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Guardians, power of attorney agents, and others may be liable for a nursing home resident's debt to the nursing home if they fail to act promptly or sign papers making themselves personally liable.

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Nursing Home Resident’s Representative May be Liable for Failing to Promptly Qualify Her for Medicaid Benefits

A Connecticut trial court refused to dismiss a nursing home's lawsuit against a resident's representative for unpaid fees, concluding that material questions exist as to whether the representative breached the nursing home’s Admissions Agreement by failing to use the resident's assets to pay for her care and promptly qualifying her for Medicaid. Hebrew Health Care, Inc. v. Levine (Conn. Super. Ct., No. CV085023211S, Nov. 3, 2009).

Acting pursuant to a power of attorney, Benjamin Levine signed the agreement that admitted his aunt, Grace Levine, to a nursing home operated by Hebrew Health Care, Inc. The Admissions Agreement designated Mr. Levine as his aunt's representative and required him to use his aunt's assets to pay for her care and to promptly apply for, and then maintain, her eligibility for Medicaid benefits. Although Mr. Levine applied for Medicaid benefits, the Connecticut Department of Social Services determined that Ms. Levine's assets exceeded eligibility limits and imposed a penalty period, leaving a portion of her nursing home bills unpaid.

The nursing home sued Mr. Levine for the outstanding balance. Mr. Levine filed a motion for summary judgment, asserting that he had no financial liability for his aunt's debts because he executed the admission agreement only in his capacity as her agent and because the agreement expressly provided that a resident's representative was not personally liable for the resident's debts. The nursing home countered that it was not attempting to hold Mr. Levine personally liable for his aunt's debts, but rather to recover damages for his failure to comply with the terms of the Admission Agreement.

The Superior Court of Connecticut denied Mr. Levine's motion for summary judgment. The court concluded that by signing the agreement Mr. Levine agreed that he was the representative under the agreement and that material questions remain as to whether he fulfilled his contractual obligations to use his aunt's assets to pay for her care and to promptly establish her Medicaid eligibility.

Illinois case: Although the facts were different in an Illinois case and although the court took a different route, the appellate court in Mount Vernon reached essentially the same result more than twenty years ago. In re the Guardianship of Mary Jane Connor, 170 Ill. App. 3d 759 (5th District 1988).

There a guardian, the Shelby County State Bank, was appointed to manage the estate and person of Ms. Connor, who resided in a nursing home.  At a hearing on the bank’s report of final financial settlement, the evidence established that if the bank had acted promptly to qualify Ms. Connor for Medicaid benefits, her homestead real estate and other assets could have been protected from a need to spend-down those assets, and that they could have been set aside for her benefit.  At the conclusion of the hearing, the circuit court ruled that the bank had violated its fiduciary duty to Ms. Connor and had allowed her estate to be dissipated.

On appeal, the Fifth District Appellate Court affirmed the circuit court's ruling that the bank had breached its fiduciary duty. The appellate court ruled that the bank’s failure to fully investigate the possible effect a sale of Ms. Connor's residence would have on her eligibility for Medicaid coverage of her nursing home bills prior selling the home constituted a breach of fiduciary duty. The appellate court concluded that the bank's failure to seek Medicaid for Ms. Connor in a diligent and orderly manner resulted in the need to apply the proceeds from the sale of her residence to pay her nursing home arrearage rather than to benefit her.

Although the Connor case involved a bank as guardian, there is no reason to believe that the appellate court would have reached any different conclusion if a private person had been a guardian.  Similarly, there is every reason to believe that the Illinois courts today would reach the same result even if there were no guardianship. Thus, for example, if an elderly mother signs a power of attorney (POA) form to appoint her adult son her agent (sometimes called an attorney-in-fact) and the son fails to protect his mother’s assets from the need to “spend down” or fails to promptly apply for Medicaid benefits to pay for his mother’s care at her nursing home, the son could be held financially responsible for his mother’s nursing home or other medical costs.

This article is to be published in the May 2010 issues of the Southern Business Journal. Click here to view online.