Thursday, February 27, 2014

Beware of Potential Liability When Signing a Nursing Home Contract

“Crisis” Medicaid planning typically involves the transfer of assets from the person seeking nursing home Medicaid coverage to one or more family members. While the transfer of assets to a spouse or disabled children constitutes “exempt” transfers that do not impact the donor’s Medicaid eligibility, transfers of assets to non-disabled children or other persons during the five-year “look back” period will result in a period of Medicaid ineligibility for those seeking nursing home Medicaid.
Even in a crisis planning situation, however, implementing a technique known as “half-a-loaf” planning makes it possible to preserve at least one-half of a nursing home resident’s assets when seeking Medicaid coverage for the cost of their care.  Unfortunately, too many people do not seek qualified professional advice when applying for Medicaid for a loved-one, and too often make assets transfers that result in significant financial penalties for not only the person applying for Medicaid coverage, but also for other family members to whom asset transfers were made.

A recent New York court case, Aaron Manor Rehabilitation and Nursing Center, LLC v. Diogo, decided on February 14, 2014, highlights this dilemma.  In that case, Grace Diogo was admitted in 2011 by her niece, Annette Louis, to the Aaron Manor nursing home.  Ms. Louis, who Ms. Diogo had designated as power of attorney, signed the nursing home admission agreement on Ms. Diogo’s behalf.  Under the terms of the admission agreement, Mr. Louis agreed to use Ms. Diogo’s assets to pay for Diogo’s cost of care, and to apply for Medicaid for Ms. Diogo.

In 2009 – two years before Ms. Louis signed the nursing home admission agreement for her aunt – Ms. Diogo gave Ms. Louis and her mother $24,000 apiece.  Since those transfers constituted non-exempt transfers that were made during the 5-year look back period, they resulted in a Medicaid “penalty period” of approximately 5 months, during which time the nursing home was not paid by either Ms. Diogo (who by 2011 was essentially out of money), or Medicaid.  

Evidently not pleased to be left holding the bag, the nursing home sued Ms. Diogo and Ms. Louis for over $62,000, asserting a number of contractual and tort claims including breach of contract, unjust enrichment, and fraudulent conveyance. Central to the nursing home’s position was the signed nursing home agreement that required Ms. Diogo (and her agent, Ms. Louis), to use Ms. Diogo’s funds to cover the cost of care. Among other claims, the nursing home asserted that the 2009 transfers constituted a breach of that promise, since those transfers during the penalty period left Ms. Diogo unable to cover the cost of her care during the resulting Medicaid penalty period.

In its recent decision, the Appellate Division for the Fourth Judicial Department denied the nursing home’s motion for summary judgment, stating that Ms. Diogo and Ms. Louis had raised genuine issues of fact as to whether the 2009 transfers actually constituted a “fraudulent conveyance,” and whether Ms. Louis had in fact acted in compliance with the nursing home agreement.  The matter was returned to the trial court for further proceedings, which likely will include a trial on the merits unless the parties are able to settle the case before trial.

But even though Ms. Diogo and Ms. Louis’ may have “won” the case at the appellate level, in a practical sense they have already lost.  They (most likely, Ms. Louis) have almost certainly spent many thousands of dollars on legal fees; and, if they don’t settle the case anytime soon, many more thousands of dollars in fees will be sure to follow, with no guarantee that they will prevail at trial.
All of this could have been avoided had Ms. Diogo and Ms. Louis retained experienced legal counsel to design and implement an appropriate “crisis” Medicaid plan to preserve as much of Ms. Diogo’s assets as possible.  An elder law attorney might have recommended a technique known as “reverse half-a-loaf,” under which a portion of the funds gifted in 2009 would have been returned to Ms. Diogo.  The returned funds would then have been loaned to Ms. Louis and repaid under a Medicaid compliant promissory note.  Such a strategy would have ensured that there were sufficient funds to cover a shortened Medicaid penalty period, while preserving at least a portion of the previously gifted assets.  Under that strategy the nursing home would have been paid from the loaned funds during the Medicaid penalty period, with no gap in payment since Medicaid would have begun paying the nursing home immediately upon the conclusion of the penalty period.  

While there is a cost to hiring an elder law attorney to design a crisis Medicaid plan, I can say with confidence that the cost pales in comparison to the cost of litigation, while producing superior results. As Ms. Diogo and her family discovered the hard way, it is rarely a good thing to see you name appear in a court caption!

Wednesday, February 19, 2014

Why are the Elderly are so Susceptible to Scams?

Here's a recent Forbes column that explains why the elderly are more likely than others to fall prey to telephone and internet scams.  Bottom line:  adult children and other family members must stay in close contact with their elderly loved-ones and be aware that the elderly family member is almost certain to be repeatedly targeted for scams.  The parent or loved-one should be repeatedly reminded to be skeptical if they are offered any type of deal on the phone or the internet by someone they don't know.  And, they should be told to report any suspicious activities to the child or other trusted family member.