MATTER OF GRILLO, 0341317/2007 (2-20-2008)

 

2008 NY Slip Op 30532(U)

 

In the Matter of the Application of MARK A. GRILLO and LYNN H.

 

SWANSON-GRILLO, as Co-Administrators of the Estate of MARK S. GRILLO,

 

Deceased, to Determine the Validity and Enforceability of a Claim

 

Against the Estate.

 

0341317/2007.

 

Surrogate's Court of the City of New York,

 

Nassau County.

 

February 20, 2008.

 

 

[EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.]

 

  JOHN B. RIORDAN, Judge.

 

  This is a proceeding brought by Mark A. Grillo and Lynn H.

Swanson-Grillo (the Grillos), in their capacity as co-administrators of

the estate of Mark S. Grillo (Mark), their deceased son, to determine

the validity and enforceability of a claim by the Nassau County

Department of Social Services (DSS) for repayment of Medicaid assistance

rendered to Mark during his lifetime. Before the court are the Grillos'

motion and DSS's cross-motion for summary judgment. Specifically, the

Grillos seek an order striking DSS's answer to the petition and

determining that the amount of the lien is limited to Medicaid

assistance expended after the creation and funding of a supplemental

needs trust for Mark's benefit. DSS seeks an order dismissing the

petition and determining that DSS's claim is valid and enforceable in

its entirety.

 

  Mark was born a triplet on July 4, 1995. As a result of a procedure he

underwent at the age of three months at Long Island Jewish Medical

Center, he suffered from severe cerebral palsy and required

twenty-four-hour-a-day assistance for all of his daily living

activities. The Grillos, individually and as Mark's parents and natural

guardians, sued Long Island Jewish Medical Center and Steven J.

Schneider, M.D. in Supreme Court, Queens County. The action was settled

for a total of $4,000,000 pursuant to an infant's compromise order

signed on September 29, 2003

Page 2

by the Honorable Alan LeVine and entered in the office of the Queens

County Clerk on October 15, 2003. According to the terms of the order,

the Grillos, as Mark's parents and natural guardians, were directed and

authorized to create the Mark Grillo Supplemental Needs Trust (SNT) and

appointed as its co-trustees. The order also directed the Grillos to pay

the net settlement funds in the amount of $2,412,698.55[fn1] to the SNT

jointly with Charles Schwab & Co., Inc., in an account held at Charles

Schwab & Co., Inc. Further, the infant's compromise order directed the

payment of $500,000 of the settlement proceeds to DSS "as and for

payment and satisfaction" of an existing medicaid lien in the amount of

$845,218.49 asserted by DSS. The sum of $500,000 was paid to DSS on

March 15, 2004.

 

  The Grillos,[fn2] as the parents and guardians of Mark, are the

grantors, as well as the trustees of the SNT. The trust agreement was

signed on December 16, 2003. According to its terms, the SNT was to

terminate on Mark's death and the trustees were to distribute any

principal and accumulated interest, in relevant part, as follows:

 

  The New York State Department of Social Services,

  or other appropriate Medicaid entity within New

  York State[,] shall be reimbursed for the total

  Medicaid Assistance provided to MARK GRILLO

  during his lifetime (less a credit for any

  amounts previously paid in satisfaction or

  partial satisfaction of any social services

  lien), as consistent with Federal and State

  Law. . . .

Page 3

 

  All remaining principal and accumulated interest

  shall be paid to the legal representative of the

  Estate of the Beneficiary [Mark] (SNT 3.1).

 

  Mark died on January 27, 2006, a resident of Nassau County. He was ten

years old. Letters of administration issued to the Grillos on April 18,

2006. DSS has made a claim against Mark's estate in the amount of

$708,410.34, which DSS asserts is the amount due and owing for unpaid

Medicaid benefits paid to Mark during his lifetime.

 

  The total amount of Medicaid benefits paid on behalf of Mark is

$1,272,790.34. Of that amount, $845,218.49 in benefits was expended

prior to the funding of the SNT, with $500,000 of that amount having

been paid to DSS pursuant to the infant's compromise order, leaving a

balance, according to DSS, of $345,218.49 at the time the SNT was

created. An additional $358,191.85 in Medicaid benefits was paid for

Mark's benefit after the SNT was created, leaving a balance due,

according to DSS, of $703,410.34.

 

  The Grillos admit that $358,191.85, the amount disbursed after the SNT

was created, is due and owing. Citing Social Services Law 369 (2) (b)

(I) (B), they assert that DSS is entitled to recover previously paid

Medicaid benefits from an estate only if the individual was fifty-five

years old or older when the assistance was rendered. Thus, they contend

that the $345,218.49 balance at the time of the creation of the SNT is

not owed to DSS because DSS's sole right of recovery stems from the

terms of paragraph 3.1 of the SNT, which states that such recovery must

be in accordance with federal and state law.

 

  DSS asserts that the entire amount of the claim is due and owing from

the SNT. DSS draws the court's attention to the fact that Congress

allows the creation of supplemental needs trusts provided such trusts

contain a provision that the state in question will "receive all amounts

Page 4

remaining in the trust upon the death of the individual up to an amount

equal to the total medical assistance paid on behalf of the individual

under a State plan under this subchapter" (42 USC ᄃ 1396p [d] [4] [A];

see Social Services Law 366 [2] [b] [2] [iii]). DSS states that

"[w]ithout the enabling act of Congress, with its payback provision, all

Medicaid Benefits paid because of this trust would have been paid

improperly and thus owing to the State."

 

  The court agrees. New York State's

 

  right to reimbursement of all Medicaid expended

  on a beneficiary's behalf flows from the terms of

  the SNT agreement itself an agreement voluntarily

  entered into by the beneficiary or his or her

  agent in order to obtain the significant

  advantage of preserving Medicaid eligibility

  while at the same time benefitting from the funds

  contained in the trust (Matter of Abraham

  XX, 36 AD3d 1085,1088 [3d Dept 2007], citing

  42 USC ᄃ 1396p [d] [4] [A]; Social Services Law

  366 [2] [b] [2] [iii]; EPTL 7-1.12 [a] [5]).

 

  Matter of Abraham XX, (36 AD3d 1085,1088 [3d Dept 2007]), is a case on

which both the Grillos and DSS rely. In that case, the Third Department

stated that 42 USC ᄃ 1396p [d] [4] [A] allows an individual qualified

under EPTL 7-1.12 [a] [5] to establish a supplemental needs trust

exempting the corpus and income thereof from inclusion as available

resources provided the trust agreement contains a provision specifying

that the "`[s]tate will receive all amounts remaining in the trust upon

the death of [the] individual up to an amount equal to the

total medical assistance paid on behalf of the individual under a State

[Medicaid] plan' (42 USC ᄃ 1396p [d] [4] [A] [emphasis added];

see Social Services Law 366 [2] [b] [2] [iii])" (Matter of Abraham

XX, 36 AD3d 1085,1089 [3d Dept 2007]). The Third Department explained

that 42 USC ᄃ 1396p "does not direct recovery of Medicaid funds"

(id.). Instead, a state's right to be repaid from a supplemental needs

trust arises from the trust agreement, which names the state as

Page 5

the primary remainderman (id.). "[S]ubsection (d) (4) (A) makes

total reimbursement a condition of preserving Medicaid eligibility

through an SNT. . . ." (id.). Thus, the words "as consistent with

Federal and State Law" contained in the SNT in question do not provide

the Grillos a basis by which to avoid repaying the $345,218.49 balance

on the Medicaid lien that existed at the time the SNT was created.

 

  The infant's compromise order dated September 29, 2003 states that the

$500,000 later paid to DSS on March 14, 2004 was "as and for payment and

satisfaction" of the medicaid lien in the amount of $845,218.49 that

existed at the time. However, DSS claims that the $500,000 payment was

in partial satisfaction of the existing lien. The Grillos conceded that

claim in paragraph 13 of their Verified Petition sworn to on April 7,

2004 in support of their petition to be named as Mark's co-guardians

under Article 81 of the New York Mental Hygiene Law wherein they aver

that "the sum of $500,000 was paid to the NCDSS as and for partial

payment and satisfaction of social services/Medicaid lien. The balance

of the lien will be deferred until termination of the SNT (i.e., upon

the demise of the AIP)." The Verified Petition was filed with Supreme

Court, Nassau County.

 

  Accordingly, the Grillos' motion is denied, and DSS's cross-motion is

granted to the extent that the court finds that DSS's total claim for

$703,410.34 is valid and payable to DSS from the SNT.

 

[fn1] As part of the settlement, the Grillos received $500,000 for their

derivative cause of action. Their attorneys received $545,855.39 in

legal fees and $41,446.06 for costs and disbursements.

 

 

[fn2] At some point prior to the creation and funding of the SNT, the

Grillos were appointed by Supreme Court, Nassau County, as co-guardians

of Mark's person and property under Article 81 of the New York Mental

Hygiene Law.