New Jersey’s Office of Administrative Law recently issued a significant ruling that may make it easier to qualify for Medicaid. In K.R. vs. Somerset County Board of Social Services, O.A.L Docket No. HMA 12343-07 (Aug. 25, 2008),  New Jersey’s Office of Administrative Law ruled that an account titled to a Medicaid applicant “or” another person is not disqualifying if the applicant can demonstrate that he did not contribute to the account and the other account holder did not intend to make a gift to the applicant in funding the account.

For many years, K.R. relied on his brother A.R. to meet his care and financial needs. A.R. established a bank account titled “K.R. or A.R.” to make funds available for K.R. should A.R. die suddenly. To lessen tax, the account used K.R.’s Social Security number. The Somerset County Board of Social Services determined that the account disqualified K.R. from Medicaid until closed, and that A.R.’s closure of the account triggered uncompensated transfer or “gift” penalties that disqualified K.R. from Medicaid for another year. K.R. requested a fair hearing.

The Board claimed that merely titling an account with a Medicaid applicant’s name and Social Security number automatically disqualifies the applicant for Medicaid, whether or not he ever contributes to the account. K.R. responded that both federal law and New Jersey’s own Medicaid regulations prohibit the state from disqualifying a Medicaid applicant whose name is on an “or” account but doesn’t have beneficial ownership in it.

K.R. noted that New Jersey’s Medicaid regulations treat an item as Medicaid disqualifying only if it is owned by the Medicaid applicant. New Jersey’s Multiple-party Deposit Account Act provides that an “or” account normally belongs to each party in proportion to the parties’ net contributions. Thus, an individual who never contributes to the account wouldn’t normally have ownership rights despite nominal title.

An administrative law judge (ALJ) held that New Jersey could not automatically treat every “or” account as Medicaid disqualifying because Supplemental Security Income (SSI) rules permit an applicant to show that he doesn’t own such an account in his name, and federal law prohibits state Medicaid eligibility methodology from being more restrictive than Social Security Administration practices in evaluating SSI eligibility. Since A.R. fully funded the account without intending to make a gift to K.R., the ALJ determined that the account was not owned by or available to K.R., and that A.R.’s closure of the account did not trigger Medicaid “gift” penalties. The Director of Medicaid affirmed in the Final Agency Decision.

Under the K.R. case, a Medicaid applicant is entitled to demonstrate that an account titled to the applicant and others is not Medicaid disqualifying even though New Jersey’s Medicaid regulations do not set forth rebuttal procedure. New Jersey’s Multiple-party Deposit Account Act rather than the Medicaid regulations determines whether an “or” account holder’s is an account owner. Medicaid penalties do not apply where an “or” account is closed and the Medicaid applicant isn’t an owner under New Jersey’s Multiple-party Deposit Account Act.

The Initial Decision by the ALJ is attached here – K.R. vs. Somerset County Board of Social Services (ALJ Decision)

The Final Agency Decision is annexed here – K.R. vs. Somerset County Board of Social Services (Final Agency Decision)