NJ Court Narrows Exception Excluding Business Property For Medicaid Purposes

A New Jersey appeals court ruled that $1.7 million in customer contracts held by a disabled man’s family business should be counted as a resource when determining his Medicaid eligibility rather than excluded under Medicaid rules which permit the exclusion of assets otherwise countable that are “used in a business … self-support activity.” G.T. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., No. A-1252-06T3, April 10, 2008).

Prior to suffering a catastrophic brain injury in 1995, G.T. owned and operated a burglar alarm installation business with his wife. After his injury, G.T. was unable to continue working but maintained a 50 percent ownership interest in the business, which had customer contracts valued at more than $1.7 million. In 2003, G.T. was admitted to a skilled nursing facility and applied for Medicaid benefits. His application was denied due to excess resources because the customer contracts were considered countable resources.

G.T. appealed, arguing that the customer contracts were property used in a trade or business that qualified for the business property exemption found in 42 U.S.C. § 1382b(a)(3) and N.J.A.C. 10:71-4.4(b)(5). The state countered that contracts are not the type of business property contemplated by the law, which specifically cites “land, buildings, equipment or supplies, motor vehicles, and tools” as exempt business property.

The Superior Court of New Jersey, Appellate Division, agreed with the state’s argument. The Court ruled that G.T.’s business contracts were countable resources for Medicaid purposes. The court found there was a basic difference between a business’s contracts with its customers and the business assets (such as cows and tools) used to fulfill those contracts. The court found that “The customer contracts provide for a stream of revenue. They are not ‘used’ in [G.T.’s] business in the same sense that a farmer uses a plow or a cow. . .”