In a ruling that affects how much power retirement communities have over the way their residents pay medical bills, the Maryland Court of Appeals said yesterday that Oakcrest Village in Baltimore County could not stop a 94-year-old patient from tapping into the Medicaid system.
The court held that even though Sherwood R. Murphy had told Oakcrest Village that he would not intentionally divest his money - a move that would make him officially indigent and qualified for Medicaid - the retirement community could not penalize him if he did so. Medicaid reimbursements to providers of medical care are generally lower than if the patient pays directly.
Federal and state laws that regulate Medicaid, the government program that pays for medical services for the indigent, trumped the contract that Murphy made with Oakcrest, the court said, upholding a Baltimore County Circuit Court ruling.
"Oakcrest can't accept the benefits of public funding, Medicaid funding, without complying with the rules and regulations that go along with it," said attorney Norman L. Smith, who represented Murphy.
Kim Hubbard-Burton, a spokeswoman for Oakcrest Village, said executives there were "evaluating the court's decision."
"The effect of this ruling is that additional individuals who have the resources to financially qualify for continuing care may, when they are directly admitted to the nursing facility, be able to transfer assets and to qualify for Medicaid benefits as indigents," said Oakcrest attorney Howard L. Sollins.
Lawyers familiar with the case said it was unclear how much of an impact yesterday's ruling would have. The Court of Appeals made clear that its decision applied only to people who, like Murphy, had directly entered a retirement community's nursing facility.
"It's probably not a large number of people that fall into that segment of the population," said Jeffrey Myers, an assistant attorney general and principal counsel to the Maryland Department of Aging. "But it may have some greater impact in that it might encourage lawyers who do Medicaid planning to be a little more aggressive than they've been in the past."
Oakcrest Village is a continuing care retirement community that provides the elderly with three types of housing - independent-living apartments, assisted-living units, and a "comprehensive care facility."
In order to get into the community, Murphy and his wife had to pay an entrance fee and show that they had the financial means to pay for their care.
They were accepted and Sherwood Murphy moved directly into the comprehensive care unit. Soon thereafter, according to court papers, the Murphys transferred their money in a way that made Sherwood Murphy's net worth fall low enough to qualify him for Medicaid. When Oakcrest learned of the transfer, it filed suit.