Morris v. Oklahoma Department of Human Resources
POSTED ON - October 20, 2018
Written By Krause Financial Services
Morris v. Oklahoma Department of Human Services validated the traditional community spouse MCA planning strategy. That is to say, the ability to purchase an MCA in the name of the community spouse as a way to spend-down excess countable assets of the couple is allowable.
The Morrises were ineligible for Medicaid benefits due to their annuity being included as an available resource. Mrs. Morris also transferred money to Mr. Morris, which was argued that the transfer should include a penalty. The verdict, ultimately, was reversed.
Leroy and Glenda Morris brought suit against the Oklahoma Department of Human Services (OKDHS) because Mrs. Morris’ Medicaid application was denied. The denial was due to the fact that they had too many resources to be eligible for benefits. The Morrises then purchased an actuarially sound annuity payable to Mr. Morris to lower their level of resources. OKDHS still denied their application. According to OKDHS, Mrs. Morris could not spend her assets on an annuity that was payable to her husband, and she would be required to pay a transfer penalty for moving her assets to Mr. Morris. The court upheld the agency’s rejection of Mrs. Morris’ Medicaid application.
Before the MCCA was passed, resources that were accessible to both spouses were considered available when applying for Medicaid eligibility. If a resource was only under the community spouse’s name, that resource would only be available to the community spouse and would not count against the institutionalized spouse if they applied for benefits. This system was changed to help prevent community spouses from becoming financially destitute. Now, with the MCCA, all resources held by either spouse are available to the institutionalized spouse.
Transfers are generally not allowed for less than fair market value up to five years before the institutionalized spouse applies for Medicaid eligibility, except in the case of spousal transfers, according to the MCCA statute. However, there is a cap on the amount that is transferable after the “initial determination of eligibility.”
The Morrises sent a request to OKDHS on March 26, 2008, to evaluate their assets to see if they were eligible for Medicaid. Mrs. Morris was not eligible for Medicaid due to the number of assets she had and needed to spend down $51,906.
The Morrises spent down their money on burial contracts, paying lawyer fees and buying an annuity for $41,000 in Mr. Morris’ name that would pay him $1,140.47 a month for three years. The annuity and payment were sent on April 1, 2008, they signed the annuity on April 8, and it was issued on April 10. On April 3, 2008, Mrs. Morris applied for Medicaid eligibility again. OKDHS denied her application again due to excess resources to which the Morrises requested a fair hearing. The Morrises’ counsel also sent a letter to OKDHS on April 8, 2008, informing them the Morrises had spent down their resources.
On July 29, 2009, OKDHS Appeals Committee affirmed the agency’s decision that Mrs. Morris was not eligible for Medicaid becuase, half of their resources should be attributed to each spouse and that the annuity purchase was a “disqualifying transfer of resources.”
However, OKDHS “did not cite any provision of the Medicaid statute for its conclusion” and thus there is no way to conclude that the purchasing of an annuity is anything but a spend down. Annuities that follow certain conditions will not qualify as a resource. OKDHS even agreed that Mr. Morris’ annuity met these specific criteria so the annuity would not qualify as a resource.
Regarding the transfer of funds, when looking to statute 1396r-5(f)(1), the limitations on transferring funds between spouses only applies once the institutionalized spouse has been found eligible for Medicaid.
The ruling was reversed. The court remanded further proceedings.
The full document text can be found here.