## Facts

- John Geston entered a skilled nursing facility and applied for Medicaid long-term care benefits; his wife, Carolyn Geston, remained in the community.
- Before John’s application, Carolyn purchased an irrevocable, non-assignable, single-premium annuity for about $400,000 that paid roughly $2,735 per month for 13 years, consistent with her life expectancy.
- Federal Medicaid spousal-impoverishment rules limit countable resources for an institutionalized spouse and permit a community spouse to retain a specified resource allowance.
- Federal Medicaid law treats certain “Medicaid-qualifying” annuities (irrevocable, non-assignable, actuarially sound, equal periodic payments without deferral or balloon payments) as the community spouse’s income rather than a countable resource.
- North Dakota law imposed an additional condition: if annuity payments caused the community spouse’s income to exceed a state-set maximum monthly income level, the annuity would not be treated as separate income and its corpus would be treated as a countable resource.
- Because Carolyn’s other income plus the annuity payments exceeded the state cap, the North Dakota Department of Human Services treated the annuity’s corpus as a countable resource.
- Counting the annuity as a resource placed the couple’s resources above the Medicaid resource limit, and John was found ineligible for Medicaid.

## Issues

1. Whether federal Medicaid law preempts a state statute that adds an income-cap condition causing a federally compliant community-spouse annuity to be treated as a countable resource.
2. Whether, in determining the institutionalized spouse’s Medicaid eligibility, a community spouse’s federally compliant annuity must be treated as the community spouse’s income rather than an available resource.

## Decision

- The court granted the plaintiffs’ motion for summary judgment and denied the defendant’s cross-motion.
- The court held that federal Medicaid law preempted N.D.C.C. § 50-24.1-02.8(7)(b) to the extent it required treating a federally compliant community-spouse annuity as a countable resource based on the community spouse’s income level.
- The court ruled that Carolyn’s annuity corpus could not be counted as an available resource for John’s Medicaid eligibility determination.

## Legal Principles

- Medicaid is a cooperative federal-state program; participating states must administer their plans consistent with federal requirements, and conflicting state law is invalid under the Supremacy Clause.
- Federal spousal-impoverishment provisions distinguish “resources” used for eligibility from “income,” and the community spouse’s income is generally not treated as available to the institutionalized spouse.
- A community spouse annuity that meets federal “Medicaid-qualifying” criteria is treated as an income stream to the community spouse rather than a countable resource.
- A state rule that adds conditions reclassifying a federally compliant annuity as a countable resource conflicts with federal objectives and is preempted under conflict-preemption principles.

## Conclusion

The court held that North Dakota could not apply an income-cap condition to convert a federally compliant community-spouse annuity from income into a countable resource, and it required the state to determine Medicaid eligibility without counting the annuity’s corpus as an available resource.


Geston v. Olson, 857 F. Supp. 2d 863 (D.N.D. 2012)