A federal appeals court ruled yesterday that “annuities with certain characteristics, including nonassignability clauses, are not assets to be counted as resources” for purposes of Medicaid eligibility.
The ruling affirms the role of planning in achieving the most favorable result for the Medicaid applicant. “Financial planning is inherent in the Medicaid scheme,” the court wrote. The court also noted that using “an elder law attorney to develop a Medicaid eligibility plan … helps ensure that the annuities purchased are Medicaid-compliant, and thus helps reduce the risk of litigation.”
The ruling settled a question about whether some short-term annuities purchased by Medicaid applicants comply with federal law. The court ruled that as long as the annuities comply with Medicaid’s “safe harbor” provisions, they will not preclude eligibility for benefits.
Annuities may violate Medicaid law’s requirement of being “actuarially sound” if they exceed the annuitant’s reasonable life expectancy, but not if they are shorter than life expectancy, according to the court.
The ruling came from the U.S. Court of Appeals for the Third Circuit, which includes Pennsylvania in its jurisdiction.
You can read the full opinion here.