Opinion ID: 2833604
Heading Depth: 3
Heading Rank: 3

Heading: is pennsylvania’s antiassignment

Text: PROVISION PREEMPTED? Under Pennsylvania law, all annuities are assignable. The relevant provision states: Any provision in any annuity . . . owned by an applicant or recipient of medical assistance[] . . . that has the effect of limiting the right of such owner to sell, transfer or assign the right to receive payments thereunder or restricts the right to change the designated beneficiary thereunder is void. 62 PA. CONS. STAT. ANN. § 441.6(b). Section 441.6(b), making annuities assignable by operation of law, applies to all annuities, regardless of who purchases them, either the Medicaid applicant who lives in a nursing home, like Claypoole or Sanner, or the community spouse, like Claypoole’s husband. 24 As we have explained, under the Medicaid Act, an annuity held by the Medicaid applicant counts as an asset for purposes of qualifying for Medicaid unless it meets certain requirements. 42 U.S.C. § 1396p(c)(1)(F), (G). One requirement is that the annuity must not be assignable. Id. § 1396p(c)(1)(G)(ii)(I). Further, although a community spouse’s resources can be counted in determining Medicaid eligibility, id. § 1396r-5(c)(2)(A), a community spouse’s irrevocable, nonassignable annuities may not be treated as available resources. James, 547 F.3d at 218-19. Thus, if § 441.6(b) controls, no Medicaid applicant or his or her spouse can exclude an annuity from being considered a resource for purposes of Medicaid eligibility because Pennsylvania makes all annuities assignable. Section 441.6(b) requires that all annuities are countable resources for the purposes of Medicaid eligibility determinations. The District Court held that the Medicaid Act preempted Pennsylvania’s statute and that the annuities had valid nonassignability clauses in compliance with the federal statute. Zahner ex rel. Zahner, 2014 WL 198526, at . On appeal, DHS argues that the federal law cannot preempt Pennsylvania’s law because §§ 1396p(c)(1)(F) and (G) do not create an impermeable safe harbor. Appellee Br. at 31-33. Rather, according to DHS, federal law merely gives states the option of allowing annuities to be excluded, and Pennsylvania chose to not exercise that option by enacting § 441.6(b). Id. at 32. DHS also claims that our precedent mistakenly assumed that Pennsylvania generally allows anti-assignment provisions; and instead, Pennsylvania is able to clarify its public policy position against nonassignment clauses by enacting § 441.6(b). Id. at 28 (citations omitted).18 The Supremacy Clause provides that “the Laws of the United States . . . shall be the supreme Law of the Land; . . . any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” U.S. CONST. art. VI, cl. 2. The Supremacy Clause preempts any state law that “interferes 18 Our review of this issue is de novo. In re Federal- Mogul Global, 684 F.3d 355, 364 n.16 (3d Cir. 2012) (citation omitted). 25 with or is contrary to federal law[.]” Free v. Bland, 369 U.S. 663, 666 (1962) (citations omitted). There are different forms of preemption, but all agree that this dispute implicates conflict preemption. Conflict preemption occurs when it is impossible to comply with both the federal and state law. Bell v. Cheswick Generating Station, 734 F.3d 188, 193 (3d Cir. 2013) (citations omitted). “Conflict preemption nullifies state law inasmuch as it conflicts with federal law, either where compliance with both laws is impossible or where state law erects an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Farina v. Nokia, 625 F.3d 97, 115 (3d Cir. 2010) (quotation marks omitted). States that elect to participate in the Medicaid program must comply with eligibility requirements set by the federal government. The Medicaid Act permits states to establish eligibility requirements that are more liberal than those of the federal government, however states may not create more restrictive requirements. 42 U.S.C. § 1396a(a)(10)(C)(i)(III). A state law is considered “no more restrictive” if “additional individuals may be eligible for medical assistance and no individuals who are otherwise eligible are made ineligible for such assistance.” Id. § 1396a(r)(2)(B). “[O]nce the state voluntarily accepts the conditions imposed by Congress, the Supremacy Clause obliges it to comply with federal requirements.” Lankford v. Sherman, 451 F.3d 496, 510 (8th Cir. 2006) (citations omitted); see also Lewis, 685 F.3d at 332 (“No State is obligated to join Medicaid, but if they do join, they are subject to federal regulations governing its administration.” (citation omitted)). “[E]very exercise of statutory interpretation begins with an examination of the plain language of the statute. Where the statutory language is plain and unambiguous, further inquiry is not required.” Rosenberg v. XM Ventures, 274 F.3d 137, 141 (3d Cir. 2001) (citations omitted). Moreover, we must examine the totality of every statute and not unduly focus on some language to the exclusion of other statutory text. Id. (“[W]hen interpreting a statute, courts should endeavor to give meaning to every word which Congress used and therefore should avoid an interpretation which renders an element of the language superfluous.” 26 (citations omitted)). We also note that, “[i]n areas of traditional state regulation, we assume that a federal statute has not supplanted state law unless Congress has made such an intention ‘clear and manifest.’” Bates v. Dow Agrosciences, LLC, 544 U.S. 431, 449 (2005) (citations omitted); see also MD Mall Assocs., LLC v. CSX Transp., Inc., 715 F.3d 479 (3d Cir. 2013). There is a presumption against preempting state law. Farina, 625 F.3d at 116 (citations omitted). Our inquiry is therefore controlled by the text of the Medicaid Act pertaining to the assignability of annuities, to the extent that the language is not ambiguous. Congress clearly intended for some annuities to be considered resources for the purposes of Medicaid eligibility. However, it is equally clear that Congress did not intend that all annuities be considered. It therefore established the criteria that would allow Medicaid applicants to purchase annuities without fear of becoming ineligible for Medicaid assistance. One criterion Congress established for an annuity to not count as a Medicaid applicant’s resource is that it must be nonassignable. 42 U.S.C. § 1396p(c)(1)(F), (G). This affords some protection for the community spouse. “Congress sought to protect community spouses from pauperization while preventing financially secure couples from obtaining Medicaid assistance. To achieve this aim, Congress installed a set of intricate and interlocking requirements with which States must comply in allocating a couple’s income and resources.” Wisconsin Dep’t of Health & Family Servs. v. Blumer, 534 U.S. 473, 480 (2002) (internal quotation marks omitted). Congress also declared that, with some exceptions, “no income of the community spouse shall be deemed available to the institutionalized spouse.” 42 U.S.C. § 1396r-5(b)(1). Irrevocable, nonassignable annuities are income streams, not countable as resources against the institutionalized spouse’s Medicaid eligibility. James, 547 F.3d at 218-19; see also Geston, 729 F.3d at 1083; Lopes, 696 F.3d at 188-89; Morris, 685 F.3d at 932-33; Vieth v. Ohio Dep’t of Job & Family Servs., 2009-Ohio-3748, at ¶ 34 (July 30, 2009). Nevertheless, DHS invites us to read ambiguity into seemingly straightforward text and precedent by pointing to a 27 separate section of the DRA. That section reads: “Nothing in this subsection shall be construed as preventing a State from denying eligibility for medical assistance for an individual based on the income or resources derived from an annuity described in paragraph (1)[.]” 42 U.S.C. § 1396p(e)(4). DHS weaves an ambiguity into this provision by noting the DRA’s use of “subsection” instead of “section.” Appellee Br. at 25-26. Section 1396p(e)(4) uses the term “subsection” in reference to subsection (e), which pertains to disclosure requirements. Thus, according to DHS, § 1396p(e)(4) “literally states only that nothing in the disclosure requirements shall prevent a State from treating an annuity as a resource.” Id. To its credit, DHS acknowledges that this reading is “something of a non-sequitur since disclosure has nothing to do with whether an annuity is treated as a resource or not.” Id at 26. Nevertheless, DHS asserts “[s]ubparagraph (e)(4) demonstrates that Congress intended that States be able to treat annuities as resources under certain circumstances, but whether that authority extends to annuities exempt from transfer of asset treatment under §§ 1396p(c)(1)(F) and (G) is uncertain.” Id. We agree that this reading is a non-sequitur and we disagree with DHS’s strained interpretation of the DRA. We reiterate that these provisions of the Medicaid Act are “not ambiguous” and, “contrary to the [DHS]’s interpretation, § 1396p(e)(4) cannot be regarded as a basis by which it may deny eligibility for benefits where the annuity otherwise complies with the law.” Weatherbee ex rel. Vecchio v. Richman, 351 Fed. App’x 786, 787 (3d Cir. 2009). When the Medicaid Act is read as a whole, Congress’s intent with respect to annuities is addressed clearly and consistently throughout. As discussed above, with respect to Medicaid applicants, §§ 1396p(c)(1)(F) and (G) make clear that annuities with certain characteristics, including nonassignability clauses, are not assets to be counted as resources for their Medicaid eligibility. Moreover, after reviewing the Medicaid Act and the Supplemental Security Income Program, we previously held that Congress intended to shield a community spouse’s annuity from calculation of 28 the institutionalized spouse’s Medicaid eligibility if the annuity is nonassignable and irrevocable. James, 547 F.3d at 218; see also Geston, 729 F.3d at 1083; Lopes, 696 F.3d at 184-85. DHS seeks to undermine James by pointing out that (1) Congress passed the DRA after the annuities in James were purchased and added a half-a-loaf gifting prohibition and (2) Pennsylvania passed § 441.6(b) specifically seeking to undermine James in light of Pennsylvania’s public policy against restraints on alienation. Appellee Br. at 28, 37-38. We find neither argument persuasive. As discussed above, the DRA outlines the requirements for annuities purchased by a person who is seeking Medicaid eligibility. James, on the other hand, discusses annuities purchased by a community spouse. Moreover, all appellate courts that have discussed whether a community spouse’s nonassignable annuity is a countable resource toward the institutionalized spouse’s Medicaid eligibility have done so after changes to the DRA and have come to the same conclusion as James. See Geston, 729 F.3d at 1083; Lopes, 696 F.3d at 188-89; Morris, 685 F.3d at 93233; Vieth, 2009-Ohio-3748, at ¶ 34. More fundamentally, Pennsylvania cannot enact legislation that changes federal law (or binding judicial interpretation of federal law) with respect to annuities. Marbury v. Madison, 5 U.S. 137 (1803). In Geston, the Court of Appeals for the Eighth Circuit explained, “[i]f the State’s public policy requires it to count as resources certain annuities that federal law excludes from the scope of resources that may be considered in making eligibility determinations, then the State’s methodology is more restrictive than the federal methodology.” Id. 729 F.3d at 1085-86 (citation omitted).19 19 DHS mistakenly interprets Geston v. Anderson as supporting its position on preemption. Geston held that § 1396p(e)(4) “maintained the status quo[,]” and merely “clarifies that the new disclosure provisions do not restrict a State’s authority to deny eligibility on the basis of an annuity where the State otherwise has authority to do so.” 729 F.3d at 29 The Medicaid Act cannot reasonably be read to support DHS’s contention that Congress intended to make protection of annuities optional. See generally United States v. Voigt, 89 F.3d 1050, 1087 (3d Cir. 1996) (“[C]ourts should disfavor interpretations of statutes that render language superfluous.” (quotation marks omitted)). Moreover, the argument here is akin to the dispute that we resolved in Lewis v. Alexander. There, we held that the Medicaid Act preempted parts of Section 9 of the Pennsylvania Act of 2005, 62 PA. STAT. ANN. § 1414, which sought to add Medicaid eligibility requirements for special needs trusts. 685 F.3d at 331. We explained that the Medicaid Act is a “complex and comprehensive system of asset-counting rules[]” in which “Congress rigorously dictates what assets shall count and what assets shall not count toward Medicaid eligibility.” Id. at 344. Lewis rejected DHS’s myopic attempts to create a gap in the Medicaid Act within which, states were free to legislate. We said: “focusing solely on the words ‘[t]his subsection’ has caused [DHS] . . . to miss the forest for the trees.” Id. at 343. Because Congress has “actually legislated on th[e] precise class of asset[]” at issue, id. at 344 (emphasis in original), further limitations from the state are preempted. No meaningful distinction can be drawn between the “rigorous system” of legislating trusts in Lewis, and the equally rigorous attempts to define when annuities can be considered for Medicaid eligibility. Thus, “it seems clear that Congress intended to create a purely binary system of classification: either a trust[, or, in this case, an annuity,] affects Medicaid eligibility or it does not.” Id. at 344. Pennsylvania may not create more restrictive requirements. 42 U.S.C. 1396a(a)(10)(C)(i)(III).