In an Initial Decision of the New Jersey Office of Administrative Law, Administrative Law Judge Laura Sanders held that transfers by a Medicaid applicant to her adult disabled children were exempt transfers that did not subject the Medicaid applicant to a penalty period. M.K. v. Division of Medical Assistance and Health Services and Somerset County Board of Social Services (“SCBOSS”), OAL Dkt. No. HMA 15716-12 (Aug. 22, 2013). I represented the petitioner in this case.

In M.K., the applicant had made transfers to her two adult disabled children during the look-back period. The gifts were made outright to the children, rather than to a trust. The children had previously been determined to be disabled by the Social Security Administration (“SSA”). However, once they had reached the full retirement age of 65, the SSA automatically converted their benefits from disability to regular retirement benefits.

A previously assigned ALJ had denied summary judgment after determining that the record lacked information as to whether the children remained disabled. (That decision denying petitioner’s motion for summary judgment is annexed here.) Thereafter, the SCBOSS stipulated that both children continued to be totally medically disabled.

Nevertheless, Medicaid had found that the transfers subjected the applicant to a penalty period. It claimed that, upon the children reaching retirement age and receiving regular retirement benefits, they ceased to fit the definition of disabled, so transfers to them could not be considered exempt under 42 U.S.C. §1396p(c)(2)(B), which provides that

(2)     An individual shall not be ineligible for medical assistance by reason of paragraph (1) to the extent that —

(B)     the assets…

(iii)     were transferred to, or to a trust (including a trust described in subsection (d)(4)) established solely for the benefit of, the individual’s child [who is blind or disabled], or

(iv)     were transferred to a trust (including a trust described in subjection (d)(4)) established solely for the benefit of an individual under 65 years of age who is disabled (as defined in section 1614(a)(3))[42 U.S.C.S. § 1382c(a)(3)].

Medicaid contended that an individual’s period of disability ends when the individual reaches retirement age. In support of that claim, Medicaid cited 42 U.S.C. §416(i)(2)(D), which states that “[a] period of disability shall end with the close of … (i) the month preceding the month in which the individual attains retirement age … or, (ii) the month preceding (I) the termination month …, or, if earlier (II) the first month for which no benefit is payable.”

ALJ Sanders began her analysis of the motions for summary judgment by citing Sorber v. Velez, 2009 U.S. Dis. LEXIS 98799 (D.N.J. Oct. 23, 2009), for the proposition that, in addition to transfers to a trust for a disabled or blind child, transfers directly to a disabled or blind child are exempt under 42 U.S.C. §1396p(c)(2)(B). (My blog post on the Sorber v. Velez case can be found here.) Citing A.D. v. DMAHS, HMA 07269-09 (Nov. 18, 2009), adopted, Dir. (Dec. 24, 2009), the ALJ also recognized that the “sole benefit” requirement applies only to trusts, rather than to direct transfers to disabled children.

The ALJ then framed the issue as “whether the type of benefit paid by the Social Security Administration is determinative of disability.” She concluded that “the regulations contemplated that the Social Security Administration’s determination was not the only method of determining whether an individual’s child is disabled or blind.” She also found that, in A.D., supra, the child in issue had been over age 65 but was nevertheless treated as meeting the definition of “disabled pursuant to the Social Security Administration.”

Turning to the instant case, ALJ Sanders recognized that M.K.’s children had been treated as disabled by the SSA prior to turning age 65, and that SCBOSS had conceded that they continued to suffer from long-term disabilities. Consequently, the ALJ concluded that the transfers fell within the aforecited exemption, and that a Medicaid penalty period should not have been imposed as a result of the transfers. (ALJ Sander’s decision granting summary judgment in favor of petitioner is annexed here.)

ALJ Sander’s Initial Decision has been filed with the Director of the Division of Medical Assistance and Health Services for consideration.

A copy of the prior ALJ’s decision denying summary judgment is annexed here: Order Denying Motions for Summary Decision

A copy of the ALJ Sander’s August 22, 2013 Initial Decision granting petitioner’s motion for summary judgment can be found here:  ALJ Decision Granting Motion for Summary Judgment

UPDATED ON DECEMBER 2, 2013: The Director of the Division of Medical Assistance and Health Services, New Jersey’s Medicaid agency, issued a Final Agency Decision affirming Judge Sanders decision. The Director found that transfers by a Medicaid applicant to her adult disabled children were exempt transfers that did not subject the Medicaid applicant to a penalty period even when the asset transfers were made AFTER the adult children attained age 65 and their Social Security disability benefits were converted to retirement benefits. The Final Agency Decision is annexed hereto: M.K. v. DMAHS – Final Agency Decision 11 12 13