Signing an Admissions Agreement on Behalf of Another (Part 3)
In my blog post last week, I was discussing the terms “responsible party” and “personal guarantor” which are found in most nursing home and assisted living facility admissions agreements. They do not mean the same thing and we must always look to the definitions set out in the specific agreement being analyzed.
In general, however, a responsible party is responsible to make payments to the facility out of the resident’s funds and may include other obligations as may be detailed in the agreement. To be a personal guarantor is to agree to make payments out of the guarantor’s own personal assets if the resident does not have sufficient funds. New Jersey law prohibits nursing homes from requiring that a family member or friend personally guarantee payment. That law, however, does not apply to assisted living facilities.
If a family member or friend agrees to be a responsible party, one might ask why there is even the need for a personal guarantor, especially if, as is typical in the case of most assisted living facilities, a prospective resident must show proof of funds to cover 2 to 3 years of the cost of care. Additionally, almost all nursing homes and assisted living facilities now require from applicants a completed financial worksheet detailing income and assets as well as recent statements confirming these numbers.
The reason stems from the increasingly difficult Medicaid application process and the risk to the facilities that there may be periods of time – because of Medicaid denials or penalties – during which Medicaid won’t cover and the resident no longer has funds to cover the cost.
Enter the personal guarantor and the responsible party. These roles – and how they are defined – will play a part in who is ultimately responsible to cover the cost that the State decides it won’t cover thru Medicaid. While the responsible party plays an especially key role in the nursing home agreement because New Jersey law prohibits requiring a personal guarantor, both terms also appear in most assisted living agreements.
More on their importance and meaning next week.