Applying for Medicaid Gives State Access to Bank Records

In order to combat fraud and abuse, Congress passed a law in 2008 (referred to in this article as the “Asset Verification Statute”), which law just now is being implemented in Maryland, directing States to impose an electronic asset verification process to facilitate asset disclosure relating to Medicaid applications for long term care.

When Disclosure is allowed.  In most instances, under Federal law, banks may not disclose one’s financial records to the government except where there is a valid law enforcement or judicial subpoena or summons, or a search warrant.  However, that same federal law allows the account holders themselves to authorize such disclosure through a written instrument.

The Asset Verification Statute directs that States that provide Medicaid benefits to aged, blind or disabled persons to cover the costs of long term care in a nursing home, or care in assisted living or at home, require the applicants for such benefit programs to provide written authorization to the State to obtain documentation from banks and other financial institutions for accounts owned by the applicant or by any other person (such as the applicant’s spouse) whose assets are considered when one applies for such benefits.

Limited Purpose for Disclosure.  The Asset Verification Statute specifies that the State’s acquisition of such financial information is to be used for the purpose of determining or redetermining eligibility for the benefit programs.  The authorization under the Asset Verification Statute ceases once the State issues a final notice that the applicant is not eligible for benefits, upon the cessation of benefits for such individual, or upon the individual’s written notice that the individual is withdrawing  his or her authorization.

Impact on Spouses.  Not specifically addressed in the Asset Verification Statute is when the authorization will cease with respect to a third party, such as the Medicaid applicant’s spouse, when such spouse’s financial records are no longer relevant to the Medicaid recipient’s recertification for benefits.  In Maryland, once a married person qualifies for Medicaid benefits for long term care, the assets and income of that person’s spouse, while relevant to the initial Medicaid eligibility determination, are ignored for future Medication redetermination applications.

Banks Must Notify Customer.  Other Federal statutes underpinning the Asset Verification Statute empower the owner of financial accounts to obtain from the financial institution a record of the disclosures made to the government pursuant to the Asset Verification Statute or pursuant to other statutory authorization.

State Access Without Customer Consent.  Notably,  while the Asset Verification Statute requires that the State obtain written authorization from the account holder before the State may obtain information and documentation from a financial institution, it does not require that the State provide a copy of such written authorization to the financial institutions from which the State will obtain information and records.  That being the case, States will, under the Asset Verification Statute, obtain through electronic means financial information without having to provide the financial institution with the customer’s authorization for the release of such information.

Implementation in Maryland.  Already in at least one county in Maryland, the local Department of Social Services which processes Medicaid recertification applications no longer will be seeking to have Medicaid recipients submit copies of bank statements when they re-apply on an annual basis for the continuation of Medicaid benefits for long term care.  Instead, the department of social services simply will obtain an electronic record of the Medicaid recipient’s bank account activity for the year.  In a recent discussion with other Medicaid lawyers, it is not clear whether this new practice is supported by the requisite written authorization of the Medicaid recipient.

Maryland Authorization Form Insufficient.  Indeed, the local Departments of Social Services in Maryland still are using a Medicaid recertification application that was last revised in 2011, which revision, while it came after the passage of the 2008 Asset Verification Statute, nevertheless occurred before the State of Maryland began its present implementation of the 2008 law.  Maryland’s Medicaid recertification application states, immediately prior to the signature block to be signed by the Medicaid recipient and the recipient’s spouse, that the person signing the document “authorize[s] any person, partnership, corporation, association, or governmental agency which knows the facts relevant to determining my eligibility [for Medicaid benefits] to release that information to the Department.” (I will refer below to this language as the “Authorizing Verbiage”).  While arguably a financial institution that is a corporation or association and that has the records of the Medicaid recipient’s financial accounts “knows . . . facts relevant to determining . . . eligibility,” it appears that the Authorizing Verbiage falls far short of the language required by the statutes underlying the Asset Verification Statute.

Under Federal law, any authorization that would allow disclosure of one’s financial information must authorize disclosure for a period of three months or less, must state that the customer may revoke such authorization any time before the disclosure is made, must identify the financial records which are authorized to be disclosed, must specify the purposes for which the disclosed information will be used and the government agency who will receive such information, and must set forth the customer’s statutory right to obtain a record from the financial institution of the instances of disclosure and the recipient of such disclosures.  Clearly, the Authorizing Verbiage found on Maryland’s long term care Medicaid recertification application does not meet these standards.

William M. Gatesman continues the evaluate the implications of Maryland’s implementation of the Asset Verification Statute and its impact on clients, and Mr. Gatesman takes into account Maryland’s new practice of obtaining asset information when representing clients who are applying for Medicaid benefits.

42 U.S. Code § 1396w
12 U.S. Code §§ 3402, 3403, and 3404