Payments Made By Medicaid Applicant To Family Member Under Care Agreement Were Uncompensated Transfers, Subject to Penalty Period

A New Jersey appeals court held that payments made by a Medicaid applicant to her daughter pursuant to a written care agreement under which the daughter provided various services were actually gifts and subject to a transfer penalty. P.W. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., No. A-4756-11T3, April 29, 2014).

M.Y., referred to as “Mary” in the court’s decision, signed a care agreement with her daughter, Paula, in which Paula agreed to provide room and board in return for $2,000 a month, which included $800 for rent and $1,200 for services. The services Paula agreed to provide included the preparation of three meals per day, weekly cleaning and laundry, assistance with bathing, dressing, hair care, and shopping, and assistance with managing finances. Mary lived with Paula for two years. During that period, Mary also transferred $16,000 to Paula’s 13 year old daughter, Reba in addition to paying Paula under the care agreement. Mary then briefly entered an assisted living facility before moving in with her other daughter, Gina, for two years. Although no care agreement was executed with Gina, Mary transferred $46,595 to Gina during the time she resided with her.

Gina and Paula placed Mary in a nursing home and applied for Medicaid benefits. The State of New Jersey determined the $1,200 monthly payments to Paula for services were transfers for less than market value and imposed a penalty period, or period of ineligibility for Medicaid. When Mary appealed, an administrative law judge ordered that the $1,200 payments be excluded from the penalty period. However, rejecting the ALJ’s decision, the Director of the State Medicaid agency found that the care agreement was a “mechanism for transferring resources” to Paula, and Mary had not received fair market value for the $1,200 per month as set forth in the agreement. Mary filed a court appeal.

The New Jersey Superior Court, Appellate Division, affirmed the Director’s decision imposing a penalty period, holding there was no evidence Mary received fair market value in exchange for the assets transferred to her daughters and granddaughter. The court noted that there was no explanation of how the $1,200 rate was reached, nor what tasks were to be done and for what length of time to earn $1,200 each month. The court also noted that the payments to Gina and Reba were sporadic and irregular. Further, no care agreement existed between Mary and her granddaughter Reba or Gina even though payments were made to both of them. Mary claimed that the caregiver agreement rebutted the presumption that the transfer of funds was made for purposes of establishing eligibility and that she produced sufficient evidence to prove the transfers were made pursuant to the agreement. However, according to the court, “in evaluating whether [Mary] had overcome the presumption that assets were transferred to establish Medicaid eligibility, all of the transfers to family members made during the look-back period must be scrutinized.”

For a complete copy of the Court’s decision, go to: P.W. v. Division of Medical Assistance and Health Services

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