D.Z. VS. OCEAN COUNTY BOARD OF SOCIAL SERVICES (DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES)

NOT FOR PUBLICATION WITHOUT THE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
D.Z.,
Petitioner-Appellant,
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.
SB2 Inc., attorneys for appellant (Laurie M. Higgins,
on the briefs).
Gurbir S. Grewal, Attorney General, attorney for
respondent Division of Medical Assistance and Health
Services (Melissa H. Raksa, Assistant Attorney
General, of counsel; Jacqueline R. D'Alessandro,
Deputy Attorney General, on the brief).
PER CURIAM
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.
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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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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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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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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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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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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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