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Medicaid Annuity Report

November 2007

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James v. Richman Decision                                     Amended Annuity Provisions

States Differing Treatment of Annuities as Resources

Written By: Matthew J. Parker, Esq., CELA*

At the recent Northeast Elder Law Symposium (held on October 12, 2007 at the Southbridge Conference Center in Southbridge, Massachusetts), elder law attorneys representing the New England states along with the states of New York, New Jersey and Pennsylvania, shared their states’ application of the rules respecting annuities used for Medicaid qualification. Perhaps not surprisingly, the states have not uniformly applied the law arising out of the Deficit Reduction Act of 2005. In particular, the states have differing rules regarding the treatment of annuities as resources.

Medicaid Qualifying Annuities are those that serve to convert otherwise available assets into streams of income for either the spouse or institutionalized person. To meet the terms set forth under the DRA, these annuities must meet both the transfer rule and name the respective state as a remainder beneficiary for all Medicaid paid to the institutionalized person (subject to a preferred status given to a community spouse and minor and disabled children).

The transfer rule provides that these annuities must be irrevocable, non-assignable and actuarially sound. To be considered actuarially sound, the term of the annuity must be no greater than the life expectancy of the annuitant.   The nine states represented at the Symposium essentially enacted the transfer rule and state as beneficiary requirement as the DRA provided.

However, when it came to the treatment of the annuity as a resource, only New Jersey , Connecticut and Pennsylvania had policies or legislation that permitted those states to consider all or part of the annuity as an available resource for Medicaid qualification.

Both Pennsylvania and New Jersey have enacted rules that permit them to cap the size of spousal annuities. New Jersey considers any part of an annuity in excess of the spouse’s Community Spouse Resource allowance an available resource. Pennsylvania has issued guidance that a spousal annuity that provides spousal income in excess of the Community Spouse Minimum Monthly Maintenance Needs Allowance is an available resource.

All three of these states base their resource rule on the theory that these annuities could be sold to third parties, known as “factor” companies who are in the business of buying and selling lottery and personal injury annuities. This is a hotly contested issue in more than one Federal lawsuit currently pending in Pennsylvania (James v. Richman, 465 F.Supp. 2d 395 (M.D. Pa. 2006) and Weatherbee v. Richman, No 07-134 in the Federal Western District Court of Pennsylvania).   To date, no Federal Court has supported the resource theory.

It is interesting to note that of the nine (9) states represented, six (6) of them have no resource rule. The fact that only a few states have enacted such a rule casts serious doubt on its merit as a legitimate restriction. After all, such a resource rule would render meaningless the transfer rule and beneficiary requirement. That is, if the states could at any time consider the annuity a resource, what purpose would be served of enacting rules to prohibit the annuity’s treatment as a transfer or require the state to be named as a beneficiary?

The shared information at the Symposium gives practitioners an insight into the prevailing interpretations of the DRA. All indications are that the resource rule enacted by Pennsylvania is not one of the popular positions held by the states in the northeast. Federal Courts will soon determine if that rule is in conflict with Federal law.

For years, Pennsylvania Care Management (PCM) has been helping attorneys obtain the annuity products their clients need. PCM limits its services to Pennsylvania attorneys and their clients. PCM has been the lawyer’s trusted source for Pennsylvania compliant annuities throughout the Hurly era. Now, in the DRA era, it remains the premier source for fast, efficient, competent, trustworthy, Pennsylvania specific annuity services.

For more detailed information on how to use DRA annuities to benefit your clients, Pennsylvania attorneys may consult the PCM website, www.paannuity.com or contact PCM at 570-326-1890 or webmail@paannuity.com.

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Attorney Parker Presented Session on Annuities at PBI’s Elder Law Update

Certified Elder Law Attorney Matt Parker presented a session on “Using Annuities as a Planning Opportunity” at PBI’s Elder Law Update in Philadelphia on Tuesday, November 13, 2007 at 10:00 AM .

Attorney Parker’s session focused on ways in which Pennsylvania Elder Law Attorneys can use Medicaid Qualifying Annuities effectively in their practices. He addressed some ways in which annuities can be used to maximize a community spouse’s monthly income; how annuities can be used as a modified half a loaf technique and ways in which an annuity can immediately qualify an institutionalized individual for Medicaid. His discussion also touched on current litigation regarding annuities in Pennsylvania and the status of his case, James v. Richman.

The similar session will be presented by Certified Elder Law Attorney Jeff Marshall on November 28, 2007 via satellite broadcast across Pennsylvania . For more information or to register for the Elder Law Update, please visit PBI’s website at www.pbi.org.

*Attorney Marshall is Certified as an Elder Law Attorney by the National Elder Law Foundation under authority of the Pennsylvania Supreme Court. He is Managing Attorney of the Law Firm of Marshall, Parker and Associates with offices in Williamsport, Jersey Shore, Wilkes-Barre, and Scranton, PA. He can be contacted at webmail@paelderlaw.com.

*Attorney Parker is Certified as an Elder Law Attorney by the National Elder Law Foundation under authority of the Pennsylvania Supreme Court.

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PCM

Pennsylvania’s trusted source for Medicaid Annuities

49 East Fourth Street , Williamsport , PA 17701

570-326-1890

www.paannuity.com

webmail@paannuity.com

______________________________________________________________________

If you would like to be added or removed from our mailing list, please e-mail PCM at webmail@paannuity.com.

_____________________________________________________________

PCM

Pennsylvania’s trusted source for Medicaid Annuities

49 East Fourth Street, Williamsport, PA 17701

570-326-1890

www.paannuity.com

webmail@paannuity.com

_____________________________________________________________

If you would like to be added or removed from our mailing list, please e-mail PCM at webmail@paannuity.com.

_____________________________________________________________

For further information, please contact:

Matthew J. Parker, Esq., CELA*    mparker@paannuity.com

Patti Jo Turner, BSEd          pturner@paannuity.com

PCM

49 East Fourth Street
Williamsport, PA 17701
570-326-1890

webmail@paannuity.com

* Certified as an Elder Law Attorney by the National Elder Law Foundation.