Director of Medicaid upholds the denial of nursing home Medicaid benefits to applicants who paid family members for care under Life Care Contracts

As I reported in a blog post in October at, ALJ Paone ruled, in a case entitled C.S. v. Division of Medical Assistance and Health Services and Union County Board of Social Services, that Medicaid applicants who prepaid for personal care services to be provided in the future by family members under Life Care Contracts were ineligible for Medicaid because the prepayments constituted transfers of assets for less than fair market value, subjecting the applicants to the imposition of penalty periods under the Medicaid program. The judge reasoned that,since the value of an asset under the Medicaid regulations [N.J.A.C. 10:71-4.1(d)] is defined as “ the price that the resource can reasonable be expected to sell for on the open market in the particular geographic area…”, and since the Life Care Contracts in issue prohibited the sale, transfer or assignment of any rights or benefits conferred by the contract, the “contracts lack[ed] intrinsic value and, thus, possessed no fair market value”.

The parties filed exceptions, and the case was reviewed by the Director of the state Medicaid agency. The Director recently filed his final agency decision, affirming the ALJ’s decision and finding the Medicaid applicants ineligible for Medicaid. The Director held that:

[N]one of the Petitioners have received fair market value for the assets transferred to their children and grandchildren and that Respondents properly imposed a transfer penalty. These “care agreements”, set up either just prior to or just after applying for Medicaid benefits, serve as a vehicle to transfer assets to these relatives for some specious jobs that may or may not occur at a later date.

The Director’s decision is attached here – cs-es-lk-v-dmahs1