Court Reverses Agency Decision Ignoring Appraised Value of Home for Purpose of Medicaid Penalty

A New Jersey appeals court reversed a final Medicaid agency decision that ignored an appraiser’s testimony that the actual value of an applicant’s house was less than the tax assessed value for purposes of imposing a penalty period. J.B. v. Camden County Board of Social Services (N.J. Super. Ct., App. Div., No. A-5665-17T4, May 5, 2020).

J.B. entered a nursing home. In preparation for applying for Medicaid, her son, acting under a power of attorney, sold her home for $17,500 to an acquaintance who was a realtor. The tax assessed value of the home was $104,700. J.B. applied for Medicaid, and the state imposed a 236-day penalty period because she sold her house for less than the market value.

J.B. appealed, arguing that the house was in poor condition, so $17,500 was fair market value. At a hearing, an appraiser testified that the market value of the house after it was sold and improvements had been made was $78,000, noting the appraisal would have been lower had it taken place either before improvements were made or had she known "the property was a hoarding situation and required a significant amount of repairs." Because there was no evidence of the condition of the house before it was sold, the administrative law judge accepted the appraised value of $78,000 and imposed a 142-day penalty period. In the final agency decision, the director of the state Medicaid agency did not discuss the appraised value and imposed a 329-day penalty period. J.B. appealed.

The New Jersey Superior Court, Appellate Division, reversed in part and remanded the case. The court agreed that the transfer was made for less than market value in order to qualify for Medicaid. The court ruled that the “appraiser's opinion that the fair market value of [J.B.’s] home at the time of the appraisal was $78,000 is well-supported by the evidence on the record as a whole” and the failure of the final agency decision to mention the appraisal “appears to be arbitrary and unreasonable.” The court remanded the case to the director to address this issue.

States Cannot Terminate Medicaid Benefits During Covid Crisis

A provision in one of the coronavirus relief packages signed into law prevents states from terminating Medicaid benefits during the pandemic.

The Families First Coronavirus Response Act (“CV Response Act”), signed into law on March 18, 2020, prevents states from terminating any Medicaid recipients who were enrolled in Medicaid on or after March 18, 2020 even if there is a change in circumstances that would normally lead to termination. All Medicaid recipients’ coverage must continue through the end of the month in which the public health emergency declared by the Secretary of Health and Human Services for COVID-19 ends.

If the state terminated a Medicaid recipient’s benefits after March 18, 2020, the state must make a good faith effort to contact the recipient and encourage him or her to reenroll. States may terminate coverage for individuals who request to be terminated or who are no longer residents of the state.

The continuous coverage requirement does not apply to individuals who were determined to be presumptively eligible for benefits. However, individuals who were determined ineligible before March 18, 2020, but who continue to receive coverage while they appeal the decision are entitled to continuous coverage.

For a description of all of the other benefits and terms of the Act, click here. 

For a list of Frequently Asked Questions (FAQ) about the Medicaid requirements under the law, click here.

Company’s Ability to Change Terms of Irrevocable Annuity Does Not Make It Available Resource

Medicaid applicant’s irrevocable annuity is not an available resource even though the company issuing the annuity has the authority to change its terms. Cushing v. Jacobs (U.S. Dist. Ct., D.N.J., No. 20-CV-130, March 25, 2020). 

Jane Cushing purchased an irrevocable annuity from the Croatian Fraternal Union of America (Croatian). The annuity had a provision that the president or treasurer of Croatian could change or waive the contract’s requirements. Ms. Cushing applied for Medicaid. The state decided that because the president or treasurer of Croatian could change its terms, the annuity was revocable. The state denied Ms. Cushing benefits due to excess assets. 

Ms. Cushing sued the state in federal court, arguing that the annuity is not an available resource, and filed a motion for summary judgment. The state argued that in a previous case (MM v. Division of Medical Assistance and Health Services, OAL Docket No. HMA 1057- 2019), a Medicaid applicant asked the president to change the terms of her annuity purchased through Croatian, so the state determined that the annuity was revocable and denied the applicant benefits. 

The U.S. District Court, District of New Jersey, granted Ms. Cushing summary judgment, holding that the annuity is not an available resource. According to the court, the annuity contract is “unambiguous on the issue of revocability,” and the prior case had no bearing on Ms. Cushing’s annuity. 

Little Noticed Provision in Trump Executive Order Allows Seniors to Opt Out of Medicare

Seniors are now permitted to opt out of Medicare.  A little-noticed section of a longer Executive Order on Medicare issued last November by President Trump directed the Secretary of Health and Human Services (HHS) to “revise current rules or policies to preserve the Social Security retirement insurance benefits of seniors who choose not to receive benefits under Medicare Part A.” (E.O. 13890, Sec. 11). The order took effect on April 3, 2020, but there appear to be no new proposed rules. 

You may wonder, "why?"  During President Obama’s administration, three retired federal employees – among them former Republican House Majority Leader Dick Armey -- sued the federal government because they wanted to drop their Medicare Part A coverage without losing Social Security benefits. They claimed participation in Medicare threatened their coverage under the Federal Employees Health Benefit (FEHB) program.

A U.S. district court judge dismissed the case in March 2011, a decision that was upheld the following year by a three-judge panel of the U.S. Court of Appeals for the District of Columbia, with then-judge Brett Kavanaugh writing for the majority that the federal statute offers the plaintiffs no path to disclaim their legal entitlement to Medicare Part A benefits.  The U.S. Supreme Court declined to review the decision.   

Although there exist no implementing rules, presumably anyone can now drop Medicare coverage without it affecting their Social Security retirement benefit.   John Kraus, one of the plaintiffs in the original suit, explained to ElderLawAnswers that “[t]here isn't any law, statute, or regulation that memorializes in the U.S. Code this linkage of the two programs. It is only found in the Social Security Administration's (SSA) Program Operations Manual System (POMS).”

When asked why he and his fellow plaintiffs wanted to separate from Medicare, Kraus explained that  the reasons

“are several.  The foremost is that one enrolled in Medicare cannot have a High Deductible Health Plan with a Health Savings Account. Secondly, for FEHB participants, their coverage becomes secondary to Medicare, without a premium reduction for FEHB coverage. Third, there is the issue of Medicare solvency, which could be a serious consideration in the near future. Lastly, there is the consideration of reduced choice and availability of health care providers because they are either leaving the Medicare program or not accepting additional Medicare recipients as new patients.”

Judith Stein, executive director of the Center for Medicare Advocacy, contends that allowing people to drop Medicare Part A would only weaken the program.  “We do not support allowing people to opt out of Part A,” Stein told ElderLawAnswers.  “[It’s] not good for Medicare in general, and not allowed by courts – to date.”  

CMS Announces Nursing Home Covid-19 Transparency Effort

On April 19th, 2020, the Centers for Medicare & Medicaid Services (CMS) announced new regulatory requirements that will require nursing homes to inform residents, their families and representatives of COVID-19 cases in their facilities. In addition, as part of President Trump’s Opening Up America, CMS will now require nursing homes to report cases of COVID-19 directly to the Centers for Disease Control and Prevention (CDC). This information must be reported in accordance with existing privacy regulations and statute. This measure augments longstanding requirements for reporting infectious disease to State and local health departments. Finally, CMS will also require nursing homes to fully cooperate with CDC surveillance efforts around COVID-19 spread.

CDC will be providing a reporting tool to nursing homes that will support Federal efforts to collect nationwide data to assist in COVID-19 surveillance and response. This joint effort is a result of the CMS-CDC Work Group on Nursing Home Safety. CMS plans to make the data publicly available. This effort builds on recent recommendations from the American Health Care Association and Leading Age, two large nursing home industry associations, that nursing homes quickly report COVID-19 cases.

“Nursing homes have been ground zero for COVID-19. Today’s action supports CMS’ longstanding commitment to providing transparent and timely information to residents and their families,” said CMS Administrator Seema Verma. “Nursing home reporting to the CDC is a critical component of the go-forward national COVID-19 surveillance system and to efforts to reopen America.”


“Scientific data derived from solid surveillance is a key element of recommendations to protect Americans, particularly our most vulnerable, from the devastating impact of COVID-19,” said CDC Director Dr. Robert Redfield. “This coordinated effort with CMS will allow CDC to provide even more detailed information to state and local health departments about how COVID-19 is affecting nursing home residents in order to develop additional recommendations to keep them safe.”

This data sharing project is only the most recent in the Trump Administration’s response to the COVID-19 pandemic. On February 6, CMS took action to prepare the nation’s healthcare facilities for the COVID-19 threat. On March 4, CMS issued new guidance related to the screening of entrants into nursing homes, informed by CDC recommendations. On March 10, CMS issued guidance related to the use of personal protective equipment (PPE) usage and optimization. On March 13, CMS issued guidance for a nationwide restriction on nonessential medical staff and all visitors, except in compassionate care situations. Shortly after that announcement, President Trump declared a national emergency, enabling the agency to take even stronger action. CMS then announced a suspension of routine inspections, and an exclusive focus on situations in which residents are in immediate jeopardy for serious injury or death, and implemented a new inspection tool based on the latest guidance from CDC. Additionally, on April 2, CMS issued a call to action for nursing homes and state and local governments. It included guidance that reinforced infection control responsibilities and urged leaders to work closely with nursing homes in their communities to determine needs for COVID-19 testing and personal protective equipment. The recommendations also urged state and local officials to work with nursing homes to designate certain sites for COVID-19-positive or COVID-19-negative patients to avoid further transmissions. On April 15, CMS announced the agency will nearly double payment for certain lab tests that use high-throughput technologies to rapidly diagnose large numbers of COVID-19 cases. This announcement built upon a March 30 announcement that hospitals, laboratories, and other entities can perform tests for COVID-19 on people at home and in other community-based settings outside of the hospital – including nursing homes.

CDC continues to work closely with CMS, state and local health departments, and nursing homes to inform national infection prevention and control policies and strategies to further support nursing homes, residents and families of residents.  CDC built a long-term care toolkit to be distributed to all 50 states to help increase infection prevention and control preparedness in nursing homes and provide remote tools to further assist these important healthcare providers.  

In addition, CDC rapidly sent teams of infection control experts to support state and local health departments during the first COVID-19 outbreak in a nursing home in the U.S. Teams were on the ground within 36 hours of the notification to assist with the implementation of measures to detect and contain additional infections in the community.  CDC continues to work closely with state and local health departments to assist long-term care facilities with COVID-19, with on the ground support provided to more than 30 jurisdictions and remote technical assistance from infection control experts across the U.S. with plans to provide additional support underway.