April 22, 2010
DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES AND GLOUCESTER COUNTY BOARD OF SOCIAL SERVICES, RESPONDENTS.
On appeal from a Final Decision of the Division of Medical Assistance and Health Services, No. 4489-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued: March 17, 2010
Before Judges Cuff and Payne.
V.S., an applicant for Medicaid benefits, appeals from a final decision of defendant Division of Medical Assistance and Health Services (DMAHS) denying Medicaid benefits and imposing a twenty-three month and fourteen day ineligibility period following transfer of her ownership interest in her house to her only child. V.S. argued the transfer was payment for years of financial support and care by her son and recent renovations to the house. We affirm.
The facts are largely undisputed. V.S. resided in a house in Philadelphia. She lived there with her husband and son, Frank S., until her husband abandoned the family in 1968. Frank S. was thirteen years of age at the time. He testified that he began contributing $100 to $200 each week to the household. He continued to support his mother and to defray the costs of keeping and maintaining the house through high school, college and after he moved out of V.S.'s house in 1981. When he left her house, Frank S. agreed to continue to support his mother, and V.S. promised to leave the house to him.
In 2004, V.S. fell and broke her shoulder. She was able to return to her home after rehabilitation, and Frank S. started to make "senior friendly" improvements to the house. As depicted in the photographs received in evidence, those improvements included new siding and windows, new kitchen cabinets and appliances, new bathroom fixtures, new carpeting, and installation of a first floor bathroom. Records received in evidence document $26,548 in expenditures; the first check is dated July 11, 2006, approximately two years after the fall.
V.S. executed three undated promissory notes to her son in the amounts of $250,000, $350,000 and $400,000. The notes stated:
FOR VALUE RECEIVED over the later years of my life for monies and services advanced and provided to me by my beloved son [F.S.] a partial list, of which is attached hereto, known as Exhibit A....
Exhibit A was never made a part of the record.
On September 25, 2007, V.S. transferred her home to her son by deed. The stated consideration was $1. A realtor supplied a certification that V.S. was competent at the time she executed the deed. The value of the house was $155,000 at the time of transfer.
In March 2008, V.S. fell a second time and broke her hip. She did not return to her home. On March 11, 2008, Frank S. applied for Medicaid benefits on her behalf. The Gloucester County Board of Social Services found that V.S. transferred her house to her son for less than fair market value within the look-back period and imposed a twenty-three month and fourteen day Medicaid ineligibility period.
V.S. appealed. Following a hearing, an Administrative Law Judge (ALJ) issued an Initial Decision reversing the county agency decision. He found that Frank S. had an equity interest in the house in excess of the $155,000 fair market value due to his financial contributions over the years and the cost of the physical renovations to the house.
The DMAHS Director rejected the ALJ decision and reinstated the period of Medicaid ineligibility finding that "the proofs presented, the timeline put forth, and the documents entered into evidence do not support a finding that the transfer was for fair market value." The Director found that the amount of equity purportedly held by Frank S. in his mother's house was not supported by "any tangible evidence that he made those expenditures in the amount or frequency alleged." Furthermore, the Director invoked the presumption reflected in N.J.A.C. 10:71-4.10(b)(6)(ii) that care and services delivered without charge at the time are presumed to have been delivered without expectation of compensation.
The Director also reversed the finding that the transfer of the house was for reasons other than applying for Medicaid benefits. The Director held that the evidence accepted by the ALJ, namely, the promissory notes, the realtor certification, and a physician statement, was hearsay and did not satisfy the residuum rule. The Director noted that the promissory notes memorialized an indebtedness and an intent to repay the debt but did not memorialize her intent to make an inter vivos transfer of the house to her son.
The federal Medicaid Act, Title XIX of the Social Security Act, 42 U.S.C.A. §§ 1396-1396v, mandates a joint federal-state program to provide medical assistance to individuals whose income and resources are insufficient to meet the cost of necessary medical services. 42 U.S.C.A. § 1396-1. Once a state joins the program, it must comply with the Medicaid statute and federal regulations. See Harris v. McRae, 448 U.S. 297, 308, 100 S.Ct. 2671, 2683, 65 L.Ed. 2d 784, 799 (1980). Participating states must submit a state plan for approval to the Secretary of the United States Department of Health and Human Services in order to receive federal financial participation. 42 U.S.C.A. § 1396a.
The Social Security Act confers broad discretion on the participating states to adopt standards for determining the extent of medical assistance, requiring only that such standards be "reasonable" and "consistent with the objectives of the Act." Monmouth Med. Ctr. v. State of New Jersey, 158 N.J. Super. 241, 249 (App. Div. 1978), aff'd, 80 N.J. 299 (1979). New Jersey's participation in the federal Medicaid program was authorized by the enactment of the New Jersey Medical Assistance and Health Services Act (the Act), N.J.S.A. 30:4D-1 to -19.5. The purposes of the Act in relevant part are: to provide medical assistance, insofar as practicable, on behalf of persons whose resources are determined to be inadequate to enable them to secure quality medical care at their own expense, and to enable the State, within the limits of funds available for any fiscal year for such purposes, to obtain all benefits for medical assistance provided by the Federal Social Security Act... benefits provided hereunder shall be last resource benefits notwithstanding any provisions contained in contracts, wills, agreements or other instruments. [N.J.S.A. 30:4D-2.]
Eligibility for medical assistance is governed by regulations adopted in accordance with the authority granted to the Commissioner of the New Jersey Department of Human Services. N.J.S.A. 30:4D-7a. DMAHS, an agency in the Department of Human Services, operates the Medicaid program. Applications are submitted to the local board of social services in each county and are reviewed for compliance with the regulatory requirements. N.J.A.C. 10:71-1.1; -1.5 to -2.2. The local board then either grants or denies the application. Ibid.
In general, only those applicants with income and non-exempt resources below specified levels may qualify for government-paid assistance. An individual's countable resources cannot exceed $2000, if they wish to qualify for the New Jersey Medicaid Only program. N.J.A.C. 10:71-4.5. A "resource" is defined as "any real or personal property which is owned by the applicant (or by those persons whose resources are deemed available to him/her, as described in N.J.A.C. 10:71-4.6) and which could be converted to cash to be used for his/her support and maintenance." N.J.A.C. 10:71-4.1(b). Both liquid and non-liquid resources are considered in the determination of eligibility unless they are specifically excluded under N.J.A.C. 10:71-4.4.
Additionally, a resource cannot be transferred or disposed of for less than fair market value during or after the start of the "look-back period"*fn1 before the individual becomes institutionalized or applies for Medicaid as an institutionalized individual. 42 U.S.C.A. § 1396p(c)(1); N.J.A.C. 10:71-4.10. If such a transfer occurs, the applicant will be subject to a period of Medicaid ineligibility, irrespective of his or her other resources. 42 U.S.C.A. § 1396p(c)(1); N.J.A.C. 10:71-4.10.
This period of ineligibility, determined in accordance with 42 U.S.C.A. § 1396p(c)(1)(E), shall be the number of months equal to the total, cumulative uncompensated value of all assets transferred by the individual, on or after the look-back date, divided by the average monthly cost of nursing home services in the State of New Jersey. [N.J.A.C. 10:71-4.10(m)(1).]
Effective February 8, 2006, the transfer penalty begins on the later of the first day of the month during or after which assets have been transferred for less than fair market value, or the date on which the individual is eligible for medical assistance and would be receiving institutional level of services but for the penalty period. 42 U.S.C.A. § 1396p(c)(1)(D)(ii). In this case, it would begin when V.S. was in the nursing facility and otherwise eligible for Medicaid long-term care benefits.
In order to avoid the transfer penalty at issue here, V.S. must demonstrate that she transferred her home solely for a reason other than to qualify for Medicaid. N.J.A.C. 10:71-4.10(j).
Review of an agency decision by an appellate tribunal is limited. We review the record to determine whether the administrative action was arbitrary, capricious or unreasonable. Univ. Cottage Club of Princeton v. N.J. Dep't of Envtl. Prot., 191 N.J. 38, 48 (2007). The decision must be supported by substantial credible evidence in the record as a whole. In re Taylor, 158 N.J. 644, 656-67 (1999). An agency decision-maker may "reject or modify findings of fact, conclusions of law or interpretations of agency policy in the decision, but shall state clearly the reasons for doing so." N.J.S.A. 52:14B-10(c). The agency decision-maker may not modify or reject credibility findings of an ALJ, unless the agency decision-maker determines that those findings are "arbitrary, capricious or unreasonable or are not supported by sufficient, competent and credible evidence in the record." Ibid. If the agency decision-maker rejects or modifies findings based on the credibility of any witness, the agency decision-maker must specifically inform the parties the reasons for the disagreement and make new or modified findings supported by the record. Ibid.; Cavalieri v. Bd. of Trs., Pub. Employees Ret. Sys., 368 N.J. Super. 527, 533-34 (App. Div. 2004).
We defer to the interpretation and application of regulations by agency personnel within the specialized concern of the agency. Estate of F.K. v. Div. of Med. Assistance & Health Servs., 374 N.J. Super. 126, 138 (App. Div.), certif. denied, 184 N.J. 209 (2005). Moreover, the party challenging agency action bears the burden of demonstrating that the decision is arbitrary, capricious or unreasonable. In re Arenas, 385 N.J. Super. 440, 443-44 (App. Div.), certif. denied, 188 N.J. 219 (2006). See also Barone v. Dep't of Human Servs., 210 N.J. Super. 276, 285 (App. Div. 1986), aff'd, 107 N.J. 355 (1987).
Here, V.S. must overcome two rebuttable presumptions. First, that there was no expectation of compensation for the support provided for free to her over the years. Second, the inter vivos transfer of her only asset was done to allow her to qualify for Medicaid benefits. A third principle is also at work. Many people want to leave something to a child, but the natural human desire to do so and the child's desire to receive something from a parent will not be subsidized by public funds. See Mistrick v. Div. of Med. Assistance & Health Servs., 154 N.J. 158, 170 (1998) (recognizing an inherent tension between preserving assets of the recipient of benefits and conserving public funds).
Here, we are satisfied that the Director's findings of fact are supported by the record, that the Director explained with particularity his disagreement with the credibility determinations and findings of fact as they pertain to the critical issues of expectation of compensation and the purpose of the various improvements, and that the Director properly applied the governing law to the facts as found. For example, the Director explained that the realtor who opined that V.S. was competent when she executed the deed, did not have the training or experience to render such an opinion. He explained that the debt enumerated in the various promissory notes did not match the funds purportedly contributed and expended for V.S.'s support and comfort. The Director explained with particularity that the various renovations and upgrades could just as easily been expended to ready the house for sale at an advantageous price as to accommodate the home for V.S.'s disability. In fact, V.S. returned to her house after the first fall, the receipts and checks introduced in evidence commence two years after the first fall. V.S. never returned to the house after the second fall, and the only truly "senior friendly" improvement was installation of a first floor bathroom.
In the end, there was more than sufficient evidence for the Director to find that V.S. did not overcome the rebuttable presumption that the transfer of her ownership in the house to her son was to preserve an asset and to avoid liquidation of the very asset to defray the costs of her care. We, therefore, affirm the April 17, 2009 decision of the Director.