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NAELA News Journal - NAELA News Online

The Subversion of Medicaid Planning That Hurts Spouses and Families; 
What NAELA Members Can Do to Fix the Problem 

By NAELA Publications
Published July 2018
The NAELA Litigation Committee is interested in learning more from NAELA members about how our clients are being served or mis-served by these different arrangements.

If your clients or potential clients did not already have enough grief in their lives, some now have the added task of resisting those “Medicaid application services” – pushed on them by their nursing homes – that pose as saviors but whose overriding goal is to protect the nursing home’s bottom line. We do not know how common or widespread this practice is, or how many “Medicaid application” services collaborate with nursing homes, but the potential negative impact on clients is sufficiently serious that we want to highlight this matter to the NAELA membership.

The nursing home’s goal is to see that its resident qualifies for Medicaid – but not too soon. To be sure, a reasonable goal is to avoid a gap between when the resident is destitute and when Medicaid starts paying. NAELA members are well aware of that problem. But when “Medicaid application” services focus only on ultimate eligibility, and not how to protect spouses and family members, it is the nursing home and not the resident or her family that is being served.

Reputable “Medicaid application” services that prepare applications and related non-legal services perform a valuable function. But when they go beyond this and purport to provide Medicaid planning, promoted by nursing homes to residents, clients can suffer.

“Medicaid application” services are not typically planners and thus are not trained to assess the different routes for advancing eligibility. Application service staffs not trained in analyzing eligibility, as good Medicaid attorneys are, are unlikely to protect their clients against the loss of valuable rights under the Medicaid system.

One sign of the disjunction between what is sold to clients and what the application service actually seeks to do – and thus whose interests they most service – can be seen in how they often studiously limit their obligations and scope of work in ways clients are unlikely to appreciate.

They often claim otherwise, however. “Medicaid application” services may advertise, for example, that they provide comprehensive Medicaid planning, assist in navigating Medicaid rules, claim overall substantive knowledge of, and expertise in, Medicaid law and procedures, and assert familiarity with local Medicaid staff. These kinds of promises can be compelling to the elderly resident easily flustered by the document demands of Medicaid offices.

But a close review of some contracts suggests that they may do much less than appears from their promotional materials. They carefully limit their actual services to the application process itself and not, despite the suggestion in claims to the contrary, providing the comprehensive eligibility analysis that competent lawyers provide as a matter of course. The typical agreement requires the customer to acknowledge that he or she is not getting legal advice or services from the application service and is not relying on it for legal advice.

In one common scenario, a Medicaid application firm contracts with nursing homes to handle all of their resident Medicaid applications. It reserves the right to refer to counsel those who do not immediately qualify for benefits. But it is hard to imagine that the nursing home will continue to work with a firm that is too quick to refer its clients to attorneys for appropriate aggressive Medicaid planning. And of course there are problems far beyond eligibility that can harm clients, such as the failure to avoid estate recovery in favor of disabled relatives or others.

NAELA members who do Medicaid work will be quick to appreciate the many problems likely overlooked by nonlawyer Medicaid application services:
  • Maximizing the community spouse resource allowance;
  • Aggressive spend-down by paying off mortgages, car loans and other debt;
  • Aggressive spend-down by paying off mortgages, car loans and other debt;
  • Timely use of spousal Medicaid qualified annuities;
  • Appropriate use of pooled special needs trust accounts for spouses;
  • Exempt transfers to disabled children or to trusts for other disabled relatives;
  • Exempt home transfers to care-giver children and co-tenant siblings;
  • Adroit use of gift and return or other spend down strategies.

The NAELA Litigation Committee has looked at the problem and believes there are promising remedies for clients or former clients who have been harmed in using one of these services.

One promising route is an individual or class action under state consumer protection laws, many of which provide both treble damages and attorney’s fees for successful plaintiffs.  In New Jersey, for example, it is a violation to advertise “as part of a plan or scheme not to sell the item or service so advertised ... “ or for an information service to fail to provide an “accurate description of the service ... clearly and conspicuously in all advertisements offering the information service.”  There are additional penalties if the victim was elderly or disabled, “not more than $10,000 if the violation caused the victim of the violation pecuniary injury and the person knew or should have known that the victim is a senior citizen or a person with a disability...”

Another would be a class action contract claim. From the contracts we have examined so far, they do not have mandatory arbitration clauses, so that class relief would not be foreclosed under the string of Supreme Court cases expanding the Federal Arbitration Act far beyond its original intended application.

A third would be a claim that the nursing homes and the application services conspired to deny residents their rights under either the Medicaid Act or the Nursing Home Reform Act. Whether there is a private cause of action would require a close examination of the specific conduct at issue laid against the specific rights established by the federal statutes. A leading case from the Third Circuit found an implied cause of action for wrongful death from the failure to ensure quality care. Grammar v. John J. Kane Regional Centers-glen Hazel, 570 F.3d 520 (2009). While it has not been widely followed in other circuits, it is good law in the circuit and has been followed there. The question in any case, even the disagreeing courts acknowledge, is a close review of the specific wrongs and the concrete rights established by Congress and the extent to which an inference of private protection can be inferred.

The NAELA Litigation Committee is interested in learning more about how our clients are being served or mis-served by these different arrangements. The issue is particularly important because it undercuts the most valuable service good Medicaid lawyers offer – maximizing benefits for the clients and their family. Services, performed by people without the time to commit to a full review of a client matter is one problem, and not a trivial one. Services that pose as client advocates, but which aren’t, is a more serious one. And of course there may well be other models or forms by which nursing homes or others take advantage of clients.

To contact the NAELA Litigation Committee, or to explore with a member whether you have a situation warranting further examination, use this link.