Long-Term Care Facilities Rejoice, Resident Fiduciaries Beware: New Hampshire Legislature Provides New Tool For Collecting Long-Term Care Debt

The scenario is all too common.  A legally incompetent person is admitted to a New Hampshire long-term care (“LTC”) facility by her adult child, who serves as the resident’s durable power of attorney (“DPOA”) and manages the resident’s financial affairs.  Eventually, the resident’s Medicare skilled nursing benefit expires and the facility converts her to private pay status.  The DPOA provides timely payment for over a year, then stops.  He makes repeated promises that payment is on its way, but it never shows up.  Eventually, the DPOA reveals that his mother’s estate is insolvent.  The LTC facility suggests that the DPOA promptly file a Medicaid application to ensure that its current and future bills, among other things, are paid.  The DPOA promises to do so, but never does.  With the unpaid balance growing, the LTC facility attempts to complete a Medicaid application for the resident, but is unable to do so without access to the information and documentation required by the Department of Health and Human Services (“DHHS”). The DPOA does not respond to the LTC facility’s repeated requests for that information.  The LTC facility then learns that over the last year or so, the DPOA transferred the resident’s remaining funds to himself and others rather than use those assets to pay for the care provided by the facility.  Meanwhile, the resident’s ever-growing bill exceeds $100,000, and she possesses no assets to satisfy her past or future obligations to the facility.

Until recently, LTC facilities had no clear path to recover the resident’s unpaid bills from the neglectful DPOA in the situation described above.  On July 2, 2013, however, the New Hampshire General Court enacted SB 138 to address this and other unfortunate scenarios that LTC facilities experience with increasing frequency.  SB 138’s protections are in effect now, codified in RSA 151-E:19.  This article summarizes key provisions of this new statute, and provides insight on how LTC facilities may use it as an effective collection tool.

  1. Limits on RSA 151-E:19’s Reach

Importantly, RSA 151-E:19 only protects nursing homes and assisted living facilities licensed pursuant to administrative rules He-P 803, 804, and 805.  Also, the statute primarily applies to the acts of a “fiduciary,” which refers to agents acting under a durable power of attorney, attorney-in-fact, legal guardian, trustee, or representative payee.

  1. Scenario #1 — Fiduciary’s Failure to File Medicaid Application

Before SB 138’s enactment, it was difficult for LTC facilities to sue fiduciaries or agents for damages caused by their failure to file a Medicaid application on behalf of a facility resident.  RSA 151-E:19, III now permits an LTC facility to sue a “fiduciary” who possesses or controls the income or assets of a resident, and has the authority to file an application for Medicaid on behalf of a resident, for all “costs of care” which are not eventually covered by Medicaid. Importantly, the facility may only sue the fiduciary when the Medicaid denial results from the fiduciary’s “negligence in failing to fully and promptly complete and pursue an application for Medicaid benefits for the resident.”  Whether a fiduciary’s conduct rises to that level will depend on the facts and circumstances.

Facilities seeking to invoke this provision of RSA 151-E:19 must take care to follow its required procedures.  For example, the LTC facility must send written notice of its intent to file suit under this provision to the fiduciary at least thirty (30) days before commencing legal action.  If the fiduciary is a legal guardian, the LTC facility must contemporaneously send written notice to the probate court with jurisdiction over the guardianship, and ultimately file its lawsuit in that court.  Once in court, the LTC facility must prove that the Medicaid denial was caused by the fiduciary’s negligence.  If it does, the fiduciary is liable to the LTC facility for the “costs of care” incurred by the facility during the penalty period at the facility’s Medicaid rate — not the facility’s private pay rate.

  1. Scenario #2 – Asset Transfer Disqualification

RSA 151-E:19 also addresses certain disqualifying asset transfers under the Medicaid rules.  For purposes of determining Medicaid eligibility, a disqualifying transfer occurs when a person transfers an asset for which he or she does not receive fair market value within five (5) years of applying for Medicaid benefits.  If DHHS determines that a disqualifying asset transfer has occurred, a penalty period is established.  A penalty period is the length of time that Medicaid will not cover the resident’s costs of care, and is calculated based on the value of the transfer.  During this penalty period, the resident must pay the facility’s private pay rate for care and services rendered.  Of course, by virtue of transferring away his or her assets, the resident is usually unable to pay for the care.  In that situation, LTC facilities often wish to pursue the recipient of the disqualifying transfer that rendered the resident ineligible for Medicaid.  Before the General Court enacted SB 138 into law, LTC facilities had great difficulty doing so.  Now, RSA 151-E:19, II(a) provides that when an asset transfer made on or after July 2, 2013 results in a Medicaid denial, the person who received the assets from the resident is personally liable to the LTC facility for all “costs of care” up to the amount transferred during the period.

LTC facilities seeking to invoke this provision should understand its limits.  For example, the transferee is liable at the facility’s Medicaid rate, not private rate, and only for services provided during the Medicaid “penalty period” (i.e., after the disqualification).  Moreover, the statute clarifies that federal law governs whether a transfer was “disqualifying,” and permits one sued under this section to challenge the DHHS’ ruling on disqualification.  Thus, even if the DHHS deemed the transfer disqualifying, the asset recipient is entitled to have the court in which they are sued make an independent determination based on federal law.  Unlike liability stemming from failure to file a Medicaid application, or failure to pay the Medicaid Patient Liability Amount, an LTC facility need not send written notice of its intent to file suit before pursuing legal action.

  1. Scenario # 3 – Failure to Pay Medicaid Patient Liability Amount

Before the passage of SB 138, LTC facilities had limited legal recourse when a resident appointed a fiduciary or other person to manage their financial affairs, income or assets but, despite demand, that person failed to pay the “patient liability amount” (i.e., the amount of income that a resident is responsible for contributing toward his or her care).  RSA 151-E:19, IV attempts to solve this problem by subjecting two classes of people to liability for refusal to pay the “patient liability amount” due under Medicaid: (i) fiduciaries, as defined in the statute, and (ii) persons who have received authority over a resident’s income (e.g., someone who has obtained authority or control over a resident’s bank account, or who has been named a joint account holder with a resident).

RSA 151-E:19, IV contains several important limitations.  First, to be subject to this provision, the offending person or fiduciary must have received written notice from DHHS of the “patient liability amount” at the time such income is received by the fiduciary or person.  Second, the LTC facility can only hold the person or fiduciary liable for “patient liability amounts” that accrue after the receipt of the written notice from DHHS.  Third, the LTC facility must send the person or fiduciary written notice of its intent to sue at least 30 days before pursuing legal action.

  1. Utilizing this Collection Tool Effectively

RSA 151-E:19 is a powerful tool, and all LTC facilities should immediately change their collection practices to ensure that the statute is utilized where appropriate.  Among other things, the LTC facility should secure contact information for its residents’ fiduciaries or responsible parties at the time of admission, and periodically confirm the accuracy of the information.  Facilities should also closely monitor their resident accounts — and if a payment problem arises, act swiftly.  A properly-drafted letter to the fiduciary or responsible party can serve two purposes: provide the statutorily-required 30-day notice, and also, make it known that the facility is paying attention and will take action if the fiduciary does not fulfill its duties.  Generally, the longer a LTC facility waits to send this message, the more likely the fiduciary or responsible party will cease involvement in their loved one’s care and ignore past and future payment obligations.  If it appears that a resident’s estate is insolvent, facilities should promptly notify the resident’s agents of the need for them to file a Medicaid application — and where appropriate, exhibit a willingness to collaborate in the application process and present the application as a necessary step to ensure that the resident’s financial obligations do not get out of hand.  LTC facilities should also include a reference to RSA 151-E:19 in their admission agreements, so that the resident and any fiduciary or agent is aware of the law and their obligations thereunder.  Competent legal counsel can assist LTC facilities in implementing these practices and complying with the complexities of RSA 151-E:19.

  1. Conclusion

Although many hail RSA 151-E:19 as a comprehensive solution to collection issues that have plagued New Hampshire LTC facilities for years, others feel the statute goes too far.  Governor Maggie Hassan, who refused to sign SB 138 but nevertheless allowed it to become law, recently issued a press release stating, “The bill’s policy is sound, but technical improvements are necessary to ensure no one is inappropriately charged with costs of care.” LTC facilities should take immediate steps to utilize the tools provided by RSA 151-E:19, but also, stay alert to the inevitable attempts to limit or invalidate  the statute in the next legislative session.