Gauthier v. Dir. of The Office of Medicaid.

• Citation: 80 Mass.App.Ct. 777,956 N.E.2d 1236
• Decision Date: 10 November 2011
• Docket Number: No. 10–P–1585.,10–P–1585.
• Parties: Mary GAUTHIERv.DIRECTOR OF THE OFFICE OF MEDICAID.
• Court: Appeals Court of Massachusetts

80 Mass.App.Ct. 777

956 N.E.2d 1236

Mary GAUTHIER

v.DIRECTOR OF THE OFFICE OF MEDICAID.

No. 10–P–1585.

Appeals Court of Massachusetts, Norfolk.

Argued Sept. 6, 2011.Decided Nov. 10, 2011.

Francis X. Small, Milford, for the plaintiff.Kirk G. Hanson, Assistant Attorney General, for the defendant.Present: KAFKER, GREEN, & GRAINGER, JJ.KAFKER, J.

Mary Gauthier (Gauthier) transferred $182,000 to her son and daughter-in-law approximately two years before applying to the Office of Medicaid (MassHealth) for long-term care benefits in a nursing home. The money was used at least in part to compensate her son (Scott) and daughter-in-law (Diane) for constructing a handicapped-accessible in-law apartment in their home and providing her lodging and care in the newly constructed area of the house. A care agreement was entered into between Gauthier and her son at the time of the transfer. MassHealth found Gauthier's payment of $182,000 to be a disqualifying transfer within the applicable look-back period prior to her application for assistance.

Gauthier claims that the transfer should not have disqualified her for benefits because she received at least fair market value for it. She also argues that it was made exclusively for a purpose other than qualifying for MassHealth, and so satisfies an exception to ineligibility that applies to transactions for less than fair market value. We conclude that there was substantial evidence to support MassHealth's determination that Gauthier did not prove that this was a fair market value transaction or that it was made exclusively for a purpose other than qualifying for MassHealth. However, a remand is required for two reasons. First, the hearing officer did not address a related exception to ineligibility that applies if Gauthier intended to engage in a fair market transaction. This exception applies even if the transaction was in actuality for less than fair market value. Second, MassHealth used the total value of the transferred asset ($182,000) to determine the ineligibility period, when the period of ineligibility is based instead on the “uncompensated value” of the transferred asset. We therefore remand to MassHealth for further findings and rulings on these two issues.

Background law. Medicaid, a cooperative Federal–State program, provides payment for medical services to individuals and families “whose income and resources are insufficient to meet the costs of necessary medical services.” Forman v. Director of the Office of Medicaid, 79 Mass.App.Ct. 218, 222, 944 N.E.2d 1081 (2011), quoting from 42 U.S.C. § 1396–1(1) (2006). See Haley v. Commissioner of Pub. Welfare, 394 Mass. 466, 467, 476 N.E.2d 572 (1985). “MassHealth is the agency within the Commonwealth ‘responsible for the administration and delivery of health-care services to low- and moderate-income individuals.’ 130 Code Mass. Regs. § 515.002(A) [2008].” Forman, supra. In order to receive Federal funds for this program, “MassHealth regulations and practices must comply with all requirements imposed by Federal Medicaid law.” Ibid., citing Haley, supra. See 130 Code Mass. Regs. § 515.002(B) (2008).

Pursuant to those requirements, MassHealth will pay for nursing home care for residents who have no more than $2,000 in countable assets and meet other criteria. See Shelales v. Director of the Office of Medicaid, 75 Mass.App.Ct. 636, 637–638, 915 N.E.2d 1092 (2009), citing 130 Code Mass. Regs. § 519.006 (2006). MassHealth has strict limitations on asset transfers made by applicants before applying for these benefits, in order to prevent individuals from giving away their assets to their family and friends and forcing the government to pay for the cost of nursing home care. See Andrews v. Division of Med. Assistance, 68 Mass.App.Ct. 228, 229, 861 N.E.2d 483 (2007). Specifically, if MassHealth determines that an applicant has made a “disqualifying transfer” of assets within the five years preceding the application for nursing home benefits, it imposes a period of ineligibility before the applicant can receive benefits. Forman, supra at 222–223, 944 N.E.2d 1081, citing 130 Code Mass. Regs. §§ 520.018, 520.019 (2006). See G.L. c. 118E, § 28. This decision forces the applicant or her family to pay for her care during the ineligibility period.

If an applicant disposes of an asset in exchange for future services, that transaction “is considered to be 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.” 130 Code Mass. Regs. § 520.007(J)(4) (2006). 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.” 130 Code Mass. Regs. § 520.019(F) (2006).

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 the Commonwealth of Massachusetts at the time of application, as determined by the MassHealth agency.” 130 Code Mass. Regs. § 520.019(G)(1) (2006). The “uncompensated value” of a resource is defined as “the difference between the fair-market value of the resource or interest in the resource at the time of transfer less any outstanding debts and the actual amount the individual received for the resource.” 130 Code Mass. Regs. § 515.001 (2005). Fair market value, in turn, is “an estimate of the value of a resource if sold at the prevailing price.” 130 Code Mass. Regs. § 515.001 (2007). Therefore, if a disqualifying transfer occurred, the ineligibility period will be ( V- R )/ C months long, where V is the fair market value of the asset transferred, R is the amount received for the asset, and C is the average monthly cost of a nursing home determined by MassHealth.

Facts. In September, 2004, when Gauthier was seventy-nine years old, her psychologist concluded that she should no longer live alone. Gauthier suffered from Alzheimer's disease and presented numerous memory and cognitive deficiencies. On or about September 10, 2004, she moved in with Scott and Diane, and lived in the first-floor den of their house in Franklin. At that time, Gauthier was incontinent of bowel and bladder and required the use of a walker. She had fallen multiple times and been injured after forgetting to use her walker. Because Scott and Diane both worked, Gauthier used her Social Security income to pay for full-time adult day care. When they were home, Scott and Diane took care of Gauthier free of charge. Diane is a registered nurse with the Visiting Nurse Association, and was therefore particularly qualified to assist Gauthier.

Because the three bedrooms in the house were occupied by Scott, Diane, and their two children, Scott and Diane planned an addition and other upgrades for the home once Gauthier moved in. Some portions of these renovations were primarily for Gauthier's benefit, including a handicapped-accessible fourth bedroom and bathroom with roll-in shower and grab bars, and the expanded septic system required by the town of Franklin for a four-bedroom house. Gauthier also had a separate heating system for the addition so that she could control the temperature independently of the rest of the house. Other renovations were primarily for Scott and Diane, such as a deck, a two-car garage, and a remodeled kitchen. Aside from the septic system, which was upgraded in 2005, these renovations commenced pursuant to an agreement with a contractor signed on March 19, 2006. That agreement included few details of the construction, only listing that certain payments would be due upon the start or completion of general items like “excavation,” “electrical,” and “plumbing.” Scott and Diane paid the contractor directly. While the record contains a list of charges and payments made to the contractor, at no point were the costs of renovations earmarked between those for Gauthier's addition and those pertaining to other areas of the house. The record also does not disclose when Gauthier moved into the new addition, but the last payment was made to the contractor on November 24, 2006. The total cost of the renovations was nearly $320,000.

On March 30, 2006, Scott and Gauthier executed a document entitled “Care Agreement.” The Care Agreement set forth the terms under which Scott would supply Gauthier with room, board, and other services in his house. It mandated that Scott would provide lodging, three meals per day, weekly housecleaning, and laundry. The lodging was to be in a newly constructed area of the house designed specifically for Gauthier, but Scott would retain title to the entire house. Scott was also responsible for taking Gauthier to doctor's appointments, as well as providing “personal assistance with bathing, dressing, ... eating, ... and incidental services.” In exchange for these services, Gauthier was to make an up-front payment of $225,000, but pay no monthly fees. The agreement expressly provided that “the amount recited [$225,000] shall be the compensation intended to be fair and sufficient compensation for the duration of [Gauthier's] lifetime.”

The agreement could, however, be canceled by either party within ninety days. After that period, Gauthier would not receive a refund of any part of the up-front payment. The agreement is silent as to what, if any, refund Gauthier would receive if s...