Major Court Ruling Limits Lawsuits Over Medicaid Denials- Business Transfers Backed By Promissory Notes Countable

If you or a loved one is preparing for long-term care and considering Medicaid to help cover nursing home or in-home care costs, a recent federal appeals court decision could significantly affect your options. In Lancaster v. Cartmell (10th Cir., Dec. 23, 2025), the court ruled that the Medicaid Act does not give individuals a private right to sue state agencies in federal court when their benefits are wrongly denied.

The Facts of the Case
Max and Peggy Lancaster, an elderly Oklahoma couple, transferred $3.8 million in assets to a limited liability company (LLC) owned by their three adult children. In exchange, the LLC gave them a promissory note, mortgages, and personal guarantees. When the Lancasters later applied for Medicaid, the state denied their applications because the promissory note was counted as an available asset that pushed them over the eligibility limit.
The couple sued the state Medicaid agencies under 42 U.S.C. § 1983, claiming the denial violated the Medicaid Act’s requirement that eligible individuals receive benefits with “reasonable promptness.” They argued they had a private right to enforce that provision in federal court.The Court’s Decision
The Tenth Circuit Court of Appeals disagreed. Relying on the U.S. Supreme Court’s 2025 decision in Medina v. Planned Parenthood South Atlantic, the court held that the Medicaid Act’s “reasonable promptness” provision (42 U.S.C. § 1396a(a)(8)) does not create an individually enforceable right that beneficiaries can sue to protect.
If your Medicaid application is denied or delayed, you generally cannot file a federal lawsuit against the state agency. You must instead go through the state’s internal administrative appeal process.
The court emphasized that Medicaid is a spending-power statute between the federal government and the states. The usual remedy for violations is for the federal government to withhold funding from the state, not for individual beneficiaries to sue.Aging-in-Place Planning and Elder Law Planning Implications
This ruling tightens the rules for Medicaid eligibility challenges nationwide (at least in the Tenth Circuit, and likely influencing other courts). For families planning ahead:

• Asset transfers and promissory notes are under even greater scrutiny. Strategies that rely on loans or notes to “spend down” assets may be counted as resources, leading to denials.
• Fewer legal protections if the state makes a mistake. Without the ability to go straight to federal court, families may face longer delays and more limited remedies.
• Stronger need for proactive planning. Once you apply for Medicaid, your options to fight a denial in court are now narrower. The best defense is careful planning before you need benefits.
• Aging-in-Place Planning Shines:  Planning to age in place and avoid institutional care completely, with its attendant risks and costs, shines as a superior plan.  

Practical Takeaways for Families

• Plan early: Ideally 5 years before you anticipate needing care. Work with an elder law attorney to structure asset transfers, trusts, or other strategies that comply with current Medicaid rules.

• Understand the appeals process: If you’re denied, request a fair hearing promptly. Time limits are strict, and you’ll need strong documentation.

• Document everything: Keep clear records of all transfers, notes, and communications with the state agency.

• Consider alternatives:  Long-term care insurance, veterans’ benefits, hybrid life insurance policies, Medicare Advantage Plans, Private Caregiver Agreements, and Hybrid Annuities can reduce reliance on Medicaid and give you more control over your aging-in-place options.

Bottom LineThe Lancaster decision reinforces that Medicaid is a complex, state-run program with limited federal-court protections for applicants. For seniors who want to stay in their homes as long as possible or protect assets for a spouse, this makes professional elder law planning more important than ever.
If you’re concerned about Medicaid eligibility, nursing home costs, or protecting your home and savings while aging in place, don’t wait until a crisis hits. Schedule a consultation with a qualified elder law attorney. A small investment in planning today can save your family tens or hundreds of thousands of dollars and give you peace of mind tomorrow.

Supreme Court Clarifies Limits on Private Lawsuits to Enforce Medicaid Rights: What Medina v. Planned Parenthood South Atlantic Means for Seniors

A landmark 2025 Supreme Court decision has significantly narrowed the ability of Medicaid beneficiaries,  including many seniors planning for long-term care or aging in place, to sue state agencies in federal court when they believe their benefits have been wrongly denied or restricted.  
In Medina v. Planned Parenthood South Atlantic, the Court held in a 6-3 opinion written by Justice Neil Gorsuch that the Medicaid Act’s “any-qualified-provider” provision (also known as the free-choice-of-provider clause) does not create an individually enforceable right that beneficiaries can sue to protect under 42 U.S.C. § 1983.  Section 1983 allows individuals to sue state or local government officials or entities in federal court when those officials violate a person's constitutional rights or certain federal statutory rights. In simple terms,  if a government actor (like a police officer, prison official, or state agency) deprives you of your constitutional rights, you can use Section 1983 to sue them for damages or to stop the violation.
The case arose when South Carolina excluded Planned Parenthood clinics from its Medicaid program because the clinics provide abortion services. Medicaid beneficiaries who wanted to continue receiving care from those clinics sued the state under § 1983, arguing that the exclusion violated their statutory right to choose any qualified provider willing to participate in the program.  The lower courts (including the Fourth Circuit) had sided with the beneficiaries, allowing the lawsuit to proceed. The Supreme Court reversed that decision.
Before Medina, federal courts were split on whether Medicaid beneficiaries could bring private lawsuits to enforce various provisions of the Medicaid Act. Several circuits, most notably the Fourth, Ninth, and others following earlier precedents, had been leaning toward permitting such private § 1983 actions for provisions like free choice of provider and “reasonable promptness” in delivering services. These courts viewed certain Medicaid language as creating clear, individual rights.
The Supreme Court in Medina rejected that approach. It reaffirmed and strengthened the demanding test from Gonzaga University v. Doe (2002) and Health and Hospital Corp. of Marion County v. Talevski (2023): Spending-power statutes like Medicaid create privately enforceable rights only in rare, atypical cases where Congress uses unmistakably clear “rights-creating” language focused on individual beneficiaries rather than on the states.
The Medicaid Act, the Court explained, is fundamentally a bargain between the federal government and the states. The primary enforcement mechanism is the federal government’s ability to withhold funding from non-compliant states, not private lawsuits by beneficiaries. As a result, most provisions of the Medicaid Act (including free choice of provider) do not support individual federal-court actions.What This Means for Seniors and Elder Law Planning
For older adults and families planning for nursing home care, in-home services, or long-term care coverage through Medicaid, the practical impact is significant:

• Challenges to state Medicaid decisions (denials, delays, or provider restrictions) are now more likely to be confined to state administrative appeal processes.
• Federal-court remedies under § 1983 are much harder to obtain.
• Careful upfront planning becomes even more important. Once you apply for Medicaid, your ability to fight an adverse decision in federal court is now more limited.

This ruling reinforces that Medicaid eligibility and coverage disputes are primarily administrative and state-level matters. Families should work proactively with an elder law attorney to structure assets, use trusts or other tools, and ensure compliance with current rules, well before a crisis arises.

If you have questions about how this decision might affect your Medicaid planning, long-term care options, or aging-in-place strategy, schedule a consultation with a qualified elder law attorney. A thorough plan today can help protect your choices and security tomorrow.