Top 12 New Jersey Elder Law Cases Decided In 2010

Here are my selections for the top ten (10) twelve (12) New Jersey elder law / public benefits / Medicaid cases decided in 2010:

(1) R.C. v. Division of Medical Assistance and Health Services and Hudson County Board of Social Services, OAK DKT. NO. HMA 08047 – 10 (Hudson County, October 22, 2010): Judge Awards Benefits To Medicaid Applicant Who Made A Gift “Exclusively For A Purpose Other Than To Establish Medicaid Eligibility”

R.C., through his wife and guardian P.C., applied for nursing home Medicaid benefits in 2010. The state Medicaid agency denied R.C.’s application for Medicaid benefits because R.C. and P.C. transferred $100,000 to their daughter and son-in-law in 2008 in violation of Medicaid prohibition against gifting. R.C. appealed.

A hearing was held. The administrative law judge (ALJ) found that, in the usual case, a gift of $100,000 would make an applicant ineligible for Medicaid benefits. In this case, however, R.C. and P.C. had proven by convincing evidence that the gift was make solely and exclusively for some purpose other than establishing Medicaid eligibility. That is, the applicant proved that he was employed and in good health when the gift was made, and that the stoke which disabled him was an unanticipated event that occurred long after the gift was made. As a result, the ALJ found that the applicant had met his burden of proof and was eligible for Medicaid benefits. (I previously blogged about the R.C. case here.)

(2) M.S. v. Division of Medical Assistance and Health Services and the Middlesex County Board of Social Services, OAL Docket No. HMA 9733-09: Summary Judgment Denied In NJ Medicaid Planning Case Involving A Loan / Promissory Note

In 2007, M.S. gave her daughter C.P. power of attorney over her financial affairs. In 2008, M.S. became eligible for nursing home Medicaid benefits. In 2009, C.P sold her mother’s home. As a result, M.S. was no longer eligible for Medicaid benefits due to excess resources, i.e., the sales proceeds. C.P., through the power of attorney provided by M.S., entered into a loan agreement with her mother. The loan agreement provided that M.P. loan C.P. $112,120 to be repaid in monthly installment payments. The parties also signed a promissory note. Along with the loan, C.P. also made a gift to herself, and then reapplied for Medicaid benefits on her mother’s behalf.

Respondent denied petitioner’s eligibility for Medicaid benefits. The agency determined that the loan / promissory note constituted a “trust-like device” because C.P. had a fiduciary relationship with M.P. that required C.P. to hold and administer the proceeds of the loan she received from M.P. for M.P.’s benefit. Under federal law, funds used to create a trust or trust-like device must be considered a resource available to an applicant for Medicaid benefits.

M.S. appealed, and filed a motion for summary judgment. The administrative law judge (ALJ) entered an Order denying summary judgment. The ALJ held that the loan / promissory note may constitute a “trust-like device” since here “there is no arms-length transaction, the borrower is acting as the attorney-in-fact for the lender, and … [the] mother may become impoverished if her daughter fails to act in her mother’s best interest… .” As a result of the ALJ’s ruling, an administrative trial was scheduled. (My prior blog post about the M.S. case can be found here.)

(3) Duffy v. Velez, Civ. No. 09 – 5539 (D.N.J. 2010): Plaintiff Stated A Claim Under The ADA When NJ Refused To Raise The Income Cap Which Excluded Him From A Community Medicaid Program

Plaintiff was disabled and received needs-based government benefits, including Medicaid. After his health declined, plaintiff moved into a Medicaid-certified hospital and was place on the waiting list for an assisted living facility (ALF). The ALF accepted plaintiff as a resident under Medicaid. Months later, plaintiff was informed by the local County Board of Social Services that plaintiff’s income exceeded the permissible income level by $10 per month and plaintiff was therefore ineligible for Medicaid. Plaintiff asked the State to make an exception to the income cap limitation, but the request was denied. As a result, plaintiff was transferred to a nursing home because in NJ there is no income cap for the nursing home Medicaid program.

Plaintiff filed a lawsuit in federal district court in New Jersey, claiming that the State’s refusal to make an exception to the income cap for benefits constituted a failure to make a reasonable accommodation for a disabled individual in violation of the Americans With Disabilities Act (ADA). Instead of filing an answer to plaintiff’s complaint, the State filed a motion to dismiss, claiming that plaintiff failed to state a claim upon which relief could be granted.

The State’s motion to dismiss was denied. The Court found that, under the ADA, the State had a duty to administer services, programs, and activities appropriate for the needs of disabled persons in an “integrated setting”, or a setting that “enables individuals with disabilities to interact with non-disabled persons to the fullest extent possible.” Here, the Court found that, since the State denied his request for an exception to the income cap, plaintiff had stated a claim under the ADA for failure to accommodate his disability. (My prior blog post on Duffy v. Velez is here.)

(4) A.G. v. Division of Medical Assistance and Health Services (DMAHS) and the Ocean Co. Bd. of Social Services, Docket No. HMA-2405-09: Caregiver Agreement Invalid; Promissory Note – Loan Medicaid Plan Is An Invalid “Trust-Like Device”

In this case, the administrative law judge (ALJ) ruled that payments made for care services provided to A.G., a nursing home resident, by her son, pursuant to a Caregiver Agreement were uncompensated transfers for less than fair value. The reasons were: (1) the services to be provided under the Agreement were duplicative of services rendered by the nursing facility (2) the son did not prove that any services were actually delivered  (3) no basis for the hourly rate was set forth in the Agreement or established at the hearing, (4) the Agreement gave A.G. no recourse against the son for failure to provide services as promised, and (5) the Agreement failed to provide for any refund if either party died prematurely.

The ALJ also found that that a loan from A.G. to her son and evidenced by a promissory note was a valid, bona fide loan which was not subject to a Medicaid penalty period. The court found that the loan was not a “trust-like device” because (1) the son/obligor did not owe a fiduciary obligations to A.G., and (2) the loan was not made with the intention that it be held for the benefit of A.G.

Later, the Director issued a Final Agency Decision which (1) affirmed the ALJ’s ruling that payments made under the Caregiver Agreement were uncompensated transfers but (2) reversed Judge Delanoy’s decision that the loan was valid, instead holding that the loan was a “trust-like device” and an available resource. (My blog post on A.G. is here.)

(5) E.S. v. Division of Medical Assistance and Health Services,  (App. Div., No. A-2564-08T2, March 26, 2010): More bad news regarding Personal Services Contracts: Payment For Care Under A Contract Is Not Transfer For Fair Market Value

The Appellate Division held that a life care contract between a nursing home resident and her daughter is not a transfer for fair market value, for the purposes of Medicaid eligibility. The daughter, as agent under a power of attorney, entered into a life care contract on her behalf in which E.S. would pay the lump sum of $56,550 for caregiving services to be rendered on an as-needed basis over E.S.’s lifetime. The administrative law judge affirmed Medicaid’s decision that the transfer was not for fair market value, and E.S. appealed.

The Appellate Division affirmed. It found that because the contract was not assignable, it had no market value, and because contract terms benefited only the caregiver, the contract exposed E.S. to unwarranted risks and was worthless on the open market. (I previously blogged about E.S. here.)

(6) W.B. v. Division of Medical Assistance and Health Services, No. A-5658-07T1 (N.J. App. Div. Feb. 24, 2010): “Ignorance Isn’t Bliss When You Apply For Medicaid”

In April 2007, while W.B.’s Medicaid application was pending, W.B.’s son discovered that W.B. owned stock worth $6,289.25 (above the $2,000 Medicaid resource limit). The son promptly sold the stock and, by the end of April 2007, used the funds to pay W.B.’s outstanding nursing home costs. Medicaid determined that W.B. was eligible for Medicaid benefits as of May 1, 2007. The son appealed, contending that an earlier eligibility date should apply. The administrative law judge ruled in favor of W.B., but the Director of Medicaid reversed. The Director found that, despite W.B.’s family’s ignorance of the existence of the stock, W.B. had the “right, authority, or power” to liquidate the asset, and that it was therefore a countable resource. The son again appealed.

The Appellate Division found that it “must accord the Division substantial deference in its areas of expertise,” and concluded that W.B.’s stock ownership through April 2007 provided a “reasoned basis” for the Director’s May 1, 2007 eligibility determination. It found that the aforecited regulations “contain no exception for situations in which the applicant, or his or her guardians, profess ignorance of the asset.” Thus, the Appellate Division affirmed Medicaid’s denial of eligibility to an incapacitated applicant, based on the applicant’s ownership of assets that she was not aware she owned. (My blog post on the W.B. case can be found here.)

(7) Arnold Walter Nursing Home v. Pumarejo, No. A-4313-08T3 (Mar. 23, 2010): Son Not Liable For Unpaid Nursing Home Bill, Even Though Transfer Of Father’s Home To Son Caused Father’s Medicaid Ineligibility

A father transferred his home to his son for $1. About 2 years later, the father became a nursing home resident. The son’s wife (and resident’s representative) signed an agreement to pay all nursing home bills that were not paid by Medicaid from the resident’s personal assets. The nursing home was informed at the time of admission that the father had transferred his house to his son.

After the father’s Medicaid application was denied because of the transfer, the nursing home attempted to collect from the son. The motion judge granted the son’s summary judgment motion and the nursing home appealed.

The appellate court affirmed the motion judge’s judgment, on two bases: (1) the admission agreement contained no requirement that assets other than the father’s be used to satisfy his financial obligations; and (2) there was nothing wrongful in the transfer of the home since Medicaid planning is legally permissible, citing In re Keri, 181 N.J. 50, 69 (2004). (My blog post on the Arnold Walter Nursing Home case can be found here.)

(8) Estate of F.L. v. Division of Medical Assistance and Health Services and the Union County Board of Social Services, OAL Docket No. HMA 13756-08 (Jan. 19, 2010): Retirement Annuity Owned By Medicaid Applicant’s Spouse Is Countable

Petitioners were married to spouses who purchased annuities with retirement assets.  The annuities were irrevocable, non-assignable and non-transferable, rendering them non-saleable.  Medicaid directed the petitioners to contact the annuity companies and request that changes be made to the endorsements so that the annuities could be sold.  The petitioners refused.  Respondents contended that the petitioners’ refusal rendered them ineligible for Medicaid. The administrative law judge (ALJ) concluded that petitioners were not required to request the insurance companies to change the terms of their annuity contract endorsements, or take any other action to allow for the liquidation of the annuity.

The Director reversed, finding that “[c]ase law supports the proposition that an applicant must take steps to obtain resources.”  As a result, the Director remanded the case for further proceedings on whether the petitioners – regardless of whether they were willing to do so – could change the payee or otherwise make the annuities accessible. (I understand that, before another administrative hearing was held, the Medicaid agency granted eligibility after petitioners showed that the issuing insurance companies would not consent to making any changes to the endorsements so that the annuities could be sold.) (For my blog post on this case, click here.)

(9) V.M. v. Division of Medical Assistance and Health Services and the Union County Board of Social Services (HMA No. 5769-09): Despite Court Order, Payment To Adult Children For Services Provided Under Power Of Attorney Was A Gift

Petitioner, V.M., was a 93 year-old widower with four adult children. In 2002, he appointed his daughter and his son as co-agents under his power of attorney (POA). In 2007, he was admitted to a nursing home. In August 2007, he applied and was approved for nursing home Medicaid.

In January 2008, petitioner sold his home and received approximately $202,747.63 in net proceeds. The co-agents/adult children under petitioner’s POA reported the sale to Medicaid, and his benefits were terminated due to excess resources.

Petitioner’s co-agents filed a Complaint seeking permission to make monetary reimbursement to themselves from petitioner’s estate for services rendered as his co-agents under the POA, and for expenses they incurred on petitioner’s behalf. The co-agents provided a detailed list of the specific services performed and expenses paid.  The court ordered that that the co-agents be compensated in the amount $102,555.55 for services rendered under the POA and reimbursed for expenses incurred on petitioner’s behalf in the amount of $24,400. After making those payments, the remainder of the proceeds of sale of petitioner’s home (approx. $75,000), was used to pay petitioner’s care costs.

Once he spent down all of his remaining assets and reapplied for benefits, Medicaid held that the payment for POA services (and the reimbursement for expenses) was actually a transfer for less than fair market value. The ALJ agreed with Medicaid, and the ALJ’s decision was adopted by the Director. The case is now on appeal. (My prior blog post discussing the V.M. case can be found here.)

(10) Frugard v. Velez, Civ. No. 08-5119 (D.N.J. 2010): Federal District Court Permanently Enjoins NJ From Imposing “Never Ending” Penalty For Gifts Made By Applicants For Services Under Medicaid Waiver Programs

For may years, New Jersey had taken the position that the period of ineligibility for Medicaid resulting from transfers made during the look-back period by applicants for home or community – based services under Medicaid programs could not start until the applicant was actually receiving services because only then would the applicant be considered an “institutionalized individual” as required under federal law. The agency’s position meant that the penalty period would never begin because the transfer itself prohibited the receipt of Medicaid services. Since the penalty period could not start under the agency’s interpretation of the law but a penalty was imposed as a result of the transfer, the penalty period was “never ending”, and the applicant never became eligible for benefits.

A number of New Jersey applicants for Medicaid services who had made asset transfers and were denied Medicaid benefits challenged the agency’s interpretation of the law. They appealed their denials of benefits, and asked for a hearing before an administrative law judge (ALJ). In an April 9, 2008 decision, the ALJ issued a Summary Decision agreeing with the applicants’ interpretation. Calling the state’s construction of the controlling federal law “tortured” and “strained,” the ALJ found that “petitioners’ applications seeking community-based waiver services are sufficient to classify petitioners as institutionalized individuals.” On September 3, 2008, the ALJ’s decision was reviewed by the Director of the State Medicaid agency who reversed the ALJ’s decision and upheld the State’s position.

The applicants filed a federal complaint in the United States District Court for the District of New Jersey pursuant to 42 U.S.C. §1983. The plaintiffs / applicants claimed, among other things, that the State of New Jersey violated federal Medicaid law by failing to impose a penalty period against applicants who made transfers of assets and who applied for home or community – based coverage under a Medicaid waiver program. In lieu of an answer, defendants filed a motion to dismiss Plaintiffs’ complaint, which was denied by the court on September 8, 2009.

Plaintiffs then filed a motion for a preliminary injunction, which was converted to a motion for summary judgment when the parties conceded that there were no issues of material fact outstanding in the case. Thereafter, on April 8, 2010 the district court issued a Memorandum Opinion, finding that the “[d]efendants’ position is plainly an incorrect reading of the statute.” With that simple conclusion, the court ruled in favor of the plaintiffs and imposed a permanent injunction against the State. (For my prior blog post discussing Frugard v. Velez, click here.)

(11) Sable v. Velez, 2010 WL 2929918 (3d Cir. July 28, 2010): In Federal Court, Legal Error to Use “Trust-Like Device” Analysis For Promissory Notes Without First Applying Regular SSI Rules

In this case, applicants were denied Medicaid because of promissory notes owned by the applicants. Each note was properly signed, and contained a specified interest rate and repayment schedule.  Medicaid found the promissory notes to be countable after determining that the notes qualified as a “trust-like device.”

In their suit in federal court under 42 U.S.C. §1983, the applicants alleged that the notes had no value because they could not be sold, and that the State violated federal law by counting the notes as trust-like devices. They asked the court to enjoin the State from denying their Medicaid applications.

U.S. District Judge Thompson held that the federal Medicaid law created enforceable rights under 42 U.S.C. §1983, but denied the preliminary injunction, ruling that the notes may have been created with an understanding that the relatives would hold the money for the benefit of their parents and, if so, the State would have correctly found them to be countable.

On further appeal, the Third Circuit vacated the district court’s order, finding that it improperly analyzed the notes as trust-like devices, without first undertaking the proper “regular SSI” analysis of the promissory notes.  As a result, the appellate court remanded the case to the lower court for further proceedings. (I previously blogged about Sable v. Velez here.)

(12) Elizabeth Ravese v. Division of Medical Assistance and Health Services, OAL Dkt. No. HMA 9901-09 (April 12, 2010): Post-Eligibility Income Received By Medicaid Recipient Can Be Used To Pay Debts Incurred Before Eligibility Was Established Under PEME Rules

Petitioner, Elizabeth Ravese, was a resident of an assisted living facility (ALF) and a Medicaid recipient. Petitioner sought to apply a portion of her monthly income to pay an outstanding ALF bill incurred prior to the date she became eligible for Medicaid. The state Medicaid agency denied Ms. Revese’s request, claiming that ALF fees incurred prior to Medicaid eligibility were not permissible expenses. Petitioner filed for a Fair Hearing. The administrative law judge (ALJ) found in favor of petitioner, holding that, under federal law relating to the payment of pre-eligibility medical expenses, or PEME, ALF charges were “amounts for incurred expenses for medical or remedial care that are not subject to payment by a third party.” As a result, the ALF charges at issue were held to be permissible post-eligibility income deductions to pay PEME. The Director of the state Medicaid agency affirmed the ALJ’s decision.