State Does Not Have to Recalculate Medicaid Penalty Period Based on Funds Returned After It No Longer Counts Partial Returns

An Ohio appeals court rules that the state correctly refused to recalculate a Medicaid penalty period based on funds that were returned after the state amended Medicaid law to not count partial returns. Paczko v. Ohio Dept. of Job & Family Servs. (Ohio Ct. App., 8th Dist., No. 105783, Dec. 14, 2017).

Eleanor Paczko transferred $146,122 to an irrevocable trust that benefited her children. She applied for Medicaid benefits in May 2015. The state found her eligible for benefits, but it imposed a penalty period based on the transfer to the trust. In September 2015, the state amended the state Medicaid statute to allow the state to recalculate a penalty period only if all of the applicant's funds had been returned. During the penalty period, Ms. Paczko's children returned $89,227.38 to Ms. Paczko. In April 2016, Ms. Paczko asked the state to recalculate the penalty period based on the returned assets. The state refused to count any funds returned after September 2015.

Ms. Paczko appealed, arguing that because the regulations implementing the statute were not updated until January 2016, the old regulation that allowed recalculation of partial returns applied to her case. She also argued that the state should not have applied the amendment to the law to a Medicaid application filed before the amendment was enacted. The state denied her appeal, and Ms. Paczko appealed to court. The trial court ruled for the state, and Ms. Paczko appealed.

The Ohio Court of Appeals, 8th District, affirms, holding that the state correctly refused to recalculate the penalty period based on funds that were returned after the state amended Medicaid law to not count partial returns. According to the court, the fact that the administrative rule implementing the law wasn't updated "for several months does nothing to diminish the force and effect of the amended statute." In addition, the court rules that Ms. Paczko's initial Medicaid application, made before the amendment of the law, did not vest "her rights such that the amendment became a retroactive application of the law."

For the full text of this decision, go to: https://www.supremecourt.ohio.gov/rod/docs/pdf/8/2017/2017-Ohio-9024.pdf

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