Recently, the New Jersey Superior Court, Appellate Division, rendered a very insightful decision concerning an issue involving the Medicaid program. Medicaid is a health payment plan for needy individuals. In order to qualify for Medicaid benefits, an individual must have a very limited amount of assets (typically, less than $2,000) and insufficient income to pay for his care.
There are many different programs of Medicaid. One program will pay for long term care costs, such as care in an assisted living residence or nursing facility. Long term care is exceedingly expensive. An assisted living residence in New Jersey can cost anywhere from $6,500 per month to $11,000 per month. A nursing home can cost anywhere from $10,000 to $15,000 per month. Few people could afford to pay for these costs for very long without bankrupting themselves.
For over twenty years, my law practice has involved helping people qualify for Medicaid benefits. In that time, I have successfully helped hundreds of my clients qualify for Medicaid benefits. Most of my clients never thought they would ever need to qualify for Medicaid benefits. Most every one of them never wanted to qualify for Medicaid benefits. But faced with the crushing costs associated with long term care, my clients feel compelled to qualify for Medicaid benefits.
When faced with long term care costs and armed with some knowledge of the Medicaid program, most people’s first reaction is to think, I’ll give away all my money and qualify for Medicaid. Medicaid will then pay for the cost of my care.
The people who wrote the Medicaid law are well aware of this basic human reaction, so they wrote a provision into the law that covers this issue. It is commonly called the “five-year lookback rule.” In a nutshell, if an applicant for Medicaid benefits gave away any of his assets during the five-year period immediately preceding the date of his application, then the Medicaid office will rendered the person ineligible for Medicaid benefits. The more money that a person gave away during the lookback period, the longer he is ineligible for Medicaid benefits.
In New Jersey, for every $11,000 that the person gave away during the lookback, he is ineligible for one month. So, for example, if a person gave away $33,000 in the past five years (and the Medicaid office aggregates all the transfers that the applicant made during the lookback period), then he would be ineligible for Medicaid benefits for three months. This rule is commonly called the “asset transfer rule.”
There are certain exceptions to the asset transfer rule. For instance, a person can transfer his home to a caregiver child who lived with the applicant for, at least, two years immediately preceding the date of application and who provided a level of care to the applicant/parent that permitted the applicant/parent to reside in his home instead of in a nursing home. If the child satisfies the caregiver child exception criteria, then the parent can transfer his home to the child without any penalty being assessed against the applicant for the gift. The value of the home is irrelevant, so this is a very big exception because the parent could gift a $500,000 home without incurring a penalty period for Medicaid eligibility.
About five years ago, the State began imposing restrictions on the caregiver exception that did not exist in the law. The State rarely ever stated these restrictions in writing and when confronted with the illegality of the restrictions that State would play coy (“Oh. We never said that.”)
One illegal restriction was that the caregiver child could not work outside the home. In other words the caregiver child couldn’t have a job. Another illegal restriction was that the caregiver child had to provide care to the parent twenty-four hours a day, seven days a week. Ridiculous.
In a recent case, the Appellate Division rebuked the State wholesale. The Court stated that not only is there no requirement that says the child cannot work but that working outside the home was actually beneficial to the applicant/parent because it meant that the child could contribute financially to the household.