Timing of annuity purchase is critical for Medicaid compliance
United States Court of Appeals, Sixth Circuit issued their final rule October 25, 2013 on the Hughes v McCarthy case which involved the denial of Medicaid benefits for the spouse living in the nursing home, secondary to the purchase of an annuity for the community spouse. The state Medicaid department denied benefits arguing that 42 U.S.C. § 1396r-5 (f)(1)2 precluded transfer of assets because it exceeded the CSRA. The question then really became whether the use of a joint resource to purchase an annuity for the community spouse’s sole benefit, can be deemed an improper transfer under 42 U.S.C.§ 1396r-5(f)(1) even though 1396p(c)(2)(B)(i) allows a transfer of assets to another for the sole benefit of the individual’s spouse. Otherwise stated does 1396r-5 supersede 1396p( c)(2)(B)(i) which allows unlimited transfer to spouse or to another for the sole benefit of the spouse? The Court explained, in great detail, the answer was dependent on the timing of the purchase in relationship to these interlocking laws.
After the CSRA is determined and the amount of “at risk” or spend down money is likewise determined for the institutionalized spouse, the purchase of an annuity for the community spouse using the spend down money is a common practice. Purchasing the annuity prior to determination of eligibility is the key to success. This Court joined the Tenth Circuit’s holding: “To avoid rendering § 1396p(c)(2)(B)(i) superfluous, we agree that it and § 1396r-5(f)(1) must be read to operate at distinct temporal periods; one period during which unlimited spousal transfers are permitted, and one period during which transfers may not exceed the CSRA.” When assets are transferred “to the individual’s spouse or to another for the sole benefit of the individual’s spouse,” 42 U.S.C. § 1396(c)(2)(B)(i), before the institutionalized spouse is determined eligible for Medicaid coverage, “the unlimited transfer provision of §1396p(c)(2) controls and a transfer penalty under 1396r-5(f)(1) is improper.