Recent Decision By Director Of Medicaid Shows Continuing Hostility Toward Annuities As A Medicaid Planning Tool

As I had reported in my March 4, 2009 post, found here, a New Jersey administrative law judge (“ALJ”) in the E.F. v. DMAHS case had held that an annuity purchased by a community spouse with retirement assets from the community spouse’s IRA was exempt in determining the institutional spouse’s nursing home Medicaid eligibility. I participated in the E.F. v. DMAHS case as legal counsel for D.F., who is the community spouse and the executor of the estate of his now-deceased spouse, petitioner E.F. The Director of the New Jersey Division of Medical Assistance and Health Services (“DMAHS”) has now reversed and remanded the ALJ decision.

The E.F. Final Agency Decision, reprinted here, relies on the Appellate Division decision of N.M. v. DMAHS, 405 N.J. Super. 353 (App. Div. 2009) for the proposition that “a state may now consider the value of an annuity purchased for the sole benefit of the community spouse in determining whether the institutionalized spouse satisfies the resource limits for Medicaid eligibility.” Based on that pronouncement, the Director held that the E.F. annuity “must” be considered in determining eligibility. The Director noted that one of the companies engaged in the business of purchasing annuities had stated that it “may” purchase the annuity payments; however, Petitioner had stated that the annuity company might object to a change of ownership of the annuity, and that such objection may preclude the potential purchasing company from completing the transaction. Because the Director found that the record did not indicate whether the annuity company had in fact objected to the change of ownership, and because he found that Petitioner was required to take all steps necessary to liquidate an otherwise available resource, the Director found this to be a material issue of fact necessitating remand of the case to the Office of Administrative law “for further findings regarding the availability and value of the annuity.”

This case evidences DMAHS’s hostility toward annuities as a Medicaid planning tool, and further illustrates the division of authority on the issue of annuities and Medicaid planning among courts in this state and federal and state courts in this federal judicial circuit.