May 13, 2011
DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES, RESPONDENT-RESPONDENT, AND HUNTERDON COUNTY BOARD OF SOCIAL SERVICES, RESPONDENT.
On appeal from the Department of Human Services, Division of Medical Assistance and Health Services.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued March 7, 2011
Before Judges Sabatino and Alvarez.
Petitioner A.K.*fn1 appeals from a final decision of respondent Division of Medical Assistance and Health Services (Division) imposing a three-month and seventeen-day ineligibility period for Medicaid services as a result of A.K.'s transfer of $25,642.50 in 2006 to her son R.K. Petitioner contends that the transfers were made as compensation for care he provided, as well as for expenditures made on her behalf. For the reasons set forth below, we affirm.
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 initial application to a county board of social services, which 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). Regulations provide that 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 such disposal of assets or income is intended to maximize the resources of 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 imposition of the three-month seventeen-day transfer penalty, during which time Medicaid benefits are not available, that A.K. appeals.
Upon notification by the Hunterdon County Board of Social Services (Board) of the transfer penalty, petitioner appealed and the case was transmitted to the Office of Administrative Law (OAL). After a hearing in which R.K. testified, the Administrative Law Judge (ALJ) issued an initial decision on October 20, 2009, finding that the transfers were not made for fair market value. He affirmed the Board's imposition of a transfer penalty.
During the hearing, R.K testified that A.K. had resided with him and his family since 2001. Commencing in May 2005, R.K. began to care for A.K. on a full-time basis and did not work. R.K. did not dispute the amounts or source of funds claimed to have been transferred; rather, he disputed whether the expenditures should result in a transfer penalty. R.K. asserted his full-time care for his mother visited financial hardships upon him and his family because he was unable to earn income during that time. He further pointed out that he "saved Medicaid money by caring for his mother in home full-time for fourteen months."
As the ALJ noted, N.J.A.C. 10:71-4.10(b)(6)(ii) provides that "a transfer of assets to a friend or relative for the alleged purpose of compensating for care or services provided free in the past shall be presumed to have been transferred for no compensation." The ALJ also noted that the presumption could only be overcome "by the presentation of credible documentary evidence pre-existing the delivery of the care or services indicating the type and terms of compensation." In this case, however, R.K. contended only that his mother orally directed he use the funds as payment for her care, for the purchase of necessary items for her, and that the expenditures were a fraction of the cost of her subsequent nursing home care. Because R.K. did not provide documentation pre-existing the delivery of care as required by the regulation, the ALJ concluded the payment was a transfer not made for fair market value, and that the penalty of three months and seventeen days was therefore reasonable.
At the OAL hearing, R.K. testified. As part of his testimony, he read into the record a statement, to which he previously had attached a letter from his mother's neurologist with regard to her advanced Parkinson's Disease. He repeatedly said that, during the relevant period of time when he stopped working in order to devote himself exclusively to his mother's care, the taxpayers were saved substantial money. He referred to the sums in dispute as "[t]he money in question, which my mother paid to me for her care . . ." After he concluded his testimony, the ALJ asked R.K. if he had additional testimony, other witnesses, or wanted to introduce any documents other that the letter with attachment we have already described. He declined.
In a final agency decision dated November 30, 2009, the Director of the Division (Director) adopted the ALJ's initial decision in its entirety. In the opening lines of the decision, the Director noted that no exceptions were filed either by the Board or by R.K. Although claiming the money was paid to reimburse him for the care he provided for A.K., R.K. offered no documentation of a pre-existing agreement to do so. Likewise, R.K. failed to provide receipts for items allegedly purchased on A.K.'s behalf. Finally, the penalty had already occurred and A.K. had received care during that period of time.
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) (quotations 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.) (citations omitted), 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).
On appeal, R.K. contends the Board gave him "misleading advice"; namely, that he need not provide documentation of expenses he incurred on behalf of his mother. In fact, R.K. sought to supplement the record on appeal with his credit card statements from 2005 through 2009, various receipts from that time period, as well as spreadsheets purporting to explain the expenditures on behalf of A.K. from 2005 through 2009. That request was denied.
There is no record support for R.K.'s claim that misrepresentations were made to him regarding the necessity to provide documentation to verify his claims. The first time this argument is raised is in R.K.'s brief on appeal. See Neider v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973); see also R. 2:5-4(a). Moreover, R.K. did read into the administrative hearing record a statement explaining his position, to which was attached documentation regarding his mother's medical condition. He would therefore appear to have been aware of the option to present documentation at the time of the hearing. Similarly, he was advised about his right to file exceptions subsequent to the entry of the ALJ's initial decision, and chose not to do so. See N.J.A.C. 1:1-18.4 (requiring exceptions to be filed within thirteen days of ALJ's initial decision). He is therefore bound by the record created in the earlier proceedings.
In any event, the administrative action in this case was neither arbitrary, capricious, nor unreasonable. It was supported by substantial and credible evidence in the record consistent with the agency's legislative mandate. R.K. has failed to establish that the agency's decision was issued in error.