CCRC Provision Prohibiting Medicaid Spend Down Is Unenforceable
Maryland's highest court rules that a continuing care retirement community's (CCRC) requirement that residents not spend down assets to qualify for Medicaid without the CCRC's prior approval violates state Medicaid law, at least in cases where residents are admitted directly into the CCRC's nursing unit. Oak Crest Village, Inc., v. Murphy (Md., No. 27/03, Feb. 9, 2004).
In November 2001, Ruth and Sherwood Murphy moved to Oak Crest Village, a CCRC. Mrs. Murphy, then 81, moved into an independent living apartment, while her husband, then 94, was admitted directly into a Medicaid-certified nursing facility that is part of the CCRC. As a condition of their acceptance into the CCRC, the Murphys had to sign a Residence and Care Agreement that included an anti-alienation provision requiring the Murphys not to sell or transfer, without prior consent of Oak Crest, any assets if the sale or transfer would result in their net worth falling below the minimum necessary to become an Oak Crest resident.
Shortly after their move to Oak Crest, Mrs. Murphy used nearly $300,000 of the couple's assets to purchase annuities payable to her. Mr. Murphy subsequently applied for and became eligible for Medicaid benefits. Oak Crest sued the Murphys, alleging a violation of the anti-alienation provision of its Residence and Care Agreement. Mr. Murphy moved to dismiss the complaint, asserting that Oak Crest's agreement violated state and federal statutes precluding a Medicaid-certified facility from requiring residents to pay the private pay rate when they are eligible for Medicaid benefits. The circuit court agreed with Mr. Murphy and held that the agreement's anti-alienation provision was invalid.
The Court of Appeals of Maryland, the state's highest court, affirms. The anti-alienation provision, the court writes, "effectively requires that [Mr. Murphy] continue to pay at the private pay rate even when he would be or could lawfully become eligible for Medicaid benefits, contrary to [the relevant state Medicaid statute], and permits him to be discharged from a Medicaid certified nursing facility because he is a Medicaid recipient, contrary to [the relevant state statute]." The court rejects Oak Crest's argument that the relevant statute applies only to nursing facilities and that Oak Crest, as a continuing care community, is not a nursing facility. However, the court holds that the anti-alienation provision is permissible in a contract for independent or assisted living. The court does not address whether a resident's move from a CCRC's independent or assisted living unit to its nursing unit would require temporary suspension of the anti-alienation provision.
To download the full text of this decision in PDF format, go to: http://www.courts.state.md.us/opinions/coa/2004/27a03.pdf.
In November 2001, Ruth and Sherwood Murphy moved to Oak Crest Village, a CCRC. Mrs. Murphy, then 81, moved into an independent living apartment, while her husband, then 94, was admitted directly into a Medicaid-certified nursing facility that is part of the CCRC. As a condition of their acceptance into the CCRC, the Murphys had to sign a Residence and Care Agreement that included an anti-alienation provision requiring the Murphys not to sell or transfer, without prior consent of Oak Crest, any assets if the sale or transfer would result in their net worth falling below the minimum necessary to become an Oak Crest resident.
Shortly after their move to Oak Crest, Mrs. Murphy used nearly $300,000 of the couple's assets to purchase annuities payable to her. Mr. Murphy subsequently applied for and became eligible for Medicaid benefits. Oak Crest sued the Murphys, alleging a violation of the anti-alienation provision of its Residence and Care Agreement. Mr. Murphy moved to dismiss the complaint, asserting that Oak Crest's agreement violated state and federal statutes precluding a Medicaid-certified facility from requiring residents to pay the private pay rate when they are eligible for Medicaid benefits. The circuit court agreed with Mr. Murphy and held that the agreement's anti-alienation provision was invalid.
The Court of Appeals of Maryland, the state's highest court, affirms. The anti-alienation provision, the court writes, "effectively requires that [Mr. Murphy] continue to pay at the private pay rate even when he would be or could lawfully become eligible for Medicaid benefits, contrary to [the relevant state Medicaid statute], and permits him to be discharged from a Medicaid certified nursing facility because he is a Medicaid recipient, contrary to [the relevant state statute]." The court rejects Oak Crest's argument that the relevant statute applies only to nursing facilities and that Oak Crest, as a continuing care community, is not a nursing facility. However, the court holds that the anti-alienation provision is permissible in a contract for independent or assisted living. The court does not address whether a resident's move from a CCRC's independent or assisted living unit to its nursing unit would require temporary suspension of the anti-alienation provision.
To download the full text of this decision in PDF format, go to: http://www.courts.state.md.us/opinions/coa/2004/27a03.pdf.
