Daniel G. Fish
Daniel G. Fish ()

Many nursing home residents enter under a “Medicaid Pending” status meaning they do not have the funds to pay privately. A Medicaid application is filed after admission, and it must contain five years of detailed financial statements. The facility receives no payments until the application is approved, which can take six months.

Medicaid is a means tested program that requires proof that an applicant has no more than $14,500 of resources. Medicaid is suspicious that funds may have been given away to meet the resource level, so it looks over the records of the five-year period preceding the application to detect any such transfers. If such a transfer is discovered, the Medicaid application will be denied.

The problem arises when the application is denied because resources have been transferred. This often occurs when funds are mishandled by people trusted to manage the resident’s affairs or out of reach due to unusual circumstances. This can be the worst nightmare for the resident and the facility. The senior is in need of care, has no funds to pay privately and is unable to qualify for Medicaid. The facility is owed six months of payments and it is very difficult to discharge a nonpaying resident so the financial exposure may be ongoing.

Undue Hardship Exception

There is, however, an exception called undue hardship. The application can be approved if the applicant is otherwise eligible for Medicaid; the inability to obtain appropriate medical care endangers health or life or deprives the individual of food, clothing or shelter or other necessities of life; and there is an inability to have the transferred assets returned.

It has been axiomatic among elder law attorneys that undue hardship relief is rarely granted. An Appellate Division, Third Department, case, Conners v. Berlin1 is an illustration. An agent under a power of attorney with no gift-giving authority transferred more than $250,000 to herself while the principal was in the Daughters of Sarah nursing home. Undue hardship was denied because the nursing home provided care. According to the opinion:

Although the Daughters of Sarah indeed attempted to discharge decedent for nonpayment, the facility was unsuccessful in obtaining an alternative safe placement for decedent and, as a result, provided medical care to decedent until the date of his death. Under such circumstances, decedent did not qualify for the undue hardship exception…To the extent that petitioners contend that respondents’ construction of the undue hardship exception is too narrow, we note that just because a statute or regulation could be interpreted in another fashion does not render the administrative agency’s interpretation thereof irrational…

The Department of Health maintains an archive of fair hearing decisions. The fair hearing record confirms the difficulty in establishing undue hardship. The following decisions denied undue hardship requests. In one case:

…the Appellant is a 97-year old World War II veteran…The representative states that the Appellant’s son, who had power of attorney and previously handled the Appellant’s financial affairs, is deceased and thus, substantiation of the purposes of the transfers is now impossible.2

In another case:

The record establishes that the Appellant, 90 years old, has resided in a local nursing home since July 31, 2008.…The documentary evidence established that the Appellant and his estranged spouse owned three properties with a combined value of [$123,500]. Additional documentation received by the agency…revealed that the properties at issue were sold by the Appellant’s estranged spouse…The Appellant’s daughter testified in relevant part that the Appellant’s estranged spouse resided in a nursing facility in another state, and is believed to be mentally incapacitated by her age and health problems….she speculated that the family of the estranged spouse improperly sold the real property, and that the proceeds from the sale of the real property are unavailable to the Appellant.3

‘Tarrytown Hall Care Center’

A recent Second Department decision, Tarrytown Hall Care Center v. McGuire,4 runs counter to the Conners decision and makes the undue hardship claim more viable. The decision breathes life into a doctrine that many practitioners had dismissed as a mirage and should lead to a reexamination of the situations in which it is applicable.

Margaret Traino was a resident in Tarrytown Hall. She had no funds with which to pay the nursing home and she was not eligible for Medicaid because she had made an uncompensated transfer of assets. The nursing home was required to provide care to her but could not receive payment and could not transfer her to another nursing home because of her Medicaid ineligibility. Tarrytown Hall filed the Medicaid application and requested that it be approved due to the undue hardship exception.

The Westchester County Department of Social Services, which administers the Medicaid program, denied the application and rejected the undue hardship claim. Medicaid argued that an undue hardship claim could not be sustained unless the facility brought a legal proceeding to discharge the nonpaying resident.

The nursing home requested a fair hearing and its director of social work testified that it was not possible to discharge the resident to another facility. The nursing home was unsuccessful at the fair hearing and at a review of the fair hearing decision by the Commissioner of the Department of Health. Petitioner filed an article 78 to challenge the adverse determination by the commissioner.

The Second Department annulled the decision of the commissioner, and the matter was remitted with the instruction to grant the Medicaid application. The decision was unanimous. The court found that:

Here, the DOH’s determination that Tarrytown Hall failed to demonstrate undue hardship is not supported by substantial evidence. To the contrary, Tarrytown Hall established that the decedent was otherwise eligible for Medicaid, and further established that she was unable to obtain appropriate medical care without the provision of Medicaid by offering proof that the decedent was insolvent and unable to recover transferred assets, and that no nursing facility which could provide her with the necessary level of care would accept her. By offering this proof Tarrytown Hall met the statutory and regulatory requirements for the undue hardship exception. The DOH has provided no authority, statutory or otherwise, for its conclusion that the commencement of an eviction proceeding was a mandatory prerequisite for demonstrating that the decedent was not able to obtain appropriate medical care and thus qualify for an undue hardship exception.

Conclusion

The majority of reported undue hardship cases involve transfers made by a third party at a time when the applicant was aged, disabled and of questionable capacity. Undue hardship remains a difficult proposition to establish but is viable when it is properly considered in advance and properly prepared for. Each element of the exception must be fully documented recognizing that they will be strictly construed.

Endnotes:

1. Conners v. Berlin, 964 N.Y.S.2d 680 (3d Dept. 2013).

2. FH 5707055J.

3. FH 5736890M.

4. Tarrytown Hall Care Center v. Kevin M. McGuire, as Commissioner of the Westchester County Department of Social Services, 984 N.Y.S.2d 93 (2d Dept. 2014).