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Wednesday, December 30, 2015

Rejection for Medicaid where family would not provide info on assets

Rejection for Medicaid where family would not provide info on assets

                                                                                    SUPERIOR COURT OF NEW JERSEY
                                                                                    APPELLATE DIVISION
                                                                                    DOCKET NO.  A-3341-13T3





November 23, 2015

Argued October 26, 2015 – Decided

Before Judges Lihotz, Fasciale and Nugent.

On appeal from the Department of Human Services, Division of Medical Assistance and Health Services.

Daniel Jurkovic argued the cause for appellant S.T. on behalf of A.T.

Jennifer L. Finkel, Deputy Attorney General, argued the cause for respondent Division of Medical Assistance and Health Services (John J. Hoffman, Acting Attorney General, attorney; Melissa H. Raksa, Assistant Attorney General, of counsel; Ms. Finkel, on the brief).

Robert E. Barry, Union County Counsel, attorney for respondent Union County Board of Social Services, joins in the brief of respondent Division of Medical Assistance and Health Services.

            S.T., on behalf of his elderly mother A.T., appeals from a February 24, 2014 final agency decision by the Director of the Division of Medical Assistance and Health Services (DMAHS) denying A.T. Medicaid eligibility from June 1, 2007 to September 30, 2008.  We affirm.
            This case arose after a rehabilitation center filed a separate lawsuit seeking reimbursement for services it provided to A.T., which A.T. had sought to recoup from the Union County Board of Social Services (UCBSS) in a related third-party complaint.[1]  DMAHS adopted the findings of the administrative law judge (ALJ) concluding that A.T. failed to timely provide the requisite verifications (the verifications), thereby depriving the UCBSS of the opportunity to evaluate the merits of her application for Medicaid benefits.  A.T. re-applied for Medicaid a year later, eventually producing the missing information, and the UCBSS authorized Medicaid benefits effective October 1, 2008.  We discern the following facts from the record on appeal.                   
            On July 3, 2007, the South Mountain Healthcare and Rehabilitation Center (SMHRC) admitted A.T. as one of its residents.  On July 22, 2007, A.T. appointed her grandson, D.T., as her power of attorney (POA).  A.T. designated her son, S.T., as an alternate POA. 
On August 28, 2007, D.T. and S.T. applied to the UCBSS for Medicaid benefits to pay for A.T.'s stay at SMHRC.  S.T. signed the application, a statement of understanding for nursing home applicants, a statement of understanding addendum, and an affidavit of understanding.  These documents stated that Medicaid had no obligation to pay any medical expenses until the application was approved in writing, and failure to produce the verifications could result in denial of the application.  Only D.T.'s address was listed on the application.  S.T., despite signing the form, did not include his mailing address on the application.                   
The UCBSS determined that the application was incomplete.  As a result, the UCBSS attempted to verify A.T.'s eligibility for Medicaid benefits by requesting certain information.  The UCBSS requested the verifications on three separate occasions, repeating the warning that failure to provide the requested information would result in denial of the application.  Despite the repeated requests for the verifications, the UCBSS was unable to determine A.T.'s eligibility because the Medicaid application remained incomplete.         
On August 28, 2007, the UCBSS provided D.T. and S.T. with a "Verifications[-]Needed" form, which provided a list of items needed to verify A.T.'s eligibility.  The requested verifications included papers related to A.T.'s checking account statements; a copy of a pre-paid irrevocable funeral trust; a copy of a deed to land owned in Virginia; written proof that a life insurance policy had been liquidated; a copy of the Blue Cross Blue Shield quarterly bill; and a copy of the POA.  D.T. and S.T. did not provide the information.
On September 20 and October 19, 2007, the UCBSS made its second and third requests to D.T. for the same items requested on August 28, 2007.  The bank account statements, the deed for the Virginia property, and written proof the life insurance policy was liquidated were critical to the UCBSS's eligibility determination.  The second and third letters also requested that the information be provided within ten days to enable the UCBSS to determine A.T.'s eligibility for Medicaid benefits.     
On November 9, 2007, the UCBSS denied A.T.'s application for failure to provide the eligibility verifications.  The denial letter, sent to D.T., notified him that he could request a fair hearing on behalf of A.T.  It was not until November 15, 2011, that S.T., on behalf of A.T., requested a fair hearing. 
In the interim, D.T. and S.T. sporadically communicated with the UCBSS without fully providing the verifications.  On November 26, 2007, D.T. and S.T. wrote the UCBSS informing them that they found a certificate of deposit (CD) in the amount of $10,000, and from that amount, they paid SMHRC $8,000, but withheld $2,000 to pay bills and to clean A.T.'s apartment; they were waiting for A.T.'s insurance company to convert the policy to paid-up insurance so they could place the proceeds into a trust; and that they were attempting to obtain a survey and appraisal for the Virginia property before listing it for sale. 
On December 4, 2007, D.T. and S.T. wrote the UCBSS asking questions about their obligation to sell the Virginia property.  On December 6, 2007, the UCBSS responded in a letter addressed to D.T., indicating that D.T. should contact an attorney regarding his and S.T.'s legal questions as to the Virginia property and stating that he could re-apply for Medicaid benefits once DMAHS obtained the previously-requested information.  On December 11, 2007, S.T. informed the UCBSS that he had contacted an attorney to assist with the sale of A.T.'s Virginia property. 
On January 27, 2008, D.T. and S.T. wrote UCBSS again, rather than re-applying for benefits.  In their letter, they indicated that the insurance policy had not yet been transferred to an irrevocable trust, there was a buyer for the Virginia property, and $15,000 plus all balances exceeding $2,000 would be turned over to SMHRC once the property was sold.  On January 30, 2008, the UCBSS reminded D.T. and S.T. that they were required to file a new application for Medicaid benefits, and provided specific details as to the re-application procedure.
On August 13, 2008, approximately one year after the initial application, D.T. and S.T. re-applied for Medicaid benefits on behalf of A.T.  By this time, A.T. had purportedly sold her property in Virginia for $12,000.  The UCBSS requested written confirmation that A.T. had turned over the proceeds of the sale to SMHRC, and informed D.T. and S.T. that the burial trust, in the amount of $8,873, was revocable, and that unless it was converted to an irrevocable trust, the value of the trust would be counted as an asset.  On September 18, 2008, the UCBSS followed up by notifying D.T. and S.T. that it had not received proof that the life insurance policy had been converted to an irrevocable trust.  
On November 18, 2008, S.T. informed the UCBSS that an irrevocable trust had been obtained, and based on that information, requested retroactive eligibility to October 27, 2008.  On approximately November 28, 2008, S.T. sent a copy of the irrevocable trust to UCBSS.  On January 6, 2009, the UCBSS approved the re-application for Medicaid benefits, retroactive to October 1, 2008.
In November 2009, SMHRC filed a complaint against A.T. and S.T. in the Superior Court of New Jersey, Law Division, Union County, and in May 2010, SMHRC filed an amended complaint adding D.T.  A third-party complaint against UCBSS was filed in approximately June 2010.   
            In November 2011, S.T., for the first time, requested a fair hearing seeking to challenge the November 9, 2007 UCBSS determination denying A.T.'s August 28, 2007 application for Medicaid benefits.  In February 2012, DMAHS denied the fair hearing request as time-barred.  S.T. appealed that decision and, in July 2012, we remanded the matter to the OAL for further proceedings.    
The ALJ conducted hearings on November 27, 2012, and on June 10, 2013.  The ALJ issued a written decision on January 17, 2014.  The ALJ concluded that the UCBSS properly denied A.T.'s August 28, 2007 application because A.T. failed to provide the requested verification information as to her assets and resources.  Additionally, the ALJ explained as to the Virginia property that
[l]iquidation of the resource and distribution of the net proceeds were not the only issues.  A.T.'s failure to provide even a deed prior to November 9, 2007, in response to three separate requests, was one consideration in the denial of benefits as of that date.  The UCBSS had no proof of exactly what land was owned, nor any basis to evaluate the Virginia property and qualify [A.T.] for Medicaid for six months pending the sale of the property.  The UCBSS had no idea what the value of the asset was and, accordingly, it was not a matter of providing the applicant with time to liquidate, but rather whether or not the applicant would even qualify for benefits based upon the value of the land [A.T.] owned in Virginia. 

As to the insurance policy, the ALJ found that it was not until August 2008 that it was converted to an irrevocable trust.  A.T. appealed to the DMAHS and on February 24, 2014, the Director of the DMAHS issued the final agency decision under review. 
On appeal, S.T. argues that the ALJ (1) failed to understand what documents are necessary for a Medicaid eligibility determination; (2) neglected to acknowledge when the UCBSS received "the necessary documents"; (3) imposed a UCBSS thirty-day rescission rule without recognizing that S.T. did not receive the November 9, 2007 denial notice; (4) subjected S.T. to the UCBSS's rescission period, which otherwise violated the Administrative Procedure Act (APA), N.J.S.A. 52:14B-1 to -15; and (5) failed to treat A.T.'s life insurance policy as a non-liquid resource.   
We begin by addressing our standard of review and general governing legal principles.  This court's review of DMAHS's determination is limited.  Barone v. Dep't of Human Servs., 210 N.J. Super. 276, 285 (App. Div. 1986), aff'd, 107 N.J. 355 (1987) (explaining that "we must give due deference to the views and regulations of an administrative agency charged with the responsibility of implementing legislative determinations"); see also Wnuck v. N.J. Div. of Motor Vehicles, 337 N.J. Super. 52, 56 (App. Div. 2001) (indicating that "[i]t is settled that [a]n administrative agency's interpretation of statutes and regulations within its implementing and enforcing responsibility is ordinarily entitled to . . . deference") (citations and internal quotation marks omitted) (second alteration in original). 
We have previously stated that "[w]here [an] action of an administrative agency is challenged, a presumption of reasonableness attaches to the action of [the] administrative agency[,] and the party who challenges the validity of that action has the burden of showing that it was arbitrary, unreasonable or capricious."  Barone, supra, 210 N.J. Super. at 285 (citations and internal quotation marks omitted).  "Delegation of authority to an administrative agency is construed liberally when the agency is concerned with the protection of the health and welfare of the public."  Ibid.  Thus, this court's task is limited to deciding
(1) whether the agency's decision offends the State or Federal Constitution; (2) whether the agency's action violates express or implied legislative policies; (3) whether the record contains substantial evidence to support the findings on which the agency based its  [11] action; and (4) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors.

[A.B. v. Div. of Med. Assistance & Health Servs., 407 N.J. Super. 330, 339 (App. Div.), certif. denied, 200 N.J. 210 (2009).]

            The Medicaid program was created when Congress added Title XIX to the Social Security Act "for the purpose of providing federal financial assistance to States that choose to reimburse certain costs of medical treatment for needy persons."  Harris v. McRae, 448 U.S. 297, 301, 100 S. Ct. 2671, 2680, 65 L. Ed. 2d 784, 794 (1980).  Participation in the Medicaid program is optional for states; however, "once a State elects to participate, it must comply with the requirements of Title XIX." Ibid.  The New Jersey Medical Assistance and Health Services Act, N.J.S.A. 30:4D-1 to -19.5,[2] authorizes New Jersey's participation in the Medicaid program.       
The Commissioner of the New Jersey Department of Human Services has the power to issue regulations dealing with eligibility for medical assistance.  N.J.S.A. 30:4D-7.  DMAHS is a division of the Department of Human Services that operates the Medicaid program in New Jersey.  N.J.S.A. 30:4D-4.  Applications for Medicaid benefits are either granted or denied by the local county welfare agencies (CWA).  N.J.A.C. 10:71-3.15.  Pursuant to this regulation, a CWA must determine "income and resource eligibility[.]"  Ibid.
            N.J.A.C. 10:71-4.1(b) defines resource to include
any real or personal property which is owned by the applicant (or by those persons whose resources are deemed available to him or her, as described in N.J.A.C. 10:71-4.6) and which could be converted to cash to be used for his or her support and maintenance.  Both liquid and non[-]liquid resources shall be considered in the determination of eligibility, unless such resources are specifically excluded under the provisions of N.J.A.C. 10:71-4.4(b).

The regulation explains that a resource must be "available" to be considered in determining eligibility.  N.J.A.C. 10:71-4.1(c).  A resource is "available" where the "person has the right, authority or power to liquidate real or personal property or his or her share of it[,]" resources that "have been deemed available" pursuant to N.J.A.C. 10:71-4.6, and resources arising from a third-party claim or action under certain circumstances.  Ibid.  The value of the resource is "defined as the price that the resource can reasonably be expected to sell for on the open market in the particular geographic area minus any encumbrances (that is, its equity value)."  N.J.A.C. 10:71-4.1(d).  The regulation explains that "[t]he CWA shall verify the equity value of resources through appropriate and credible sources."  N.J.A.C. 10:71-4.1(d)(3).  "Resource eligibility is determined as of the first moment of the first day of each month."  N.J.A.C. 10:71-4.1(e). 
            In delineating the responsibilities in the application process, the regulation states that the applicant is required to
"[c]omplete, with assistance from the CWA if needed, any forms required by the CWA as a part of the application process[.]"  N.J.A.C. 10:71-2.2(e)(1).  Moreover, the applicant is expected to "[a]ssist the CWA in securing evidence that corroborates his or her statements[.]"  N.J.A.C. 10:71-2.2(e)(2).  "The process of establishing eligibility involves a review of the application for completeness, consistency, and reasonableness."  N.J.A.C. 10:71-2.9.  Retroactive eligibility for Medicaid is governed by the regulation and allows "outstanding unpaid medical bills incurred within the three month period prior to the month of application" to be compensated upon approval by the agency.  N.J.A.C. 10:71-2.16(a).
            Finally, the regulation notes that "[e]ligibility must be established in relation to each legal requirement to provide a valid basis for granting or denying medical assistance" and that an applicant's statements regarding eligibility are "evidence."
N.J.A.C. 10:71-3.1(a), (b).  "Incomplete or questionable statements shall be supplemented and substantiated by corroborative evidence from other pertinent sources, either documentary or non[-]documentary."  N.J.A.C. 10:71-3.1(b).  Thus, these regulations establish that an applicant must provide sufficient documentation to the agency to allow it to determine eligibility and corroborate the claims of the applicant. 
            Here, the ALJ concluded that
A.T.'s application of August 28, 2007, was properly denied on November 9, 2007, because petitioner did not supply the requested information regarding her assets and resources in due time to approve the application.  I further [conclude] that the UCBSS did not act in an arbitrary, capricious and unreasonable manner in failing to rescind the denial, because petitioner did not supply the requested information regarding her assets and resources within thirty days after the denial letter to meet all eligibility requirements.

Applying these governing standards of review and legal principles, we conclude there exists substantial credible evidence in the record to support the ALJ's findings, and that the ALJ's decision was not arbitrary, capricious, or unreasonable. 
We reject S.T.'s contention that the ALJ failed to distinguish between what documents were necessary to a Medicaid eligibility determination.      
On August 28, 2007, the UCBSS provided S.T. and D.T. with a "Verifications[-]Needed" form, which provided a checklist of required documentation or information.  The regulations require the applicant to assist in procuring necessary documents and to provide the agency with required materials.  N.J.A.C. 10:71-2.2(e)(1)-(2).  At the hearing, S.T.'s counsel argued that
[t]here's liquid resources and non-liquid resources. . . . their own regulations say that any asset that takes more than [twenty] days to liquidate, is non-liquid and may not be counted. . . . my contention is, basically, that both the life insurance -- life insurance policy and the real property -- . . . . [a]re inaccessible resources that shouldn’t have been counted. 
The regulation defining "resource" clearly states that "[b]oth liquid and non[-]liquid resources shall be considered in the determination of eligibility, unless such resources are specifically excluded under the provisions of N.J.A.C. 10:71-4.4(b)."  N.J.A.C. 10:71-4.1(b) (emphasis added).  None of the potential resources at issue in this case are explicitly excluded by N.J.A.C. 10:71-4.4(b).
            As to the deed for the property in Virginia, the ALJ correctly found that the UCBSS was without necessary information to evaluate that resource.  Nancy Moharter, a supervisor in the Medicaid department at UCBSS, testified that obtaining a copy of the deed to the property was critical to the eligibility determination, and that the deed was not provided until after the initial application was denied.  Ms. Moharter made clear in her testimony that the decision as to whether real property is accessible or not is made after the Division receives the required verifications.
            As to the life insurance policy, the cash value of A.T.'s policy was $8,873.  Once UCBSS received the required verifications, it may have determined that the real property and life insurance should not have been counted as resources, pursuant to N.J.A.C. 10:71-4.4(b), but the resource determination was never reached because the verifications were never provided.  Ms. Moharter testified that "[l]ife insurance is not usually inaccessible.  You can cash it in."  However, to make that determination, the agency needs information as to the details of the policy to determine whether it should be considered a resource under the regulations and Medicaid Communication 87-26.
The ALJ properly found that "no credible evidence was submitted that A.T.'s life insurance policy was not accessible to her, or that [D.T. or S.T.] took steps to convert the life insurance policy to an irrevocable trust until after the November 9, 2007[] denial letter was issued."  D.T. did not request that the life insurance policy be converted to paid-up insurance until December 14, 2007, well after the denial letter had been issued.           
S.T. argues that the ALJ erred by failing to recognize when the necessary documents were received by the UCBSS.  It is undisputed that the verifications were not submitted until after the UCBSS denied A.T.'s first application for Medicaid benefits.  S.T. argues that "it appears" there were certain attachments to a November 26, 2007 letter relating to A.T.'s financial affairs, but there is no indication what those documents were, and in any event, November 26, 2007 was after the denial of benefits on November 9, 2007.  Plaintiff contends that the deed to the Virginia property was enclosed in a letter dated December 11, 2007.  Although the deed was eventually supplied after the denial of eligibility, that document alone was insufficient to assure A.T. qualified for benefits because it was one of several assets whose values needed to be verified. 
S.T. argues that the ALJ failed to consider a November 26, 2007 letter from D.T. and A.T. to UCBSS indicating the life insurance policy was in the process of being converted to a paid-up policy to be placed into a trust.  This letter is dated after the initial denial of coverage on November 9, 2007.  And the paid-up policy was not used to purchase a burial trust until August 13, 2008.  It was not until after September 18, 2008 that an irrevocable trust was created, which prevented the assets from being counted as a resource.  Thus, there is no evidence S.T. or D.T. complied with the UCBSS verification request, which asked for a "copy of pre[-]paid funeral trust (irrevocable) when completed."
We reject S.T.'s argument that the ALJ failed to "account" for the fact that the UCBSS mailed the November 9, 2007 denial notice to D.T. 
S.T. asserts that he should not be held to the thirty-day rule because the UCBSS mailed the November 9, 2007 denial letter to D.T.  The UCBSS "shall promptly notify, in writing, the applicant for, or beneficiary of, Medicaid Only of any agency decision."  N.J.A.C. 10:71-8.3.  The "[a]pplicant" is defined as "the aged, disabled or blind individual or his/her authorized agent who executes the formal written application . . . ."  N.J.A.C. 10:71-2.1. 
The UCBSS sent the denial notice to the correct person.  A.T. identified D.T. as her POA.  D.T. listed his address on the August 28, 2007 application.  As a result, the UCBSS properly mailed the November 9, 2007 denial notice to D.T.  See Estate of V.M. v. Div. of Med. Assistance & Health Servs., 385 N.J. Super. 165, 169-70 (App. Div. 2006).  The UCBSS also mailed to D.T. the September 20, 2007 and October 19, 2007 letters requesting verifications.  S.T. testified that he and D.T. were in contact with each other.  It is undisputed that S.T. had knowledge that the first application was deficient because he received the August 28, 2007 verifications form itemizing the outstanding information that the UCBSS had requested.  The ALJ recited these facts, which fully support her conclusion D.T. was informed of the requirements for verifications and the notice of denial.

After reviewing the record and the briefs, we conclude that S.T.'s remaining contentions are without sufficient merit to warrant discussion in a written opinion.  R. 2:11-3(e)(1)(E).  We add the following brief remarks. 
S.T. contends that the UCBSS's thirty-day rescission policy violates the APA.  Ms. Moharter explained that this thirty-day rescission period is an informal policy within Union County that grants additional clemency to applicants that provide required documentation within fifteen days after the denial.  Thus, Union County has an informal policy, benefitting the applicant, which allows the caseworker to rescind a denial if the applicant comes forward with the required information within fifteen days.  Here, because S.T. and D.T. failed to provide the UCBSS with all verifications within the fifteen-day period, we need not resolve whether formal rule making is in order because such a determination would have no impact on A.T.'s status, rendering the issue moot.


[1]   The parties to that lawsuit settled the matter subject to a hearing in the Office of Administrative Law (OAL) regarding A.T.'s first application for Medicaid benefits. 
[2]   N.J.S.A. 30:4D-2 provides that

[i]t is the intent of the Legislature to make statutory provision which will enable the State of New Jersey to provide medical assistance, insofar as practicable, on behalf of persons whose resources are determined to be inadequate to enable them to secure quality medical care at their own expense, and to enable the State, within the limits of funds available for any fiscal year for such purposes, to obtain all benefits for medical assistance provided by the Federal Social Security Act as it now reads or as it may hereafter be amended, or by any other Federal act now in effect or which may hereafter be enacted.