A.M. VS. MONMOUTH COUNTY BOARD OF SOCIAL SERVICES (DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICE) (RECORD IMPOUNDED)

RECORD IMPOUNDED

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5105-18

A.M.,
APPROVED FOR PUBLICATION

Petitioner-Appellant, March 11, 2021

APPELLATE DIVISION
v.

MONMOUTH COUNTY BOARD
OF SOCIAL SERVICES,

Respondent-Respondent.
_____________________________

Submitted February 8, 2021 – Decided March 11, 2021

Before Judges Sabatino, Currier and DeAlmeida.

On appeal from the New Jersey Department of Human
Services, Division of Medical Assistance and Health
Services.

Wilentz, Goldman & Spitzer, PA, attorneys for
appellant (Darren M. Gelber, of counsel and on the
briefs).

Gurbir S. Grewal, Attorney General, attorney for
respondent (Melissa H. Raksa, Assistant Attorney
General, of counsel; Jacqueline R. D'Alessandro,
Deputy Attorney General, on the brief).

The opinion of the court was delivered by

DeALMEIDA, J.A.D.
 M.M.,1 through her son and power of attorney, petitioner A.M., 2 appeals

from the June 14, 2019 final agency decision of the Acting Director, Division

of Medical Assistance and Health Services (DMAHS) finding her eligible for

Medicaid benefits but: (1) imposing a penalty of $496,333.33, the value of the

one-third interest in her home she transferred to A.M. during the five-year

"look-back period" established in N.J.A.C. 10:71-4.10; and (2) directing that

the penalty be increased by the value of a life estate in the home M.M.

relinquished to A.M. at the time of the transfer. A.M. argues the transfers are

exempt from the penalty under the child caregiver exemption established in

N.J.A.C. 10:71-4.10(d)(4). We agree and reverse.

I.

The following facts are derived from the record. At the times relevant to

this appeal, M.M. was in her eighties. A.M. resided with M.M. for more than

fifty years. He worked as a teacher at a nearby school.

M.M. owned the home in which she and her son lived. In August 2003,

she transferred a one-third interest in the property to A.M. and a one-third

1
We identify the parties by their initials to protect the confidentiality of
M.M.'s medical records.
2
During the pendency of this appeal, M.M. died. We ordered that A.M. be
substituted as appellant.
A-5105-18
2
interest to her daughter, C.F. M.M. retained the remaining one-third interest

and a life estate in the property.

In 2008, M.M. was diagnosed with Alzheimer's disease. A.M. was

M.M.'s sole caregiver from the time of her diagnosis until September 2012. In

a certification, A.M. stated:

[d]uring this time I would prepare her meals, take her
to her doctor's appointments, help her dress and bathe,
drive her to see family and friends, help her manage
her finances, help her with her medications, walk and
shop with her, do her laundry and household chores,
take her to church and assist her in any way she
needed.

A 2012 medical report notes that M.M.'s illness had progressed. The

report indicates that her short-term memory had worsened and that she had

developed incontinency. In September 2012, A.M. hired two part-time home

healthcare aides to assist him in caring for M.M. when he was at work four

days a week. A.M. used M.M.'s assets to pay for the aides.

During this period, A.M.'s typical day began at about 5:30 a.m., when

his mother awoke and needed help getting out of bed. He assisted her with

walking to the bathroom and toileting. A.M. then assisted his mother with

washing, dressing, and grooming. He cooked breakfast for M.M. and watched

television with her before leaving for work at approximately 10:00 a.m., when

one of the aides arrived. A.M. would inform the aide of M.M.'s condition,

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medication schedule, and needs for the day. When he returned from work,

A.M. prepared dinner for M.M. and assisted her with eating. After dinner, he

cleaned his mother, assisted her with taking a shower, and administered her

medications. Around 8:00 p.m., he assisted his mother into sleepwear and put

her to bed. During the night, he would take care of his mother when she

wandered and assist her when she needed to use the bathroom. If she had an

accident, A.M. would change his mother's sheets and clothes and assist her

back to bed.

As M.M.'s illness progressed, she needed further assistance. In

response, A.M. rearranged his work schedule, reducing his hours from ten to

twelve hours a day to six hours a day. He also declined a promotion to a

supervisory position which would have required greater work hours.

On September 30, 2014, M.M. transferred her one-third interest in the

house to A.M. According to the deed memorializing the transfer, it "is meant

to convey [M.M.'s] interest in this property to [A.M.]" There is no express

provision in the deed stating that M.M. reserved her life estate. M.M. received

less than fair market value for the transfer of her interest in the property to

A.M.

In October 2014, M.M. entered a long-term care facility. A medical

report stated that "A.M. was his mother's primary caregiver and without him

A-5105-18
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she would have had to go to an [a]ssisted [l]iving or [n]ursing [h]ome [f]acility

years before she needed to go." A.M.'s tax records show that he earned

$67,482 in 2012 and $66,533 in 2013, but $75,538 in 2014 and $98,814 in

2015, after his mother entered the long-term care facility.

On April 3, 2018, A.M. applied to respondent Monmouth County Board

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

M.M. The CWA found M.M. eligible for benefits as of April 1, 2018 for

ancillary services, and as of June 15, 2021 for the Medicaid program. The

agency imposed an eligibility penalty of 1170 days (or $496,333.33) based on

the value of the September 2014 transfer of her one-third interest in the

residence to A.M. The CWA did not mention a purported transfer of M.M.'s

life estate.

A.M. requested a fair hearing, arguing that the 2014 transfer of his

mother's one-third interest in the property was exempt from the look-back

penalty under the child caretaker exemption established in N.J.A.C. 10:71-

4.10(d)(4). The matter was transferred to the Office of Administrative Law

(OAL), where a hearing was held before an Administrative Law Judge (ALJ).

The ALJ heard testimony from A.M. and a representative of the CWA.

On May 2, 2019, the ALJ issued an initial decision reversing the CWA's

decision. The ALJ found A.M.'s testimony to be credible and supported by

A-5105-18
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M.M.'s medical records. The judge concluded that the assistance A.M.

provided to M.M. exceeded the personal support services a child is normally

expected to provide to a parent, specifically dressing, grooming, toileting,

bathing, and preparing meals. In addition, the ALJ found the services A.M.

provided to his mother were essential for her health and safety and that he

provided those services for more than two years prior to her

institutionalization. Thus, the ALJ concluded, M.M.'s 2014 transfer of her

one-third interest in the residence fell within the child caregiver exemption to

the look-back penalty.

The ALJ rejected the CWA's argument that A.M.'s full-time employment

negated the child caregiver exemption. The judge determined that N.J.A.C.

10:71-4.10(d)(4) does not require a child to dedicate his full time to caring for

a parent to qualify for the exemption. He noted that A.M. reduced his work

hours to care for his mother for longer amounts of time when her needs

increased.

For the first time, the CWA raised before the ALJ the argument that the

penalty had been undercalculated because M.M., in addition to transferring her

one-third interest in the property to A.M. in 2014, relinquished her life estate.

The CWA argued that the matter should be remanded for recalculation of the

penalty to include the value of the life estate.

A-5105-18
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 The ALJ rejected the CWA's argument that M.M. relinquished her life

estate to A.M. in 2014, concluding instead that M.M. retained a life estate in

the property at that time. Thus, the ALJ decided, the CWA should recalculate

the penalty to reflect the value of M.M.'s life estate in the residence, not

because she transferred the asset to A.M., but because it was an asset available

to M.M. at the time of her institutionalization.

A.M. filed exceptions to the ALJ's decision. On June 14, 2019, the

Acting Director issued a final agency decision adopting in part and reversing

in part the ALJ's initial decision. She determined that A.M. did not prove

entitlement to the child caretaker exemption. While acknowledging full -time

employment does not prohibit application of the exemption, the Acting

Director concluded that A.M. did not prove he provided care that exceeded

normal expectations for a child and delayed M.M.'s institutionalization. In

addition, the Acting Director concluded A.M. did not prove that he reduced his

work hours to care for M.M. and found that the aides provided care for M.M.

during most of her waking hours. In addition, because A.M. paid for the aides

with M.M.'s funds, the Acting Director concluded M.M. "provided for her own

care in order to remain at home and out of the nursing facility." Lastly, the

Acting Director found A.M. failed to prove the amounts paid for the aides or

that they were compensated at fair market value. N.J.A.C. 10:71-4.10(j).

A-5105-18
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 With respect to the life estate, the Acting Director, contrary to the

finding of the ALJ, concluded that M.M. relinquished her life estate in the

residence in the 2014 transaction. She determined that the value of the life

estate must be added to the look-back penalty because M.M. did not receive

fair market value for that asset. The Acting Director, therefore, affirmed the

portion of the ALJ's decision concerning recalculation of the penalty, albeit for

different reasons. 3

This appeal followed. A.M. raises the following arguments for our

consideration.

POINT I

THE DETERMINATIONS THAT THE 2014 DEED
WAS NOT COVERED BY THE CAREGIVER
EXCEPTION AND THAT [M.M.] RETAINED A
LIFE ESTATE IN THE PROPERTY AT THE TIME
SHE EXECUTED THE 2014 DEED WERE
ARBITRARY, CAPRICIOUS, UNREASONABLE
AND NOT SUPPORTED BY SUBSTANTIAL
CREDIBLE EVIDENCE.

3
The CWA subsequently valued the life estate at $450,244, increasing the
look-back penalty to $946,577.
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 POINT [II]

THE ISSUE OF WHETHER [M.M.] RETAINED A
LIFE ESTATE IN THE PROPERTY AT THE TIME
SHE EXECUTED THE 2014 DEED WAS NOT AN
ISSUE BEFORE THE A.L.J. OR THE DIVISION.

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 la cks

fair 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).

Nevertheless, if our review of the record shows that the agency's finding

is clearly mistaken, the decision is not entitled to judicial deference. H.K. v.

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Dep't of Human Servs., 184 N.J 367, 386 (2005); L.M. v. State, Div. of Med.

Assistance & Health Servs., 140 N.J. 480, 490 (1995). Moreover, where an

agency rejects an ALJ's findings of fact, we need not give the agency the

deference we ordinarily accord on review of final agency decisions. H.K., 184

N.J. at 384.

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

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

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

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

217 (App. Div. 2004)); see also 42 U.S.C.A. § 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).

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).

A-5105-18
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 Because Medicaid funds are limited, only those applicants with income

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

paid assistance. 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.A. § 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 eligibility than that to which the applicant would otherwise be

entitled. N.J.A.C. 10:71-4.10(i). The presumption may be rebutted with

"convincing evidence that the assets were transferred exclusively (that is,

solely) for some other purpose." N.J.A.C. 10:71-4.10(j). 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

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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).

An exception to the transfer penalty applies when an applicant transfers

her interest in her home to her child under certain circumstances. The

exception is established in N.J.A.C. 10:71-4.10(d)(4), which provides:

(d) [A]n individual shall not be ineligible for an
institutional level of care because of the transfer of his
or her equity interest in a home which serves (or
served immediately prior to entry into institutional
care) as the individual's principal place of residence
and the title to the home was transferred to:

....

4. A son or daughter of the institutionalized
individual . . . who was residing in the individual's
home for a period of at least two years immediately
before the date the individual becomes an
institutionalized individual and who has provided care
to such individual which permitted the individual to
reside at home rather than in an institution or facility.

i. The care provided by the individual's son or
daughter for the purposes of this subchapter shall have
exceeded normal personal support activities (for
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 example, routine transportation and shopping). The
individual's physical or mental condition shall have
been such as to require special attention and care. The
care provided by the son or daughter shall have been
essential to the health and safety of the individual and
shall have consisted of activities such as, but not
limited to, supervision of medication, monitoring of
nutritional status, and insuring the safety of the
individual.

The regulation reflects the language of a federal statute, 42 U.S.C.A. §

1396p(c)(2)(A)(iv), the intent of which is to provide relief where a child

provided care for two years that prevented the institutionalization of a parent.

The applicant bears the burden of establishing entitlement to the exemption.

Having carefully reviewed the record in light of applicable legal

standards, we conclude the Acting Director misapplied N.J.A.C. 10:71-

4.10(d)(4) to the facts.

There is no dispute that A.M. was M.M.'s child and that he lived in the

house that was the subject of the transfer for at least two years immediately

preceding M.M.'s institutionalization. Nor does the Acting Director dispute

that M.M. had a medical condition requiring special attention or care.

At issue is the Acting Director's determination that A.M. failed to prove

that he provided care to M.M. that "exceeded normal personal support

activities" and which "permitted [M.M.] to reside at home rather than in an

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13
institution or facility." The Acting Director relied on a number of conclusions

to support this determination.

First, the Acting Director, while acknowledging that N.J.A.C. 10:71-

4.10(d)(4) does not require a child caregiver to not be employed outside the

home to qualify for the exemption, found that A.M. failed to prove that he

significantly reduced his hours at work and pay to care for M.M. The

regulation, however, does not place a limit on the number of hours a child may

work outside the home or the amount of income the child may earn in order to

fall within the exemption. It is silent with respect to the child's employment

and income.

In addition, the intent of the regulation – to encourage children to make

the necessary arrangements to care for a parent in their home to avoid the

public expense of institutionalization – would not be furthered by a

requirement that the child caregiver work only a limited number of hours

outside the home or earn no more than a particular income. To the contrary, to

the extent that a child can both provide for the care of a parent in her home and

provide a source of income for the family through outside employment, the

purpose of the regulation is furthered. A child who earns money outside the

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14
home may well be more likely to afford the expenses associated with the at -

home care of a parent who would otherwise be institutionalized. 4

Second, the Acting Director determined that A.M. did not prove that he

provided a level of care to M.M. beyond that normally expected from a child

and which delayed her institutionalization. However, there is ample

undisputed evidence in the record to the contrary. A.M. attended to all of the

tasks necessary to wake, feed, clean, medicate, and dress his mother in the

mornings before he left for work. He fed, bathed, clothed, medicated, and put

his mother to bed after he returned from work. He also monitored M.M.

during the overnight hours, a significant responsibility, given that M.M.

sometimes wandered and soiled the bed, requiring further bathing, dressing,

and a change of sheets. A medical report in the record states that A.M. was his

mother's primary caregiver and that without his assistance she would have

been institutionalized years earlier than she was. In light of this overwhelming

evidence, we conclude it was unreasonable for the Acting Director to find that

A.M. did not establish that the care he provided to M.M. fell within the

regulation.

4
We note A.M.'s income increased in the years after M.M. was
institutionalized, suggesting his employment was curtailed while he was caring
for M.M.
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 Nor do we find support in N.J.A.C. 10:71-4.10(d)(4) for the Acting

Director's conclusion that the exemption does not apply when a child arranges

for home healthcare aides to assist in providing care to a parent. Nothing in

the regulation requires the child to be the sole caregiver to a parent to qualify

for the exemption. It is instead the extent of the assistance provided by the

child that is relevant. In her decision, the Acting Director asked, in light of the

extensive personal services A.M. provided to his mother before and after work,

and the number of hours M.M. slept, "what services were the aides paid . . . to

perform?" The question both contradicts the Acting Director's finding that

A.M. failed to prove that he provided non-expected services to M.M. before

and after work and overlooks evidence in the record regarding M.M.'s need for

overnight assistance. A.M.'s testimony and medical records indicate that M.M.

wandered during the night, requiring A.M.'s intervention for her safety, and

sometimes soiled her bed, requiring further assistance from A.M. The aides

provided necessary assistance and monitoring of M.M. in the comparatively

few hours per week that A.M. was not directly caring for his mother to allow

him to maintain his employment and a source of income for the household.

We also find no support in the regulation for the Acting Director's

conclusion that the source of the funds used to pay for the home heal thcare

aides has legal import. It is undisputed that A.M. paid for the aides with

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M.M.'s funds. The regulation does not, however, require that the child

caregiver finance all of the care provided to a parent to qualify for the

exemption. A.M. arranged for the aides to assist his mother while he was at

work. He was responsible for ensuring daily coverage, instructed the aides

each morning on his mother's condition, scheduled medication, and needs, and

relieved them when he returned home. A.M. arranged for and oversaw the

care the aides provided to M.M., whose condition made it impossible for her to

perform those tasks for herself.

Because the Assistant Director erred in her application of N.J.A.C.

10:71-4.10(d)(4), we reverse her determination that A.M. is not entitled to the

child caregiver exemption for any assets transferred to him by M.M. in the

2014 deed.

There is ample support in the record for the Assistant Director's

determination that M.M. relinquished her life estate in the property in the 2014

deed. A.M. does not dispute this finding. This interest in the home, B.D. v.

Div. of Med. Assistance & Health Servs., 397 N.J. Super. 384, 392 (App. Div.

2007), also falls within the child caregiver exemption. 5

5
In light of our determination that N.J.A.C. 10:71-4.10(d)(4) precludes
imposition of a look-back penalty, we need not decide A.M.'s due process
arguments.
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 The June 14, 2019 final agency decision of the Acting Director is

reversed to the extent that it imposes a look-back penalty on M.M. The agency

is directed to take appropriate steps to implement our determination promptly

and no later than forty-five days from the date of this opinion.

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