January 28

Discretionary Supplemental Needs Trust Doesn’t Pass Ohio’s Medicaid Test

In a case argued by ElderLawAnswers member William J. Browning, an Ohio appeals court upholds the state’s decision to count the assets in a fully discretionary supplemental needs trust against a Medicaid recipient because the trust contains language allowing the trustee to use funds for the beneficiary’s health or welfare and the beneficiary did not obtain a declaratory judgment stating that the trust is an exempt resource.  Cook v. Ohio Department of Job & Family Services (Ohio. Ct. App.,10th, Nos. 14AP-852, 14AP-853, Nov. 19, 2015).

Virginia Cook was the beneficiary of a supplemental needs trust set up by her mother in 2000.  Between 2004 and 2011, Ms. Cook received Medicaid benefits from the Ohio Department of Job and Family Services (DJFS), but upon review of the trust, DJFS terminated Ms. Cook’s benefits in 2013.  The state claimed that the trust was not an exempt resource because it contained language allowing the trustee to use trust funds for Ms. Cook’s health or welfare and it did not fall within several exceptions.

Ms. Cook appealed, arguing that since the trust was wholly discretionary, it could not be a countable resource and was specifically exempted under state and federal law.  In support of this argument, Ms. Cook pointed to a decision by the Ohio Supreme Court in 2008 (Pack v. Osborn, 117 Ohio St.3d 14, 2008-Ohio-90) that allowed a trustee to obtain a declaratory judgment clarifying that a trust was completely discretionary for purposes of qualifying for Medicaid benefits.  She also argued that the doctrine of equitable estoppel should prevent the state from disapproving a trust it had reviewed and approved in 2004.

The Ohio Court of Appeals, Tenth District, upholds the state’s decision.  The court finds that the trust does not fall within any allowable exceptions and that it is not exempted by law.  The court states that “the proper method for determining whether a trust is a wholly discretionary trust . . . for purposes of a Medicaid eligibility determination is through a declaratory judgment action.  Such an interpretation could then be used in the Medicaid eligibility review process to determine whether the trust qualifies under the exceptions listed [in the statute].”  The court also rejects the equitable estoppel argument because the Ohio Supreme Court has not allowed the doctrine to be used against political subdivisions engaged in governmental functions.

To read the court’s decision, go to: http://www.supremecourt.ohio.gov/rod/docs/pdf/10/2015/2015-Ohio-4966.pdf

January 25

State Properly Rejected Medicaid Application When Requested Verifications Were Not Provided

A New Jersey appeals court rules that the state properly rejected a Medicaid application because the appropriate verifications were not provided, preventing the state from determining whether the applicant’s property and life insurance policy were available resources. A.T. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., No. A-3341-13T3, Nov. 23, 2015).

A.T. entered a nursing home and her son, S.T., applied for Medicaid on her behalf. The state requested verification regarding A.T.’s bank account statements, the deed for property she owned, and proof that a life insurance policy had been liquidated. S.T. did not provide the requested verifications, and the state denied Medicaid benefits. After selling A.T.’s property and converting the life insurance policy to an irrevocable trust, S.T. again applied for benefits on A.T.’s behalf, and the state approved the application.

After the nursing home filed a complaint against A.T. and S.T. for non-payment of services, S.T. appealed the original denial of Medicaid benefits. A hearing officer ruled that the original application was properly denied due to lack of verification. S.T. appealed to court, arguing that the state did not distinguish which documents were necessary to make an eligibility determination.

The New Jersey Superior Court, Appellate Division, affirms the original denial of Medicaid benefits. According to the court, the state could not determine whether the property and life insurance policy were available resources until it received the requested verifications.

For the full text of this decision, go here: http://njlaw.rutgers.edu/collections/courts/appellate/a3341-13.opn.html

January 21

Guardian May Not Deduct Fee From Medicaid Recipient’s Income

A Florida appeals court rules that the guardian of a Medicaid recipient may not deduct a guardianship fee from the recipient’s income because the fee is not medically necessary. Lutheran Services Florida, Inc. v. Department of Children and Families (Fl. Ct. App., 2nd Dist., No. 2D13-5840, Nov. 25, 2015).

Lutheran Services Florida (LSF) is the court-appointed guardian of nursing home resident Larry Peron. LSF’s duties include reviewing Mr. Peron’s medical treatment and giving consent for medical procedures. When Mr. Peron qualified for Medicaid, he paid the majority of his income to the nursing home as the patient responsibility amount.

LSF obtained a court order authorizing that a monthly $200 guardianship fee be deducted from Mr. Peron’s income and petitioned the Department of Children and Families to deduct the guardianship fee from Mr. Peron’s patient responsibility amount. The Department denied the petition, determining that the fee cannot be deducted from a Medicaid recipient’s income because it is not “medically necessary” under state law.  A hearing officer upheld the determination, noting that state law defines medically necessary as services provided in accordance with generally accepted standards of medical practice and reviewed by a physician. LSF appealed.

The Florida Court of Appeals affirms, holding that the guardianship fee is not medically necessary. According to the court, state law allows only deductions from a Medicaid recipient’s income for “medical or remedial care services rendered by a medical professional directly to the Medicaid recipient.” The court acknowledges that this result leaves a gap “wherein a guardian of an incapacitated ward who provides the necessary consent for medically necessary treatment cannot be compensated for its services under the state’s Medicaid program,” and suggests that the legislature look into changing the law. 

For the full text of this decision, go to: http://www.2dca.org/opinions/Opinion_Pages/Opinion_Pages_2015/November/November%2025,%202015/2D13-5840.pdf

January 18

Irrevocable Trust Is Available Asset Because Medicaid Applicant Had Right to Use Trust Asset

A Massachusetts trial court rules that a Medicaid applicant’s irrevocable trust is an available asset because the applicant still had a right to live in, use, and get income from the condominium owned by the trust. Daley v. Sudders (Mass. Super. Ct., No. 15–CV–0188–D, Dec. 24, 2015).

James and Mary Daley created an irrevocable trust. They conveyed their interest in their condominium to the trust, but retained a life estate in the property. Seven years later, Mr. Daley was admitted to a nursing home and applied for MassHealth (Medicaid) benefits. The state denied him benefits after determining that the trust was an available asset.

Mr. Daley appealed, but after a hearing the state ruled that the trust was an available asset because the Daleys had the right to occupy and use the condo and the trust granted them the right to convert the trust’s principal into income. Mr. Daley died during the appeal, and his estate appealed to court.

The Massachusetts Superior Court affirms, holding that the trust is an available asset. The court rules that the main trust asset — the condominium — was available to the Daleys because they retained life estates under the deed and continued to use and live in the condo after establishing the trust. In addition, the court holds that the trust is an available asset because the Daleys had the right to income from the condo. 

For the full text of this decision, click here.

For commentary on the decision by Harry S. Margolis in his blog, click here.

January 14

Bank Not Liable for Improper Withdrawals Made Under a Power of Attorney

A New Jersey appeals court holds that a bank is not liable for improper withdrawals made by a nursing home resident’s caregiver under a power of attorney because the resident’s signature was on the power of attorney. In re Estate of Yahatz (N.J. Super. Ct., App. Div., No. A-0099-14T1, Dec. 14, 2015).

Michael Yahatz opened a bank account and signed an agreement that provided that the bank would not be liable if Mr. Yahatz failed to notify the bank of suspected problems within 60 days of receiving a bank statement. Mr. Yahatz entered a nursing home where Nydia Davalia was one of his caretakers. Mr. Yahatz signed a power of attorney appointing Ms. Davalia as his attorney-in-fact and authorizing her to make withdrawals from his bank account. Ms. Davalia withdrew $80,000 from the account.

After Mr. Yahatz died, his estate filed a claim against the bank, arguing that it was negligent when it accepted the power of attorney. The trial court granted the bank summary judgment, ruling that the claims were time-barred because Mr. Yahtaz did not notify the bank about the contested withdrawals until more than 60 days after he received the bank statement. The estate appealed, arguing that the power of attorney was invalid on its face because of the way it was signed.

The New Jersey Superior Court, Appellate Division, affirms, holding that the bank was not negligent when it accepted the power of attorney from Ms. Davila because the signature on the power of attorney was Mr. Yahatz’s signature. According to the court, “there can be no violation of a duty of ordinary care, or a finding of bad faith, where a bank fails to take action to confirm the authenticity of a signature the customer does not dispute is his own.”

For the full text of this decision, go to: http://njlaw.rutgers.edu/collections/courts/appellate/a0099-14.opn.html