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M.C. v. Division of Medical Assistance and Health Services


July 19, 2010


On appeal from the Department of Human Services, Division of Medical Assistance and Health Services.

Per curiam.


Argued April 19, 2010

Before Judges Lisa and Alvarez.

M.C. appeals from a final decision of respondent Division of Medical Assistance and Health Services (DMAHS) denying Medicaid services and imposing a four-month and twenty-eight-day ineligibility period as a result of the transfer of $33,800 approximately eight months before M.C.'s Medicaid application. M.C. contends that the transfer was a payment pursuant to a "care agreement," and that the contract overcomes the rebuttable presumption created by N.J.A.C. 10:71-4.10(b)(6)(ii) that transfers of funds for care rendered by a relative for free are "intended to be delivered without compensation." Although we question the ultimate merits of petitioner's issues on appeal, we are constrained to remand the matter to DMAHS for further proceedings to develop a more complete factual record.

On September 12, 2008, respondent Ocean County Board of Social Services (the Board) denied M.C. Medicaid benefits based on the $33,800 care agreement payment. The Board imposed a transfer penalty, or period of Medicaid ineligibility, of four months and twenty-eight days from the first day of the month that M.C.'s resources would fall below $2000. Generally, an applicant's countable available resources cannot exceed $2000 if they wish to qualify for New Jersey's Medicaid Only program. N.J.A.C. 10:71-4.5(c). Upon notification of the imposition of the transfer penalty and the denial of benefits, petitioner appealed and the case was transmitted to the Office of Administrative Law (OAL) as a contested case.

D.L., M.C.'s daughter, who allegedly holds a durable power of attorney (POA) for her mother, entered into a caregiver contract on July 1, 2007. No copy of the POA is supplied as part of this record; none was presented to the Administrative Law Judge (ALJ) before whom proceedings were conducted.

According to a document submitted with the Medicaid application, titled "Affidavit of Child Living With Parent" (Affidavit), M.C. began to live with her daughter D.L. on March 12, 2004. On that date, M.C., D.L., and D.L.'s husband purchased a home: D.L. and her husband held an 81.3% interest in the property and M.C. owned the remaining 18.7%. On January 22, 2008, M.C.'s 18.7% share was deeded to D.L.

The Affidavit states that M.C. has resided in a skilled nursing facility since April 7, 2008, and includes the following language: "This Affidavit is being executed contemporaneously with the transfer of real property to me from my mother in order to provide the factual basis for the exemption of this transfer from any transfer penalties pursuant to 42 U.S.C. § 1396(p) et seq." Neither the Affidavit nor the real estate transfer are mentioned in the DMAHS decision or in the ALJ's initial decision.

The "care agreement" was signed by D.L., both in her capacity as the caregiver and in her capacity as M.C.'s POA, on July 1, 2007. It enumerated the services that the caregiver would provide to M.C., referred to in the agreement as "parent," in exchange for a $33,800 lump sum payment. The agreement specified that services commenced on July 1, 2007, although payment would not be made until January 15, 2008.

The schedule of services attached to the care agreement were essentially word-for-word a copy of the list of available home health care agency services obtained by D.L.'s attorney's paralegal when she conducted a phone survey of three agencies in Monmouth and Ocean County. Those services were enumerated in precisely the same language in the paralegal's affidavit, dated December 2, 2008, supplied to the ALJ prior to the hearing. Somehow, the schedule of services as recited in the paralegal's subsequent affidavit was incorporated wholesale into the earlier "care agreement." It was not tailored to fit in any fashion to the services D.L. was actually rendering to M.C. D.L. submitted M.C.'s Medicaid application on August 19, 2008. The care agreement and the Affidavit were included with the application.

The federal Medicaid Act, 42 U.S.C.A. §§ 1396-1396v, creates a federal-state program that extends medical benefits to "individuals[] whose income and resources are insufficient to meet the costs of necessary medical services." 42 U.S.C.A. § 1396. New Jersey is expected to comply with the Medicaid statute and federal regulations, as are all other states, in order to receive funds. See Harris v. McRae, 448 U.S. 297, 308, 100 S.Ct. 2671, 2683-84, 65 L.Ed. 2d 784, 799 (1980). A state must submit a plan for review and approval by the Secretary of the United States Department of Health and Human Services in order to be eligible. 42 U.S.C.A. § 1396.

The Social Security Act vests significant discretion in participating states to adopt and develop standards for determining the extent of medical assistance, requiring only that the standards be "reasonable" and "consistent with the objectives of the Act." Monmouth Med. Ctr. v. State, 158 N.J. Super. 241, 249 (App. Div. 1978), aff'd, 80 N.J. 299 (1979). By the enactment of the New Jersey Medical Assistance and Health Services Act, N.J.S.A. 30:4D-1 to -19.5, New Jersey authorized participation in the program and adopted relevant standards. See N.J.S.A. 30:40-2. Eligibility for medical assistance is governed by regulations adopted by the Commissioner of the New Jersey Department of Human Services. N.J.S.A. 30:4D-7. DMAHS is the agency within the Department of Human Services that administers the Medicaid program. N.J.A.C. 10:71-2.2.

Applications are submitted to local boards of social services in each county and are reviewed for compliance with the regulatory requirements. N.J.A.C. 10:71-1.1; N.J.A.C. 10:71-2.2. In this instance, the Board was the entity that initially denied M.C.'s application.

An applicant's resources cannot be transferred or disposed of for less than fair market value during or after the start of the thirty-six-month look-back period without penalty. See H.K. v. State, 184 N.J. 367, 380 (2005). Congress's imposition of a penalty for the disposal of assets or income for less than fair market value during the look-back period is intended to maximize the resources for Medicaid for those truly in need. See Estate of DeMartino v. Div. of Med. Assistance & Health Servs., 373 N.J. Super. 210, 219 (App. Div. 2004), certif. denied, 182 N.J. 425 (2005). The calculation of the length of the transfer penalty is set forth at N.J.A.C. 10:71-4.10(m)1. It is from the transfer penalty, during which time Medicaid benefits are not available, that M.C. appeals.

The problems with this record begin with the initial OAL hearing. M.C.'s counsel participated in the hearing along with an individual identified in the transcript as Jonathan Lazarus, Esquire. In the ALJ's decision, however, Lazarus is identified as a "Human Services Specialist 3, appearing pursuant to N.J.A.C. 1:1-5.4(a)(3) for" the Board. N.J.A.C. 1:1-5.4 is captioned "Representation by Non-lawyers...." This distinction is significant because at the outset of the hearing, passing reference is made to several "stipulations" entered into between Lazarus and M.C.'s counsel. The stipulations are not included in the record presented on appeal; neither were they specifically described during the course of the hearing.

It is clear that Lazarus agreed that M.C. had entered into a care agreement. Lazarus may also have agreed, on behalf of the Board, that services were provided by D.L. to M.C. Details such as length of time and nature of services were never explained, and as a result, we do not know the precise outline of the relevant stipulation.

Furthermore, after reviewing the transcript of the OAL hearing, it is not clear if Lazarus, on behalf of the Board, was disputing the gross amount of compensation called for by the care contract, the deferred nature of the compensation, or the propriety of the agreement as a whole. In the DMAHS final decision, the "stipulations" were rejected wholesale. In relevant part, the decision states that:

[t]o the extent that the parties stipulated the services were provided and amount charged was reasonable, I FIND those stipulations are belied by the testimony and the documents in evidence. Petitioner stresses that Ocean County stipulated to these facts but as they are contradicted by the case presented by [p]petitioner, the stipulations cannot stand.

Our role in reviewing administrative agency "decisions is limited," and we employ a deferential standard. Mainland Manor Nursing & Rehab. Ctr. v. N.J. Dep't of Health & Senior Servs., 403 N.J. Super. 562, 571 (App. Div. 2008) (citing Univ. of Med. & Dentistry of N.J. v. Grant, 343 N.J. Super. 162, 168 (App. Div. 2001)). "An... agency decision will not be disturbed absent a showing that it is arbitrary, capricious or unreasonable, lacks fair support in the evidence, or violates legislative policies." Ibid. (citation omitted). This deferential standard of review assumes that the administrative agency will independently evaluate "the relevant evidence and legal arguments." Ibid. (citing In re Virtua-W. Jersey Hosp., 194 N.J. 413, 424-36 (2008)).

An independent evaluation by the agency could not have occurred here because so much information is missing from the OAL proceeding. For example, the ALJ's January 30, 2009 initial decision states that the parties stipulated that the amounts charged for the services provided by D.L. to M.C. were reasonable. This significant stipulation is nowhere referenced in the record supplied to us. From what we can discern, the Board disputed the amounts charged in the contract because the rates were not based on the compensation an individual health care worker would receive but instead were amounts that would be charged by an agency, which would include overhead expenses.

The ALJ assumed that the Board's sole challenge to the care agreement was the deferral of payment into 2008 for services rendered in 2007. On the contrary, not only did Lazarus dispute the deferral of compensation, but he disputed the rate that was paid, as well as at a later point during the hearing, the overall legitimacy of the contract.

The ALJ stated, and the Director's decision reiterated, that D.L. was employed full-time in 2007 as a school teacher while she provided services to M.C. The ALJ noted that D.L. wanted to defer compensation under the agreement because "she planned to retire... in 2008 and did not want to be taxed at a higher income level for 2007." The Director of DMAHS observed, however, that this meant "it [was] inconceivable that [D.L.] was able to provide her mother 24[-]hour caregiver services" throughout the school year as claimed. Our review of the record reveals that D.L. testified, albeit very briefly, that she was retired from her prior employment as a school teacher for some indefinite amount of time, and that in 2007 she had "done some teaching during my retirement and... raise[d] my income over my pension amount." In other words, although the Director's decision was based in significant part on D.L.'s unavailability to provide services to her mother in 2007 because she worked full-time, the record does not support the conclusion. According to D.L., she was not employed full-time; rather, she had retired prior to 2007 on some unknown date but had returned to work on a part-time basis. D.L. did not spell out the terms of her employment, however.

Additionally, it is apparent from our reading of the hearing transcript that the ALJ assumed no caregiver services were provided by D.L. to M.C. until after the care agreement was signed. Yet the Affidavit, presumably reviewed by the ALJ as it was originally attached to the Medicaid application, established that D.L. provided care services for free to her mother M.C. from March 12, 2004, when the family purchased a home together, to July 1, 2007, when the care agreement was signed. Neither did the ALJ mention that the care agreement was signed not by M.C. herself, but by D.L. on behalf of M.C.

Further adding to the confusion, in the exceptions to the OAL decision, the Board stressed the significance of the conveyance of real estate out of M.C.'s name at the same time that her liquid assets were transferred to D.L. This fact was not mentioned in the OAL proceeding, was not referred to in the ALJ's written decision, nor was it addressed by the Director in his decision rejecting the ALJ's approval of M.C. for Medicaid benefits. Yet DMAHS relies upon that information in its arguments on appeal, contending that D.L. is being compensated twice for her services to her mother, and M.C. objects to DMAHS raising the issue on appeal. But the information was a part of the record from the time the application was made.

DMAHS observed that the description of services attached to the care agreement was "not a chart of services rendered but rather a mathematical calculation to fit the amount of resources transferred" and that M.C. did not receive fair market value for the $33,800 payment transferred to D.L. Although we suspect these conclusions may prove to be ultimately correct, the state of the record just does not support them.

We regard an administrative agency's decision deferentially only where there has been "careful consideration of the facts in issue and appropriate findings addressing the critical issues in dispute." Bailey v. Bd. of Review, 339 N.J. Super. 29, 33 (App. Div. 2001). Absent such careful consideration of all the facts and the issuance of appropriate findings thereon, we cannot make a determination as to the correctness of an agency's decision.

On appeal, M.C. merely contends that the initial decision of the ALJ should be upheld and that the DMAHS decision was incorrect. We cannot assess the merits of the claim absent a more complete record. The fifty-eight-page colloquy between the ALJ, M.C.'s counsel, and Lazarus, and the two pages of D.L.'s testimony and the documents we have been supplied, not mentioned by the ALJ or DMAHS, are simply insufficient. We therefore reverse and remand to DMAHS with the understanding that the record must be reopened in order to afford both M.C. and the Board an opportunity to supplement the record with the necessary proofs.

Reversed and remanded to DMAHS for further proceedings not inconsistent with this opinion. We do not retain jurisdiction.


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