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NOTICE: This opinion is subject to motions for rehearing under Rule 22 as well as formal revision before publication in the New Hampshire Reports. Readers are requested to notify the Reporter, Supreme Court of New Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any editorial errors in order that corrections may be made before the opinion goes to press. Errors may be reported by E-mail at the following address: reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00 a.m. on the morning of their release. The direct address of the court's home page is: http://www.courts.state.nh.us/supreme. THE SUPREME COURT OF NEW HAMPSHIRE ___________________________ Department of Health and Human Services No. 2005-856 APPEAL OF EMILY HUFF (New Hampshire Department of Health and Human Services) Argued: July 21, 2006 Opinion Issued: November 28, 2006 Wiggin & Nourie, P.A., of Manchester (Jan P. Myskowski and Jaime I. Gillis on the brief, and Mr. Myskowski orally), for the petitioner. Kelly A. Ayotte, attorney general (Suzan M. Lehmann, senior assistant attorney general, on the brief and orally), for the respondent. John D. MacIntosh, of Concord, and John S. Kitchen, of Laconia, on the brief, for the Office of Public Guardian, Tri-County Cap, Inc./Guardianship Services and Enhanced Life Options Group, as amici curiae. New Hampshire Legal Assistance, of Portsmouth and Manchester (Kay E. Drought and Laurel O'Connor on the brief) and Disability Rights Center, of Concord (Ronald K. Lospennato on the brief), for Michael Bourgeois, Anita Handren, The Brain Injury Association of New Hampshire and the National Alliance of the Mentally Ill, as amici curiae.

Ransmeier & Spellman, P.C., of Concord (Tina L. Annis on the brief), Laboe Associates, PLLC, of Concord (John E. Laboe on the brief), McLane, Graf, Raulerson & Middleton, P.A., of Manchester (Nelson A. Raust on the brief), Law Office of W. Michael Todd, of New London (W. Michael Todd on the brief), and Law Office of Ann N. Butenhof, of Manchester (Ann N. Butenhof and Judith L. Bomster on the brief), for the Elder Law, Estate Planning and Probate Section of the New Hampshire Bar Association, as amicus curiae. DUGGAN, J. The petitioner, Emily Huff, appeals a final decision of the New Hampshire Department of Health and Human Services Administrative Appeals Unit (AAU). The AAU concluded that special needs trust distributions function as income for purposes of Medicaid eligibility. We vacate and remand. The following facts were found by the AAU or are uncontested. The petitioner is a disabled, young woman. On February 24, 2004, the petitioner's mother, who also serves as her legal guardian, applied on the petitioner's behalf for medical assistance under the Aid to the Permanently and Totally Disabled (APTD) program. As part of her application, the petitioner informed the department of health and human services (DHHS) that she was the beneficiary of a special needs trust, the Emily Huff Irrevocable Trust (the trust). DHHS determined that the petitioner satisfied the APTD's categorical criteria and therefore sought to determine her financial eligibility. In order to ascertain the petitioner's financial eligibility, DHHS verified her monthly Social Security benefits and requested information concerning expenditures made by the trust. On May 7, 2004, the petitioner's mother, who also serves as trustee for the trust, provided a list of expenditures from the trust, which included payments for: (1) federal and state taxes; (2) attorney's fees; (3) a camp attended by the petitioner; (4) a bond required for the guardianship; and (5) a trip to Wisconsin. DHHS concluded that some of these expenditures constituted income for purposes of determining the petitioner's financial eligibility for medical assistance. Based upon this conclusion, DHHS determined that the petitioner qualified as medically needy, but not categorically needy; therefore, she would have to meet a spend-down requirement before she could receive Medicaid. From DHHS' initial determination, the petitioner appealed to the AAU. There, a hearings officer reversed DHHS' finding as to the amount of the spenddown that the petitioner would be required to meet, but upheld DHHS' determination that trust expenditures for the benefit, or on behalf, of the 2

petitioner constituted income for purposes of Medicaid eligibility. The petitioner moved for reconsideration, which the hearings officer denied. The petitioner also moved to supplement the record with documents pertaining to the department's Medicaid eligibility policies in effect on January 1, 1972. The hearings officer denied this request as well, concluding that the petitioner had not followed the appropriate procedure to supplement the record or to introduce additional information as part of her motion for reconsideration. On appeal, the petitioner argues that the AAU erred in counting trust expenditures as income for purposes of Medicaid eligibility and in denying her motion to supplement the record. The petitioner also argues that DHHS and the AAU violated her due process rights by engaging in improper rule-making and by relying on unwritten rules in adjudicating her application. DHHS counters that: (1) this matter may only be brought as a declaratory judgment action in Superior Court; and (2) the petitioner's income was lawfully and properly calculated. Established in 1965 as Title XIX of the Social Security Act (SSA), the Medicaid program offers federal financial assistance to states that opt to reimburse certain costs of medical treatment for needy persons. Schweiker v. Gray Panthers, 453 U.S. 34, 36 (1981). States participating in the program must develop a plan that includes reasonable standards for determining an individual's eligibility for Medicaid and the extent of medical assistance to be provided. Id. "An individual is entitled to Medicaid if [s]he fulfills the criteria established by the State in which [s]he lives. State Medicaid plans must comply with requirements imposed both by the [SSA] itself and by the Secretary of Health and Human Services." Id. at 36-37 (citation omitted). "As originally enacted, Medicaid required participating States to provide medical assistance to `categorically needy' individuals who received cash payments under one of four welfare programs established elsewhere in the [SSA]." Id. at 37 (citation omitted). These programs included Old Age Assistance, Aid to Families with Dependent Children, Aid to the Blind, and Aid to the Permanently and Totally Disabled. Id. at 37 n.1. Congress deemed the individuals who participated in these four programs to be especially deserving of public assistance. Id. at 37. States were also allowed to offer assistance to the "medically needy," meaning persons who could not pay for their medical expenses but who had "incomes too large to qualify for categorical assistance." Id. In 1972, Congress replaced three of the four categorical assistance programs with a new program called Supplemental Security Income for the Aged, Blind, and Disabled (SSI). Under SSI, the Federal Government displaced the States by assuming

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responsibility for both funding payments and setting standards of need. In some States, the number of individuals eligible for SSI assistance was significantly larger than the number eligible under the earlier, state-run categorical need programs. The expansion of general welfare accomplished by SSI portended increased Medicaid obligations for some States because Congress retained the requirement that all recipients of categorical welfare assistance--now SSI--were entitled to Medicaid. Congress feared that these States would withdraw from the cooperative Medicaid program rather than expand their Medicaid coverage in a manner commensurate with the expansion of categorical assistance. In order not to impose a substantial fiscal burden on these States or discourage them from participating, Congress offered what has become known as the

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