THE CRIMINALIZATION OF ASSET TRANSFERS, GRANNY GOES TO JAIL, GRANNY'S ATTORNEY GOES TO JAIL, NOW NO ONE GOES TO JAIL.
The myth and mystery surrounding the issue of transfers when applying for Medicaid can finally be removed. First it was a felony to transfer assets to become eligible for medicaid to pay for the costs of long term care, hence the "Granny Goes to Jail" moniker. Then the law was amended to set "Granny" free but imprison her attorney for telling her to make a transfer. Now we believe that the whole issue can finally be put to rest by recent court decision finding the law to be unconstitutional.
Below you will find a history of this law, commentary from Attorney General Janet Reno and finally the text of the court's opinion finding the law to be unconstitutional.
GIVING ADVICE NOW A FELONY.
Elder Law Attorneys prohibited from telling clients about Medicaid and protecting assets.
By SEAN W. SCOTT, ESQ., August 1997
In November of 1986, Margaret Peebler, an 87 year old widow, fell several times at her Portland Oregon home. She had $14,824 in savings and was likely to require skilled nursing home care the rest of her life. If she was ever to have Medicaid pay for the care she would have to reduce her assets below $2000. On Medicaid, though, she could only keep $35 of her monthly income to spend on her personal needs. She wanted to save some of her money for future expenses. So, on the advice of her attorney, she transferred $7,785 to her great-nephew to hold for her benefit. Such actions may now be a criminal felony.
Last year, to crack down on what many believed to be fraud within the Medicaid program, Congress enacted a law which criminalized the transfer of assets to become eligible for Medicaid. Medicaid is a joint federal and state program which will pay for the costs of long term nursing home care. Many seniors look to Medicaid to pay for these costs, and may transfer assets in order to meet the program's qualifications.
The law, effective January 1, 1997, has received much criticism within the press and came to be known as the "Granny Goes to Jail Law." The political fallout lead to the law's amendment in the most recent session of Congress. On August 5, 1997, the President signed the budget reconciliation bill which includes amendments to the Granny Goes to Jail Law.
The amendments now make it a crime to for a fee, counsel or assist an individual to make certain asset transfers. The provision replaces the previous provision which criminalized certain transfers of assets for the purpose of qualifying for Medicaid. In other words, instead of granny going to jail, her attorney goes instead. It is no longer a felony for someone to transfer assets, although this will likely make the applicant ineligible for benefits, instead it is now a crime to advise the client what the law is; the penalty, $25,000 and five years in prison. The irony to this is that the new law makes it a crime to discuss with clients matters that, by themselves, are perfectly legal.
Transferring assets now is perfectly legal. Extreme care though, must be taken in order to avoid the imposition of "penalty periods" associated with the act of transferring. Persons going into a nursing home without the assistance of a qualified elder law attorney eventually become eligible for Medicaid after they have spent all their savings. Some feel that this is not fair that those who choose to retain an attorney to protect their assets get the same benefits. If you have made a transfer of assets an elder law attorney can help you determine the proper time to apply for benefits or otherwise reduce the effect of the transfer.
Under current Medicaid law, and for more than the past ten years, Medicaid has been denied to persons who transferred assets under the transfer penalty rules of the Medicaid Program. There has consistently been an appropriate relationship between transfer of assets and denial of Medicaid benefits. To take the next step and make advising of the law regarding such transfers result in the commission of a Federal crime, is inappropriate.
If Medicaid costs are to be controlled, such controls should flow from the Medicaid program and not the criminal justice system, which is already staggering under an unmanageable caseload. The criminalization of legal conduct is unconscionable. This is also bad social policy. To the extent that there are problems with existing Medicaid law, they should be dealt with in the context of a discussion about how best to finance long-term care. There must be a full debate on this issue. This new law will serve to frighten the frail and elderly who have legitimate concerns about their needs and who fear impoverishment because the current health care system fails to meet their needs. the legislation affecting Medicaid is steadily restricting access to the program, it can not be restricted so much as to deny access to program.
Attorney General will not defend Constitutionality of Medicaid Criminalization Law.
As of March 11, 1998 it seems that wisdom has finally shone on the halls of congress. Below is copy of a letter sent from Janet Reno to Speaker Newt Gingrich regarding the Justice Department's position on enforcing the letter of the law when it comes to providing advice on Medicaid and protecting assets.
"This is to respectfully inform you that, after close and careful scrutiny of the matter, the Department of Justice will not defend the constitutionality of Section 1128B(a)(6) because the counseling prohibition in that provision is plainly unconstitutional under the First Amendment and because the assistance prohibition is not severable from the counseling prohibition. "
Letter from Attorney General Janet Reno to Speaker Newt Gingrich:
Dear Mr. Speaker:
I am writing to you regarding Section 1128B(a)(6) of the Social Security Act, as amended by Section 4734 of the Balanced Budget Act of 1997, which was signed into law on August 5, 1997. As amended by Section 4734, Section 1128B(a)(6) of the Social Security Act, to be codified at 42 U.S.C. Sec. 1320a-7b(a)(6), provides that whoever:
for a fee knowingly and willfully counsels or assists an individual to dispose of assets in order for the individual to become eligible for medical assistance under a State plan under Title XIX, if disposing of the assets results in the imposition of a period of ineligibility for such assistance under section 1917(c), shall ... (ii) in the case of such a ... provision of counsel or assistance by any other person, be guilty of a misdemeanor and upon conviction thereof fined not more than $10,000 or imprisoned for not more than one year or both.
Pub. L. No. 105-33, 11 Stat. 522-23. Section 1128B(a)(6) is the subject of constitutional challenges in New York State Bar Association v. Reno, 97-CV-1768-TJM-DRE in the District Court for the Northern District of New York, and Magee v. United States, 98-CA-073, in the District Court for the District of Rhode Island.
This is to respectfully inform you that, after close and careful scrutiny of the matter, the Department of Justice will not defend the constitutionality of Section 1128B(a)(6) because the counseling prohibition in that provision is plainly unconstitutional under the First Amendment and because the assistance prohibition is not severable from the counseling prohibition.
Notably, Section 4734 of the Balanced Budget Act of 1997 repealed the prior Section 1128B(a)(6) of the Social Security Act, which had been added by Section 217 of the Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191, 110 Stat. 2008, and which was codified at 42 U.S.C. Sec. 320a-7(a)(6) (Supp. II 1996)). The prior Section 1128B(a)(6) of the Social Security Act made it unlawful for any person to "knowingly and willfully dispose[ ] of assets (including by any transfer in trust) in order for an individual to become eligible for medical assistance under a State Plan under Title XIX, if disposing of the assets results in the imposition of a period of ineligibility for such assistance under Section 1317(c).
Because Section 4734 repealed the provision just quoted, the new Section 1128B(a)(6) of the Social Security Act would prohibit attorneys and other professional advisors from "counsel[ing]" their clients to engage in an estate-planning strategy that itself is lawful. Under these unique circumstances, and in light of the fact that, pursuant to this provision, professional advisors such as attorneys would be prohibited from providing truthful, non-misleading advice to their clients about lawful behavior, we are unable to identify a governmental interest that would justify this restriction on protected speech. Accordingly, we believe that the "counseling" prohibition in Section 1128B(a)(6) of the Social Security Act plainly is unconstitutional under First Amendment, and cannot survive judicial scrutiny.
The amended Section 1128B(a)(6) of the Social Security Act also would prohibit attorneys and other professionals from "assist[ing]" an individual "to dispose of assets in order for the individual to become eligible for medical assistance", if disposing of the assets results in the imposition of a period of ineligibility for Medicaid nursing home benefits under Section 1917(c). Congress may enjoy greater authority under the Constitution to restrict professional "assist[ance]" that is distinct from "counsel[ing]," since such assistance need not necessarily take the form of protected speech. However, we do not believe that Congress would have intended to impose an assistance prohibition in the absence of a concomitant prohibition either on the underlying conduct (the disposal of assets itself) or on the counseling to engage in such conduct. Accordingly, we have concluded that the assistance prohibition is not severable from the counseling prohibition.
Therefore, in accordance with the practice of the Department, I am hereby informing the Congress that the Department of Justice will not defend the constitutionality of the counseling prohibition in Section 1128B(a)(6) of the Social Security Act. Consistent with my determination on the constitutional and severability questions, I also am hereby informing the Congress that the Department of Justice will not bring any criminal prosecutions under the current version of that Section.
Finally, I would like to stress that the Department of Justice is available to assist Congress, if it so desires, in attempting to draft new legislation that would address the concerns of Congress in a manner that comports with contemporary First Amendment jurisprudence and that meets other policy objectives of the Congress and the Executive Branch.
Sincerely,
Janet Reno
Medicaid Criminalization Law Found Unconstitutional by Court.
New York State Bar Association,
plaintiff,
v.
Janet Reno, et al.,
defendants
TRANSCRIPT of Proceedings held in U.S. District Court, Northern District of New York, September 14, 1998.
Nixon, Hargrave, Devans & Doyle, LLP by G. Robert Witmer
Daniel J. Hurteau, for plaintiff; U.S. Department of Justice by Thomas E. Carallero for defendant.
------------------------------------------------------------------------
THE COURT (Thomas J. McAvoy, Chief U.S. District Court Judge):
Presently before the Court is plaintiff's motion for summary judgment seeking a declaration that 42 US Code §1320-7b(a)(6) is unconstitutional and a permanent injunction enjoining the defendant from enforcing the statutes.
Section 1320a-7b(a)(6) makes it a crime for anyone to knowingly and willfully counsel or assist an individual, for a fee, to dispose of assets in order for the individual to become eligible for Medicaid benefits if disposing of such assets would result in the imposition of a period of ineligibility.
Plaintiff asserts that the statute violates the First and Fifth Amendments to the U.S. Constitution. Plaintiff further asserts that defendant concedes the unconstitutionality of the statute and, therefore, summary judgment is appropriate.
Defendant, on the other hand, asserts that summary judgment is inappropriate because the present case is not justiciable under Article III of the U.S. Constitution.
The defendant claims that the present matter is justiciable because plaintiff cannot demonstrate a claim of specific present harm or imminent future harm. Defendant asserts that plaintiff would be unable to demonstrate the requisite degree of harm because plaintiff's members are not being prosecuted under the statute and do not face an imminent threat of prosecution. This, according to the defendant, is supported by letters from the Attorney General advising Assistant U.S. Attorneys not to initiate any prosecutions under this statute.
Plaintiff has submitted affidavits demonstrating that the statute has resulted in its members refraining from providing certain counsel and assistance to clients. Plaintiff claims that the statute places its members in a quandary. On the other hand, plaintiff's members are ethically bound to respect and uphold the law, which would include the statute at issue here. On the other hand, plaintiff's members also have an ethical obligation to provide full and competent representation to their clients. See, generally, 22 New York Codes Rules and Regulations, §1200.32. Lawyers shall not intentionally fall to seek the lawful objectives of the client through reasonable available means provided through the law. This includes advising clients on financial planning to qualify for Medicaid. Thus, under the statute, plaintiff's members would be precluded from advising clients to engage in an estate-planning strategy that itself is legal.
The issue if justiciability arises out of the limitations on the judicial power of the United States to the resolution of cases and controversies. Valley Forge Christian College versus Americans United for Separation of Church and State Inc., 102 Supreme Court 752, at 757. This court already determined the instant litigation to be ripe. Memorandum decision and order of April 7, 1998. That decision is the law of the case. Zdanok versus Glidden Company Durkee Famous Foods Division, 327 Fed 2d 944, at 953, cert denied; 884 Supreme Court 1338. Where litigants have once battled for the court's decision, they should neither be required, nor without good reason permitted, to battle for it again. That's the Durkee case.
Furthermore, special rules apply in First Amendment cases where, as here, there is a challenge to the overbreadth of the statute. Bates versis State bar of Arizona, 97 Supreme Court 2691, at 2707. Quote, an overbroad statute might serve to chill protected speech. First Amendment interests are fragile interests, and a person who contemplates protected activity might be discouraged by the interrorem effect of the statute, close quote. That's from Bates. Thus, plaintiff's claim is ripe under the First Amendment jurisprudence if its First Amendment Rights have been restricted or chilled by the existence of the Act. See, generally, New York Public Interest Research Group Inc. versus Village of Roslyn Estates, 498 Fed Supp 922, at 928; Natco Theaters Inc. versus Ratner, 463 Fed Supp 1124, at 1126.
The case of St. Martin's Press Inc. versus Carey, 605 Fed 2d 41, relied upon by defendant is distinguishable. That case involved conduct that was unlikely to be covered by the challenged statute. In that case, the chilling effect was too remote. Here, however, the challenged conduct is directly covered by the challenged statute.
The defendant principally relies on Sanger versus Reno, 966 Fed Supp 151, which also is readily distinguishable. Much like St. Martin's Press, Sanger involved a situation where plaintiff's allegations of a chilling effect were not substantiated by evidence that the challenged statute would directly affect them. Again, the chilling effect was too remote.
The present case may be likened to Epperson v. Arkansas, 89 Supreme Court 266, wherein a teacher challenged a statute making it unlawful to teach any theory of evolution or adopt or use a textbook that teaches evolution. In Epperson, the teacher was provided with a book by the school administration that contained a chapter on evolution. As in the present case, the teacher was faced with a dilemma because, on the one hand, she was supposed to use and teach from the book, but, on the other hand, to do so would constitute a criminal offense. The Supreme Court speifically noted that, quote, there is no record of any prosecutions under the statute. It is possible that the statute is presently more of a curiosity than a vital fact of life, close quote. That's Epperson at 269. Nevertheless, the Supreme Court stated that, quote, it is our duty to decide the issues presented, close quote. Also Epperson. See also Doe versus Bolton, 93 Supreme Court 739.
Here, plaintiff commenced the instant litigation claiming that the statute violated the Constitution. Thereafter, the defendant voluntarily stated that she would not enforce the statute. The statute, however, remains on the books. Congress has not repealed the statute. Thus, there remains the fear that a future administration or even a wayward U.S. Attorney could attempt to enforce the statute.
As discussed, plaintiff has submitted evidence that the challenged statute is having the immediate and demonstrable effect of deterring plaintiff's members from advising clients of the legal transfer of assets to become eligible for Medicaid. Since the plaintiff's members are prospectively subject to proscriptions that plaintiff is challenging, there is a sufficient chilling effect such that the validity of the statute is proper before this Court. Laird versus Tatum, 92 Supreme
Plaintiff claims that the subject statute violates the First and Fifth Amendments of the U.S. Constitution. Defendant does not defend the constitutionality of the statute.Court 2318, at 2324.
Congress is precluded from making any law abridging the freedom of speech, U.S. Constitution Amendment I. The speech at issue here is advice given by an attorney to a client for a fee regarding the transfer of assets to qualify for Medicaid.
Assuming, without deciding, that the speech at issue is commercial speech, thereby implicating a mid-level scrutiny standard, the statute does not pass muster. The Government fails to demonstrate: One, a substantial governmental interest; and two, that the statute directly advances any asserted governmental interest; and three, that the statute is not more extensive than necessary to serve that interest. Central Hudson Gas and Electric Corporation versus Public Service Commission of New York, 100 Supreme Court 2343, at 2351. In fact, the defendant has stated that, quote, we are unable to identify a governmental interest that would justify the restriction on protected speech, close quote. March 11, 1998 letter from Janet Reno, Attorney General, to Albert Gore Jr., President of the Senate. Since the statute cannot withstand mid-level scrutiny, it certainly cannot withstand strict scrutiny. See Consolidated Edison Company versus Public Service Commission of New York, 100 Supreme Court 2326, at 2334.
Furthermore, under the overbreadth doctrine applicable to statutes restricting speech, quote, a statute is invalid in all of its applications; that is, facially invalid, if it is invalid in any of them. Ada versus Guam Society of Obstetricians and Gynecologists, 113 Supreme Court 633, at 634. The defendant does not even assert a circumstance under which the statute could be applied in a constitutional manner. Thus, the statute is overbroad and facially invalid.
For the foregoing reasons, the plaintiff's motion for summary judgment is granted. Section 1128B(a)(6) of the Social Security Act, 42 US Code §1320a-7b(a)(6) is hereby declared unconstitutional and the defendant is permanently enjoined from enforcing same.
Plaintiff is to submit an order.
Thank you both for an interesting argument.
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