Promissory Note Given to Medicaid Applicant's Wife Is Not a Trust-Like Device

On remand, a federal district court in Oklahoma holds that a promissory note given to a Medicaid applicant's wife is not a trust-like device and that the Medicaid statute’s reasonable promptness requirement gives applicants a private right of action to sue under 42 U.S.C. § 1983. Gragert v. Hendrick (U.S. Dist. Ct., W.D. Okla., No. CIV-11-984-C, Jan. 24, 2014).

George Gragert and his wife sold a rental property to their son for $28,000 in exchange for a promissory note given to Mr. Gragert's wife. The note provided that it could not be sold or assigned. When Mr. Gragert entered a nursing home and applied for Medicaid, the Oklahoma Health Care Authority found the promissory note was an available resource and denied him benefits.

Mr. Gragert sued the state in federal court, and the 10th Circuit ultimately ruled that the promissory note was not an available resource. The court noted that no ruling had been made on whether Mr. Gragert had a valid 42 U.S.C. § 1983 claim, and remanded the decision. On remand, the state asked for summary judgment, arguing that Mr. Gragert does not have a valid § 1983 claim because he did not identify a statute that gave him a private right of action; that Mr. Gragert's suit is barred by the Eleventh Amendment; and that the promissory note is a trust-like device.

The U.S. District Court for the Western District of Oklahoma denies the state summary judgment, holding Mr. Gragert does have a private right of action and the promissory note is not a trust-like device. The court notes that the promissory note is the same type as in Lemmons v. Lake (U.S. Dist. Ct., W.D. Okla., No. CIV–12–1075–C, March 21, 2013), and that it is not an available resource because the state did not offer any evidence to refute Mr. Gragert's evidence that the house is for the sole benefit of the purchaser and that it is not held for Mr. and Mrs. Gragert. The court also rules that Mr. Gragert has a private right of action under 42 U.S.C. § 1396a(a)(8), which requires the state to furnish Medicaid to all eligible individuals with reasonable promptness. Finally, the court holds that that the Eleventh Amendment does not preclude the court from issuing an injunction preventing the state from holding that the promissory note was a resource. 

ElderLawAnswers member Craig Riffel of the firm Mitchel, Gaston, Riffel & Riffel, P.L.L.C., in Enid, OK, was one of the attorneys for Mr. Gragert.

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