In A.G. v. Division of Medical Assistance and Health Services and the Ocean County Board of Social Services, OAL Docket No. HMA-2405-09 (October 13, 2009), Hon. Edward J. Delanoy, Jr., Administrative Law Judge (ALJ), ruled that payments made for care services provided to A.G., a nursing home resident and Medicaid applicant, by E.G., her adult son, pursuant to a Caregiver Agreement were, in fact, uncompensated transfers for less than fair value, subject to a penalty period under the Medicaid program. ALJ Delanoy also found that that a loan made by A.G. to her son and evidenced by a promissory note was a valid, bona fide loan which was not subject to a Medicaid penalty period. How Judge Delanoy reached these conclusions was enlightening.

A.G. was an aged, nursing home resident receiving Medicaid benefits. Her only asset was her home, which was listed for sale.  While her home was on the market, A.G. entered into a Caregiver Agreement with her son E.G. Under the agreement, E.G. would provide four hours of care services per week over A.G.’s expected lifetime in return for a lump sum payment of $68, 952.00, payable from the proceeds of sale of the home. A.G. also sign a power of attorney appointing E.G. as her agent. Further, A.G. also signed a loan agreement and promissory note in which A.G. agreed to loan E.G. $42,000 which would be repaid at the rate of $7,097.03 per month for six months. Later when the home sold, A.G. became ineligible for Medicaid due to excess resources. Soon thereafter, A.G. paid E.G. a reduced lump sum payment of $39,780.00 under the Caregiver Agreement because the sale proceeds were less than expected, and made the loan due under the promissory note. A.G. then reapplied for nursing home Medicaid benefits. The Medicaid agency denied the application, finding that the Caregiver Agreement and promissory note were invalid, and that all payments made under the Caregiver Agreement and the loan constituted a transfer of resources for less than fair market value resulting in a twelve month and five day penalty period. A.G. appealed, asking for a Fair Hearing.

A hearing was held before the ALJ Delanoy. At the conclusion of the hearing, Judge Delanoy issued an opinion finding, first, that the Caregiver Agreement was invalid because (1) the services to be provided under the Agreement were duplicative of services rendered by the nursing facility in which A.G. resided, (2) E.G. did not prove that any services were actually delivered under the Agreement, (3) no basis for the hourly rate paid to E.G. was set forth in the Agreement or established at the hearing, (4) A.G. had no recourse against E.G. under the Agreement if E.G. failed to provide services as promised, and (5) the Agreement failed to provide for any refund if either A.G. or E.G. died prematurely.

Second, Judge Delanoy found, contrary to Medicaid’s determination, that the promissory note was valid. Medicaid’s denial was based on its finding that, in the context of a Medicaid application, the promissory note was a countable resource because it was a “trust like” device. Judge Delanoy found to the contrary, ruling that the promissory note was not a “trust like” device because (1) E.G., the obligor under the note, did not owe any fiduciary obligations to A.G., and (2) the loan to E.G. was not made with the intention that it be held, managed or administered for the benefit of A.G. (In ruling that the promissory note was valid, Judge Delanoy cited the G.L. v. Division of Medical Assistance and Health Services and the Middlesex County Board of Social Services case, which I blogged about here.) As a result, Judge Delanoy affirmed the imposition of a penalty period for Medicaid benefits based upon the payments made under the Caregiver Agreement, but reversed the penalty period imposed as a result of the loan and promissory note made to E.G.

The ALJ’s decision is annexed here – Judge Delanoy’s Decision re A.G. v. DMAHS

UPDATED ON JANUARY 18, 2010 – The Director issued a Final Agency Decision recently which (1) affirmed ALJ Delanoy’s ruling that payments made for care services provided to A.G., the Medicaid applicant, by E.G., her adult son, pursuant to a Caregiver Agreement were uncompensated transfers for less than fair value, subject to the imposition of a penalty under the Medicaid program; and, (2) reversed Judge Delanoy’s decision that a loan made by A.G. to her son and evidenced by a promissory note was valid, instead holding that the loan was a “trust-like device” and an available resource for purposes of determining Medicaid eligibility. Thus, the conclusion of the Ocean County Board of Social Services was affirmed, and the applicant was found to be ineligible for Medicaid benefits.

The Final Agency Decision is annexed here – A.G. v. DMAHS – Director’s Decision