Kaiser v. Townsend, 362 N.E.2d 586 (N.Y. 1977)
FICA taxes withheld from an individual’s wages are not considered ‘actually available’ income for the purposes of determining eligibility for Medicaid benefits under New York’s Social Services Law, as such taxes are mandated by law and not subject to individual control.
Summary
The New York Court of Appeals addressed whether Social Security deductions (FICA taxes) should be considered ‘income available’ when determining eligibility for Medicaid. Kaiser, a father of six, was denied medical assistance because his net income exceeded the statutory limit by a small margin. This determination included FICA taxes as part of his available income. The court held that FICA taxes are not ‘actually available’ to the applicant because they are mandated by law and not subject to individual control, therefore they should not be considered when determining Medicaid eligibility. The Court modified the lower court’s judgment to grant Kaiser the requested individual relief.
Facts
Petitioner Kaiser, a man with a wife and six children, applied for medical assistance under New York State’s Medicaid program. His application was denied because his monthly net income was found to exceed the statutory limit of $650 for a family of eight. The Commissioner of Social Services determined that ‘net income’ included income less income taxes, health insurance premiums, and court-ordered payments, but not FICA taxes. If the $42.83 withheld monthly for FICA taxes was deducted from Kaiser’s income, he would have been eligible for medical assistance.
Procedural History
The Director of the Monroe County Department of Social Services initially denied Kaiser’s application. This decision was confirmed by the State Commissioner of Social Services after a fair hearing. The Appellate Division affirmed the commissioner’s determination, with one Justice dissenting. The New York Court of Appeals granted leave to appeal to consider the issue.
Issue(s)
Whether FICA taxes deducted from an applicant’s wages constitute ‘income available’ to the applicant under federal and state regulations for determining eligibility for Medicaid benefits.
Holding
Yes, because FICA taxes are not ‘actually available’ to the applicant in the present, as they are mandated by law and the applicant exercises no control over them, contrasting with voluntary deductions like life insurance premiums. Therefore, these taxes should not be considered when calculating income for Medicaid eligibility.
Court’s Reasoning
The court emphasized that both state and federal statutes mandate adherence to federal standards in determining Medicaid eligibility, citing Matter of Martin v. Lavine. Federal regulations (45 CFR 248.3[b][1]) stipulate that only income and resources ‘actually available’ should be considered. The court reasoned that FICA taxes are not ‘actually available’ because they are mandated by the Internal Revenue Code (26 U.S.C. § 3102), and employers are legally obligated to withhold them. The court contrasted FICA taxes with voluntary deductions like life insurance premiums or pension contributions, where individuals make a conscious economic decision to allocate their income. The court noted that while Social Security benefits might be received in the future, this is insufficient to consider the deducted taxes as ‘actually available’ for present needs. The court further reasoned that the absence of an explicit exemption for FICA taxes in Social Services Law § 366 is not determinative, as paragraph (b) of subdivision 2 permits exclusions for income and resources that are unavailable. The court distinguished income taxes, which, unlike FICA taxes, do come into the possession of the wage earner, thus requiring an express exemption. The court rejected the argument that HEW’s approval of the State Medicaid plan demonstrated approval of including FICA taxes in net income, finding no evidence that Federal authorities had specifically approved this practice. The court concluded that ‘reason, fairness and the plain language of the Federal regulation require that respondents exclude FICA taxes from an applicant’s income in determining eligibility for medical assistance.’