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LIABILITY, LEGAL; NURSING HOMES;

OLR Research Report


February 17, 2010

 

2010-R-0096

LIABILITY FOR NURSING HOME COSTS

 

By: Saul Spigel, Chief Analyst

You asked what financial liability family members or others have to pay for a relative in a nursing home.

SUMMARY

Federal law permits a nursing home to require an individual who has legal access to a resident's assets to sign a contract requiring that person (often called the responsible party) to use those assets to pay for services the home renders to the resident. It authorizes such contracts as long as they do not require the responsible party to personally guarantee payment as a condition for admission or continued stay in the facility (42 USC 1396r(c). Connecticut's Nursing Home Bill of Rights mirrors the federal framework (CGS 19a-550(b)(26)).

In practice, nursing home admission contracts typically require the responsible party to (1) use the resident's assets to pay for nursing home services; (2) supply the Department of Social Services (DSS) with the information it needs to determine Medicaid eligibility; and (3) qualify the resident for Medicaid benefits, including spending his or her assets to reach the $1,600 asset limit for eligibility. And, while the law and the contracts explicitly preclude personal liability by the responsible party, homes have successfully sought damages against the responsible party under a breach of contract theory. They base these suits on the grounds

that the party failed to qualify the resident for Medicaid in a timely manner; unreasonably delayed the application process; or improperly transferred the resident's assets, thus jeopardizing his or her Medicaid eligibility.

Two Connecticut courts have upheld such suits. In one, the Appellate Court held that (1) a nursing home contract that obligated a responsible party to use a resident's assets to pay the home did not violate federal or state law; (2) someone signing the contract as power of attorney could be held to be a responsible party; and (3) the responsible party must use the resident's assets to pay the home, not for other, non-home services. In the other case, the court held that a verbal explanation by a home's representative coupled with a family member's failure to object to the terms of that explanation constituted an oral contract and made the person a responsible party. That party's failure to ensure that his relative qualified for Medicaid constituted breach of contract, negligence, and promissory estoppel. Both cases are discussed below.

SUNRISE HEALTHCARE CORP. v. AZARIGIAN (76 Conn. App. 800 (2003))

In this case, the nursing home contended that Azarigian breached her contract by failing to (1) take the necessary steps to ensure her mother's Medicaid eligibility and (2) use her mother's assets to pay for the services she received. The parties stipulated that the defendant (1) held her mother's power of attorney, (2) transferred about $50,000 from her mother's accounts, (3) used over $31,000 of her mother's assets to pay for a private companion for her mother, and (4) stopped paying the home before her mother became eligible for Medicaid.

At trial, Azarigian argued that the contract's terms violated federal law by making her responsible for the missed payments and that she had upheld her contractual obligations in good faith. The court found for the home, finding that (1) the contract did not make Azarigian personally liable and (2) she breached the contract by using her mother's assets to pay the personal companion and transferring some assets for estate planning purposes.

On appeal, the defendant argued that (1) the contract was unenforceable because it did not meet the federal law's requirements, (2) the contract contemplated the types of transfers she made, and (3) she was not liable for her mother's expenses because she was acting as her agent. The Appeals Court rejected all of these arguments.

The court found the contract explicitly prohibited Azarigian's personal liability and obligated her to use her mother's assets to pay for services. Thus, while the defendant was not personally liable, she was liable for her handling of her mother's assets to the extent they would cover outstanding payments owed to the nursing home. The court likened her potential liability to a trustee's liability for unauthorized use of trust property, and just as with a trustee, any such liability would depend on the plaintiff showing she misused those assets. It then determined that the contract's requirement for Azarigian to use her mother's assets for her “welfare” meant that they had to be used for basic necessities, such as nursing care, and that any spending beyond that, such as a personal companion, did not benefit the mother's welfare and violated the contract.

Azarigian also argued that since the contract indicated she acted with her mother's power of attorney, she could not be liable for the missed payments. The court rejected this argument in finding that she also signed the contract as responsible party and thus assumed responsibilities well beyond her role as power of attorney.

The court affirmed the trial court's judgment that the defendant pay the home $78,779 for the missed payments.

GLASTONBURY HEALTHCARE CENTER v. ESPOSITO (2008 Conn. Sup. 10497, 45 CLR 671)

A nursing home sued the defendant for his failure to properly pursue a claim for Medicaid benefits on his mother's behalf. It asserted several causes of action: breach of contract, negligence, promissory estoppel, and fraudulent misrepresentation. This complex case involved (1) the nature of the contract with the nursing home, (2) the defendant's status as responsible party, (3) the source of his mother's funds and his use (and misuse) of them, and (4) the timeliness and nature of information he provided DSS in the Medicaid application for his mother. Two years after the initial application, DSS denied it on the grounds of lack of information.

Esposito argued that he had signed the contract as power of attorney but not on the line designating him as responsible party; consequently he was not bound by the contract's obligations for a responsible party. The court, however, found that at the meeting to complete the admission and sign the contract, the home's representative verbally informed Esposito that (1) he was the responsible party and (2) the agreement required him to, among other things, provide all information DSS asked for concerning the Medicaid application and act promptly to ensure Medicaid eligibility, including reducing his mother's assets to meet the $1,600 Medicaid limits. The court concluded that, while Esposito never agreed to comply with these requirements, he never objected, either. This silence “led the plaintiff to reasonably conclude he was accepting these obligations.” His silence constituted consent and created an oral contract, which he breached by failing to give DSS information and reduce his mother's assets to the Medicaid limit.

The court also found the defendant negligent in exercising his responsible party obligations. It cited his failure to reduce his mother's assets to the Medicaid limit and turn over the proceeds of a bank account that clearly belonged to his mother.

The court also agreed with the plaintiff on the matter of promissory estoppel. It determined that Esposito wanted Medicaid to pay for his mother's care, knew the Medicaid asset limit, and knew that the home would not accept her admission without her being approved for Medicaid. Consequently, he agreed to apply for Medicaid on her behalf. The home believed his silence when told of responsible party duties was consent and relied on his fulfilling his promise. Esposito argued that the nursing home failed to exercise due diligence as to the truth of his mother's Medicaid eligibility. The court rejected that argument, accepting the home's response that it reasonably expected that Esposito would sell his mother's assets and noting that he did not tell the home about some assets.

Finally, the court rejected the plaintiff's accusation that the financial disclosure form Esposito submitted falsely and knowingly represented that his mother had no assets. It found he honestly believed that some assets were his when they were actually his mother's and that he was unaware of a law that would have allowed his mother to elect to receive a bequest from her husband's estate.

The court ordered Esposito to pay the home over $102,000. But he did not have to pay attorneys fees or interest because, although the admissions agreement provided for these, the home's representative did not explain them to him and he did not consent to them.

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