In the C.C. v. Division of Medical Assistance and Health Services case, plaintiff filed an application for nursing home Medicaid benefits which was denied by the Ocean County Board of Social Services. The agency imposed a penalty, or a period of ineligibility, on her application. That is, the agency found that plaintiff sold her residence during Medicaid’s five-year look-back period under state and federal rules, and gave half the proceeds, $99,233.75, to her nephews. As a result, when plaintiff applied for Medicaid, the agency imposed a 387-day transfer penalty, or period of ineligibility, resulting from the gift of the proceeds of the home sale.  Further, the agency refused to reduce the penalty imposed even though plaintiff’s nephews returned $17,000 to her during the ineligibility period, which was used to pay for plaintiff’s care.

Plaintiff appealed, asking for a Fair Hearing. At the hearing, plaintiff conceded that the transfer penalty imposed by the agency was appropriate; but she argued that the  penalty should have been reduced because a portion of the transferred proceeds of the home sale were returned to pay for her care. However, the administrative law judge determined that no reduction was possible and affirmed the decision of the Ocean County Board of Social Services. The Director of the Division of Medical Assistance and Health Services (DMAHS), the state Medicaid agency, adopted the decision in its entirety, ruling that a reduction of the penalty based on a partial return of transferred assets is in violation of federal and state Medicaid rules.

Plaintiff again appealed, this time to the Superior Court, Appellate Division. On appeal, plaintiff argued that “even if New Jersey law does restrict the return of transferred funds . . . , federal law trumps New Jersey’s law” and thus the $17,000 returned to petitioner should reduce the penalty period.” Unfortunately, the Appellate Division disagreed, stating:

Petitioner’s argument ignores that federal and State law are consistent in requiring the return of all assets transferred for less than fair market value in order to reduce the transfer penalty. … [B]oth 42 U.S.C.A. § 1396p(c)(2)(C) and N.J.A.C. 10:71-4.10(e)(6) provide that no transfer penalty shall be applied if “all assets transferred for less than fair market value have been returned”

Accordingly, the appeals court affirmed the decision of the Director of DMAHS, imposing the 387-day transfer penalty resulting from the gift of the proceeds of the home sale with no reduction for the return of $17,000 by plaintiff’s nephews.

The case is annexed here – C.C. v. Division of Medical Assistance and Health Services

For additional information concerning Medicaid and public benefits planning, visit:
https://vanarellilaw.com/medicaid-public-benefits-planning/