I SEC.
405. CERTAIN MEDICAID DRA TECHNICAL CORRECTIONS. . .
(b) Clarifying Treatment of Certain Annuities (Section 6012)-
(1) IN GENERAL- Section 1917(c)(1)(F)(i) of the Social Security Act (42
U.S.C. 1396p(c)(1)(F)(i)), as added by section 6012(b) of the Deficit
Reduction Act of 2005, is amended by striking `annuitant' and inserting
`institutionalized individual'.
(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall be effective
as if included in the enactment of section 6012 of the Deficit Reduction
Act of 2005.
This
is a helpful clarification. Congress is saying that a community spouse can
purchase an immediate annuity without transfer penalty so long as the
annuity complies with the DRA actuarial soundness requirement and the
state is named as remainder beneficiary for the Medicaid long term care
payments it makes on behalf of the INSTITUTIONALIZED spouse.
This
approach is reminiscent of the Estate Recovery laws. The state collects
for Medicaid payments but only after the death of the community spouse.
The approach also seems somewhat analogous to the payback provisions
of (d)(4)(a) special needs trusts. The state gets reimbursed from
what is left after the death of the beneficiary (in this case, the
community spouse).
The
Tax Relief and Health Care Act of 2006 is yet another reiteration of
Congressional approval of the purchase of actuarial sound immediate
annuities as a way of protecting the financial security of the community
spouse. 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 community
spouses. Whatever its motivation, the new law continues
Congressionally mandated special treatment of annuities.
If
the community spouse is the annuitant, the income payments will be
received by the community spouse who can retain them as income. The recent
James v Richman case holds that such
income payments cannot be considered to be a resource of the community
spouse, so the receipt of the income will not affect the eligibility of
the institutionalized spouse for Medicaid. (Indeed, the special annuity
provisions of the new Tax Relief Act would not be needed if the law were
otherwise).
The
annuitant and income recipient is the community spouse. (If there is a
minor or disabled child that child may be named as beneficiary ahead of
DPW). Secondary beneficiary is DPW to the extent of the total amount of
medical assistance paid on behalf of the institutionalized spouse).
The
federal Medicaid law sections regarding annuities provide an excellent
opportunity for married couples to protect the financial security of the
community spouse.
The
relevant provisions of federal Medicaid law regarding annuities as
modified by the DRA and the Tax Relief and Health Care Act of 2006 are
posted the paannuity website at www.paannuity.com.
Click on “News and Events” on the left hand side.
Attorney Marshall can be contacted at webmail@paelderlaw.com
or at 1-800-401-4552
