Signing an Admissions Agreement on Behalf of Another (Part 4)

In last week’s post I distinguished the terms “personal guarantor” and “responsible party” which are found in most long term care facility contracts.   This week I’ll explain why they are so important, in light of the increasing difficulty in obtaining Medicaid benefits under the government programs that cover long term care when an applicant has no funds to pay for it.

As I have written about previously in this blog, the State has placed more scrutiny on each application and the 5 years of records for all of an applicant’s assets that is required.  This has resulted in a greater chance that an application will be denied for failure to produce requested documents or approved but with a Medicaid penalty or waiting period for benefits.  As a result, gaps in Medicaid coverage become a problem for nursing homes and assisted living facilities when a resident has run out of funds.

If a family member signs a personal guarantee, that means that if the resident has no more funds but Medicaid still won’t cover the cost, then the personal guarantor is obligated to pay out of his or her own funds.  As I wrote last week, New Jersey prohibits a nursing home from making personal guarantees a condition of admission but not assisted living facilities.

There is no prohibition, however, against requiring a responsible party.  As I said last week, the responsible party is responsible to pay the facility bill out of the resident’s funds.  Admissions agreements do typically require much more of the responsible party.  That person may be responsible for filing a timely Medicaid application and provided all the documentation necessary.  That person must also complete the financial information part of the agreement.

Each of these responsibilities could open the door to personal responsibility.  If, for example, the Medicaid application is not filed in a timely manner or is denied because of a failure to provide the necessary documentation might a facility be able to legally pursue payment from the responsible party on the theory of breach of contract – that the responsible party did not fulfill his or her obligations under the contract? 

What if the financial form is completed incorrectly?  What if the assets disclosed were actually less than what appears on the form?   Might the facility be able to pursue payment from the responsible party in that instance?

As the cost of care continues to increase and the State continues to place new Medicaid applications under greater scrutiny, the amount of an unpaid bill can easily reach $100,000 or more.  It is not hard to envision more attempts by facilities to seek other sources of payments, which is why I always discuss the importance of knowing what’s in every document before you sign.  Read everything before you sign and be sure you understand in what capacity you are signing – whether on behalf of the applicant as agent under power of attorney, as responsible party or as personal guarantor.