After John Lopes was admitted to a nursing home, his wife, Amelia, purchased a irrevocable, nontransferable, single premium annuity for $166,878.99 from The Hartford Life Insurance Company. The annuity contract provided for monthly payments of $2,340.83 over a period of approximately six years. In a letter, the annuity company confirmed that no part of the annuity was assignable, including the periodic payments. After the purchase, the remaining assets owned by the couple were below Mrs. Lopes’ community spouse resource allowance, the amount of the couple’s assets she was permitted to retain under the Medicaid rules.

Mr. Lopes applied for Medicaid. The state identified a potential buyer of the annuity’s income stream and directed Mrs. Lopes to attempt to sell the annuity. Mrs. Lopes refused, claiming that she was not legally obligated to sell the annuity income stream. The State of Connecticut denied Medicaid benefits to Mr. Lopes, claiming that the income stream from the annuity was an available asset which could be sold on the secondary market.

Mr. Lopes filed a complaint in the United States District Court for the District of Connecticut seeking an injunction as well as damages. Thereafter, Mr. Lopes filed a motion for summary judgment, and the State of Connecticut filed a cross-motion for the same relief.

The federal district court granted Mr. Lopes’ motion for summary judgment, and denied the State’s cross-motion. The court held that the annuity company did not permit Mrs. Lopes to assign the income stream from her annuity, so it could not be characterized as an asset. The State of Connecticut was directed to approve Mr. Lopes’ Medicaid application. (I blogged about the federal district court’s decision in the Lopes case in 2010 here.)

The State of Connecticut appealed. Today, the United States Court of Appeals for the Second Circuit affirmed the district court, holding that the payment stream from a non-assignable annuity is not a resource for purposes of determining Medicaid eligibility. The court noted that its decision was influenced by the views, which it solicited, of the U.S. Department of Health and Human Services (HHS).  The HHS urged the Second Circuit to accept Mrs. Lopes’ position, which it said was consistent with Medicaid’s primary purposes of providing health care to the indigent and protecting community spouses from impoverishment.

The case is annexed here – Lopes v. Department of Social Services

Brief submitted by the U.S. Department of Health and Human Services (HHS) which was solicited by the Court. HHS urged the Second Circuit to accept Mrs. Lopes’ position and hold that the payment stream from a non-assignable annuity is not a resource for purposes of determining Medicaid eligibility. The agency argued that Mrs. Lopes’ position was consistent with Medicaid’s primary purposes of providing health care to the indigent and protecting community spouses from impoverishment – Amicus Brief By The US Department of Health and Human Services