New Jersey Settles Federal Lawsuit, Amending its Medicaid Program to Exclude VA Pension as Countable Income

In February 2015, a Consent Order was filed in New Jersey federal district court, concluding a hard-fought class action lawsuit. In the Order, the State of New Jersey agreed to amend its Medicaid program on a State-Wide basis to exclude pension benefits paid by the Department of Veterans Affairs (VA) when determining an applicant’s eligibility for Medicaid benefits.

Alma Galletta, the first plaintiff in the class action lawsuit, is the widow of a World War II veteran. She applied for benefits through NJ’s “Global Options for Long Term Care” program (Global Options), a program funded by Medicaid that paid for care provided at home. In order to be approved for the Global Options program, an applicant must prove she has income and resources below certain maximum levels. 

Plaintiff’s monthly income included VA pension benefits paid to her as a result of her late husband’s military service. As part of the application, plaintiff submitted a letter from the VA indicating that, of the $1,094.00 in VA pension benefits plaintiff received every month, $684.00 was designated by the VA as “pension” and $410.00 was designated as “aid and attendance”. The Medicaid agency included the $684.00 designated as “pension” as countable income for Medicaid eligibility purposes, and excluded the $410.00 designated as “aid and attendance.” As a result, plaintiff’s application was denied because her income exceeded the maximum income permitted under the Global Options program. Had the portion of the VA benefit designated as “pension” not been included in her countable income, plaintiff would have been eligible for Global Options. 

Plaintiff contended that the entire VA pension benefit she received resulted from unreimbursed medical expenses, and therefore should have been included as countable income in determining Medicaid eligibility. In January 2013, plaintiff, along with other members of the plaintiff class who were denied Medicaid eligibility due to their receipt of VA pension, filed a class action complaint against defendants, Jennifer Velez, Commissioner of the New Jersey Department of Human Services, and Valerie Harr, Director of the New Jersey Division of Medical Assistance and Health Services, in federal court, seeking an injunction to prevent defendants from treating VA pension benefits as income for Medicaid eligibility purposes, a re-determination of eligibility, an order granting Medicaid eligibility on a retroactive basis to class plaintiffs who would have been eligible for benefits had VA benefits not been incorrectly treated as income, and attorneys’ fees and costs. 

In February 2013, after filing her complaint, plaintiff submitted another letter to Medicaid from the VA indicating, contrary to a prior letter issued by the agency, that the entire amount of VA benefits, then totaling $1,113.00 per month, constituted “aid and attendance.” Based upon the most recent VA letter, Medicaid determined that none of the VA benefits were countable, and that plaintiff was thus eligible for the Global Options program. Defendants then moved to dismiss the complaint as moot, arguing that plaintiff received all the benefits to which she was entitled. 

The court denied the State’s motion to dismiss, ruling that the lawsuit was not moot. Because the State’s policy of counting VA pension in determining Medicaid eligibility had not changed, plaintiff might be wrongfully denied Medicaid benefits in the future after an annual eligibility review. 

In May 2014, Esther Stoller, one of the class plaintiffs in the Galletta  lawsuit, filed for summary judgment on her claims. In her motion, plaintiff indicated that she would be evicted from her assisted living facility if she was not granted eligibility under the GO program. In response, defendants filed a motion to dismiss. 

The federal court found, based on federal and state regulations, that a VA pension “resulting from unusual medical expenses,” meaning unreimbursed expenditures for medical treatment exceeding 5% of a person’s annual income, may not be counted as income for the purposes of any Medicaid program. The court then analyzed the basis for Mrs. Stoller’s award of VA benefits as set forth in the VA’s award letter and determined that she was eligible for VA pension benefits because of unusual medical expenses. As a result, the court held the entire VA benefit was not “countable income” in determining Medicaid eligibility.

As a result of the award of summary judgment granted in favor of Mrs. Stoller, Medicaid eligibility was granted to all class members in the lawsuit except for Mrs. Galletta.  The State of New Jersey then began to settlement discussions with her. Based upon the negotiations, the parties entered into a Consent Order that was accepted and filed by the federal court on February 6, 2015. In the Consent Order, the State of New Jersey agreed as follows: 

  • A VA pension shall not be included as countable income during the Medicaid eligibility determination process when the applicant can demonstrate that the VA pension is received as a result of “unusual medical expenses” as defined in the statutes, i.e., when the VA pension results from unreimbursed expenditures for medical treatment exceeding 5% of the applicant’s annual income; 
  • Within 3 months of the date the Consent Order is signed by the Court, New Jersey shall issue a Medicaid Communication and will distribute it to all County Welfare Agencies stating that a VA pension will not be included as countable income during the Medicaid eligibility determination process; 
  • Plaintiff Alma Galletta’s effective date for Medicaid eligibility will be changed from March 13, 2013 to August 1, 2012; and, 
  • New Jersey shall pay $100,000 in attorney fees and costs within 60 days of the entry of the Consent Order. 

As a result of the settlement in the Galletta  case, I believe that eligibility for Medicaid will expand for needy New Jersey residents. 

I wish to thank my co-counsel in the Galletta class action case for their efforts in achieving our goals in the case. Counsel in the case were: Alan H. Sklarsky, Esq., of the law firm of Williams Cuker Berezofsky, lead counsel in the case. Donald D. Vanarelli, Esq. represented Alma Galletta, the first plaintiff in the case. Class plaintiff Rosalie Barbagallo was represented by attorney Donald McHugh, Esq., principal with the McHugh and Macri law firm. Class plaintiff Opal Bova was represented by Christopher Olszak, Esq., of Olszak & Olszak, LLC. Finally , class plaintiff Esther Stoller was represented by Frederick P. Niemann, Esq., of the Hanlon Niemann law firm. Congratulations and thank you to the above attorneys for their excellent work in the case. 

The Consent Order concluding the Galletta class action lawsuit is annexed here – Consent Order

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On February 18, 2015, I notified the Elder and Disability Law Section of the NJ State Bar Association of the our settlement with the State of New Jersey in the Galletta case via email as follows:

Just to let everyone know that New Jersey settled the Galletta federal class action lawsuit earlier this month. We got the relief we were seeking in that the State agreed that VA pension benefits will not be included as countable income when determining an applicant’s eligibility for Medicaid. The State will issue a Medicaid Communication to all county welfare offices notifying the caseworkers of the change in policy within 90 days. The named plaintiff Alma Galletta herself received retroactive Medicaid eligibility back to the date of her original application. And, the State agreed to pay $100,000 in fees to be distributed to all counsel. I wrote a blog post about the settlement and attached the Consent Order signed by all counsel and the State here – https://www.dvanarelli.co! m/new-jersey-settles-federal-lawsuit-amending-medicaid-program-exclude-va-pension-countable-income/

In response, I received many congratulatory emails from colleagues, for which I am very grateful. A sample of those emails follow:

 Congrats to you and the others who helped. Once again you have done a great service to our clients — and got paid for it to boot.

Susan L. Goldring, Esq.
Zager Fuchs, PC
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 Don- excellent results!

Fran J. Garb, Esq.
Law Office of Fran J. Garb
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Don, Congratulations on the grand-slam home run!

Gary Mazart, Esq.
Schenck, Price, Smith & King, LLP
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Congratulations. Great work.

Linda S. Ershow-Levenberg Esq.
Fink, Rosner, Ershow-Levenberg
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Nice decision on the VA issue. They should rename you “Studley”.

Matthew J. Nolfo, Esq.
Matthew J. Nolfo and Associates
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Don’t know what we would do without you guys and your excellent work.  Congratulations!!!

Brenda McElnea, Esq. – CELA
Elder and Disability Law and Special Needs Planning

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Don, great result. Congratulations to yourself & Fred.  Does this also mean that you DO NOT need to put the VA income into A QIT?

Jerold E. Rothkoff, Esq., Rothkoff Law Group

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Wow! That’s as close to a home run as can be.  Congratulations, Don.  Well done!

William P. Isele, Esq.
Archer & Griner
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Congratulations to Don V. Don McHugh, Chris Olzsak, and Fred Neimann. who all worked on this matter. The fee award against the State is especially nice to see.

Stephanie M. Kay, Esq.
The Kay Law Firm LLC
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Clearly, this was an important issue when Medicaid wouldn’t cover long term care outside a nursing home if income exceeded the MO cap. In light of the expansion to Miller Trusts, what is the impact going forward? I assume the VA benefits won’t count as income in determining whether a Miller Trust is needed. Although the VA benefit may not be income for eligibility purposes, it still counts toward share of cost/patient pay share, right? If the VA benefit counts against share of cost, it seems like it wouldn’t have to go in a Miller Trust but still must be paid against long term care costs. 

Lawrence A. Friedman, Esq.,
FriedmanLaw 

(Answer: the VA pension income cannot be included for eligibility purposes, so it would not need to go into the trust; however, for post-eligibility treatment, it is still income, so it would have to be paid to the facility. However, if you are a nursing facility resident, the VA pension is reduced to $90.00 per month and the recipient gets to keep that $90.00)

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Great work, Don.

John W. Callinan, Esq.
Certified Elder Law Attorney*

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Don,
Congratulations! That is a great result.

Shirley B. Whitenack, Esq.
Schenck, Price, Smith & King, LLP
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Don, great job and kudos.  Now the only question is, how will VA planning change at the end of march?

Gary B. Garland, Esq., Certified Elder Law Attorney


For additional information concerning Medicaid and public benefits planning, visit:
https://vanarellilaw.com/medicaid-public-benefits-planning/

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