Husband entered the nursing home on July 21, 2010. His wife was well. The wife consulted an attorney and she reconfigured her assets in a conventional way and clearly permitted by North Dakota law. The wife also purchased a single-premium (lump sum) immediate annuity for $400,000. The annuity was required to pay the wife $2,734 per month over 13 years.
The State of North Dakota denied the husband’s application of Medicaid benefits. The State was of the opinion that the annuity was a countable resource. The couple filed a lawsuit in the federal district court and won. North Dakota, and eight other states, appealed to the Eighth Circuit.
One of the prime rules of Medicaid planning is that state law and regulations cannot be more restrictive than federal law in determining Medicaid eligibility.
North Dakota’s main argument was that the term “annuity” in the Medicaid law meant a ‘retirement annuity’ as defined by the Internal Revenue Code. The Eight Circuit rejected that argument by noting that Congress did incorporate the tax term “annuity” in one section of the Medicaid law, but not in the applicable section. The Congress acted intentionally and the courts will not rewrite the law. Other rules of statutory construction supported the trial court’s holding.
North Dakota also argued that it was its public policy to provide Medicaid funding “only for the truly needy.” The federal court found that as long as federal law was followed, the applicant was eligible for Medicaid.
Lesson. A married couple protected over $500,000 in assets because they consulted an elder law attorney. I can do the same thing for you depending upon your assets.
One might ask why do the states continue to enact laws, regulations and policies that are more restrictive than federal law? I submit there are two reasons. One, a Medicaid application is an adversarial process and the states want to win. Two, one statistic I saw in another case claimed that two-thirds of the persons in nursing homes today are receiving Medicaid benefits. The bottom-line here is that the states want to cut their Medicaid expenditures.
Source: Geston v. Anderson, 729 F.3d 1077 (8th Cir. 2013).