Flaster Greenberg’s seasoned elder law attorney, Jane M. Fearn-Zimmer, obtained a landmark Medicaid Final Agency Decision for her elderly, ailing client and her family after a three-year long dispute with the New Jersey Division of Medical Assistance & Health Services and the Burlington County Board of Social Services. The Appellate Court ultimately ruled in favor of Jane’s client and reversed a Medicaid penalty computed on the sum of $179,000, based on the equalized value of the family home, which was gifted by the elderly mother to her caregiver child. The final ruling is based on the exemption for a transfer to a caregiver child. This exception to the Medicaid transfer penalty is intended to encourage children to take care of their aging parents so the parent can remain at home as long as possible. The conditions of the exemption may be met where the parent has a documented need for 24/7 skilled nursing care during the two years immediately prior to the date the parent enters into a nursing home and the child provides such vital, round-the-clock care for the parent during that period. If these conditions are met, then the parent may transfer her home to the child without incurring a Medicaid penalty, provided that the parent is otherwise financially eligible for Medicaid.
This case is a significant breakthrough, because since approximately 2015, there has been a substantial decrease in caregiver child exemptions awarded on Medicaid applications in the State of New Jersey, due in large part to an internal change in the State’s Medicaid policy. Attorneys throughout the state began to notice that requests for caregiver child status were denied, particularly where the proposed caregiver child was gainfully employed, or working for pay, whether inside or outside the home.
In 2007, the adult child in the Burlington County case gave up his own home out of state and returned to New Jersey, moving back into the aging parents’ home to assist them as they progressed through age and various illnesses. The child cared for the parents for seven years while residing in their home and earned income by working on long-term projects as an independent contractor from the parents’ home. The level of support and care provided by the child increased with the parents’ progressive declines. After the client’s husband passed away in 2015, and the client entered a nursing facility, the mother transferred the home to the child under the caregiver child exemption, allowing the elderly parent to apply for Medicaid coverage to pay for her nursing home bill.
As mentioned above, in order to qualify for the caregiver child exception, the caregiver child must reside in the parent’s home and must serve as the parent’s caregiver for a period of two years. In this particular case, the child had already served this role for seven years.
Medicaid is a public welfare benefit program with a countable resource threshold of less than $2,000. Unless an individual has less than $2,000 in countable assets (defined to include most annuities, bank and brokerage accounts, United States savings bonds, cash, the cash surrender value of whole life insurance, individual retirement accounts, and deferred compensation plans including 401(k) and 457(b) accounts) during the month of Medicaid eligibility sought, the individual will not qualify for Medicaid and any Medicaid penalty period will not begin to run.
In this case, the first and second Medicaid applications, along with the caregiver child exemption application, were denied, in part based on the child’s work at home, resulting in the imposition of a steep Medicaid penalty period of nearly 18 months on the client’s application. This meant that Medicaid would deny any payment for a period of nearly 18 months, for the elderly mother’s skilled nursing care during the penalty period. Medicaid, combined with her modest social security income, would not pay for her care, until the Medicaid penalty period was run. Because the elderly parent was already “spent down” for Medicaid, this meant that there was no source to pay for her skilled nursing care, the cost of which escalated to well over $200,000 during the Medicaid penalty period. This situation placed both the child and the aging parent in financial jeopardy.
Jane undertook the case at the Fair Hearing level, first challenging the improper Medicaid penalty in Federal Court, where the County acknowledged during a hearing that it would no longer continue to condition the caregiver child exemption on unemployment by the caregiver child. However, the County declined to remove the Medicaid penalty, now claiming that the mother, who was diagnosed with dementia and used a walker, did not require round-the-clock care. The County had claimed that the father, who was diagnosed with multiple serious, chronic health conditions, was allegedly caring for the mother. Jane took the case to a Medicaid Fair Hearing before an administrative law judge resulting in a very strong initial decision finding that all of the requirements for the caregiver exemption were met.
The Initial Decision was upheld by the Agency Director in a Final Agency Decision, which led to the issuance of a new Medicaid determination removing the $179,000 Medicaid penalty period for the home transfer. As a result of the decision, the family home has been saved and the nursing home will be paid through Medicaid.
The Decision and its Significance:
Since approximately 2015, the State of New Jersey very frequently denied caregiver child applications on the basis of a child’s ability to work while providing care for the parent. However, unless the child was wealthy or receiving disability benefits, he or she would have no funds to pay for the household expenses. Jane managed to overcome prior policy through relentless litigation in both Federal Court and the State Administrative Fair Hearing System over a three-year period.
In the State Administrative Fair Hearing, Jane won a favorable initial decision by strategically examining and presenting the medical records, utilizing a physiatrist as an expert witness, and building upon other arguments and facts in the case.
Unfortunately, the vast majority of the 21 favorable Initial Decisions finding caregiver child status since 2015 on Medicaid Fair Hearings in New Jersey were reversed and ultimately denied at the Final Agency Decision level based on an alleged lack of credible medical evidence. Jane’s case was an exception, as it was eventually upheld in favor of her client by the Agency Director.
The decision has far-reaching implications, demonstrating that there is hope for families whose homes could otherwise be subjected to a Medicaid lien upon the death of the parent under the Medicaid estate recovery program. For example, elderly individuals in need of skilled nursing care as the result of Alzheimer’s, Parkinson’s, ALS, MS or other chronic illnesses, who need to pay for long-term care but still want to protect their home, may potentially be eligible for the caregiver child exemption, under the right circumstances, through careful Medicaid planning and advocacy in the Medicaid application process. Eligibility for the caregiver child exemption is very fact-specific and the results obtained in this case are not a guarantee of a specific result in another case. However, with the right facts, establishing eligibility for the exemption may be possible. The beneficiaries of a decision such as this one are elderly, their families, and the nursing home industry.
This is a precedential decision based on black letter federal law applicable in all 50 states. It is particularly relevant in New Jersey, Massachusetts, Ohio and Connecticut, which have had some apparent tension with the states or commonwealths’ attempts to limit the caregiver child exception to the Medicaid transfer penalty.
Jane Fearn-Zimmer dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She is also currently serving as the Editor of the Elder Law Report, Including Special Needs Planning, a national newsletter designed to update both experienced and aspiring elder and disability law attorneys in current developments and to provide them with new practice tips.