Agency Mistake No Basis For Retroactive Medicaid Eligibility

JULY 10, 2000 VOLUME 8, NUMBER 2

The federal-state Medicaid program was designed to make sure poor Americans would receive necessary medical care. It now pays for about half of all nursing home costs. Tragically, the program is so complicated that it often requires expert legal assistance to ensure that benefits are received in accordance with the program’s own rules. A recent Iowa case demonstrates that it can be a mistake to rely on even Medicaid’s own staff members for interpretation of those rules.

William and Lydia Ahrendsen knew as early as 1991 that they might face nursing home placement, and they wanted to keep the family farm in the family. On advice of their attorney, they “sold” the property to their two children for two dollars; the farm was worth about $240,000 at the time. Because the “sale” was really a gift to the children, Medicaid rules made the Ahrendsen’s ineligible for Medicaid assistance for a period of months.

The period of ineligibility for such a gift is determined by dividing the value of the gift by an amount set by the state. That amount, in turn, is intended to approximate the actual monthly cost of nursing home care. In the Ahrendsen’s case, the period of ineligibility worked out to be 72 months (six years).

Both Mr. and Mrs. Ahrendsen went into the nursing home shortly after making the gift to their children. A year later, at the suggestion of the nursing home social worker, their son Glen applied for Medicaid assistance. Because the gift was just over a year old their application was denied; the Medicaid worker advised Glen Ahrendsen that they would not be eligible until August of 1997—nearly five years later.

The Medicaid worker, as it turned out, was simply wrong. Federal law provides that gifts older than three years (in most cases) are not counted in calculating Medicaid eligibility. Although there has been some dispute about what that means for people who make an early application like the Ahrendsens, Iowa’s Medicaid rules were clear: the Ahrendsens would have been eligible in February, 1994.

Glen Ahrendsen learned of the mistake in September, 1996. He immediately filed for Medicaid eligibility for his mother and father, even though his father had died two years earlier. He sought reimbursement for the nursing home payments which would have been covered during the prior two years if he had not received incorrect advice from the state’s Medicaid worker.

Federal Medicaid law limits retroactive coverage to the three months prior to filing of an application. The Iowa courts disallowed Glen Ahrendsen’s request for additional reimbursement, and the Iowa Supreme Court agreed. Because he relied on agency advice, the Ahrendsen family was simply out of luck. Ahrendsen v. Iowa Dep’t. of Human Services, July 6, 2000.

©2017 Fleming & Curti, PLC