Ohio Violated Federal Law In Counting Annuity Purchased By Community Spouse

Ohio’s First District Court of Appeals has joined other state and federal courts across the country in ruling recently that Ohio improperly imposed a penalty period on a Medicaid applicant whose wife purchased an annuity during the look-back period. The Court held that Ohio’s regulations regarding the purchase of annuities are improperly restrictive, and are preempted by more liberal federal law.

In Rorick v. Ohio Department of Job and Family Services, (Ohio Ct. App., 1st Dist., No. C–090627, November 19, 2010), the applicant, Paul Rorick (“Paul”), was admitted to a nursing home in May 2008. his wife, Betty Rorick (“Betty”), was not institutionalized and remained living in the community. At the time of his institutionalization, the couple’s combined resources were approximately $74,224.61. In July 2008, Betty purchased a single premium immediate annuity for $14,562.55 that provided a monthly payment to her of $136.22 for 10 years. Paul was the primary beneficiary and the State of Ohio was the secondary beneficiary. In August 2008, Paul applied for nursing-home Medicaid benefits.

The local Medicaid agency determined that Betty’s annuity purchase, paid for after the date of Paul’s institutionalization, constituted an “improper transfer of assets” made by the couple to reach the Medicaid resource eligibility limit. As a result, the local Medicaid agency suspended Medicaid payments for Paul’s nursing-home care for a period of two and one-half months.

Paul appealed. After a hearing, a hearings officer denied Paul’s appeal. The Bureau of State Hearings later affirmed the hearings officer’s decision. Paul appealed State’s decision to the Hamilton County Court of Common Pleas. The trial court ruled in Paul’s favor, holding that it was a violation of the Medicaid Catastrophic Coverage Act, federal Medicaid law and the Supremacy Clause in the U.S. Constitution for the annuity purchase to be treated as an improper transfer.

The State of Ohio then filed an appeal. Ohio’s Court of Appeals affirmed, holding that Ohio cannot use a Medicaid eligibility methodology based on resources and income in a manner that is more restrictive than the resource standards of the Supplemental Security Income program.

The case is attached here – Rorick v. Ohio Department of Job and Family Services