Use of Filial Responsibility to Collect a Nursing Home Debt Survives Federal Challenges

The State of Pennsylvania is racking up victories supporting the use of filial responsibility in resource recovery of Medicaid benefits.  Future courts will likely point to the Second Circuit Court's decision in Eades v. Kennedy, PC Law Offices (U.S. Ct. App., 2nd Cir., No. 14-104-cv, June 5, 2015) as a peculiarly important case paving the way for greater reliance upon filial responsibility.  Aside from the fact that the case concerned an effort to collect funds from a Medicaid recipient's family who were residents of another state, the court specifically rejected any claim that existing federal law preempts  state filial responsibility.

The U.S. Court of Appeals held that a law firm that was attempting to collect a debt from a nursing home resident's family did not violate debt collection law when it filed a lawsuit against the family based on Pennsylvania's filial support law.  Joni Eades' mother died owing the Pennsylvania nursing home she resided in around $8,000. The nursing home hired Kennedy, PC Law Offices to collect the debt from Ms. Eades and her father, who resided in the State of New York. Kennedy sent a letter to Ms. Eades, stating that she could be held liable for the debt under Pennsylvania's filial support statute. During a phone call with Ms. Eades, a Kennedy employee allegedly stated that if the debt was not paid, Kennedy would put a lien on her father's house and garnish her wages.

Kennedy filed a complaint against Ms. Eades and her father for failing to pay the debt. Ms. Eades and her father filed a lawsuit in federal court against Kennedy alleging that it violated the fair debt collection law. The district court granted Kennedy's motion to dismiss, ruling that it did not have jurisdiction over Kennedy and that Ms. Eades’ obligation to pay the nursing home was not a debt. Ms. Eades and her father appealed.

The U.S. Court of Appeals, Second Circuit, affirmed in part but remanded  part of the case. The court held that while the court does have jurisdiction over Kennedy and while Ms. Eades' obligation to pay the nursing home was a debt, there was no conflict between the federal nursing home law and Pennsylvania's support law, so filing a lawsuit under the filial support law did not violate the debt collection law.

The court held that federal law did not preempt the Pennsylvania law.  Eades argued that the federal Nursing Home Reform Act (NHRA), which prohibits nursing homes from requiring third party guarantees of payment, preempted the Pennsylvania law.  The court disagreed: 

"[T]he NHRA is not inconsistent with the Pennsylvania indigent support statute, which holds an indigent person’s spouse or child liable for the person’s maintenance or financial support, unless the spouse or child is financially unable to support the indigent person or meets other statutory exceptions. 23 Pa. Cons. State 4603(a).  By its terms the Pennsylvania statute does not appear to condition the continuing care of the indigent person on a family member’s financial support. Thus, a nursing home can petition a court to order an indigent resident’s spouse or child to pay for the resident’s nursing home care pursuant to the state statute without violating the NHRA, as long as the nursing home refrains from conditioning the resident’s admission, expedited admission, or continued stay on a third party guarantee of payment. For these reasons, we conclude that the indigent support statute does not conflict with the NHRA."

The court did remand the case to the district court to consider the the issue of whether the phone call from the Kennedy employee to Ms. Eades violated the debt collection law.

For the full text of this decision, go here.

SSA Clarifies Its Position on Court-Established (d)(4)(A) Trusts

Responding to criticism from advocates that the Social Security Administration (SSA) was unfairly refusing to allow court-established (d)(4)(A) trusts to qualify as exempt resources for Supplemental Security Income (SSI) purposes, the SSA has issued an Administrative Message clarifying its policy regarding these trusts and ordering officials to approve the trusts if they meet the other (d)(4)(A) requirements and were not created prior to the order issued by the court.

Apparently based on the SSA's Trust Training Fact Guide, some SSA offices have recently been refusing to approve court-established (d)(4)(A) trusts because they were not created by a court "order."  Since people with disabilities are unable to establish their own (d)(4)(A) trusts, if the SSA's position were uniformly applied it would mean that no court could ever establish a (d)(4)(A) trust unless it did so on its own initiative.

The SSA has now issued an Administrative Message, first published by Illinois attorney and Social Security expert Avram L. Sacks on the NAELA members listserv, explaining that the rejection of court-established (4)(d)(A) trusts is inappropriate when the trust was not finalized prior to the court's action.  The message states that "[i]n the case of a special needs trust established through the actions of a court, the creation of the trust must be required by a court order for the exception in section 1917(d)(4)(A) of the Act to apply. That is the special needs trust exception can be met when courts approve petitions and establish trusts by court order, so long as the creation of the trust has not been completed before, the order is issued by the court. Court approval of an already created special needs trust is not sufficient for the trust to qualify for the exception. The court must specifically either establish the trust or order the establishment of the trust."

The message goes on to give four clarifying examples of situations where trusts may or may not fit this criteria.  In the first example, an SSI beneficiary's sister petitions the court to create and order the funding of a trust to hold the beneficiary's inheritance.  The sister provides a draft trust to the court.  When the court issues an order approving the petition and ordering the creation of the trust, it will meet the requirements of SI 01120.203B.1.f.  In the second example, a judge orders the creation of a trust to hold a settlement, and the trust document lists the settlement as the trust's original corpus.  This trust also passes muster with the SSA.  In the two negative examples, the SSA claims that when a court approves a trust that has already been created ahead of time, or when a court amends a defective trust with a nunc pro tunc order to make the amendment retroactive to the date the trust was originally created, the trusts will not qualify for the special needs trust exception.

Click here to read the SSA's entire message.

Get legal Advice When Applying for Medicaid- State Can Recover From a Medicaid Recipient's Estate Even Though Estate Would Have Qualified for Hardship Waiver

A recent case underscores the importance of seeking and obtaining legal advice when dealing with Medicaid resource recovery.  A Michigan appeals court has ruled that a Medicaid recipient's estate cannot avoid estate recovery by claiming undue hardship because the state didn't pursue a hardship waiver when it had the chance. In re Estate of Clark (Mich. Ct. App., No. 320720, May 28, 2015).

Larry Wykle enrolled his mother, Violet Clark, in Medicaid. The application included an acknowledgment that the state may try to recover for services from Ms. Clark's estate and that the state may agree not to pursue recovery if an undue hardship exists. After Ms. Clark died, Mr. Wykle became the administrator of her estate. The state notified Mr. Wykle that it intended to recover Medicaid expenditures. The notice included information about applying for a hardship exemption. The estate's only asset was a house that was valued at less than the average price of a home in the area, which under the state Medicaid plan would have made it eligible for a hardship exemption.

Mr. Wykle did not pursue the hardship waiver and he denied the state's claim. The state sued the estate. Mr. Wykle argued that the estate could not collect against the estate because the value of the home qualified for a hardship waiver, and that the state did not provide Mr. Wykle with information how to apply for a hardship waiver, informing him only that such a waiver was available.  The trial court granted the estate summary judgment because the estate consisted only of a modest household and the state did not provide Mr. Wykle with information on how to apply for a hardship waiver when he enrolled Ms. Clark in Medicaid.The state appealed.

The Michigan Court of Appeals reversed, holding that Mr. Wykle received proper notice of the hardship exemption and that the hardship exemption does not prevent the state from pursuing estate recovery against an estate that might have qualified, but did not apply. The court rules that Mr. Wykle "cannot now attempt to avail himself of the waiver’s benefits without having followed the procedural rules necessary to claim the benefit." In addition, the court rules that the written notice about the waiver in the application was sufficient.

For the full text of this decision, click here.

State Cannot Modify Penalty Period Unless All Transferred Assets Are Returned

A New Jersey appeals court has held that a Medicaid applicant's penalty period cannot be modified unless all the assets transferred during the look-back period are returned. C.C. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., No. A-4291-13T4, May 29, 2015 unpublished).

C.C. sold her house and gave half the proceeds ($99,233.75) to her nephews. She applied for Medicaid and the state imposed a 387-day penalty period based on the transfer. During the penalty period, her nephews returned $17,000 to pay for her care.

C.C. argued that the state should reduce her penalty period because the nephews returned $17,000. The state determined that it could not reduce a penalty period unless all the transferred funds are returned. C.C. appealed to court.

The New Jersey Superior Court, Appellate Division, agreed with the state that the penalty period should not be changed. The court holds that "both federal and state law require the return of all assets transferred during the look-back period in order to modify the penalty."

For the full text of this decision, click here.

Spouses of Hospice Residents Less Likely to Become Depressed

Symptoms of depression are less common in the spouses of hospice residents when compared to families where hospice was not involved, a recent study suggests.  Investigators at Mount Sinai's Icahn School of Medicine in New York City studied data from a national survey and Medicare claims, and followed more than 1,000 surviving spouses of deceased patients who were over age 50. They found those whose spouses were in hospice for at least three days were less depressed, and the positive effect was more prominent a year after the death.

Although they could not correlate specific services with improvement of symptoms, hospice offered medical services, symptom management, spiritual counseling, social services and bereavement counseling.  These services are provided to patients and their immediate families.

Approximately 45% of terminally ill residents die while receiving hospice care in the U.S, more than a 20% increase from the past decade.

This was the first national study to examine the mental health of spouses of residents with all types of serious illnesses.  Prior studies focused mostly on cancer patients and their families.

Source: McKnight's