Federal Judge In New Jersey Appears Poised To Enjoin The State From Denying Medicaid Eligibility To An Applicant With An Annuity

In June 2009, plaintiff, Daisy Jeanne Prall, applied for nursing home Medicaid benefits with the Ocean County Board of Social Services. To be eligible for Medicaid, plaintiff and her spouse, Christopher Prall, cannot own resources which exceed $111,560; $109,560 is the community spouse resource allowance and $2,000 is the institutionalized spouse resource allowance. Although the resources of the applicant and her spouse exceeded the resource limit at the time of application, in August 2009 plaintiff’s spouse purchased a single premium immediate annuity for $80,000 to be paid back to him over 180 months. Plaintiff claimed that her spouse’s annuity was not countable under the federal Deficit Reduction Act of 2005, P.L. 109-171 (“DRA”), and that, as a result, she was eligible for Medicaid. No action was taken by the County on plaintiff’s Medicaid application.

Soon after the annuity was purchased, in August 2009 plaintiff filed a class action lawsuit against the state Medicaid agency, among others, in the Federal District Court for the District of New Jersey pursuant to 42 U.S.C. § 1983 on behalf of herself and a class of individuals similarly situated to her; i.e., those applicants for Medicaid with spouses who purchased or in the future will purchase an immediate, irrevocable, non-transferrable, actuarially-sound annuity that names the state of New Jersey as first remainder beneficiary in compliance with the DRA.

Thereafter, plaintiff filed a motion asking the federal court to immediately issue a preliminary injunction against defendants, enjoining defendants from denying Medicaid benefits to Daisy Jeanne Prall because Christopher Prall purchased a commercial annuity. Defendants opposed the plaintiff’s motion, and submitted a cross-motion to dismiss based largely on the premise that plaintiff’s claim is not ripe as New Jersey has yet to deny or approve plaintiff’s Medicaid application.

Oral argument on the parties’ pending motions was held before United States District Judge Joel A. Pisano on October 15, 2009. The next day, Judge Pisano entered an Order which recognized the likelihood of plaintiff’s success on the merits of the case, but reserved decision on the preliminary injunction application until New Jersey made a final decision either approving or denying Prall’s Medicaid application. Judge Pisano directed New Jersey to make a final decision on plaintiff’s Medicaid application within twenty days, and to advise the Court of the decision so the Court could then act accordingly.

Based upon the Court’s finding that plaintiff would likely be successful on the merits, I believe that Judge Pisano is poised to enjoin New Jersey from denying Medicaid eligibility to Daisy Jeanne Prall if the state Medicaid agency denies eligibility based on excess resources due to Christopher Prall’s annuity. If I’m right, New Jersey’s long-standing regulations outlawing the ownership of annuities by Medicaid applicants and their spouses will immediately change.