New York Court Rules Lump-Sum Payments for Future Personal Services Are Improper Transfers

Combining a series of related cases, a New York appeals court determined that five Medicaid applicants’ personal service agreements that provide lump sum payments for future services are transfers of assets for less than fair market value. Matter of Barbato v. New York State (N.Y. Sup. Ct., App. Div., 4th Dept., No. 711 TP 08-02216, Aug. 21, 2009). Related cases: Matter of Jackson v. New York State (N.Y. Sup. Ct. App. Div., 4th Dept., No 745 TP 08-01506, Aug. 21, 2009); Matter of Kinne v. New York State (N.Y. Sup. Ct. App. Div., 4th Dept., No 743 TP 08-01289, Aug. 21, 2009); Matter of Goddard v. New York State (N.Y. Sup. Ct. App. Div., 4th Dept., No. 742 TP 08-01287, Aug. 21, 2009); Matter of Caulkins v. New York State (N.Y. Sup. Ct. App. Div., 4th Dept., No. 744 TP 08-01290, Aug. 21, 2009).

Five nursing home residents had personal service agreements with their caregivers. The caregivers agreed to provide services to the residents for the rest of their lives in exchange for a bulk transfer of assets. One of the agreements stated that services would be provided “at least” 15 hours a week while the remaining agreements stated that services would be provided “as needed.”

The nursing home residents applied for Medicaid benefits, but the state denied their request finding that the residents had made a transfer of assets for less than market value. The residents appealed.

The Appellate Division of the Supreme Court of New York affirmed in part, holding that the transfers for future services were not for fair market value. According to the court, the agreements that contain “as needed” language were not transfers for fair market value “because there is no basis upon which to conclude that the transfer of a specific amount of assets for services that may or may not be rendered is for fair value.” In addition, the absence of a refund provision in any of the agreements means the caregiver could receive a windfall if the applicant does not meet his or her life expectancy. The court noted, however that the fair market value of “services performed may be determined and used in calculating each of the periods during which petitioners are ineligible for medical assistance benefits.” Source –

I blogged here and here about an appeal pending in New Jersey in a case involving facts very similar to those in the Matter of Barbato case and the related cases noted above. In C.S. v. Division of Medical Assistance and Health Services and the Union County Department of Social Services, the administrative law judge (ALJ) ruled 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 ALJ’s decision was affirmed by the Director of the state Medicaid agency. The C.S. case is now on appeal in the Appellate Division of New Jersey’s Superior Court.