A New Jersey appeals court held earlier this month that a Medicaid applicant’s transfer of assets occurred when the checks she wrote were cashed, not when they were written, so the Deficit Reduction Act of 2005 (DRA) applies to the transfer and the penalty period begins when the applicant would have been otherwise eligible for benefits if not for the transfer.

M.M. wrote several checks to her family before and after she entered a nursing home in January 2006. Because there were not sufficient funds in M.M’s checking account, she asked her family not to cash the checks until her CDs could be liquidated and deposited into the account. The CDs were deposited on February 13, 2006 and the checks were cashed soon after. In the interim, Congress passed the DRA, which made several changes to Medicaid law.

M.M. applied for Medicaid on November 1, 2007. Because M.M. had made an unauthorized transfer of assets within the look-back period, the state applied post-DRA law and determined she was ineligible for benefits until September 30, 2008. Under prior Medicaid law, the penalty period for an unauthorized transfer began on the first day of the month in which a Medicaid applicant transferred the assets. However, under the DRA, the penalty period begins on either the date of the transfer or the date on which the applicant would otherwise become eligible for Medicaid benefits but for the transfer, whichever is later. M.M. appealed to court, arguing that because she wrote the checks before the DRA passed, pre-DRA law should apply.

The New Jersey Superior Court, Appellate Division, affirmed the denial of Medicaid benefits, holding that the transfer of assets occurred when the checks were cashed, not when they were written, so the DRA applies. The court noted that any time before the checks were actually cashed, M.M. could have changed her mind and not deposited money into her account.

The M.M. v. Division of Medical Assistance and Health Services case is annexed here – mm-v-dmahs