Gift or Theft? – Part 3

       In this week’s post I give you the conclusion to John’s saga with Medicaid. As you will recall, we have applied for Medicaid for John’s sister, Mary. In reviewing the 5 years of records which we must submit to the State, we found that John’s brother, Jerry took $200,000 of Mary’s money for his own use while he was carng for Mary and handling her finances.

       I had John prepare for the likelihood that New Jersey Medicaid would impose a Medicaid penalty – a period of ineligibility – as a result of these transfers for which Mary did not receive anything of equal value in product or service. John filed a criminal complaint for theft as well as a civil complaint in an attempt to recoup the funds.

       Sure enough, the state focused on the transfers. I was ready with copies of both the criminal and civil complaints. But, then we got a surprise. Based on what John told me about Jerry’s financial troubles, I never thought we would ever recover a dime from Jerry. We only filed the legal actions because that is what Medicaid requires us to do. Except that not only did Jerry hire an attorney to defend him in the lawsuit we filed, he also made an offer of restitution – 50% to be exact.

       John was elated. “It isn’t a full recovery but”, he said, “anything is better than nothing, right?” Well, we are talking about Medicaid which, I often explain to clients, is like a bizarro world. What looks good isn’t always good. That was the case here.

       I told John I needed to check with the caseworker to see if accepting an offer of less than 100% would be a problem. I didn’t think so because this would be a negotiated settlement – a calculation that this was the best we could get given the risk of pursuing the claim and either being unable to prove theft or finding that Jerry is judgment proof – that we get a judgment that he owes Mary the money but then no way to collect on the judgment. I suspected the State might disagree.

       That is exactly what I found. The caseworker informed me that the State’s position is that if we accept the offer of 50%, the remaining 50% – $100,000 in this case – would be treated as a transfer for less than fair value causing a 10 month penalty.

       I told the caseworker this outcome is kind of crazy. She didn’t disagree. I told her that if we pursued the case and did get a judgment it could take a year or more. Of course we could lose and get nothing and even if we did win we still had to pursue collection efforts. Jerry was not likely to send us a check but instead would make us chase after his assets.

       A settlement seemed to me to be a win for everyone. We would avoid the penalty but would also have $100,000 to cover care for another 10 months or so. This obviously benefits the State, which would pay less on Mary’s behalf, saving tax revenue. But, that’s not the way the State sees it. So we must reject the settlement offer and continue on with the case and if it turns out we come away with nothing, that’s just the crazy world of Medicaid.