District Court Affirms Medicaid Compliant Annuity as Irrevocable

Krause Financial

Disclaimer: With Medicaid, VA, and insurance regulations frequently changing, past blog posts may not be presently accurate or relevant. Please contact our office for information on current planning strategies, tips, and how-to's.

In a recent case stemming from New Jersey, the Division of Medical Assistance and Health Services (DMAHS), through its Director, affirmed the decision of an administrative law judge determining that a Medicaid Compliant Annuity (MCA) was an available resource. This became known in the elder law community as the “MM” decision.

The decision was based on the case-specific factual background in conjunction with language in the annuity contract indicating only the president, secretary, or treasurer of the insurance company were permitted to make a change to the contract or waive any of its rights or requirements. DMAHS concluded that this rendered the annuity “revocable,” and therefore available to the Medicaid applicant.  As a result, DMAHS implemented a policy of counting MCAs written with that same carrier as an available resource, subsequently leading to a number of Medicaid denials.

One affected Medicaid applicant filed a lawsuit against the Assistant Commissioner of the DMAHS in the United States District Court for the District of New Jersey (D.N.J.). That case was recently decided on summary judgment in favor of the Plaintiff/Medicaid applicant. A copy of the decision is available here. In analyzing the case facts, the D.N.J. based its decision on three main issues:

  1. DMAHS did not offer any analysis or reference to the appropriate level of deference in this case.
  2. Though the annuity in question contains a provision which allows an officer of the insurance carrier to alter its terms, the contract’s specific irrevocability clause supersedes this statement.
  3. The MM decision was factually distinct from the case at hand and cannot be “blindly” applied to support DMAHS’ position.

In its analysis, the Court also determined the original MM decision was also made in error. The D.N.J. then issued an order enjoining DMAHS from continuing to enforce:

A policy that an annuity contract issued by [the Carrier], which is subject to a provision that the “National President or Secretary/Treasurer of [the Carrier] may, in writing, make or change a contract or waive any of its rights or requirements,” be counted as an available resource, due to the presence of that term.

A copy of the order can be found here.

Not only does this decision explain that DMAHS was wrong, but it outlines the several ways in which they were wrong. It also undercuts DMAHS’ reliance on the MM decision in this case, but should effectively foreclose their reliance on the case in subsequent cases as a Federal Court has concluded the legal basis was inapplicable.

If you have any questions relating to the use of annuities in your state, contact our office at (866) 605-7437 or [email protected].


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