Department Promises Change on Spousal Annuity Beneficiary Issue

By Doug Chalgian on March 18, 2015

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Thanks to the excellent advocacy of Amy Tripp and David Shaltz, it appears we may be getting close to resolving one of the difficult issues related to using annuities in Medicaid planning in cases involving married couples.  The issue relates to the State of Michigan’s interest in annuities purchased by a community spouse.

In the case of Hughes v McCarthy, U.S. Court of Appeals, 6th Circuit, 2013, the Court reversed a determination by Ohio’s Medicaid agency which concluded that an annuity purchased by the community spouse was divestment because the State was not named first beneficiary, but rather a contingent beneficiary after the nursing home spouse.  The Hughes opinion goes into extensive detail regarding the underlying federal law, and concludes that the Ohio agency was wrong.  The analysis of the opinion clarifies that the requirements for naming the State as a beneficiary at all are not applicable to annuities purchased by the community spouse before application for benefits.  Click here to read Hughes.

Michigan policy, set forth in BEM 401, is less clear on the topic.  It says that any annuity must name the State as beneficiary “for an amount at least equal to the amount of the Medicaid benefits provided.”  What is unclear is whether the term “benefits provided” relates to the annuitant (who would be the community spouse) or the nursing home resident.

In the Calhoun County case handled by Amy Tripp in which this issue arose, the annuity was purchased by the community spouse and the State was named as beneficiary for medical expenses incurred by the annuitant and paid by the State, which would only apply if the community spouse became a Medicaid beneficiary at some later date.  Calhoun County DHS concluded this was divestment, and that determination led to contact with higher ups in the Department.

The response from the Michigan Department of Health and Human Services was an acknowledgement that the policy as written is wrong, and a promise to revise the policy to comply with the Hughes decision.  Click here to read the exchange of correspondence.  While we do not know at this time exactly how the policy will be revised, this is a big deal for everyone who uses these types of annuities in married couple Medicaid plans.

In any event, the good news is that the Department is responsive to such inquiries and willing to review policy where it can be demonstrated that such policy is not complying with the governing law.  (The Hughes case is a Sixth Circuit decision, and Michigan is in the Sixth Circuit.)

Thanks David, Thanks Amy and Thanks Mr. Meyer, acting Deputy Director of DHHS.  We are hopeful that this is the beginning of better lines of communication with the Department so that we can work together toward the benefit of the populations we mutually serve.

AN UPDATE:  No detail – but some movement.  Click here

AND NOW THE FINAL POLICY:  Looks good.  Click here

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mm By: Doug Chalgian
Doug Chalgian

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