State of Maine “Name on the Check Rule” Decision

Paper, glasses and a laptop

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The Institutionalized Spouse (IS) applied for MaineCare as she was currently living in a nursing home. When she received the amount she was to pay for her care, the annuity income was included in the cost calculation. The Department of Health and Human Services argued that including the annuity income in her cost of care calculation was correct. An administrative hearing was then scheduled to come to a conclusion on this issue.

The basic facts of this case were agreed upon on both sides; it was the application of regulations that needed to be determined.

The Department argued that if they were to exclude the annuity income from the IS’s monthly income, it would contradict the MaineCare policy and “render federal and state spousal impoverishment legislation irrelevant.” The IS is simply moving her income to her husband so her co-pay would be less.

The court looked at two provisions from the MaineCare Eligibility Manual. The first provision identified ownership of income and the second discussed treatment of annuities.

According to the Department, if the IS was able to transfer her income to the CS, she could transfer her entire income so that Medicaid would have to pay for all of her care. The IS should not be allowed to “cherry pick” certain provisions of MaineCare and should, rather, look at the program as a whole.

They also argued that the provision that “Payments from annuities are considered income to the individual for whom the payments are designated” did not mean that the payments from the annuity belong to the CS. Instead, they explain that the “person designated is the owner and the annuitant of the annuity.” Thus, the CS was the owner and the annuitant.

Also, the Department said the beneficiary of an annuity cannot benefit from that annuity until the owner has passed away and since the IS was still alive, the income must be considered hers. The IS also agrees that the income distributed from the annuity is taxable to her, so she must also be the person who receives the income.

In response to the Department, the IS stated that taxation does not equal ownership. Even the IRS does not equate ownership with taxation. The hearing officer agreed with the IS in that taxation does not equal ownership.

She also says MaineCare policy supports her side as the citations in the manual are very clear so there is no need to “investigate the legislative intent.” She also states that she is not “cherry picking” the rules because the Department did not come forward with any other rules that would be of concern in this case.

The annuity she created followed all the regulations and, ultimately, the annuity income was never hers to begin with. “An annuity, at its inception, directs income to an individual per the terms of the contract.” So the IS wasn’t diverting any income, the income was always the CS’s income.

The hearing officer concluded that “the Department incorrectly included the income from the annuity when calculating the IS’s cost of care. This is because the annuity in question meets the criteria, under the rules, to neither be counted as an available resource for the IS nor counted as an impermissible transfer of assets. The annuity also meets the ownership rules.”

The hearing officer also agreed that annuities are a unique entity and the Department failed to recognize this. They directed the department to recalculate the IS’s cost of care, excluding the income from the annuity.

The full document text can be found here.