by Jose D. Roman | Feb 4, 2025 | Legal Bulletin, Medicaid
In an interesting case from last year, J.R. v. Horizon NJ Health, A-2028-21 (February 5, 2024), the American Civil Liberties Union (ACLU) of New Jersey, supported by advocacy groups like Disability Rights New Jersey and the National Health Law Program, took on a widespread issue affecting Medicaid recipients. The case centered on J.R., a child with medically complex needs whose Private Duty Nursing (PDN) hours were significantly reduced by Horizon NJ Health, her Medicaid provider. Despite some clever legal arguments, the Superior Court of New Jersey, Appellate Division, ruled in favor of the Horizon’s decision to scale back J.R.’s care hours.
Background
Born prematurely in February 2019, J.R. faces serious medical conditions, including bronchopulmonary dysplasia, hypertension, and laryngomalacia. Initially, Horizon provided her with round-the-clock PDN care to meet her intensive medical needs. However, in 2020, Horizon reassessed her condition using a form called the PDN Acuity Tool—developed by Milliman Care Guidelines—and decided to cut her nursing hours from 24 per day down to just 8. This drastic reduction, which unfortunately is a common practice, was challenged. Specifically, at issue was the fairness and reliability of the process when using an automated assessment method such as the PDN Acuity Tool.
Legal Arguments: A Fight for Fairness
The ACLU of New Jersey, advocating for J.R., presented novel arguments against Horizon NJ Health’s decision, emphasizing the following concerns:
- Inadequate Notice: J.R.’s legal team argued that Horizon NJ Health failed to provide a clear, detailed explanation for reducing her PDN hours, leaving insufficient regulatory grounding for the decision.
- Questionable Standards and the PDN Acuity Tool: Critics contend that the reliance on the PDN Acuity Tool constitutes an overly opaque method for determining medical necessity. While automated tools can standardize assessments, such systems risk oversimplifying the complexities inherent with severe disabilities. The proprietary nature of the tool—and the lack of transparency regarding its underlying algorithms—can conceal potential biases and errors that adversely affect vulnerable populations.
- Ignoring Medical Expertise: Despite J.R.’s treating physician’s strong recommendation for 24/7 care, the decision-making process largely depended on the tool’s point score, which may not fully incorporate individualized clinical judgments.
The PDN Acuity Tool and Automated Decision-Making
This case is an important attempt at taking a critical look at the implications of using automated decision-making systems in the delivery of healthcare:
- Balancing Standardization and Individual Needs: The PDN Acuity Tool was designed to convert complex clinical data into a quantifiable score. However, this case highlights the fact that while such tools promote consistency, they may fall short when addressing the multifaceted nature of a patient care. In J.R.’s case, the tool’s reduction from 24 to 8 hours was based on a standardized scoring system that her attorneys argued failed to fully capture the child’s nuanced clinical needs, and was contrary to the recommendation of her physician.
- Transparency and Accountability Concerns: Critics argue that using algorithmic forms such as the PDN Acuity Tool lack transparency because there is no clear disclosure of how individual variables are weighted. The forms simply have pre-determined point values without disclosing how the point value was determined. As a result, consumers are left with little means to challenge potentially arbitrary reductions in care. This analysis underscores the necessity for state agencies to ensure that automated assessments are accompanied by detailed, accessible explanations that uphold due process rights. It also highlights a roadmap for future legal challenges.
- Impact on Individuals with Unique Needs: While automated decision-making systems may be efficient, they may inadvertently disadvantage those with complex or atypical care needs. The legal discourse around J.R.’s case illustrates how reliance on proprietary tools can obscure critical nuances and lead to decisions that appear “reasonable” on paper but are ethically problematic when applied to individual patients.
The Court’s Decision: A Disappointing Outcome
The Appellate Division ultimately upheld the decision to reduce J.R.’s care hours, concluding that Horizon NJ Health had acted within Medicaid regulations. The ruling was based on several key points:
- Sufficient Notice: The court found that, despite lacking explicit regulatory citations, the notice provided adequate information about the reasons for the reduction.
- Legitimacy of the PDN Acuity Tool: No evidence was presented showing improper use of the tool. The court accepted its results as a “reasonable and objective” method to determine medical necessity, even as critics warned that such assessments might not fully address individual clinical complexities.
- Consideration of Medical Evidence: The review included extensive clinical records and expert testimony, which the court deemed sufficient to support the decision.
What This Means for Medicaid Recipients
J.R.’s case brings to light the ongoing tension between cost containment measures and the rights of Medicaid beneficiaries to receive personalized, medically appropriate care. While automated tools like the PDN Acuity Tool offer efficiency, they also underscore the need for transparency, individualized assessment, and robust safeguards against the potential biases inherent in algorithm-driven decisions.
Looking Ahead
Although the ruling was not favorable, it highlights an important conversation regarding the use of automated decision-making systems. The Appellate Division seemed to indicate that it was looking for more evidence from J.R.’s side that could be a roadmap for future litigation. Specifically, the court noted that at the hearing stage “J.R. had the right to discovery, to subpoena witnesses, and to call her own witnesses, including experts.” Perhaps depositions of Horizon representatives and experts, as well as testimony from experts who are critical of the PDN tool could change the outcome in a future case. In the meantime, advocacy organizations will continue to call for clearer guidelines, enhanced transparency, and more comprehensive evaluations that integrate both standardized assessments and individualized clinical judgments. This case serves as a powerful reminder of the critical role legal advocacy plays in ensuring that technological advancements in healthcare do not come at the expense of patient rights and quality care.
by Jose D. Roman | Jan 28, 2025 | Irrevocable Family Trusts, Legal Bulletin, Medicaid, Medicaid Planning, Trusts
In a recent Superior Court of New Jersey, Appellate Division decision, W.F. v. Morris County Department of Family Services, the court reversed the imposition of a Medicaid transfer penalty for funds placed in trust to meet future child support obligations.
Background of the Case
The case involved W.F., an incapacitated individual living in a Care One nursing home due to a long-term alcoholism-related disease. Years before his incapacitation, W.F. entered into a property settlement agreement (PSA) during his divorce, agreeing to pay $23,400 annually in child support and cover half of his children’s future college expenses.
As W.F.’s financial situation deteriorated, his assets became insufficient to cover both his nursing home debts and child support obligations. To ensure his children received the necessary support, an irrevocable Family Trust was established with the approval of the court. This led to a dispute with the Morris County Department of Family Services regarding the classification of these trust funds in the context of Medicaid eligibility. When considering his eligibility for long-term Medicaid (MLTSS), the County argued that the transfer of funds to the trust was improper and imposed a 190 day transfer penalty.
Legal Arguments and Court’s Analysis
The County considered the funds in the Family Trust to be W.F.’s available assets or money he could have used to pay for his care. The County further found the transfer to the Trust for his children to be an improper gift for the purpose of qualifying him for Medicaid. As a result the improper transfer/give resulted in a period of ineligibility for Medicaid benefits, that is, a transfer penalty. However, W.F.’s guardian challenged the imposition of a penalty, arguing that the child support payments were legitimate, court-ordered debts and should not be treated as voluntary transfers.
The Appellate Division examined several key points:
- Definition of Available Resources: Under N.J.A.C. 10:71-4.1(b), resources include any property that can be converted to cash for support and maintenance. Only resources that are “available,” meaning the individual has the right or power to liquidate them, are counted towards Medicaid eligibility. N.J.A.C. 10:71-4.1(c).
- Transfer Penalty Rules: N.J.A.C. 10:71-4.10(a) imposes a penalty if assets are transferred below fair market value during a look-back period (the 60-month period before the Medicaid application is filed). The presumption is that such transfers are made to qualify for Medicaid, unless proven otherwise by the applicant.
- Court-Ordered Transfers: The regulations specify that transfers ordered by a court, not acting at the individual’s behest, may indicate that the transfer was for purposes other than establishing Medicaid eligibility. N.J.A.C. 10:71-4.10(k).
Court’s Decision
The Appellate Division reversed the Division of Medical Assistance and Health Services’ (DMAHS) decision, which upheld the County’s imposition of the transfer penalty. The court found several faults in the DMAHS’s approach:
- Misinterpretation of Gifts: The court held that the transfer of assets to the Family Trust was not a gift by W.F. but a court-ordered reallocation to fulfill pre-existing child support obligations. This distinction is crucial because gifts imply voluntary transfer of assets, whereas court-ordered payments are mandatory and binding.
- Lack of Control Over Assets: W.F. had no control over the funds once they were placed in the irrevocable trust. The trial court, recognizing the children’s entitlement to support, ordered the division of W.F.’s assets accordingly.
- Erroneous Legal Standards: The Appellate Division found that DMAHS misapplied the legal standards of eligibility, and that its actions were unreasonable, arbitrary and capricious. The court emphasized that the allocation of assets to meet pre-existing child support obligations, as mandated by a divorce judgment, was clearly not a gift under the circumstances of this case.
Final Thoughts
By reversing the transfer penalty, the court has once again shown that it favors upholding court-ordered support obligations versus strict interpretation of Medicaid regulations. This case will provide further guidance to Medicaid planning professional dealing with the issue of allocating competing debts and support obligations. It reinforces the principle that mandated child support payments are not gifts but essential support mechanisms protected by law.
by Jose D. Roman | Jan 27, 2025 | Legal Bulletin, Medicaid, Medicaid Planning, Medicaid Updates
The New Jersey Department of Human Services, Division of Medical Assistance and Health Services issued Medicaid Communication No. 25-01 on December 24, 2024. The document includes updates to certain eligibility and post-eligibility calculations, and reflects a 2.5% federal cost-of-living adjustment (COLA) for SSI eligibility standards.
Notable changes effective January 1, 2025, include:
- Assisted Living Residence (ALR) and Comprehensive Personal Care Home (CPCH): Monthly room and board rates set at $973.40, with a maintenance needs allowance of $143.65.
- Adult Family Care (AFC): Monthly room and board rates set at $854.60, with a maintenance needs allowance of $143.65.
- Community Spouse Resource Allowance: Minimum increased to $31,584; maximum raised to $157,920.
- MLTSS Income Cap/Living at Home Monthly Standard: Increased to $2,901.
- In-kind Support Income Amounts: Updated to $342.33 for individuals and $503.33 for couples.
For full details on eligibility calculations, refer to the updated administrative manual sections (N.J.A.C. 10:71-4.8, 5.4-6, and 5.9). Practitioners should be mindful of these changes and update staff to ensure clients receive the most up to date advice. Read the full document here.
by Jose D. Roman | Jan 21, 2025 | Estate Administration, Medicaid, Medicaid Estate Recovery
Medicaid provides crucial health coverage for individuals and families with limited income and resources, as well as people who require long-term nursing care. However, many recipients and their families may not realize that Medicaid is often entitled to be paid back after the recipient dies. Let’s talk about Medicaid Estate Recovery in New Jersey.
What Is Medicaid Estate Recovery?
Medicaid Estate Recovery is a federal requirement that obligates states to recover the costs of certain Medicaid benefits paid on behalf of a recipient after their death. This means that New Jersey’s Medicaid program may seek reimbursement from the estate of a deceased Medicaid beneficiary for services provided.
When Does Medicaid Estate Recovery Apply?
In New Jersey, Medicaid Estate Recovery applies in the following cases:
- Age 55 and Older: Medicaid benefits provided to individuals aged 55 or older are subject to estate recovery. This typically includes expenses related to nursing home care, home and community-based services, and other long-term care costs.
What Assets Are Subject to Recovery?
The state can only recover from assets that are part of the deceased’s probate estate. In New Jersey, this includes assets owned in the individual’s name at the time of death, such as:
- Real property (e.g., a home)
- Bank accounts
- Investments
Assets held jointly, in a trust, or designated with a beneficiary (like life insurance) may not be subject to recovery or recovery may be delayed, depending on the structure of ownership.
Are There Any Exceptions?
- Hardship Waivers: Families may apply for a hardship waiver if estate recovery would create significant financial hardship for survivors.
- Surviving Spouse: Recovery is deferred until the death of the Medicaid recipient’s surviving spouse.
- Dependent Family Members: If the deceased has a surviving child under age 21, or a blind or disabled child of any age recovery is postponed.
- Home Exemptions: If an adult child lived in the home and provided care that delayed the need for Medicaid benefits, the home may be exempt from recovery.
How to Protect Assets from Medicaid Estate Recovery
There are legal strategies to safeguard assets, but they require careful planning well in advance:
- Creating Trusts: Irrevocable trusts can shield assets from probate and Medicaid recovery.
- Gifting Assets: Transferring assets to family members or others, while adhering to Medicaid’s 5-year look back period rules, can minimize exposure.
- Joint Ownership: Structuring assets as jointly owned with right of survivorship can limit probate exposure.
- Exempt Transfers: Some transfers of assets are exempt from Medicaid’s 5-year look back.
Conclusion
These rules are complicated and confusing, even for the average attorney. It is essential to consult with an attorney who specializes in elder law to explore these strategies and implementing a plan that complies with both federal and your state’s Medicaid regulations.
by Jose D. Roman | Jan 15, 2025 | Medicaid, Qualified Income Trusts, Trusts
For many individuals in New Jersey, Medicaid serves as a lifeline for accessing essential healthcare services, especially under the Managed Long-Term Services and Supports (MLTSS) program. MLTSS provides coverage for home-based care, assisted living, and nursing home services. For the vast majority of individuals, qualifying for Medicaid is the only way to pay for long-term nursing care. However, since Medicaid was designed to only help people with very low income and assets, qualifying for Medicaid in New Jersey can be complex, particularly for individuals with income exceeding the program’s strict limits. One effective tool for overcoming this hurdle is a Qualified Income Trust (QIT).
What Is a Qualified Income Trust (QIT)?
A Qualified Income Trust, also referred to as a Miller Trust, is a legally established irrevocable trust that allows individuals to meet Medicaid’s income requirements. For individuals whose income exceeds Medicaid’s eligibility threshold, a QIT serves as a vehicle to redirect excess income, ensuring compliance with program limits.
Under New Jersey’s 2025 Medicaid guidelines, the monthly income limit for an individual applying for MLTSS Medicaid is $2,901. Income exceeding this threshold typically disqualifies an applicant. However, with a QIT, the applicant can deposit the source of the excess income into the trust, effectively reducing their countable income to meet the eligibility criteria.
Key Features of a QIT
- Irrevocability: A QIT must be irrevocable, meaning it cannot be changed or canceled once it is created.
- Income Source: Only income can be deposited into the trust, not assets or resources. The entire amount of whatever source is causing the excess income must be deposited into the QIT. For example, if the applicant receives both a pension and a social security check and the pension check is causing the excess income, the entire amount of the pension check must be placed into the trust each month.
- Name Medicaid as Beneficiary: The trust must name the State of New Jersey as the primary beneficiary upon the Medicaid recipient’s death. This ensures that any remaining funds in the trust are used to reimburse the state for Medicaid benefits paid. The law requires Medicaid recipients over the age of 55 to reimburse the state for benefits paid.
- Limited Use of Funds: Funds deposited into the QIT can only be used for specific purposes, such as paying the Medicaid recipient’s share of the cost for long-term care services, personal needs allowances, and medical expenses not covered by Medicaid. A successful Medicaid applicant will receive instructions from the state on how the income must be spent each month. The funds must be spent before the end of each month in accordance with these instructions or coverage could be terminated.
Steps to Establish a QIT:
- Drafting the Trust: Using the template provided by the state, individuals can draft the QIT document themselves. Alternatively, consulting an attorney is recommended for those who prefer personalized guidance or have complex financial situations.
- Setting Up a Bank Account: A separate bank account is opened in the name of the trust. The entire source of income exceeding Medicaid’s limit must be deposited into this account each month.
- Ongoing Administration: Proper administration of the trust is crucial. Funds must be managed according to the state’s guidelines and instructions, with detailed records kept of deposits and disbursements.
To further assist individuals, the State of New Jersey has published a helpful QIT FAQ document, which addresses common questions and provides detailed guidance on setting up and administering a QIT. You can access this resource at QIT FAQs.
Benefits of Using a QIT
- Medicaid Eligibility: A QIT allows individuals with income above Medicaid’s limits to qualify for Long Term Medicaid. It prevents excess income from disqualifying applicants while ensuring compliance with program requirements.
- Access to Long-Term Care: By meeting Medicaid’s income requirements, individuals can access essential long-term care services they might otherwise be unable to afford.
Final Thoughts
While a QIT is a powerful tool, it is not without challenges. Many individuals are intimidated and confused by the process. The trust must be established and managed in strict compliance with Medicaid regulations. Any misstep in administering the trust could jeopardize Medicaid eligibility. Additionally, creating and maintaining a QIT involves administrative responsibilities, which require attention to detail.
For individuals who are confident in their ability to follow the state’s guidelines, the free QIT template offers a cost-effective solution. However, consulting an experienced elder law attorney is highly recommended for those who are seeing to preserve assets or prefer expert guidance and want to ensure that all of their Medicaid planning questions are addressed.
by Jose D. Roman | Nov 27, 2024 | Estate Planning, Irrevocable Funeral Trusts, Medicaid, Trusts
Qualifying for Medicaid is often the only way most individuals can afford long term nursing care, whether that care is received in a long term care facility such as a nursing home or at home. In New Jersey, a long term Medicaid applicant is only permitted to have $2,000.00 in available assets in order to qualify. Many individuals are required to “spend down” their assets to meet the $2,000.00 limit. One tool that can help individuals qualify for Medicaid, while also saving for inevitable funeral expenses is to establish an Irrevocable Funeral Trust. In this post, we’ll explore what an irrevocable funeral trust is, how it works, and how it can assist with Medicaid planning in New Jersey.
What Is an Irrevocable Funeral Trust?
An Irrevocable Funeral Trust is a legal arrangement that allows individuals to set aside funds to cover funeral and burial expenses. Once funds are placed in the trust, they are managed by a trustee and cannot be withdrawn, altered, or revoked by the individual who established the trust. This ensures the money is exclusively used for pre-arranged funeral costs. While the funds are irrevocable, it is often easy to reassign the funds to a different funeral service provider.
Unlike a revocable trust, which can be changed or terminated, an Irrevocable Funeral Trust offers specific benefits, particularly in the context of Medicaid planning. The funds in an Irrevocable Funeral Trust are generally exempt from being counted as an asset when determining Medicaid eligibility. With the average New Jersey funeral costing in the $10,000.00 to $15,000.00 an Irrevocable Funeral Trust can be a powerful planning tool.
How Does an Irrevocable Funeral Trust Work?
- Establishing the Trust:
- The individual works with a funeral provider or financial institution to set up the trust. They specify the funeral and burial arrangements they want, including items such as a casket, service, and burial plot.
- Funding the Trust:
- The individual transfers a sum of money into the trust, typically based on the anticipated costs of the funeral and burial arrangements.
- Management of Funds:
- The funds are managed by the trustee and used exclusively for the purposes outlined in the trust. Any remaining funds after the funeral services will revert to the State of New Jersey if you are a Medicaid recipient or in other cases to your estate.
Benefits of an Irrevocable Funeral Trust for Medicaid Eligibility
Medicaid is a need-based program, meaning applicants must meet strict income and asset limits to qualify. In New Jersey, individuals often find it challenging to meet these requirements while also setting aside money for necessary future expenses. Here’s how an Irrevocable Funeral Trust can help:
- Asset Protection:
- Funds placed in a Medicaid compliant Irrevocable Funeral Trust are not counted as part of an individual’s assets for Medicaid eligibility. This means you can reserve money for funeral expenses without jeopardizing your ability to qualify for Medicaid.
- Spend-Down Strategy:
- If an individual has excess assets that prevent them from qualifying for Medicaid, funding an Irrevocable Funeral Trust can be an effective spend-down strategy. By transferring assets into the trust, the individual reduces their countable resources while ensuring their end-of-life expenses are covered.
- Peace of Mind:
- An Irrevocable Funeral Trust provides certainty that your funeral and burial arrangements are pre-funded and will not burden your loved ones during a difficult time.
Key Considerations for New Jersey Residents
- State-Specific Rules:
- New Jersey has specific guidelines regarding how the funds in an Irrevocable Funeral Trust can be spent. Services ancillary to the funeral costs may not be permitted. Some states also have a maximum contribution limit. It is essential to work with a knowledgeable professional to ensure compliance with these limits.
- Irrevocability:
- Once funds are placed in the trust, they cannot be withdrawn or repurposed. This is a binding arrangement, so careful planning is crucial.
- Choosing a Trustee:
- Select a reputable funeral home or financial institution to manage the trust. Transparency and reliability are key factors to consider. In New Jersey, Funeral Planning CHOICES, the New Jersey Prepaid Funeral Trust Fund is the leading funeral prefunding product in the state and one of the largest prepaid funeral trusts in the country.
Final Thoughts
An irrevocable funeral trust can be a valuable part of Medicaid planning for New Jersey residents. It offers a way to preserve assets, ensure Medicaid eligibility, and relieve loved ones of financial and emotional burdens associated with end-of-life arrangements. However, navigating the complexities of Medicaid and trusts requires careful planning and professional guidance.
If you’re considering an IFT, consult with an elder law attorney or a trusted funeral director to ensure that your trust is properly established and aligned with New Jersey’s requirements.