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James v. Richman

November 12, 2008

JOSEPHINE A. JAMES, AS THE ADMINISTRATOR FOR THE ESTATE OF ROBERT A. JAMES
v.
ESTELLE RICHMAN, IN HER OFFICIAL CAPACITY AS SECRETARY OF THE COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF PUBLIC WELFARE, APPELLANT.
*(AMENDED PER THE CLERK'S ORDER DATED 6/28/07)



On Appeal from the United States District Court for the Middle District of Pennsylvania. (D.C. Civ. No. 05-cv-02647) District Judge: Hon. A. Richard Caputo.

The opinion of the court was delivered by: Roth, Circuit Judge

PRECEDENTIAL

Argued on March 4, 2008

Before: SCIRICA, Chief Judge, FISHER and ROTH, Circuit Judges

OPINION

Estelle B. Richman, Secretary of the Commonwealth of Pennsylvania, Department of Public Welfare (the Department), appeals the order of the District Court for the Middle District of Pennsylvania, enjoining the Department from denying Medicaid benefits to Robert A. James. The central issue to the appeal is whether an annuity, purchased by James's wife Josephine, may be treated by the Department as an available resource in calculating James's eligibility for Medicaid benefits. We agree with the District Court that the Department may not so treat it. We will therefore affirm the judgment of the District Court.

I. BACKGROUND

A. Factual Background

Medicaid applicants are required to exhaust all available resources in order to be eligible for benefits. Under the amendments to Medicaid implemented by the Medicare Catastrophic Coverage Act of 1988 (MCCA), 42 U.S.C. § 1396r-5, a spouse living at home (the "community spouse") may reserve certain income and assets to meet his or her monthly needs, making them unavailable to the institutionalized spouse. 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), but shelters only a limited subset of the community spouse's assets under the "community spouse resource allowance" or CSRA. 42 U.S.C. § 1396r-5(c).

Robert A. James was a resident of Summit Health Care nursing facility in Wilkes-Barre, Pennsylvania. He was admitted on August 10, 2005, and died on March 24, 2007, while this case was on appeal. James was married to Josephine A. James.

On September 20, 2005, James filed a Resource Assessment with the Department of Public Welfare at the Luzerne County Assistance Office. He stated in the Resource Assessment that, as of August 10, 2005, he and his wife's available resources totaled $381,443.00. After allowing for the CSRA and the institutionalized spouse's allowance, James and his wife then had available resources totaling $278,343.00.

In order to reduce their assets to the level that would qualify Robert James for Medicaid benefits, on September 12, 2005, Josephine James had purchased for $250,000 a single premium immediate irrevocable annuity from General Electric Assurance Company. The annuity was payable to Josephine James over an eight year period in monthly amounts of $2,937.71, beginning October 1, 2005, and ending September 1, 2013. The annuity's terms of the endorsement provided that "[t]his 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." The parties agree that the annuity is actuarially sound.

On September 15, 2005, Robert James also purchased a new automobile for $28,550. At this point, all the James's resources in excess of those permitted by the CSRA and the institutionalized spouse's allowance had been spent or converted to the annuity.

James's September 20, 2005, Resource Assessment and application for Medicaid coverage to assist with the payment of his nursing facility bill sought eligibility as of September 15, 2005. On November 22, 2005, the Luzerne County Assistance Office determined that Robert James was not eligible for Medicaid assistance because he ...


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