## Facts

- Betty Hutcherson required long-term nursing-facility care and applied in June 2007 for Medicaid long-term care assistance through Arizona’s Medicaid agency (AHCCCS).
- Because the couple’s assets exceeded eligibility limits, John Hutcherson purchased a $100,000 irrevocable, non-transferable annuity in his name to reduce countable resources.
- The annuity paid $2,781.63 monthly for 36 months; AHCCCS was designated the first remainder beneficiary and the couple’s daughter, Rebecca Hutcherson, the second remainder beneficiary.
- John died in April 2008 with roughly $75,000 remaining in the annuity.
- Under the annuity’s terms, the beneficiary could elect a lump sum or continued monthly payments; AHCCCS elected continued payments.
- AHCCCS applied the annuity payments to pay Betty’s ongoing Medicaid-covered care after John’s death and, where payments exceeded monthly care costs, to reimburse itself for about $24,000 in Medicaid costs previously paid on Betty’s behalf.
- After Betty ceased receiving Medicaid benefits and AHCCCS recovered its expenditures, the remaining annuity balance was released to Rebecca.
- Rebecca sued seeking a declaration that AHCCCS had no right to recover from the annuity, or at minimum no right to recover for care provided after John’s death.

## Issues

1. Whether the 2006 amendment to 42 U.S.C. § 1396p(c)(1)(F)(i) gives a state Medicaid agency, as primary remainder beneficiary, an enforceable right to recover Medicaid costs from a community spouse’s annuity for the institutionalized spouse’s care.
2. If such a right exists, whether recovery is limited to medical assistance paid as of the community spouse’s death, or may include costs incurred after that death.

## Decision

- The Ninth Circuit affirmed summary judgment for AHCCCS.
- The court held that 42 U.S.C. § 1396p(c)(1)(F)(i), as amended in 2006, creates a state right to recover as remainder beneficiary against a community spouse’s annuity for the institutionalized spouse’s medical costs.
- The court held the state’s recovery is not limited to amounts paid as of the community spouse’s death; it may include assistance paid after death, up to the total amount of medical assistance paid on behalf of the institutionalized spouse.
- AHCCCS therefore could receive post-death annuity payments to cover Betty’s continuing costs and to reimburse prior expenditures until its total Medicaid outlays were repaid.

## Legal Principles

- Under 42 U.S.C. § 1396p(c)(1)(F)(i), when an annuity is purchased by or for a Medicaid applicant or the applicant’s spouse during the look-back period, the state must be named as remainder beneficiary in the first position for at least the total amount of medical assistance paid for the institutionalized individual.
- The remainder-beneficiary requirement operates as a substantive, enforceable state recovery interest in the annuity’s remaining value after the annuitant’s death, not merely a condition of eligibility.
- The “total amount of medical assistance paid” cap permits recovery for all assistance paid on behalf of the institutionalized spouse, without a cutoff at the community spouse’s date of death.

## Conclusion

The Ninth Circuit held that Arizona’s Medicaid agency, named as primary remainder beneficiary on a community spouse’s annuity, could recover from remaining annuity payments up to the total Medicaid assistance paid for the institutionalized spouse, including costs incurred after the community spouse’s death.


Hutcherson v. Ariz. Health Care Cost Containment Sys. Admin., 667 F.3d 1066 (9th Cir. 2012)