Opinion ID: 4215122
Heading Depth: 2
Heading Rank: 1

Heading: Background on the Medicaid Program

Text: For context, we begin with some background on the Medicaid program. Medicaid “is a cooperative endeavor in which the Federal Government provides financial assistance to participating States to aid them in furnishing health care to needy persons.” Harris v. McRae, 448 US 297, 308, 100 S Ct 2671, 65 L Ed 2d 784 (1980). Although the Medicaid program is partly financed by the federal government, each state administers its own program. 42 CFR § 430.0. To do so, each state creates its own “state plan.” See 42 USC § 1396a (setting out requirements for state plans); 42 CFR § 430.10 1 The Court of Appeals declined to exercise its discretion under ORS 19.415(3) to determine the facts de novo in this equitable action. Larisa’s Home Care, LLC v. Nichols-Shields, 277 Or App 811, 813 n 2, 372 P3d 595 (2016). 118 Larisa’s Home Care, LLC v. Nichols-Shields (describing state plans). Oregon’s state plan is administered by the Department of Human Services (department). See ORS 409.010(2)(b) (department is responsible for programs and services relating to elderly and persons with disabilities); ORS 410.070 (department’s duties regarding same); ORS 411.060 (authority to adopt and enforce rules).2 The department requires an application to deter- mine a person’s eligibility for Medicaid benefits. See OAR 461-115-0700 (requiring that “all eligibility factors must be verified at initial application”). As relevant here, a person applying for Medicaid benefits must disclose any asset transfers made within the past 60 months. That disclosure permits the department to determine whether those transfers disqualify the person from receiving benefits for a period of time. If the applicant has made transfers within the 60 months preceding the application for benefits, and if those transfers were “in whole or in part for the purpose of establishing or maintaining eligibility for benefits,” then the person will be disqualified from receiving benefits for a period of time. OAR 461-140-0210(2), (5). The length of the disqualification period depends on the amount transferred: the greater the amount, the more months the person will have to wait to receive benefits. See OAR 461-140-0296(2) (as applicable here, disqualification period in months is determined by dividing amount transferred by $5,360). B. Plaintiff’s Services to Prichard at Medicaid Rates Plaintiff owns two adult foster homes for the elderly. Plaintiff had contracted with the department to provide services in a home-like setting to patients who qualified for Medicaid. For those patients, the rates charged would be those set by the department. Prichard, an elderly woman who suffered from cog- nitive difficulties and dementia, became one of plaintiff’s patients in June 2007. Prichard then resided and received 2 Except as otherwise noted, all references to sections of the Oregon Revised Statutes are to current versions of those statutes, which have not been modified since 2007 in any way dispositive as to the issues presented here. By contrast, and except as otherwise noted, all references to rules for Oregon’s state plan are to the versions of the Oregon Administrative Rules in effect on April 17, 2007, the date that Prichard applied for Medicaid. Cite as 362 Or 115 (2017) 119 care in one of plaintiff’s adult foster homes until her death in November 2008. Because Prichard had been approved to receive Medicaid benefits, plaintiff charged Prichard the rate for Medicaid-qualified patients: approximately $2,000 per month, with approximately $1,200 of that being paid by the department. Plaintiff’s Medicaid rates were substantially below the rates paid by plaintiff’s non-Medicaid patients, or “private pay” patients. For private pay patients, the rate varied depending on the level of care. During Prichard’s stay, plaintiff charged private pay patients $4,000 per month for Level 2 care, and for more intensive Level 3 care, plaintiff charged private pay patients $5,700 per month. Prichard received Level 2 and Level 3 care during her stay in plaintiff’s facility. If Prichard had not been approved for Medicaid benefits and had instead been a private pay patient, she would have paid plaintiff over $48,000 more for her care. C. Prichard’s Medicaid Application Prichard’s application for Medicaid benefits, as with her other affairs, was handled by her son, Richard Gardner. Prichard had given Gardner a power of attorney to act on her behalf back in 2004. Exercising his authority to apply for Medicaid benefits on behalf of Prichard, Gardner completed the application form on April 17, 2007. Gardner affirmatively represented on Prichard’s application that she had not given away or transferred any cash or other property to anyone in the preceding 60 months. As a result, the department approved Prichard for Medicaid benefits. Prichard’s affairs were not as represented on the form, however. Her application form was false in its representation that there had been no transfers in the past 60 months. In actuality, Gardner had for years been transferring Prichard’s assets, mostly to himself (or using those funds for his personal benefit). In the 60 months before Prichard’s application for Medicaid, Gardner had transferred away over $150,000 of Prichard’s assets. Gardner’s misconduct was discovered by another of Prichard’s children: defendant Karen Nichols-Shields, who was appointed the personal representative for Prichard’s 120 Larisa’s Home Care, LLC v. Nichols-Shields estate. In 2009, defendant contacted the police and reported her brother for theft. Ultimately, Gardner pleaded guilty to three counts of criminal mistreatment in the first degree.3 Gardner’s sentence included an obligation to pay a compensatory fine to Prichard’s estate in the amount of $195,710.11. Gardner has complied with that obligation and paid the estate. Thus, the amount that Gardner took from Prichard was restored to Prichard’s estate. D. Plaintiff’s Action Against Prichard’s Estate After defendant, in her capacity as personal representative, denied plaintiff Larisa’s Home Care, LLC’s claim against Prichard’s estate, plaintiff filed this action.4 In its complaint, plaintiff sought equitable relief for unjust enrichment. Essentially, plaintiff asserted that Prichard had been qualified for Medicaid through fraud and that Prichard should have been charged as a private pay patient. It sought restitution from the estate for the difference between the amount Prichard would have paid as a private pay patient and the amount that plaintiff actually received for Prichard’s care at plaintiff’s adult foster home. After a bench trial, the trial court ruled in favor of plaintiff, concluding that there was unjust enrichment. The court explained: “[A]s a whole, there is no reason why, as we look at this case as a[n] equitable one and fundamental fairness, that because of that fraud, the fraud on the applications, the 3 Criminal mistreatment in the first degree is defined in ORS 163.205. One of the ways in which a person commits the crime is when, “in violation of a legal duty to provide care for a dependent person or elderly person,” or having undertaken that care, the person “intentionally or knowingly”: “Hides the dependent person’s or elderly person’s money or property or takes the money or property for, or appropriates the money or property to, any use or purpose not in the due and lawful execution of the person’s responsibility[.]” ORS 163.205(1)(b)(D). 4 The Court of Appeals correctly noted that an action against Prichard’s estate is properly brought against its personal representative, defendant. Larisa’s Home Care, LLC v. Nichols-Shields, 277 Or App 811, 814 n 4, 372 P3d 595 (2016); see ORS 115.305 (“All causes of action or suit, by one person against another, survive    against the personal representative of the latter.”). Cite as 362 Or 115 (2017) 121 fraud on all the paperwork that was presented, that the estate of Ms. Prichard should not now be basically paying [the] debt. “[The estate] cannot now benefit from all that has come before to this particular point. It would be unfair for the plaintiff to be left holding the bag    and for the estate to now benefit from the fraud.” The court also concluded that Medicaid law did not prevent plaintiff’s recovery. Accordingly, the court entered judgment in favor of plaintiff for $48,477. Defendant appealed to the Court of Appeals. She presented two arguments, broadly speaking: (1) there was no unjust enrichment; and (2) regardless, Medicaid-related law (statutes, rules, and the terms of plaintiff’s contract with the department) prohibited plaintiff from recovering from defendant. Without reaching the Medicaid issues, the Court of Appeals agreed with defendant that there was no unjust enrichment. Larisa’s Home Care, LLC v. NicholsShields, 277 Or App 811, 372 P3d 595 (2016). The Court of Appeals began with its precedent con- cerning the elements of a “quasi-contractual claim of unjust enrichment.” Id. at 815 (internal quotation marks and citation omitted). The elements that the Court of Appeals has long used are “ ‘(1) a benefit conferred, (2) awareness by the recipient that she has received the benefit, and (3) it would be unjust to allow the recipient to retain the benefit without requiring her to pay for it.’ ” Id. The court quoted its decision in Cron v. Zimmer, 255 Or App 114, 130, 296 P3d 567 (2013), which in turn had restated the elements that the court first articulated in Jaqua v. Nike, Inc., 125 Or App 294, 298, 865 P2d 442 (1993). The Court of Appeals also relied on Jaqua for the legal standard used in determining when it is “unjust” for the defendant to retain the benefit. Larisa’s Home Care, LLC, 277 Or App at 816. The court explained that its precedent required plaintiff to prove at least one of the following circumstances: “ ‘(1) the plaintiff had a reasonable expectation of payment; (2) the defendant should reasonably have expected to pay; 122 Larisa’s Home Care, LLC v. Nichols-Shields or (3) society’s reasonable expectations of security of person and property would be defeated by non-payment.’ ” Id. (quoting Jaqua, 125 Or App at 298). None of those three forms of unjust enrichment, the court concluded, were proved in this case. As to the first form of unjust enrichment, the court determined that plaintiff did not have a reasonable expectation of payment. Prichard had been qualified for Medicaid, and plaintiff thus was contractually obligated to charge her only the Medicaid rate. Plaintiff’s reasonable expectation was to receive the Medicaid rate payment and nothing more. Larisa’s Home Care, LLC, 277 Or App at 816-18. As for defendant’s expectation to pay, the second form, the Court of Appeals held that there was no evidence in the record that would permit a finding that Prichard reasonably should have expected to pay the private pay rate. Id. at 818. Finally, as to the third form of unjust enrichment, the Court of Appeals held that societal expectations would not be defeated by the estate’s nonpayment. The court based that holding on two different conclusions. First, the court derived from Medicaid law certain underlying policies that, it concluded, reflected a societal expectation that Medicaid providers would not seek to recover funds beyond what Medicaid allowed. Id. at 818-19 (for example, ORS 443.739(16), a “bill of rights” for residents of adult foster homes, states that a provider “may not solicit, accept or receive money or property from a resident other than the amount agreed to for services”). Second, the court concluded that the wrongdoer was Gardner, not Prichard, who was blameless, and that therefore her estate should not be required to pay for Gardner’s wrongdoing. Id. at 819-20. Having concluded that plaintiff had failed to adduce sufficient evidence that Prichard’s estate had been unjustly enriched in any of the three ways reflected in its case law, the Court of Appeals reversed the judgment of the trial court. Id. at 820. Plaintiff then sought review in this court.