E.A. began residing in a home owned by her adult daughter, B.C., in September 2004. From September 2004 to June 2005, B.C. received no compensation for any caregiver services or lodging provided to her mother. From June 2005 to September 2006, B.C. received E.A.’s Social Security benefits of approximately $1500 per month to offset the cost of care. .

Several years before she applied for Medicaid, E.A. executed a document whereby B.C. would receive $3600 per month for room and board. About one year later, E.A. updated the care agreement to increase the monthly payment to $4300. The following year, E.A. again updated the care agreement to increase B.C.’s monthly payment to $5100

Several years later, E.A. was hospitalized and then discharged to a nursing home. She paid all nursing home costs from her remaining funds. Soon thereafter, B.C. applied for Medicaid benefits on E.A.’s behalf. in support of the application, B.C. submitted the care agreement and E.A.’s bank account statements.

In 2013, the Hunterdon County Board of Social Services (HCBSS) determined that E.A. was medically and financially eligible for Medicaid benefits. However, HCBSS also found that E.A. had transferred a total of $244,510 to B.C. during the 5 year Medicaid look-back period for less than fair market value based on the payments made by E.A. to B.C. under the care agreement. As a result, HCBSS imposed a 936-day period of ineligibility, to begin in the month E.A. applied for Medicaid.

B.C. requested a hearing on E.A.’s behalf, and the matter was transferred to the Office of Administrative Law as a contested case. At the trial, the administrative law judge (ALJ) affirmed the 936-day penalty period imposed by HCBSS.  The ALJ based his decision on a number of findings. First, the ALJ found that E.A. and B.C. did not abide by the care agreement. Over the years, B.C. made many large withdrawals from E.A.’s bank accounts beyond the monthly payments she was due under the care agreement. The large withdrawals totaled almost $101,000 more than the payments B.C. was entitled to under the care agreement.

Second, B.C. received payments under the care agreement for months in which E.A. was in the nursing home and did not require caregiver services in B.C.’s home. Third, B.C.’s monthly payments were never reduced even though E.A. made many payments over the years for a home health aide to assist in providing care to E.A. Fourth, B.C. had no records of the services she or others provided to her mother, and she did not report any of the money she received under the care agreements as ordinary income on her tax returns. Fifth, the ALJ found that, although B.C. was paid at the same hourly rate charged by independent care providers, B.C. should have been paid less because the independent care providers were bonded, insured and trained while B.C. was not trained or licensed and had responsibilities other than caring for E.A., Sixth, the ALJ found that the care agreement did not specify the types of services and terms of compensation for each service provided.

Finally, although the ALJ acknowledged that B.C. provided substantial services to E.A. over many years, he emphasized that it was customary for children to provide many of the services to their parents out of love and affection for no compensation. The Director of the New Jersey’s Medicaid agency adopted the ALJ’s decision in its entirety.

On appeal, the Appellate Division affirmed the Director’s decision. With regard to the validity of the care agreement, the appeals court held that:

The mere existence of a pre-existing care agreement for services does not automatically establish that the services were rendered for fair market value.  … Notwithstanding a care agreement, the applicant still bears the burden to establish the types of care or services provided, the type and terms of compensation, the fair market value of the compensation, and that the amount of compensation or the fair market value of the transferred asset is not greater than the prevailing rates for similar care or services in the community.  … The care agreement in this case fell short of meeting that burden. (Citations Omitted)

The E.A. case is annexed here – E.A. v. Hunterdon County Board of Social Services

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