Louisiana state court Medicaid preemption case

An intermediate appellate court in Louisiana wrote a very helpful preemption opinion in a Medicaid annuities case. The case concerns the denial of Medicaid for long term care based on excess resources, due to the counting of an annuity as an available resource. The state regulations required that an annuity name the State of Louisiana, Department of Health and Hospitals, as the primary and permanent residual beneficiary remaining in the annuity, not to exceed any Medicaid funds expended during the lifetime of the individual. This regulation is more restrictive than the federal guidelines. The court held that the state regulations were preempted by federal law. King v. Secretary, Louisiana Dep’t of Health and Hospitals, 2007 WL 984400, Case No. 42071-CA (La.App. 2 Cir. April 4, 2007).

The court stated: “It is well established that generally state regulations that are inconsistent with federal law are invalid under the Supremacy Clause. U.S.C.A. Const. Art. 6, cl. 2.  Also, it is generally held that the Supremacy Clause applies to the regulatory scheme promulgated under the Medicaid act.”  The court cited two cases in which the court found jurisdiction under 42 U.S.C. § 1983 and a consent decree case.  Thus, this decision views section 1983 cases as providing a basis for jurisdiction under the Supremacy Clause.

 

The court then analyzed the applicable law, and found that the state regulation “is inconsistent with the federal Medicaid Act and the directives of the Secretary of Health and Hospitals.  Therefore, it is unenforceable.”  The court stated that it understood the state “was frustrated with the practice of what could be perceived as sheltering assets,” but the annuity regulation “did not comply with the applicable preemptive federal statutes.”  The court held that the individual was entitled to Medicaid.

Louisiana had tried to apply this policy against a Medicaid applicant who applied BEFORE the enactment of the DRA.  The court does note that the DRA amended the Medicaid Act to include state remainder beneficiary rules for annuities owned by Medicaid LTC applicants and their spouses, but that "the statute was not in effect at the time of Mrs. King's application."