Resident Who Transferred Assets and Applied for Medicaid Breached CCRC Contract

A New York appeals court held that a continuing care retirement community (CCRC) resident is required to spend the assets disclosed in the CCRC’s admission agreement on nursing home care before applying for Medicaid. Good Shepard Village at Endwell Inc. v. Yezzi (N.Y. Sup. Ct., App. Div., 3rd Dept., No. 520621, Nov. 5, 2015).  The decision means that CCRC resdidents should proceed cautiously with Medicaid eligibility planning.

Hazel and Peter Yezzi moved into a CCRC after signing an admission agreement that disclosed their assets. The contract with the CCRC provided that that the Yezzis could not transfer their assets for less than fair market value if it would impair their ability to pay their monthly fees. Mrs. Yezzi entered the nursing home, transferred her assets to Mr. Yezzi, and applied for Medicaid. The CCRC refused to accept the Medicaid payments.

The CCRC sued Mr. Yezzi (Mrs. Yezzi died in the nursing home) for breach of contract and fraudulent conveyance, arguing that the Yezzis were obligated to use the funds disclosed in the CCRC admission agreement before applying for Medicaid. The trial court granted the CCRC summary judgment, and Mr. Yezzi appealed.

The New York Supreme Court, Appellate Division, 3rd Dept., affirmed, holding that Mrs. Yezzi's transfer of assets for less than fair market value constituted a breach of contract. According to the court, under federal and state law the CCRC "could require a resident to first spend the resources identified upon admission before applying for Medicaid" because "the essence of the CCRC financial model requires a tradeoff between the resident and the facility, in which the resident must disclose and spend his or her assets for the services provided, while the facility must continue to provide those services for the duration of the resident's lifetime even after private funds are exhausted and Medicaid becomes the only source of payment."