A New Jersey administrative law judge (ALJ) recently held, contrary to a court order awarding wages for services rendered, that a payment to the adult children of a Medicaid applicant for services rendered under a power of attorney was properly considered to be a gift by the State’s Division of Medical Assistance and Health Service (DMAHS) and subject to a penalty, or period of ineligibility for Medicaid benefits. V.M. v. Division of Medical Assistance and Health Services, et al., OAL Docket No.  5769-09 (March 22, 2010, Union County)

Petitioner, V.M., is a 93 year-old widower with four adult children. Petitioner’s wife died in 1994. Petitioner owned a home in Westfield, NJ where he resided until placed in a nursing home. In 2002, petitioner appointed his daughter and his son as co-agents under his Power of Attorney (POA). In 2007, petitioner was admitted to a nursing home. In August 2007, petitioner applied and was approved for nursing home Medicaid.

In January 2008, petitioner sold his home in Westfield, N.J., and received approximately $202,747.63 in net proceeds. The co-agents/adult children under petitioner’s POA reported the sale of V.M.’s home and receipt of the proceeds of the sale to Medicaid. Later in 2008, Medicaid notified petitioner that his benefits were terminated due to excess resources.

After receiving he proceeds of sale, petitioner’s co-agents filed an Order to Show Cause and Verified Complaint in the Superior Court of New Jersey, Chancery Division, Union County, seeking an order authorizing monetary reimbursement to themselves from petitioner’s estate for services rendered as petitioner’s co-agents under the POA, pursuant to N.J.S.A. 46:2B-8.12, and for expenses they incurred over the years on petitioner’s behalf. In the Verified Complaint attached to the Order to Show Cause, the co-agents certified that between January 22, 2002, and March 2008, they provided numerous and various POA services expecting to be paid for such services. The services included: taking petitioner to family gatherings on birthdays and holidays, taking him to the bank, doctor visits and to dinner. The co-agents provided a detailed list of the specific services and expenses for which they sought compensation and reimbursement. The co-agents charged petitioner $15 per hour for those services. They also certified that they made various expenditures expecting to be reimbursed. They valued the POA services at $102,555 and expenses at $24,400.

On June 11, 2008, Judge John Malone of the Chancery Division ordered that that the co-agents be compensated in the amount $102,555.55 for services rendered under the POA and reimbursed for expenses incurred on petitioner’s behalf in the amount of $24,400. After the payment authorized by the court was made to the co-agents, the remainder of the proceeds of sale of petitioner’s home, approx. $75,000, was used to pay petitioner’s care costs.

Once he spent down all of his remaining assets, petitioner reapplied for nursing home Medicaid. The Medicaid agency held that both the payment for services rendered under the power of attorney and the reimbursement for expenses, although authorized by the court, was actually a transfer of assets for less than fair market value, rendering petitioner ineligible for Medicaid. Petitioner appealed.

Unfortunately, things didn’t get any better for petitioner on appeal. Before trial, petitioner filed a motion for summary judgment in the Office of Administrative Law. The matter was heard by Hon. Caridad Rigo, ALJ. Petitioner alleged that the court’s Order authorizing him to pay for services rendered by his co-agents and to reimburse his co-agents for expenses incurred by them on petitioner’s behalf precluded Medicaid from treating the payments as uncompensated transfers. The court disagreed, entering judgment in favor of Medicaid and against petitioner as follows:

Petitioner asserts that the court-ordered transfer is credible evidence that rebuts the presumption that the transfer was made to become Medicaid eligible. Petitioner also asserts that the DMAHS’s decision is inconsistent with State law … . I DISAGREE. The Medicaid regulation does not prevent DMAHS from determining that such a transfer was a transfer exclusively made for a purpose other than to make V.M. Medicaid eligible. … [Further,] … the Superior Court Judge was not making a determination of Medicaid eligibility, he was simply applying the law relating to the Power of Attorney where agents can be compensated for services rendered pursuant to a Power of Attorney. The Medicaid regulation concerned in this case does not prohibit such compensation or transfers[;] it simply dictates that such compensation is to be analyzed under the concept of Medicaid eligibility.

The case is annexed here – ALJ Rigo Decision

Exceptions have been filed by the parties. The case now goes to the Director of the Medicaid agency for review and the entry of a final agency decision.

UPDATED ON MAY 23, 2011: After the Director of the Medicaid agency affirmed the ALJ’s decision, petitioner filed an appeal to the Superior Court of New Jersey, Appellate Division.  I received the decision today, and the appeals court affirmed Medicaid’s decision that the payment to V.M.’s children for services rendered as agents under V.M.’s power of  attorney were gifts:

V.M.’s children are relatives who provided services to him in the past for free at the time the services were delivered. … Although there is a preexisting POA, it is silent about the type and terms of compensation for the services or expenses the children seek here. Accordingly, V.M. failed to rebut the presumption that the transfers were made in order to establish Medicaid eligibility. … The court order does not change this result. (Slip Opinion at Page 15)

The Appellate Division opinion is annexed here – V.M. v Department of Human Services