May 5

Lawsuit to Prevent State from Recovering Medicaid Benefits from Spousal Annuity May Proceed

A U.S. district court rules that a case by the family of a Kentucky Medicaid recipient challenging the state’s adherence to federal law regarding spousal annuities rather than to a less restrictive state regulation may proceed against the secretary of Kentucky’s Medicaid agency because the secretary does not have qualified immunity. Singleton v. Commonwealth of Kentucky (U.S. Dist. Ct., E. D. Ky., No. 15-15-GFVT, March 31, 2016).

Claude Singleton entered a nursing home and applied for Medicaid. His wife, Mary, purchased an annuity with herself as annuitant. Ms. Singleton wished to name the state as remainder beneficiary up to the amount of Medicaid paid on her behalf. State regulations provide that the state must be named remainder beneficiary for the amount of Medicaid benefits paid on behalf of the annuitant, and this did not change even after federal Medicaid law was amended in 2006 to require that states be named as a remainder beneficiary for Medicaid benefits paid on behalf of the institutionalized individual.  However, Ms. Singleton’s attorneys – the ElderLawAnswers member firm of McClelland & Associates, PLLC —  informed her that the state Medicaid agency’s branch manager would view structuring the annuity pursuant to the state’s regulation as a transfer for less than market value, so Ms. Singleton changed the state’s remainder beneficiary amount to Medicaid paid on behalf of Mr. Singleton.  

After Ms. Singleton died, her children, the annuity’s secondary beneficiaries, sued the secretary of the state Medicaid agency, along with other parties, arguing that state regulations may be less restrictive than federal law and that the branch manager’s alleged policy of rejecting annuities drafted pursuant to Kentucky’s own statute was improper. The state filed a motion to dismiss, arguing, among other things, that the secretary has immunity.

The United States District Court for the Eastern District of Kentucky denies the motion to dismiss the claim against the secretary in her official capacity. The court holds that because the Ms. Singleton’s children are seeking prospective injunctive relief by seeking to prevent the state from collecting any more than the amount paid by the state on behalf of Ms. Singleton, the secretary is not entitled to immunity.

For the full text of this decision, go to:

February 15

The Benefits and Drawbacks of Buying an Annuity Doubler to Pay for Long-Term Care

As long-term care insurance premiums keep rising and fewer companies are offering policies, seniors are looking for other ways to help pay for long-term care. Annuity “nursing home doublers” have emerged as a new long-term care option. These doublers can be beneficial, but as with any annuity product, customers should use caution before purchasing.

An annuity is a contract with an insurance company under which the consumer pays the company a certain amount of money and the company sends the consumer a monthly check for the rest of his or her life, or for a certain term. Immediate annuities are a way to receive a guaranteed income for life and can be useful in Medicaid planning

Many insurance companies that sell annuities are now offering “nursing home doublers” to help pay for long-term care. If the beneficiary of such an annuity needs long-term care, the insurance company will make double payments for five years or until the annuity’s cash value is depleted. To activate the doubler, the annuitant needs to be unable to perform two of six activities of daily living (i.e., eating, bathing, dressing, transferring, toileting, and continence). Once the five years are up and if the annuity still has a cash value, the insurance company would go back to making regular payments.

The benefit of a doubler is that it is relatively inexpensive. Many insurance companies offer the doubler at no additional cost beyond the lifetime income rider fee. If there are additional fees, the fees are usually low. The double payments are not designed to cover the full cost of long-term care, but the double payments can help defray the cost.

Before purchasing an annuity, you should fully research the product. While annuities—particularly immediate annuities–can be a valuable retirement product, annuity salespeople have come under scrutiny for targeting older Americans with deceptive sales tactics. Before purchasing an annuity with a doubler, find out whether it covers home care in addition to nursing home care. In addition, using a doubler depletes the cash value of your policy, which means there would be less left in the annuity to leave to your heirs. Also, if you purchase a joint annuity, the doubler will only cover one spouse’s long-term care.

Before making any purchases consult with your elder law attorney to find out the best way to plan for long-term care.