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Ohio Medicaid battle erupts over a conflict between state and federal rules

SHERRY KARABIN
Legal News Reporter

Published: October 28, 2014

Federal and state laws don’t always agree. A dispute over Medicaid compliant annuities came to a boiling point recently with U.S. District Court Chief Judge Susan J. Dlott threatening to ask the Centers for Medicare & Medicaid Services and the U.S. Department of Health and Human Services to withhold federal funding for Ohio’s Medicaid program.

The case involved three couples, in which the wives were in nursing homes and receiving Medicaid to cover their expenses. Their husbands used retirement funds to buy annuities, which the state alleged amounted to an improper transfer of resources.

As Certified Elder Law Attorney Marta Williger explained, in Ohio a person is not eligible for Medicaid until his/her assets are reduced to $1,500 or less. Once this has been achieved, Williger said the person must spend all of his/her monthly income except for $45 before Medicaid will step in.

“If a person is married, it is even more complicated,” said Williger, a partner at Williger Legal Group in Munroe Falls.

Williger said the healthy spouse could retain half of the couple’s total assets, with a minimum amount of $23,448 and a maximum cap at $117,240.

“For example, if a couple has $100,000, the healthy spouse would be able to keep $50,000 and the ill spouse who is seeking Medicaid would need to spend down to $1,500 to qualify.

“There are certain assets that are exempt like the home, one car and personal property.”

To reduce assets to qualify for Medicaid, a couple can spend the money on care or purchase exempt assets, said Williger, however it’s considered improper to give the assets away.

“If a transfer is improper Medicaid will impose a penalty, a period of time during which they will not pay for care. This is measured by how many months the person could have paid for care had he/she kept the money.”

She said once Medicaid is approved, the healthy spouse is allowed to keep all of his/her own monthly earnings and even keep a part of the ill spouse’s income if it’s necessary.

When one spouse needs to qualify for Medicaid to cover a nursing home for instance, Williger said there is often a rush to spend the excess assets. To ensure that the healthy spouse has enough to live on, many families are choosing to buy an immediate annuity.

“This irrevocably converts an asset that must be reduced into a stream of monthly income, which the healthy spouse will receive for the rest of his/her life,” said Williger. “Federal law allows the purchase so long as the annuity meets specific criteria that make it Medicaid compliant.

“What the state said in the recent case was that even though the annuity that was purchased met all of the federal rules of being Medicaid compliant, the spouses made an improper transfer of funds and so they must pay a penalty. If the money that was spent on the annuity would have covered 10 months in a nursing home for example, the state would deny payment for that period.

“The spouse cannot return the annuity, yet the person is required to cover the costs of the nursing home using money which he no longer has.”

In the Ohio Southern District Court case of Martha Wagner, et al. v. John B. McCarthy, which was filed on Aug. 13, Judge Dlott issued a preliminary injunction, demanding that the state cover the nursing home costs of the ill spouses until a final decision is made.

If the state chose not to comply, Williger said the judge warned she would hold a contempt hearing and ask the federal agencies to halt funding for Ohio’s Medicaid program, which had the potential to affect jobs and coverage for numerous Ohioans.

In the end, officials chose to comply with the preliminary injunction. “The Ohio Department of Medicaid has instructed the Hamilton County JFS (Job & Family Services) to lift any restrictions on Medicaid services affecting the parties involved in this case,” said Sam Rossi, communications director for the Ohio Department of Medicaid.

As a result, 79-year-old Martha Wagner, a resident at Clovernook Health Care Pavilion in North College Hill, 84-year-old Ellen Reeves, located at Mount Washington Care Center in Anderson Township, and 84-year-old Phyllis Cohen, who resides at Glendale Place Nursing & Rehab Center in Woodlawn, will all have their nursing home expenses covered for now.

“A final decision in the case has not yet been made,” said Williger. “When it is, it will apply only to the parties in this suit, but will serve as precedent for future cases.”

Officials at Ohio Attorney General Mike DeWine’s office would not comment on the specifics of the case.

“When the state participates in a federal program, I think it is important that it follow all the rules and not create its own rules such that a family in Ohio cannot live as well as one in another state,” said Williger.


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