Medicaid: Annuity; Transfer Penalty for Failing to Name State as Beneficiary

Annuity; Transfer Penalty for Failing to Name State as Beneficiary. Petitioner, a 95 year old nursing home resident, applied for Medicaid on December 15, 2008. DFCS denied eligibility and imposed a transfer of resources penalty because she had purchased an annuity without naming the State of Georgia as a beneficiary. The annuity was irrevocable and non-assignable, was actuarially sound and provided for immediate monthly payments of $1,648.41 for 52 months with no deferral and no balloon payments. All of Petitioner’s other resources qualified for the burial exclusion and a QIT was used since Petitioner’s income with the annuity exceeded the income cap. The ALJ held that the annuity could not be penalized because a transfer penalty may only be imposed on an asset and the annuity was not an asset. Although this is a misreading of the code, the ALJ reversed assessment of the transfer penalty. Technically, under the federal Medicaid statute, “asset” includes all income and resources. 42 U.S.C. 1396p(h)(1) and a transfer penalty may be imposed when income or resources are transferred for less than fair market value. Confusing the terms, the ALJ seemingly decided that a transfer penalty may only be assessed on transfers of resources.

• But see Cook v. Glover (July 11, 2014) where the Georgia Supreme Court found that an annuity is subject to the transfer penalty rules unless it complies with both 42 U.S.C. 1396p(c)(1)(F) and (G), which requires naming the State as a beneficiary of the annuity. The Court of Appeals had found otherwise, holding that if a nursing home applicant satisfied either 42 U.S.C. 1396p(c)(1)(F) or (G), which would allow an applicant to avoid naming the State as beneficiary so long as the annuity was actuarially sound, was the clear intent of Congress. The Supreme Court held that the statute was far from clear and when ambiguous, the Courts must defer to the agency’s interpretation. “DCH’s interpretation of § 2339, which is consistent with CMS’s interpretation of the statute, to be reasonable and entitled to deference. Accordingly, we hold the Court of Appeals erred in finding the language of 42 U.S.C. 1396p(c)(1) to be plain and unambiguous and erred in failing to defer to DCH’s decision upholding the transfer of asset penalty in this case.”

Harbin v. Department (May 7, 2009).