A New Jersey appeals court upheld the imposition of a penalty period on a nursing home resident’s receipt of Medicaid benefits, holding that the resident failed to rebut the presumption that a court-ordered payment made to the resident’s adult children for previously uncompensated services provided under a power of attorney was not a valid payment for services rendered but instead was made to establish Medicaid eligibility. V.M. v Department of Human Services, (N.J. App., No. A-5886-09T3, May 23, 2011).

In January 2008, nursing home resident and Medicaid recipient V.M. received $202,747.63 from the sale of his home. Upon learning of the sale of the residence, the state Medicaid agency informed V.M. that his resources exceeded Medicaid eligibility limits and that he could reapply for benefits when his resources were lower. After the proceeds of sale were received, V.M.’s children filed a court action seeking payment of $126,955 for services rendered and expenses they incurred on V.M.’s behalf as his agents under a power of attorney which V.M. executed in 2002. The court action was premised upon a state statute authorizing a court to award compensation to agents appointed under a New Jersey power of attorney. The children understood and the State of New Jersey later stipulated that Medicaid benefits had terminated upon receipt of the proceeds of sale, so the children did not give notice to New Jersey’s Medicaid agency of the court action. The court granted the unopposed request for payment filed by V.M.’s children.

After the trial court entered an order awarding the children payment for services rendered and expenses paid by them under the power of attorney, V.M. later reapplied for Medicaid benefits. This Medicaid application was denied based on the court-ordered payment to V.M.’s children. The Medicaid agency determined, contrary to the court’s award of compensation for services rendered, that the payment to the children was, instead, a transfer of assets for less than fair market value, or a gift, subject to a gift penalty. The agency found that the services rendered by the children between 2002 and 2007 were originally provided for free and that V.M. failed to rebut the presumption in the Medicaid regulations that the transfers were made to qualify V.M. for Medicaid, notwithstanding the court order authorizing the payment.

On appeal, V.M. argued that the court-ordered transfer was a valid payment for services provided by his children and reimbursement of expenses incurred by them which were authorized under state statute based upon their status as co-agents under the applicant’s power of attorney and that, regardless, the court order effectively rebutted the presumption that the transfer was made to establish Medicaid eligibility.

The Appellate Division of the Superior Court of New Jersey affirmed the denial of benefits, noting the lack of credible documentary evidence to support the requested compensation and that the court order was entered without notice to the state and upon the children’s request for their own benefit.

The V.M. case is annexed here – V.M. v Department of Human Services.