Massachusetts High Court Reminds Reverse Mortgage Holders- Foreclosure IS possible; Rules that Lenders Don't Have to Spell Out Foreclosure Risk to Consumers

The Supreme Judicial Court of Massachusetts ruled in favor of a reverse mortgage lender in a foreclosure case earlier this month, finding that mortgagees don’t have to explicitly spell out their legal right to foreclose in their paperwork.

The case involved James B. Nutter Company and three reverse mortgage borrowers, all of whom secured Home Equity Conversion Mortgages in 2007 and 2008. Within the span of a few years, two had died and the third became too ill to remain in the home; J.B. Nutter then moved to foreclose by bringing actions against the borrowers or their executors in local land court.

But the case was delayed due to an objection over the company’s ability to foreclose on homes under state law. In Massachusetts, the Supreme Judicial Court (SJC) wrote in its opinion, foreclosures can proceed without a judge’s confirmation as long as the mortgage itself gives the lender “the power of sale” in such situations.

The problem stemmed from some imprecise language in J.B. Nutter’s standard reverse mortgage paperwork. The company informed borrowers that it “may invoke the power of sale and other remedies permitted by applicable law … At this sale, Lender or another person may acquire the Property. This is known as ‘foreclosure and sale.’ In any lawsuit for foreclosure and sale, Lender will have the right to collect all costs allowed by law.”

The disclosure, though left unresolved issues.  The form language  fails to directly refer to the “statutory power of sale,” which was insufficient to justify the lender’s power to foreclose after the death of a borrower or his departure from the property.

But despite the lack of legal specificity, the SJC found that “no reasonable borrower” could assume that a reverse mortgage lender did not have the power to sell his or her property in the event of a foreclosure.

“It matters that this is a contract for a reverse mortgage, rather than a traditional mortgage, where the borrower makes no monthly payments of principal or interest, where the lender cannot hold the borrower personally liable for the debt, and where the lender’s only recourse on default is to obtain repayment through a foreclosure sale,” the court wrote in its opinion.

“Without a power of sale, the only way that a lender can recover the principal of the loan, not to mention interest and fees, is through foreclosure by entry — a process that would take three years — or foreclosure by action, ‘a method rarely used’ in Massachusetts.”

The court also noted that J.B. Nutter would still have to abide by all other rules regarding foreclosures in the state.

Interestingly, the court had some words of praise for the reverse mortgage product in general — while also citing a controversial report from the Consumer Financial Protection Bureau that advised consumers against taking out the loans to delay Social Security payments.

“For many retirees, one of the most reliable potential sources of income in later life is the accrued equity in their homes,” the court wrote by means of introduction.

Like many financial products and strategies, a reverse mortgage has a specific purpose, and specific circumstances justify its use.  Unfortunately, like most financial products, consumers do not always understand fully these purposes or circumstances and find themselves suffering disadvantage or harm when they are misused. The consequences can be devastating. 

As discussed preciously on this blog, these financial devises can be particularly troubling for elderly couples that do not plan carefully.  See the articles posted here and here, for example. 

New Budget Deal Reinstates Protections for Personal Injury Awards from State Claims

The budget deal signed into law by President Trump on February 9, 2018 permanently and retroactively restored protection of personal injury recoveries from State claims.  Under the new law, States can only make claims against the medical expense reimbursement portion of personal injury judgments and settlements, protecting the rest of such recoveries, such as the portions representing compensation for pain and suffering from such claims.

The new law represents a permanent and retroactive repeal of the law that overturned the Supreme Court decision in Arkansas Department of Health and Human Services, et al. v. Ahlborn 547 U.S. 268 (2006).  Ahlborn had been overturned by Section 202 of the Bipartisan Budget Act of 2013 (BBA), which expanded states’ access to entire personal injury settlements and awards to recoup Medicaid costs spent on a beneficiary’s behalf.  Originally set to take effect on October 1, 2014, it was twice delayed before finally coming into force late in 2017.  The current bill eliminates the 2013 language that nullified Ahlborn.

In 2006 the Supreme Court issued its Ahlborn decision, finding that under the anti-lien restrictions of the Social Security Act states had a right to recover only from the portion of a settlement or award that was allocated to medical expenses. The remainder of the settlement went to help cover the recipient’s expenses not covered by Medicaid.  Seven years later, in Wos v. E.M.A. 568 U.S. 627 (2013), the Court struck down a state statute imposing a mandatory Medicaid lien on up to one-third of a recovery, reiterating that "[a]n irrebuttable, one-size-fits-all statutory presumption is incompatible with the Medicaid Act's clear mandate that a State may not demand any portion of a beneficiary's tort recovery except the share that is attributable to medical expenses." 

Following Wos, and without warning, Congress used the BBA to erase the protection Ahlborn and Wos afforded personal injury recoveries.  The 2013 budget bill amended the Social Security Act to give states the right to recover from Medicaid beneficiaries' entire settlements.  The BBA also gave states the right to place a lien on those settlements or awards. 

From the beginning, the American Association for Justice (AAJ) has vigorously fought to eliminate the BBA provision.  It managed to twice delay implementation -- first to October 2016, and then again to October 2017.  Ever since last October’s delay expired, the AAJ has worked for repeal.  “We believe this is a great victory that will ensure Medicaid recipients retain access to the courts,” said Linda Lipsen, AAJ’s Chief Executive Officer.  

Federal Court Holds Long-Term Care Insurance Company Breached Policyholder's Contract by Raising Premiums

A U.S. court of appeals has ruled  that a long-term care insurance company breached its contract with a policyholder who purchased a "Reduced-Pay at 65" policy when it raised her premiums after age 65. Newman v. Metropolitan Life Insurance Company (U.S. Ct. App., 7th Cir., No. 17-1844, Feb. 6, 2018).  The case represents a rare holding in favor of policy holders against long term care insurance companies pursuing claims arising from dramatic premium increases. 

The plaintiff, Margery Newman, purchased a long-term care insurance policy from Metropolitan Life Insurance Company when she was age 56. She chose an option called "Reduced-Pay at 65" in which she paid higher premiums until she reached age 65, when the premium would drop to half the original amount. The long-term care insurance contract set out the terms of the reduced-pay option. It also stated that the company could increase premiums on policyholders in the same "class." When Ms. Newman was 67 years old, the company notified her that it was doubling her premium.

Ms. Newman sued MetLife for breach of contract and fraudulent and deceptive business practices, among other claims. The company argued that the increase was imposed on a class-wide basis and applied to all long-term care policyholders over the age of 65, including reduced-pay policyholders. The U.S. district court granted the company's motion to dismiss, ruling that the contract permitted the company to raise Ms. Newman's premium. Ms. Newman appealed.

The U.S. Court of Appeals, 7th Circuit, reversed, holding that the company breached its contract when it raised Ms. Newman's premium. According to the court, "none of the four references in the policy to [the company's] right to change premiums sufficed to disabuse a reasonable person of the understanding that purchasing the Reduced-Pay option took her out of the class of policyholders who were at risk of having their premium increased after their post-age-65 anniversary." The court also allowed Ms. Newman's claims for fraudulent and deceptive business practices to proceed.  The Court ruled that Ms. Newman showed sufficient evidence that the company's marketing of the policy was deceptive and unfair to proceed with those claims.

Although it is possible, an appeal to the United States Supreme Court is unlikely.  

Study Finds that POLST (Physician Ordered Life Support Treatment) Orders Meet Patient Goals

The News section of the National POLST Paradigm posted the following article:

"The Progression of End-of-Life Wishes and Concordance with End-of-Life Care,” a brief report authored by Jennifer Hopping-Winn, LCSW, Juliette Mullin, MPH, MBA, Laurel March, MA, Michelle Caughey, MD, Melissa Stern, MBA, and Jill Jarvie, RN, MSN, was published in the Journal of Palliative Medicine (January 2018, ahead of print). Using in-depth chart reviews from patients who had participated in the Kaiser Permanente Northern California (KPNC) advance care planing program, the study found that 290 out of 293 (99%) patients were found to have received goal-concordant care if a POLST was completed up to 12 months before they died. In 7 of 300 cases, concordance could not be determined.

Since 2013, KPNC has used an advance care planning program to elicit, document and honor the care treatment preferences of patients near the end of life. This study aimed to determine whether patient wishes were actually respected at the end of life, with a hypothesis that patients’ wishes would be their ultimate care preferences if the conversation occurred within 12 months of their death and that the patient would receive care concordant with those POLST-documented care preferences ~95 to 98% of the time, an estimate based on two previous studies on the concordance rate of the Respecting Choices advance care planning program.

In this study, the research focused on patient who had participated in the KPNC’s Life Care Planning (LCP) Advanced Steps (AS) program, modeled on the Respecting Choices’s Last Steps program. Patients are referred to LCP AS if their physicians estimate they are in their last year of life. An AS facilitator helps the patient discuss their preferences in the presence of their designated decision maker (DDM) about the patient’s preferences for end-of-life care.

Three LCP experts at KPNC conducted the in-depth chart review to determine goal concordance per patient. Concordance was defined as documentation that care received in setting before death was either consistent with documented wishes on patient’s POLST form or inconsistent with POLST selections, but consistent with the DDM’s or patient’s verbal guidance. Study authors noted that a particular strength of this study was the researchers’ accessibility to a breadth of information in order to determine care preferences and the final care received, made possible by the Kaiser Permanente integrated health system’s electronic health record that includes records from a wide variety of clinical settings.

The researchers randomly selected 300 of the 3701 patient who had participated in the AS program and died in 2015. How close in time the conversation took place before death varied from one day to more than 2 years, with an average time of about 10 months.  Among the 300, 253 had completed a POLST Form; among the 253 who had completed a POLST Form, 48 (19%) revised their care preferences at some point. Patients were more likely to change their preferences over time if the AS conversation was not recent or if they returned to the hospital for care. Most (85%) of the time, the patient of DDM opted for less intensive care when changing care preferences, and in most of these cases, the DDM made the change on behalf of the patient, generally when the patient’s condition deteriorated significantly and the patient could no longer speak for him or herself.

The study confirmed a very high level of respect for patients’ wishes across care settings. Only in three of the 293 cases were care decisions made by clinicians found to be in conflict with the patient’s wishes; one case occurred in a hospital emergency department, one in a community dialysis clinic, and one in a community skilled nursing facility. In each of these 3 cases, the DDM was not immediately available, leaving the decision to the clinician. The researchers noted that clinicians should not have to depend on the presence of a DDM in order to follow patient wishes; when accessible, the POLST Form should serve to help guide and communicate patient preferences when the patient or DDM is unable to do so.

The conclusion:

“A skillful, facilitated advance care planning conversation is a worthwhile approach for eliciting patients’ wishes, and the POLST form is a valuable tool. When patients’ preferences about medical care are made known in this way, they overwhelmingly receive concordant care. However, our findings highlight the need for comprehensive, continuous conversations across all care settings, even after a POLST is completed. As the U.S. healthcare system continues to improve end-of-life care, more research on the documentation and progression of care preferences is needed to fully understand how healthcare providers can best identify and act on patients’ wishes, especially when a DDM is unavailable.”

GAO Report Warns that Assisted Living Quality Oversight Lacking: "National Scandal"

According to the Long Term Care Community Coalition (LTCCC) and the Center for Medicare Advocacy (CMA), "assisted living is viewed by seniors and their families as a desirable option for residential care when an individual wishes to avoid the institutional environment characteristic of a typical nursing home. While the assisted living industry has grown rapidly to meet this demand, little is known about the quality and safety provided to residents in these facilities." 

A newly released Report by the Government Accountability Office (GAO) warns that the Centers for Medicare & Medicaid Services (CMS) ability to oversee and regulate the quality of care provided to Medicaid beneficiaries in assisted living communities is severely compromised.  McKnights Senior Living reports that some federal lawmakers and consumer advocates are already pushing for changes in assisted living because of the report’s findings.

The GAO, at the request of a bipartisan group of  Senators, surveyed all state Medicaid agencies (including Washington, DC) for the report, titled “Medicaid Assisted Living Services: Improved Federal Oversight of Beneficiary Health and Welfare is Needed.” The Senators sought “to understand federal and state spending and oversight of care, but as the title suggests, the GAO was unable to respond effectively to the Senators' request because facts were difficult to ascertain. 

State Medicaid agencies in 48 states that covered assisted living services reported spending more than $10 billion (federal and state) on assisted living services in 2014. These 48 states reported covering these services for more than 330,000 beneficiaries through more than 130 different programs. Most programs were operated under Medicaid waivers that allow states to target certain populations, limit enrollment, or restrict services to certain geographic areas.

With respect to oversight of their largest assisted living programs, state Medicaid agencies reported varied approaches to overseeing beneficiary health and welfare, particularly in how they monitored critical incidents involving beneficiaries receiving assisted living services. Although state Medicaid agencies are required to protect beneficiary health and welfare and operate systems to monitor for critical incidents—cases of potential or actual harm to beneficiaries such as abuse, neglect, or exploitation, the GAO found a lack of required monitoring and reporting:

• Twenty-six state Medicaid agencies could not report to GAO the number of critical incidents that occurred in assisted living facilities, citing reasons including the inability to track incidents by provider type (9 states), lack of a system to collect critical incidents (9 states), and lack of a system that could identify Medicaid beneficiaries (5 states).
• State Medicaid agencies varied in what types of critical incidents they monitored. All states identified physical, emotional, or sexual abuse as a critical incident. A number of states did not identify other incidents that may indicate potential harm or neglect such as medication errors (7 states) and unexplained death (3 states).
• State Medicaid agencies varied in whether they made information on critical incidents and other key information available to the public. Thirty-four states made critical incident information available to the public by phone, website, or in person, while another 14 states did not have such information available at all.

The report Highlights summarized:

Oversight of state monitoring of assisted living services by... CMS, an agency within the Department of Health and Human Services (HHS), is limited by gaps in state reporting. States are required to annually report to CMS information on deficiencies affecting beneficiary health and welfare for the most common program used to provide assisted living services. However, states have latitude in what they consider a deficiency. States also must describe their systems for monitoring critical incidents, but CMS does not require states to annually report data from their systems. Under federal internal control standards, agencies should have processes to identify information needed to achieve objectives and address risk. Without clear guidance on reportable deficiencies and no requirement to report critical incidents, CMS may be unaware of problems. For example, CMS found, after an in-depth review in one selected state seeking to renew its program, that the state lacked an effective system for assuring beneficiary health and welfare, including reporting insufficient information on the number of unexpected or suspicious beneficiary deaths. The state had not reported any deficiencies in annual reports submitted to CMS in 5 prior years (emphasis added).

The GAO recommended that CMS provide guidance and clarify requirements for states regarding their monitoring and reporting of deficiencies in assisted living communities. Additionally, the GAO recommended that CMS establish standard Medicaid reporting requirements that all states could use to annually report information on critical incidents. Finally, GAO recommended that CMS ensure that all states submit annual reports for Home and Community Based Services (HCBS) waivers on time as required.

HHS agreed with two of the three recommendations, according to the report, but “did not explicitly agree or disagree with [GAO's] third recommendation to require all states to report information on critical incidents to CMS annually.”

“The oversight of the assisted living industry at the state level has failed to protect residents,” the LTCCC and the CMA said in a joint press release.

“This report verifies reports from families over the years indicating that, too often, the “promise” of assisted living is unfulfilled for seniors,” said Richard Mollot, executive director of LTCCC, "Medicare beneficiaries deserve good care and dignity no matter where they access care and services.” 

“State oversight has failed assisted living residents and the taxpayers who help pay for their care,” said Toby S. Edelman, Senior Policy Attorney, CMA; “This national scandal cannot be swept under the rug any longer.”

LTCCC and CMA said their “near-term recommendations” for the federal government include that state and federal websites similar to Nursing Home Compare be developed for assisted living communities, with validated information on staffing, inspection results, complaints and critical incidents. The two organizations also recommend that the federal government “take immediate steps to protect assisted living residents by enacting sensible standards to ensure safety and dignity.”

Assisted Living and other community based care programs must be well administered, and  able to produce and demonstrate positive health outcomes for seniors before they will be reliable Aging in Place strategies.