APRIL 2, 2007 VOLUME 14, NUMBER 40
When Mary Brewton entered a Louisiana nursing home in January, 2003, her husband Marvin stayed in their family home. The value of the home was not considered in calculating her eligibility for Medicaid assistance with the nursing home costs, and so she qualified immediately. When her husband moved into the nursing home with her three months later, however, their home went on the market—and ultimately was sold late in the same year.
While the home was listed for sale, the Brewtons entered into a personal services agreement with three relatives. They agreed to pay a lump sum of $150,000 once the home was sold, and the relatives agreed to provide services for as long as either Mr. or Mrs. Brewton should live. A few months after the sale of the home, $118,805.22 was transferred to the relatives, and Mr. Brewton applied for Medicaid assistance with his own nursing home costs soon thereafter.
When the state Medicaid agency considered Mr. Brewton’s application, it realized that the payment could affect Mrs. Brewton’s application for benefits. After deciding that the transfer of her one-half interest in the sale proceeds had been a gift to the relatives, the agency withdrew her Medicaid assistance; she appealed, but an Administrative Law Judge agreed with the agency.
A state judge reversed the agency’s denial of Medicaid. In the judge’s view the promise to perform work for Mr. and Mrs. Brewton for the rest of their lives had some value, and he ruled that the Medicaid agency had not shown that the transfer exceeded that value.
The Louisiana Court of Appeal agreed with the trial judge, over the Medicaid agency’s objections that there could be no valuable services to perform since Mrs. Brewton’s care was being provided by Medicaid Far from taking care of all of her needs, said the appellate judges, Medicaid left a number of tasks to the relatives, including handling the couple’s financial dealings; cleaning up, listing and ultimately selling the house; replacing clothing lost in the nursing home’s laundry; and obtaining replacement hearing aids for Mr. Brewton (who, like many long-term care patients, persistently lost or mislaid his hearing aids).
In addition, the relatives visited the Brewtons regularly and helped ensure that Mr. Brewton cooperated with the nursing home staff despite his growing confusion. On one occasion Mr. Brewton left a hospital and had to be physically returned by the relatives. In short, the personal services contract provided value for the $150,000 payment, and it should not have been treated as a gift. Brewton v. State of Louisiana Department of Health and Hospitals, March 13, 2007.
Compare the Brewton holding, however, to the similar case involving Marion Andrews of Swampscott, Massachusetts. Mrs. Andrews owned her home, a lovely but deteriorating Victorian, which she could not afford to keep after she moved into a nursing home. Her daughter and son-in-law considered offers in the range of $150,000 to $175,000, and obtained the estimate of a real estate agent that they might get as much as $225,000 for the home. Instead, they took leaves of absence from their own work, invested a small amount (about $2,600) in paint and other supplies, and spent the next year working on fixing up the house.
When Mrs. Andrews’ daughter finally completed the work and sold the house, it fetched $429,000. Even as the sale of Mrs. Andrews’ home was closing, her daughter discovered for the first time that her mother could qualify for Medicaid assistance if the net sale proceeds were below a certain level, and so she created a $100,000 “invoice” for her and her husband’s work in fixing up the home. After payment of that invoice amount to themselves, they applied on Mrs. Andrews’ behalf for Medicaid assistance.
The state Medicaid agency denied eligibility, finding that the payment was actually a gift by Mrs. Andrews because there had not been any agreement that her daughter and son-in-law would be compensated for their work. The Massachusetts Superior Court agreed. While Mrs. Andrews’ daughter and her husband clearly “put a great deal of time and effort into the renovations,” there was no indication that Mrs. Andrews intended to pay them for their work from the outset, or even as the work progressed. In fact, ruled the judge, it appeared that the primary motivation for the invoice may have been to secure Medicaid eligibility rather than to compensate Mrs. Andrews’ daughter for any agreed-upon work arrangement. Andrews v. Division of Medical Assistance, February 14, 2007.
What are the combined lessons of the Brewton and Andrews cases? Two points, at least, can be extracted:
- An agreement for legitimate services, even services to be performed prospectively, can be an appropriate payment from a prospective Medicaid applicant’s funds, and
- Any such agreement should be prospective (entered into before the work is undertaken), in writing, and for a fair amount considering the work which will actually be undertaken.