Petition for Writ of Certiorari — Laurie A. Dermody, Petitioner v. Massachusetts Executive Office of Health and Human Services

Supreme Court briefMar 29, 2023

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No. ________

IN THE

Supreme Court of the United States

_________

LAURIE A. DERMODY,

Petitioner,

EXECUTIVE OFFICE OF HEALTH AND HUMAN SERVICES

OF THE COMMONWEALTH OF MASSACHUSETTS,

Respondent.

_________

LINDA MARIE MONDOR, ET AL.,

Petitioners,

EXECUTIVE OFFICE OF HEALTH AND HUMAN SERVICES

OF THE COMMONWEALTH OF MASSACHUSETTS,

Respondent.

_________

On Petition for a Writ of Certiorari

to the Supreme Judicial Court of Massachusetts

_________

PETITION FOR A WRIT OF CERTIORARI

_________

LISA M. NEELEY

RUBIN AND RUDMAN, LLP

53 State Street, 15th Floor

Boston, MA 02109

(617) 330-7033

BRIAN E. BARREIRA

118 Long Pond Rd., Suite 206

Plymouth, MA 02360

(508) 747-8282

ADAM G. UNIKOWSKY

Counsel of Record

JONATHAN J. MARSHALL*

ABRAHAM G. KANTER

JENNER & BLOCK LLP

1099 New York Ave., NW,

Suite 900

Washington, DC 20001

(202) 639-6000

aunikowsky@jenner.com

* Not admitted in the District of

Columbia; practicing under

direct supervision of members

of the D.C. Bar

QUESTION PRESENTED

In determining the Medicaid eligibility of a married

institutionalized individual, the assets of both spouses

are normally considered. Under 42 U.S.C. § 1396p(c)(1),

an institutionalized spouse is penalized (i.e., becomes

ineligible for benefits) to the extent the married couple’s assets were transferred for less than fair market

value during a specified look-back period.

Section 1396p(c)(1) provides that for purposes

of this transfer penalty, “the purchase of an annuity

shall be treated as the disposal of an asset for less

than 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.” 42 U.S.C.

§ 1396p(c)(1)(F)(i). Section 1396p(c)(2), however, lists a

number of conditions under which “[a]n individual shall

not be ineligible for medical assistance by reason of

paragraph (1).” Id. § 1396p(c)(2). One such condition is

where “the assets . . . were transferred to the individual’s spouse or to another for the sole benefit of the individual’s spouse.” Id. § 1396p(c)(2)(B)(i).

The question presented is:

Whether an annuity that satisfies the condition in

Section 1396p(c)(2)(B)(i) must name the State as the

first remainder beneficiary in order to avoid Section

1396p(c)(1)’s transfer penalty.

PARTIES TO THE PROCEEDING

Petitioner in Dermody is Laurie A. Dermody, who

was Plaintiff-Appellee in the Supreme Judicial Court of

Massachusetts. Petitioners in Mondor are Linda Marie

Mondor, Michelle Mogan, Cathy Ann Mondor, Kathleen

Ann Bristow, Marianne Schwenzfeier, and John

Francis Castle, who were collectively DefendantsCross-Claimants-Appellees in two consolidated cases in

the Supreme Judicial Court of Massachusetts.

Respondent in both Dermody and Mondor is the

Executive Office of Health and Human Services of the

Commonwealth of Massachusetts, which was Defendant-Appellant in the Supreme Judicial Court of Massachusetts in Dermody and Defendant-Cross-ClaimantAppellant in the Supreme Judicial Court of Massachusetts in Mondor.

Nationwide Insurance Company was DefendantCross-Claimant in the Massachusetts Superior Court,

Middlesex County, in Dermody, but is no longer a party

to the case and is not a respondent in this Court.

Standard Insurance Company was InterpleaderPlaintiff in the Massachusetts Superior Court, Suffolk

County, in each of the two consolidated cases in Mondor, but is no longer a party to the cases and is not a

respondent in this Court.

iii

RELATED PROCEEDINGS

Superior Court of Massachusetts, Middlesex County:

Laurie A. Dermody v. The Executive Office of

Health & Human Services, et al., No.

1781CV02342 (Jan. 16, 2020)

Superior Court of Massachusetts, Suffolk County:

Standard Insurance Company v. Linda Marie

Mondor, et al., No. 2084CV02484 (July 1, 2021)

Standard Insurance Company v. Kathleen Ann

Bristow, et al., No. 2184CV00962 (July 1, 2021)

Supreme Judicial Court of Massachusetts:

Laurie A. Dermody v. Executive Office of Health

and Human Services, No. SJC-13199 (Jan. 27,

2023)

Executive Office of Health and Human Services v.

Linda Marie Mondor, et al., No. SJC-13179 (Jan.

27, 2023)

TABLE OF CONTENTS

QUESTION PRESENTED .............................................. i

PARTIES TO THE PROCEEDING ............................. ii

RELATED PROCEEDINGS......................................... iii

TABLE OF AUTHORITIES ......................................... vi

PETITION FOR A WRIT OF CERTIORARI ............ 1

OPINIONS BELOW ......................................................... 1

JURISDICTIONAL STATEMENT .............................. 1

RELEVANT STATUTORY PROVISIONS ................ 2

STATEMENT .................................................................... 2

Statutory Background ..................................... 2

Factual Background ......................................... 7

Proceedings in the Massachusetts

Courts ............................................................... 10

REASONS FOR GRANTING THE PETITION....... 15

II.

The Decisions Below Deepened a Split of

Authority .................................................................. 16

The Supreme Judicial Court Expressly Rejected the Position of the Sixth

Circuit............................................................... 16

The Ninth Circuit Has Also Disagreed

with the Sixth Circuit .................................... 19

The Question Presented Is Deeply Important and Should Be Resolved in These

Cases.......................................................................... 22

III. The Decisions Below Are Wrong .......................... 28

CONCLUSION ................................................................ 33

APPENDIX

Appendix A—Opinion of the Supreme Judicial Court of Massachusetts in Dermody

(Jan. 27, 2023) ........................................................ 1a

Appendix B—Opinion of the Supreme Judicial Court of Massachusetts in Mondor

(Jan. 27, 2023) ...................................................... 19a

Appendix C—Memorandum of Decision and

Order of Superior Court of Massachusetts, Middlesex County, in Dermody

(Jan. 16, 2020) ...................................................... 28a

Appendix D—Statutory Provisions....................... 53a

TABLE OF AUTHORITIES

CASES

American National Insurance Co. v. Breslouf,

No. 2084CV02374, 2021 WL 2343024 (Mass.

Super. Ct. Suffolk Cnty. June 3, 2021) ................. 21

Becerra v. Empire Health Foundation ex rel.

Valley Hospital Medical Center, 142 S. Ct.

2354 (2022) ............................................................... 26

Burrage v. United States, 571 U.S. 204 (2014) ........ 32

Commissioner v. Lundy, 516 U.S. 235 (1996) ......... 32

Food Marketing Institute v. Argus Leader

Media, 139 S. Ct. 2356 (2019) ................................ 32

Gallardo ex rel. Vassallo v. Marstiller, 142

S. Ct. 1751 (2022)..................................................... 26

Hughes v. McCarthy, 734 F.3d 473 (6th Cir.

2013) ...................................... 12, 13, 16, 17, 18, 19, 31

Hutcherson v. Arizona Health Care Cost

Containment System Administration, 667

F.3d 1066 (9th Cir. 2012) .................3-4, 4, 19, 20, 21

Marietta Memorial Hospital Employee Health

Benefit Plan v. DaVita Inc., 142 S. Ct. 1968

(2022) ........................................................................ 26

Pereira v. Sessions, 138 S. Ct. 2105 (2018)............... 32

Puerto Rico v. Franklin California Tax-Free

Trust, 579 U.S. 115 (2016) ...................................... 32

Rehabilitation Ass’n of Virginia v. Kozlowski,

42 F.3d 1444 (4th Cir. 1994) ................................... 28

vii

Schweiker v. Gray Panthers, 453 U.S. 34 (1981) ....... 2

Skidmore v. Swift & Co., 323 U.S. 134 (1944) .......... 18

United States v. Ron Pair Enterprises, 489

U.S. 235 (1989) ......................................................... 32

Wisconsin Department of Health & Family

Services v. Blumer, 534 U.S. 473 (2002) ............ 2, 3

Wos v. E.M.A. ex rel. Johnson, 568 U.S. 627

(2013) ...................................................................26-27

STATUTES

28 U.S.C. § 1257(a) ......................................................... 1

42 U.S.C. § 1396p ................................................... 2, 53a

42 U.S.C. § 1396p(c) ....................... 14, 17, 18, 19, 29, 30

42 U.S.C. § 1396p(c)(1) .................................... 3, 4, 7, 31

42 U.S.C. § 1396p(c)(1)(A) .......................................... 29

42 U.S.C. § 1396p(c)(1)(B) .......................................... 29

42 U.S.C. § 1396p(c)(1)(C) .......................................... 29

42 U.S.C. § 1396p(c)(1)(D) .......................................... 29

42 U.S.C. § 1396p(c)(1)(E) .......................................... 29

42 U.S.C. § 1396p(c)(1)(E)(i)(I) .................................... 4

42 U.S.C. § 1396p(c)(1)(E)(i)(II) .................................. 4

42 U.S.C. § 1396p(c)(1)(F) ........................ 11, 17, 18, 29

42 U.S.C. § 1396p(c)(1)(F)(i)................ 6, 11, 12, 13, 15,

19, 20, 21, 30, 31

42 U.S.C. § 1396p(c)(1)(F)(ii)........................................ 6

42 U.S.C. § 1396p(c)(2) ...................................... 4, 15, 30

viii

42 U.S.C. § 1396p(c)(2)(B) ........................................ 4, 6

42 U.S.C. § 1396p(c)(2)(B)(i).................. 5, 7, 11, 13, 15,

16, 17, 18, 20, 21, 31

42 U.S.C. § 1396p(c)(2)(B)(ii)........................................ 5

42 U.S.C. § 1396p(c)(2)(B)(iii) ...................................... 5

42 U.S.C. § 1396p(c)(2)(B)(iv) ...................................... 5

42 U.S.C. § 1396r-5(b)(1)............................................... 5

42 U.S.C. § 1396r-5(c)(1)(A) ......................................... 5

42 U.S.C. § 1396r-5(c)(2) ............................................... 3

Deficit Reduction Act of 2005, Pub. L. No. 109171, 120 Stat. 4 (2006) ............................................... 5

§ 6012(b) ..................................................................... 6

Medicare Catastrophic Coverage Act of 1988,

Pub. L. No. 100-360, 102 Stat. 683 ...................... 3, 4

§ 303(b) ....................................................................... 4

Medicare Improvements and Extension Act of

2006, Pub. L. No. 109-432, div. B, 120 Stat.

2975 ....................................................................... 6, 20

§ 405(b)(1)............................................................. 6, 20

§ 405(b)(2)................................................................... 6

Omnibus Budget Reconciliation Act of 1993,

Pub. L. No. 103-66, 107 Stat. 312 .........................4-5

§ 13611(a) ................................................................4-5

Mass. Gen. Laws ch. 118E, § 9 ..................................... 7

Mass. Gen. Laws ch. 118E, § 9A .................................. 7

Mass. Gen. Laws ch. 118E, § 31(b) ............................ 14

Mass. Gen. Laws ch. 118E, § 31(b)(1) ....................... 28

REGULATIONS AND R ULES

42 C.F.R. § 409.61(b) ................................................... 22

55 Pa. Code § 178.104a(h) ........................................... 24

55 Pa. Code § 178.174(e).............................................. 24

Sup. Ct. R. 12.4............................................................... 1

Mass. R. App. P. 5........................................................ 14

Mass. R. App. P. 11................................................ 12, 14

Mass. R. Civ. P. 64 ....................................................... 14

LEGISLATIVE MATERIALS

H.R. Rep. No. 100-105, pt. 2 (1987) ............................. 3

OTHER AUTHORITIES

Annuity, Black’s Law Dictionary (11th ed.

2019) ............................................................................ 5

Brief for the United States Department of

Health & Human Services as Amicus Curiae, Hughes v. McCarthy, 734 F.3d 473 (6th

Cir. 2013) (No. 12-3765), 2013 WL 3366469 ......... 31

Center for Medicaid & State Operations, Centers for Medicare & Medicaid Services, Enclosure, Sections 6011 and 6016: New Medicaid Transfer of Asset Rules Under the Deficit Reduction Act of 2005 (2006),

https://downloads.cms.gov/cmsgov

/archived-downloads/SMDL/downloads

/toaenclosure.pdf...................................................... 18

Centers for Medicare & Medicaid Services,

Medicaid Long Term Services and Supports

Annual Expenditures Report: Federal Fiscal Year 2019 (2021) ............................................... 23

Genworth Financial, Inc., Genworth Cost of

Care Survey: Median Cost Data Tables

(2022), https://pro.genworth.com/riiproweb

/productinfo/pdf/282102.pdf ................................... 22

How Do States Pay for Medicaid?, Peter G. Peterson

Found.

(Apr.

26,

2022),

https://www.pgpf.org/budget-basics/budgetexplainer-how-do-states-pay-for-medicaid ........ 23

Hurd, Michael D., et al., Distribution of Lifetime Nursing Home Use and of Out-ofPocket Spending, 114 Proc. Nat’l Acad. Scis.

9838 (2017) .............................................................. 22

Memorandum from Office of Chief Counsel,

Arkansas Department of Human

Services, LTSS LTC Application with a

Spouse with an Annuity (May 10, 2016),

https://www.medicaidannuity.com/wpcontent/uploads/2016/05/OCC-OpinionLetter-for-CS-Annuity-State-not-aBeneficiary.pdf ........................................................ 24

Memorandum from Rich Rosen, Attorney, Office of Chief Counsel, Arkansas Department

of Human Services, LTC: CS Annuity—

Deeds—Sale of Business Property (Sept. 29,

2015), https://www.medicaidannuity.com

/wp-content/uploads/2015/10/AR_memo.pdf ..... 24

Michigan Department of Health & Human

Services, BPB 2015-007, BEM 401 Annuity

Policy Bulletin (effective May 1, 2015),

https://dhhs.michigan.gov/olmweb/exf/BP

/Public/BPB/2015-007.pdf .................................23-24

PETITION FOR A WRIT OF CERTIORARI

Petitioners Laurie A. Dermody and Linda Marie

Mondor, et al., respectfully petition for a writ of certiorari to review the judgments of the Supreme Judicial

Court of Massachusetts.

Pursuant to this Court’s Rule 12.4, Petitioners are

filing a “single petition for a writ of certiorari covering

all the judgments” because multiple judgments “are

sought to be reviewed on a writ of certiorari to the

same court and involve identical or closely related

questions.”

OPINIONS BELOW

In Dermody, the opinion of the Supreme Judicial

Court of Massachusetts (Pet. App. 1a-18a) is reported

at 201 N.E.3d 285. The memorandum of decision and

order of the Superior Court of Massachusetts, Middlesex County (Pet. App. 28a-52a), is unreported but is

available at 2020 WL 742194.

In Mondor, the opinion of the Supreme Judicial

Court of Massachusetts (Pet. App. 19a-27a) is reported

at 201 N.E.3d 281. There was no opinion issued by any

lower Massachusetts court.

JURISDICTIONAL STATEMENT

The judgments of the Supreme Judicial Court of

Massachusetts were entered on January 27, 2023. The

jurisdiction of this Court is invoked under 28 U.S.C.

§ 1257(a).

RELEVANT STATUTORY PROVISIONS

The pertinent section of the U.S. Code, 42 U.S.C.

§ 1396p, is reproduced in the appendix to this petition.

Pet. App. 53a-85a.

STATEMENT

Statutory Background

1. Medicaid is a state-federal cooperative program

through which States provide medical benefits to lowincome individuals and the federal government reimburses the States for some of those costs. See Wis.

Dep’t of Health & Fam. Servs. v. Blumer, 534 U.S. 473,

479 (2002). Participating States develop plans setting

forth benefits and eligibility criteria pursuant to federal

statutes and regulations. See Schweiker v. Gray Panthers, 453 U.S. 34, 36-37 (1981).

For a time, States would determine Medicaid eligibility for married individuals by considering both

spouses’ income and the couple’s jointly held assets, but

not assets held solely in the name of the “community

spouse” (i.e., the spouse of the “institutionalized

spouse”). See Blumer, 534 U.S. at 479-80. This “produced unintended consequences.” Id. at 480. In some

cases, a community spouse would be “left destitute by

the drain on the couple’s assets necessary to qualify the

institutionalized spouse for Medicaid.” Id. And if a

wealthy couple held all spousal assets in the community

spouse’s name alone, the institutionalized spouse might

qualify for Medicaid benefits notwithstanding the couple’s “ample means.” Id.

2. Against this backdrop, Congress enacted the

Medicare Catastrophic Coverage Act of 1988 (MCCA),

Pub. L. No. 100-360, 102 Stat. 683, “to protect community spouses from ‘pauperization’ while preventing financially secure couples from obtaining Medicaid assistance.” Blumer, 534 U.S. at 480 (quoting H.R. Rep. No.

100-105, pt. 2, at 65 (1987)). The MCCA “amended the

Medicaid rules so that in determining eligibility, a couple’s combined assets are considered available to the

applicant regardless of specific ownership.” Pet. App.

8a. In addition, the MCCA “installed a set of intricate

and interlocking requirements” governing allocation of

a married couple’s resources and income. Blumer, 534

U.S. at 480; see id. at 480-84.

In determining the institutionalized spouse’s initial

Medicaid eligibility, the MCCA allowed some of the

couple’s assets to be “reserved for the benefit of the

community spouse.” Blumer, 534 U.S. at 482 (citing 42

U.S.C. § 1396r-5(c)(2)). That amount is known as the

“community spouse resource allowance,” or the

“CSRA.” Id. at 478. “The CSRA is considered unavailable to the institutionalized spouse in the eligibility determination, but all resources above the CSRA (excluding a small sum set aside as a personal allowance for the

institutionalized spouse . . . ) must be spent before eligibility can be achieved.” Id. at 482-83 (citing 42 U.S.C.

§ 1396r-5(c)(2)).

3. The Medicaid Act requires States to impose a

penalty when either an institutionalized individual or

her spouse has transferred assets for less than

fair market value during a five-year look-back period.

42 U.S.C. § 1396p(c)(1); see Hutcherson v. Ariz. Health

Care Cost Containment Sys. Admin., 667 F.3d 1066,

1069 (9th Cir. 2012). When this transfer penalty applies, the institutionalized spouse is deemed ineligible

for Medicaid benefits for the number of months equal to

the “the total, cumulative uncompensated value of

all assets transferred” during the look-back period

divided by “the average monthly cost to a private

patient of nursing facility services in the State.” 42

U.S.C. § 1396p(c)(1)(E)(i)(I)-(II). In other words, “if

either spouse tries to give away assets, the institutionalized spouse will be ineligible for Medicaid benefits for

the length of time that those assets could have covered

the spouse’s medical costs.” Hutcherson, 667 F.3d at

1069. The transfer-penalty provisions appear in Section 1917(c)(1) of the Medicaid Act, 42 U.S.C.

§ 1396p(c)(1), captioned “[t]aking into account certain

transfers of assets.” Pet. App. 65a-72a.

The MCCA made several changes to the transferpenalty provisions. Among others, the MCCA added

Section 1917(c)(2) to the Medicaid Act, 42 U.S.C.

§ 1396p(c)(2), which listed circumstances under which

“[a]n individual shall not be ineligible for medical assistance by reason of paragraph (1),” i.e., an asset transfer

for less than fair market value would not be penalized.

MCCA § 303(b), 102 Stat. at 761; Pet. App. 73a-75a. As

relevant here, one such circumstance was where

“the resources were transferred to (or to another

for the sole benefit of) the community spouse.”

MCCA § 303(b), 102 Stat. at 761 (adding 42 U.S.C.

§ 1396p(c)(2)(B)). After several minor amendments,

that “sole benefit” exception took its current form in

1993. See Omnibus Budget Reconciliation Act of 1993,

Pub. L. No. 103-66, § 13611(a), 107 Stat. 312, 623. The

exception now provides that “[a]n 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.” 42 U.S.C.

§ 1396p(c)(2)(B)(i).1

4. A community spouse may shield personal or

spousal assets by using them to purchase an annuity.2

The purchase of an annuity converts the community

spouse’s assets (which are considered in determining

the institutionalized spouse’s eligibility for Medicaid

benefits, see 42 U.S.C. § 1396r-5(c)(1)(A)) into income

(which is not, see id. § 1396r-5(b)(1)). And under certain

circumstances, the community spouse’s use of assets to

purchase an annuity within the look-back period does

not give rise to a period of Medicaid ineligibility for the

institutionalized spouse.

As part of a broad slate of amendments to the Medicaid laws, Title VI of the Deficit Reduction Act of 2005

(DRA), Pub. L. No. 109-171, 120 Stat. 4 (2006), added a

new requirement that some annuities must meet to remain exempt from consideration in Medicaid eligibility

1 The provision also exempts assets “transferred from the in-

dividual’s spouse to another for the sole benefit of the individual’s spouse,” 42 U.S.C. § 1396p(c)(2)(B)(ii), and other transfers

involving trusts, see id. § 1396p(c)(2)(B)(iii)-(iv).

2 An annuity is “[a]n obligation to pay a stated sum, usu[ally]

monthly or annually, to a stated recipient.” Annuity, Black’s

Law Dictionary 113 (11th ed. 2019).

determinations. Section 6012(b) of the DRA provided

that for purposes of the transfer penalty, “the purchase

of an annuity shall be treated as the disposal of an asset

for less than 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 annuitant.” 120 Stat. at 63 (adding 42

U.S.C. § 1396p(c)(1)(F)(i)).3

Congress quickly amended that new provision.

Later the same year, Congress made a “technical correction” to Section 1396p(c)(1)(F)(i) as amended by the

DRA, “[c]larifying” that the exemption applies when

the State is named as the first remainder beneficiary

for at least the amount of benefits paid on behalf of the

“institutionalized individual,” not the “annuitant.”

Medicare Improvements and Extension Act of 2006,

Pub. L. No. 109-432, div. B, § 405(b)(1), 120 Stat. 2975,

2996, 2998 (amending 42 U.S.C. § 1396p(c)(1)(F)(i))

(emphasis added). The change was made retroactive to

the effective date of the DRA. Id. § 405(b)(2), 120 Stat.

at 2998.

Neither the DRA nor the later clarifying amendment made any change to Section 1396p(c)(2)(B), which

continued to provide that “[a]n individual shall not

3 The DRA’s amendment also exempted the purchase of an

annuity from the transfer penalty if “the State is named as

such a beneficiary in the second position after the community

spouse or minor or disabled child and is named in the first

position if such spouse or a representative of such child disposes of any such remainder for less than fair market value.” DRA

§ 6012(b), 120 Stat. at 63 (adding 42 U.S.C. § 1396p(c)(1)(F)(ii)).

be ineligible for medical assistance by reason of [Section 1396p(c)(1)] to the extent” that assets were transferred “for the sole benefit” of the community spouse.

42 U.S.C. § 1396p(c)(2)(B)(i).

Factual Background

These cases each involve an annuity purchased by

the spouse of an elderly individual admitted to a skillednursing facility for long-term care. Pet. App. 2a, 19a20a. The purchases of the annuities allowed the community spouses to ensure monthly income while reducing the couple’s assets, thus making the institutionalized spouses eligible for benefits through MassHealth,

the program through which the Commonwealth of Massachusetts participates in Medicaid. Id. at 2a-4a, 20a25a. MassHealth is administered by the Commonwealth’s Executive Office of Health and Human Services (EOHHS), the sole Respondent in each case. Id.

at 5a; see Mass. Gen. Laws ch. 118E, §§ 9-9A.

The community spouses in each case listed the

Commonwealth of Massachusetts as the primary remainder beneficiary on the annuity and their children

as the contingent remainder beneficiaries. Pet. App.

3a, 21a, 23a-24a. In each case, the community spouse

died before the annuity was fully paid out, leading to a

dispute between the children and the Commonwealth

as to who was entitled to the remaining funds. Id. at

4a, 23a, 25a.

1. In June 2015, Robert Hamel used spousal resources to purchase an annuity from Nationwide Life

Insurance Company so that his wife Joan—who had

been admitted to a long-term nursing facility the previ-

ous month—would become eligible for MassHealth

benefits. Pet. App. 3a. The annuity application listed

“Commonwealth of MA the Extent Benefits Paid [sic]”

as the primary remainder beneficiary and the couple’s

daughter, Petitioner Laurie Dermody, as the contingent remainder beneficiary. Id. (alteration in original).

Neither the application nor the issued annuity (which

listed the primary remainder beneficiary as “State of

MA Medicaid Per Application”) clarified whether the

limit on the Commonwealth’s recovery was to the extent benefits had been paid on behalf of Robert or Joan.

See id. at 3a & n.4. Joan then began to receive

MassHealth benefits for her care. Id. at 3a.

Robert died in December 2016 without having personally received MassHealth benefits. Pet. App. 3a.

EOHHS then asserted that it was entitled to the approximately $119,000 remaining on the annuity, which

was less than the medical coverage it had provided on

behalf of Joan. Id. at 3a-4a. After Nationwide distributed the remainder to the Commonwealth, Ms. Dermody brought suit in Massachusetts court, seeking a declaratory judgment that she was entitled to the funds.

Id. at 4a.4

2. In April 2018—the month after his wife Elda

was admitted to a long-term nursing facility—Edward

Mondor purchased an annuity from Standard Insurance

Company using funds in his individual retirement ac4 Ms. Dermody also asserted unfair-business-practice claims

against Nationwide, but those claims were later settled and are

not at issue in this Court. See Pet. App. 4a n.6, 46a-51a.

count. Pet. App. 20a-21a. Edward named the Commonwealth as the primary remainder beneficiary and

the couple’s three daughters—Petitioners Linda Marie

Mondor, Michelle Mogan, and Cathy Ann Mondor

(Mondor Petitioners)—as the contingent remainder

beneficiaries. Id. at 21a; see id. at 20a. Having paid for

the annuity in full, Edward and Elda’s joint assets were

reduced to the point that Elda became eligible for

MassHealth benefits, which she began to receive. Id. at

21a-23a. Edward never received any MassHealth benefits. Id. at 23a.

Edward died in April 2020 with approximately

$98,000 remaining on the annuity. Pet. App. 23a. The

Commonwealth claimed that it was entitled to those

funds, having paid more than that in benefits on behalf

of Elda. Id. Mondor Petitioners also claimed entitlement to the funds. Id. Standard retained the money

and brought an interpleader suit against Mondor Petitioners and the Commonwealth to resolve the controversy. Id. at 25a.

3. In November 2018, James Castle similarly used

individual retirement funds to purchase an annuity

from Standard so that his wife Carol, who had been

admitted to a long-term nursing facility several months

earlier, would be eligible for MassHealth benefits. Pet.

App. 23a-24a. James named the Commonwealth as the

primary remainder beneficiary and the couple’s three

children—Petitioners Kathleen Ann Bristow, Marianne

Schwenzfeier, and John Francis Castle (Castle Petitioners)—as the contingent remainder beneficiaries.

Id. at 24a; see id. at 23a. James never received any

MassHealth benefits. Id. at 24a-25a.

James died in October 2020 with approximately

$110,000 remaining on the annuity—less than the

amount of medical benefits the Commonwealth had

paid on behalf of Carol. Pet. App. 24a. Standard disbursed some of the funds to the Commonwealth after it

asserted its entitlement to the remainder. Id. at 25a.

But when Castle Petitioners asserted their interest,

Standard ceased making payments and instead sued

both Castle Petitioners and the Commonwealth. Id.

Proceedings in the Massachusetts Courts

1. a. The Massachusetts trial court granted

summary judgment to Ms. Dermody, holding that she

was entitled to the funds remaining on her father’s annuity. Pet. App. 28a-52a.

The court took the view that under state contract

law, Ms. Dermody would prevail unless the Medicaid

Act compelled a contrary conclusion. As the court explained, Robert’s annuity “designates the ‘State of MA

Medicaid Per Application’ as his primary beneficiary,

and his annuity application states that the Commonwealth’s right to recover is limited to the ‘Extent Benefits Paid.’” Pet. App. 45a. It further observed that

“Robert was the sole annuitant of the contract, and

Joan is not referenced anywhere in the contract.” Id.

“Accordingly,” the court found, “nothing in the plain

terms of the contract suggests the ‘benefits paid’ language refers to anyone other than Robert.” Id. Under

this interpretation, all remaining benefits would go to

Ms. Dermody because the Commonwealth had not paid

any benefits on behalf of Robert (as opposed to Joan).

The Commonwealth, however, invoked 42 U.S.C.

§ 1396p(c)(1)(F)(i) to argue that it was entitled to the

remaining funds. It asserted that the Medicaid Act required it to be named as the first remainder beneficiary

to the extent it had paid for Joan’s care, notwithstanding the fact that the annuity purchase was for the

“sole benefit” of Robert and was thus subject to Section

1396p(c)(2)(B)(i). Id. § 1396p(c)(2)(B)(i); see Pet. App.

38a-39a. The Commonwealth argued that “if the

court finds that a transfer of assets to purchase an annuity must satisfy both provisions,” i.e., Section

1396p(c)(1)(F)(i) and 1396p(c)(2)(B)(i)—“then the court

also must find that the ‘Extent Benefits Paid’ language

in Robert’s contract necessarily refers to Joan” in order

to justify the Commonwealth’s approval of Medicaid

benefits without subjecting Joan to the transfer penalty. Id. at 38a; see id. at 38a-39a. The trial court thus

characterized the “gravamen of this dispute” as

“hing[ing] on whether an annuity that satisfies the sole

benefit rule must also satisfy the annuity rules under

§ 1396p(c)(1)(F).” Id. at 38a.

The trial court then rejected the Commonwealth’s

interpretation of the Medicaid Act. In light of the Act’s

“unambiguous” text,” Pet. App. 41a, the court concluded that an annuity satisfying Subparagraph (c)(2)(B)(i)

“need not satisfy the annuity rules set forth in [Subparagraph (c)(1)(F)],” id. at 43a-44a; see id. at 39a-44a. Accordingly, the court held that Ms. Dermody “is entitled

to the remaining balance of Robert’s annuity as the

contingent beneficiary.” Id. at 45a.

b. The Supreme Judicial Court of Massachusetts5

reversed. Pet. App. 1a-18a.

The Supreme Judicial Court began by noting, as the

trial court had, that “determination of the rightful owner of the annuity’s remainder proceeds turns on our interpretation of the Medicaid Act.” Pet. App. 4a. The

court then held that the Medicaid Act required the annuity to name the Commonwealth as the first remainder beneficiary in order to avoid the transfer penalty.

Pet. App. 11a-14a. It reached that conclusion based on

an analysis of the purpose of the Medicaid Act, the general intent of the DRA’s amendment, and the practical

effects of a contrary ruling. See id. at 12a-14a.

The Supreme Judicial Court first observed that

one of the purposes of the “aptly named Deficit Reduction Act was to close loopholes in the Medicaid

Act that allowed affluent couples to shelter their assets.” Pet. App. 12a. And it explained that Section

1396p(c)(1)(F)(i), the provision added by the DRA requiring the State to be named as an annuity beneficiary, did not itself contain a “carve-out for those annuities purchased for the sole benefit of the community

spouse,” and the court “decline[d] to add one.” Id. at

12a-13a.

The Supreme Judicial Court noted the Sixth Circuit’s contrary conclusion in Hughes v. McCarthy, 734

F.3d 473 (2013), that “the sole benefit provision [i.e.,

5 The Supreme Judicial Court agreed to hear the case on direct

appeal, bypassing the Commonwealth’s intermediate appellate

court. See Mass. R. App. P. 11.

Section 1396p(c)(2)(B)(i)] ‘carves out an exception

to paragraph (1)’s transfer penalties.’” Pet. App. 13a

(quoting Hughes, 734 F.3d at 485). But the court

rejected this reading of the two provisions on the

basis that it would “frustrate[] the purpose of

§ 1396p(c)(1)(F)(i).” Id. at 13a n.18. On the Sixth Circuit’s reading, the court explained, “the sole-benefit

loophole would remain open, frustrating not only the

purpose of the beneficiary naming 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.” Id. at 13a-14a. The court therefore concluded that “subsections (c)(1)(F)(i) and

(c)(2)(B)(i) both must apply to ensure that an annuity

purchased does not become a vehicle for sheltering assets that otherwise properly would be used to pay for

medical care.” Id. at 14a.

Having resolved the disputed interpretation of the

Medicaid statutes, the Supreme Judicial Court held

that the Commonwealth was entitled to the funds remaining on Robert Hamel’s annuity. Pet. App. 15a; see

id. at 15a-18a. The court explained that because the

Medicaid Act required the Commonwealth to be named

as the first remainder beneficiary to the extent it had

paid benefits on behalf of Joan, the annuity must be interpreted as giving the Commonwealth this rightful

benefit. Id. at 16a-17a. The court further noted that

even if the annuity had not named the Commonwealth

as a beneficiary, the Commonwealth would still be entitled to the funds pursuant to the transfer penalty because the annuity would be noncompliant with Section

1396p(c)(1)(F)(i)’s requirement. Id. at 17a n.22.

Finally, the Supreme Judicial Court rejected the

argument that a Massachusetts statute would bar the

Commonwealth from recovering the remainder of the

annuity. Pet. App. 17a-18a. That statute, which governs the Commonwealth’s ability to recoup Medicaid

benefits, provides that “[t]here shall be no adjustments

or recovery of medical assistance correctly paid except”

under specified conditions—all of which involve recovery from the estate of an institutionalized individual,

not her spouse. Mass. Gen. Laws ch. 118E, § 31(b). The

court explained that to the extent Commonwealth law

would preclude it from recovering, that law would be

preempted by the federal Medicaid Act. Pet. App. 17a18a.

2. In an unsigned opinion issued the same day as

its opinion in Dermody, the Supreme Judicial Court of

Massachusetts6 held that disposition of the remaining

funds from the Mondor and Castle annuities was “governed in all material respects by our decision” in Dermody. Pet. App. 26a; see id. at 19a-27a.

The Supreme Judicial Court explained that “[i]n

Dermody, we concluded that . . . in order to avoid a determination of ineligibility or the imposition of a disqualifying transfer penalty under 42 U.S.C. § 1396p(c)

6 The trial court reported the cases involving the Mondor and

Castle annuities for appellate determination without issuing a

judgment. See Mass. R. Civ. P. 64; Mass. R. App. P. 5. As in

Dermody, the Supreme Judicial Court agreed to exercise direct

appellate review and consolidated the two cases. See Mass. R.

App. P. 11.

with respect to annuity transactions . . . , any annuity

purchased by a community spouse for Medicaid planning purposes in order to achieve the Medicaid eligibility of an institutionalized spouse and designated for the

‘sole benefit’ of the community spouse under

§ 1396p(c)(2) must also satisfy the beneficiary naming

requirement of § 1396p(c)(1)(F)(i).” Pet. App. 26a. The

court also noted its “conclu[sion] in Dermody that to

the extent that the State Medicaid estate recovery

statute . . . would prevent the Commonwealth from collecting annuity proceeds it is designated to receive as

the primary remainder beneficiary, the State statute is

preempted by the Medicaid Act.” Id.

The Supreme Judicial Court therefore concluded, as

it had in Dermody, that “the relevant ‘institutionalized

individual[s]’ for purposes of § 1396p(c)(1)(F)(i) are the

individuals whose eligibility for Medicaid long-term

benefits was made possible by the purchase of the annuities and whose eligibility for Medicaid long-term

care benefits turned on the proper disclosure and

treatment of the annuities in accordance with the Medicaid Act.” Pet. App. 26a-27a (alteration in original)

(quoting 42 U.S.C. § 1396p(c)(1)(F)(i)). Thus, the Commonwealth was entitled to the funds remaining on both

annuities. Id. at 27a.

REASONS FOR GRANTING THE PETITION

In determining that an annuity that complies with

42 U.S.C. § 1396p(c)(2)(B)(i) must nevertheless name

the State as the first remainder beneficiary under Section 1396p(c)(1)(F)(i) to avoid the Medicaid Act’s transfer penalty, the Supreme Judicial Court of Massachusetts expressly rejected the contrary view of the Sixth

Circuit in Hughes v. McCarthy, 734 F.3d 473 (2013).

Unlike the Sixth Circuit, which interpreted the two

provisions according to their plain and unambiguous

text, the Supreme Judicial Court relied on statutory

titles and purpose to reach a flatly atextual reading of

the Act.

In so doing, the Supreme Judicial Court deepened

an existing split of authority—its judgments align with

the position taken by the Ninth Circuit, which has also

staked out a position irreconcilable with the Sixth Circuit’s. And the question on which the court erred has

deep importance to elderly individuals, the estate planners who advise them, state Medicaid agencies, and

state legislatures making budget determinations. The

judgments below are incorrect, and these cases present

ideal vehicles for resolving the question presented.

This Court should grant the petition.

THE DECISIONS BELOW DEEPENED A

SPLIT OF AUTHORITY.

The Supreme Judicial Court Expressly Rejected the Position of the Sixth Circuit.

In Hughes, supra, the Sixth Circuit held that an annuity satisfying Section 1396p(c)(2)(B)(i) is not subject

to the transfer penalty even if it fails to name the State

as the first remainder beneficiary. 734 F.3d at 483-86.

That holding is in square conflict with the decisions below.

1. Like these cases, Hughes involved an annuity

purchased by a community spouse in order to help an

institutionalized spouse become eligible for Medicaid.

734 F.3d at 477. The Ohio state agency treated the

transfer as improper for failure to name the State as

the first remainder beneficiary, and accordingly determined that the institutionalized spouse was ineligible

for “the number of months that the difference between

[the community spouse’s] CSRA and the annuity would

have paid for nursing home costs.” Id. Among other

arguments made in support of its determination, the

state agency posited that “the transfer of a community

resource to purchase an annuity by or on behalf of the

community spouse that satisfies § 1396p(c)(2)(B)(i)’s

sole-benefit rule must also satisfy the annuity rules under § 1396p(c)(1)(F).” Id. at 483; see id. at 479-86.

The Sixth Circuit rejected the state agency’s argument, holding that “its reading of the two provisions

defies the text and structure of the statute.” Hughes,

734 F.3d at 484; see id. at 483-86. Instead, the court

of appeals held that “an annuity that satisfies

§ 1396p(c)(2)(B)(i) need not satisfy § 1396p(c)(1)(F).” Id.

at 484. The court relied on a textual analysis of the two

provisions, explaining that by its plain text and clear

structure, Section 1396p(c) “places § 1396p(c)(1)(F)

within paragraph (1)’s transfer-penalty framework and

specifically sets forth § 1396p(c)(2)(B)(i)’s sole-benefit

rule as an exception to paragraph (1).” Id. at 485.

The Sixth Circuit was also unpersuaded by the state

agency’s invocation of “floor statements by members of

Congress” that “indicat[ed] in general terms that the

DRA was enacted to close loopholes related to the purchase of annuities.” Hughes, 734 F.3d at 486. The court

did not agree that those floor statements “reveal[ed]

Congressional intent to subject § 1396p(c)(2)(B)(i) to

§ 1396p(c)(1)(F)’s annuity rules,” id. at 486 n.16, and

explained that it would not matter anyway because the

statutory language is “unambiguous[],” id. at 486. The

court further observed that the DRA did not amend

Section 1396p(c)(2)(B)(i) and that “[i]f Congress prefers

the interpretation that applies § 1396p(c)(1)(F) notwithstanding § 1396p(c)(2)(B)(i), it need only amend the

statute.” Id.

The Department of Health and Human Services

(HHS) took a contrary position in an amicus brief filed

in Hughes. See 734 F.3d at 484-85. The Sixth Circuit

rejected HHS’s view, observing that HHS presented it

“without any reference to the statutory text, meaningful analysis, or reference to authority.” Id. at 484. Instead, HHS relied solely on an informal “letter enclosure” asserting that Section 1396p(c)(1)(F) applies

to annuities purchased by the community spouse

without any analysis of Section 1396p(c)(2)(B)(i). Id. at

484-85; see Ctr. for Medicaid & State Operations,

Ctrs. for Medicare & Medicaid Servs., Enclosure,

Sections 6011 and 6016: New Medicaid Transfer of

Asset Rules Under the Deficit Reduction Act of

2005, at 13-14 (2006), https://downloads.cms.gov/cmsgov

/archived-downloads/SMDL/downloads/toaenclosure.pdf.

Finding that “HHS’s rationale lacks reasoning and contravenes the plain language of [both provisions],” the

court declined to afford the agency’s view even mild

deference under Skidmore v. Swift & Co., 323 U.S. 134

(1944). Hughes, 734 F.3d at 485.

2. The Supreme Judicial Court could not have

made clearer that its interpretation of Section 1396p(c)

was contrary to the Sixth Circuit’s holding in Hughes.

The court observed that Ms. Dermody “rel[ied] heavily

on the reasoning of the Sixth Circuit in Hughes,” Pet.

App. 11a; it cited Hughes repeatedly, see id. at 11a-13a;

and it expressly “reject[ed] [Hughes’s] interpretation”

as “frustrat[ing] the purpose of § 1396p(c)(1)(F)(i),” id.

at 13a n.18.

Indeed, the conflict between Hughes and the

decision below is plain. Hughes relied on the text

and structure of Section 1396p(c) to hold that an annuity satisfying the sole-benefit rule in Subparagraph

(c)(2)(B)(i) need not comply with Subparagraph

(c)(1)(F)(i)’s rule that annuities are subject to a transfer

penalty if they do not name the State as the first remainder beneficiary to the extent it has paid for benefits on behalf of the institutionalized spouse. 734 F.3d

at 483-86. The decisions below, relying on the DRA’s

purpose to close purported “loopholes” in the Medicaid

statutes, rejected that plain-text interpretation and instead concluded that in order to further Congressional

purpose, both provisions must be applicable. Pet. App.

12a-14a, 26a-27a.

In short, the conclusions of the Supreme Judicial

Court of Massachusetts and the Sixth Circuit are in binary opposition.

The Ninth Circuit Has Reached the Same

Conclusion as the Supreme Judicial Court.

In Hutcherson v. Arizona Health Care Cost Containment System Administration, 667 F.3d 1066 (2012),

the Ninth Circuit confronted a set of facts materially

identical to those in the cases below and, in accord with

the Supreme Judicial Court, held that the State of Ari-

zona was “entitled to recover as the primary remainder

beneficiary from [the community spouse’s] annuity for

the amount of medical costs it paid on behalf of [the institutionalized spouse].” Id. at 1071.

Like these cases, Hutcherson involved a husband

who purchased an annuity with spousal assets so that

his institutionalized wife would be eligible for Medicaid

benefits. 667 F.3d at 1067. That annuity paid monthly

benefits to the husband, see id.; in other words, it was

for his “sole benefit,” 42 U.S.C. § 1396p(c)(2)(B)(i). After the husband’s death, the couple’s daughter claimed

that the State “had no right to recover from [the] annuity.” Hutcherson, 667 F.3d at 1068. She pointed out

that the amendment to Section 1396p(c)(1)(F)(i) that

changed “on behalf of the annuitant” to “on behalf of

the institutionalized individual” was labeled by Congress as a “technical correction.” Medicare Improvements and Extension Act of 2006, Pub. L. No. 109-432,

div. B, § 405(b)(1), 120 Stat. 2975, 2996, 2998 (amending

42 U.S.C. § 1396p(c)(1)(F)(i)); see Hutcherson, 667 F.3d

at 1070. She argued that “the ‘technical’ character of

the amendment indicates that Congress was merely

trying to ‘clarify’ the law and not to make substantive

changes to the law,” and that Congress thus intended

that “‘institutionalized individual’ [be interpreted] to

mean ‘annuitant’ despite the different meanings of

those words.” Hutcherson, 667 F.3d at 1070.

The Ninth Circuit disagreed, concluding that the

amendment effected a substantive change to the statute. Hutcherson, 667 F.3d at 1070-71. The court of appeals therefore held that the State was “entitled to recover as the primary remainder beneficiary from [the]

annuity for the amount of medical costs it paid on behalf of [the institutionalized wife].” Id. at 1071. In other words, Hutcherson held that under the same circumstances present in the cases below, the State was entitled to recover as a remainder beneficiary even

though the annuity was purchased “for the sole benefit

of the [institutionalized] individual’s spouse,” 42 U.S.C.

§ 1396p(c)(2)(B)(i).7

Hutcherson did not expressly address the specific

argument, asserted below and in Hughes, that the

State was not required to be named as the first remainder beneficiary because the annuity, having satisfied Section 1396p(c)(2)(B)(i)’s sole-benefit rule, was

exempt from Section 1396p(c)(1)(F)(i)’s transfer penalty. But having construed the statute in Hutcherson,

stare decisis principles would bind the Ninth Circuit to

the same conclusion as the one reached in the cases below, even if the individuals in a future case raised different arguments. That is why courts have treated

Hutcherson as dispositive of the statutory dispute at

issue here. See, e.g., Am. Nat’l Ins. Co. v. Breslouf, No.

2084CV02374, 2021 WL 2343024, at *9 & n.7 (Mass. Super. Ct. Suffolk Cnty. June 3, 2021) (relying on

Hutcherson “[a]lthough [it] did not discuss 42 U.S.C.

§ 1396p(c)(2)(B)(i)” and rejecting the argument that

“because Hutcherson did not address the sole benefit

exception of section 1396p(c)(2)(B)(i), it is not on

point”).

7 Hutcherson further held that the State could recover for con-

tinuing Medicaid benefits paid on behalf of the surviving wife

even after her husband’s death. See 667 F.3d at 1071-72.

II.

THE QUESTION PRESENTED IS DEEPLY

IMPORTANT AND SHOULD BE RESOLVED

IN THESE CASES.

This Court should grant certiorari and resolve the

conflict of authority. The proper interpretation of the

Medicaid Act provisions at issue here is extraordinarily

important to elderly couples planning for end-of-life

care and for their estates. States, too, face uncertainty

over how federal law will compel them to expend their

budgets. These cases are ideal vehicles to resolve the

split, and the Court should do so.

1. To begin, this Court should grant review because the conflict of authority creates serious estateplanning challenges for a large number of individuals in

the United States. Over one-quarter of those in this

country who reach age 57 will spend 100 or more days

in a skilled-nursing facility at some point in the future.8

And it is typical that institutionalized elderly individuals will rely on public funding to pay for this care: the

average annual cost for skilled-nursing care is roughly

$100,000, and Medicare does not cover long-term stays.

See 42 C.F.R. § 409.61(b).9

In determining how to finance this care, married

couples must make important decisions about whether

8 See Michael D. Hurd et al., Distribution of Lifetime Nursing

Home Use and of Out-of-Pocket Spending, 114 Proc. Nat’l

Acad. Scis. 9838, 9839 (2017).

9 See also Genworth Fin., Inc., Genworth Cost of Care Survey:

Median Cost Data Tables 1 (2022), https://pro.genworth.com

/riiproweb/productinfo/pdf/282102.pdf.

to use their own assets or to rearrange those assets according to the prescriptions of federal law so that the

institutionalized spouse will be eligible for Medicaid

benefits. A popular—and perfectly lawful—strategy is

for spousal assets to be converted to an annuity that

pays monthly income to the community spouse. To decide whether this strategy is appropriate, it is imperative that couples understand what will happen with the

annuity’s remainder in the event the community spouse

dies earlier than is actuarially expected.

2. The conflict of authority also hinders the States.

Medicaid spending accounts for 27% of state budgets,

and long-term skilled-nursing care represents a significant portion of state Medicaid expenditures.10 In planning their budgets, States need and deserve clarity as

to the circumstances under which they will be entitled

to reimbursement for benefits provided.

Even before the Supreme Judicial Court issued its

ruling, state agencies reached divergent conclusions on

the interpretive question presented here. For example,

Michigan has taken the position (following Hughes) that

annuities purchased for the sole benefit of the community spouse need not name the State as a remainder

beneficiary. Mich. Dep’t of Health & Hum. Servs., BPB

10 See Ctrs. for Medicare & Medicaid Servs., Medicaid Long

Term Services and Supports Annual Expenditures Report:

Federal Fiscal Year 2019, at 7, 10, 29 (2021); How Do States

Pay for Medicaid?, Peter G. Peterson Found. (Apr. 26, 2022),

https://www.pgpf.org/budget-basics/budget-explainer-how-dostates-pay-for-medicaid.

2015-007, BEM 401 Annuity Policy Bulletin 1 (effective

May 1, 2015), https://dhhs.michigan.gov/olmweb/exf/BP

/Public/BPB/2015-007.pdf. Arkansas (without binding

state or circuit precedent) initially followed suit,

but then sowed confusion by issuing inconsistent guidance the next year.11

Other States offer contradictory guidance in an attempt to simply reproduce the statutory text. For instance, regulations in Pennsylvania (also without state

or circuit precedent) treat annuities “as a transfer of

assets for less than [fair market value]” if they do not

name the Commonwealth as the first beneficiary, 55 Pa.

Code § 178.104a(h), but then also state without clarification that “[a]n individual will not be ineligible for

nursing facility services if” the assets at issue “were

transferred to . . . another for the sole benefit of the individual’s spouse from the individual’s spouse,” id.

§ 178.174(e).12

11 Compare

Memorandum from Rich Rosen, Att’y, Off. of

Chief Counsel, Ark. Dep’t of Hum. Servs., LTC: CS

Annuity—Deeds—Sale of Business Property 2 (Sept. 29, 2015),

https://www.medicaidannuity.com/wp-content/uploads/2015/10

/AR_memo.pdf, with Memorandum from Off. of Chief Counsel,

Ark. Dep’t of Hum. Servs., LTSS LTC Applicant with a

Spouse with an Annuity 2-3, 3 n.2 (May 10, 2016),

https://www.medicaidannuity.com/wp-content/uploads/2016/05

/OCC-Opinion-Letter-for-CS-Annuity-State-not-a-Beneficiary.pdf.

12 Indeed, Massachusetts itself appears to have taken its cur-

rent view only in about 2016, roughly a decade after the DRA’s

enactment. Before that time, EOHHS advised informally that

annuities like those at issue in these cases need not name

In short, States do not know what to do when a

community spouse purchases an annuity and then dies

earlier than expected. The Supreme Judicial Court’s

decision will only exacerbate that confusion.

3. The issue in this case recurs frequently. In its

brief before the Supreme Judicial Court, the Commonwealth listed twenty-two cases in the Massachusetts

trial courts involving disputes over ownership of annuity remainders—among them, twenty filed in 2020 and

2021 alone. See EEOHS Sup. Jud. Ct. Br. addendum at

140-44 (Nov. 8, 2021).

The fact that there are only three cases from federal

courts of appeals or state supreme courts reflects an

unfortunate reality of Medicaid litigation: litigants often run out of money. When an annuitant fails to name

the State as the first remainder beneficiary (because he

believes he is not required to do so under Section

1396p(c)(2)(B)(i)’s sole-benefit rule) and the State disagrees, the effect of the disagreement is that the State

will deem the institutionalized spouse ineligible for

Medicaid benefits for a period of time, pursuant to the

transfer penalty’s formula. The community spouse—

who has just transferred the bulk of spousal assets into

the annuity and whose spouse is ill to the point of needing institutionalization—will rarely have the wherewithal or the appetite to litigate that issue against the

State.

the Commonwealth as a remainder beneficiary. See MondorBristow Sup. Jud. Ct. Br. 47-50 (Dec. 20, 2021).

Further, when a community spouse complies with

the State’s official policy that it will apply the transfer

penalty (and deny Medicaid benefits) for annuity purchases that do not name the State as the first remainder beneficiary, there is nothing left to fight about if

the community spouse dies earlier than expected and

money is actually handed over to the State. At that

point, the State is entitled to the money no matter what

because it was named as the first remainder beneficiary—even if it did not have to be so named.

These cases, however, properly present an opportunity to resolve the question. The annuities themselves are not clear on whether Massachusetts is entitled to the remaining funds; as the Massachusetts

courts all agreed, the Commonwealth’s entitlement

therefore turns on the appropriate interpretation of the

Medicaid Act. This Court should take advantage of the

clean posture in which the question arises here and

grant certiorari in these cases.

4. Nor is additional percolation needed. In recent

years, this Court has stepped in to resolve splits of authority on the proper interpretation of the Medicare

and Medicaid laws without awaiting a lengthy percolation among lower courts. See, e.g., Becerra v. Empire

Health Found. ex rel. Valley Hosp. Med. Ctr., 142

S. Ct. 2354, 2361 (2022) (conflict among three circuits);

Marietta Mem’l Hosp. Emp. Health Benefit Plan v.

DaVita Inc., 142 S. Ct. 1968, 1972-73 (2022) (conflict between two circuits, both of which issued their decisions

in 2020); Gallardo ex rel. Vassallo v. Marstiller, 142

S. Ct. 1751, 1757 (2022) (conflict between one federal

court of appeals and one state high court); Wos v.

E.M.A. ex rel. Johnson, 568 U.S. 627, 632 (2013) (same).

The Court should follow the same path here. The Sixth

Circuit and the Supreme Judicial Court of Massachusetts have issued detailed opinions on both sides of the

question presented, and additional decisions are unlikely to illuminate the legal issues any further.

5. These cases are ideal vehicles for resolving the

split of authority on the proper interpretation of the

Medicaid Act.

The Supreme Judicial Court cleanly resolved the

federal issue in these cases, and its resolution of that

federal issue was dispositive. At the outset of its discussion, the court framed the threshold question as one

of federal law: “whether certain provisions of the Medicaid Act bearing on the application of asset transfer

penalties are meant to operate together or separately.”

Pet. App. 5a. Only after resolving that threshold issue

would the court analyze “the contract terms in light of

our interpretation of those provisions.” Id.

Consistent with that framing, the Supreme Judicial

Court began its “[a]nalysis” by interpreting the Medicaid Act in the manner advocated by the Commonwealth. Pet. App. 11a; see id. at 11a-15a. After its ruling on federal law, the court then addressed the “plaintiff’s additional arguments, grounded in State law,” id.

at 15a, and found that its resolution of the federal question dictated the outcome of the plaintiff’s state-law

claims. In particular, Ms. Dermody argued that regardless of the proper interpretation of the Medicaid Act,

the correct construction of the annuity was that the

Commonwealth was named as a beneficiary only to the

extent it had paid benefits on behalf of Robert (i.e., $0).

Id. at 15a-16a. The Superior Court had agreed with Ms.

Dermody’s analysis as a matter of state contract law,

see id. at 45a, but the Supreme Judicial Court reversed

that determination, finding that the Medicaid Act required construing the annuity in a manner favorable to

the Commonwealth, see id. at 15a-17a. Indeed, because

the Medicaid Act required the Commonwealth to be the

first remainder beneficiary to the extent it had paid

benefits on Joan’s behalf, the Supreme Judicial Court

explained that it would have reached the same result

even had the annuity not named the Commonwealth as

a remainder beneficiary at all. Id. at 17a n.22.

Ms. Dermody separately argued that a Commonwealth statute would bar its recovery from Robert’s

estate. Pet. App. 17a (citing Mass. Gen. Laws ch. 118E,

§ 31(b)(1)). But the Supreme Judicial Court rejected

that argument on the basis that the Commonwealth

statute would be preempted by federal law to the extent it barred recovery where federal law explicitly authorized it. Id. at 17a-18a. This reasoning again underscores that the court’s interpretation of federal law dictated the outcome of these cases. These cases are

therefore an ideal vehicle to determine whether that

interpretation is correct.

III. THE DECISIONS BELOW ARE WRONG.

The Medicaid laws have been described as “among

the most completely impenetrable texts within human

experience,” Rehab. Ass’n of Va. v. Kozlowski, 42 F.3d

1444, 1450 (4th Cir. 1994), but the question presented in

these cases is not difficult. One of the two provisions at

issue sets out a general rule about the circumstances in

which the purchase of an annuity is considered an asset

transfer that triggers the transfer penalty. The other

provision states clearly, however, that the transfer

penalty does not apply when assets are transferred for

the sole benefit of the community spouse. These cases

each involve just such a transfer, so the penalty is

plainly inapplicable.

A. The provisions at issue appear in 42 U.S.C.

§ 1396p(c), which is captioned “[t]aking into account

certain transfers of assets.” Paragraph (1) of that subsection governs the circumstances in which an institutionalized individual will be ineligible for Medicaid benefits if either she “or the spouse of such an individual

. . . disposes of assets for less than fair market value on

or after the look-back date specified in subparagraph

(B)(i).” Id. § 1396p(c)(1)(A). The next several subparagraphs discuss the length of the look-back period, id.

§ 1396p(c)(1)(B); the extent of Medicaid ineligibility as a

result of covered transfers, id. § 1396p(c)(1)(E); and

other technical details, id. § 1396p(c)(1)(C)-(D). Then,

Subparagraph (c)(1)(F) provides (in relevant part):

For purposes of this paragraph [i.e., Section

1396p(c)(1)], the purchase of an annuity shall be

treated as the disposal of an asset for less than

fair market value unless—

(i) 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 . . . .

Id. § 1396p(c)(1)(F).

Thus, Section 1396p(c)(1)(F)(i) sets forth a general

rule. A transfer of assets for less than fair market value during the look-back period can lead to a corresponding period of Medicaid ineligibility. The purchase

of an annuity counts as such a disqualifying transfer unless the State is listed as the first remainder beneficiary (to the extent the State has paid Medicaid benefits on behalf of the institutionalized individual).

Paragraph (2) of Section 1396p(c) carves out an exception to the ineligibility rule set forth in Paragraph

(1). It states (in relevant part):

An individual shall not be ineligible for medical

assistance by reason of paragraph (1) to the extent that—

....

(B) the assets—

(i) were transferred to the individual’s spouse

or to another for the sole benefit of the individual’s spouse . . . .

42 U.S.C. § 1396p(c)(2).

Section 1396p(c)(2) is not an annuity-specific rule; it

governs all asset transfers. It provides in clear terms

that Paragraph (1) does not penalize asset transfers for

less than fair market value (such as property sales or

the purchases of annuities) when the transfer is solely

to benefit the Medicaid recipient’s spouse.13

13 As HHS agrees, an annuity whose remainder reverts to an-

other only after the death of the annuitant is “for the sole bene-

The applicability of the two provisions to the annuities at issue in these cases is straightforward. Take the

Dermody annuity. Section 1396p(c)(1)(F)(i), standing

alone, would deem Robert Hamel’s purchase of the annuity an asset transfer for less than fair market value—

and therefore make Joan ineligible for Medicaid benefits for a corresponding period—unless the annuity

named the Commonwealth as the first remainder beneficiary to the extent it had paid benefits on Joan’s behalf. But because the annuity was for the “sole benefit

of” Robert, it was exempt from the transfer penalty

under Section 1396p(c)(2)(B)(i), which makes the penalty provisions of Section 1396p(c)(1) inapplicable in the

case of such asset transfers. Robert thus had no obligation to name the State as the first remainder beneficiary.

B. The Supreme Judicial Court reached the contrary conclusion only by ignoring the statutory text and

choosing instead the interpretation that would best effectuate what it believed was Congress’s “intent.” Pet.

App. 14a. The court started its analysis by relying on

the DRA’s title—explaining that “one purpose of the

fit” of the annuitant within the meaning of Section

1396p(c)(1)(F). See Hughes, 734 F.3d at 481-83; see also Brief

for the United States Department of Health & Human Services

as Amicus Curiae at 14-16, Hughes, 734 F.3d 473 (No. 12-3765),

2013 WL 3366469. Accordingly, the annuities at issue in these

cases were each “for the sole benefit” of the respective community spouses, even though they named others (the Commonwealth and the respective couples’ children) as remainder beneficiaries.

aptly named Deficit Reduction Act was to close loopholes in the Medicaid Act that allowed affluent couples

to shelter their assets.” Id. at 12a. And it found that if

an annuity did not need to name the State as a remainder beneficiary, “the sole-benefit loophole would remain

open, frustrating . . . the [perceived] purpose of the

beneficiary naming provision” and “one of the central

goals of the Medicaid program, which is to provide

health care to those who cannot afford it.” Id. at 13a14a.

That is no way to interpret statutes. “In statutory

interpretation disputes, a court’s proper starting point

lies in a careful examination of the ordinary meaning

and structure of the law itself.” Food Mktg. Inst. v. Argus Leader Media, 139 S. Ct. 2356, 2364 (2019). And

the “inquiry should end” there as well where, as here,

“the statute’s language is plain.” Puerto Rico v. Franklin Cal. Tax-Free Tr., 579 U.S. 115, 125 (2016) (quoting

United States v. Ron Pair Enters., 489 U.S. 235, 241

(1989)).

Accordingly, the Supreme Judicial Court’s concerns

about wealthy individuals evading limitations on Medicaid eligibility should have played no role in the analysis; such “practical considerations are meritless and do

not justify departing from the statute’s clear text.” Pereira v. Sessions, 138 S. Ct. 2105, 2118 (2018). As this

Court has explained, a court’s role “is to apply the statute as it is written—even if [it] think[s] some other approach might ‘“accor[d] with good policy.”’” Burrage v.

United States, 571 U.S. 204, 218 (2014) (final alteration

in original) (quoting Comm’r v. Lundy, 516 U.S. 235,

252 (1996)).

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

LISA M. NEELEY

RUBIN AND RUDMAN, LLP

53 State Street, 15th Floor

Boston, MA 02109

(617) 330-7033

BRIAN E. BARREIRA

118 Long Pond Rd., Suite 206

Plymouth, MA 02360

(508) 747-8282

ADAM G. UNIKOWSKY

Counsel of Record

JONATHAN J. MARSHALL*

ABRAHAM G. KANTER

JENNER & BLOCK LLP

1099 New York Ave., NW,

Suite 900

Washington, DC 20001

(202) 639-6000

aunikowsky@jenner.com

* Not admitted in the District of

Columbia; practicing under

direct supervision of members

of the D.C. Bar

APPENDIX

TABLE OF CONTENTS

Appendix A—Opinion of the Supreme Judicial

Court of Massachusetts in Dermody (Jan. 27,

2023) ............................................................................... 1a

Appendix B—Opinion of the Supreme Judicial

Court of Massachusetts in Mondor (Jan. 27,

2023) ............................................................................. 19a

Appendix C—Memorandum of Decision and Order

of Superior Court of Massachusetts, Middlesex

County, in Dermody (Jan. 16, 2020) ........................ 28a

Appendix D—Statutory Provisions............................. 53a

APPENDIX A

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) 557-1030; SJCReporter@

sjc.state.ma.us

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.

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.

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 Chap-

ter of the National Academy of Elder Law Attorneys.

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-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

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 benefi-

ciary is “State of MA Medicaid Per Application” and the contingent beneficiary is the plaintiff.

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.

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

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.

6 The judge further permitted the plaintiff’s claim against Na-

tionwide 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.

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 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.

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 afford to pay. The Medicare Catastrophic Coverage

Act of 1988 (MCCA), 42 U.S.C. § 1396r-5, is one such example.

7 We do not suggest that Medicaid planning is discouraged; how-

ever, 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]).

Prior to the passage of the MCCA, “[S]tates generally considered income from either spouse and jointlyheld 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 needs

(community spouse resource allowance [CSRA]).9 42

U.S.C. § 1396r-5(c), (f). See 130 Code Mass. Regs.

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).

9 As of January 1, 2023, the standard maximum CSRA amount

is $148,620. See Eligibility Figures for Residents of a LongTerm-Care

Facility,

https://www.mass.gov/doc/eligibilityfigures-for-residents-of-a-long-term-care-facility-2/download

[https://perma.cc/LY22-BWJQ].

§ 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 U.S.C. § 1396p(c)(1).12

This transfer penalty renders the applicant ineligible for

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 ex-

tended to five years by the Deficit Reduction Act of 2005. See

note 15, infra.

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].”

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, § 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

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).

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.”

10a

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), 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.

11a

§ 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 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

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 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.”

12a

§ 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

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)

17 See Olmstead v. Department of Telecomms. & Cable, 466

Mass. 582, 589 & n.12 (2013) (title of act is relevant to statutory

interpretation).

13a

does not include a carve-out for those annuities purchased for the sole benefit of the community 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 provision (added by the DRA), but also one of

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).

14a

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 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

15a

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

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

19 The plaintiff’s claim that Congress’s use of the term “institu-

tionalized 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, 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.

16a

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 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

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).

17a

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 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

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”).

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.”

18a

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

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.

24 The plaintiff also argues in passing that under G. L. c. 118E,

§ 31 (c), the Commonwealth can recover from only an 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.

19a

APPENDIX B

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) 557-1030; SJCReporter@

sjc.state.ma.us

SJC-13179

EXECUTIVE OFFICE OF HEALTH AND HUMAN

SERVICES vs. LINDA MARIE MONDOR & others1

(and a consolidated case2).

January 27, 2023.

Medicaid. MassHealth. Annuity. Federal Preemption.

Statute, Construction, Federal preemption.

The parties to these consolidated cases seek a judgment declaring their respective rights to the remainder

proceeds of two annuity contracts, each of which names

the Commonwealth as primary remainder beneficiary

and the individual defendants as contingent remainder

beneficiaries. In each case, the plaintiff, the Executive

Office of Health and Human Services (Commonwealth),

1 Michelle Mogan and Cathy Ann Mondor.

2 Executive Office of Health and Human Services vs. Kathleen

Ann Bristow & others.

20a

only claims entitlement to remainder proceeds up to the

amount of medical assistance paid on behalf of an “institutionalized spouse”3 whose eligibility for Medicaid longterm care benefits was achieved by the purchase of the

annuity during the relevant “look-back” period as defined by Federal statute. See 42 U.S.C. § 1396p(c). For

the reasons discussed infra, we remand the consolidated

cases for entry of a declaratory judgment in favor of the

Commonwealth.

Background. 1. Facts. We recite the facts as set

forth in the parties’ statement of agreed material facts

pursuant to Mass. R. Civ. P. 64, as amended, 423 Mass.

1410 (1996).

a. Mondor annuity. Defendants Linda Marie Mondor, Michelle Mogan, and Cathy Ann Mondor (collectively, Mondor beneficiaries) are the daughters of Elda

Mondor and Edward J. Mondor.4 Edward was Elda’s

spouse. Elda was admitted to a skilled nursing facility

for long-term care in March 2018, at the age of eightyfour.

In April 2018, Edward purchased an annuity contract

(Mondor annuity) issued by Standard Insurance Company (Standard). Edward paid a premium of $191,215.28

3 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).

4 For convenience, we hereinafter refer to Elda and Edward

Mondor by their first names.

21a

for the Mondor annuity using funds held in a traditional

individual retirement account (IRA) for Edward. The

Mondor annuity named Edward as the sole annuitant

and owner. The Mondor annuity provided that Edward,

as annuitant, would receive monthly payments in the

amount of $4,065, commencing June 3, 2018, and continuing for a four-year term. Edward named the “Commonwealth of Massachusetts” as the primary remainder beneficiary of the Mondor annuity, and he named the Mondor beneficiaries as the contingent remainder beneficiaries. The Mondor annuity is nontransferable, nonforfeitable, nonassignable, noncommutable, and irrevocable.

In June 2018, Elda submitted an application for

MassHealth5 long-term care benefits. But for Edward’s

purchase of the Mondor annuity, Edward and Elda’s

joint assets would have exceeded the allowable limit for

Elda to be deemed eligible for MassHealth long-term

care benefits. Elda’s application for MassHealth benefits disclosed the Mondor annuity, as required by 42

U.S.C. § 1396p(e), and Elda also provided MassHealth

with a completed Notice of Preferred Remainder Beneficiary, known as an “ANN-3” form. The completed

5 MassHealth refers to the State program by which the Com-

monwealth participates in Medicaid, “a cooperative Federal and

State program that provides medical assistance to low income

persons based on financial need” (quotation and citation omitted). Fournier v. Secretary of the Executive Office of Health &

Human Servs., 488 Mass. 43, 45 (2021). The plaintiff, the Executive Office of Health and Human Services (Commonwealth), is

the State agency responsible for administering MassHealth. See

Daley v. Secretary of the Executive Office of Health & Human

Servs., 477 Mass. 188, 190 (2017).

22a

ANN-3 form, signed by Edward as Elda’s authorized

representative, identified the Mondor annuity and

stated in relevant part:

“The [Commonwealth] has determined that, pursuant to MassHealth regulations at 130 [Code

Mass. Regs. §] 520.007(J) and [F]ederal law at 42

U.S.C. [§] 1396p(e), the Commonwealth of Massachusetts must be named as a preferred remainder

beneficiary in the first position (primary beneficiary) if there is no community spouse or minor or

disabled child . . . . The Commonwealth may collect up to the total amount of medical assistance

paid on behalf of the individual if there is no community spouse or minor or disabled child.

In accordance with [F]ederal law 42 U.S.C.

[§] 1396p(e), the Commonwealth must notify the

annuity issuing company of its interest as a preferred remainder beneficiary under the annuity

and will do so by way of sending the company a

copy of this form.”

The Commonwealth provided Standard with a copy of

the completed ANN-3 form regarding the Mondor annuity.

Before approving Elda’s MassHealth application,

MassHealth requested additional documentation, including a current statement from the Mondor annuity

“with Commonwealth of Mass[.] as beneficiary.” After

the additional documentation was provided, MassHealth

approved Elda’s application, deeming her eligible for

long-term care benefits retroactive to May 1, 2018. At

the time of the filing of the complaint, Elda continued to

23a

reside in a skilled nursing facility and receive

MassHealth benefits for her long-term care.

Edward died on April 11, 2020. At the time of his

death, $97,720.28 in annuity payments remained to be

paid on the Mondor annuity. The Commonwealth made

a claim on the proceeds of the Mondor annuity up to the

total amount of medical assistance paid on behalf of Elda.

The Commonwealth asserted that as of July 29, 2020, it

had paid $146,903.57 in medical assistance on Elda’s behalf. The Mondor beneficiaries also made a claim to all

remaining proceeds of the Mondor annuity.

As of March 31, 2021, MassHealth had paid

$191,865.61 in medical assistance on behalf of Elda. Edward never applied for or received Medicaid or

MassHealth benefits during his lifetime. Standard remains in possession of all the remainder proceeds from

the Mondor annuity.

b. Castle annuity. Defendants Kathleen Anne

Bristow, Marianne Schwenzfeier, and John Francis Castle (collectively, Castle beneficiaries) are the children of

Carol A. Castle and James W. Castle.6 James was

Carol’s spouse. Carol was admitted to a skilled nursing

facility for long-term care in August 2018, at the age of

seventy-eight.

In November 2018, James purchased an annuity contract (Castle annuity) issued by Standard. James paid a

premium of $176,859.75 for the Castle annuity, using

funds held in a traditional IRA for James. The Castle

6 For convenience, we hereinafter refer to Carol and James Cas-

tle by their first names.

24a

annuity named James as the sole annuitant and owner.

The Castle annuity provided that James, as annuitant,

would receive monthly payments in the amount of

$3,031.93, beginning on November 19, 2018, and continuing for a five-year term. James named the “Commonwealth of Massachusetts” as the primary remainder beneficiary of the Castle annuity, and he named the Castle

beneficiaries as the contingent remainder beneficiaries.

The Castle annuity is nontransferable, nonforfeitable,

nonassignable, noncommutable, and irrevocable.

In December 2018, Carol submitted an application

for MassHealth long-term care benefits. But for James’s

purchase of the Castle annuity, James and Carol’s joint

assets would have exceeded the allowable limit for Carol

to be deemed eligible for MassHealth long-term care

benefits. Carol’s application for MassHealth benefits

disclosed the Castle annuity, per 42 U.S.C. § 1396p(e),

and Carol also provided MassHealth with a completed

ANN-3 form, signed by James as Carol’s authorized representative, which identified the Castle annuity and contained language identical to that quoted supra from the

ANN-3 form in connection with the Mondor annuity.

The Commonwealth later provided a copy of the ANN-3

form to Standard.

MassHealth approved Carol’s application, deeming

her eligible for long-term care benefits retroactive to

November 12, 2018. Carol died on April 23, 2020. As of

that date, MassHealth had paid $123,413.51 in medical

assistance on Carol’s behalf.

James died on October 1, 2020. At the time of his

death, approximately $110,000 in annuity proceeds remained to be paid on the Castle annuity. James never

25a

applied for or received Medicaid or MassHealth benefits

during his lifetime.

The Commonwealth made a claim on the proceeds of

the Castle annuity up to the total amount of medical assistance paid on behalf of Carol, which was identified as

$123,413.51. In or around February 2021, the Castle

beneficiaries also made a claim to the remaining proceeds of the Castle annuity.

Standard initially made payments to the Commonwealth in response to its claim as primary remainder

beneficiary, but then ceased making payments in response to the competing claims of the Castle beneficiaries. As of February 19, 2021, Standard had made payments to the Commonwealth for a total of $15,159.65.

Standard remains in possession of the balance of the

Castle annuity proceeds.

2. Prior proceedings. The cases before us were

commenced by Standard, at least in part as interpleader

actions, to resolve the competing claims to the proceeds

of the Mondor and Castle annuities. In each case, the

parties filed cross motions for declaratory judgment, and

then stipulated to Standard’s dismissal from the case.

The cases were consolidated in the Superior Court, and

the parties jointly moved to report the cases to the Appeals Court without decision on a statement of agreed

material facts pursuant to Mass. R. Civ. P. 64. A judge

in the Superior Court allowed the motion, and after the

cases were entered in the Appeals Court, this court

granted the parties’ joint motion for direct appellate review.

26a

3. Discussion. The consolidated cases are governed in all material respects by our decision today in

Dermody v. Executive Office of Health & Human Servs.,

491 Mass.

(2023). In Dermody, we concluded that

under the Federal Medicaid Act, 42 U.S.C. §§ 1396 et

seq., in order to avoid a determination of ineligibility or

the imposition of a disqualifying transfer penalty under

42 U.S.C. § 1396p(c) with respect to annuity transactions

occurring after February 8, 2006, any annuity purchased

by a community spouse for Medicaid planning purposes

in order to achieve the Medicaid eligibility of an institutionalized spouse and designated for the “sole benefit” of

the community spouse under § 1396p(c)(2) must also satisfy the beneficiary naming requirement of

§ 1396p(c)(1)(F)(i). We also concluded in Dermody that

to the extent that the State Medicaid estate recovery

statute, G. L. c. 118E, § 31 (b) (1), would prevent the

Commonwealth from collecting annuity proceeds it is

designated to receive as the primary remainder beneficiary, the State statute is preempted by the Medicaid

Act.

On the facts presented here, in order for the Medicaid

applications of the institutionalized spouses, Elda and

Carol, to be approved without the imposition of a transfer penalty, the Mondor and Castle annuities were required to, and did, name the Commonwealth as primary

remainder beneficiary pursuant to § 1396p(c)(1)(F)(i).

Further, on the deaths of the annuitants, the Commonwealth became entitled to remainder proceeds from the

annuities to the extent of benefits paid by the Commonwealth on behalf of the “institutionalized individual[s]”

pursuant to § 1396p(c)(1)(F)(i). In accordance with our

27a

opinion in Dermody, the relevant “institutionalized individual[s]” for purposes of § 1396p(c)(1)(F)(i) are the individuals whose eligibility for Medicaid long-term benefits

was made possible by the purchase of the annuities and

whose eligibility for Medicaid long-term care benefits

turned on the proper disclosure and treatment of the annuities in accordance with the Medicaid Act, see 42

U.S.C. § 1396p(c)(1)(F)(i), (e). Here, the relevant “institutionalized individual[s]” of the Mondor and Castle annuities are Elda and Carol, respectively.

The consolidated cases are remanded to the Superior

Court for entry of a declaratory judgment in favor of the

Commonwealth and for any further proceedings necessary to permit Standard to disburse the remainder proceeds from the Mondor and Castle annuities in a manner

consistent with this opinion.7

So ordered.

Jesse M. Boodoo, Assistant Attorney General, for

Executive Office of Health and Human Services.

Brian E. Barreira for Lisa Marie Mondor & others.

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.

7 To the extent that the Mondor and Castle beneficiaries raise

issues not explicitly addressed in this opinion, we have not overlooked them. Rather, we find them without merit and decline to

discuss them.

28a

APPENDIX C

COMMONWEALTH OF MASSACHUSETTS

MIDDLESEX, ss.

SUPERIOR COURT

CIVIL ACTION

NO. 1781CV02342

LAURIE A. DERMODY

vs.

THE EXECUTIVE OFFICE OF HEALTH AND

HUMAN SERVICES & another1

MEMORANDUM OF DECISION AND ORDER ON

PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND DEFENDANTS’ CROSS MOTIONS

FOR SUMMARY JUDGMENT

The plaintiff, Laurie A. Dermody (“plaintiff”), filed

this action against the Executive Office of Health and

Human Services (“Commonwealth”) and Nationwide

Life Insurance Company (“Nationwide”),2 seeking residual benefits payable under an annuity that her father

purchased from Nationwide. The matter is presently before the court on the plaintiff’s motion for summary

judgment on all counts, the Commonwealth’s cross motion for summary judgment on Count 1 of the complaint,

and Nationwide’s cross motion on all counts of the com-

1 Nationwide Financial Insurance Company.

2 Nationwide contends that its name is incorrect in the caption

of the First Amended Complaint (“complaint”).

29a

plaint as well as its cross claim against the Commonwealth for indemnification. For the following reasons,

the plaintiff’s motion and Nationwide’s cross motion are

ALLOWED, in part and DENIED, in part, and the

Commonwealth’s cross motion is DENIED.

BACKGROUND

The following undisputed facts are taken from the

summary judgment record, with certain additional facts

reserved for later discussion.

On July 7, 2015, the plaintiff’s father, Robert Hamel

(“Robert”), purchased a single premium immediate annuity contract from Nationwide (“annuity contract” or

“the contract”). The purchase amount was $172,000.

Robert was the named owner and annuitant of the contract. Robert designated the “State of MA Medicaid Per

Application” as the primary beneficiary. His annuity application provides that the Commonwealth shall be the

primary recipient of residual benefits to the “Extent

Benefits Paid.” Robert listed the plaintiff as the contingent beneficiary.

Although Robert never applied for or received

MassHealth benefits during his lifetime, his wife, Joan

Hamel (“Joan”), requires long-term care in a skilled

nursing facility. She presently resides at the Apple Valley Center in Ayer, Massachusetts. On July 23, 2015, approximately two weeks after Robert purchased the annuity, Joan applied for and subsequently received

MassHealth long-term care benefits, retroactive to June

2015, which pays for her nursing home costs.

On December 23, 2016, Robert died. At the time of

his death, he was residing at the Langdon Place assisted

30a

living facility in Nashua, New Hampshire. On December

29, 2016, Nationwide sent a letter to the MassHealth Estate Recovery Unit, which stated, in part:

“This correspondence is in reference to the primary beneficiary designation of the Commonwealth of Massachusetts for the reimbursement

of any Medicaid payments or state assistance received by Robert G Hamel from the Commonwealth of Massachusetts, under the above listed

contract owned by Robert G Hamel.

After your review and completion of the documentation provided from Nationwide . . . regarding the death benefit claim . . . Nationwide will release the amount being claimed from the annuity

contract by Commonwealth of Massachusetts as

primary beneficiary. Please complete the W-9

and Beneficiary Claim Form provided and return

along with a copy of the death certificate.”

On June 27, 2017, the MassHealth Estate Recovery

Unit sent a letter to Nationwide demanding that it pay

the balance of the contract to the Commonwealth as reimbursement for care costs paid through May 31, 2017,

on Joan’s behalf. On July 7, 2017, Nationwide processed

the Commonwealth’s request and remitted payment for

the full residual benefits ($118,517.50).

After having received the Commonwealth’s June 27

letter, Attorney Michael DellaMonaca, who previously

represented Joan in connection with her MassHealth application, contacted Nationwide on July 13, 2017, demanding that it refrain from issuing any payment to the

31a

Commonwealth. The next day, on July 14, 2017, Nationwide responded that it already had distributed the remaining balance of the contract to the Commonwealth.

Subsequently, the plaintiff retained her own attorney, and on August 4, 2017, the plaintiff filed this action

against the Commonwealth, seeking a declaration that

she is entitled to the remaining balance of the contract.

In particular, she alleges that because the Commonwealth is the primary beneficiary to the “Extent Benefits Paid,” and because Robert did not receive

MassHealth benefits during his lifetime, the Commonwealth is not entitled to any payout from the contract.

Therefore, as the contingent beneficiary, she claims she

is entitled to the balance of the contract.

On August 14, 2017, plaintiff’s counsel sent a letter to

Nationwide alerting it of the disagreement concerning

the beneficiary language in the contract, clarifying that

Robert did not receive any MassHealth benefits, and demanding that it not distribute the remaining annuity

benefits prior to the resolution of the litigation between

the plaintiff and the Commonwealth. Two days later, on

August 16, 2017, Nationwide responded that it had processed the claim and paid out the remaining balance of

Robert’s annuity to the primary beneficiary, the Commonwealth, on July 7, 2017.

On September 11, 2017, plaintiff’s counsel sent Nationwide a G. L. c. 93A demand letter, outlining the

plaintiff’s claim that Nationwide violated the terms of

the annuity contract by wrongfully paying the remaining

balance of the contract to the Commonwealth. Nationwide did not respond to the plaintiff’s c. 93A demand letter.

32a

On October 25, 2017, the plaintiff amended her complaint, adding Nationwide to the suit. The claims are as

follows. Count 1 seeks a declaration against the Commonwealth and Nationwide that the plaintiff is entitled

to the remaining balance of the annuity contract. Count

2 alleges that Nationwide breached the contract by

wrongfully paying the remaining balance to the Commonwealth. Count 3 alleges that Nationwide engaged in

unfair or deceptive acts or practices in violation of G. L.

c. 93A and G. L. c. 176D, § 3(9). In response, Nationwide

filed a cross claim against the Commonwealth for indemnification. All parties now move for summary judgment

on all counts of the complaint, and Nationwide also

moves for summary judgment on its cross claim against

the Commonwealth.

DISCUSSION

Standard of Review

Summary judgment shall be granted when there are

no genuine issues of material fact and the moving party

is entitled to judgment as a matter of law. Mass. R. Civ.

P. 56(c); Kourouvacilis v. General Motors Corp., 410

Mass. 706, 714 (1991). The moving party bears the burden of affirmatively demonstrating the absence of a triable issue. Pederson v. Time, Inc., 404 Mass. 14, 17

(1989). The moving party may satisfy this burden by

submitting affirmative evidence negating an essential

element of the opposing party’s case or by demonstrating that the opposing party has no reasonable expectation of proving an essential element of his case at trial.

Flesner v. Technical Comm’ns Corp., 410 Mass. 805, 809

(1991); Kourouvacilis, 410 Mass. at 716. Once the moving party establishes the absence of a triable issue, the

33a

party opposing the motion must respond with evidence

of specific facts establishing the existence of a genuine

dispute. Pederson, 404 Mass. at 17. The opposing party

cannot rest on its pleadings and mere assertions of disputed facts to defeat the motion for summary judgment.

LaLonde v. Eissner, 405 Mass. 207, 209 (1989).

When deciding a motion for summary judgment, the

court considers pleadings, deposition transcripts, answers to interrogatories, admissions on file, and affidavits. Mass. R. Civ. P. 56(c). The court reviews the evidence in the light most favorable to the nonmoving party

but does not weigh evidence, assess credibility, or find

facts. Attorney Gen. v. Bailey, 386 Mass. 367, 370 (1982).

Where, as here, the court is presented with cross motions for summary judgment, the standard of review is

identical for all motions. Epstein v. Board of Appeals of

Boston, 77 Mass. App. Ct. 752, 756 (2010).

II.

Overview

MassHealth

Medicaid

Program

and

The crux of this dispute is governed by the proper

interpretation of certain statutes and regulations of the

Medicaid Act. Many areas of Medicaid law have been

referred to as a labyrinth, “rend[er]ing them ‘almost unintelligible to the uninitiated’” (citation omitted). Richardson v. Hamilton, 2018 U.S. Dist. LEXIS 31127 at *43

(D. Me. 2018). As such, the following is a brief summary

of the Medicaid program and some of the relevant statutes and regulations.

The Federal Medicaid Act, 42 U.S.C. §§ 1396 et seq.,

was enacted in 1965 as Title XIX of the Social Security

34a

Act. Daley v. Secretary of Exec. Office of Health & Human Servs., 477 Mass. 188, 189 (2017). It is a voluntary,

cooperative federal and state program, which provides

payment for medical services to eligible individuals and

families. Forman v. Director of Office of Medicaid, 79

Mass. App. Ct. 218, 221-22 (2011). If states choose to participate in the program, they must comply with federal

Medicaid law in order to receive federal funding. Daley,

477 Mass. at 189-190. It has become one of the largest

programs in the federal budget as well as a major expenditure for state governments, who must finance a

significant portion of Medicaid benefits on their own. Id.

at 190.

Massachusetts participates in the program via the

establishment of MassHealth. See G. L. c. 118E, § 9.

Among other things, MassHealth provides nursing home

benefits for individuals who meet certain criteria. Forman, 79 Mass. App. Ct. at 222.

To qualify for a MassHealth contribution toward

nursing home expenses, an applicant must have $2,000

or less in “countable assets.” See 130 Code Mass. Regs.

§ 520.003(A)(1) (2014). If the applicant has a spouse that

is not institutionalized and does not receive Medicaid

benefits, the spouse, also known as a community spouse,

may have up to $126,420 in countable assets.3 See 130

Code Mass. Regs. § 520.003(A)(1) (2014); 130 Code Mass.

3 To avoid impoverishing the community spouse, Congress en-

acted certain provisions to protect the spouse, such as 42 U.S.C.

§ 1396r-5(b)(1), which states that the community spouse’s income is deemed unavailable to an institutionalized spouse. See

130 Code Mass. Regs. § 520.016(B)(2) (2014).

35a

Regs. § 520.016(B)(2) (2014) (amount adjusted for inflation). “This asset limit often requires applicants to

‘spend down’ or otherwise deplete their resources to

qualify for Medicaid long-term care benefits when they

enter a nursing home.” Daley, 477 Mass. at 192. To prevent asset transfers that are undertaken solely to allow

the applicant to qualify for MassHealth, strict rules have

been promulgated that limit the amount of assets an applicant and their spouse can dispose of without affecting

the applicant’s eligibility for assistance.4 See 42 U.S.C.

§ 1396p; 130 Code Mass. Regs. § 520.007 (2014).

To determine eligibility, MassHealth reviews an applicant’s and their spouse’s transfers of resources during

a statutorily created “look-back” period prior to the applicant’s application. Forman, 79 Mass. App. Ct. at 222.

The transfer at issue in this case is Robert’s annuity,

which he purchased on July 7, 2015, well within the sixtymonth look-back period. 42 U.S.C. § 1396p(c)(1)(B); 130

Code Mass. Regs. § 520.019(B)(2) (2014).

If an applicant or an applicant’s spouse transfers any

resource or an interest in any resource during the look-

4 “Through ‘Medicaid planning,’ individuals attempt to transfer

or otherwise dispose of their assets long before they need longterm care so that, when the need arises, they may satisfy the

asset limit and qualify for Medicaid benefits. In essence, the purpose of Medicaid planning is to enable persons whose assets

would otherwise render them ineligible for long-term care benefits to become eligible for Medicaid benefits by transferring to

their children or other loved ones the assets they would otherwise use to pay for long-term care, shifting to the taxpayers the

burden of paying for that care.” Daley, 477 Mass. at 192.

36a

back period for less than the fair market value, it is considered a disqualifying transfer unless subject to a few

delineated exceptions. 42 U.S.C. § 1396p(c); 130 Code

Mass. Regs. § 520.019(C) (2014). If MassHealth determines that a disqualifying transfer has occurred, it

deems the applicant ineligible for nursing home benefits

for a period equal to the total, cumulative, uncompensated value of all resources transferred, divided by the

average monthly cost to a private patient receiving

nursing-facility services in the Commonwealth at the

time of the application.

130 Code Mass. Regs.

§ 520.019(G)(1) (2014).

III. Exceptions to Disqualifying Transfer Rule

As stated above, there are certain exceptions to the

disqualifying transfer rule. Of significance in this case

are the exceptions set forth in 42 U.S.C. § 1396p(c).

To restate the general rule briefly, § 1396p(c)(1) provides that an applicant will be deemed ineligible for a calculable period of time if the applicant or the applicant’s

spouse disposes of assets for less than the fair market

value during the look-back period.5

Section 1396p(c)(2)(B) (hereinafter, “the sole benefit

rule” or “paragraph [2]”) contains an exception to that

5 The court notes that there are Massachusetts regulations that

mimic the federal Medicaid statutes; however, because Massachusetts must comply with the federal guidelines, for ease of

analysis, the court refers only to the relevant federal statutes

from here on out in its analysis. See generally 42 U.S.C.

§ 1396a(r)(2)(A) (in determining income eligibility, states cannot

be more restrictive than federal methodology).

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general rule. It permits asset transfers to a spouse directly or to another so long as the transfer is “for the sole

benefit” of the spouse. In the latter instance, if assets

are transferred to purchase an annuity on the spouse’s

behalf, the transfer satisfies the sole benefit rule if the

annuity is actuarially sound. An annuity is actuarially

sound if the expected return from the annuity is commensurate with the annuitant’s life expectancy. Normand v. Director of Office of Medicaid, 77 Mass. App.

Ct. 634, 637 (2010). In other words, an annuity is not actuarially sound if the projected yield to the annuitant

during his or her anticipated lifetime is less than the premium paid for the annuity. Id. Here, for the purposes of

this motion, it is undisputed that Robert’s annuity was

actuarially sound and that Robert’s annuity complied

with the sole benefit rule.

In 2006, however, Congress passed the Deficit Reduction Act of 2005 (“the act” or “DRA”), Pub. L. No.

109-71, § 1932, 120 Stat. 4, 62-64, in an attempt to reduce

government spending on certain programs, such as Medicaid. The act added, among other things, subparagraph

(F) to § 1396p(c)(1), which states:

“For the purposes of this paragraph, the purchase

of an annuity shall be treated as the disposal of an

asset for less than the fair market value unless –

(i) 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 . . . .”

The act, however, did not amend or revoke the sole benefit rule set forth in § 1396p(c)(2)(B).

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IV. Summary of Dispute

The gravamen of this dispute hinges on whether an

annuity that satisfies the sole benefit rule must also satisfy the annuity rules under § 1396p(c)(1)(F) (hereinafter, “subparagraph [F]”). The answer to this narrow issue dictates which party is entitled to the remaining balance of Robert’s annuity. If both provisions must be satisfied, as the Commonwealth contends, then the Commonwealth would be entitled to the remaining balance of

Robert’s annuity contract. However, if Robert’s annuity

need only satisfy the sole benefit rule, as the plaintiff

suggests, then the plaintiff is entitled to the remaining

balance.

To place this issue into context, Robert named the

Commonwealth as the primary beneficiary of his annuity

to the “Extent Benefits Paid,” and he named the plaintiff

as his contingent beneficiary. His annuity contract, however, is silent on the identity of the individual for whom

benefits were paid, and “Joan” or “institutionalized individual” is not mentioned anywhere in his annuity application. The Commonwealth, nonetheless, argues that if

the court finds that a transfer of assets to purchase an

annuity must satisfy both provisions—the sole benefit

rule and subparagraph (F) – then the court also must

find that the “Extent Benefits Paid” language in Robert’s contract necessarily refers to Joan.6 Otherwise,

MassHealth would have deemed Robert’s annuity purchase a disqualifying transfer under subparagraph (F),

6 The Commonwealth claims that the inclusion of “Extent Ben-

efits Paid” language in Robert’s annuity contract is derived from

the requirements set forth in subparagraph (F).

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and Joan would have been subject to a period of ineligibility. In other words, to have approved Joan’s

MassHealth application without subjecting her to a period of ineligibility, the Commonwealth claims that Robert was required, pursuant to subparagraph (F), to name

the Commonwealth as his primary beneficiary to the extent benefits were paid on Joan’s behalf. Therefore,

even though neither Joan’s name nor the phrase “institutionalized individual” appears in Robert’s annuity application or contract, the Commonwealth, nevertheless,

contends that it is was properly listed as the primary

beneficiary of Robert’s annuity and that it is entitled to

the remaining balance of the contract because it paid for

Joan’s nursing home care costs.

The plaintiff, however, disagrees with the Commonwealth’s interpretation and argues that the sole benefit

rule is an exception to subparagraph (F). Therefore, she

claims that Robert was not required to name the Commonwealth as his primary beneficiary despite Joan’s receipt of MassHealth benefits and that because Robert

did not receive MassHealth benefits himself, she is entitled to the remaining balance of her father’s annuity as

the contingent beneficiary. For the following reasons,

the court agrees with the plaintiff.

Analysis

Resolving the foregoing issue is a matter of statutory

interpretation, and it is question of first impression in

this jurisdiction. However, the Sixth Circuit Court of

Appeals decided the issue in Hughes v. McCarthy, 734

F.3d 473 (6th Cir. 2013), cert. denied, 572 U.S. 1034

(2014), which this Court finds highly persuasive.

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In Hughes, the court found that an annuity that satisfies the sole benefit rule in § 1396p(c)(2)(B) need not

satisfy the annuity rules under subparagraph (F). Id. at

484. In reaching its conclusion, the court looked to the

plain language and structure of the statute. Id. at 484486.

As stated above, § 1396p(c)(1) (hereinafter, “paragraph [1]”) sets forth the general rule regarding disqualifying transfers and the penalty that may be imposed

when an applicant or spouse makes a disqualifying transfer. With the enactment of the DRA, however, subparagraph (F) was added to paragraph (1), which states:

“For the purposes of this paragraph, the purchase of an annuity shall be treated as the disposal of an asset for less than the fair market

value unless –

(i) 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” (Emphasis added).

Id. at 484, quoting 42 U.S.C. § 1396p(c)(1)(F).

In essence, subparagraph (F) deems all annuity purchases a transfer of assets for less than the fair market

value unless the state is named as the primary beneficiary of the annuity. However, subparagraph (F) clearly

states that its effect is limited to “this paragraph” (e.g.,

paragraph [1]). The sole benefit rule appears in paragraph (2) below and sets forth an exception to the transfer penalty regime in paragraph (1). It states, in pertinent part:

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“An individual shall not be ineligible for medical

assistance by reason of paragraph (1) to the extent that . . . (B) the assets . . . (i) were transferred

to the individual’s spouse or to another for the

sole benefit of the individual’s spouse” (Emphasis

added).

Id. at 484-485, quoting 42 U.S.C. § 1396p(c)(2)(B).

Per the unambiguous, plain language of these provisions, subparagraph (F) applies to all annuities not exempt by the sole benefit rule in paragraph (2). Id. at 485.

Therefore, any transaction that satisfies the sole benefit

rule is exempt from the transfer penalty set forth in paragraph (1), including the annuity rules in subparagraph

(F). Id. at 485-486. Because Robert’s annuity satisfies

the sole benefit rule in paragraph (2), his asset transfer

is exempt from paragraph (1) and thus cannot be analyzed under the annuity rules in subparagraph (F).

The Commonwealth, nonetheless, argues that

§ 1396p should not be read as one cohesive statute, but

rather, as a statute that has been modified and amended

multiple times over decades and that the newer, more

specific requirements set forth in subparagraph (F)

should prevail over the more general sole benefit rule.

The court disagrees. Although it is axiomatic that “specific statutory language should control more general language when there is a conflict between the two,” see National Cable & Telecomms. Ass’n, Inc. v. Gulf Power

Co., 534 U.S. 327, 335 (2002), there is no conflict between

subparagraph (F) and the sole benefit rule because the

plain language of subparagraph (F) limits its application

to the transfer penalty regime in paragraph (1). There-

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fore, the sole benefit rule, which appears in the next paragraph, sets forth an exception to that penalty regime.

Accordingly, these two provisions do not contradict but

rather supplement one another. Hughes, 734 F.3d at

485.

Additionally, the Commonwealth references various

congressional floor statements, claiming that subparagraph (F) should be read in light of its purpose – that it

was enacted to reduce the deficit by foreclosing certain

loopholes that permitted applicants and their spouses to

shelter assets. However, it is well settled that it is not

the role of the court to compensate for an apparent legislative oversight by effectively rewriting a law to comport with one of the perceived or presumed purposes

motivating its enactment. See United States v. Charles

George Trucking Co., 823 F.2d 685, 688 (1st Cir. 1987).

Therefore, where, as here, § 1396p is unambiguous, comments regarding its purported purpose cannot override

the clear statutory text. See Hughes, 734 F.3d at 486,

citing Barnhart v. Sigmon Coal Co., 534 U.S. 438, 457

n.15 (2000) (noting floor statements cannot override

clear statutory text), and Connecticut Nat’l Bank v. Germain, 503 U.S. 249, 253-254 (1992) (“We have stated time

and again that courts must presume that a legislature

says in a statute what it means and means in a statute

what it says there.”). If Congress intended otherwise,

then it need only amend § 1396p to reflect that intent.

Furthermore, to the extent that the Commonwealth

cites to agency and regulatory memoranda and manuals

to support its interpretation, such materials are not the

product of formal rulemaking and do not have the force

of law. See Rent Control Bd. v. Cambridge Tower Corp.,

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394 Mass. 809, 814 (1985). Although courts generally

consider such interpretations persuasive, they are entitled to respect only if the interpretation is reasonable

and has the “power to persuade.” See id.; Hughes, 734

F.3d at 478, quoting Skidmore v. Swift & Co., 323 U.S.

134, 140 (1944). Because the statute is unambiguous, the

contradictory agency interpretations are not reasonable.

Finally, the Commonwealth argues that the plaintiff’s interpretation strains credulity because if the sole

benefit rule is the only provision that applies to annuities

purchased by a community spouse, then when do the annuity rules under subparagraph (F) apply? This argument is not persuasive either. As the court recognized

in Hughes, subparagraph (F) applies to all annuities not

excepted by another provision, including annuities benefiting non-exempt children or a spousal annuity that is

not actuarially sound. 734 F.3d at 485. Therefore, it affects more than just actuarially sound annuities purchased by a community spouse. Moreover, even if this

Court’s interpretation of § 1396p gives rise to some redundancy within the statute, the mere redundancy is not

enough for the court to ignore the clear text of the statute. See Rimini St., Inc. v. Oracle USA, Inc., 139 S. Ct.

873, 881 (2019) (“If one possible interpretation of a statute would cause some redundancy and another interpretation would avoid redundancy, that difference in the

two interpretations can supply a clue as to the better interpretation of a statute. But only a clue. Sometimes

the better overall reading of the statute contains some

redundancy” [Emphasis added].).

Accordingly, the court agrees with the plaintiff’s interpretation, which is that an annuity that is actuarially

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sound pursuant to paragraph (2) need not satisfy the annuity rules set forth in subparagraph (F). As a result,

the court will enter a declaration that Robert was not

required to name the Commonwealth as his primary

beneficiary to the extent benefits were paid on Joan’s

behalf, and because Robert did not receive MassHealth

benefits himself, the plaintiff is the proper beneficiary of

his annuity contract.

Notwithstanding the above conclusion, even if an appellate court later determines that both requirements –

the sole benefit rule and the annuity rules in subparagraph (F) – must be satisfied, the court concludes that

the plaintiff still prevails under basic contract interpretation principles.

The interpretation of a contract is a question of law,

as is the question whether an ambiguity exists. Quinn

v. Mar-Lees Seafood, LLC, 69 Mass. App. Ct. 688, 695

(2007). “Contracts that are free from ambiguity must be

interpreted according to their plain terms.” Suffolk

Constr. Co. v. Lanco Scaffolding Co., 47 Mass. App. Ct.

726, 729 (1999). In interpreting a contract, the court

must construe the words according to their usual and ordinary meaning. Id. “Contract language is ambiguous

where ‘an agreement’s terms are inconsistent on their

face or where the phraseology can support a reasonable

difference of opinion as to the meaning of the words employed and the obligations undertaken.’” Id., quoting

Fashion House, Inc. v. K Mart Corp., 892 F.2d 1076,

1083 (1st Cir. 1989). However, “an ambiguity is not created simply because a controversy exists between parties, each favoring an interpretation contrary to the

45a

other’s.” Jefferson Ins. Co. v. Holyoke, 23 Mass. App.

Ct. 472, 475 (1987).

Here, Robert’s annuity is not ambiguous. His contract designates the “State of MA Medicaid Per Application” as his primary beneficiary, and his annuity application states that the Commonwealth’s right to recover is

limited to the “Extent Benefits Paid.” Robert was the

sole annuitant of the contract, and Joan is not referenced

anywhere in the contract. Accordingly, nothing in the

plain terms of the contract suggests the “benefits paid”

language refers to anyone other than Robert. Therefore, the proper interpretation of Robert’s annuity contract is that the Commonwealth was his primary beneficiary to the extent that he received MassHealth benefits,

and because he did not, the plaintiff is entitled to the remaining balance of Robert’s annuity as the contingent

beneficiary.7

7 The court also notes that even if Robert was required to name

the Commonwealth as the primary beneficiary of his annuity to

the extent benefits were paid on Joan’s behalf, his annuity contract did not state as such, and the Commonwealth, nonetheless,

approved Joan’s MassHealth application without subjecting her

to a period of ineligibility. This was an oversight on the Commonwealth’s part.

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Remaining Claims

Plaintiff’s Remaining Claims Against Nationwide

1.)

Breach of Contract (Count 2)

Because the court agrees with the plaintiff that she

is entitled to the remaining balance of her father’s annuity contract, it necessarily follows that the court also

must find that Nationwide breached that contract by improperly paying the remaining balance to the Commonwealth. Accordingly, summary judgment shall enter in

the plaintiff’s favor on Count 2 (breach of contract).

However, because the court orders the Commonwealth

to turn over to the plaintiff the funds that it received

from Nationwide, see Order below, the plaintiff is not entitled to a double recovery from Nationwide for those

same funds. Therefore, the plaintiff is permitted only to

recover damages from Nationwide that she incurred

separate and apart from the actual balance of the annuity contract, which must be determined at trial.

2.)

Chapter 93A and Chapter 176D claim (Count 3)

Count 3 alleges that Nationwide’s actions constitute

unfair or deceptive settlement practices in violation of

G. L. c. 93A, § 2 and G. L. c. 176D, § 3(9). Pursuant to

G. L. c. 93A, § 2, unfair methods of competition and unfair or deceptive acts or practices in the conduct of any

trade or commerce are unlawful. In the insurance context, “unfair methods of competition and unfair or deceptive acts or practices” include unfair claim settlement

practices. G. L. c. 176D, § 3(9). General Laws. c. 176D,

§ 3(9) lists several acts or omissions that constitute unfair settlement practices. Here, the plaintiff relies on

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four of those enumerated acts or omissions, which the

court addresses separately below.

Failure to Acknowledge Communications

The first act or omission on which the plaintiff relies

falls under subsection (b): “Failing to acknowledge and

act reasonably promptly upon communications with respect to claims arising under insurance policies.” G. L.

c. 176D, § 3(9)(b). In support of this theory, the plaintiff

alleges that Nationwide violated this subsection by repeatedly ignoring her settlement demands and paying

the remaining balance of Robert’s annuity contract to

the Commonwealth before the beneficiary dispute was

resolved. However, contrary to the plaintiff’s assertions, there is no evidence in the record to support this

theory of liability.

According to the summary judgment record, the

plaintiff’s attorney sent Nationwide a letter for the first

time on August 14, 2017, demanding that it refrain from

distributing the remaining balance of Robert’s annuity

until the beneficiary dispute was resolved. Nationwide

responded to that letter two days later on August 16,

2017, stating that it previously distributed the funds to

the Commonwealth on July 7, 2017.8 The only communication to which Nationwide did not respond was the

8 Nationwide received a prior communication on July 13, 2017,

that raised the beneficiary issue. However, Robert’s family attorney sent the letter, and at that time, the funds had already

been distributed to the Commonwealth. Nationwide, nonetheless, responded to the letter the next day, on July 14, 2017, indicating that it had received a beneficiary claim request from the

48a

plaintiff’s c. 93A demand letter, which she sent on September 11, 2017. However, failing to respond to a demand letter is not in itself a violation of c. 93A; rather,

failing to respond is a relevant factor in considering

whether a defendant intentionally violated c. 93A. See

Dawe v. Capital One Bank, 2007 U.S. Dist. LEXIS 82870

at *4 n.2 (D. Mass. 2007), citing Heller v. Silverbranch

Constr. Corp., 376 Mass. 621, 627 (1978) and Castanouribe v. McBride, 2001 Mass. App. Div. 172, 174 (App. Ct.

2001). Accordingly, there is no evidence in the record

that Nationwide failed to acknowledge or act reasonably

promptly in response to the plaintiff’s communications in

violation of G. L. c. 176D, § 3(9)(b). Therefore, summary

judgment shall enter in Nationwide’s favor on this theory.

ii.

Failure to Investigate

The next two acts or omissions on which the plaintiff

relies are: (c) “Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies” and (d) “Refusing to pay

claims without conducting a reasonable investigation

based upon all available information.” G. L. c. 176D,

§ 3(9)(c)-(d). Specifically, the plaintiff alleges that Nationwide failed to conduct any investigation from the

time it received the Commonwealth’s benefit claim form

to the time it distributed the remaining balance to the

Commonwealth. However, because there are genuine

issues of material fact in dispute, summary judgment is

not appropriate.

Commonwealth on July 5, 2017, and that it processed the request

on July 7, 2017.

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First, there is insufficient evidence before the court

regarding what steps Nationwide took to investigate

this matter. Second, although the plaintiff’s attorney did

not provide written notice to Nationwide about the beneficiary dispute until August 14, 2017, there are communications in the record suggesting that Nationwide may

have been aware of the dispute before it paid the remaining balance to the Commonwealth. If Nationwide was

aware of the dispute and failed to take reasonable steps

to investigate the issue, then the plaintiff would be entitled to relief under c. 93A. However, resolution of this

issue is a question of fact, which precludes summary

judgment on this theory. See O’Leary-Alison v. Metropolitan Prop. & Cas. Ins. Co., 52 Mass. App. Ct. 214, 217

(2001) (“Resolution of G. L. c. 93A claim . . . depends on

a factual determination of the defendant’s knowledge

and intent.”).

iii.

“Reasonably Clear” Liability

The fourth and final act or omission on which the

plaintiff relies falls under subsection (f): “Failing to

effectuate prompt, fair and equitable settlements of

claims in which liability has become reasonably clear.”

G. L. c. 176D, § 3(9)(f). In essence, the plaintiff alleges

that if Nationwide conducted a reasonable investigation,

liability would have been “reasonably clear,” but instead,

Nationwide prematurely paid the remaining balance of

Robert’s annuity contract to the wrong party – the Commonwealth.

An insurer’s duty to settle a claim arises only when

“liability has become reasonably clear.” G. L. c. 176D,

§ 3(9)(f). Liability, in that context, encompasses both

fault and damages. O’Leary-Alison, 52 Mass. App. Ct.

50a

at 217. To determine when an insured’s liability is “reasonably clear,” an objective test is used. Id. The fact

finder must determine “whether a reasonable person,

with knowledge of the relevant facts and law, would

probably have concluded, for good reason, that the insured was liable to the plaintiff.” Demeo v. State Farm

Mut. Auto Ins. Co., 38 Mass. App. Ct. 955, 956-957

(1995).

Typically, subsection (f) is invoked in cases in which

an insurer denies liability or contests the amount of

money owed. In those situations, it is well settled that

“liability under c. 176D and c. 93A does not attach merely

because an insurer concludes that it has no liability under an insurance policy and that conclusion is ultimately

determined to have been erroneous.” See Guity v. Commerce Ins. Co., 36 Mass. App. Ct. 339, 343 (1994), quoting

Pediatricians, Inc. v. Provident Life & Accident Ins.

Co., 965 F.2d 1164, 1173 (1st Cir. 1992) (“A plausible, reasoned legal position that may ultimately turn out to be

mistaken – or simply . . . unsuccessful – is outside the

scope of the punitive aspects of the combined application

of c. 93A and c. 176D.”). See also O’Leary-Alison, 52

Mass. App. Ct. at 218 (“An insurer’s good faith, but mistaken, valuation of damages does not constitute a violation of c. 176D.”). This case, however, presents a unique

situation because neither liability nor the amount of

money owed was in dispute. Rather, the crux of the

plaintiff’s claim is that liability was not reasonably clear

because there was a dispute regarding who was Robert’s

beneficiary, and yet, Nationwide paid the remaining balance, albeit to the wrong party. Determining whether

this conduct constitutes a violation of G. L. c. 176D,

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§ 3(9)(f) requires fact finding, particularly with respect

to Nationwide’s knowledge and intent, which the court

cannot do at the summary judgment stage.9 See Attorney Gen., 386 Mass. at 370. See also O’Leary-Alison, 52

Mass. App. Ct. at 217. Accordingly, summary judgment

is not appropriate on this theory of liability either.

Nationwide’s Cross Claim against the Commonwealth for Indemnification

Nationwide filed a single cross claim against the

Commonwealth for indemnification of all damages for

which it may be found liable. To the extent that Nationwide is attempting to avoid having to pay the remaining

balance of Robert’s annuity contract for a second time,

the court agrees that it should not have to do so. However, because the court orders the Commonwealth to

turn those funds over to the plaintiff, see Order below,

Nationwide’s cross claim for indemnification is moot. To

the extent that Nationwide claims it is not legally responsible for breaching the annuity contract or engaging

in unfair or deceptive acts in violation of c. 93A and

c. 176D, it has not cited to any case law to support its

position and the facts of this case suggest otherwise. Accordingly, Nationwide’s motion for summary judgment

on its cross claim for indemnification must be denied.

9 As an aside, the court notes that it considered, but was not

persuaded by, Nationwide’s waiver argument; however, the

plaintiff’s purported delay in raising the beneficiary issue may

be relevant as to whether Nationwide’s conduct violated G. L.

c. 176D, § 3(9)(c), (d), and (f).

52a

ORDER

For the foregoing reasons, it is hereby ORDERED

that the plaintiff’s motion for summary judgment is ALLOWED as to Count 1 (declaratory relief) and the Commonwealth’s cross motion is DENIED. The court

hereby DECLARES that the plaintiff is entitled to the

remaining balance of the annuity contract, and the Commonwealth is ORDERED to turn over to the plaintiff

the funds it received from Nationwide within ninety (90)

days of the issuance of this order.

It is further ORDERED that the plaintiff’s motion

for summary judgment is ALLOWED as to Count 2

(breach of contract) but with respect to liability only.

As for Count 3 (violation of c. 93A and c. 176D), the

plaintiff’s motion for summary judgment is DENIED,

and Nationwide’s cross motion is ALLOWED, in part,

only in regards to the plaintiff’s “failure to acknowledge

communications” theory of liability. Nationwide’s cross

motion for summary judgment is otherwise DENIED.

January 16, 2020

/s/ C. William Barrett

Justice of the Superior Court

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APPENDIX D

Section 1917 of the Medicaid Act (Title XIX of the Social

Security Act, ch. 531, 49 Stat. 620 (1935), as added by the

Health Insurance for the Aged Act, Pub. L. No. 89-97,

tit. I, § 121(a), 79 Stat. 290, 343-53 (1965)), as added by

the Tax Equity and Fiscal Responsibility Act of 1982,

Pub. L. No. 97-248, § 132(b), 96 Stat. 324, 370-73, as

amended, 42 U.S.C. § 1396p, provides:

§ 1396p. Liens, adjustments and recoveries, and

transfers of assets

(a) Imposition of lien against property of an individual on account of medical assistance rendered to him

under a State plan

(1) No lien may be imposed against the property of any

individual prior to his death on account of medical assistance paid or to be paid on his behalf under the State

plan, except—

(A) pursuant to the judgment of a court on account

of benefits incorrectly paid on behalf of such individual, or

(B) in the case of the real property of an individual—

(i) who is an inpatient in a nursing facility, intermediate care facility for the mentally retarded, or

other medical institution, if such individual is required, as a condition of receiving services in such

institution under the State plan, to spend for costs

of medical care all but a minimal amount of his income required for personal needs, and

54a

(ii) with respect to whom the State determines,

after notice and opportunity for a hearing (in accordance with procedures established by the

State), that he cannot reasonably be expected to

be discharged from the medical institution and to

return home, except as provided in paragraph (2).

(2) No lien may be imposed under paragraph (1)(B) on

such individual’s home if—

(A) the spouse of such individual,

(B) such individual’s child who is under age 21, or

(with respect to States eligible to participate in the

State program established under subchapter XVI) is

blind or permanently and totally disabled, or (with

respect to States which are not eligible to participate

in such program) is blind or disabled as defined in section 1382c of this title, or

(C) a sibling of such individual (who has an equity interest in such home and who was residing in such individual’s home for a period of at least one year immediately before the date of the individual’s admission to the medical institution),

is lawfully residing in such home.

(3) Any lien imposed with respect to an individual pursuant to paragraph (1)(B) shall dissolve upon that individual’s discharge from the medical institution and return home.

(b) Adjustment or recovery of medical assistance correctly paid under a State plan

(1) No adjustment or recovery of any medical assistance

correctly paid on behalf of an individual under the State

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plan may be made, except that the State shall seek adjustment or recovery of any medical assistance correctly

paid on behalf of an individual under the State plan in the

case of the following individuals:

(A) In the case of an individual described in subsection (a)(1)(B), the State shall seek adjustment or recovery from the individual’s estate or upon sale of the

property subject to a lien imposed on account of medical assistance paid on behalf of the individual.

(B) In the case of an individual who was 55 years of

age or older when the individual received such medical assistance, the State shall seek adjustment or recovery from the individual’s estate, but only for medical assistance consisting of—

(i) nursing facility services, home and community-based services, and related hospital and prescription drug services, or

(ii) at the option of the State, any items or services under the State plan (but not including medical assistance for medicare cost-sharing or for

benefits described in section 1396a(a)(10)(E) of

this title).

(C)

(i) In the case of an individual who has received

(or is entitled to receive) benefits under a longterm care insurance policy in connection with

which assets or resources are disregarded in the

manner described in clause (ii), except as provided in such clause, the State shall seek adjustment or recovery from the individual’s estate on

56a

account of medical assistance paid on behalf of the

individual for nursing facility and other long-term

care services.

(ii) Clause (i) shall not apply in the case of an individual who received medical assistance under a

State plan of a State which had a State plan

amendment approved as of May 14, 1993, and

which satisfies clause (iv), or which has a State

plan amendment that provides for a qualified

State long-term care insurance partnership (as

defined in clause (iii)) which provided for the disregard of any assets or resources—

(I) to the extent that payments are made under a long-term care insurance policy; or

(II) because an individual has received (or is

entitled to receive) benefits under a long-term

care insurance policy.

(iii) For purposes of this paragraph, the term

“qualified State long-term care insurance partnership” means an approved State plan amendment under this subchapter that provides for the

disregard of any assets or resources in an amount

equal to the insurance benefit payments that are

made to or on behalf of an individual who is a beneficiary under a long-term care insurance policy if

the following requirements are met:

(I) The policy covers an insured who was a

resident of such State when coverage first became effective under the policy.

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(II) The policy is a qualified long-term care insurance policy (as defined in section 7702B(b)

of the Internal Revenue Code of 1986) issued

not earlier than the effective date of the State

plan amendment.

(III) The policy meets the model regulations

and the requirements of the model Act specified in paragraph (5).

(IV) If the policy is sold to an individual

who—

(aa) has not attained age 61 as of the date

of purchase, the policy provides compound

annual inflation protection;

(bb) has attained age 61 but has not attained age 76 as of such date, the policy

provides some level of inflation protection;

and

(cc) has attained age 76 as of such date, the

policy may (but is not required to) provide

some level of inflation protection.

(V) The State Medicaid agency under section

1396a(a)(5) of this title provides information

and technical assistance to the State insurance

department on the insurance department’s

role of assuring that any individual who sells a

long-term care insurance policy under the

partnership receives training and demonstrates evidence of an understanding of such

policies and how they relate to other public

and private coverage of long-term care.

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(VI) The issuer of the policy provides regular

reports to the Secretary, in accordance with

regulations of the Secretary, that include notification regarding when benefits provided

under the policy have been paid and the

amount of such benefits paid, notification regarding when the policy otherwise terminates, and such other information as the Secretary determines may be appropriate to the

administration of such partnerships.

(VII) The State does not impose any requirement affecting the terms or benefits of such a

policy unless the State imposes such requirement on long-term care insurance policies

without regard to whether the policy is covered under the partnership or is offered in

connection with such a partnership.

In the case of a long-term care insurance policy

which is exchanged for another such policy, subclause (I) shall be applied based on the coverage

of the first such policy that was exchanged. For

purposes of this clause and paragraph (5), the

term “long-term care insurance policy” includes a

certificate issued under a group insurance contract.

(iv) With respect to a State which had a State

plan amendment approved as of May 14, 1993,

such a State satisfies this clause for purposes of

clause (ii) if the Secretary determines that the

State plan amendment provides for consumer

protection standards which are no less stringent

than the consumer protection standards which

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applied under such State plan amendment as of

December 31, 2005.

(v) The regulations of the Secretary required under clause (iii)(VI) shall be promulgated after consultation with the National Association of Insurance Commissioners, issuers of long-term care insurance policies, States with experience with

long-term care insurance partnership plans, other

States, and representatives of consumers of longterm care insurance policies, and shall specify the

type and format of the data and information to be

reported and the frequency with which such reports are to be made. The Secretary, as appropriate, shall provide copies of the reports provided

in accordance with that clause to the State involved.

(vi) The Secretary, in consultation with other appropriate Federal agencies, issuers of long-term

care insurance, the National Association of Insurance Commissioners, State insurance commissioners, States with experience with long-term

care insurance partnership plans, other States,

and representatives of consumers of long-term

care insurance policies, shall develop recommendations for Congress to authorize and fund a uniform minimum data set to be reported electronically by all issuers of long-term care insurance

policies under qualified State long-term care insurance partnerships to a secure, centralized electronic query and report-generating mechanism

that the State, the Secretary, and other Federal

agencies can access.

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(2) Any adjustment or recovery under paragraph (1)

may be made only after the death of the individual’s surviving spouse, if any, and only at a time—

(A) when he has no surviving child who is under age

21, or (with respect to States eligible to participate in

the State program established under subchapter

XVI) is blind or permanently and totally disabled, or

(with respect to States which are not eligible to participate in such program) is blind or disabled as defined in section 1382c of this title; and

(B) in the case of a lien on an individual’s home under

subsection (a)(1)(B), when—

(i) no sibling of the individual (who was residing

in the individual’s home for a period of at least one

year immediately before the date of the individual’s admission to the medical institution), and

(ii) no son or daughter of the individual (who was

residing in the individual’s home for a period of at

least two years immediately before the date of

the individual’s admission to the medical institution, and who establishes to the satisfaction of the

State that he or she provided care to such individual which permitted such individual to reside at

home rather than in an institution),

is lawfully residing in such home who has lawfully resided in such home on a continuous basis since the

date of the individual’s admission to the medical institution.

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(3)

(A) The State agency shall establish procedures (in

accordance with standards specified by the Secretary) under which the agency shall waive the application of this subsection (other than paragraph

(1)(C)) if such application would work an undue hardship as determined on the basis of criteria established by the Secretary.

(B) The standards specified by the Secretary under

subparagraph (A) shall require that the procedures

established by the State agency under subparagraph

(A) exempt income, resources, and property that are

exempt from the application of this subsection as of

April 1, 2003, under manual instructions issued to

carry out this subsection (as in effect on such date)

because of the Federal responsibility for Indian

Tribes and Alaska Native Villages. Nothing in this

subparagraph shall be construed as preventing the

Secretary from providing additional estate recovery

exemptions under this subchapter for Indians.

(4) For purposes of this subsection, the term “estate”,

with respect to a deceased individual—

(A) shall include all real and personal property and

other assets included within the individual’s estate,

as defined for purposes of State probate law; and

(B) may include, at the option of the State (and shall

include, in the case of an individual to whom paragraph (1)(C)(i) applies), any other real and personal

property and other assets in which the individual had

any legal title or interest at the time of death (to the

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extent of such interest), including such assets conveyed to a survivor, heir, or assign of the deceased

individual through joint tenancy, tenancy in common,

survivorship, life estate, living trust, or other arrangement.

(5)

(A) For purposes of clause (iii)(III), the model regulations and the requirements of the model Act specified in this paragraph are:

(i) In the case of the model regulation, the following requirements:

(I) Section 6A (relating to guaranteed renewal or noncancellability), other than paragraph (5) thereof, and the requirements of section 6B of the model Act relating to such section 6A.

(II) Section 6B (relating to prohibitions on

limitations and exclusions) other than paragraph (7) thereof.

(III) Section 6C (relating to extension of benefits).

(IV) Section 6D (relating to continuation or

conversion of coverage).

(V) Section 6E (relating to discontinuance

and replacement of policies).

(VI) Section 7 (relating to unintentional

lapse).

(VII) Section 8 (relating to disclosure), other

than sections 8F, 8G, 8H, and 8I thereof.

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(VIII) Section 9 (relating to required disclosure of rating practices to con

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