Monday, July 30, 2012

Insufficient Recordkeeping Under Personal Services Contract Contributes to Loss of Medicaid Benefits

Long-term care Medicaid benefits are a valuable commodity, and will be provided by the government only upon proof that the applicant has met the strict eligibility criteria.  The recently decided case of Swartz v. NYS Dep't of Health (App. Div., 3rd Dep't., June 17, 2012) emphasizes the importance for an applicant to have all their ducks in a row when submitting an application for institutional care.

In Swartz, two parents in declining health moved in with their daughter.  At the time of the move the parents and daughter entered into a "personal services contract" under which the daughter agreed to provide custodial care and related services to her parents on a 24-hour basis.  The contract specified that the daughter was to maintain contemporaneous records as to the dates and nature of services provided.  The contract further specified that the daughter was to be paid at rates between $15.50 and $17 per hour, depending upon the type of services she provided to her parents.

The use of a personal services contract between a parent and a child (or any other caregiver with the exception of a spouse) is a permitted means of transferring wealth from the parent to the caregiver without incurring a Medicaid "penalty period" that would otherwise result if assets were simply transferred to a child as a gift.  Under present law, any nonexempt asset transfers within 60-months of filing a nursing home Medicaid application results in a period of Medicaid ineligibility.  For example, a $100,000 gift made by a Medicaid applicant residing in Orange County to anyone other than their spouse during the 60-month "look back" period will result in a period of nursing home Medicaid ineligibility, or "penalty period," for 9.7 months.  If, however, the same $100,000 were paid to a caregiver for documented care provided for the Medicaid applicant pursuant to a written personal services contract, that wealth transfer should not result in the imposition of a Medicaid penalty period.

Despite the existence of a valid personal services contract, the Court in Swartz held that the Broome County Department of Social Services was justified in determining that a portion of the payments to the daughter were in fact disqualifying gift transfers.  The main flaw in the personal services agreement was that while the contract called for the daughter to be paid for 24-hour care, the Court noted that, "the record contains no detailed contemporaneously-prepared records documenting the services that [the daughter] allegedly provided each night of the week between the hours of 10:45 P.M. and 6:00 A.M."  Accordingly, the Court held that $36,000 of the daughter's "salary" attributed for nighttime care was not supported by the documentary evidence, and was properly considered a gift rather earned compensation by Broome County.

The Swartz decision follows a line of cases that have consistently held that if you are going to utilize a personal services contract, it is imperative that the caregiver maintain complete and contemporaneous time records to document the type and extent of services to be provided under the agreement.  Merely "being there" during the night does not appear sufficient justification to charging a "fee" for the entire night.  This result seems a bit harsh in that a non-related caregiver such as a private home care agency will certainly charge a fee for being available all night even if services are not required.  But the Courts pay especially close scrutiny to caregiver arrangements between related parties, and failing to document actual care provided will almost certainly result in a determination that the pay for any undocumented periods will be considered an uncompensated gift transfer for Medicaid purposes.

I am more troubled by the Court's holding that it was acceptable for the Broome County Department of Social Services to determine that the appropriate hourly rate for home healthcare rates was $9.22, which according to U.S. Department of Labor statistics is the mean hourly wage rate for a personal home healthcare aide in New York; the Swartz family had asserted that the appropriate rate to apply was $15.50, which is the rate they claimed would have been paid to a local home healthcare agency.  Most caregivers are provided by home healthcare agencies, and personal services contracts routinely provide that hourly rates are pegged to those of local home healthcare agencies. It is unfair to penalize family caregivers who often sacrifice their own careers to take care of a parent or other loved-one by limiting compensation to what is essentially poverty-level subsistence.

Wednesday, July 11, 2012

Federal Court Approves Community Spouse's Purchase of Annuity to Shelter Excess Resources

Earlier this week, the United States Tenth Circuit Court of Appeals issued what might be considered a landmark decision in the realm of "crisis" Medicaid planning.  In Morris v. Oklahoma Dept. of Human Resources (10th Cir., No. 10-6241, July 9, 2012), the Court held that a Community Spouse may use assets in excess of the Community Spouse Resource Allowance ("CSRA") to purchase an immediate annuity, which effectively converts non-exempt resources into an income stream. This strategy allows a Community Spouse to avoid having to spend down all of their excess resources in order for a sick or disabled spouse to be eligible for nursing home Medicaid coverage.

In New York, community spouses are presently permitted to retain excess resources by executing a "spousal refusal," which effectively renders the assets and income of a refusing spouse as unavailable for determining a community spouse's Medicaid eligibility.  However, many counties are now actively bringing post-Medicaid approval "support actions" against refusing community spouses who retain assets in excess of the CSRA.  Like the community spouse in Morris, a community spouse residing in New York may consider purchasing an immediate annuity to convert excess resources into an income stream, thereby rendering that spouse less of of a target for a spousal recovery lawsuit.

The entire Morris opinion can be read here.