On appeal from a Final Decision of the Department of Human Services, Division of Medical Assistance and Health Services, HMA-2364-03.
The opinion of the court was delivered by: S.L. Reisner, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE COMMITTEE ON OPINIONS
Before Judges Wecker, S.L. Reisner and Seltzer
This case concerns the continuing tension between the State's effort to conserve Medicaid resources for the truly needy and the legal ability of institutionalized Medicaid recipients to shelter income for the benefit of their non-institutionalized spouses. In this case, we hold that the applicant and his wife transgressed the permissible limits of Medicaid planning by entering into a divorce from bed and board*fn1 and agreeing, in a consent order entered without judicial fact finding, that the institutionalized husband's pension benefits would be paid to the wife as alimony.
The facts in this case were largely stipulated. The husband, H.K., suffered a debilitating stroke and was admitted to a nursing home in May 2002. H.K. initially applied for Medicaid, under the "medically needy" nursing home program, in May 2002, but could not qualify until he and his wife, R.K., had "spent down" their available resources to the limit that would qualify H.K. for Medicaid. See N.J.A.C. 10:71-4.8; H.K. v. Div. of Med. Assistance & Health Servs., __ N.J. __ (2005) (slip op. at 16-19); Estate of F.K. v. Div. Med. Assistance & Health Servs., 374 N.J. Super. 126, 134-35 (App. Div.), certif. denied, __ N.J. __ (2005). They reached that limit in August of 2002.
H.K. was able to qualify for medically needy nursing home Medicaid even though he had Social Security and pension income of approximately $4,500 per month and his wife worked full-time and earned over $2,000 per month. However, H.K. was required to use his pension and Social Security benefits to pay part of the cost of his nursing home care. See N.J.A.C. 10:70-4.1 and -6.1. Medicaid would pay for the balance of the nursing home costs. See L.M. v. Div. of Med. Assistance & Health Servs., 140 N.J. 480, 486-88 (1995).*fn2
The Federal Medicaid statute, 42 U.S.C.A. § 1396r-5(d), and our State's implementing regulations, N.J.A.C. 10:71-5.7(c), recognize that some portion of an institutionalized spouse's income may be used to support the community spouse to avoid the latter from becoming impoverished. See Wisconsin Dep't of Health and Family Servs. v. Blumer, 534 U.S. 473, 480, 122 S.Ct. 962, 968, 151 L.Ed. 935 (2002) ("Congress sought to protect community spouses from 'pauperization' while preventing financially secure couples from obtaining Medicaid assistance."). But those same provisions place strict limits on the amount of a Medicaid recipient's income that can be used for the community spouse allowance. Id. at 481-82, 122 S.Ct. at 965. At the time H.K. qualified for Medicaid, the spousal allowance was normally limited to $1,493. See N.J.A.C. 10:71-5.7(c); Division of Medical Assistance and Health Services Medicaid Communication No. 02-17 (July 5, 2002). A community spouse may obtain a larger allowance by demonstrating, at an administrative hearing, that he or she suffers "exceptional circumstances resulting in financial duress." N.J.A.C. 10:71-5.7(e). See 42 U.S.C.A. § 1396r-5(e). A separate provision, N.J.A.C. 10:71-5.7(f), permits an alternative means of obtaining support for the community spouse:
If a court has entered an order against an institutionalized spouse for monthly income for the support of a community spouse and the amount of the order is greater than the amount of the community spouse deduction, the amount so ordered shall be used in place of the community spouse deduction.
This regulation implements an analogous provision in the federal Medicaid statute, 42 U.S.C.A. § 1396r-5(d)(5).*fn3
R.K.'s monthly income was too high to entitle her to a community spousal allowance under N.J.A.C. 10:71-5.7(c). Therefore, unless R.K. qualified for an exception to the cap set by section 5.7(c), H.K.'s entire income would be used to pay for his nursing home care.
H.K. and R.K. attempted to invoke the "court order" exception of N.J.A.C. 10:71-5.7(f), by obtaining a divorce from "bed and board" with a property settlement agreement providing for support to be paid to R.K. from H.K.'s pension.*fn4 The divorce action was filed in October 2002 and was finalized by consent on December 24, 2002. The Final Judgment of Divorce From Bed and Board specifically recited that the property settlement agreement, incorporated in the judgment, was entered without the court having taken testimony "as to the merits thereof, and therefore [the court] makes no judgment with respect to the fairness thereof." Based on this final judgment, H.K. sought recalculation of H.K.'s Medicaid benefit, claiming that the court ...