Maine’s Section 1115 waiver application seeks to blatantly skirt annuity protections for no good demonstration reason.
The state of Maine, as part of a negotiation for a Medicaid expansion under the ACA, has requested a Section 1115(a) waiver from the Secretary of HHS to waive certain mandatory provisions of the Medicaid Act. Approval of a demonstration project under Section 1115 requires that the Secretary examine three issues: “first, whether the project is an ‘experimental, pilot or demonstration project.’ Second, whether the project is ‘likely to assist in promoting the objectives of the act.’ Third, ‘the extent and period’ for which she finds the project is necessary.”
Complementing other highly objectionable waivers being requested, Maine DHHS seeks to waive the prohibition of imposing a transfer penalty for the purchase of otherwise Medicaid-compliant annuities for long-term care coverage determinations and institute reasonable minimum pay out periods for the annuitant. In support of this request, Maine reported that since 2011, a whopping 12 individuals in the state (Maine has a population of 1,328,361 reported in 2017) had purchased annuities valued at $400,000 or more within two months of their spouse applying for long-term coverage so as to shelter assets and qualify for Medicaid.
In addition to the request to apply a transfer penalty to these types of annuities, Maine DHHS seeks to amend policies around the actuarial soundness criteria for these annuities. Specifically, DHHS wants to require that the minimum length of the payout of a Medicaid-compliant annuity equal 80 percent of the life expectancy of the annuitant, regardless of whether the annuitant is the institutionalized spouse or the non-institutionalized spouse. Maine does not clearly say whether the purchase of an annuity that meets the “80% rule” will be considered payment for fair market value for purposes of their new transfer penalty rule.
Maine lists as its experimental hypothesis: “The inability to impose restrictions and transfer penalties on Medicaid-compliant annuities has resulted in MaineCare eligibility for individuals who have personal assets that could be used to purchase health insurance coverage or pay for medical bills. We will record the number of transfer penalties applied to applicants pre- and post-demonstration.” This does not read like a social science hypothesis at all, but as a values statement in opposition to annuity planning. There is no further discussion about how testing this statement will assist in promoting the objectives of the Medicaid Act, or how it will impact other aspects of MaineCare.
Congress enacted Section 1115 of the Social Security Act to ensure that certain of the Act’s otherwise mandatory requirements did not “stand in the way of experimental projects designed to test out new ideas and ways of dealing with the problems of public welfare recipients.” Thus, approval for a project under this provision requires the Secretary to “make some judgment that the project has a research or a demonstration value.” “While § 1315 obviously represents a congressional judgment that, in certain circumstances, such an override is appropriate, we doubt that Congress would enact such comprehensive regulations, frame them in mandatory language, require the Secretary to enforce them, and then enact a statute allowing states to evade these requirements with little or no federal agency review.”
The Department of Health and Human Services has stated that Medicaid-qualifying annuities are protected income streams that coheres with the policy goals of Medicaid — in particular, protecting community spouses from impoverishment by permitting them to retain some of their assets, while recognizing that couples must apply a fair share of their combined resources toward the cost of care before receiving benefits. This 1115(a) waiver request further restricting these annuities completely fails the Beno test and if the Secretary approves it, litigation for a preliminary injunction and further relief would be warranted, not only to protect Maine Medicaid applicants and their spouses, but to protect our clients in all jurisdictions who face creative state directors who are hostile to annuities and looking to legislate by other means.
Kathleen Kienitz, CELA, of Lewiston, Maine, is closely following this waiver application and states, “At one time, I was proud to be practicing elder law in Maine because our DHHS was kinder and more compassionate than some of our neighboring New England states. With the LePage administration, those days have been eclipsed. Now our DHHS seems to be more concerned with bragging rights on how much money can be squeezed from the Medicaid budget, often couched in language that appears to blame the poor and needy for being poor and needy. Our governor blocked legislative attempts to allow Medicaid expansion under the ACA. This new waiver proposal follows suit. Our Elder Law Section is rallying to fight the proposal and is grateful for the work that NAELA is doing to support our efforts.”
Maine’s comment period for this draft waiver ended on May 25, 2017. As of the date of this publication, the waiver application has not been posted on Medicaid.gov.