Second Circuit Affirms That Income Stream from Annuity Is Not an Asset for Medicaid Purposes

In a case pursued by the ElderLawAnswers member firm of CzepigaDaly LLC, the U.S. Court of Appeals for the Second Circuit upholds a district court ruling that Connecticut cannot treat the income stream from an annuity as an available asset for the purposes of Medicaid eligibility. Lopes v. Dept. of Social Services (2nd Cir., No. 10-3741-cv, Oct. 2, 2012).

After John Lopes moved to a nursing home, his wife, Amelia, purchased an annuity. She received a letter from the annuity company stating that no part of the annuity was assignable, including periodic payments. Mr. Lopes applied for Medicaid. The state identified a potential buyer of the annuity's income stream and directed Mrs. Lopes to attempt to sell the annuity. When Mrs. Lopes refused, the state denied Medicaid benefits to Mr. Lopes.

Mr. Lopes appealed, arguing Mrs. Lopes was not legally obligated to sell the annuity's income stream. The state ruled that Mrs. Lopes' annuity was an available asset, and Mr. Lopes appealed to the court.

The U.S. District Court for the District of Connecticut granted Mr. Lopes's motion for summary judgment, ruling that the state could not treat the income stream from an annuity as an available asset for the purposes of Medicaid eligibility. Connecticut appealed. 

The U.S. Court of Appeals for the Second Circuit affirms the district court, holding that the payment stream from a non-assignable annuity is not a resource for purposes of determining Medicaid eligibility.  The court goes on to rule that it is irrelevant that the annuity was purchased just prior to Mr. Lopes’ application for Medicaid benefits. The court notes that its decision was influenced by the views, which it solicited, of the U.S. Department of Health and Human Services (HHS).  In an amicus brief, HHS urged the Second Circuit to accept Mrs. Lopes’ position, which it said was consistent with Medicaid’s primary purposes of providing health care to the indigent and protecting community spouses from impoverishment.

ElderLawAnswers member attorneys, Brendan Daly and Paul Czepiga represented Mr. Lopes, along with longtime National Academy of Elder Law Attorneys member René H. Reixach, Jr., of Woods Oviatt Gilman LLP in Rochester, N.Y.

For the full text of the court's decision, click here. 

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