United States Court of Appeals for the Third Circuit Issues Opinion in the Matter of Weatherbee v. Richman

On November 12, 2009, Third Circuit Court of Appeals issued a non-precedential decision in the matter of Weatherbee v. Richman. Weatherbee addressed the issue as to whether an annuity purchased by a community spouse in a qualified retirement account can be properly regarded as a "resource" for purposes of Medicaid eligibility. The Pennsylvania Department of Welfare had taken the position that the annuity was, in fact, a resource which could be "counted" for purposes of declining Medicaid eligibility for the institutionalized spouse. The Federal District Court issued an order precluding the Department from denying Medicaid benefits to Weatherbee. Pennsylvania appealed the District Court's decision.

The Third Circuit affirmed the District Court's ruling stating that the Deficit Reduction Act unambiguously indicates that the conversion of IRA assets to an annuity could not be a basis to deny eligibility for benefits where the annuity otherwise complies with applicable law.

While the Third Circuit's holding does not serve as precedent for New Jersey State Courts, the well reasoned rulings of the Third Circuit and Federal District Court, have substantial, persuasive value for similar cases arising in New Jersey. This is most relevant as, like Pennsylvania, New Jersey has used the conversion of a community spouse's IRA assets to an annuity as a basis for denying Medicaid eligibility for an institutionalized spouse. Pending cases should clarify this issue in New Jersey. The Third Circuit's decision in Weatherbee can be found at http://www.ca3.uscourts.gov/opinarch/091399np.pdf