In a letter to an Ohio practitioner, the Centers for Medicare and Medicaid Services (CMS) has rendered its opinion on the validity of a number of questionable state practices pertaining to annuities and Medicaid asset transfers.
For example, CMS determines that states may treat the purchase of annuity trusts or private annuities as available resources in Medicaid eligibility determinations. It is a reasonable interpretation of federal law to limit the definition of "annuity" to a commercial annuity, CMS indicates.
CMS made this and other determinations in an April 26, 2004, opinion letter to Dayton, Ohio, elder law attorney and ElderLawAnswers member Michael Millonig concerning the Ohio Medicaid rules on annuities and transfers. Millonig had sent CMS a letter 17 months earlier asserting that a number of Ohio's rules violate federal Medicaid law.
In the letter, Glenn A. Stanton, Acting Director, Disabled and Elderly Health Programs Group, said that the balloon payment prohibition in the Ohio rule is also a reasonable restriction by states, although he reaffirmed the life expectancy test as the basis of the annuity rule.
The letter rebuffed in a single sentence Mr. Millonig's detailed argument that Ohio's prohibition against post-eligibility transfers by the community spouse is a violation of federal law.
But CMS agreed with Millonig on the invalidity of an Ohio rule that using the institutionalized spouse's share of resources to purchase an annuity for the benefit of the community spouse is an improper transfer. (O.A.C. Sec. 5101:1-39-228 (C)(6)) CMS subscribed to Millonig's argument that the state cannot limit the use of funds after the first continuous date of institutionalization to the amount of the CSRA.
"This would appear to allow the purchase of annuities after NH [nursing home] entry and essentially guts the primary prohibition of the Ohio rule," Millonig said in a letter to Ohio elder law attorneys. (CMS states that it understands that Ohio has removed this provision from its regulations, but Millonig says that so far this has not happened.)
The letter also affirms that states cannot limit spend down by requiring spending only for the benefit of the institutionalized spouse and cannot prohibit transfers between spouses or for the sole benefit of the spouse.
This means, Millonig said in his letter to Ohio practitioners, that "the CS [community spouse] should be able to purchase an annuity post snapshot without a determination that there as been an improper transfer of the IS [institutionalized spouse] share."
To download the CMS letter, click here. (Note that file size is 1.6 mb.)
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