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R.A. v. Division of Medical Assistance and Health Services


November 19, 2010


On appeal from the Department of Human Services, Division of Medical Assistance and Health Services, Docket No. HMA 9671-08.

Per curiam.


Submitted September 27, 2010

Before Judges Reisner and Alvarez.

Petitioner R.A. appeals from a final decision of respondent Division of Medical Assistance and Health Services (Division) imposing a two-month and ten-day ineligibility period for Medicaid services as a result of certain transfers over two years totaling $16,100. Petitioner contends that the transfers, made between February 2006 and December 2007, were for fair market value and consisted of monthly incidental cash expenditures, including the cost of restaurant meals, clothing, cleaning, gifts to family, and other miscellaneous items. For the reasons set forth below, we affirm.

Upon notification by the Bergen County Board of Social Services (Board) of the transfer penalty, initially for $19,670, petitioner appealed and the case was transmitted to the Office of Administrative Law (OAL). After a hearing in which only petitioner's son, R.M.A., testified, the Administrative Law Judge (ALJ) issued an initial decision on November 7, 2008, that the transfers were made for fair market value and were not made in contemplation of petitioner's application for Medicaid. At the time of the transfers, petitioner, although well into her nineties, was healthy, active, and lived independently in senior citizen housing. At the time of the hearing, however, petitioner had suffered several falls and resided in a nursing home. She died September 5, 2009, while this appeal was pending.

The ALJ stated in her initial decision that she found R.M.A.'s testimony "credible and convincing" concerning the $16,100 in dispute. She determined that the funds were used for miscellaneous monthly expenses, with any remainder designated as a stipend for R.M.A.'s family needs due to his unemployment during that period. The ALJ thereby reduced the resource transfer penalty to $2992.79.

At the OAL hearing, R.M.A. testified that he assisted petitioner by managing her financial affairs, maintaining her checkbook, writing her checks, taking her on trips, to restaurants, and generally helping her with day-to-day life. As she aged, petitioner had difficulty dealing with her own checking account and accordingly asked R.M.A. to do so for her sometime prior to 2006. This application for Medicaid was made on May 16, 2008.

R.M.A. testified that the canceled checks written to cash, commencing in 2006 for $600, and for $700 monthly in 2007, funded small cash gifts to petitioner's numerous progeny on occasions such as birthdays, Christmas, or graduations; over-the-counter medications; gas for R.M.A.'s car when petitioner traveled with him and his wife on trips; and similar incidental undocumented expenditures.

Based on this testimony, the ALJ determined that from March 1, 2006, to January 2007, she would exclude $600 per month, and for January through June 2007, and August, November, and December 2007, she would exclude $700 per month, from the amounts allegedly transferred for less than fair market value. She calculated that certain other checks, including at least one made payable to cash for a duplicate amount in one month, were non-excludable transfers for less than fair market value. The new figure thus came to $2992.79.

The Division reversed the ALJ on December 19, 2008. In the agency's view, the transfers were not proven to be "for fair market value," and petitioner had failed to "rebut[] the presumption that these transfers were to qualify for Medicaid." The Division discounted the ALJ's credibility finding because R.M.A. could not produce any documentation in support of his testimony, and because of R.M.A.'s unemployed status during the relevant time frame. The Division further found that there were other canceled checks that "belied" R.M.A.'s testimony, as they were specifically written for rent, utilities, physician services, food, and other expenses duplicated in his testimony regarding incidentals. The Division also noted that petitioner's monthly income was $2378 during the relevant time frame, leaving her with a monthly remainder of $1300 after payment of her fixed expenses. In summary, the Division reversed the ALJ because it found R.M.A. incredible, and rejected his claim that the sums were transferred for fair market value.

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 required to comply with the Medicaid statute and federal regulations, as are all other states, in order to receive Medicaid funds. See Harris v. McRae, 448 U.S. 297, 308, 100 S.Ct. 2671, 2683-84, 65 L.Ed. 2d 784, 799 (1980).

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) (quoting Beal v. Doe, 432 U.S. 438, 444, 97 S.Ct. 2366, 2371, 53 L.Ed. 2d 464, 462 (1977)). The Division is the agency within the Department of Human Services that administers the Medicaid program. N.J.A.C. 10:71-2.2(a).

An individual seeking Medicaid submits an application to a county board of social services, which application is reviewed for compliance with the regulatory requirements. N.J.A.C. 10:71-1.1; N.J.A.C. 10:71-2.2(b). 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 period prior to the application (the look-back period) without penalty. N.J.A.C. 10:71-4.10; 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 R.A. appeals.

On judicial review of an agency decision, "[o]ur function is to determine whether the administrative action was arbitrary, capricious or unreasonable." Burris v. Police Dep't, Twp. of W. Orange, 338 N.J. Super. 493, 496 (App. Div. 2001) (citing Henry v. Rahway State Prison, 81 N.J. 571, 580 (1980)); see also Aqua Beach Condo. Ass'n v. Dep't of Cmty. Affairs, 186 N.J. 5, 15-16 (2006) (citations omitted). The agency decision must be supported by substantial and credible evidence in the record. Circus Liquors, Inc. v. Middletown Twp., 199 N.J. 1, 10 (2009) (quoting Mazza v. Bd. of Trs., 143 N.J. 22, 25 (1995)). It must not offend either the state or federal constitution and must be in accord with the agency's legislative mandate. Ibid. (citations omitted). "The burden of demonstrating that the agency's action was arbitrary, capricious or unreasonable rests upon the [party] challenging the administrative action." In re Arenas, 385 N.J. Super. 440, 443-44 (App. Div.), certif. denied, 188 N.J. 219 (2006) (citations omitted); 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).

Even where an ALJ's decision is founded upon credibility determinations, a reviewing administrative agency is entitled to reject such findings. Clowes v. Terminix Int'l, Inc., 109 N.J. 575, 587-88 (1988). They are not, however, entitled to deference in our review as to this credibility issue. See id. at 587-88. In fact, subsequent to the enactment of N.J.S.A. 52:14B-10(c), an administrative agency may no longer "sift through the record anew to make its own decision," with the expectation that it "will be affirmed if it is independently supported by credible evidence.... [I]n order to reverse such a factual finding by an ALJ, the agency head must explain why the ALJ's decision was not supported by sufficient credible evidence or was otherwise arbitrary." Cavalieri v. Bd. of Trs., Pub. Emp. Ret. Sys., 368 N.J. Super. 527, 534 (App. Div. 2004). In such instances "there is a particularly strong need for careful appellate review." In re Lalama, 343 N.J. Super. 560, 565 (App. Div. 2001).

The agency head in this instance gave a sufficient explanation of the reasons he considered R.M.A.'s testimony to be incredible. No documentation was presented concerning expenses purportedly paid from each check cashed by R.M.A. The testimony that the $600 to $700 monthly cash expenditures were legitimate was contradicted by the existence of other checks written on R.A.'s behalf made payable to specific vendors and suppliers. Petitioner's income was significantly greater than her expenses at her senior citizen housing. The Division also rejected R.M.A.'s testimony that prior to his job loss and the end of his unemployment benefits, R.A.'s cash expenditures had been underwritten by him.

"It is settled that '[a]n administrative agency's interpretation of statutes and regulations within its implementing and enforcing responsibility is ordinarily entitled to our deference.'" Wnuck v. N.J. Div. of Motor Vehicles, 337 N.J. Super. 52, 56 (App. Div. 2001) (quoting In re Appeal by Progressive Cas. Ins. Co., 307 N.J. Super. 93, 102 (App. Div. 1997)). The Division is entrusted with the responsibility of implementing federal and state law so as to not jeopardize the eligibility of New Jersey residents for federal Medicaid funding. N.J.A.C. 10:71-2.2(a) & (b).

The party challenging the agency's action bears the burden of demonstrating that the decision is arbitrary, capricious, or unreasonable. Arenas, supra, 385 N.J. Super. at 443-44. R.M.A. has not satisfied that burden. The agency's finding that the testimony was not credible in light of the other checks written for petitioner's expenses, petitioner's income, and R.M.A.'s unemployment status, is reasonable. The Division's ultimate conclusion is supported by substantial and credible evidence in the record.



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