Elder Law: Nursing homes going after unpaid bills

[cougarnurse]

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Nursing homes across the country are becoming even more aggressive in attempting to collect unpaid bills from relatives. I have indicated in past articles that, in Florida, a family member should not be liable for the nursing home costs of a resident. There is also case law to support the proposition that, in Florida, a spouse is not liable for such costs, which will be discussed next week.

There have been many lawsuits by health care providers against children of nursing home residents in other states. Understanding these lawsuits may allow a relative to avoid actions which could invoke these grounds for personal liability.

Oregon has a law which makes parents and children mutually responsible for each other's support, as do a few other states. It is my understanding, that to date, Medicaid in Oregon has not sued children for Medicaid reimbursement. This may be, because, as a condition of participation in the Medicaid program, a state must agree to accept the federal guidelines, which count only spousal assets as available to the applicant. As more applicants are denied benefits under the tougher standards, facilities may sue the children and spouse under these relative responsibility laws.

Suppose four years ago, when your widowed mother sold her home to move into an independent living facility, your mother gave away $80,000 to her grandchildren. Perhaps you did not remember these transactions, but when your mother now applies for Medicaid to pay the $7,000 a month cost, she is denied benefits for 16 months. She has gone through all of her savings and only has social security of $814 each month.

You probably do not want the nursing home to look to you to pay that $80,000 shortfall until she qualifies for Medicaid in 13 months. If a much larger transfer was made, the period of disqualification could be well in excess of five years. Hopefully, you did not do something which would give the facility grounds to hold you liable.

The nursing home may allege in a lawsuit against you, that by beginning to pay the bills with your own funds, you voluntarily assumed responsibility for ongoing charges. They may argue that you made an oral promise to pay and the payment history supports that promise.

If you do want to assume that liability, you may qualify for an IRS dependency exemption. If you do not want to assume that unlimited obligation, then you should only pay with the resident's own clearly identified funds and not mislead the facility by paying with your own funds.

The nursing home may allege that you assumed the liability under a contractual theory based on your signing as a guarantor. If you guarantee your child's auto loan of $10,000, you know that your obligation is limited to that amount, less what has been paid down on the loan, plus interest. If you guarantee a person's nursing home bill, you do so for an unlimited amount which could quickly exceed $100,000.

Nursing homes do not ask you to sign a separate document called a guarantee, as the bank might ask you to sign for your child's auto loan. They may ask you to sign the admissions documents, which could be 10 to 60 pages, as the "responsible party." Buried in the document, which is customarily signed without reading and without an attorney's review, may be a definition of responsible party which obligates you to personally pay the bills when the resident cannot. If the facility does not accept Medicaid and Medicare reimbursement, the clause may be enforceable, although it is deceptive.

If the facility accepts Medicare or Medicaid payments, the clause is illegal and unenforceable under the federal Nursing Home Reform Act (NHRA), even if the patient is not eligible for Medicaid benefits. The Act states that a nursing home may not require a third party guarantee of payment as a condition of admissions, of expedited admissions, or of continued stay.

These provisions in the nursing home agreements are also illegal because they are deceptive, implying that the person is merely signing as the contact person. It is also illegal because the person who signs receives no benefit from such a provision. Under general contract law, a contract is enforceable only if each party receives a benefit. The only benefit to a family member who signs is to obtain admission, but the NHRA says that nursing home admission decisions cannot be dependent on a family member assuming financial responsibility.

Some nursing home admissions agreements say the responsible party is not guaranteeing payment, but only promising to take all necessary steps to arrange for payment, such as making a Medicaid application. If the resident's bill remains unpaid, the facility may claim it is because the responsible party did not take all necessary steps to obtain payment.

The responsible party can avoid personal obligation by having a representative capacity clearly identified on the signature line. You should write after your signature words like, by her agent, or under power of attorney, or as trustee, or as her guardian, and add the words "without personal liability." If you sign in the proper manner, the facility can only look to the resident's assets and not to your own assets.

Other theories facilities have been using to obtain personal liability are transferee liability and breach of fiduciary duty. If a parent transfers assets, when the parent knew that their future financial obligations would exceed the value of the gifts, the gift may be in violation of a state's fraudulent conveyance laws. The child may be liable for the unpaid costs up to the amount of the gift. The transferee liability theory was successfully used against three daughters in a Tennessee case by Beverly Healthcare in 2005.

The facility may also sue the child for breach of fiduciary duty for failing to apply the resident's funds to the bills. In one Minnesota case, the son was sued for an unpaid balance of $3,838, and the facility was awarded attorney's fees of over $14,000. The court ruled that the son could be held liable as an agent if he acted in bad faith.

Please, before signing any legal document, see your attorney.