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.
Krause Financial has recently learned of a case out of Ohio involving Medicaid planning and the use of an annuity. In 2014, an institutionalized spouse was subjected to a divestment penalty period after his wife, the community spouse, purchased an annuity they believed to be Medicaid compliant. The couple decided to appeal the decision. Unfortunately, the appeal was denied, and the couple took no further legal action. Now, the couple is likely regretting this decision, as it is the cause of their recent dismissal in a suit against the Ohio Department of Medicaid.
Trask v. McCarthy Case Facts
Phillip Trask was a resident of an Ohio nursing home. After entering the facility, but before applying for Medicaid benefits, Ursula Trask, the community spouse, purchased a traditional spousal annuity. In February of 2014, when Medicaid eligibility was being determined, Mrs. Trask’s annuity purchase was deemed an improper transfer based on the fact the annuity was purchased after Mr. Trask entered the facility. Therefore, a divestment penalty period was applied from February of 2014 to March of 2015. The Trasks appealed the decision, however, the appeal was denied. Under Ohio law, the Trasks had 30 days to appeal the second denial and chose not to proceed. This was their last opportunity to fight the imposed divestment penalty period.
Then, in February of 2016, the Ohio Department of Medicaid released Medicaid Eligibility Procedure Letter 112, which stated that annuities purchased after the institutionalized spouse has entered the facility, but before Medicaid eligibility has been determined, should not be considered countable resources or an improper transfer. In light of ODM’s letter, the Trasks sued the State of Ohio on the grounds that Mrs. Trask’s annuity purchase should not have been considered an improper, and they sought a repayment of benefits lost during the 13-month divestment penalty period.
Res Judicata and the Eleventh Amendment
On August 24, 2016, the Trasks’ suit was dismissed for two main reasons: res judicata and the Eleventh Amendment. Res judicata, or claim preclusion, states that matters already litigated are final. In that no further action was taken when the Trasks had the opportunity to do so, the judgment stands. The decision itself states that because Mrs. Trask didn’t appeal the initial decision to the court of common pleas during the allotted time frame, “she is bound by that decision.”
The Court further found that even if res judicata wasn’t the basis for dismissal, the Eleventh Amendment would be. The Eleventh Amendment bars citizens from suing the State or State entities for money damages, the purpose of which is to protect state sovereignty from federal judgment. Furthermore, under this amendment, federal courts are prohibited from repaying past benefits when the State has denied those benefits – even if the federal court agrees the benefits were “wrongfully withheld.” It is important to note that the Court did agree the Trasks were wrongly denied benefits, however it irrelevant in light of the Eleventh Amendment.
What Does This Mean for Medicaid Planners?
Denials are tough, stressful, and put your clients in a poor position. No one can blame the Trasks for not wanting to go through a second appeal, however, had they appealed the decision when they had the chance, their situation could have turned out much differently.
If your client receives a denial, Krause Financial is here to help. When purchasing a Medicaid Compliant Annuity (MCA) through Krause Financial Services, you’re backed by one of the nation’s leading attorneys and insurance agents on MCAs, Dale M. Krause, J.D., LL.M. Dale and his team offer complimentary litigation support and expert testimony. Don’t face your denial alone and put your client’s benefits at risk. Call us today for help!
Read the full text of the Trask v. McCarthy decision here.