A New Jersey woman with dementia, asthma, diabetes, and a high fall risk was told by Medicaid she was "clinically ineligible" for nursing home care, despite her doctors begging to differ. As a consequence, her Medicaid benefit was terminated, and she was essentially evicted. Although rare, this is a circumstance most people don't even consider in their planning. When we talk about "worst case scenarios," this might be an example of the most severe "worst case."
An October 16, 2025, New Jersey Appellate Division ruling in R.G. v. Division of Medical Assistance and Health Services, upheld the state's decision to cut off her benefits, forcing her to leave the facility where she'd lived safely for years. But here's the cruel twist: if R.G. had followed typical Medicaid crisis planning, selling her home to spend down assets, or if she had strategically transferred it to her children (even permissibly under the 5-year look-back), and the house was sold, she'd have no home to return to.
For readers of the Aging in Place Planning and Elder Law Blog, this isn't just a legal upset; it's a chilling reminder that even when you're in a nursing home, Medicaid can pull the rug out from under you, thrusting you into homelessness or family dependence. As we've explored repeatedly on this Blog, proactive tools like advance directives, supported decision-making (SDM) agreements, and trusts can help families navigate these shocks, preserving choice and dignity. This article breaks down the case in plain language, the devastating real-world impacts (including the "no home to go back to" nightmare), and five bulletproof strategies to protect your care plan, whether in a facility or at home.The Case: A Nurse's Assessment Trumps Doctors' Testimony
R.G., a 67-year-old woman with multiple chronic conditions, was admitted to Autumn Lake Healthcare nursing home in 2021 after a Medicaid assessment deemed her in need of nursing facility level of care (NFLOC). COVID paused annual reviews, but her managed care organization (MCO) noted in 2021 and 2022 that she'd "completed rehab" and was "independent with all ADLs" (activities of daily living).
In May 2023, nurse Carolyn Burton, working for the Office of Community Choice Options (OCCO), reassessed R.G. She observed R.G. walking with a walker, interviewed her (R.G. said she was independent), reviewed facility charts (showing no ADL assistance needed despite the walker), and spoke with staff, all confirming self-sufficiency according to Burton. OCCO declared R.G. ineligible for NFLOC under New Jersey regulations, requiring dependence in 3 or more ADLs or severe cognitive impairment.
R.G. appealed (it is likely that her family appealed on her behalf). An Administrative Law Judge (ALJ) sided with her, crediting testimony from her primary doctor, Dr. Graci, and experts who warned of a "high fall risk" and medical complexity. Graci testified that she suffered from "several medical conditions which increased her fall risk and medical risk in general," including pulmonary disease, asthma, sleep apnea requiring a positive pressure device and oxygen at night, high blood pressure, osteoarthritis in her knees, and a meniscal tear in her left knee that was repaired surgically." Dr. Graci testified:
R.G. is dependent on others for "instrumental activities of daily living" including "shopping, housekeeping, accounting, food preparation[,] and transportation" and "has difficulty navigating steps." She requires assistance using the toilet because of her obesity and "mobility deficits from her arthritis.He reviewed a report from her endocrinologist that noted R.G. has "a myriad of medical complications" in "addition to diabetes" and "her ability to properly care for herself is...inhibited by cognitive and emotional impairment." Graci opined that outside Autumn Lake, R.G. "would be very high-risk for hospitalization and poor health outcomes."
Another Doctor, Dr. Alexescu, a gerontologist, testified that R.G. exhibited "low oxygen saturation levels, which could result in a fall." She testified that R.G.s medical conditions are chronic, and that "[i]n an environment where she might not have adequate administration of medication, supervision with compliance with the medications, [and] supervision...with the diet...she would go into exacerbation of the chronic conditions...that will end up requiring hospitalizations." She did not believe R.G. "has the ability to maintain her reasonable standard of living out of a nursing home or out of an assisted living facility."
But, on appeal by the State, the Division reversed, upholding OCCO's decision. The Appellate Division determined that the nurse's comprehensive needs assessment, based on observation, records, and staff input, was "sufficient credible evidence," and not arbitrary. In other words, the decision met the 'legal standard" of "sufficiency" to support a decision...not that it was "right," "correct," or supported by the "better" or "best" evidence. Doctors' opinions? Helpful, but not required; regulations don't mandate physician consultation.
R.G. lost her Medicaid-funded nursing home spot.The Real-World Fallout: From Safety to Scramble-With No Home to Return To
A "clinically ineligible" ruling isn't paperwork, it's a life sentence to uncertainty. Here's the toll, amplified by the "no home" nightmare:
- Forced Discharge: R.G. had to leave Autumn Lake, potentially returning to a home unequipped for her needs: stairs, no grab bars, no 24/7 monitoring. Worse: If she'd sold her house to spend down (common advice) or transferred it to kids she'd be homeless, no assets, no options.
- Financial Ruin: Private pay at $12,000/month drains savings fast; 70% exhaust assets in 12 months (Genworth 2025). Selling the home early? Gone forever.
- Health Risks: Without NFLOC, no funded aides, fall risk spikes, infections risks rise, and risk of disability and death rise.
- Emotional Devastation: The trauma of being dislocated after years, and possible resulting isolation, increases the risk of emotional or psychological trauma and depression.
- Family Fracture: The family may now be financially and practically responsible in ways they never planned. Caregivers face 31 or more weekly hours of care, stress, and burnout, heightened because it was likely wholly unanticipated. Family conflict is possible, and disagreements lead to fractures and legal disputes.
The Most Important Lesson: Medicare and Medicaid as Legal Gatekeepers, Not Pure Healthcare Providers
The most important lesson from R.G.'s heartbreaking case is this: Medicare and Medicaid are not benevolent healthcare systems dedicated solely to your well-being. They are legal frameworks, intricate bureaucracies that regulate when and how the government pays for care, often prioritizing fiscal rules, administrative efficiency, and regulatory compliance over the nuanced realities of individual health needs. A truly patient-centered system would weigh the best medical evidence, prioritize outcomes such as reduced hospitalizations or sustained independence, and always err in favor of the person's best interests, even if it means bending a rule or two. Instead, these programs operate like a vast, impersonal machine, where eligibility hinges on checkboxes, forms, and interpretations that can override a doctor's expertise or a family's intuition. R.G. wasn't denied because she suddenly "got better;" she was denied because a nurse's one-hour snapshot, filtered through state regulations, trumped years of medical history. In that moment, the system didn't see a frail woman at high risk for falls and infections; it saw a line item that no longer fit the formula.
This systemic mindset, prioritizing fiscal rules and regulatory compliance over individual health needs, manifests in numerous ways, far beyond prioritizing a nurse's administrative assessment over the diagnoses and opinions of multiple treating doctors. Consider the infamous "two-midnight rule" under Medicare, which determines inpatient stays based on whether a doctor predicts hospitalization will span two midnights, disregarding the patient's actual trajectory or family input, and leading to claims denials on technicalities. Or the Medicaid "income cap," where a senior earning $1 over the limit must divert funds to a QIT, even if that money could pay for essential home aides to prevent a fall. These aren't isolated "errors" or "anomalies;" they're baked into a framework designed for cost containment, not compassionate care. The 2024 Office of Inspector General OIG Report on nursing home staffing failures found 24% of facilities under-resourced. Yet, CMS bonuses ($10 billion since 2018) reward self-reported metrics over real outcomes, leaving seniors in understaffed homes where a "legal" bed is no guarantee of safety. Families, already juggling 31 or more weekly caregiver hours, face not just emotional strain but a labyrinth of appeals, hearings, and penalties that can exhaust savings and spirits in months. See our post, "Nursing Homes' 'Bonus for Bad Care' Scandal: A Utah Spotlight on a National Crisis, and Why It Matters for Seniors and Families.
The peril is real: A 2024 review of 1,500 denied Medicaid cases showed 66% of applicants faced financial ruin within a year, with 25% entering unwanted facilities due to unbridgeable gaps. In R.G.'s world, this meant leaving Autumn Lake for a home she couldn't navigate alone, stairs she couldn't climb, a kitchen she couldn't reach, all because the system's legal lens deemed her "independent" on paper. It's a cruel irony: Programs meant to support the vulnerable can, through rigid interpretation, become the very force that destabilizes them.
So, what’s the antidote? Proactive, ironclad planning that anticipates the system's blind spots and builds buffers around your wishes. Start with advanced directives and a trust or supported decision-making (SDM) agreement, naming trusted family or friends to advocate during assessments, ensuring your voice, backed by doctors' letters and daily logs, drowns out a one-off snapshot. Layer in a revocable living trust to fund private aides via family caregiving agreements during appeals, preserving assets without triggering penalties. Don't overlook Medicaid Asset Protection Trusts (MAPTs), which are irrevocable vehicles that shield your home and savings while qualifying for or paying for home-based services. However, consider them carefully and use them strategically.
These aren't luxuries; they're necessities in a system where "clinically eligible" can shift with a nurse's notepad. By planning now, you reclaim the narrative, turning potential peril into protected peace. Five Bulletproof Strategies to Protect Your Care Plan—and Your Home
Don't wait for a shock of reassessment. Act now:
- Document Everything:
- Keep a daily care log (who helps with what ADL, when, and how often).
- Get specific physician letters periodically (quarterly or even monthly in 'close" cases): "Patient requires assistance with bathing, dressing, mobility, due to [conditions]," and/or "patient's cognitive fluctuation and frequent bouts of emotional malaise render her incapable of managing her medications or meals independently."
- Don't rely on the nursing for documentation; it's usually poor, and certainly not intended for your purposes in an administrative or legal dispute.
- Consider camera use; cameras capture and document daily struggles and needs.
- Utilize family caregiving applications that make communication of daily activities easier and routine. These devices are intended to make communication easier, but using them to document daily or weekly events creates a record and, if necessary, evidence.
- Appeal Early and Often:
- File within the prescribed period (20 days of denial in New Jersey per N.J.A.C. 10:49-10.3).
- Request a fair hearing, ALJs reverse 50% of cases with strong doctor testimony.
- Layer with Advance Directives and Supported Decision-making (SDM) Agreements:
- Name supporters to advocate during reassessments; our "SDM-Driven Supplemental Advanced Directive" ensures your voice.
- Revise these for specific needs, such as documenting periodically ADL needs and limitations, as well as complications arising from the interplay of conditions.
- Have a "Home" or Medical Improvement Plan:
- Consider options in the unexpected event that nursing home or assisted living care is not possible, for example, monetizing the home by way of reverse mortgage or home equity line to pay for home modifications or aids.
- Retain the house if possible. If not, consider the implications if it is sold.
- Consider a Private Care Agreement so that the family can navigate such changes without discord.
- If rehab "succeeds," draft a contingency directive: "If reassessed as independent, fund home mods/aides via trust and do not sell home without a written opinion of two physicians or other medical professionals that my need for assistance with at least three ADLs is permanent."
R.G.'s story is every family's nightmare: A system that "improves" you out of necessary care, and potentially out of your home. But it's also a blueprint for protection. While this article has provided a thorough analysis of the case and prevention strategies, it is by no means comprehensive. Medicaid rules evolve rapidly. Readers must remain vigilant and consult an elder law attorney when evaluating risks. By combining awareness with good planning, families can safeguard independence and thrive while aging in place. For support, consult a professional. Your security depends on proactive engagement.
