Medicaid Updates

Promissory Notes Cases

The Deficit Reduction Act allows Medicaid applicants to transfer assets in exchange for a properly structured promissory note without incurring a transfer penalty.  This law has been successfully litigated by a number of Medicaid applicants in cases throughout the United States although it had not been litigated in Oklahoma until 2009. 

On September 9, 2008, in a case known as McAlary, an Oklahoma District Court also held in favor of Medicaid applicants allowing them to transfer assets in exchange for a properly structured promissory note.  The Oklahoma state Medicaid agencies appealed. 

On December 31, 2009, an Oklahoma Court of Civil Appeals reversed the decision in McAlary on grounds not related to the promissory note but acknowledging the Act allowing transfer of assets in exchange for a promissory note.  The Medicaid applicants appealed for clarification.  On March 29, 2010, the Oklahoma Supreme Court refused to review the McAlary case and neither affirmed nor reversed the previous decision.  The Court also did not address the promissory note law.  Medicaid applicants further appealed.  On October 4, 2010, the United State Supreme Court refused to review the McAlary case and neither affirmed nor reversed the previous decision.  Again, the Court did not address the promissory note law.

After the Oklahoma Supreme Court refused to review the McAlary case, the Medicaid applicant in a case known as Harper filed a Federal District Court action to have the federal courts review the practices of the Oklahoma state Medicaid agencies.  A scheduling conference was held in Federal District Court on October 7, 2010.  During the scheduling conference, the Court required all dispositive motions to be filed by December 1, 2010 with all discovery being completed by January 1, 2011.  The Court has set the Harper case for trial in February 2011.