I am frequently asked if a parent can reimburse a child or other individual for expenses paid for the benefit of the parent during the spend down phase preceding application for Medicaid without running into problems with Medicaid.  In short, the answer is no unless there is evidence of a debt incurred in the form of a written agreement, promissory note, etc., for which the payment is made.  This is a harsh and difficult position for many caregivers who do not think twice of paying moving expenses, deposits, medical expenses, etc., for a parent only to find that later they cannot be reimbursed because they did not make a formal agreement.

A New York appellate court case recently confirmed this application of the Medicaid regulations by allowing a penalty to be imposed on the transfer of assets to a caregiver daughter without presenting a written agreement to evidence the debt.  Matter of Krajewski v. Zucker (N.Y. Sup. Ct., App. Div., 3rd Dept., No. 522888, Dec. 8, 2016).

In that case Jessie Krajewski lived with her daughter for two years before entering a nursing home. Ms. Krajewski’s husband withdrew money from their joint bank account to reimburse the daughter for her caregiving expenses. After Ms. Krajewski entered the nursing home, she applied for Medicaid. The state imposed a penalty period based, in part, on the transfers made to her daughter.

Ms. Krajewski appealed, arguing that because the transfers were made to reimburse her daughter for her care, the payments were not made in order to qualify for Medicaid. After a hearing, the state upheld the penalty period, and Ms. Krajewski appealed her case in court.

The N.Y. Supreme Court, Appellate Division, affirmed the agency decision, holding that Ms. Krajewski did not rebut the presumption that the transfers were made in order to qualify for Medicaid. The court found that there was no evidence of a written agreement between Ms. Krajewski and her daughter and the only evidence consisted of handwritten summaries of Ms. Krajewski’s living expenses, which was not enough to rebut the presumption.

The lesson to take from this case is that when a caregiver pays expenses for a person who will be applying for Medicaid, it is essential to have written proof of the debt before reimbursing the caregiver for those expenses.  While this is a general rule for transfer of money to a caregiver, be aware of the fact that in Alabama more requirements need to be met to reimburse a family caregiver for actual care provided.  If you want to establish such an arrangement it is important to seek legal advice first.