In the usual case, a transfer of assets, or gift, by a Medicaid applicant made within five (5) years of the date of the Medicaid application will result in the imposition of a penalty, or period of ineligibility for Medicaid. N.J.A.C. 10:71-4.10(a) The length of the penalty period depends upon the value of the gifted assets. However, not all gifts made by a Medicaid applicant are penalized. One such exempt gift is the transfer of the Medicaid applicant’s home to a “caregiver child”, defined in New Jersey’s Medicaid regulations as follows:

However, an individual shall not be ineligible for an institutional level of care because of the transfer of his or her equity interest in a home which serves (or served immediately prior to entry into institutional care) as the individual’s principal place of residence and the title to the home was transferred to:

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(4) A son or daughter of the institutionalized individual (other than described in (d)2 above) who was residing in the individual’s home for a period of at least two years immediately before the date the individual becomes an institutionalized individual and who has provided care to such individual which permitted the individual to reside at home rather than in an institution or facility.

i. The care provided by the individual’s son or daughter for the purposes of this subchapter shall have exceeded normal personal support activities (for example, routine transportation and shopping). The individual’s physical or mental condition shall have been such as to require special attention and care. The care provided by the son or daughter shall have been essential to the health and safety of the individual and shall have consisted of activities such as, but not limited to, supervision of medication, monitoring of nutritional status, and insuring the safety of the individual. N.J.A.C. 10:71-4.10(d)(4)

As shown above, an adult child living in the Medicaid applicant’s home and providing care for two (2) years prior to the date of institutionalization must provide a level of care “which permitted the individual to reside at home rather than in an institution or facility” before that adult child meets the standard necessary to be classified as a “caregiver child” under the Medicaid regulations. Most if not all of the States have a regulation similar to the New Jersey regulation cited above which exempts transfers of the home to a “caregiver child” from the Medicaid transfer of assets rules.

Recently, a court in Massachusetts provided insight into the level of care which a adult child must provide in order to meet the “caregiver child” standard under the Medicaid rules. In Maguire v. Dehner (Mass. Sup., Essex, Civ. No. 2008-02259, Sept. 28, 2010), a Massachusetts court concluded that, despite a physician’s letter to the contrary, a Medicaid applicant failed to establish that her daughter provided a level of care that would allow the transfer of the applicant’s residence to the daughter under the “caretaker child” exception to the Medicaid transfer of assets rules.

Nursing home resident Reta Maguire transferred her residence to her daughter and then applied for Medicaid nursing home benefits. In the application, Ms. Maguire sought to have the transfer of the residence exempted from the eligibility determination based on the “caretaker child” exception in Massacusetts, similar to the New Jersey rule noted above.

A hearing officer imposed a 548-day penalty period on Ms. Maguire’s receipt of nursing home benefits, concluding that during the relevant time period, Ms. Maguire had not needed or received from her daughter a level of care that would require admission to a nursing home. The hearing officer found that the daughter’s characterization of the assistance she provided did not match the regulatory criteria for assistance with activities of daily living. Ms. Maguire appealed to the superior court and renewed an earlier motion for judgment on the pleadings, asserting that the denial was an error of law, unsupported by substantial evidence and an abuse of discretion.

The Superior Court of Massachusetts disagreed and denied the motion. Specifically, the Court found “no error of law present on the record that would prevent [the agency] from concluding that the applicant’s daughter failed to meet her burden to show that the applicant needed an institutional level of care for at least two (2) years preceding the transfer, and that the daughter who received the home provided a sufficient level of care to the applicant in order to make the gift exempt under the rules. As a result, the transfer of the applicant’s home to her daughter was subject to the imposition of a penalty.

The case is annexed here – Maguire v. Dehner

UPDATED ON OCTOBER 16, 2012: Margolis & Bloom, LLP is a well-known and respected elder and disability law firm located in Massachusetts, the State which issued the decision in the Maguire case.  The Margolis firm published a commentary on the Maguire case which I think might to interesting to readers of this blog.  The commentary follows:

Maguire Decision Threatens Caretaker Child Exception

In Maguire v. Director of the Office of Medicaid, the Court of Appeals sides with MassHealth in denying the so-called “caretaker” child exception to the transfer of a $140,000 one-bedroom condominium from Mrs. Maguire to her daughter, Karen.

In upholding the denial, the Court of Appeals appears to raise the bar for qualifying for the exception to require that applicants and their families prove that they could not have received care anywhere but in a nursing home, the Court opining that Mrs. Maguire might have been cared for in an assisted living facility during the two years prior to her move to a nursing home. The Court appears to be oblivious to developments in the field of long-term care over the two decades since Congress enacted the caretaker child exception, since the alternative of assisted living hardly existed back then.

Congress wanted to encourage and reward families for caring for their elders, not to apply this provision in an overly restrictive manner as the Court did in this decision.