In Colonial Park Care Ctr. v. Dep't of Human Services, a decision published on September 21, 2015, the Commonwealth Court of Pennsylvania affirmed the decision of the Bureau of Hearings and Appeals (BHA) imposing a penalty on a nursing facility resident's eligibility for Medical Assistance (MA) benefits due to a transfer of assets for less than fair market value. While the ruling is somewhat predictable and represents a loss for the beneficiary, the decision appears to expand the traditional basis upon which a beneficiary can seek an undue hardship waiver from a penalty period.
In 2007, John Matjasic suffered a stroke. After his stroke, he could not live alone. He moved in with his daughter, required constant care, could not ambulate without assistance, and needed the assistance of home health aides starting in 2009. In 2012, he suffered from a seizure and was admitted to a nursing facility. The nursing facility filed an application for MA benefits, which was granted. However, the Department of Human Services (DHS) imposed a penalty period based on a substantial transfer of assets for less than fair market value.
When a transfer of assets is for less than fair market value, a presumption arises that transfer was made in order for the resident to qualify for MA. However, an MA applicant can present evidence to overcome this presumption, such as "proof of the circumstances surrounding the transfer, such as the transfer's purpose, plans for self-support after the transfer and the applicant's relationship to the person or persons to whom the asset was transferred." Testimony was presented that Matjasic made the transfers pursuant to an estate plan that predated his admission to the nursing facility by two years, that his family did all they could to prevent his admission to a nursing facility, and that the 2012 seizure was an unanticipated medical event. The Court determined this argument was without merit because Matjasic's health had been fragile for number of years, and though the 2012 seizure may have been unexpected, the need for institutionalization was not unforeseeable. The Court also found it significant that the transfers left him unable to pay for his care.
An undue hardship waiver was also filed on behalf of the resident, which was also unsuccessful. According to DHS's statement of policy, it must be shown that in order to qualify for a hardship waiver, the beneficiary must demonstrate a physical deprivation of medical care or necessities of life. Colonial Park offered only the unexpected nature of the onset of illness as justification for the hardship waiver, arguing that DHS can examine factors beyond those deprivations. Significantly, the Court held that "In order to establish undue hardship, there must be serious physical deprivations of medical care or necessities of life or serious events of a sudden and/or unexpected nature." (Emphasis in original.) The Court also suggested this standard could be met by showing an unexpected loss of assets after the transfer. Ultimately, though, the Court found that the standard for undue hardship had not been met because the beneficiary's institutionalization was foreseeable.
A few conclusions can be drawn from this case. In cases where an individual makes gifts while he or she is of failing health, in need of care at home, and cannot live without the assistance of others, it would be difficult to overcome the presumption that the gifts were made in order to qualify for MA. Likewise, it would also be difficult to establish an undue hardship in those circumstances, unless it can be shown that the individual is otherwise unable to access needed services. The Colonial Park case shows that the factors in qualifying for an undue hardship and in determining whether an individual transferred assets for a reason other than to qualify for MA continue to overlap, blurring the lines and standards between the two processes. Nonetheless, Colonial Park does expand the basis upon which a beneficiary for a provider with proper assignment can seek to establish an undue hardship.
If your organization wishes to discuss issues pertaining to Medical Assistance, collections and guardianships, please contact Steven M. Montresor from our office at (717) 620-2424 or [email protected]