New York Court Addresses “Medicaid Transfer” Issue in Context of Continuing Care Community (CCRC)
On November 6, 2015 the appellate division of New York’s Supreme Court addressed an issue long brewing in some states, whether Continuing Care Retirement Communities (CCRCs) can insist on “private pay” for skilled nursing care despite a resident’s “eligibility” for Medicaid under state and federal laws. In Good Shepherd Village at Endwell, Inc. v. Yezzi, the unanimous panel affirmed summary judgment in favor of the CCRC on the payment question.
The decision highlights Congressional DRA action in 2005/6 that amended federal Medicaid law to expressly permit CCRCs to offer contracts that require residents to “spend on their care resources declared for the purposes of admission before applying for medical assistance.” The DRA amendment was a response to the industry’s lobbying efforts, following a 2004 decision by a Maryland appellate court in Oak Crest Village, Inc. v. Murphy that held such a contractual provision violated the federal Nursing Home Residents’ Bill of Rights, viewed as prohibiting nursing homes from conditioning admission on guarantees of private pay.
In the New York case history, the couple apparently signed two separate documents, beginning with a “contract” at the time of their entrance into the CCRC that required them to pay both an entrance fee ($143,850) and “basic monthly fees” of approximately $2,550 to cover the cost of independent living. Any need for skilled nursing care would be assessed “an additional charge.” That contract provided that residents could “not transfer assets represented as available” for less than fair market value. When the wife needed skilled care, the couple signed a second document, referred to in the case as an “admission agreement,” for treatment in the CCRC’s skilled nursing unit. The “admission agreement” reportedly required the Yezzis to “pay for, or arrange to have paid for by Medicaid” all services provided by the CCRC.
After the wife entered the skilled nursing facility at the CCRC, the couple notified the CCRC of their application for Medicaid and their transfer of some $750,000 dollars of joint assets into the husband’s name. The Medicaid application was approved for the wife. (New York law on the size of permitted spousal transfer appears to be more generous than in other states, depending on what assets were involved.) In any event, this is not a case where the spousal transfer violated Medicaid rules or triggered a penalty period; however the CCRC took the position that it was still entitled to higher private pay rates, regardless of the apparent lawfulness of the intra-spousal transfer for Medicaid purposes, as the transfer breached the couple’s contract with the CCRC.
The appellate division wrote:
[W]e agree with plaintiff [CCRC] that the contract could require a resident to first spend the resources identified upon admission before applying for Medicaid, in compliance with both state and federal law. As [the New York court’s trial dvision] recognized, the essence of the CCRC financial model requires a tradeoff between the resident and the facility, in which the resident must disclose and spend his or her assets for the services provided, while the facility must continue to provide those services for the duration of the resident’s lifetime even after private funds are exhausted and Medicaid becomes the only source of payment. With this long-term commitment, the facility necessarily must evaluate the financial feasibility of accepting a resident in the first instance….
Although, as defendants correctly contend, the contract does not affirmatively state that the Yezzis must expend the private resources identified in their application, it does expressly preclude the transfer of such resources without fair consideration.
In conclusion, the court ruled that (1) the Yezzis’ actions breached the “contract” (discussed briefly in an interesting interpretation of the apparent inconsistency in payment provisions in the “contract” versus the “admissions agreement”) and (2), that the transfer was a “fraudulent conveyance” under state law.
The appellate panel did not address certain other issues or facts. For example, apparently the CCRC declined or refused to submit bills to the state agency for the authorized Medicaid payments for the wife’s care. Could the couple have been required to pay “only” the portion of the wife’s private pay rate that exceeded the available Medicaid payments? The lower court noted that the CCRC would have had to certify that it was accepting Medicaid payments in “full satisfaction” of pending charges. That question becomes important, given that another issue apparently raised by the Yezzis, but not addressed in the appellate opinion, was whether it was proper to treat the 1984 New York Medicaid statute on eligibility as somehow “incorporating” the later, 2005 federal DRA provision regarding CCRCs.
The dollar difference between the CCRC’s private pay rate and the Medicaid rate is not spelled out in the appellate opinion, although the payment sought by the CCRC totaled between “over $106,000” (appellate opinion) and $137,000 (trial opinion) for care between October 2012 and January 2014, when the wife passed away. The lower court also awarded “reasonable attorneys’ fees, plus costs and disbursements” to the CCRC.
My thanks to Pennsylvania Elder Law attorney Rob Clofine for sending us this interesting ruling. This case is a reminder that individuals and families may benefit from advice before making the decision to move in, especially from attorneys who understand both CCRC contracts and Medicaid rules.