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James v. Richman

March 20, 2006

ROBERT A. JAMES, BY HIS NEXT FRIEND AND ATTORNEY IN FACT, JOSEPHINE A. JAMES, PLAINTIFF
v.
ESTELLE B. RICHMAN, IN HER OFFICIAL CAPACITY AS SECRETARY OF THE COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF PUBLIC WELFARE, DEFENDANTS



The opinion of the court was delivered by: A. Richard Caputo United States District Judge

MEMORANDUM

Before me is the Plaintiff's Request for Temporary Restraining Order and Motion for Preliminary Injunction. (Doc. 10). The request and motion seek to enjoin Estelle B. Richman, the Secretary of the Commonwealth of Pennsylvania Department of Public Welfare to cease denying Medicaid coverage to the plaintiff and to order the defendant, Ms. Richman, to issue Medicaid from the date of requested eligibility throughout the pendency of this case.

Because the plaintiff is likely to succeed on the merits and will suffer irreparable harm if the injunction is not granted, I will enter a restraining order.

DISCUSSION

The facts are not in dispute. By way of background, Pennsylvania participates in the Federal Medicaid Program established by Title XIX of the Social Security Act, also known as the Medicaid Act, 42 U.S.C. §1396 et seq. Under the Act, the states are granted federal funding to establish plans to dispense assistance to qualified needy individuals. The federal funding is conditioned on the state's adoption of a plan which complies with specific federal requirements. The Department of Public Welfare ("Department") is the Pennsylvania regulatory body charged with administering this program throughout the Commonwealth of Pennsylvania.

The Medicare Catastrophic Coverage Act of 1988 ("MCCA"), 42 U.S.C. § 1396r-5, amended the Medicaid Act to provide for spousal impoverishment provisions which "permit a spouse living at home (called the `community spouse') to reserve certain income and assets to meet the minimum monthly maintenance needs he or she will have when the other spouse (the `institutionalized spouse') is institutionalized, usually in a nursing home, and becomes eligible for Medicaid." Wisconsin Department Health and Family Services v. Blumer, 534 U.S. 473, 478 (2002). The court also found that Congress sought to bar financially secure couples from Medicare assistance. Id. at 480.

The MCCA provides that "no income of the community spouse shall be deemed available to the institutionalized spouse." 42 U.S.C. § 1396r-5(b)(1). "The community spouse's income is thus preserved for that spouse and does not effect the determination whether the institutionalized spouse qualifies for Medicaid." Blumer, 534 U.S. at 480-81.

MCCA shelters a standard amount of assets called "Community Spouse Resource Allowance" or "CSRA." Id. at 477. To determine the CSRA, the total of all the couples' resources whether owned jointly or severally, is calculated as of the time one spouse is institutionalized; half of that total is then allocated to each spouse. 42 U.S.C. § 1396r-5(c)(1)(A). That amount is the CSRA and is subject to a ceiling. 42 U.S.C. § 1396r-5(c)(2)(B), (f)(2)(A), (g). In determining eligibility, the CSRA is not considered available to the institutionalized spouse, but all resources above the CSRA must be spent for that spouse in order for that spouse to be eligible. Blumer, 534 U.S. at 482-83.

As a part of this regimen, an institutionalized spouse otherwise eligible for Medical Assistance, may be denied Medicaid eligibility in the event that that person or his or her spouse has transferred a non-exempt asset for less than fair market value during a period, generally thirty-six (36) months, before applying for medical assistance. 42 U.S.C. § 1396p (c)(1)(A) and (c)(1)(B)(I). If there is such an asset transferred during this "look back" period, then the applicant is subject to a penalty, a period of ineligibility for assistance for nursing home care.

In this case, the plaintiff, Robert A. James, entered a nursing facility in Wilkes-Barre, Pennsylvania on August 10, 2005, at which time he was seventy-seven (77) years old. On September 20, 2005, plaintiff filed a Resource Assessment with the Department of Public Welfare, setting forth that plaintiff had available resources on the date of his admission to the nursing facility totaling $381,443.00. After allowing the CSRA, and the institutionalized spouse allowance, there was $278,343.00 in available resources. In order to reduce their assets to the required level of spousal impoverishment, the plaintiff's wife, Josephine, purchased a single premium immediate irrevocable annuity from General Electric Insurance Company for $250,000.00. The annuity was payable to plaintiff's wife in monthly amounts of $2,937.71 from October 1, 2005 to September 1, 2013, an eight (8) year period. The terms of the annuity provides "This contract may not be surrendered, transferred, collaterally assigned, or returned for a return of the premium paid. This contract is irrevocable and has no cash surrender value. An Owner may not amend this contract, or change any designation under this contract." Plaintiff's spouse also purchased an automobile for $28,550.00. At this point, all of plaintiff's available resources beyond the permitted allowances had been spent or converted to the annuity.

Subsequent to the application for Medicaid coverage seeking eligibility for September 15, 2005, the Department issued a notice to the plaintiff advising that the plaintiff was ineligible for nursing home payments because excess resources existed due to the availability of the $250,000.00 annuity. At the time of the annuity purchase, the plaintiff's spouse was seventy-eight (78) years of age and her life expectancy was 10.24 years. Affidavit of Josephine A. James, Doc. 15. The parties agree that the annuity is actuarially sound.

The reasons for the rejection for assistance is that the Defendant contends that the annuity has a value of $185,000.00 and therefore represents proceeds that are beyond the CSRA, and are therefore available for payment for nursing care. As a result, the Department is denying coverage. Defendants offer the Affidavit of Michael Goodman, the CEO of J.G. Wentworth, a finance company specializing in the purchase of annuities, as evidence of the value of the annuity. (See Def. Ex. A to Def. Brief in Opposition to Plaintiff's Request for Temporary Restraining Order and Motion for Preliminary Injunction, Doc. 17).

I. Jurisdiction

The complaint sets forth the claim that the Commonwealth has enacted legislation that is not consistent with Federal law and one or more parts of that law has been relied upon for the denial of Medicaid benefits to plaintiff. While the Medicaid Act does not guarantee rights to individuals, it compels states to draft a plan that is in conformity with Federal law. See Sabree v. Richardson, 367 F.3d 180, 182 (3d Cir. 2004). When a state drafts a plan that is not in conformity with the law, and the plan leads to the denial of Medicaid benefits, an adversely affected applicant has grounds to ...


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