## Facts

- Benjamin Johnson, age 83, lived in a nursing home in Tennessee.
- Benjamin and his wife, Wilma Johnson, applied to the Tennessee Department of Human Services for Medicaid coverage of Benjamin’s nursing-home care.
- Applying the spousal-impoverishment provisions of the Medicare Catastrophic Coverage Act of 1988 (MCCA), the department calculated the couple’s combined monthly income as $1,358.
- The department determined that $1,358 was $432 below the minimum monthly maintenance needs allowance (MMMNA) for the community spouse.
- The department calculated the couple’s combined nonexempt resources as $164,694 and set Wilma’s community spouse resource allowance (CSRA) at $82,347.
- Because the couple’s remaining countable resources exceeded Medicaid’s resource limits, the department found Benjamin ineligible until the couple spent down additional assets.
- The Johnsons appealed administratively, arguing that Wilma’s CSRA had to be increased so that, if invested, it would generate enough income to cover the $432 monthly MMMNA shortfall.
- The Johnsons contended Wilma’s CSRA should be increased to about $172,800—effectively allowing her to retain essentially all of the couple’s nonexempt assets—because investing that amount would yield the missing $432 per month.
- A hearing officer denied the request to increase the CSRA.
- The Johnsons sued Gina Lodge, the department’s secretary, claiming the MCCA required Tennessee to increase the CSRA under these circumstances.
- Tennessee responded that no CSRA increase was required because Wilma could use funds within the default CSRA to buy a $37,073 annuity that would pay $432 per month.
- The district court consolidated the Johnsons’ case with a similar lawsuit brought by John and Julia Crips, who advanced the same statutory theory.

## Issues

1. Whether the MCCA requires a state Medicaid agency to increase the community spouse’s CSRA whenever the community spouse’s income is below the MMMNA, so that retained resources must be set high enough to generate income covering the shortfall.
2. Whether Tennessee could comply with the MCCA by keeping the CSRA at the default amount and expecting the community spouse to convert part of that allowance into income (e.g., by purchasing an annuity) to cover the MMMNA gap.

## Decision

- The court ruled for Secretary Lodge and upheld Tennessee’s denial of the requested CSRA increase.
- The court held that the MCCA did not require Tennessee to increase Wilma’s CSRA to the higher amount the Johnsons requested solely because of an MMMNA shortfall.
- The court accepted Tennessee’s position that the default CSRA could be sufficient if it allowed the community spouse to obtain the missing income through a permitted financial arrangement, such as purchasing an annuity paying $432 per month.
- The court rejected the Johnsons’ interpretation that would effectively allow the community spouse to retain virtually all of the couple’s nonexempt assets as CSRA whenever there is an MMMNA shortfall.

## Legal Principles

- The MCCA’s spousal-impoverishment provisions set a standard method for calculating the CSRA and provide a mechanism for review, but they do not mandate that the CSRA be raised to whatever level a spouse claims is necessary to generate investment income equal to an MMMNA gap.
- An MMMNA shortfall does not, by itself, entitle the community spouse to a CSRA increase to an amount that would shield most or all marital resources from Medicaid eligibility calculations.
- A state may address an MMMNA shortfall through lawful treatment of resources within the existing CSRA, including expecting the community spouse to convert a portion of resources into an income stream (such as an annuity), rather than increasing the CSRA above the default figure.
- The spousal-impoverishment framework reflects Congress’s effort to protect the community spouse from insufficient support while preserving Medicaid’s role as coverage after available resources are applied.

## Conclusion

In Johnson v. Lodge, the Middle District of Tennessee held that the MCCA did not require Tennessee to increase a community spouse’s resource allowance to the level requested by the Johnsons simply because the community spouse’s income fell below the MMMNA; Tennessee could keep the CSRA at the default amount where the community spouse could use resources within that allowance to obtain the additional income needed to cover the monthly shortfall.


Johnson v. Lodge, 673 F. Supp. 2d 613 (2009)