Conservatorship litigation made life insurance policy inaccessible

In a recent case (Dep’t of Tenncare 4/20/2022), Appellant’s application for nursing home Medicaid was denied due to ownership of a life insurance policy with a cash value of $2,184.66. She had been under a limited conservatorship since June 2, 2021. The Medicaid application was filed on July 21, 2021. Neither Appellant nor the limited conservator had legal authority to convert the policy to cash and spend down the proceeds. At hearing Appellant alleged her application was improperly denied because the life policy was inaccessible.

The record reflected that Tenncare requested additional documentation on August 19, 2021. At some point between August 19, 2021 and October 7, 2021, the limited conservator became aware of the policy. On October 7, 2021, the insurance company confirmed the policy’s existence and confirmed it’s face value. On October 20, 2021, Tenncare requested additional information. On October 28, 2021, the limited conservator filed a motion to redeem the policy in Chancery Court. Sometime prior to November 8, 2021, Appellant believed her application was denied and she filed an appeal of the alleged denial. The appeal included an explanation of the limited conservator’s efforts. On December 27, 2021, the Chancery Court entered an order setting a hearing for January 12, 2022. On December 28, 2021, Tenncare issued a formal denial of Appellant’s Medicaid application. On January 12, 2022, the Chancery Court issued an order approving the motion to redeem the life policy, but requiring the limited conservator to return to court to “apply by motion” for approval of a spenddown plan.” The limited conservators made requests to the carrier to redeem the policy on January 6, 2022, January 25, 2022 and February 2, 2022. On February 2, 2022, the carrier provided a cash surrender request form which was returned the same day. Tenncare again deneid the application for Medicaid on March 14, 2022, sneding a form of “Agreement to Sell Property.” A hearing was held on March 29, 2022 and the order recites that the carrier had not released the funds as of the hearing date so the limited conservator still was unable to secure Chancery Court approval of a spend down plan.

At hearing, the parties stipulated that the sole issue was whether Appellant was over resourced due to the life policy’s cash value. Appellant argued the policy should be excluded because it was inaccessible. She argued Tenncare’s delivery of an “Agreement to Sell Property” was an admission that Tenncare knew the policy was inaccessible. Unfortunately the agreement was never signed so the ALJ rejected that argument. However, because the policy was subject to ongoing litigation, Tenncare’s Policy Manual No. 110.060 rendered the policy inaccessible due to litigation. The ALJ decided the policy first became involved in litigation on October 28, 2021 and that the litigation continued through the hearing date. Thus, the policy should have been excluded effective October 28, 2021. Appellant’s petition was granted in part and remanded to Tenncare for further proceedings with direction to review the entire record and reconsider eligibility and to exclude the policy as of October 28, 2021.

Commentary:

The decision did not go far enough in protecting Appellant. The record made it clear she had no legal authority and the limited conservator had no legal authority to liquidate the policy from June 2, 2021 through January 12, 2022 and that the limited conservator still lacked legal authority to spend down the proceeds which, as of the hearing date, had not been received. Thus, if a litigation exception was applied, the correct date was the date Appellant was placed under a conservatorship, not the date when the motion to redeem was filed. Second, a resource the applicant is unaware of should be excluded. As decided in Lawrence v. DFCS (a Georgia decision), an applicant cannot take action to spend down a resource the applicant doesn’t know exists. Specifically, POMS SI 0110.117 provides: “An individual may be unaware of his or her ownership of an asset. If this is the case, the asset is not a resource during the period in which the individual was unaware of his/her ownership.” The ALJ specifically found that the limited conservator became aware of the policy sometime between August 19, 2021 and October 7, 2021, with no clear evidence of awareness prior to October 7, 2021. Thus, the POMS (which Tenncare is required to follow) dictate the policy should have been excluded from the date of application through October 7, 2021. Third, logic dictates that if the life policy was inaccessible on October 28, 2021, it was inaccessible prior to that date for the same reason a motion to redeem was required in the first place. By limiting the litigation exclusion date to October 28, 2021, rather than the date the conservatorship (an ongoing proceeding) was established, the ALJ elevated form over substance, narrowly deciding the terms of the litigation exception. Fourth, Tenncare’s delivery of the Agreement to Sell Property should have been accepted as an opposing party’s admission against interest that the policy was inaccessible and as a result Tenncare should have been barred from denying the life policy was inaccessible. Finally, Tenncare’s argument that the poliy should have been counted because the conservator was cooperating is nonsensical. Tenncare’s policy, at Section 110.060.3(a) states: If the individual has a guardian, conservator, power of attorney or durable power of attorney at the time of application or renewal, the assets of the individual are considered available to the individual. That person is legally appointed to act on behalf of the individual and is expected to make the individual’s assets available for use by or for the care of the individual.” However the record clearly stated Appellant had a “limited conservator” who had no legal authority prior to and continuing through the hearing date to spenddown the policy proceeds when they are eventually received. Instead, the ALJ should have continued reading the next paragraph of Section Section 110.060.3(a) which directs Tenncare to exclude temporarily resources when there is no conservator which was Appellant’s circumstance since the limited conservator had no authority to act without Chancery Court approval.