Sunday, September 15, 2013

Sams Case a Warning for Injury Attorneys

A recent Pennsylvania case raises a flag of warning for personal injury attorneys who use annuities in structured settlements. Personal injury, products liability, and workmen’s compensation cases are frequently settled in return for an annuity that provides long term periodic payments to the injured party.
Structured settlements are a well recognized method of providing income to meet the ongoing needs of the claimant while reducing the risk of improvident dissipation (i.e. “blowing the money”) that accompanies a lump sum settlement.  
Where the injured party may need Medicaid benefits in the future, the lawyer must consider the Medicaid implications of settlement arrangements. Medicaid rules are particularly complex and represent a significant trap for the unwary claimant and his or her lawyer. Consider the recent Pennsylvania case of Dustin Sams. 

Sams v. Department of Public Welfare

Mr. Sams received a brain injury when his motorcycle was struck by another vehicle. His injury lawsuit was eventually settled. As part of the settlement Sams’ guardian agreed to accept a structured settlement annuity for $232,474.15. Thereafter, the guardian began receiving monthly payments of $967.23, payable at an annual interest rate of 3% for 360 months to continue for the remainder of Sams’s life. His sister was named as secondary beneficiary of the annuity in the event of Sams' death during the guaranteed payment period.
Prior to receiving the annuity payments, Sams was receiving Medicaid financed Home and Community Based Long Term Care Services (HCBS-LTC). Because of the monthly annuity payments, Sams had to reapply for HCBS-LTC. When he did, the County Assistance Office informed him that he was ineligible for further medical assistance.  

DRA Sets Requirements for Annuities

Sams was no longer eligible for home care benefits because his annuity did not comply with the Medicaid requirements for annuities enacted as part of the Deficit Reduction Act of 2005 (DRA). Section 602 of the DRA governs the treatment of annuities in regards to qualification for Medicaid long term care services such as those needed by Mr. Sams.    
As a result of its non-compliance with the DRA, Sams’ annuity purchase was determined to be a disposition of assets without receiving fair market value, which meant that Sams would be ineligible for further HCBS-LTC benefits for a long time. The CAO imposed a period of ineligibility to run for over two years, from July 1, 2012, to November 22, 2014.  
Sams’ appeal to an administrative law judge and then to the Pennsylvania’s Commonwealth Court were denied. Sams v. Department of Public Welfare (PA Commonwealth Court, August 21, 2013).  

Bad Result Could Have Been Avoided with Medicaid Planning 

Mr. Sams could have continued to receive Medicaid funded home care benefits without interruption had his annuity complied with the DRA. 
One company that helps Pennsylvania lawyers purchase annuities that meet the full requirements of Medicaid law is PCM, located in Williamsport, PA. The PCM website ( contains a lot of information on DRA compliant annuities. DRA annuities have been used for years to ensure the eligibility of individuals and married couples for Medicaid. 
Mr. Sams had options that would have allowed his eligibility for Medicaid home care benefits to be preserved. The use of a DRA compliant annuity would have worked. Another common Medicaid planning option that could have been considered was the “special needs trust.” These tools can be used to protect an injured claimant’s entitlement to future Medicaid benefits.
The Sams case illustrates that the injury lawyer needs to take care to consider their client’s potential need for Medicaid Long Term Care benefits before they settle. So should a company issuing a settlement annuity. A lack of effective Medicaid advance planning can be disastrous for the client.  

Further Reading on Medicaid Annuities and Special Needs Trusts:

Disclosure: I am a shareholder in PCM which is referred to in this post.

Thursday, September 12, 2013

How to Pay for Long Term Care without Impoverishing your Spouse

About 70 percent of people age 65 or older will someday need long term care services and supports. Unfortunately, the cost of that care is generally not covered by Medicare or other health insurance. It can easily bankrupt the care recipient and destroy his family's financial security. It often does.
The Medicaid program is the most significant source of financial assistance for families struggling to meet the cost of long term care. But, for an applicant to be eligible for Medicaid benefits, his assets must not exceed statutory limits.

Medicaid Protections for the Spouse

If the applicant is married, the resources of his spouse are considered in determining Medicaid eligibility. Fortunately, Medicaid law includes provisions intended to protect the spouse from financial ruin. These protections include a well-known standard “community spouse resource allowance” (CSRA).   
Less well recognized are protections that allow a well-advised spouse to retain financial resources in excess of the standard CSRA. Perhaps most significant are a complicated set of Medicaid provisions that allow the non-applicant spouse to protect excess resources through the purchase of a special type of so-called Medicaid annuity.     
By purchasing a Medicaid annuity, a couple can spend down to the CSRA level and qualify immediately for Medicaid payment of long term care costs. (Of course, the applicant must otherwise qualify for long term care benefits under the program’s rules – such as level of care requirements.)
Some state Medicaid agencies don’t like Medicaid annuities. The annuities allow married couples to shift the cost of care  to the state. In an effort to reduce state Medicaid expenditures state agencies will sometimes inappropriately deny benefits to an applicant whose spouse has purchased a Medicaid qualified annuity.
But the legality of purchasing a Medicaid annuity to protect excess financial resources has been approved by courts across the country. The federal rules require it, and states must follow those federal rules in this area of law.
A key case is establishing the annuity planning option was James v. Richman, 547 F.3d 214 (3d Cir. 2008), which I’m proud to say was handled by attorney Matthew Parker of my law office, Marshall, Parker and Weber. Later appeals court cases in other circuits include:  Lopesv. Starkowski (2d Cir. 2012) and Morris v. Oklahoma Department of Human Services (10th Cir. 2012).

Recently, the United States Court of Appeals for the Eighth Circuit joined these other circuit courts in approving the use of Medicaid annuities. The case is Geston v. Anderson, decided September 10, 2013. The court’s opinion illustrates how couples can use Medicaid annuities to protect the future financial security of the spouse who does not need long term care.   

Mrs Geston’s Planning

John Geston entered a nursing home on July 21, 2010. At that time the Gestons filed an “asset assessment” form with the state Medicaid agency that showed that their countable assets exceeded the statutory Medicaid limit by $586,854.80.
The Gestons then began to reduce their resources. First, they purchased certain assets that Medicaid law does not count toward an applicant’s eligibility: they sold their primary residence and purchased a more expensive home, Mrs. Geston sold her car and purchased a more expensive car, and each purchased prepaid burial services.
Second, Mrs. Geston (the “community spouse”) purchased a single-premium immediate annuity for $400,000. The annuity was scheduled to pay her income of $2,734.65 per month over 13 years for a total return of $426,605.40. The annuity contract was “irrevocable” and could not be “transferred, assigned, surrendered or commuted during Mrs. Geston’s lifetime.
Under federal Medicaid law the community spouse’s income is excluded from Medicaid eligibility determinations regarding the institutionalized spouse. 42 U.S.C. § 1396r-5(b)(1). Because resources count toward the institutionalized spouse’s eligibility while the community spouse’s income does not, an asset’s classification as a “resource” of the couple or “income” of the community spouse can determine whether an institutionalized spouse qualifies for benefits.
After these expenditures, Mr. Geston applied for Medicaid benefits. The North Dakota Department of Human Services denied his application on the grounds that the annuity constituted a countable resource under North Dakota’s Medicaid statute. It concluded that the Gestons’ assets therefore exceeded the Medicaid asset limit. (North Dakota state law provides that an annuity can be treated as a resource if its payments raise the community spouse total income over a certain threshold).

State Opposition is Common

The Gestons filed a federal lawsuit to compel North Dakota to approve Mr. Geston’s Medicaid application. The lower court held in favor of the Gestons and North Dakota appealed to the Eighth Circuit Court of Appeals. A number of other state Medicaid agencies, including Hawaii, Kansas, Maryland, New Mexico, Oklahoma, Rhode Island, Tennessee and Connecticut, filed briefs in support of North Dakota’s appeal. 
The state Medicaid agencies came up with a number of ingenious, if strained, arguments in an effort to convince the court to disallow the annuity planning option. One of the arguments was that under North Dakota state law, the agency should be permitted to count the annuity as a resource to the extent it provided the community spouse with income in excess of a protected income standard. 
The state lost. The court rejected all of the Medicaid agency arguments and found in favor of the Gestons.  It said,
“the Gestons rely principally on two provisions of federal law to establish that Mrs. Geston’s annuity is unearned income that North Dakota may not count as a resource when determining Mr. Geston’s eligibility for Medicaid benefits. Like the other circuits to address this issue, we conclude that the arguments are persuasive. See Lopes v. Dep’t of Social Servs., 696 F.3d 180 (2d Cir. 2012); James v. Richman, 547 F.3d 214 (3d Cir. 2008).”
Basically, the courts are telling the state Medicaid agencies – if you don’t like the national policy on Medicaid annuities, you should seek a policy change in Congress, not in the courts.  

Expert Guidance Needed to Use the Annuity Protections

Medicaid annuities are a wonderful planning tool for a married couple who have resources in excess of the standard Medicaid spousal allowance. It's a pity that many couples are unaware of this option. In general, planning with Medicaid annuities is most beneficial for married couples. But there are even situations where this type of annuity can be beneficial for unmarried individuals as well.
It is critically important to get expert legal advice before engaging in Medicaid planning and purchasing an annuity. An ill-advised couple who purchase the wrong kind of annuity, or buy it at the wrong time, will likely end up in a worse position than where they started. And that can easily happen if you don't have expert guidance. 
And given continued Medicaid agency hostility to the use of annuities, be sure you are represented by an attorney who is going to be able to defend your planning in the event you get an initial denial. 
Married couples who reside in Pennsylvania can get additional information how to use a Medicaid annuity and other options to protect their assets from my law firm, Marshall, Parker and Weber, which can be reached at 1-800-401-4552.  Residents of other states may wish to seek the advice of a Certified Elder Law Attorney – a national list is available at

Tuesday, September 3, 2013

What Medicare Beneficiaries need to know about the New Health Insurance Marketplaces

What are Health Insurance Marketplaces

Over the next two months consumers will be bombarded with information about Health Insurance Marketplaces (sometimes called “exchanges.”) The marketplaces will be a great place for many consumers to shop for, compare, and purchase health insurance. It’s a new way for individuals, families, and employees of small businesses to get health insurance.

Beginning Oct. 1, consumers will be able to enroll in a private health insurance plan through a marketplace. You can do this by going online at or by calling 1-800-318-2596, 24 hours a day, 7 days a week. Open enrollment starts October 1, 2013. Plans and prices will be available then. Coverage will not start until at least January 1, 2014.

Each state will have its own separate marketplace. For now, the federal government will run the marketplace in Pennsylvania.

When you use your state’s Health Insurance Marketplace, you will fill out an application and see all of the health plans available in your area. You'll find out if you can get lower costs on your monthly premiums for private health insurance. You'll learn if you qualify for lower out-of-pocket costs.

The Marketplace will also tell you if you qualify for free or low-cost coverage available through Medicaid or the Children's Health Insurance Program (CHIP).

By August the Pennsylvania insurance department had issued preliminarily approval for a group of substantial insurers to participate in the Pennsylvania marketplace. They include:

  • Aetna 
  • Capital BlueCross
  • Blue Cross of Northeastern Pennsylvania
  • Geisinger Health System
  • HealthAmerica PA (subsidiary of Coventry, which was acquired by Aetna in 2013)
  • Highmark
  • Keystone Health Plan and QCC Insurance Company (subsidiaries of Independence Blue Cross)
  • University of Pittsburgh Medical Center
The Marketplaces are designed to make health insurance more attainable and affordable. They will be particularly helpful for people who are currently uninsured and for individuals with low or middle incomes. Nearly 900,000 Pennsylvania residents will be eligible for tax credits to help them pay for coverage purchased through the health insurance marketplace, according to Families USA. 

The marketplaces may be especially welcome for older adults 55-64 who have lost their employer based health insurance but are too young for Medicare.

For more information on how the marketplaces will work see the following government YouTube video:

What if I have Medicare?

Should seniors visit the health insurance marketplace to shop for Medicare Coverage? The answer is “No.” If you have Medicare, you already have health insurance coverage. The marketplace is not designed for you.

Medicare is not part of the Health Insurance Marketplace. You don’t need to, and should not go there to shop for Medicare coverage. Medicare insurance will not be available through the marketplaces. 

You will continue to get your Medicare including your choice of Original Medicare or Medicare Advantage, as well as Part D and Medicare Supplement (Medigap) coverage outside of the marketplace. For information on these Medicare programs, visit

The Marketplace won’t affect your Medicare benefits and will not change them. No matter how you get Medicare, whether through Original Medicare or a Medicare Advantage Plan, you’ll will still have the same benefits and security you have now. You won’t have to make any changes.

Medicare has its own separate open enrollment period during which you can shop for coverage. This is different from the enrollment period for the marketplaces. Medicare’s open enrollment period runs from October 15 – December 7, 2013. During that time you can review your health and prescription drug coverage and make a change to your coverage for next year, if you want to.

When you are considering your Medicare enrollment options, make sure that you are reviewing Medicare Plans and not Marketplace options. If you are satisfied with your current Medicare coverage you don’t need to do anything.

Note: a few high income Medicare beneficiaries – those who are paying special premiums based on their high incomes - might conceivably decide to choose a marketplace plan over Medicare according to an article in Kaiser Health News. I personally think that most high income beneficiaries should be able to easily afford the extra Medicare premiums and are best advised to stick with Medicare. In any event, the vast majority of Medicare beneficiaries should just ignore their state’s health insurance marketplace.

Beware of Scams

The risk of scams is likely to increase during the confusing enrollment periods ahead of us. The United States Department of Health and Human Services gives the following cautionary advice to people with Medicare coverage:

- The Medicare open enrollment period is a time where there’s a higher risk for fraudulent activities.

- It’s against the law for someone who know that you have Medicare to sell you a Marketplace plan

- DO NOT share your Medicare number or other personal information with anyone who knocks on your door or contacts you uninvited to sell you a health plan.

Obamacare Benefits People on Medicare

The health insurance marketplace is an important aspect of Obamacare that will benefit millions of Americans. It’s just not designed for people on Medicare.

But Obamacare is already providing other very important advantages to Medicare beneficiaries. For example, Medicare benefits have already expanded under the health care reform law to include things like free preventive benefits, cancer screenings, and an annual wellness visit. Obamacare is also saving money for seniors who are in the prescription drug “donut hole” with discounts on brand-name prescription drugs.

Further Reading

No Shopping Zone: Medicare Is Not Part Of New Insurance Marketplaces