Federal Agency Takes Position in Favor of Annuities

In a case pending in the Second Circuit Court of Appeals (one step removed from the United States Supreme Court), the U.S. Department of Health and Human Services filed an Amicus Brief in Lopes v. Dep’t of Social Services. This is a case from Connecticut where a husband was sick and needed nursing home case. To avoid impoverishment, his wife (known under federal law as a “Community Spouse”) purchased a Medicaid compliant annuity. The State, however, challenged the use of the annuity. To understand the State’s challenge, you really have to understand how Medicaid treats money and other resources. The program always treats money as either income or as a resource, but never as both. Because the Medicaid program exempts income paid to a Community Spouse, if the annuity payments were treated as income, then her husband’s would get Medicaid and his nursing home bills would be paid. On the other hand, if the annuity was treated as a resource, then they had too much money to quality and would be over the resource limits.

The State of Connecticut took the position that the annuity was a resource because it could be sold on the secondary market. It found a company that was willing to purchase the income stream flowing from the annuity. The federal government weighed in on the side of the Community Spouse, indicating that the SSI rules would not require that the wife breach her contract (which said it could not be sold or assigned) and would treat the annuity as income. We are now awaiting word from the Court so, as Paul Harvey would say, we can tell you the rest of this story.

Click here to read the Brief filed by the Department of Health and Human Services.
Click here for the 2010 District Court Decision

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