401(k) and IRAs Owned by the Spouse of a Medicaid Applicant may not be countable by New Jersey Medicaid

New Jersey Medicaid may not count IRAs, 401(k) and pension plans owned by the spouse of an applicant in determining eligibility if funds may be withdrawn only by borrowing against the retirement assets. Avery v. Union County Division of Social Services

Rose Avery admitted her husband, Friend Avery, to a nursing home in July 1997. After five months, Friend died. During her husband’s stay in the nursing home, Rose applied to the Union County Division of Social Services (UCDSS) for Medicaid to pay for three months of his nursing home expenses. Two months of those expenses had been covered by private insurance.

At the time she applied for Medicaid, Rose had been working at Schering-Plough for twenty-eight years. Among her employee benefits was a 401(k) and a profit sharing plan (collectively referred to as the “pension plans”). The combined value of the pension plans was $99,010.36. The value of the pension plans exceeded the applicable resources limit under Medicaid regulations. Accordingly, the UCDSS denied  Rose’s application based on “excess resources.”

Rose appealed from the denial of Medicaid benefits and asked for a “Fair Hearing,” contending that the pension plans were not “available resources.” According to Rose, there were only two ways to withdraw money from the pension plans. Under the “hardship withdrawal” provision, she could withdraw funds to pay for “medical care.” However, Rose proved that, under the applicable regulations, she could not qualify for a hardship withdrawal because the term “medical care” did not include the kind of “custodial care” that Friend was receiving in the nursing home.

The only other way to withdraw money from the pension plans was to borrow against the plans. However, Rose argued that the Medicaid law and regulations do not mandate that a community spouse must borrow in order to gain access to a resource.

After the hearing, the administrative law judge (ALJ) ruled in favor of Rose. In a comprehensive opinion, which was later described as “a compendium of the legal history of Medicaid in New Jersey,” the ALJ held that Rose did not possess the unfettered right, authority or power to gain access to, or to liquidate, the pension plans. As a result, Friend was found eligible for Medicaid.

The UCDSS appealed the ALJ’s decision to the Acting Director of DMAHS. The Director disagreed with the ALJ, and reversed. The Acting Director found that Rose provided no proof that she ever applied for a “hardship waiver” from her employer’s pension plan administrator. Therefore, her claim that she would not receive the waiver was speculative. Moreover, after reviewing the record, the Acting Director concluded that Rose’s need to pay her husband’s nursing-home expenses would have qualified for a “hardship waiver.” The Director did not address Rose’s argument that Medicaid regulations did not require her to borrow against the pension plans. Rose appealed.

The appellate division of our state court reversed, and remanded the case to the administrative forum. The court ruled that Rose had to actually apply for a “hardship waiver” in order to determine if she would be eligible for a waiver. The court also ruled that Director’s failure to decide if Medicaid regulations required Rose to borrow against the pension plans might compel a community spouse to take out a loan that might well impoverish her.in order to avoid losing the right to receive Medicaid assistance. Thus, the court concluded that the Director must determine whether a community spouse is required to borrow in order to gain access to the pension plans.

The case is attached here – Avery v. Union County Division of Social Services

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