By Elizabeth M. Dries, J.D.
A state agency designated to administer Medicaid benefits can consider a minor’s physical custody when determining benefit eligibility. The Texas Health and Human Services Commission (THHSC) reasonably applied federal regulations when it considered both the physical custody and tax dependency of a minor before it denied Medicaid benefits to a claimant. THHSC properly applied federal Medicaid law rather than Texas family law to determine whether a minor "lives with both parents" for purposes of determining the modified adjusted gross income (MAGI) (42 U.S.C. § 1396a(e)(14)). The federal Internal Revenue Code (IRC) provisions and Medicaid rules, on which HHSC’s determination are modeled require consideration of physical custody to determine eligibility (The Texas Health and Human Services Commission v. Benjamin J. Gutierrez, June 14, 2018, Rose, J.).
Application and denial. In March 2014, the applicant filed a request with the THHSC for renewal of Medicaid benefits for his child. At the time, he did not claim his child as tax dependent and stated the child received health insurance via the child’s mother. THHSC requested additional information, including the child’s home address and the income of the person who claimed the child as tax dependent. The applicant offered a copy of an order adjudicating parentage naming both parents as managing conservators of the child. In response, THHSC denied the renewal request for failure to provide the requested information regarding the taxpayer claiming the child as dependent. The applicant requested a hearing on his renewal request, at which the hearings officer sustained THHSC’s denial of benefits, concluding that the applicant is not included in the child’s MAGI household and does not have a tax relationship with the child. In response, the applicant requested an administrative review of the hearing which THHSC affirmed. The applicant then filed suit for judicial review challenging THHSC’s conclusion that his child did not live with him. Appellee argued that THHSC improperly applied federal law instead of Texas Family Code in determining the custody question. The trial court reversed THHSC’s order finding that the applicant is a joint managing conservator and the child lived with both parents.
Federal law properly considered. On appeal, THHSC asserted that the trial court erred in reversing their decision because THHSC properly applied federal Medicaid law rather than Texas family law to determine if the child lives with both parents for purposes of the household-composition exception and the MAGI determination. THHSC relied regulations stating that in the event of shared custody agreement, the custodial parent is the parent with whom the child spends most nights (42 C.F.R. §435.603(f)(2)). In addition, THHSC argued that a dependent must have the same place of abode for more than half of a taxable year (26 U.S.C. §152(c)(1)(B)). The IRC and Medicaid rule, on which THHSC rules are modeled and must comply with for Medicaid purposes, require consideration of physical custody to determine eligibility. The applicant asserted that he has joint custody under the Texas Family Code and that Texas case law recognizes that a person may have multiple residences. The court disagreed, stating the composition of the child’s household did not meet federal requirements for Medicaid funds, and federal law may preempt state family law with respect to federal funds. Therefore, THHSC had reasonably considered the physical custody of the child when it denied the applicant’s benefits.
The case is No. 03-16-00748-CV.
Attorneys: Eugene A. Clayborn, Office of the Attorney General of Texas, for The Texas Health and Human Services Commission. Benjamin J. Gutierrez, pro se.
Companies: The Texas Health and Human Services Commission
MainStory: TopStory CMSNews MedicaidNews EligibilityNews
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