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Sunday, July 19, 2020

Payment to caregiver prior to Medicaid application examined D.Z., v. OCEAN COUNTY BOARD OF SOCIAL SERVICES,

Payment to caregiver prior to Medicaid application examined

D.Z.,

v.

OCEAN COUNTY BOARD
OF SOCIAL SERVICES,

     Respondent-Respondent.
_______________________________

                   Submitted May 28, 2020 – Decided June 23, 2020

                   Before Judges Suter and DeAlmeida.

                   On appeal from the New Jersey Department of Human
                   Services, Division of Medical Assistance and Health
                   Services.
OT FOR PUBLICATION WITHOUT THE                                 APPROVAL OF THE APPELLATE DIVISION         This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the      internet, this opinion is binding only on the parties in the case and its use in other cases is limited . R. 1:36-3.                                                              SUPERIOR COURT OF NEW JERSEY                                                          APPELLATE DIVISION                                                          DOCKET NO. A-5962-17T3

      Petitioner D.Z. appeals from the December 18, 2019 amended final

agency decision of the Division of Medical Assistance and Health Services

(DMAHS) finding her eligible for Medicaid benefits but imposing a penalty of

$207,525.93 for assets D.Z. transferred during the five-year look-back period

established in N.J.A.C. 10:71-4.10. We affirm.

                                        I.

      The following facts are derived from the record. D.Z., through her son

and power of attorney, R.Z., applied to respondent Ocean County Board of

Social Services, a county welfare agency (CWA), for Medicaid benefits. The

CWA found D.Z. eligible for benefits as of August 1, 2016, but imposed an

eligibility penalty for August 1, 2016, to April 25, 2018, because she transferred

$210,579.16 during the look-back period.

      D.Z. requested a fair hearing with respect to the transfer penalty. The

matter was transferred to the Office of Administrative Law, where a fair hearing

was held before an Administrative Law Judge (ALJ). At the hearing, R.Z.

testified that D.Z. hired three health care aides to assist her at her home in the

years before she was transferred to a nursing facility. He identified the aides by




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 their full names, although we refer to them as E.D., L.O., and N.L. to protect

D.Z.'s confidential medical records.

      R.Z. testified the aides assisted D.Z. with dressing, ambulating, bathing,

cooking, cleaning, and laundry in rotating shifts of two and one-half days each.

He testified that one aide lived with D.Z. full time for several months.

According to R.Z., E.D. and L.O. were paid approximately $13 to $15 per hour,

and N.L. was paid approximately $700 to $750 per week.

      D.Z. paid the aides by check. On approximately 125 checks, she wrote

"cash" as the payee and the individual aide's first name or nickname in the memo

line. R.Z. testified that D.Z. sometimes wrote checks for more than the aide was

due in pay, with the excess to be used to purchase items for D.Z. In those

instances, the notation in the memo line contained both the aide's first name and

the name of the store at which the purchase was to be made. According to R.Z.,

he had authority to sign his mother's checks and wrote some of the checks

admitted into evidence for the aides' services and other expenses.

      On most of the checks, the handwritten name in the memo section matched

the signed endorsement on the back of the check. However, two of the checks

had only the name of a store written in the memo section, with a signed

endorsement on the back by one of the aides. Two other checks were endorsed


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 by someone other than the person listed in the memo section. One check

endorsed by N.L. had no name in the memo section.

      A few additional checks were written to three additional aides identified

by R.Z. as substitutes when one of the three regular aides was unavailable. One

check was written to Sears with a notation in the memo line of "carpet cleaning."

Two checks were written to D.Z.'s homeowners' association for fees and three

checks were written to the township to pay local property taxes on her residence.

      The three aides did not testify at the hearing. R.Z. testified that his attempt

to secure their testimony proved futile.

      On May 11, 2018, the ALJ issued an initial decision modifying the amount

of the transfer penalty. The ALJ found D.Z. proved by a preponderance of the

evidence she paid E.D., L.O., and N.L. for home health care and the payments

were not subject to the look-back penalty because they were exclusively for a

purpose other than to qualify for Medicaid. N.J.A.C. 10:71-4.10(j).

      In addition, the ALJ determined D.Z.'s payment of homeowners'

association fees, local property taxes, and the carpet cleaning expense were

excludable from the transfer penalty. The ALJ ordered that the transfer penalty




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 be reduced by the amounts D.Z. paid to the three aides and for personal

expenses.1 This totaled a reduction of $104,425.23 from the transfer penalty.

      On July 12, 2018, the Director of DMAHS issued a final agency decision

adopting in part, and reversing in part, the ALJ's initial decision. The Director

determined D.Z. failed to establish the type of services provided to her, the

compensation she provided for those services, or that the compensation was not

greater than the prevailing rates for similar care or services in the community.

See N.J.A.C. 10:71-4.10(b)(6)(ii) and (j).

      The Director also concluded that although the ALJ's credibility

determination was entitled to deference, the record did not satisfy the residuum

rule. See N.J.A.C. 1:1-15.5(b). That rule provides that when an ALJ relies on

hearsay testimony, "some legally competent evidence must exist to support each

ultimate finding of fact to an extent sufficient to provide assurances of reliability

and to avoid the fact or appearance of arbitrariness." Ibid.

      The Director found the record contained no evidence: (1) of a caregiver

agreement establishing the expectations of care and compensation for services

between D.Z. and her aides; or (2) that the aides were certified home health aides



1
  The ALJ found D.Z. did not prove her payments to the temporary aides
constituted payments excluded from the transfer penalty.
                                                                             A-5962-17T3
                                         5
 warranting compensation at the rates D.Z. paid.         In addition, the Director

determined the checks in evidence: (1) did not show a consistent pattern of

payments; (2) showed multiple payments to the same aide on the same day in

one instance; (3) demonstrated payments to L.O. at a time R.Z. testified N.L.

lived with his mother fulltime; and (4) were issued at a time when D.Z.'s

daughter-in-law, according to her testimony, was caring for D.Z. The Director

also concluded the record did not establish what services were provided to D.Z.

by the aides during the overnight hours.

      The Director, therefore, reversed the ALJ's initial decision to the exten t it

deducted from the transfer penalty the payments D.Z. claimed were for the

services of the aides. The Director adopted the portion of the ALJ's initial

decision directing the CWA to deduct from the transfer penalty $3,053.23 to

reflect D.Z.'s payments for homeowners' association fees, local property taxes,

and carpet cleaning. This resulted in a transfer penalty of $207,525.93.

      This appeal followed.      D.Z. raises the following arguments for our

consideration:

            POINT I

            RESPONDENT FAILED TO MAKE NEW OR
            MODIFIED FINDINGS OF FACT AS REQUIRED BY
            LAW UPON REJECTING THE ALJ'S FINDINGS OF
            FACT.

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                                         6
             POINT II

            RESPONDENT FAILED TO GIVE PROPER
            DEFERENCE  TO   THE FACT  FINDER'S
            ASSESSMENT OF THE CREDIBILITY OF
            WITNESSES.

            POINT III

            RESPONDENT REVIEWED AN INCOMPLETE
            RECORD, WITHOUT THE TRANSCRIPT, IN
            ORDER TO ASSESS THE TESTIMONY AND
            EVIDENCE SUBMITTED TO THE COURT.

            POINT IV

            RESPONDENT INCORRECTLY APPLIED THE
            RESIDUUM RULE IN ASSESSING THE ALJ'S
            INITIAL DECISION.

      After D.Z. submitted her brief, the Director moved for a limited remand.

The Director sought to clarify what she described as "a fundamental

misunderstanding caused by a lack of analysis in the" final agency decision. We

granted the motion.

      On December 18, 2019, the Assistant Commissioner of DMAHS issued

an amended final agency decision. The amended final agency decision reiterates

the findings in the earlier final agency decision and concludes D.Z.

            has not been able to rebut the presumption that these
            transfers for less than fair market value were to qualify
            for Medicaid. And, because [D.Z.] has provided

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                                       7
             inadequate support to rebut the presumption, [D.Z.]
            cannot show that the transfers were not made in order
            to qualify for Medicaid.

      The Assistant Commissioner again reversed the ALJ's initial decision to

the extent it ordered the CWA to reduce the transfer penalty by the amounts D.Z.

claimed to have paid her aides and adopted the portion of the ALJ's initial

decision ordering a reduction in the transfer penalty to reflect D.Z.'s payment of

homeowners' association fees, local property taxes, and personal expenses.

      In a reply brief filed after issuance of the amended final agency decision,

D.Z. raised the following arguments:

            POINT I

            RESPONDENT SHALL NOT EVALUATE THE
            MERITS OF PETITIONER'S TRANSFERS OF
            ASSETS BUT ONLY DETERMINE WHETHER OR
            NOT THE TRANSFER[S'] PURPOSE WAS TO
            ESTABLISH MEDICAID ELIGIBILITY.

            POINT II

            RESPONDENT ACKNOWLEDGES THAT THE ALJ
            FOUND THAT PETITIONER RECEIVED SERVICES
            FROM THE CAREGIVERS FOR HER PAYMENTS,
            WHICH SHOULD REBUT THE PRESUMPTION.

                                       II.

      "An administrative agency's decision will be upheld 'unless there is a clear

showing that it is arbitrary, capricious, or unreasonable, or that it lacks fair

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                                        8
 support in the record.'" R.S. v. Div. of Med. Assistance & Health Servs.,  434 N.J. Super. 250, 261 (App. Div. 2014) (quoting Russo v. Bd. of Trs., Police &

Firemen's Ret. Sys.,  206 N.J. 14, 27 (2011)). "The burden of demonstrating that

the agency's action was arbitrary, capricious or unreasonable rests upon the

[party] challenging the administrative action." E.S. v. Div. of Med. Assistance

& Health Servs.,  412 N.J. Super. 340, 349 (App. Div. 2010) (alteration in

original) (quoting In re Arenas,  385 N.J. Super. 440, 443-44 (App. Div. 2006)).

"[I]f substantial credible evidence supports an agency's conclusion, a court may

not substitute its own judgment for the agency's even though the court might

have reached a different result." Greenwood v. State Police Training Ctr.,  127 N.J. 500, 513 (1992).

      "Medicaid is a federally-created, state-implemented program that

provides 'medical assistance to the poor at the expense of the public.'" In re

Estate of Brown,  448 N.J. Super. 252, 256 (App. Div. 2017) (quoting Estate of

DeMartino v. Div. of Med. Assistance & Health Servs.,  373 N.J. Super. 210,

217 (App. Div. 2004)); see also 42 U.S.C. § 1396-1. To receive federal funding

the State must comply with all federal statutes and regulations. Harris v. McRae,

 448 U.S. 297, 301 (1980).




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                                       9
       Pursuant to the New Jersey Medical Assistance and Health Services Act,

 N.J.S.A. 30:4D-1 to -19.5, DMAHS is responsible for administering the

Medicaid program in our State. Through its regulations, DMAHS establishes

"policy and procedures for the application process . . . ." N.J.A.C. 10:71-2.2(b).

"[T]o be financially eligible, the applicant must meet both income and resource

standards."   Brown,  448 N.J. Super. at 257; see also N.J.A.C. 10:71-3.15;

N.J.A.C. 10:71-1.2(a).

      Because Medicaid funds are limited, only those applicants with income

and non-exempt resources below specified levels may qualify for government -

paid assistance. To qualify for the Medicaid Only program, an individual

applicant may not have resources that exceed $2000. N.J.A.C. 10:71-4.5(c).

Resources are defined "as any real or personal property which is owned by the

applicant . . . and which could be converted to cash to be used for his or her

support and maintenance." N.J.A.C. 10:71-4.1(b).

      An applicant who transfers or disposes of resources for less than fair

market value during a sixty-month look-back period before the individual

becomes institutionalized or applies for Medicaid is penalized for making the

transfer. 42 U.S.C. §1396p(c)(1)(E); N.J.A.C. 10:71-4.10(m)(1). Transfers

within the look-back period are presumed to be made to obtain earlier Medicaid


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                                       10
 eligibility than that to which the applicant would otherwise be entitled. N.J.A.C.

10:71-4.10(j). The presumption may be rebutted with "convincing evidence that

the assets were transferred exclusively (that is, solely) for some other purpose."

Ibid. If the applicant does not overcome the presumption, a transfer penalty

denies Medicaid benefits during the period the applicant should have been using

the transferred resources for medical care. See W.T. v. Div. of Med. Assistance

& Health Servs.,  391 N.J. Super. 25, 37 (App. Div. 2007).

      If the applicant transfers any resource within the look-back period, the

transfer is reviewed, and the resource's fair market value is ascertained, as is the

consideration received for the transferred resource. N.J.A.C. 10:71 -4.10(c).

The difference between the fair market value of the resource and the

compensation received by the applicant is the "uncompensated value . . . ."

N.J.A.C. 10:71-4.10(c)(2).     If the uncompensated value of the transferred

resources, combined with other countable resources, exceeds the resource limit

for Medicaid eligibility, a transfer penalty is assessed.         N.J.A.C. 10:71-

4.10(m)(1).

      Having carefully reviewed the record and applicable legal principles, we

conclude the agency's decision is supported by substantial credible evidence in

the record as a whole. R. 2:11-3(e)(1)(D). Accordingly, we affirm the Assistant


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 Commissioner's amended final agency decision for the reasons set forth therein.

We add the following comments.

      The Assistant Commissioner did not reject the ALJ's determination that

R.Z. credibly testified that D.Z. paid aides to assist her.      She concluded,

however, that D.Z. did not establish that the amount she paid the aides reflected

fair market value for the services she received. As the Assistant Commissioner

noted, the record contains no service contract memorializing the aides'

compensation rate, the services they were expected to provide, or that they were

licensed caregivers whose skill warranted the compensation they received. We

acknowledge DMAHS regulations do not require a written contract or licensing

for home health services to qualify as exempt from the transfer penalty.

However, the absence of a contract and proof of licensing here significantly

hindered the agency's ability to determine the services D.Z. received, the rate

she paid for those services, and whether that rate was warranted by the aides'

skill level and training.

      In addition, the evidence was imprecise with respect to the compensation

paid to the aides. Among other things, the checks upon which D.Z. relied were

made out to "cash," in some instances conflated the aides' compensation with

D.Z.'s personal expenses without clear delineation, and were issued at


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 inconsistent frequencies.   Because the agency could not determine the fair

market value of the services D.Z. received or the amount of compensation she

gave to the aides, the agency could not award a credit against the transfer penalty

commensurate with the fair market value of services rendered. Based on this

record, we cannot conclude the Assistant Commissioner's determination D.Z.

failed to overcome the presumption that the transfers were for a purpose other

than qualifying for Medicaid was arbitrary, capricious, or unreasonable.

      We have reviewed petitioner's remaining arguments and conclude they

lack sufficient merit to warrant discussion in a written opinion.        R. 2:11-

3(e)(1)(E).

      Affirmed.

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