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Weinberg/Whelan Bill To Protect Residents From Assisted-Living Facility Scams Clears Health Committee

Measure Prompted By Assisted Living Concepts Inc. Move To Skirt State Court Ruling, Involuntarily Discharge Elderly Residents Who Have Depleted Their Life Savings

TRENTON – Legislation sponsored by Senators Loretta Weinberg (D-Bergen) and Jim Whelan (D-Atlantic) to close a loophole in state law that a company has used to scam residents out of their life savings today cleared the Senate Health, Human Services and Senior Citizens Committee.

“The business practices employed by this company are absolutely horrific,” said Senator Weinberg, Chair of the Committee. “This legislation will ensure that people who spend their life savings to make assisted living facilities their homes are not thrown out on the streets when a facility owner decides to get rid of its operating license rather than comply with state rules.”

The measure (S-2284) was prompted by a matter involving Assisted Living Concepts Inc., which promised prospective residents that once they had spent down their private resources on facility living expenses, they would be permitted to convert to Medicaid. An investigation launched by the Public Advocate’s Office in 2007 found that when the time came for residents to switch to Medicaid, the company – then operating eight assisted living facilities in southern New Jersey – moved to involuntarily discharge them.

The state filed a complaint in Superior Court to halt one discharge in particular, that of an 83-year-old resident, Betty Merklinger, who had spent down more than $300,000 in private funds at Chapin House in Rio Grande, Cape May County before becoming eligible for Medicaid, according to the Public Advocate’s Office. In April, the Appellate Division of the Superior Court upheld a Department of Health and Senior Services decision that the facility was in violation of its certificate of need application – part of the state licensing process – that said it would not discharge private pay residents who spend down their savings and become eligible for the Medicaid program. Rather than comply with the court order, the company in June announced its intent to surrender the licenses of four of seven existing facilities it owns in southern New Jersey, and essentially convert them to apartments. According to published reports, more than a dozen residents of the company’s facilities received notification that month that they would be evicted because they qualified for Medicaid.

The legislation would address this issue directly, by requiring an assisted living residence that opts to surrender its license after having promised not to discharge residents who become Medicaid-eligible to escrow sufficient funds to pay for the care of the residents in an alternate assisted living facility for as long as needed. This legislation is intended to ensure that Medicaid-eligible residents can reside in another State-licensed assisted living residence.

“While we cannot reverse the company’s decision, we can ensure that owners of assisted living facilities are not able to swindle elderly residents in the future,” said Senator Whelan. “Under this bill, any company that decides it wants to change the rules mid-game will be held financially responsible for the care of its residents in another facility for as long as they require it.”

The Wisconsin-based company operates seven facilities in southern New Jersey, and over 200 facilities in 20 states. The facilities in New Jersey include: Baker House in Vineland, Goldfinch House in Bridgeton and Maurice House in Millville, all in Cumberland County; Lindsay House in Pennsville, Salem County; Mey House in Egg Harbor Township, Atlantic County; Granville House in Burlington, Burlington County; and Post House in Glassboro, Gloucester County. Chapin House in Rio Grande, Cape May County, has since closed.

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