                                NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.




                                                         SUPERIOR COURT OF NEW JERSEY
                                                         APPELLATE DIVISION
                                                         DOCKET NO. A-2881-17T1

R.K.,

          Petitioner-Appellant,

v.

DIVISION OF MEDICAL
ASSISTANCE AND HEALTH
SERVICES, and CAPE MAY
COUNTY BOARD OF SOCIAL
SERVICES,

     Defendants-Respondents.
______________________________

                    Submitted October 8, 2019 – Decided December 5, 2019

                    Before Judges Gilson and Rose.

                    On appeal from the New Jersey Department of Human
                    Services, Division of Medical Assistance and Health
                    Services.

                    SB2, Inc., attorneys for appellant (Laurie M. Higgins,
                    of counsel and on the briefs).

                    Gurbir S. Grewal, Attorney General, attorney for
                    respondent Division of Medical Assistance and Health
            Services (Melissa H. Raksa, Assistant Attorney
            General, of counsel; Mark D. McNally, Deputy
            Attorney General, on the brief).

            Respondent Cape May County Board of Social Services
            has not filed a brief.

PER CURIAM

      Petitioner R.K. appeals from a final agency decision by the Division of

Medical Assistance and Health Services (the Division) that imposed a 199-day

period of ineligibility for Medicaid benefits. That ineligibility was based on

R.K. having transferred her ownership interest in a home to her daughter and

son-in-law within sixty months of entering a nursing home facility. R.K. argues

that the Division acted arbitrarily and capriciously in rejecting a determination

by an administrative law judge (ALJ) that R.K. qualified for the caregiver

exemption. The Division found that R.K. submitted insufficient evidence to

support the exemption. Given our deferential standard of review, we discern no

basis to reject the Division's determination and, therefore, we affirm.

                                        I.

      R.K. was admitted to the Autumn Lake Healthcare Nursing Home at

Ocean View on April 22, 2015. Four months later, in August 2015, a Medicaid

application was submitted on her behalf to the Cape May County Board of Social

Services, the county welfare agency (CWA) responsible for reviewing such

                                                                          A-2881-17T1
                                        2
applications. The CWA approved R.K. for Medicaid benefits as of May 1, 2015

but imposed an asset transfer penalty. The penalty was based on R.K. having

transferred her one-third interest in her home in 2011 to her daughter and son-

in-law.

      R.K. requested a fair hearing to dispute the transfer penalty. The matter

was transmitted to the Office of Administrative Law (OAL) and a hearing was

held before an ALJ in 2016. In May 2016, the ALJ issued an initial decision

reversing the transfer penalty. The ALJ found that R.K.'s 2011 transfer of her

interest in her home met the caregiver exemption. In making that determination,

the ALJ accepted the evidence submitted by R.K. that her daughter had provided

care to her for two years before R.K. went into the nursing home that allowed

R.K. to remain at home rather than be institutionalized.

      On administrative appeal, the Division rejected the ALJ's decision

because the record did not support the ALJ's findings. The Division foun d that

R.K. had not provided competent medical evidence about her physical condition

for the two years before she entered the nursing home. Specifically, the Division

rejected an affidavit from Dr. Jenny Lynn Cook because that affidavit did not

state that Dr. Cook had treated R.K. Consequently, the Division remanded the

matter to the OAL for further development of the record. The Division also


                                                                         A-2881-17T1
                                       3
directed the ALJ to clarify who paid for the adult daycare and hospice services

R.K. received before going to the nursing home.

      In 2017, a second hearing was held before the same ALJ.            After

considering additional evidence, on October 16, 2017, the ALJ again found that

R.K. was entitled to the caregiver exemption and reversed the transfer penalty.

The ALJ relied on records that showed that R.K. had received hospice care since

November 7, 2013. Those records showed that in November 2013, R.K. was

diagnosed with congestive heart failure, atrial fibrillation, cerebral vascular

accident (stroke), dementia, and depression. The ALJ also found that R.K. had

received medical care provided by an adult day care facility from June 2014

until December 2014, and hospice services from November 2013 that continued

through R.K.'s institutionalization. Those services had been paid for by R.K.'s

private insurance and Medicare. The ALJ held that such insurance and Medicare

did not constitute governmental benefits such as Medicaid and, thus, did not

disqualify R.K. from the caregiver exemption.

      On a second administrative appeal, the Division again rejected the ALJ's

determination in a final agency decision issued on January 16, 2018. The

Division found that R.K. had not provided medical documentation showing her

medical condition for the full two-year period required by the caregiver


                                                                       A-2881-17T1
                                      4
exemption. Specifically, the Division found that R.K. "provided no medical

evidence whatsoever about her condition from March 2013 through November

2013."   In making that finding, the Division pointed out that the records

concerning R.K.'s hospice services began in November 2013. The Division also

stated that it had previously rejected the affidavit of Dr. Cook and R.K. had not

provided any other medical documentation concerning her condition before

November 2013.

      In addition, the Division rejected the ALJ's determination that the

healthcare services R.K. received from her private insurer and Medicare should

not be considered in determining whether R.K.'s daughter's care was the reason

that R.K. remained at home for the two-year caregiving period. The Division

held that the ALJ's interpretation was inconsistent with the plain language of the

regulations defining the caregiver exemption, which the Division construed to

require that the care be provided by the daughter.

                                       II.

      R.K. now appeals from the Division's January 16, 2018 final agency

determination imposing the transfer penalty. She makes three arguments: (1)

the transfer of R.K.'s interest in her home is exempt from any penalty under the

caregiver exemption; (2) the Division engaged in unlawful rule making when it


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                                        5
considered the care provided by the adult daycare center and the hospice

provider; and (3) the Division acted arbitrarily, capriciously, and unreasonably

by rejecting the facts found by the ALJ.

      Our role in reviewing an agency decision is limited. R.S. v. Div. of Med.

Assistance and Health Servs., 434 N.J. Super. 250, 260-61 (App. Div. 2014)

(citing Karins v. City of Atl. City, 152 N.J. 532, 540 (1998)). We "defer to the

specialized or technical expertise of the agency charged with administration of

a regulatory system." In re Virtua-W. Jersey Hosp. Voorhees for Certificate of

Need, 194 N.J. 413, 422 (2008) (citing In re Freshwater Wetlands Prot. Act

Rules, 180 N.J. 478, 488-89 (2004)). "[A]n appellate court ordinarily should

not disturb an administrative agency's determinations or findings unless there is

a clear showing that (1) the agency did not follow the law; (2) the decision was

arbitrary, capricious, or unreasonable; or (3) the decision was not supported by

substantial evidence." Ibid. (citing In re Herrmann, 192 N.J. 19, 28 (2007)).

      A presumption of validity attaches to the agency's decision. Brady v. Bd.

of Review, 152 N.J. 197, 210 (1997); In re Tax Credit Application of Pennrose

Properties, Inc., 346 N.J. Super. 479, 486 (App. Div. 2002).          The party

challenging the validity of the agency's decision has the burden of showing that

it was arbitrary, capricious, or unreasonable. J.B. v. N.J. State Parole Bd., 444


                                                                         A-2881-17T1
                                       6
N.J. Super. 115, 149 (App. Div. 2016) (quoting In re Arenas, 385 N.J. Super.

440, 443-44 (App. Div. 2006)). "Deference to an agency decision is particularly

appropriate where interpretation of the Agency's own regulation is in issue."

I.L. v. N.J. Dep't. of Human Servs., Div. of Med. Assistance and Health Servs.,

389 N.J. Super. 354, 364 (App. Div. 2006) (citing H.K. v. Div. of Med.

Assistance and Health Servs., 379 N.J. Super. 321, 327 (App. Div. 2005)).

Nevertheless, "an appellate court is 'in no way bound by the agency's

interpretation of a statute or its determination of a strictly legal issue.'" R.S. v.

Div. of Med. Assistance and Health Servs., 434 N.J. Super. 250, 261 (App. Div.

2014) (quoting Mayflower Sec. Co. v. Bureau of Sec. in Div. of Consumer

Affairs of Dep't. of Law & Pub. Safety, 64 N.J. 85, 93 (1973)).

      When an agency head rejects or modifies an ALJ's "findings of facts,

conclusions of law[,] or interpretations of agency policy in the decision . . ." the

agency head "shall state clearly the reasons for doing so." N.J.S.A. 52:14B -

10(c). Moreover, an agency is not required to accept an ALJ's findings when

those findings "are arbitrary, capricious[,] or unreasonable or are not supported

by sufficient, competent, and credible evidence in the record." Ibid.

Nevertheless, when rejecting or modifying an ALJ's findings of fact, "the agency

head must explain why the ALJ's decision was not supported by sufficient


                                                                             A-2881-17T1
                                         7
credible evidence or was otherwise arbitrary." Cavalieri v. Bd. of Trs. of Pub.

Employees Ret. Sys., 368 N.J. Super. 527, 534 (App. Div. 2004) (first citing

N.J.S.A. 52:14B-10(c); then citing S.D. v. Div. of Med. Assistance & Health

Servs., 349 N.J. Super. 480, 485 (App. Div. 2002)).

      Medicaid is a federally-created, state-implemented program that provides

"'medical assistance to the poor at the expense of the public.'"     Estate of

DeMartino v. Div. of Med. Assistance and Health Servs., 373 N.J. Super. 210,

217 (App. Div. 2004) (quoting Mistrick v. Div. of Med. Assistance and Health

Servs., 154 N.J. 158, 165 (1998)); see also 42 U.S.C. § 1396-1. Once a state

elects to participate and has been accepted into the Medicaid program, it must

comply with the Medicaid statutes and federal regulations. See Harris v. McRae,

448 U.S. 297, 301 (1980); United Hosps. Med. Ctr. v. State, 349 N.J. Super. 1,

4 (App. Div. 2002); see also 42 U.S.C. §§ 1396a, 1396b (2019).

      New Jersey participates in the federal Medicaid program pursuant to the

New Jersey Medical Assistance and Health Services Act, N.J.S.A. 30:4D-1 to -

19.5. Eligibility for Medicaid in New Jersey is governed by regulations adopted

in accordance with the authority granted by N.J.S.A. 30:4D-7 to the

Commissioner of the Department of Human Services (DHS). The Division is a

unit within DHS that administers the Medicaid program. N.J.S.A. 30:4D-5, -7;


                                                                       A-2881-17T1
                                      8
N.J.A.C. 10:49-1.1. Consequently, the Division is responsible for protecting the

interests of the New Jersey Medicaid program and its beneficiaries. N.J.A.C.

10:49-11.1(b).

      The Medicaid regulations deem an applicant ineligible for nursing home

benefits if the individual "has disposed of assets at less than fair market value at

any time during or after the [sixty]-month period immediately before . . . the

date the individual applies for Medicaid as an institutionalized individual [,]"

(the look-back period).     N.J.A.C. 10:71-4.10(a); see also N.J.A.C. 10:71-

4.10(b)(9)(ii). If it is determined that the applicant transferred an asset for less

than fair market value during the look-back period, the applicant will be subject

to a period of Medicaid ineligibility. N.J.S.A. 30:4D-3(i)(15)(b); N.J.A.C.

10:71-4.10(c)(4).

      There are limited exemptions to the transfer penalty rules. Once such

exemption is the caregiver exemption. N.J.A.C. 10:71-4.10(d).           Under that

exemption, an individual will not be subject to a penalty when the individual

transfers an "equity interest in a home which serves (or served immediately prior

to entry into institutional care) as the individual's principal place of residence "

and when "title to the home" is transferred to a daughter or son under certain

circumstances. Ibid. Those circumstances include that the son or daughter must


                                                                            A-2881-17T1
                                         9
have resided in the home for "at least two years immediately before" the

individual becomes institutionalized and the son or daughter must have

"provided care to such individual which permitted the individual to reside at

home rather than in an institution or facility." N.J.A.C. 10:71-4.10(d)(4). The

care provided by the son or daughter must exceed "normal personal support

activities" and the individual's physical or mental condition must be such that

he or she "require[d] special attention and care." N.J.A.C. 10:71-4.10(d)(4)(i).

      R.K. was admitted to the nursing home in April 2015. Consequently, to

qualify for the caregiver exemption, R.K. must demonstrate that from April 2013

to April 2015, her daughter provided a level of care that allowed R.K. to reside

at home rather than an institution or facility.

      The Division determined that there were no medical records

demonstrating that R.K. required a special level of care from March 2013 up to

November 2013. Specifically, the Division focused on the lack of any evidence

concerning R.K.'s medical condition during that period of time. Our review of

the records demonstrates that there was no evidence concerning R.K.'s medical

condition during that period of time. Consequently, the Division's determination

is supported by the record and we discern no basis for rejecting that

determination.


                                                                         A-2881-17T1
                                        10
      In her second argument, R.K. contends that the Division engaged in

unlawful rule making when it determined that the care provided by the adul t

daycare center and the hospice provider disqualified R.K. from the caregiver

exemption.   More specifically, the Division determined that the care that

allowed R.K. to remain in her home had to be provided by her daughter rather

than from other services.    We need not reach this issue.      The Division's

determination concerning the regulations was a second and alternative ground

for rejecting the ALJ's determination.     We have already accepted the first

ground, which was that there were no records establishing R.K.'s medical

condition between March 2013 and up to early November 2013.

      Finally, R.K. contends that the Division acted arbitrarily, capriciously,

and unreasonably in rejecting the ALJ's findings. As already noted, the Division

rejected the ALJ's determination because there were no medical records

establishing R.K.'s medical condition between March 2013 and up to November

2013. The Division has the authority to reject an ALJ's findings when they are

not supported by "sufficient, competent, and credible evidence in the record."

N.J.S.A. 52:14B-10(c).

      Affirmed.




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                                      11
