By Matthew S. Buehler
The Massachusetts Medicaid plan, MassHealth, pays for nursing home care received by individuals who have less than $2,000 in assets and meet certain other criteria.1 This creates an incentive, however, for individuals to give away their assets to friends and families in order to qualify for nursing home benefits. To minimize this incentive, MassHealth reviews asset transfers made by an applicant. 2 The Appeals Court in Gauthier v. Director of the Office of Medicaid, 80 Mass. App. Ct. 777 (2011), reviewed such an asset transfer in the form of a care agreement.
Specifically, the plaintiff in Gauthier entered into a care agreement with her son whereby she transferred all of her assets to him. The plaintiff applied to MassHealth roughly two years later for nursing home benefits. MassHealth, however, found that the care agreement was a disqualifying asset transfer.
MassHealth reviews all asset transfers made an applicant for nursing home benefits within the five years preceding the application. If MassHealth determines that an applicant has made a “disqualifying transfer” of assets during that period, it imposes a period of ineligibility before the applicant can receive benefits.3
A contract for future care (such as the agreement between the plaintiff and her son) is “a disqualifying transfer of assets to the extent that the transaction does not have an ascertainable fair-market value or if the transaction is not embodied in a valid contract that is legally and reasonably enforceable by the applicant.”4 However, even if a disqualifying transfer has occurred, no ineligibility period will be imposed if the applicant “demonstrates to the MassHealth agency’s satisfaction that (1) the resources were transferred exclusively for a purpose other than to qualify for MassHealth; or (2) the [applicant] intended to dispose of the resource at either fair-market value or for other valuable consideration. Valuable consideration is a tangible benefit equal to at least the fair-market value of the transferred resource.”5
The ineligibility period (in months) imposed for a disqualifying transfer of assets is “equal to the total, cumulative, uncompensated value … of all resources transferred … divided by the average monthly cost to a private patient receiving nursing-facility services in … Massachusetts at the time of application, as determined by the MassHealth agency.”6 The “uncompensated value” of a resource is defined as “the difference between the fair-market value of the resource ,,, at the time of transfer … and the actual amount the individual received.”7 Fair market value is “an estimate of the value of a resource if sold at the prevailing price.” 8
The plaintiff suffered from Alzheimer’s disease. By September 2004, when the plaintiff was 79 years old, her condition had reached the point where she could no longer live alone and she moved in with her son and his wife (the plaintiff’s daughter-in-law). The son and daughter-in-law subsequently renovated their home and built a living area for the plaintiff. In March 2006, the plaintiff entered into a Care Agreement (“the Agreement”) with her son. Under the Agreement, the son agreed to provide the plaintiff with lodging, 3 meals a day and weekly housecleaning and laundry services. In return, the plaintiff agreed to pay $225,000 up-front to her son.
After 90 days, the son had the right to terminate the Agreement for “good and sufficient cause” and keep any payments. “Good and sufficient cause” was defined to include if the plaintiff could no longer care for her personal needs, including bathing or dressing herself. The Agreement remained in effect over 2 years until the son terminated it in May 2008 after he had back surgery and could no longer lift the plaintiff. At that time, the plaintiff had paid $182,000 to her son and did not have any further assets.
Upon termination of the Agreement, the plaintiff moved into a nursing home and applied for MassHealth benefits. MassHealth though denied her application on the ground that the Agreement was a disqualifying transfer. The plaintiff appealed the denial of MassHealth benefits with the Office of Medicaid Board of Hearings. After a hearing, the agency Hearing Officer upheld the denial of benefits.
In particular, the Hearing Officer found that the plaintiff’s payment of $182,000 to her son was a disqualifying transfer as the Agreement had no fair-market value. The Hearing Officer further found the payment was made at least in part to qualify for MassHealth. As a result, the plaintiff was ineligible for nursing home benefits for 682 days ($182,000 divided by a $267 average daily cost of a private nursing home in Massachusetts).
In reviewing the Hearing Officer’s decision, the Appeals Court first upheld the finding that the Agreement was a disqualifying transfer.9 Fair-market value is determined by reviewing the value of what the applicant received at the time of transfer.10 At the time of its execution, however, the Agreement was ambiguous as to how long the son would care for the plaintiff and what care she would receive. The Agreement did not have a set duration and lacked benchmarks for care provided. The Agreement instead only required the son to care for the plaintiff as much he could for as long as he could.11
Moreover, the plaintiff was already in failing health in March 2006 due to Alzheimer’s and needed one-on-one supervision. As a result, the son literally could have terminated the Agreement at any time. The son did provide a newly built living area to the plaintiff but he retained title to it. The son further controlled how long the plaintiff could live there as he could cancel the Agreement without having to make a refund. These factors provided substantial evidence to support the Hearing Officer’s finding that the Agreement did not, at the time of its execution, have an ascertainable fair market and hence was a disqualifying transfer.12
The Appeals Court next reviewed the Hearing Officer’s finding that the plaintiff entered into the Agreement at least in part in order to qualify for MassHealth. MassHealth provides an exception for transfers made solely for another purpose than qualifying for benefits. 13 To qualify for this exception, an applicant must provide more than verbal assurances as to his or her intent. An applicant must instead prove his or her intent through convincing evidence.14 The Appeals Court found that substantial evidence supported the finding that the plaintiff did not meet this burden.
The plaintiff was already in failing health when she executed the Agreement. The Agreement thus contemplated a possible future where the plaintiff would need more care than the son and his wife could provide. At that time, the plaintiff would have no alternative but to go to a nursing home, and would have to apply for MassHealth. This supported the conclusion that one purpose of the Agreement was to enable the plaintiff to qualify for MassHealth if and when her son could no longer care for her.15
The Appeals Court found, however, that these facts were insufficient to end the inquiry into the intent of the Agreement. MassHealth regulations also provide an exception for transfers where the applicant intended to receive valuable consideration.16 The Appeals Court noted that it was possible that the son intended to give the plaintiff fair consideration, even if he believed that she would ultimately have to receive nursing home care. In fact, the son did build a living area for the plaintiff and cared for her under the Agreement for nearly two years. The Appeals Court stated that these facts could support a finding that the plaintiff did intend to receive fair consideration, although the Hearing Officer did not make any separate findings on this issue. The Appeals Court thus remanded the case for further findings.17
In addition, the Appeals Court addressed the calculation of the plaintiff’s ineligibility period. The Hearing Officer based the ineligibility period on the entire $182,000 transfer by the plaintiff. This period is supposed to be based on uncompensated value, i.e., the difference between what the plaintiff paid under the Agreement and what it was worth.18 The plaintiff paid $182,000 under the Agreement, although, as discussed above, it is difficult to determine the fair market value for what the plaintiff received. The Hearing Officer appears to have treated the Agreement as worthless based on its lack of value when executed. The Hearing Officer also noted, though, that the plaintiff received 22 months of care under the Agreement – and that the average monthly cost of nursing home care was $8,010. The plaintiff thus likely would have paid nearly $182,000 if she spent those 22 months in a nursing home instead.
The Appeals Court noted that MassHealth regulations are unclear whether uncompensated value is measured at the time of execution or by the services subsequently provided under a contract. The Court indicated that it preferred calculating the value of the contract based on the value of services actually provided but it declined to make a definitive ruling without more guidance from the agency. Instead, the case was remanded for further findings as to the intent and uncompensated value of the Agreement.19 Until then, the value of future care contracts will remain uncertain.
Matthew S. Buehler is a contract Staff Attorney at DentaQuest, LLC. Mr. Buehler’s practice focusses on regulatory compliance and filings and representing the company in administrative proceedings. Mr. Buehler graduated from Suffolk University Law School in 1995. Prior to joining DentaQuest, Mr. Buehler worked primarily in the public sector, including the Office of Medicaid and the Office of the Attorney General, Insurance Division. While at the Office of Medicaid, Mr. Buehler brought enforcement actions under the ‘payer-of-last-resort’ of the state and federal Medicaid acts and represented the MassHealth program in court proceeding. Mr. Buehler further defended administrative appeals of MassHealth audits. While at the Attorney General’s Insurance Division, Mr. Buehler brought enforcement actions under the consumer protection, healthcare and insurance statutes. In addition, Mr. Buehler has worked as an attorney for the Attorney General’s Civil Rights Division and the Massachusetts Commission Against Discrimination.
1 130 C.M.R. § 519.006.
2 130 C.M.R. §§ 520.018 & 520.019.
3 130 C.M.R. § 520.019.
4 130 C.M.R. § 520.007(J)(4).
5 130 C.M.R. § 520.019(F).
6 130 C.M.R. § 520.019(G)(1).
7 130 C.M.R. § 515.001.
8 130 C.M.R. § 515.001.
9 The plaintiff initially sought judicial review under G.L. c. 30A, § 14(7) of MassHealth’s decision. The Superior Court (Donovan, J.) upheld the denial of benefits and the plaintiff appealed this decision to the state Appeals Court.
10 Forman v. Director of Office of Medicaid, 79 Mass. App. Ct. 218, 224-25.
11 Gauthier, 80 Mass. App. Ct. at 784-85.
12 Gauthier, 80 Mass. App. Ct. at 784-85.
13 130 C.M.R. § 520.019(F)(1).
14 Gauthier, 80 Mass. App. Ct. at 785 (citing State Medicaid Manual).
15 Gauthier, 80 Mass. App. Ct. at 785-86.
16 130 C.M.R. § 520.019(F)(2).
17 Gauthier, 80 Mass. App. Ct. at 786-87.
18 130 C.M.R. § 520.019(G)(1).
19 Gauthier, 80 Mass. App. Ct. at 787-90.