Lemmons v. Lake, Director of Oklahoma Department of Human Services

Juanita Lemmons (plaintiff) sold a farm and an investment account to her son in exchange for a promissory note worth $85,000, which was less than the assets’ full market value. The note (1) would be fully repaid during Lemmons’s expected lifetime; (2) provided for equal payments to Lemmons, without any balloon or deferred payments; and (3) could not be cancelled when Lemmons died. Further, although Lemmons could direct where the note would go after she died, the note’s terms prevented Lemmons from selling the note. Lemmons then entered a nursing home and applied for Medicaid. However, Lemmons was eligible for Medicaid only if her available resources did not include either the promissory note itself or the assets that she had transferred to obtain the note. The state’s Department of Human Services (department) (defendant) declared Lemmons ineligible for Medicaid, finding that the transferred farm and account should still be considered Lemmons’s resources because she had exchanged them for less than their full market value. Lemmons sued for a declaration that she was eligible for Medicaid. Lemmons argued that (1) the promissory note was not a Medicaid resource because it was nontransferable and (2) the transferred farm and investment account could not be considered part of her Medicaid resources because she had exchanged them for a promissory note that met the federal requirements for pre-Medicaid transfers. Both sides moved for summary judgment.