Under federal mandate, Medicaid eligibility determinations must be made with reasonable promptness

In Brill v. Velez (U.S. Dist. Ct., D. N.J., No. 1:13-cv-05643 (NLH/AMD), June 27, 2014), a federal district judge ruled that an applicant’s claim against the State of New Jersey for denying Medicaid benefits based upon the purchase of an annuity survived a motion to dismiss even though the State reversed the denial because the applicant still has a claim against the State for unreasonable delay in processing the application.

On March 22, 2012, plaintiff Ada Brill applied to the Camden County Board of Social Services (“Board”) for long-term care benefits under New Jersey’s Medicaid program. Plaintiff had purchased an annuity the day before she filed her application. Approximately 15 months later, New Jersey notified Ms. Brill that she would incur a penalty period for the purchase of the annuity, calling the purchase an “impermissible transfer.”

Plaintiff filed this lawsuit in federal court seeking to enjoin the State from treating the purchase of an annuity as an “impermissible transfer” and from applying a “de facto policy of delaying determinations involving annuities.” Plaintiff also requested costs, attorney’s fees, and “such other relief as the court may deem just and equitable.” Two weeks after the lawsuit was filed, New Jersey reversed its position on the annuity, changed the status of Ms. Brill’s application to “pending” and requested additional information, which was provided by plaintiff. However, as of the date of this opinion, Ms. Brill still had not received Medicaid benefits. The State then moved to dismiss, claiming the lawsuit was moot because the annuity was no longer being treated as an impermissible transfer.

The U.S. District Court for the District of New Jersey denied the motion to dismiss for two reasons. First, the court ruled that:

‘[V]oluntary cessation of allegedly illegal conduct’ does not generally moot a case. When a defendant voluntarily refrains from the conduct challenged by plaintiff, he is still ‘free to return to his old ways.’ Consequently, ‘the court’s power to grant injunctive relief survives discontinuance of the illegal conduct.’ [Citations Omitted]

Second, the Court ruled that it could provide meaningful relief other than the injunction requested by plaintiff:

Federal courts are not limited to the relief requested in the pleadings. Federal Rule of Civil Procedure 54(c) provides that, except in default judgments, courts ‘should grant the relief to which each party is entitled, even if the party has not demanded that relief in its pleadings.’ Fed. R. Civ. P. 54(c). While plaintiffs cannot recover for claims they never alleged, courts should grant the relief justified by the facts for any claim stated.

Since, according to the Court, the effect of treating the annuity as an impermissible transfer was to delay the date when Ms. Brill would begin receiving Medicaid benefits, the Court ruled that it could remedy this wrongful conduct with an injunction against further violation of “the federal mandate to make eligibility determinations with reasonable promptness.”

The opinion of the Court is annexed here – Brill v. Velez (U.S. Dist. Ct., D. N.J., No. 1:13-cv-05643 (NLH/AMD), June 27, 2014)

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