Weatherbee v. DPW
POSTED ON - August 18, 2018
Written By Kimberly Jahns, Krause Financial Services
Weatherbee v. DPW validated that a Medicaid Compliant Annuity would not be deemed available to an institutionalized spouse when applying for Medicaid.
Theodore E. Weatherbee was admitted to Golden Living Center-Kinzua nursing facility in Warren, Pennsylvania on September 1, 2006. On February 28, 2007, Weatherbee requested a resource assessment from the Department of Public Welfare (DPW) in order to determine if he is eligible for Medical Assistance – Long Term Care (MA-LTC) benefits. After reviewing Wetherbee’s resources, DPW determined that he had $442,696.05 available.
Weatherbee’s wife, Adeline A Weatherbee (“Adeline”) spent down the money by purchasing pre-paid funerals and a new vehicle, both of which were acceptable under MA-LTC regulations. She then purchased a single premium immediate irrevocable annuity from the Jefferson-Pilot Life Insurance Company. The annuity was primarily funded through an existing deferred annuity owned by both Weatherbee and his wife. The new annuity allows Adeline to receive $4,423.47 a month for 107 months.
Weatherbee then filed an application for benefits again but was denied eligibility after DPW determined the money from the annuity was an available resource to Weatherbee. This was determined because the annuity could be sold on the secondary market.
The Medicare Catastrophic Coverage Act of 1988 (MCCA) states that the spousal impoverishment standards “permit a spouse living at home to reserve certain income and assets to meet the minimum monthly maintenance needs he or she will have while the other spouse is institutionalized.” The MCCA was created by Congress to protect the spouse living at home (community spouse) from becoming impoverished while also excluding financially secure couples from sheltering their assets in order to become eligible for Medicaid.
The MCCA protects the community spouse by allowing him or her to maintain a standard amount of assets called the “community spouse resource allowance (CSRA).” To determine the CSRA, all the resources the couple owns, jointly or separately, are calculated and, usually, half of that amount is given to the community spouse. However, certain resources will be excluded from this calculation; for example home, a car, personal effects and household goods. The CSRA also has a cap for the limits on the amount allocated to the community spouse.
A community spouse’s income, however, will not affect the institutionalized spouse’s Medicaid eligibility. Also, if the community spouse is receiving a payment from a trust and it is paid only in their name, then that income is considered only the community spouse’s income.
The main argument was whether DPW “properly treated the income stream from the Weatherbee Annuity as an available resource in determining his MA-LTC eligibility.”
DPW argued that the money coming in from his annuity qualifies as a resource because it can be sold on the secondary market. Also, the monetary value of the annuity would be above the CSRA. The court rejected this contention as this rule would undermine federal law.
The court concluded that DPW was not permitted to count the income stream from the annuity as a resource under these circumstances. DPW’s contention that the income from the annuity could be considered a resource is rejected because that would “undermine the MCCA rule that ‘no income of the community spouse shall be deemed available to the institutionalized spouse.’”
DPW’s Motion to Dismiss was denied and was precluded from denying benefits on the basis of the income stream generated by the annuity.
The full document text can be found here.