Hutcherson v. Arizona Health Care Cost

Under 42 U.S.C. § 1396p(1)(F)(i), the State is entitled to recover medical costs stemming from the institutionalization of an individual receiving Medicaid assistance out of an annuity purchased by the spouse. The recovery is not limited to only medical care costs incurred after the spouse’s death.

Appellant’s mother, Betty Hutcherson, qualified for Medicaid assistance from Arizona Health Care Cost Containment System Administration ("AHCCCS") for her long-term nursing care. In order to qualify for Medicaid, Betty’s husband acquired an annuity in his name to “spend down” his assets, with AHCCCS on record as the beneficiary in compliance with Medicaid statute 42 U.S.C. § 1396p(1)(F)(i). After Betty’s husband died in 2008, AHCCCS collected the annuity payments to cover both Betty’s ongoing health care costs and those incurred prior to her husband’s death. Appellant sought a declaration that AHCCCS was not entitled to collect from the annuity at all, or in the alternative, not entitled to collect on it after Betty’s husband’s death. The district court granted summary judgment for AHCCCS. The Ninth Circuit noted that Congress passed the Medicare Catastrophic Coverage Act ("MCCA") with the aim of protecting spouses of Medicaid beneficiaries from indigence while stopping abuse of the system from well-off couples who were able to qualify for assistance while completely sheltering their assets. Notwithstanding this objective, the option of purchasing an annuity to “spend down” assets was preserved if the State was named as beneficiary. The court held that under a plain reading of § 1396p(1)(F)(i), AHCCCS was entitled to recover on the annuity as the primary beneficiary for Betty’s medical institutionalization costs both before and after her husband’s death. The Court also found that this interpretation of the statue was consistent with Congress’ purpose to keep spouses of institutionalized persons from poverty while ending wealthy couples' abuse of the system. AFFIRMED.