North Dakota is amongst a handful of states that impose the annuity legislation outlined in the Deficit Reduction Act of 2005 ("DRA") as well as their own added annuity requirements. In addition to those of DRA, one of the added annuity requirements imposed by North Dakota is that all monthly payments from all annuities owned by the purchaser must not exceed the minimum monthly maintenance needs allowance for a community spouse, and that total combined income from all sources of the annuitant and the annuitant's spouse does not exceed 150% of the minimum monthly maintenance needs allowance allowed for a community spouse (N.D.C.C. § 50-24.1-02.8(7)(b)). Annuities that do not abide by the aforementioned are treated as countable resources.
The above was challenged in a recent case, Geston v. Olson (U.S. Dist. Ct. N.D., No. 1:11-cv-044, April 24, 2012). Mrs. Geston purchased an annuity providing income of $2,734.65 prior to her husband, Mr. Geston, making an application for North Dakota Medicaid benefits. The annuity met every requirement of DRA, and the purchase lowered the Gestons' resources below that of the North Dakota limits. However, while Mrs. Geston's annuity provided income less than the minimum monthly maintenance, the Gestons' total combined income, including the annuity, was $7,903.22. Because the annuity income exceeded 150% of the minimum monthly maintenance needs allowance for a community spouse the annuity was treated as a countable asset. As a result, Mr. Geston was found ineligible for Medicaid.
The Gestons filed suit, arguing that 50-24.1-02.8(7)(b) of the North Dakota Century Code is more restrictive than federal law.
The Court found that 50-24.1-02.8(7)(b) was more restrictive than federal law and thus violates 42 U.S.C. §§ 1396a(a)(10)(c)(i) and 1396a(r)(2)(B). The Court also found that 50-24.1-02.8(7)(b) violates 42 U.S.C. § 1396r-5(b)(1) which prohibits consideration of the community spouse's income in the institutionalized spouse's Medicaid eligibility determination. The Court granted the Gestons Medicaid eligibility, and awarded reasonable costs and attorneys' fees to the Gestons.
In a memorable closing statement, the court provided:
"If there is a 'loophole' under federal law as to the treatment of irrevocable and non-assignable annuities under the Medicaid program, the closing of that 'loophole' is best left for Congress to address."