Title: Dermody v. Executive Office of Health & Human Services

State: massachusetts

Issuer: Massachusetts Supreme Court

Document:

NOTICE:  All slip opinions and orders are subject to formal 
revision and are superseded by the advance sheets and bound 
volumes of the Official Reports.  If you find a typographical 
error or other formal error, please notify the Reporter of 
Decisions, Supreme Judicial Court, John Adams Courthouse, 1 
Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-
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SJC-13199 
 
LAURIE A. DERMODY  vs.  EXECUTIVE OFFICE OF HEALTH AND HUMAN 
SERVICES. 
 
 
 
Middlesex.     February 2, 2022. - January 27, 2023. 
 
Present:  Budd, C.J., Gaziano, Lowy, Cypher, Kafker, Wendlandt, 
& Georges, JJ. 
 
 
Medicaid.  MassHealth.  Annuity.  Contract, Construction of 
contract.  Federal Preemption.  Statute, Construction, 
Federal preemption. 
 
 
 
Civil action commenced in the Superior Court Department on 
August 4, 2017. 
 
The case was heard by C. William Barrett, J., on motions 
for summary judgment. 
 
The Supreme Judicial Court granted an application for 
direct appellate review. 
 
 
Jesse M. Boodoo, Assistant Attorney General, for the 
defendant. 
Lisa M. Neeley for the plaintiff. 
Patricia Keane Martin, Clarence D. Richardson, Jr., & 
C. Alex Hahn, for Massachusetts Chapter of the National Academy 
of Elder Law Attorneys, amicus curiae, submitted a brief. 
 
 
 
2 
BUDD, C.J.  Robert G. Hamel purchased an annuity issued by 
Nationwide Life Insurance Company (Nationwide) to help his wife, 
Joan Hamel,1 become eligible for Medicaid benefits to pay for her 
long-term care.  Robert named the Commonwealth as the primary 
remainder beneficiary to the "extent benefits paid," and the 
plaintiff, his daughter Laurie A. Dermody, as the contingent 
remainder beneficiary.  When Robert died before the end of the 
annuity period, the plaintiff brought suit against the Executive 
Office of Health and Human Services (Commonwealth) and 
Nationwide contending that she, rather than the Commonwealth, 
was entitled to the remainder of the annuity.  A Superior Court 
judge agreed with the plaintiff.  For the reasons that follow, 
we reverse.2 
Facts and prior proceedings.  We recite the undisputed 
facts, reserving some details for later discussion.  In May 
2015, Joan was admitted to a skilled nursing facility for long-
term care.  The following month, Robert used spousal resources 
to purchase an annuity contract (annuity) from Nationwide.  
Robert paid a single premium of $172,000 for the annuity, which 
provided for a monthly payment to him of $2,873.69 for a five-
 
 
1 As they share a surname, we refer to Joan and Robert Hamel 
by their given names. 
 
 
2 We acknowledge the amicus brief of the Massachusetts 
Chapter of the National Academy of Elder Law Attorneys. 
 
3 
year term.3  It is undisputed that the purchase of the annuity 
was intended to help Joan become eligible for long-term care 
benefits pursuant to the Medicaid Act and MassHealth 
regulations.  In the application for the annuity, Robert listed 
"Commonwealth of MA the Extent Benefits Paid [sic]" as the 
primary remainder beneficiary and the plaintiff as the 
contingent remainder beneficiary.4 
In July 2015, Joan submitted an application for MassHealth 
long-term care benefits, which was approved in December of that 
same year.  Robert, who never applied for or received MassHealth 
benefits on his own behalf, died in December 2016.  In June 
2017, MassHealth informed Nationwide that it was making a claim 
on the annuity up to the total amount of medical assistance paid 
on behalf of Joan, which at that time totaled $135,511.99.5  In 
July 2017, Nationwide paid $118,517.50 to the Commonwealth, 
which was the full remaining value of the annuity proceeds. 
 
3 The parties do not dispute that the annuity Robert 
purchased was sound actuarially, meaning it was intended to be 
paid out in full to Robert during his lifetime according to his 
life expectancy.  See Normand v. Director of the Office of 
Medicaid, 77 Mass. App. Ct. 634, 637 (2010). 
 
 
4 The annuity itself states that the primary remainder 
beneficiary is "State of MA Medicaid Per Application" and the 
contingent beneficiary is the plaintiff. 
 
 
5 The Commonwealth represented in November 2021 that Joan 
continued to receive MassHealth benefits at a rate of over 
$5,000 per month.  As of September 30, 2021, MassHealth had paid 
a total of $439,100.04 in benefits on Joan's behalf. 
 
4 
In August 2017, the plaintiff brought a declaratory 
judgment action against the Commonwealth and Nationwide, 
claiming that she was entitled to the remaining proceeds in the 
annuity rather than the Commonwealth.  After the Commonwealth's 
motion to dismiss was denied, all parties filed cross motions 
for summary judgment.  A Superior Court judge subsequently 
granted summary judgment for the plaintiff and ordered the 
Commonwealth to turn over to the plaintiff the remaining annuity 
proceeds it received from Nationwide.6  The Commonwealth 
unsuccessfully sought an interlocutory appeal pursuant to Mass. 
R. Civ. P. 64, as amended, 423 Mass. 1410 (1996).  After final 
judgment entered, the Commonwealth filed a timely notice of 
appeal, and we allowed the plaintiff's application for direct 
appellate review. 
Discussion.  Our determination of the rightful owner of the 
annuity's remainder proceeds turns on our interpretation of the 
Medicaid Act, as well as the annuity contract.  More 
specifically, first we must decide whether certain provisions of 
the Medicaid Act bearing on the application of asset transfer 
penalties are meant to operate together or separately, and then 
 
 
6 The judge further permitted the plaintiff's claim against 
Nationwide under G. L. cc. 93A and 176D to proceed to trial.  
Nationwide subsequently settled the claims against it and 
dismissed its cross claims against the Commonwealth. 
 
5 
we must view the contract terms in light of our interpretation 
of those provisions. 
1.  Medicaid program.  a.  Overview.  The Medicaid Act, 
passed by Congress in 1965, "created a cooperative State and 
Federal program to provide medical assistance to individuals who 
cannot afford to pay for their own medical costs."  Daley v. 
Secretary of the Executive Office of Health & Human Servs., 477 
Mass. 188, 189 (2017).  See Title XIX of the Social Security 
Act, 42 U.S.C. §§ 1396 et seq. 
A State choosing to participate in the Medicaid program 
"develops a plan containing reasonable standards . . . for 
determining eligibility for and the extent of medical assistance 
within boundaries set by the Medicaid statute and the Secretary 
of Health and Human Services" (quotation and citation omitted).  
Wisconsin Dep't of Health & Family Servs. v. Blumer, 534 U.S. 
473, 479 (2002).  All participating States "must comply with 
certain requirements imposed by [Title XIX of the Social 
Security Act, 42 U.S.C. §§ 1396 et seq.,] and regulations 
promulgated by the Secretary through [the Centers for Medicare 
and Medicaid Services]."  Daley, 477 Mass. at 190, citing Wilder 
v. Virginia Hosp. Ass'n, 496 U.S. 498, 502 (1990).  
Massachusetts participates in Medicaid through MassHealth, which 
is administered through the Executive Office of Health and Human 
Services (EOHHS).  See G. L. c. 118E, § 9. 
 
6 
The provisions comprising the Medicaid Act have been 
described as "among the most completely impenetrable texts 
within human experience."  Briggs v. Commonwealth, 429 Mass. 
241, 243 n.3 (1999), quoting Rehabilitation Ass'n of Va., Inc. 
v. Kozlowski, 42 F.3d 1444, 1450 (4th Cir. 1994), cert. denied 
sub nom. Metcalf v. Rehabilitation Ass'n of Va., Inc., 516 U.S. 
811 (1995).  This is due to the fact that they are "dense 
reading," but also because "Congress . . . revisits the area 
frequently, generously cutting and pruning in the process."  
Briggs, supra.  In many cases, Congress has made changes to the 
Medicaid Act in response to "Medicaid planning" by "individuals 
with 'significant resources [who] devise strategies to appear 
impoverished in order to qualify for Medicaid benefits.'"7  
Fournier v. Secretary of the Executive Office of Health & Human 
Servs., 488 Mass. 43, 45 (2021), quoting Lebow v. Commissioner 
of the Div. of Med. Assistance, 433 Mass. 171, 172 (2001).  That 
is, the amendments have been attempts to ensure that Medicaid 
benefits go to those who need them rather than to those who can 
 
7 We do not suggest that Medicaid planning is discouraged; 
however, because the process is open to abuse, Congress closely 
monitors and regulates its use.  See Morris v. Oklahoma Dep't of 
Human Servs., 685 F.3d 925, 934 (10th Cir. 2012) ("Indeed, 
rather than close the annuity 'loophole,' Congress has twice 
amended the Medicaid statutes to specify the types of annuities 
capable of producing uncountable spousal income" [citation 
omitted]). 
 
7 
afford to pay.  The Medicare Catastrophic Coverage Act of 1988 
(MCCA), 42 U.S.C. § 1396r-5, is one such example. 
Prior to the passage of the MCCA, "[S]tates generally 
considered income from either spouse and jointly-held assets in 
determining the Medicaid eligibility for the institutionalized 
spouse, but did not consider assets held solely in the name of 
the community spouse."8  Hutcherson v. Arizona Health Care Cost 
Containment Sys. Admin., 667 F.3d 1066, 1068 (9th Cir. 2012).  
"As a result, some community spouses were left destitute so that 
the institutionalized spouse could qualify for Medicaid 
assistance, while some wealthy couples were able to qualify for 
assistance by holding their assets solely in the name of the 
community spouse."  Id. 
With the passage of the MCCA, "Congress sought to protect 
community spouses from 'pauperization' while preventing 
financially secure couples from obtaining Medicaid assistance" 
(citation omitted).  Blumer, 534 U.S. at 480.  The MCCA amended 
the Medicaid Act to allow the community spouse to retain a 
certain amount of income and assets for monthly maintenance 
 
8 The term "institutionalized spouse" means "an individual 
who . . . is in a medical institution or nursing facility . . . 
[and] is married to a spouse who is not in a medical institution 
or nursing facility."  42 U.S.C. § 1396r-5(h)(1).  The term 
"community spouse" means "the spouse of an institutionalized 
spouse."  42 U.S.C. § 1396r-5(h)(2). 
 
 
8 
needs (community spouse resource allowance [CSRA]).9  42 U.S.C. 
§ 1396r-5(c), (f).  See 130 Code Mass. Regs. § 520.016(B)(2) 
(2013).  "[A]ll resources above the CSRA . . . must be spent 
before eligibility can be achieved."  Blumer, supra at 483, 
citing 42 U.S.C. § 1396r-5(c)(2). 
The MCCA also amended the Medicaid rules so that in 
determining eligibility, a couple's combined assets are 
considered available to the applicant regardless of specific 
ownership.10  See Morris v. Oklahoma Dep't of Human Servs., 685 
F.3d 925, 929 (10th Cir. 2012), citing 42 U.S.C. §1396r-
5(c)(2)(A).  See also 130 Code Mass. Regs. § 520.003(A)(2) 
(2019).  Moreover, the MCCA added a provision generally 
penalizing asset transfers for less than fair market value 
during a particular period of time prior to an applicant's 
initial eligibility determination ("look-back" period).11  See 42 
 
 
9 As of January 1, 2023, the standard maximum CSRA amount is 
$148,620.  See Eligibility Figures for Residents of a Long-Term-
Care Facility, https://www.mass.gov/doc/eligibility-figures-for-
residents-of-a-long-term-care-facility-2/download [https://perma 
.cc/LY22-BWJQ]. 
 
10 A married applicant is eligible for long-term care 
benefits through MassHealth if, after subtracting the community 
spouse resource allowance, he or she has $3,000 or less in 
combined "countable assets."  130 Code Mass. Regs. 
§ 520.003(A)(2) (2019). 
 
11 The look back period initially was three years but was 
extended to five years by the Deficit Reduction Act of 2005.  
See note 15, infra. 
 
9 
U.S.C. § 1396p(c)(1).12  This transfer penalty renders the 
applicant ineligible for benefits for the period of time that 
the assets could have been used to pay for long-term care.13 
We turn now to the two provisions at issue here, both of 
which affect the operation of the look-back rule -- the sole 
benefit provision (42 U.S.C. § 1396p[c][2][B][[i]) and the 
beneficiary naming provision (42 U.S.C. § 1396p[c][1][F][i]). 
b.  Section 1396p(c)(2)(B)(i) and 1396p(c)(1)(F)(i).  To 
provide an avenue for couples to spend down their assets to 
become Medicaid-eligible without becoming completely 
impoverished, Congress exempted from the look-back rule those 
transfers made for the "sole benefit" of the community spouse.  
42 U.S.C. § 1396p(c)(2)(B)(i), as amended by the Omnibus Budget 
Reconciliation Act of 1993, Pub. L. No. 103-66, Title XIII, 
 
12 Title 42 U.S.C. § 1396p(c)(1)(A) states in pertinent 
part: 
 
"[I]f an institutionalized individual or the spouse of such 
an individual . . . disposes of assets for less than fair 
market value on or after the look-back date . . . the 
individual is ineligible for medical assistance for 
services described in subparagraph (C)(i) . . . [for a 
calculable period of time]." 
 
 
13 "In its present form, the 'look-back' rule provides that, 
if such a transfer occurs, the applicant is ineligible for 
Medicaid benefits for a period of time determined by dividing 
the value of the transfer by the average monthly cost of the 
nursing home facility."  Daley, 477 Mass. at 193, citing 42 
U.S.C. § 1396p(c)(1)(E). 
 
10 
§ 13611(a), 107 Stat. 622 (1993).14  Such transfers traditionally 
have been accomplished through the purchase of an annuity for 
the benefit of the community spouse.  See State Medicaid Manual 
§ 3258.9.  In this way, assets that otherwise would be 
considered in determining an institutionalized spouse's 
eligibility for Medicaid are converted to an income stream for 
exclusive use by the community spouse, which is not counted for 
eligibility purposes.  See Hutcherson, 667 F.3d at 1069.  See 
also 42 U.S.C. § 1396r-5(b)(1), (c)(1). 
However, the sole benefit provision made it theoretically 
possible for married couples to shelter an unlimited amount of 
assets by converting them to income for the community spouse 
without being subject to the transfer penalty, regardless of 
need.  The widespread use of this "loophole" prompted Congress 
to make additional changes to the Medicaid Act.  In 2005, 
Congress passed the Deficit Reduction Act of 2005 (DRA), which, 
among other things, strengthened the constraints on Medicaid 
planning.  See Pub. L. No. 109-171, 120 Stat. 4, 61-67 (2006).  
See also Hughes v. McCarthy, 734 F.3d 473, 486 (6th Cir. 2013), 
 
14 Title 42 U.S.C. § 1396p(c)(2)(B)(i) provides in relevant 
part: 
 
"An individual shall not be ineligible for medical 
assistance by reason of paragraph (1) to the extent that 
. . . the assets . . . were transferred to the individual's 
spouse or to another for the sole benefit of the 
individual's spouse." 
 
11 
cert. denied, 572 U.S. 1034 (2014) ("floor statements by members 
of Congress . . . indicating in general terms that the DRA was 
enacted to close loopholes" specifically "related to the 
purchase of annuities"); Hutcherson, 667 F.3d at 1069-1070, and 
cases cited (collecting sources discussing DRA's purpose "to 
further close loopholes in the Medicaid Act" by, in part, 
"add[ing] several requirements that must be met before an 
annuity is exempt from the transfer penalty"). 
The DRA imposed a number of requirements that annuities had 
to meet to be exempt from the transfer penalty.  Among other 
things, "the annuity must (i) be irrevocable and nonassignable, 
(ii) be actuarially sound, and (iii) provide for payments in 
equal amounts with no deferral and no balloon payments."  42 
U.S.C. § 1396p(c)(1)(G)(ii).  See Hutcherson, 667 F.3d at 1069.  
As relevant here, the DRA also requires annuities to name the 
State as the primary remainder beneficiary on the death of the 
community spouse (beneficiary naming provision).15  42 U.S.C. 
§ 1396p(c)(1)(F)(i).16  Thus, if the community spouse survives 
 
15 The DRA also requires applicants to disclose any interest 
in "community spouse annuities," and extended the "look-back" 
period from three to five years for transfers occurring after 
the DRA's effective date.  42 U.S.C. § 1396p(c)(1)(B)(i), (e). 
 
16 Title 42 U.S.C. § 1396p(c)(1)(F)(i) states in relevant 
part: 
 
"For purposes of this paragraph, the purchase of an annuity 
shall be treated as the disposal of an asset for less than 
 
12 
for the term of the annuity, he or she receives all of the 
income from the annuity; however, if the community spouse dies 
before all of the annuity funds have been distributed, the 
Commonwealth is entitled to any remaining proceeds up to the 
amount it paid for benefits on behalf of the institutionalized 
spouse (who achieved Medicaid eligibility in part or in toto by 
way of the purchased annuity). 
c.  Analysis.  Relying heavily on the reasoning of the 
United States Court of Appeals for the Sixth Circuit in Hughes, 
734 F.3d at 485-486, the plaintiff contends that an annuity that 
satisfies the sole benefit rule in § 1396p(c)(2)(B)(i) need not 
also satisfy the beneficiary naming requirement in 
§ 1396p(c)(1)(F)(i).  She reasons that the language "[a]n 
individual shall not be ineligible for medical assistance by 
reason of paragraph (1)" in § 1396p(c)(2)(B)(i) means that asset 
transfers meeting the sole benefit rule are exempted from the 
whole of § 1396p(c)(1) (paragraph [1]), including the transfer 
penalty and the beneficiary naming exception to that penalty.  
See Hughes, supra at 485.  We disagree. 
When interpreting statutory provisions, we begin, as 
always, with the plain language, keeping in mind that the 
 
fair market value unless . . . the State is named as the 
remainder beneficiary in the first position for at least 
the total amount of medical assistance paid on behalf of 
the institutionalized individual under this subchapter." 
 
13 
fundamental goal is to discern the intent of the law-making 
body.  See Harvard Crimson, Inc. v. President & Fellows of 
Harvard College, 445 Mass. 745, 749 (2006), citing Hanlon v. 
Rollins, 286 Mass. 444, 447 (1934).  See also Negonsott v. 
Samuels, 507 U.S. 99, 104 (1993), quoting Griffin v. Oceanic 
Contrs., Inc., 458 U.S. 564, 570 (1982) (ultimate task "is to 
give effect to the will of Congress").  Thus, "the words of a 
statute must be read in their context and with a view to their 
place in the overall statutory scheme."  Davis v. Michigan Dep't 
of the Treasury, 489 U.S. 803, 809 (1989).  See New England 
Power Generators Ass'n v. Department of Envtl. Protection, 480 
Mass. 398, 410 (2018) ("The court does not determine the plain 
meaning of a statute in isolation but rather in consideration of 
the surrounding text, structure, and purpose of the . . . act 
. . ." [quotations and citation omitted]). 
As explained supra, one purpose of the aptly named Deficit 
Reduction Act was to close loopholes in the Medicaid Act that 
allowed affluent couples to shelter their assets.17  Notably, in 
spelling out the beneficiary naming requirement, the plain 
language of § 1396p(c)(1)(F)(i) does not include a carve-out for 
those annuities purchased for the sole benefit of the community 
 
17 See Olmstead v. Department of Telecomms. & Cable, 466 
Mass. 582, 589 & n.12 (2013) (title of act is relevant to 
statutory interpretation). 
 
14 
spouse, and we decline to add one.  See Commonwealth v. Palmer, 
464 Mass. 773, 778 (2013) ("[W]e will not add words to a statute 
that the Legislature did not put there, either by inadvertent 
omission or by design" [citation omitted]). 
Moreover, we do not agree with the plaintiff that the sole 
benefit provision "carves out an exception to paragraph (1)'s 
transfer penalties."18  Hughes, 734 F.3d at 485.  Instead, we 
read § 1396p(c)(2)(B)(i) as being applicable to asset transfers 
generally, whereas § 1396p(c)(1)(F)(i) applies only to annuity 
purchases. 
If we were to adopt the plaintiff's interpretation of these 
provisions, the sole-benefit loophole would remain open, 
frustrating not only the purpose of the beneficiary naming 
 
18 The plaintiff cites to the Hughes court's explanation of 
the way the two provisions work together: 
 
"[T]here is no inherent conflict between the two 
provisions, and each provision is specific in its own way.  
Section 1396p(c)(1)(F) purports to govern all annuities 
through the imposition of a transfer penalty under 
paragraph (1) if the annuity does not satisfy certain 
rules.  On the other hand, § 1396p(c)(2)(B)(i) carves out 
an exception to paragraph (1)'s transfer penalties.  The 
language of § 1396p(c)(1)(F) limits its annuity rules 
'[f]or purposes of this paragraph.'  The language of 
§ 1396p(c)(2)(B)(i) provides that '[a]n individual shall 
not be ineligible for medical assistance by reason of 
paragraph (1)' if a transfer satisfies, in relevant part, 
the sole-benefit rule." 
 
Hughes, 734 F.3d at 485.  As discussed supra, we reject this 
interpretation, as it frustrates the purpose of 
§ 1396p(c)(1)(F)(i). 
 
15 
provision (added by the DRA), but also one of the central goals 
of the Medicaid program, which is to provide health care to 
those who cannot afford it.  See 42 U.S.C. § 1396a(a)(10)(C); 
Moe v. Secretary of Admin. & Fin., 382 Mass. 629, 633 (1981).  
When affluent individuals engage in schemes to hide assets in 
order to qualify for programs to which they are otherwise not 
entitled, their actions improperly "divert[] scarce Federal and 
State resources from low-income [qualifying individuals]."  
Cohen v. Commissioner of the Div. of Med. Assistance, 423 Mass. 
399, 404 (1996), cert. denied sub nom. Kokoska v. Bullen, 519 
U.S. 1057 (1997), quoting H.R. Rep. No. 265, 99th Cong., 1st 
Sess., pt. 1, at 72 (1985).  See Lebow, 433 Mass. at 172 ("The 
Medicaid program . . . is designed to provide health care for 
indigent persons.  Individuals are expected to deplete their own 
resources before obtaining assistance from the government.  The 
unfortunate reality is that some individuals with significant 
resources devise strategies to appear impoverished in order to 
qualify for Medicaid benefits"). 
As there is no exemption directing us to disregard the 
beneficiary naming provision, and because creating one would 
contravene Congress's intent to limit the use of annuities for 
Medicaid planning purposes, subsections (c)(1)(F)(i) and 
(c)(2)(B)(i) both must apply to ensure that an annuity purchased 
 
16 
does not become a vehicle for sheltering assets that otherwise 
properly would be used to pay for medical care. 
Evaluated with this reading of the statutory provisions in 
mind, the annuity at issue here met the requirements set forth 
in the Medicaid Act to be exempt from the transfer penalty.  The 
annuity was sound actuarially and was structured such that it 
was intended to be for Robert's "sole benefit" during his 
lifetime under § 1396p(c)(2)(B)(i).  Further, the Commonwealth 
was named as primary remainder beneficiary to the extent of 
benefits paid on Joan's behalf pursuant to § 1396p(c)(1)(F)(i).19  
Thus, the annuity properly was executed such that Joan did not 
incur an eligibility penalty as a result of the transfer, and on 
Robert's passing, the remainder of the annuity properly belongs 
to the Commonwealth up to the amount it has paid for Joan's 
care.20 
 
19 The plaintiff's claim that Congress's use of the term 
"institutionalized individual" in § 1396p(c)(1)(F)(i), rather 
than the more specific term "institutionalized spouse," means 
that the Commonwealth can only claim recovery of expenses paid 
on Robert's behalf (which are zero, in this case) is without 
merit.  See Hegadorn v. Department of Human Servs. Director, 503 
Mich. 231, 272 n.3 (2019) (McCormack, C.J., concurring). 
 
20 As mentioned supra, § 1396p(c)(1)(F)(i) allows the State, 
as the primary remainder beneficiary, to recover "at least the 
total amount of medical assistance paid on behalf of the 
institutionalized individual."  We have not been asked to decide 
whether the amount to which the Commonwealth is entitled is 
limited to the total amount expended at the time of Robert's 
passing.  However, restricting the Commonwealth's recovery in 
such a way would leave open a potential loophole.  That is, 
 
17 
2.  State law claims.  The plaintiff's additional 
arguments, grounded in State law, regarding her claim to the 
remainder proceeds are unavailing.  First, she argues that based 
on the wording of the annuity contract she, rather than the 
Commonwealth, is the rightful remainder beneficiary.  We are not 
persuaded. 
The annuity states that the primary remainder beneficiary 
is the "State of MA Medicaid Per Application."  The application, 
in turn, lists "Commonwealth of MA the Extent Benefits Paid 
[sic]" as the primary remainder beneficiary.  The plaintiff 
argues that as there is no mention of Joan as the recipient of 
benefits, the contract must refer to benefits paid on Robert's 
behalf.  Because Robert did not receive any benefits from the 
Commonwealth, the plaintiff reasons that the condition was not 
fulfilled and therefore she is entitled to the remaining annuity 
proceeds as the second contingent beneficiary. 
This argument is flawed.  Admittedly, the annuity contract 
is not a model of clarity.  However, it is undisputed that 
Robert purchased the annuity as part of a strategy to spend down 
the couple's assets so that Joan would be eligible for 
 
after the death of the community spouse, the transfer to family 
members of any assets that had been placed in a community spouse 
annuity to help the institutionalized spouse become Medicaid-
eligible would frustrate the purpose of the Medicaid Act.  See 
Hutcherson, 667 F.3d at 1072. 
 
18 
MassHealth benefits.21  Because a community spouse annuity must 
list the State as the remainder beneficiary to the extent 
benefits are paid for the institutionalized spouse to be 
exempted from a transfer penalty, we conclude that Joan, as the 
institutionalized spouse, is the presumed recipient of benefits 
referenced in the remainder clause.  And the Commonwealth is the 
rightful beneficiary of the remainder proceeds up to the amount 
it paid on behalf of Joan.  See Robert & Ardis James Found. v. 
Meyers, 474 Mass. 181, 188 (2016) (contract is construed so as 
"to give it effect as a rational business instrument and in a 
manner which will carry out the intent of the parties"); Starr 
v. Fordham, 420 Mass. 178, 192 (1995) (same).22 
The plaintiff also contends that the Commonwealth's claim 
is barred by the State Medicaid estate recovery statute, G. L. 
c. 118E, § 31 (b) (1), because, she argues, the statute only 
 
 
21 To that end, the existence of the annuity was disclosed 
on Joan's MassHealth application, as required by 42 U.S.C. 
§ 1396p(e). 
 
22 Because an annuity that does not name the Commonwealth as 
the primary remainder beneficiary is subject to a transfer 
penalty, the Commonwealth would be entitled to the amount due 
even if we were to conclude that the contract language was not 
sufficiently clear to name the Commonwealth as the remainder 
beneficiary.  See generally 130 Code Mass. Regs. 
§ 520.019(K)(2)(b) (2013) ("Curing a transfer"). 
 
19 
allows the Commonwealth to seek repayment for benefits from the 
estate of the institutionalized spouse.23 
As discussed supra, the Medicaid Act exempts from transfer 
penalties only those annuities naming the State as the primary 
remainder beneficiary.  See 42 U.S.C. § 1396p(c)(1)(F)(i).  
Moreover, 42 U.S.C. § 1396a(a)(18) specifically requires 
participating States to "comply with the provisions of [the 
Medicaid Act] with respect to[, among other things,] recoveries 
of medical assistance correctly paid."  Because a State statute 
may not "stand[] as an obstacle to the accomplishment of Federal 
objectives," Boston v. Commonwealth Employment Relations Bd., 
453 Mass. 389, 396 (2009), it makes no difference whether the 
plaintiff's interpretation of G. L. c. 118E, § 31, is correct.  
That is, to the extent the provision would prevent the 
Commonwealth from collecting the annuity proceeds Robert 
designated it to receive, the State statute is preempted by 
Federal law.24 
 
23 General Laws c. 118E, § 31 (b) (1), states in pertinent 
part: 
 
"There shall be no adjustments or recovery of medical 
assistance correctly paid except as follows:  . . . . 
Recovery from the Permanently Institutionalized:  From the 
estate of an individual, regardless of age, who was an 
inpatient in a nursing facility or other medical 
institution when he or she received such assistance." 
 
24 The plaintiff also argues in passing that under G. L. 
c. 118E, § 31 (c), the Commonwealth can recover from only an 
 
20 
Conclusion.  For the reasons discussed supra, we vacate the 
judgment of the Superior Court, we reverse the order of the 
Superior Court allowing the plaintiff's motion for summary 
judgment and denying the Commonwealth's motion for summary 
judgment as to the plaintiff's claim for declaratory judgment, 
and we remand the case for further proceedings consistent with 
this opinion. 
 
 
 
 
 
 
 
So ordered. 
 
individual's probate estate, which does not include nonprobate 
assets such as annuities with named beneficiaries.  Assuming the 
plaintiff's interpretation is correct, like § 31 (b), § 31 (c) 
would be preempted by Federal law.