A recent decision of the New Jersey Superior Court, Appellate Division, highlights the difficulty of dealing with the Medicaid program from a practical standpoint. Medicaid is a health insurance program for needy individuals. In order to qualify for Medicaid, an individual must have very limited assets and income that is insufficient to pay for his care.
Unlike private health insurance plans, the Medicaid program will pay for long-term care, such as care in a nursing home or assisted living residence. For this reason, many individuals who need long-term care and who never thought they would need Medicaid find themselves looking to qualify for the Medicaid program.
Because Medicaid is only available to needy individuals, the Medicaid program punishes individuals who dispose of their assets for less than fair market value. In other words, if an applicant has gifted his assets away, perhaps to friends or family, Medicaid will make the applicant ineligible for Medicaid benefits for a period of time. The more money that an individual gives away, the longer the period of time during which he will be ineligible for Medicaid.
Only gifts made within a certain period of time prior to applying for Medicaid benefits are punished. Currently, that time period is five years. This period of time is commonly known as the “lookback period.”
In New Jersey, the Division of Medical Assistance and Health Services or DMAHS administers the Medicaid program. DMAHS contracts out the work of processing Medicaid applications to the local county boards of social services located in each county. So, each county’s board of social services processes applications for that county.
DMAHS and the county boards have a significant amount of leeway in the way they administer the Medicaid program. Moreover, from a practical standpoint, it is difficult to quantify if these entities are fairly administering the program on a systemic basis.
In my practice, I have helped clients with hundreds, if not thousands, of Medicaid applications. Yet, when a client asks me what is going to happen with their application before we have even applied for the client, I tell them that I treat every application as a first-time experience. I simply have no idea how their application will be handled, for instance, will it be processed quickly, what questions will the caseworker in charge of that client’s application ask or not ask, etc.
In the recent appellate divisions case of In the Matter of A.N., a minor, the trustee of a special needs trust asked a court’s guidance on certain expenditures that the trustee had made and would continue to make from a special needs trust for the benefit of a disabled child who was receiving Medicaid benefits. A trustee asking a court if certain expenditures are proper is a fairly common event. There is a court rule that permits a trustee to ask for the court’s guidance when a trustee is concerned about the propriety of distributions he is making. By asking the court’s guidance on an issue, the trustee can feel safe that what he is doing is correct.
In the A.N. case, the court gave the trustee guidance, and DMAHS appealed the decision of the trial court, contending that a court’s decision on issues of Medicaid eligibility is not binding. In other words, DMAHS argued that a court cannot tell it what to do as far as A.N.’s eligibility for Medicaid benefits is concerned.
Well, the appellate division agreed with DMAHS and reversed the decision of the trial court. According to the appellate division, DMAHS is the only entity with authority to make eligibility determinations in the first instance, not a court.
The problem with this rationale, from a practical standpoint, is, any trustee of a special needs trust must make all distributions without any guidance, even if the trustee is seeking guidance. So, if the trustee makes an incorrect decision, some disabled trust beneficiary is going to pay the price by losing his Medicaid benefits and his healthcare. Situations such as this make it scary when you are dealing with the Medicaid program.