Federal Court Orders Medicaid Benefits in Spousal Annuity Case

Written By: Attorney Jeffrey A. Marshall, CELA*

  A Federal District Court has permanently enjoined Pennsylvania from treating an actuarially sound, irrevocable, non-assignable immediate annuity as a resource of the community spouse.

Immediate annuities have long been utilized to protect the financial security of retirees.  A commercial immediate annuity is purchased from an insurance company. The investor pays a sum of money to the insurance company. In return, the insurance company agrees to provide payments to the investor over a stated period of time.

There are many variations of annuity investments. With an immediate annuity the insurance company begins to make the contracted payments immediately.  An immediate annuity can provide a retiree with the security of a guaranteed income for a term of years or for life.  Lifetime guaranteed income is an attractive option not available with most non-annuity investments.

Immediate annuities can have an extra benefit for the community spouse of an individual who needs long-term care.  For purposes of Medicaid eligibility, a married couple's countable resources are pooled and excess resources are at risk.  However, the income of the community spouse is protected.  A community spouse can retain his or her income without affecting the Medicaid eligibility of the institutionalized spouse.  

An immediate annuity converts a cash sum into a guaranteed stream of payments.  Such payments have traditionally been treated as income under Medicaid law.  As a result, the purchase of an immediate annuity can convert an otherwise countable resource (cash) into a non-countable stream of payments for a community spouse.

But what if there were a potential buyer for the stream of payments being received by the community spouse?  Can a state Medicaid agency force a community spouse to turn the promise of future income payments into a countable resource? 

When Robert James entered the nursing home, his wife, Josephine, had more than her allowed community spouse resource allowance.  To spend down to the eligibility point, Mrs. James purchased an actuarially sound immediate annuity. The annuity was irrevocable, non-assignable and had no cash value.

When Mr. James thereafter applied for Medicaid benefits, his application was denied on the basis that the annuity was countable and the couple still had excess resources.  Mr. James, represented by attorneys Matthew Parker and Kevin Grebas, of Marshall, Parker & Associates, filed an action in Federal Court which alleged that the denial issued by the Pennsylvania Department of Public Welfare (DPW) was in violation of federal Medicaid law. 

In support of its denial of benefits, DPW took the position that the annuity was a countable resource because Mrs. James could sell the future payment stream of the annuity. It offered an affidavit from an officer of J.G. Wentworth Company stating that Wentworth would buy the community spouse's rights to the annuity's income payments.  Thus, argued DPW, the annuity payments constituted a countable resource.

On November 20^th, the Federal District Court for the Middle District of Pennsylvania rejected DPW's arguments and permanently enjoined it from denying Medicaid benefits to Mr. James.  Judge Caputo explained the Court's ruling as follows:  

Defendant [DPW] essentially argues that, even if the income stream itself cannot be considered for purposes of determining Medicaid eligibility, the market value of that income stream should be a countable resource to preclude eligibility. Such a rule would completely undermine federal law, which excludes income of the community spouse from factoring into the institutionalized spouse's Medicaid eligibility. Indeed, a holding that the market value of an income stream derived from an irrevocable actuarially sound annuity is a countable resource would effectively contravene the MCCA, which provides that "no income of the community spouse shall be deemed available to the institutionalized spouse." 42 U.S.C. § 1396r-5(b)(1). To be sure, Defendant's argument blurs the distinction drawn by the MCCA between assets and income.

 

Rather, so long as the principal or corpus of an irrevocable annuity or trust cannot be reached by the applicant or spouse, the income derived from such an asset cannot be counted as a resource for Medicaid purposes, notwithstanding that income stream's market value in the eyes of a third party.

Pennsylvania and other State Medicaid authorities tend to see the ability of a community spouse to protect his or her financial security through the purchase of a Medicaid annuity as a loophole in federal Medicaid law. If so, it is a loophole that Congress has continually refused to close.

A cynic might suggest that the Congressional attitude towards Medicaid annuities is rooted more in the power of the insurance lobby in Washington , than in concern for the financial plight of middle class married seniors.  Whatever its motivation, Congress has continued the special treatment of annuities in the recently enacted Deficit Reduction Act.  It appears that individuals and couples facing devastating nursing home costs can continue to plan through the use of properly structured immediate annuities.  

The ruling in the James case is significant for couples with a desire to protect a community spouse from financial impoverishment due to nursing home costs.

Robert A. James v. Estelle B. Richman, United States District Court for the Middle District of Pennsylvania, Civil Action No. 3 :05-CV-2647 (November 21, 2006).  A copy of the Court's memorandum and order is available online at www.paannuity.com.

Attorney Marshall can be contacted at webmail@paelderlaw.com or at 1-800-401-4552

Pennsylvania Updates Advance Health Care Directive Laws

Written By: Attorney Jeffrey A. Marshall , CELA*

  For many years, Pennsylvania has been criticized for having out-of-date laws regarding health care powers of attorney and other advance directives.  Now, Pennsylvania has enacted sweeping legislation designed to enhance the right and ability of individuals to control the fate of their health care. 

On November 29, 2006 , Governor Rendell signed Act 169-2006 (SB 628) into law.  Act 169 sets forth a comprehensive set of laws governing health care decision making for incompetent persons.

The new law permits an individual to appoint a surrogate decision maker(s) who can be authorized to make any health-care decision, including those concerning end-of-life treatment.  It updates Pennsylvania 's laws regarding living wills and out-of hospital do-not-resuscitate orders.  And, it authorizes family members and close friends to make health decisions for individuals lacking a designated surrogate. 

The legislation was the result of years of discussion, lobbying, and negotiation by many interest groups.  (An earlier version was vetoed in 2004). The new law shows the effects of this collective parentage - the Act is lengthy and intricate. Unfortunately, this complexity increases the risk that its provisions will be either misunderstood or disregarded by health care providers. 

Act 169 amends and restructures the prior Chapter 54 of Title 20 of the Pennsylvania Consolidated Statutes and incorporates laws regarding living wills, out of hospital do not resuscitate orders, and decision-making by health care agents and representatives into a revised Chapter 54.  The new Chapter 54 is organized in five sub-chapters:

Subchapter A (General Provisions)  This subchapter provides general provisions and definitions of some of the terms that are used in the Act.  However, some notable terms such as "sound mind" are not defined.  

Subchapter B (Living Wills) This updates Pennsylvania 's 1992 law regarding health care "declarations" (which are more commonly known as living wills). A living will applies when a patient is determined to be incompetent and has an end stage medical condition or is permanently unconscious.

Subchapter C (Health Care Agents and Representatives) Subchapter C covers the authority and responsibilities of health care agents and representatives. A health care agent is named in advance to make health care decisions by an individual who later becomes incompetent. The Act sets forth a set of standards for the agent to follow in making decisions.

Where another surrogate decision maker is not otherwise available for an individual who lacks decision making capacity, the Act provides for decision making authority by a "health care representative."  An individual "of sound mind" may designate this representative.  Otherwise, the statute creates the following order of priority:

(1)  The spouse, unless an action for divorce is pending, and the adult children of the principal who are not the children of the spouse.

(2)  An adult child.

(3)  A parent.

(4)  An adult brother or sister.

(5)  An adult grandchild.

(6)  An adult who has knowledge of the principal's preferences and values, including, but not limited to, religious and moral beliefs, to assess how the principal would make health care decisions.

Subchapter D (Combined Form). This subchapter contains a form that combines a health care power of attorney with "living will" end of life treatment instructions.  The use of this form is optional, but its use will likely become widespread.

Subchapter E (Out-of-Hospital Nonresuscitation).  A do-not-resuscitate (DNR) order is a medical order written by a patient's attending physician that directs medical personnel to forgo cardiopulmonary resuscitation (CPR) if the patient's heart or breathing stops. There are two varieties of DNR orders. The traditional DNR order is given by the doctor of a hospital patient directing that resuscitation not be performed in the event that the patient's heart or breathing stops. The order, often referred to as a "no code," is usually placed on the patient's chart. The second variety of DNR gives similar instructions for non-hospitalized individuals.

A patient's desire to forgo CPR can be more difficult to enforce when the patient does not reside in a hospital. Well-meaning family members and other caregivers tend to call 911, drawing the response of an emergency medical services ( EMS ) team, which is trained to provide CPR and has no time to investigate the patient's circumstances. In 2002, Pennsylvania enacted a law to deal with such out-of-hospital situations and to provide a means for non-hospitalized and terminally ill patients to ensure that their choices regarding end-of-life care are honored by EMS personnel.  The new Act essentially incorporates the 2002 law into Chapter 54. 

The Act also requires the Department of Health to consider, in consultation with an advisory committee, adoption of a standardized form for a physicians-order-for-life-sustaining-treatment (POLST), which would provide for continuity of DNR and other life-sustaining treatment orders from one setting to another.

Updating Pennsylvania 's health care decision making laws was significantly overdue.  Prior statutory provisions were in conflict with the realities of medical practice and the conventions followed by health care providers.  Applicable standards and procedures for health care agents were not clearly defined and there was no statutory authorization for decision making by family members.

The new law will hopefully enhance patient decision-making autonomy and provide protection for both patients and health care providers.  It is scheduled to take effect 60 days after the date the Governor signed it into law.

A copy of the new Chapter 54 is available on Marshall , Parker & Associates website at the following link http://www.paelderlaw.com/pdf/SB_628.pdf .

Attorney Marshall can be contacted at webmail@paelderlaw.com or at 1-800-401-4552

Quality Insights of Pennsylvania

Written By: Lisa Barner, Marshall, Parker & Associates Planning Specialist

  Medicare beneficiaries and their families often wonder how long a hospital stay should be for a particular illness.  The answer is always the same (regardless of the reason for the hospital stay).  You should stay in the hospital as long as it is medically necessary.  Medical necessity is based upon your needs (as determined by your physician). What should you do if you feel you are being discharged too soon?

Medicare has developed an appeals process. Medicare beneficiaries should receive information upon admission to the hospital. This information should inform you of what you can do if you feel you are being discharged from the hospital too soon. 

First, you must request and obtain a hospital issued notice of non-coverage. This notice will explain why the hospital believes you no longer need hospital care.  After you receive this notice, contact Quality Insights at 1-800-322-1914 immediately. (Inform the hospital that you have called Quality Insights.) A family member or friend may call for you. If you call during the evening, weekend, or holidays, leave a message.  Quality Insights will return your call the next business day.  Once you have called Quality Insights, you can not be forced to leave the hospital while they are conducting a review.  You will not be charged for the review or for the days you stay in the hospital while the review is being conducted. 

When you place a call to Quality Insights, they will ask you for some information and then contact the hospital to obtain a copy of your medical record. Once they receive your information, one of their physicians will review your case and decide whether you need to remain in the hospital.  If this physician decides you need additional hospital care, you can stay in the hospital and Medicare will pay for your stay as long as that care is medically necessary. 

If Quality Insights decides you do not need any additional hospital care, Medicare will no longer pay for your hospital stay after Quality Insights has made its decision.  For more information contact www.qipa.org .

Lisa can be contacted at webmail@paelderlaw.com or at 1-800-401-4552

Study Finds: Support of Caregivers Delays Nursing Home Admissions

Written By: Attorney Jeffrey A. Marshall, CELA*

  A new study reports that people with Alzheimer's can remain at home much longer if their caregivers are provided with formal counseling and support. The study, which appears in the November issue of the journal, Neurology, found that nursing home placement can be delayed for an average of 1.5 years if the caregiver spouse is provided with enhanced counseling and support.

Researchers recruited caregivers of patients who had been diagnosed with Alzheimer's disease and who were living with their spouse and had one other relative living in the area. The caregivers received two individual and four family counseling sessions, each tailored to the caregiver's needs. Caregivers were also able to receive later telephone counseling and encouraged to go to support group meetings. The researchers followed the caregivers for up to 17 years to assess the long-term impact of the intervention.

"The caregivers were given instruction on managing troublesome behaviors and promoting better communication between family members," explains study co-author, William Haley, director of the University of South Florida School of Aging Studies. "Caregivers assigned to the control group received services normally provided, but did not participate in formal counseling sessions."

"Family caregivers often want to avoid or delay placement, but they can wear out under the long-term strain of caregiving. Appropriate counseling and support can help empower the caregiver, reduce their distress, and give them the strength to continue providing care at home" said Dr. Haley.

Legislators and government officials should take note.  Providing nursing home care to persons with Alzheimer's imposes enormous costs on the government's Medicare and Medicaid programs.

Today, 4.5 million people in the U.S. have Alzheimer's. By the middle of the century, that number is expected to increase to between 11.3 and 16 million.  The Study suggests that Medicare and Medicaid costs could be significantly reduced and the quality of life of caregivers enhanced, by improving caregiver counseling and support.

"Interventions that help reduce nursing home placement without overburdening family members will be essential for our society, which is faced with a projected tripling of cases of Alzheimer's disease in the decades ahead," said the study's lead author, Mary Mittelman of the New York University School of Medicine.

Nearly 60% of all nursing home residents have Alzheimer's disease or a related disorder. "Given the average cost of $60,000 per year for nursing home care in the United States in 2004, a delay in placement of one and half years represents about a $90,000 savings per patient," noted Dr. Mittleman.

The study report, "Improving caregiver well-being delays nursing home placement of patients with Alzheimer disease." by Mary S. Mittelman, DrPH, William E. Haley, PhD, Olivio J. Clay, MA and David L. Roth, PhD is available online  http://www.neurology.org/cgi/content/abstract/67/9/1592

 Attorney Marshall can be contacted at webmail@paelderlaw.com or at 1-800-401-4552

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*Attorneys Marshall and Parker are certified as Elder Law Attorneys by the National Elder Law Foundation under authorization from the Pennsylvania Supreme Court.

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