Scrivener’s Error and Limited Power of Appointment Do Not Make Property Available to State to Recoup Medicaid Benefits

A recent Massachusetts land court ruling is instructive regarding the extent to which states will go in attempting to collect resources for Medicaid. 

Athena and Sotirios Koutoukis hired an attorney to transfer ownership of their real estate to their daughters, creating and retaining a life estate for their benefit.  They also  retained a power of appointment to convey the property to their children. Mr. Koutoukis received MassHealth (Medicaid) benefits before he died. After Mr. Koutoukis’s death, the attorney for the estate discovered that the deed included the words “tenants in common for life and further,” which was an error.

The estate filed an action in probate to correct the scrivener’s error, and the state filed a claim against the estate in order to recoup the Medicaid benefits paid on Mr. Koutoukis’s behalf. The state filed for summary judgment, arguing that because Mr. Koutoukis left property in his will to his wife, he did not intend to create a life estate and that the power of appointment in the deed made the property a countable asset. The estate also filed for summary judgment. The Massachusetts Land Court, Department of the Trial Court, granted summary judgment for the estate benefitting the Koutoukis family, holding that the deed can be reformed to correct the mistake, and the state cannot recoup benefits from the property.  Estate of Koutoukis v. Secretary of the Executive Office of Health and Human Services (Mass. Land Ct., Dept. of the Trial Ct., No. 20 MISC 000004 (RBF), Sept. 17, 2021). 

The court held that the power of appointment in the deed is a limited power that did not permit the Koutoukises to grant the property to themselves, so the property was not a countable asset for Medicaid purposes.  More importantly, the court wrote that the evidence clearly established that the Koutoukises intended to create a life estate, and the state did not provide any evidence to the contrary:

On a motion for summary judgment, the nonmoving party cannot create a dispute of material fact simply by declaring that it disputes the material fact. The nonmoving party is supposed to provide some evidence that disputes the fact; that is, some evidence that, if credited, would support the opposite of the claimed undisputed fact. On these cross-motions for summary judgment, the defendant Secretary of the Executive Office of Health and Human Services (EOHHS) has attempted to forestall summary judgment on the plaintiffs’ claim for reformation of a deed due to a scrivener’s error by the simple expedient of saying the affidavits provided by the plaintiffs do not support the claim, without providing any evidence of its own to the contrary.

As the affidavits do support the claim for reformation, there is no dispute of material fact. Based on the undisputed material facts and the applicable law, summary judgment shall enter reforming the subject deed to clarify that the parties’ intent was to create a life estate, and declaring that the life estate and the limited power of appointment in the deed do not make the subject property a 

The court noted that state "has denied many of the asserted facts relating to the claim of scrivener’s error in the subject deed without providing any affidavits or other evidence whatsoever."  

Estate of Koutoukis, at p. 4.  

The court concluded that the state cannot recoup Medicaid benefits from a Medicaid recipient’s property, left in a life estate notwithstanding a scrivener’s error,  and a limited power of appointment. Estate of Koutoukis v. Secretary of the Executive Office of Health and Human Services (Mass. Land Ct., Dept. of the Trial Ct., No. 20 MISC 000004 (RBF), Sept. 17, 2021). 

Liberal Magazine Fires Shot Across the Bow of Cruise Ship Roth IRA

A Roth IRA is an individual retirement account (IRA) that allows qualified withdrawals on a tax-free basis provided certain conditions are satisfied. Established in 1997, it was named after William Roth, a former Delaware Senator.  Roth IRA's are popular investment choices for Americans.

Roth IRAs are similar to traditional IRAs, the biggest distinction between the two being how they are taxed. Roth IRAs are funded with after-tax dollars; the contributions are not tax-deductible. Once you start withdrawing funds, the money is tax-free. Conversely, traditional IRA deposits are generally made with pretax dollars; you usually get a tax deduction on your contribution and pay income tax when you withdraw the money from the account during retirement.

Many people use Roths because account holders don't have to start taking distributions at age 70½ as they do with traditional IRAs. The money can sit untouched and grow tax-free throughout the owner's lifetime—a big plus for those who don't need the assets to live on. And while those who inherit any type of IRA must start taking distributions immediately, they are permitted to stretch out those payments, allowing the bulk of a Roth account to continue growing tax-free.

This and other key differences make Roth IRAs a better choice than traditional IRAs for some retirement savers. They are, at the same time, increasingly unpopular among those who champion government intervention to alleviate wealth disparity.  I have warned investors to consider seriously possible future changes to the laws governing Roth IRA's before investing, and particularly before implementing IRA conversions, i.e., liquidating a traditional IRA, and paying the taxes on the investment, in order to convert the investment to a Roth IRA that permits future tax-free withdrawals of both principal and income. See, "Roth IRAs Dim as Inheritance Vehicles- Beware the Rush to Covert."

Mother Jones Magazine (MJ) recently published an article critical of the government continuing to "support" wealthy individuals in an effort to avoid taxation using Roth IRA's. The article may be the first in a coming onslaught of attacks against the investment option, and may be a bell weather indicating reform. 

Although the article often reads more like a partisan platform or political screed (the article is openly published under the MJ "Politics" section), language choice, narrative, and hyperbole aside, the article explores the uses and misuses of the Roth IRA, particularly as a tool of the ultra-wealthy: 

"For many working Americans, a Roth IRA is a useful, if not particularly interesting, way to save money for retirement. For tech billionaire Peter Thiel, it was a way to accumulate more than $5 billion. The nonprofit journalism shop ProPublica ran an exposé in June revealing how a small number of extremely wealthy folks had ended up with Roths—federally subsidized retirement accounts meant for middle-class savers—worth tens to hundreds of millions of dollars and up. Thiel did so, the article noted, by “stuffing” his Roth IRA with wildly undervalued “founders shares” of pre-IPO startups—potentially an illegal tactic—and then watching as their values rose exponentially, and completely tax-free.

The story prompted congressional leaders to request data from the nonpartisan Joint Committee on Taxation, which reported that, as of 2019, more than 28,000 Americans held combined (Roth and traditional) IRA balances of $5 million or more, and 497 taxpayers had balances of at least $25 million. The latter group had socked away a combined $77 billion in their IRAs—on average, more than $150 million each. 'IRAs were designed to provide retirement security to middle-class families, not allow the super wealthy to avoid paying taxes,' Sen. Ron Wyden (D-Ore.) lamented in a press release.  

But it turns out IRAs are only the tip of the iceberg. The bigger problem, according to Steve Rosenthal, a tax attorney and senior fellow at Urban-Brookings Tax Policy Center, is that, thanks to a series of bipartisan bills Congress has passed over the past quarter-century, the government spends a fortune subsidizing a whole range of retirement plans whose benefits flow overwhelmingly to America’s most affluent. 'It’s unbelievable the amounts of dollars at stake, and how tilted they are to the high end,' Rosenthal told me. 'It’s just staggering.'"

The author acknowledges that reform of the Roth IRA is not likely or particularly popular, right now:

“'The wealth defense industry—the lawyers, accountants, and wealth managers to the super-rich—are paid millions to sequester trillions, stretching the limits of the law and sometimes writing the law themselves,' says Chuck Collins, director of the Program on Inequality and the Common Good at the Institute for Policy Studies and author, most recently, of a book titled The Wealth Hoarders. 'They have fracked every corner of the tax code, especially tax-advantaged retirement programs, to extract benefits for their wealthy clients.'"

The article concludes with a contributing source explaining possible reforms and illustrating the lack of receptiveness there is for reform in Congress: 

"'To prevent stuffing and other kinds of self-dealing, [Steve Rosenthal, a tax attorney and senior fellow at Urban-Brookings Tax Policy Center] continues, Congress should just forbid people from holding non–publicly traded assets—like shares of a pre-IPO startup—in an IRA. Lawmakers also could enact a combined asset limit that covers all types of tax-advantaged retirement plans—as first proposed by the Obama administration. They also could strengthen nondiscrimination rules or consider shoring up Social Security—which appears to be in trouble—instead of further enriching the families who need the least help in their old age. “Congress will struggle to solve the problem they created,' Rosenthal told me in an email. 'But the longer they wait, the harder it will be.'

He’s not holding his breath. In July, when the Senate Finance Committee held a hearing titled 'Building on Bipartisan Retirement Legislation: How Can Congress Help?,' Rosenthal and University of Chicago professor Daniel Hemel submitted a statement for the record, but most of the professionals present at the hearing were part of what he calls the retirement-industrial complex: 'The benefits community, the practitioners, the retirement service industry—they testified. Nobody was invited to testify who says the emperor has no clothes.'"

MJ, despite is controversies, and mis-fires, has often been at or near the forefront of a once controversial position moving mainstream.  MJ was, for example, among the first to overtly connect Former President Trump to the alt-Right, although it's effort was roundly criticized, from the Left because its article portrayed a neo-nazi in a "positive" light.   

More importantly, the past few years have demonstrated just how quickly change is possible.  Roth IRA's, like all investment options, should be considered carefully. 

Nursing Homes Create Phony Diagnoses to Sedate Patients with Dangerous Drugs, Doubling Risk of Death

The New York Times (NYT), in a recent front-page Sunday article, "Phony Diagnoses Hide High Rates of Drugging at Nursing Homes," explores and exposes the use of chemical restraints, including antipsychotic medications, to control behavior of  long-term care residents. This blog has previously discussed the use of pointless  and dangerous drugs dispensed to terminally ill dementia patients in nursing homes.  See, "Most Terminal Dementia Patients in Nursing Homes Given Pointless and Potentially Dangerous Drugs."

Antipsychotic drugs have faced criticism for decades as “chemical straitjackets. They are medically unnecessary and dangerous for older people with dementia, nearly doubling their chance of death from heart problems, infections, falls and other ailments. Understaffed nursing homes have, nonetheless, often used the sedatives so they don’t have to hire more staff to handle residents.  

The battle against this pernicious practice is not new.  In 1987, President Ronald Reagan signed a law banning the use of drugs that serve the interest of the nursing home or its staff, not the patient.

But the practice persisted. In the early 2000s, studies found that antipsychotic drugs like Seroquel, Zyprexa and Abilify made older people drowsy and more likely to fall. The drugs were also linked to heart problems in people with dementia. More than a dozen clinical trials concluded that the drugs nearly doubled the risk of death for older dementia patients.

In 2005, the Food and Drug Administration (FDA) required manufacturers to put a label on the drugs warning that they increased the risk of death for patients with dementia.  While FDA advisories generated public awareness, it is well known that prescribers’ compliance with black-box warnings is low. Seven years later, in 2012, with antipsychotics still widely used, nursing homes were required to report to Medicare how many residents were getting the drugs. That data is posted online and becomes part of a facility’s “quality of resident care” score, one of three major categories that contribute to a home’s star rating.

The only catch: antipsychotic prescriptions for residents with any of three uncommon conditions, schizophrenia, Tourette’s syndrome and Huntington’s disease, are not included in a facility’s public tally. The theory was that since the drugs were approved to treat patients with those conditions, nursing homes shouldn’t be penalized.

The loophole was opened. The NYT has discovered that residents are simply  given "new" diagnoses of, for example, schizophrenia, attempting to justify the sedation associated with major antipsychotic medications, such as Haldol, despite the fact that such medications are contraindicated for dementia patients. According to the NYT, since 2012, the share of residents classified as having schizophrenia has risen to 11 percent from less than 7 percent.  The diagnoses rose even as nursing homes reported a decline in behaviors associated with the disorder. The number of residents experiencing delusions, for example, fell to 4 percent from 6 percent.

Today, one in nine residents has received a schizophrenia diagnosis. In the general population, the disorder, which has strong genetic roots, afflicts roughly one in 150 people.  Moreover, Schizophrenia, which often causes delusions, hallucinations and dampened emotions, is almost always diagnosed before the age of 40.

“People don’t just wake up with schizophrenia when they are elderly,”  Dr. Michael Wasserman, a geriatrician and former nursing home executive who has become a critic of the industry told the NYT. “It’s used to skirt the rules.”

Some portion of the rise in schizophrenia diagnoses probably stems from the fact that nursing homes, like prisons, have become a refuge of last resort for people with the disorder, after large psychiatric hospitals closed decades ago.

But unfounded diagnoses are also undoubtedly driving the increase. In May, a report by a federal oversight agency said nearly one-third of long-term nursing home residents with schizophrenia diagnoses in 2018 had no Medicare record of being treated for the condition.  Even for those for which there was some record of treatment, the treatment records, do not provide important details about the drug use (e.g., which antipsychotic drugs were prescribed; at what quantities and strengths; and for what durations).  The lack of treatment records suggest the drugs are not being prescribed to treat a legitimate condition, but are being used for other purpose.

The revelation should come as no surprise: many facilities have found ways to hide serious problems, like inadequate staffing and haphazard care, from government audits and inspectors.  The problem with misreporting staffing was so outrageous that, in 2019, CMS actually demanded payroll reports to verify nursing home reporting of staff numbers, immediately after which implementing such verification, more than one-third of nursing homes saw their ratings decline. See, this blog's article: "Medicare Ratings Fall for Short-Staffed Nursing Homes- One-Third of Nursing Homes See Ratings Drop."  There were a minority of nursing homes that didn't even have a staff nurse, resulting in home closures. 

The NYT, demonstrating the power of investigative journalism, reports:

According to Medicare’s web page that tracks the effort to reduce the use of antipsychotics, fewer than 15 percent of nursing home residents are on such medications. But that figure excludes patients with schizophrenia diagnoses.

To determine the full number of residents being drugged nationally and at specific homes, The Times obtained unfiltered data that was posted on another, little-known Medicare web page, as well as facility-by-facility data that a patient advocacy group got from Medicare via an open records request and shared with The Times.

The figures showed that at least 21 percent of nursing home residents...are on antipsychotics [link included in original].

That means a full one in five nursing home residents are receiving potentially unnecessary and dangerous medications!  The reasons why this practice continues are obvious: caring for dementia patients is time- and labor-intensive. Workers need to be trained to handle challenging behaviors like wandering and aggression. But many nursing homes are chronically understaffed and do not pay enough to retain a sufficient number of employees, especially the nursing assistants who provide the bulk of residents’ daily care. 

Studies have found that the worse a home’s staffing situation, the greater its use of antipsychotic drugs. That suggests that some homes are using the powerful drugs to subdue and sedate patients to avoid having to hire extra staff, or alternately to relieve already over-worked staff from the burden of caregiving.  According to the NYT analysis of Medicare data, homes with staffing shortages are also the most likely to misrepresent the number of residents on antipsychotics.

Staffing shortages are extreme, and threatening, made worse by a pandemic that has battered the industry. Nursing home employment is down more than 200,000 since early last year and is at its lowest level since 1994.

As staffing dropped, the use of antipsychotics rose.

Recent vaccine mandates further threaten industry staffing. In fact, following an announcement from President Biden that all nursing home staff will be required to be fully vaccinated against COVID-19 in a forthcoming regulation, the nursing home industry warned about the potential impact on the profession’s already challenging workforce situation. Industry leaders are deeply concerned that it may cause a "mass exodus" from the nursing home profession, leaving frail seniors without the caregivers and access to care they need.

In Ohio, only 54.3% of nursing home staff have been vaccinated, according to federal data.  Pete Van Runkle, head of the Ohio Health Care Association, which represents the state's for-profit long-term care facilities, fears additional staffing shortages. A facility in Ohio on average has 19 open positions it can't fill, according to a recent Ohio Health Care Association survey. The mandate could make things worse, Van Runkle has said.

"I'm scared to death of what that's going to look like," he said.

Van Runkle noted there was one large long-term care company that voluntarily mandated vaccines, only to walk it back later after workers threatened to leave.

Staff exodus will only increase the already strong incentives to misuse and abuse drugs as chemical restraints.  According to the NYT, the country’s leading experts on elder care are already "taken aback" by the frequency of false diagnoses and the overuse of antipsychotics.  Barbara Coulter Edwards, a senior Medicaid official in the Obama administration, told the NYT she discovered that her own father was given an incorrect diagnosis of psychosis in the nursing home where he lived even though he had dementia.

“I just was shocked,” Ms. Edwards said. “And the first thing that flashed through my head was this covers a lot of ills for this nursing home if they want to give him drugs.”

In 2019 and again in 2021, Medicare said it planned to conduct targeted inspections to examine the issue of false schizophrenia diagnoses, but those plans were repeatedly put on hold because of the pandemic.

In an analysis of government inspection reports, The NYT found about 5,600 instances of inspectors citing nursing homes for misusing antipsychotic medications. Nursing home officials told inspectors that they were dispensing the powerful drugs to frail patients for reasons that ranged from “health maintenance” to efforts to deal with residents who were “whining” or “asking for help.”  

"Asking for help."  Let that sink in.

Filial Responsibility- Resident’s Son Not Liable for Breach of Contract Because He Did Not Cause His Mother to Be Ineligible for Medicaid

The efforts of nursing homes to create and enforce filial responsibility, even where state legislators have not enacted such legislation, is a frequent topic of articles on this blog.  See, for example, the following: 

• Judge Can Not Impose an ‘Unusual’ Condition on a Reversal of a Default Judgment in a Nursing Home Breach of Contract Lawsuit;
• Tortious Interference With Contractual Relationship Claim Most Recent Possible Remedy Nursing Homes can Employ Against Children of Nursing Home Residents;
• Conservator Owes Duty to Nursing Home to Timely Apply for Medicaid;
• Agent Under Power of Attorney Liable for Damages to Nursing Home for Breach of Contract;
• Conveyance to Son Was Fraudulent, But His Siblings May Also Be Liable Under Filial Support Law;
• Nursing Home May Sue Resident's Daughter for Breach of Contract.

A recent case demonstrates just how aggressive a nursing home can be when protecting its interests.  A New York appeals court ruled, though, that the nursing home resident’s son, who signed an admission agreement agreeing to take all necessary steps to provide documentation for his mother’s Medicaid application, is entitled to summary judgment in a breach of contract claim by the nursing home, because there was no evidence his actions caused her to be ineligible for Medicaid. Wedgewood Care Center, Inc. v. Kravitz (N.Y. Sup. Ct., App. Div., 2nd Dept., No. 2017-12681, Aug. 18, 2021).

Eric Kravitz admitted his mother, Beatrice Kravitz, to a nursing home and signed an admission agreement. The admission agreement stated that Mr. Kravitz would be personally liable if he failed to take all necessary steps to provide requested documentation to Medicaid or if his actions contributed to non-payment of fees. The nursing home applied for Medicaid on Ms. Kravitz’s behalf, but the state determined she had excess resources. Ms. Kravitz died owing the nursing home almost $50,000.

The nursing home sued Mr. Kravitz for breach of contract, claiming that he failed to provide documentation to assist with Ms. Kravitz’s Medicaid application and that he had control over some of Ms. Kravitz’s assets. The nursing home argued that Mr. Kravitz was contractually obligated to have Ms. Kravitz sign a release of her financial records and obtain documentation from other entities. Mr. Kravitz filed a motion for summary judgment, arguing that the state did not deny Medicaid coverage because of his actions. The trial court granted the nursing home summary judgment. Mr. Kravitz appealed.

The Supreme Court of New York, Appellate Division, 2nd Department, reversed and granted summary judgment to Mr. Kravitz on the breach of contract claim relating to his failure to cooperate with the Medicaid application. The court ruled that the “admission agreement did not require the defendant to provide documents or information that were not within his possession or control” and that Mr. Kravitz’s actions did not cause Ms. Kravitz to be ineligible for Medicaid. According to the court, “the admission agreement expressly limited the scope of the [Mr. Kravitz’s] liability to circumstances where his own breach of the agreement constituted a proximate cause of the [nursing home’s] damages.” 

The court also ruled that although Mr. Kravitz had control over some of Ms. Kravitz’s assets, the nursing home did not demonstrate that those assets were available to pay for her care. The court remanded the case for further proceedings to consider Mr. Kravitz's duty to use his mother's assets to pay the nursing home.

The case is not over.  The son lost in the trial court, but won on appeal, sending the case back to the trial court for further consideration.  The son may or may not prevail before the trial court upon reconsideration, but one thing is clear- the son has expended and lost what is probably an extraordinary amount in legal expense and time, simply because he was the person responsible for his mom, and that placed him between the nursing home and money.   

Medicare Advantage Plans and Staffing Shortages Slowing Hospitals Discharges to Nursing Homes

Skilled nursing admissions are being slowed by both staffing shortages and Medicare Advantage restrictions.  According to a recent article in Mcknight's Long-term Care News, the delays  are threatening log jams in "hospitals desperate to discharge patients to post-acute care and free up needed beds."  The problem is especially pronounced in states with high COVID-19 case rates. 

Hospital executives and healthcare leaders have complained that the prior authorizations needed to send no-longer acute patients on to post-acute care have always come slowly in states like Florida, Louisiana and Oregon. But the problem is limiting access to care for would-be hospital admits during the ongoing delta surge.

Many Medicare Advantage plans have suspended their restrictions during this stage of the pandemic, but their replacement requirements and expiration dates vary. Humana’s waiver for Louisiana lasts until Sept. 17, while Florida Blue’s is open-ended. 

Some want uniformity directed by state or federal regulation.  “The challenge when it is not being directed by a state or federal agency is you have significant variation from one plan to the next as to how they are providing the flexibility, which creates more confusion at a time when we need to minimize as much confusion as possible,” Mary Mayhew, CEO of the Florida Hospital Association, told Modern Healthcare.

In places where waivers exist, they can be highly effective. AdventHealth in Altamonte Springs, FL, estimated waivers issued by some Medicare Advantage plans cut transitions into post-acute care down to about 24 hours.

“If the waiver goes away, we are concerned hospitals could return to seeing delayed transfers contribute to challenging capacity constraints,” said Lisa Musgrave, vice president of home care administration and post-acute services.

The American Hospital Association has been working with the Centers for Medicare & Medicaid Services (CMS) and Medicare Advantage organizations to “encourage adoption of these waivers.”  For its part, CMS issued a memo that “strongly encouraged” plans to relax prior authorizations “to facilitate the movement of patients from general acute-care hospitals to post-acute care and other clinically-appropriate settings, including skilled nursing facilities.”

Whether skilled nursing facilities could accept patients more quickly if prior authorizations are lifted remains to be seen. Kristen Knapp, spokeswoman for the Florida Health Care Association, said the larger issue “is all about staffing.”

A survey of FHCA members in early August found half had had to reduce admissions in the previous month due to worker shortages.

“The workforce crisis is real, and while we want to be good community partners during the surge, nursing centers right now are doing everything they can to maintain and recruit more staff to support the patients they are currently caring for,” Knapp told McKnight’s Long-Term Care News.