State Decision Ignoring Appraised Value of Medicaid Applicant’s House When Imposing Penalty Period Is Reversed

A New Jersey appeals court reverses a final Medicaid agency decision that ignored an appraiser’s testimony about the actual value of an applicant’s house being less than the tax assessed value when it imposed a penalty period. J.B. v. Camden County Board of Social Services (N.J. Super. Ct., App. Div., No. A-5665-17T4, May 5, 2020).

J.B. entered a nursing home. In preparation for applying for Medicaid, her son, acting under a power of attorney, sold her home for $17,500 to an acquaintance who was a realtor. The tax assessed value of the home was $104,700. J.B. applied for Medicaid, and the state imposed a 236-day penalty period because she sold her house for less than market value.

J.B. appealed, arguing that the house was in poor condition, so $17,500 was fair market value. At a hearing, an appraiser testified that the market value of the house after it was sold and improvements had been made was $78,000, noting the appraisal would have been lower had it taken place either before improvements were made or had she known "the property was a hoarding situation and required a significant amount of repairs." Because there was no evidence of the condition of the house before it was sold, the administrative law judge accepted the appraised value of $78,000 and imposed a 142-day penalty period. In the final agency decision, the director of the state Medicaid agency did not discuss the appraised value and imposed a 329-day penalty period. J.B. appealed.

The New Jersey Superior Court, Appellate Division, reverses in part and remands. The court agrees that the transfer was made for less than market value in order to qualify for Medicaid. However, the court rules that the “appraiser's opinion that the fair market value of [J.B.’s] home at the time of the appraisal was $78,000 is well-supported by the evidence on the record as a whole” and the failure of the final agency decision to mention the appraisal “appears to be arbitrary and unreasonable.” The court remands to the director to address this issue.

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