Fagan v Bremby
POSTED ON - May 22, 2018
Written By Krause Financial Services
Mr. Martin Fagan and Mrs. Pamela Fagan filed suit in January 2016 against Roderick Bremby who was Commissioner of the Connecticut Department of Social Services (“DSS”). The Fagans received a transfer penalty from Bremby which made Mr. Fagan ineligible for Medicaid benefits for six years.
During the lookback period, if DSS sees the applicant disposed of their resources for less than fair market value, it will result in a penalty period before the applicant becomes Medicaid eligible. The exception to this is that resources can be transferred to the individual’s spouse as long as it is for the sole benefit of the spouse.
The Centers for Medicare and Medicaid Services (CMS) explains that this exception should not have a great effect on eligibility due to the fact that both spouses’ resources are combined to help determine if the institutionalized spouse is eligible.
Mr. Fagan resided in a nursing facility due to severe injuries resulting from a motorcycle accident. He applied for long-term Medicaid benefits and was approved. However, two years later when he received $2 million for a personal injury settlement, Mr. Fagan’s benefits ended.
Mr. Fagan, after paying off legal fees and paying back the Connecticut Department of Administrative Services, transferred the rest of the sum of money, $966,102.69 to Mrs. Fagan. He made two transfers; one transfer was for the amount Mrs. Fagan paid for her residence and the other transfer went towards a Medicaid Compliant Annuity that Mrs. Fagan purchased.
When Mr. Fagan tried to re-apply for benefits, he was rejected as the two transfers were considered improper transfers. However, he argued that those transfers were pre-eligibility transfers so they should be exempt. DSS did not agree and ruled that his transfers in the penalty period will not allow Mr. Fagan to be Medicaid eligible until 2022. Mr. Fagan now has to pay the $13,000 a month for his nursing facility bill.
Both parties agree on the facts of the case. The Court needed to decide if there was a period of time in between Mr. Fagan’s applications for Medicaid that would allow the unlimited transfer exception to be appropriate and if the process would reset itself when there’s a break in eligibility.
The Court agreed with the DSS ruling that any transfer made to the community spouse after the initial determination of eligibility is prohibited. The Court interpreted the word “initial” from Section 1396r-5(f)(1) as “encompassing only the very first determination declaring an individual eligible for Medicaid with respect to a single period of institutionalization.”
If Mr. Fagan was allowed to make this transfer, the Court explained, this would create a loophole for couples to remain on Medicaid who have “sufficient assets” which goes against that “the MCCA was meant to ‘prevent financially secure couples from obtaining Medicaid assistance.”
The Court ruled that once DSS originally approved Mr. Fagan for Medicaid, he was prohibited from transferring more than the limited transfers (according to Section 1296r-5(f)(1)) to his spouse as long as he was continuously institutionalized. The denial of benefits to Mr. Fagan was upheld.
The full document text can be found here.