject to a power of disposition, exercisable by the grantor . . . .

"(b) Exceptions for certain powers

"Subsection (a) shall not apply to . . . (3) . . . A power exercisable only by will, other than a power in the grantor to appoint by will the income of the trust where the income is accumulated for such disposition . . . ."

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Because, in the present case, [*46] article I of the trust instrument directs the trustees to distribute the net trust income to the plaintiff, the trust is a "grantor trust"; see 26 U.S.C. § 677; 26 C.F.R. § 1.671-3 (a) (1); and consequently, the trust's income is subject to taxation pursuant to §§ 671 through 678 of the Internal Revenue Code. Apparently addressing the fact that there are circumstances under which capital gains realized by a grantor trust are included in the grantor's taxable income, article VI (B) of the trust instrument requires that the trustees pay trust principal to the plaintiff to the extent necessary to permit her to satisfy any income tax liability that has accrued to her by virtue of the trust's realization of capital gains.

The defendant did not raise the issue of the effect of article VI (B) on the plaintiff's eligibility for medicaid benefits before the fair hearing officer or before the trial court. Nevertheless, the defendant now apparently contends that pursuant to § 674 (a) of the Internal Revenue Code, capital gains realized by the trust are includable in the plaintiff's taxable income and that, as a result, trust principal is available for distribution to the plaintiff. There [*47] is nothing in the record before us, however, to indicate that the trust in fact has realized a capital gain that caused the plaintiff to incur income tax liability during an "applicable budget period." See State Medicaid Manual, supra, § 3215.3. Moreover, the power of appointment that the plaintiff reserved in article I of the trust instrument only provides her with authority to appoint trust beneficiaries in her will. There is nothing in the record to suggest that the exemption set forth in § 674 (b) of the Internal Revenue Code for a reservation of a power of appointment by will is not applicable to the trust. Consequently, the record before us does not permit a conclusion that, if the trust were to incur capital gains, the plaintiff would be treated as the owner of trust principal pursuant to 26 U.S.C.