A New York trial court ruled that residents of a continuing care retirement community (CCRC) breached their contract when they applied for Medicaid before spending down their assets.  Good Shepherd Villages v. Yezzi (NY Slip Op 51900 – NY: Supreme Court, Broome 2014).

 Peter and Hazel Yezzi signed a contract with Good Shepard Village (the “Good Shepard”), a Continuing Care Retirement Community (“CCRC”). Also, as required by the contract, the Yezzis disclosed assets of $1 million and annual income of $25,000. Based upon the Yezzis’ financial disclosure, Good Shepherd admitted them to the independent living section of the CCRC. Mr. and Mrs. Yezzi moved in and, during the early phase of their admission, the Yezzis paid the monthly fee as required by the contract.

Years after the admission, Mrs. Yezzi was permanently moved to the nursing home section of the CCRC where she remained until her death. Good Shepherd billed the Yezzis for Mrs. Yezzi’s room, board, and care in the nursing home section at private pay rates. The Yezzis did not pay the nursing home bills and the outstanding amount as of the date of this lawsuit was $137,141.72.

Peter Yezzi and Joseph Yezzi applied to the Broome County Department of Social Services for Medicaid eligibility for Hazel Yezzi. Good Shepherd received a letter purportedly from Hazel Yezzi advising that she has transferred some of her jointly held assets to her husband’s name alone – assets that had been listed and pledged on their admission application to Good Shepherd. Mrs. Yezzi’s Medicaid application was initially denied on the ground that the entrance fee paid to Good Shepherd was an available resource. Thereafter, Medicaid coverage for Mrs. Yezzi was approved.

Good Shepherd filed a summons and complaint against the Yezzis alleging breach of contract and fraudulent transfer.  Good Shepherd claimed that its bills should have been paid from Mr. and Mrs. Yezzi’s personal assets disclosed in their contract with the facility. The Yezzis filed an answer denying Good Shepard’s claim, arguing that Good Shepherd is legally obligated to accept the Medicaid payments in satisfaction of the outstanding bills. Upon completion of discovery, Good Shepherd moved summary judgment, and defendants cross-moved for summary judgment dismissing plaintiff’s complaint.

The court entered judgment in favor of Good Shepard. The court found as follows:

[D]efendants are conflating the issues of the Good Shepherd and Yezzi contracts with the Yezzis’ legal right to apply for Medicaid. Simply stated, while the Yezzis may well have a right to apply for Medicaid, that is not to say that the exercise of that right – under certain circumstances such as present here – might not violate a separate perfectly valid contract. As noted above, 42 USC § 1396r (c)(5)(B)(v), admission contracts for continuing care retirement communities, such as here, are permitted to “require residents to spend on their care resources declared for the purposes of admission before applying for medical assistance.”

The court’s opinion is annexed here – Good Shepherd Villages v. Yezzi

For additional information concerning Medicaid applications and appeals, visit: https://vanarellilaw.com/medicaid-applications-medicaid-appeals/

UPDATED ON NOVEMBER 6, 2015: The New York appeals court affirmed the decision of the trial court described above, holding that a continuing care retirement community (CCRC) resident is required to spend the assets disclosed in the CCRC’s admission agreement on nursing home care before applying for Medicaid.  Good Shepherd Villages v. Yezzi (N.Y. Sup. Ct., App. Div., 3rd Dept., No. 520621, Nov. 5, 2015)