Eight Circuit Court of Appeals Upholds Validity of Medicaid Annuity and Deals a Blow to Numerous States

The Eighth Circuit Court of Appeals (one of the highest courts in the U.S.) has re-affirmed that Medicaid annuities are still a very important and powerful way to obtain Medicaid coverage for nursing home residents.

Today, in the case of Geston v. Olson, the justices of the United States Court of Appeals for the Eight Circuit issued an opinion which dealt a blow to states whose laws and regulations governing Medicaid qualification are more restrictive than federal law.  As background, John Geston aplied for Medicaid benefits, and the North Dakota Department of Human Services denied his application on the basis that the total assets owned by Gaston and his wife exceded the eligibility limit.  The Gestons sued in the district court, arguing that the Department had wrongfully denied the application because it had improperly counted against Mr. Geston’s eligibility an annuity owed by his wife.  The district court ruled for the Gestons, holding that the North Dakota statute under which the annuity had been deemed “countable”, violates and is preempted by federal Medicaid law.  The State of Hawaii, Department of Human Services, the Kansas Department of Health and Environment, the Attorney General of the State of Maryland, the State of New Mexico Human Services Department, the Oklahoma Health Care Authority, the Rhode Island Executive Office of Health and Human Services, the State of Tennessee and the Connecticut Department of Social Services filed briefs in amici on behalf of the State of North Dakota.  The appeallate court found the arguments of the State of North Dakota and its friends to be wanting and uphled the decision of the district court.

Specifically, the Gastons are a married couple who purchased a $400,000 Medicaid annuity, with Mrs. Gaston as the annuitant, as a way of removing that amount of money from their “countable” assets for Medicaid qualification purposes.  Citing more restrictve state law, the State of North Dakota denied the Medicaid application.    The Geston sued the State of North Dakota in the federal circuit court and won a ruling granting thier Motion for Summary Judgment.  As a result, the husband, Mr. Gaston, (in the nursing home) was able immediately to qualify for Medicaid and the at-home wife, Mrs. Gaston was able to receive the benefit of the $400,000 without having to “spend down” all that money. Mrs. Gaston will receive monthly payments of $2,735 for 13 years.  Although such planning with Medicaid annuities is most beneficial for married couples, there are a number of scenarios where they can also be very helpful for single (unmarried/divorced/widowed) individuals as well.

Peter G. Milne is an attorney  practicing elder law, medicaid planning and qualification, tax law and estate law in Texas, California and the District of Columbia.  Mr. Milne advises and informs clients seeking Medicaid assistance of tools and techniques available under the law to protect and preserve thier assets.

A copy of this important decision can be found here: http://media.ca8.uscourts.gov/opndir/13/09/122224P.pdf

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