On appeal from a Final Agency Decision of the Department of Human Services, Division of Medical Assistance and Health Services, Docket No. HMA-8007-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Graves, Sabatino and Alvarez.
This case involves the financial resources that may be counted in determining a person's eligibility for Medicaid benefits under federal and state law. G.T., a disabled man who co-owns a security alarm monitoring business with his wife, appeals a September 25, 2006 decision of the Director of the State Division of Medical Assistance and Health Services ("the Division"). In that final decision, the Director found that the alarm business's standing contracts with its customers, which have a stipulated value of over $1.7 million, should be included in assessing G.T.'s Medicaid eligibility. We affirm.
The relevant facts, as presented at the trial in the Office of Administrative Law ("OAL") in 2006, are substantially undisputed. G.T., who is currently fifty-four years old, is a long-time resident of Monmouth County. Since 1979 he has been married to I.T. They have two children, a daughter and a son, who were respectively in college and in high school when this matter was tried.
In 1985 G.T. and his wife started a business in New Jersey known as Bounty Alarms, Inc. The business sells, installs and services burglar alarm systems. As of the time of trial, the company had about 2,500 customer accounts. It is stipulated for purposes of this litigation that G.T. and I.T. each have a fifty percent ownership interest in Bounty Alarms, Inc. and also its related limited liability corporation, Bounty Alarms, LLC.*fn1
In September 1995, G.T. was involved in a motor vehicle accident that caused him to sustain a permanent traumatic brain injury. As a result, G.T. is totally disabled. He lived at home with his family until February 2003, when he was admitted to a skilled nursing facility nearby. He continues to reside there. He receives $1,423 monthly in Social Security disability benefits and $1,204 each month in private disability insurance.
Since her husband's 1995 accident, I.T. has managed the family business on a full-time basis. According to her testimony at the OAL trial, I.T. oversees Bounty's staff of technicians and office personnel, schedules customer service calls, negotiates agreements, and handles the collection of delinquent accounts. She draws slightly more than $100,000 in income annually from the business, a sum that Bounty's accountant characterized at trial as being at or below the compensation of similar executives who own and operate small companies in the area. I.T. works out of her residence, and is regularly "on call" to customers who need their alarms repaired or reactivated.
Bounty owns a small amount of tangible property, mainly office furniture and other equipment, which is located in I.T.'s house. As of the time of trial, Bounty's customers typically paid $22.95 per month for their alarm services. The parties have stipulated that the industry standard is to value customer accounts at thirty times the monthly charges, or $688.50 per account. Using that stipulated ratio, the customer contracts are worth 2,500 times $688.50, or roughly $1.7 million.
After moving into the nursing facility in 2003, G.T. filed, with the assistance of his wife and their counsel, an application for Medicaid benefits. The application was rejected by the Monmouth County Board of Social Services. The rejection was principally based on the fact that G.T. has excessive financial resources, in particular his ownership interest in Bounty, that make him ineligible for Medicaid. G.T. appealed the denial of benefits to the Division, which transferred the contested case to the OAL.
After several procedural events that we need not delve into here at length, the matter was ultimately tried before Administrative Law Judge ("ALJ") Joseph Lavery in April 2005. G.T. principally argued that his ownership interests in Bounty's customer contracts, as well as those of I.T., are excludable under the applicable Medicaid statutes and regulations, particularly 42 U.S.C.A. § 1382b(a)(3) and 20 C.F.R. § 416.1220, and related provisions of New Jersey law. In support of that position, G.T. presented testimony from his wife, as well as testimony from Bounty's certified public accountant, describing the nature and the value of the business's customer contracts. The Division did not present any witnesses, but instead relied upon various documents moved into evidence and the legal arguments of counsel.
ALJ Lavery issued his written decision on June 27, 2006. He concluded that the business property of Bounty, including its customer contracts, is not exempt from consideration in evaluating G.T.'s financial eligibility for Medicaid. G.T. then sought review of the ALJ's ruling with the Division Director. On September 25, 2006, the Director issued a final agency decision, ratifying the ALJ's findings. Among other things, the Director determined that federal Medicaid laws and regulations require Bounty's customer contracts to be treated as a non-exempt business asset. Because the value of that asset "vastly exceeds the Medicaid standard" of financial need, the Director concluded that G.T. is not eligible for benefits. Consequently, the taxpayers who fund the Medicaid program are not required to pay for his medical care.
This appeal ensued. G.T. argues that the ALJ and the Director misapplied the Medicaid laws and regulations in treating Bounty's customer contracts as non-exempt business property. Additionally, G.T. argues that the Division's ineligibility determination is arbitrary and capricious, and violated constitutional principles of equal protection and due process. G.T. finally contends that the Division should be estopped from taking the ...