Medicaid Applicant's Promissory Note Is Available Asset Because Repayments Were Not in Equal Amounts

A Nebraska appeals court holds that a Medicaid applicant's promissory note is an available asset because the note did not provide for repayment in equal amounts and there was no evidence it was actuarially sound. Freeman v. Nebraska Dept. of Health and Human Servs. (Neb. Ct. App., No. A-17-950, March 26, 2019).

Lorena Freeman entered a nursing home and applied for Medicaid. She gave $5,547.08 to her representative, Rodney Halstead, in exchange for a promissory note. The promissory note provided that Mr. Halstead would pay Ms. Freeman one installment of $4,236 on April 15 and another installment of $561.08 on May 1. The state denied Ms. Freeman's Medicaid application, counting the promissory note as an available resource and finding that Ms. Freeman had excess resources.

Ms. Freeman appealed, arguing that the promissory note should be counted as a transfer, not as an available resource. Under federal law, a promissory note is considered an asset unless it has an actuarially sound repayment term, provides for repayment in equal amounts, and does not allow the balance to be cancelled when the lender dies. The state upheld the finding of excess resources, and the trial court affirmed. Ms. Freeman appealed, arguing that the promissory met all three of the requirements to be excluded as an asset. Ms. Freeman argued that the note was actuarially sound because her life expectancy was more than two months and that it is typical for a final payment to be smaller.

The Nebraska Court of Appeals affirms, holding that the promissory note is an available resource. The court rules that there was no evidence the promissory note was actuarially sound and that the note did not allow for repayment in equal amounts. According to the court, the plain language of federal law "contemplates at least two equal payments before a possible final unequal payment."

For the full text of this decision, go to: https://supremecourt.nebraska.gov/sites/default/files/a17-950m.pdf

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