A New Jersey appeals court ruled that the penalty period for a Medicaid applicant who transferred funds to her son could not begin until she became financially eligible for Medicaid, which occurred only after the son used all the transferred assets to pay the cost of the applicant’s care. S.S. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., No. A611809T1, April 28, 2011).

S.S. was an elderly person residing in a nursing home since November 2007.  She met the medical requirements for Medicaid eligibility on January 28, 2008. Some time before September 2008, S.S. transferred $76,570.40, all of her assets, to her son for less than fair market value. S.S. claimed that she became financially eligible for Medicaid benefits as of September 1, 2008 when her assets fell below the resource limit permitted under the Medicaid regulations as a result of the transfers of assets to her son. S.S.’s son used $42,909.75 of the money S.S. transferred to him to pay for her care through February 2009. The balance of the transferred funds were presumably retained by S.S.’s son.  S.S. then applied for Medicaid benefits, and the state imposed a transfer penalty, which it determined should begin March 1, 2009.

S.S. filed an administrative appeal, arguing that the penalty period should begin when she became financially eligible for Medicaid in September 2008. The hearing officer found that she was not financially eligible at that time because, by transferring her assets to her son, she had created a “false financial eligibility.” As a result, the hearing officer determined that the penalty period should begin on March 1, 2009, and should be calculated based upon the value of the assets retained by the son. The Director of the State Medicaid agency affirmed the hearing officer’s decision, and S.S. appealed to court.

The New Jersey Superior Court, Appellate Division, affirmed, holding that S.S. became eligible for Medicaid on March 1, 2009. The court determined that although S.S.’s resources fell below the level required to establish Medicaid eligibility on September 1, 2008, this was a “false financial eligibility” created by the transfer of assets for less than their fair market value.

The case can be found here – S.S. v. Division of Medical Assistance and Health Services