COA affirms transfer penalty for nursing home resident

The Indiana Court of Appeals has affirmed a finding by the Family and Social Services Administration that an elderly woman was not entitled to Medicaid nursing home benefits in the eight months after she gave $35,500 to her nephew and his wife.

In the case of Lola Austin v. Indiana Family and Social Services Administration, 64A04-1008-MI-514, Lola Austin appealed the FSSA determination that the payment constituted a transfer. The FSSA’s decision had previously been affirmed by an Administrative Law Judge and a trial court.

Austin moved into the Alzheimer’s Unit of the Whispering Pines Health Care Center in September 2007, during which time her nephew and his wife, James and Julianne Mack, began building an addition onto their home. James claimed that the addition could potentially enable Austin to live in the Mack household. At the end of September, Austin signed a form naming the Macks her attorneys-in-fact.

On November 29, 2007, the Macks, signing both on their own behalf and as Austin’s attorneys-in-fact, executed a “Lifetime Care Agreement” that stated the Macks would provide a variety of services for Austin for the remainder of her life, including grooming, laundry, and personal shopping.

The agreement provided, based on Austin’s actuarial life expectancy and an average cost of $12 per hour for the services and an estimated 15 hours per week to provide them, that the total value of the services to be provided by the Macks was $41,236. However, the Macks agreed to accept only $35,500 from Austin, as that was the full extent of her savings at the time. The Macks immediately used the $35,500 to help pay for the addition to their house.

Austin’s Medicare benefits for residing at Whispering Pines ran through November 2007. On December 12, 2007, James filed an application for Medicaid nursing home benefits with FSSA on behalf of Austin. FSSA denied this application on January 24, 2008, on the basis that Austin’s resources exceeded the Medicaid eligibility limit. On April 18, 2008, James filed another application for Medicaid benefits with FSSA, retroactive to December 2007. James believed the first denial failed to consider that several checks from Austin’s checking account had been outstanding at the time of the first application, and that the cashing of those checks would have lowered her resources below the Medicaid eligibility limit. On May 19, 2008, FSSA generally approved the application. However, FSSA stated that it was imposing a transfer penalty based on the November 2007 payment of $35,500 to the Macks, which resulted in Austin being denied coverage for nursing home benefits from December 2007 through July 2008.

In its affirmation, the COA said that it believed the FSSA and the courts are justified in turning a skeptical eye toward “personal care” contracts and carefully examining whether they truly represent a fair market value exchange for cash or assets of a nursing home resident. The FSSA didn't challenge the agreement itself, but rather argued it did not have a fair market value of $35,500.