Annuity Ownership OK for Medicaid Qualification - PA Court Ruling

Category: Elder Law,

My blogging has been sporadic of late, but I am now back in the blog business.

A great ruling for seniors holding annuities. Usually, an annuity is a contract to pay a certain amount a month for a period of time (ie: $100 a month for life"). Many Medicaid agencies, including those in New Jersey, took the approach that the income right (the "$100 a month") could be sold (similar to the way a personal injury settlement could be sold), so therefore the annuity was treated as an accessible resource, even though (1) under the contract, the person only had the right to a monthly income, not to liquidate the asset and take it back, and (2) the annuity had not in fact been sold on the theorectical open market. The result, a person who in fact had no access to additional assets (just the income from those assets) was denied access to Medicaid because of the theoretical value of those assets. The result is even more troubling because seniors are the target market for annuities, which means that these same seniors end up being punished for making this type of investment, and would have not way of righting the situation.

The Federal Court in Pennsylvania noticed in the inequity in this law, and ruled that such an annuity could not be counted as an asset. The summary below is from elderlawanswers.com.

"A U.S. District Court finds that an actuarially sound annuity is not an
available resource under federal Medicaid law even if it is marketable, and that
Pennsylvania's provisions to the contrary contradict federal law. James v.
Richman (U.S. Dist. Ct., M.D. of Penn., No. 3:05-2647, March 20, 2006).
Robert James entered a nursing home and applied for Medicaid benefits. Mr.
James's wife, Josephine, purchased an actuarially sound annuity in order to
reduce the couple's assets to the required level. The state denied Mr. James's
application, claiming that the annuity was an available resource. Under state
law, immediate annuities were presumed to be marketable and therefore available
resources.

Mr. James asked the court for a restraining order preventing the
state from denying him Medicaid benefits. In support of its position that the
annuity was marketable, the state submitted an affidavit from a potential
purchaser of the annuity.

The U.S. District Court for the Middle District of
Pennsylvania grants the restraining order, holding that the state law
contradicts federal law, which excludes irrevocable, actuarially sound annuities
from resource determinations. Because the annuity is permitted under federal
law, it is not an available resource and Mr. James cannot be denied benefits.

Mr. James was represented by ElderLawAnswers member attorney Matthew J.
Parker of the Elder Law Firm of Marshall and Associates. "