Every once in awhile we get good news from the courts. Such was the case in October 2012 when the Court of Appeals for the Second Circuit rendered its decision in the Lopes case.
When someone enters a nursing home, Medicaid considers the resources of both spouses available to the nursing home spouse. The Medicaid applicant is able to keep $2,000, while the other or “community” spouse can keep as much as $113,000.
While this sounds harsh, Medicaid regulations are designed to force a couple to “spend down” their assets before the nursing home spouse can qualify for government assistance.
The decision in the Lopes case was a rare bit of good news for couples seeking Medicaid. The court ruled that the community spouse may convert “resources” into “income” by purchasing a qualifying annuity that names the government as the beneficiary of any funds left after the death of the annuitant. By using $166,000—the amount exceeding the Medicaid allowance—Mrs. Lopes purchased an annuity paying her $2,340 per month for six years and naming the state as beneficiary of any remaining funds if Mrs. Lopes passes away during the 6 years.
The court found that the payment stream was “income” (not available to the nursing home spouse), and after the purchase of the annuity, the couples’ combined resources did not exceed the Medicaid limit. Contrary to the State’s assertion, the court ruled that the fact the annuity was purchased for the purpose of qualifying for Medicaid was irrelevant.
This ruling recognizes the dual purpose of Medicaid legislation: “…to provide health care for the indigent and protect community spouses from impoverishment while preventing financially secure couples from obtaining Medicaid assistance.”
Medicaid rules are constantly changing. This is a good time to schedule a complimentary consultation and make sure your assets are as protected as possible.
Parman & Easterday