John Geston v. Maggie D. Anderson
729 F.3d 1077
8th Cir.2013Background
- John Geston entered a care facility in July 2010; his wife, Mrs. Geston, remained in the community. They applied for Medicaid and the State denied Mr. Geston’s application as the couple’s countable assets exceeded the limit.
- After institutionalization, the Gestons converted countable assets (including sale of a house and car) and Mrs. Geston purchased a single-premium immediate annuity for $400,000, irrevocable and nontransferable, paying a fixed monthly amount for 13 years.
- North Dakota treated the remaining annuity corpus as a countable resource (because Mrs. Geston’s total monthly income exceeded a statutory threshold), causing the denial of Mr. Geston’s Medicaid eligibility.
- The Gestons sued, arguing federal Medicaid law treats annuity payments as unearned income (not a resource) and that the State’s statute is preempted and “more restrictive” than federal methodology; the district court granted summary judgment for the Gestons.
- The State appealed, contending the annuity could be classified as a resource (citing IRS §408 definitions, various federal regulations, Deficit Reduction Act provisions, trust-like device rules, and the income-first rule).
- The Eighth Circuit affirmed: under federal statute and SSA regulations an irrevocable, nonliquidatable annuity is unearned income (not a resource), and North Dakota’s classification was more restrictive and thus preempted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Mrs. Geston’s irrevocable annuity is "unearned income" or a countable "resource" for Mr. Geston’s Medicaid eligibility | Geston: §1382a(a)(2)(B) treats annuity payments as unearned income; the annuity is nonliquidatable so not a resource under 20 C.F.R. §416.1201(a)(1) | ND: State statute may treat annuity corpus as a resource; annuity purchased with couple’s assets should be counted | Held for Geston: annuity is unearned income, not a resource; State law is more restrictive and preempted |
| Whether the term "annuity" in §1382a(a)(2)(B) is limited to §408 (retirement) annuities | Geston: §1382a’s text and context show "annuity benefit" is not limited to §408 retirement annuities | ND: "Annuity" should be read with its statutory neighbors (noscitur a sociis) to mean retirement/§408-type annuities | Held for Geston: no textual basis to import §408; context and other enumerated benefits show broader meaning |
| Whether the SSA regulation’s liquidation test permits classifying this annuity as a resource because it was purchased with cash (conversion rules) | Geston: 20 C.F.R. §416.1201(a)(1) asks whether the person has a legal right to liquidate; the contract forbids liquidation so not a resource | ND: regulations treating exchanges of resources as still resources (sale -> cash -> annuity) mean the annuity should count | Held for Geston: conversion regs apply to exchanges at or after application and to convertible resources; here annuity was nonliquidatable before application and is income not resource |
| Whether other federal provisions (DRA disclosure, income-first, trust-like device rules, or interest-only treatment) allow the State to recharacterize the annuity as a resource | Geston: those provisions do not authorize recharacterizing statutorily defined unearned income as a resource; timing and statutory text matter | ND: DRA and related rules permit States to deny eligibility based on annuities or treat annuities as trust-like or as resource to prevent abuse | Held for Geston: DRA did not change classification rules; Secretary has not designated annuities as trust-like for §1396p(d); income-first and exchange regs do not apply to this nonliquidatable annuity pre-existing at application |
Key Cases Cited
- Wisc. Dep’t of Health & Family Servs. v. Blumer, 534 U.S. 473 (describing Medicaid cooperative federalism and spousal-impoverishment rules)
- Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519 (discussing federal Medicaid statutory framework and state flexibility)
- Lopes v. Dep’t of Social Servs., 696 F.3d 180 (2d Cir. 2012) (annuity treated as income when nonliquidatable)
- James v. Richman, 547 F.3d 214 (3d Cir. 2008) (similar holding on annuity classification)
- In re Eilbert, 162 F.3d 523 (8th Cir. 1998) (applying noscitur a sociis to limit "annuity" in a different statute)
- Russello v. United States, 464 U.S. 16 (presumption against importing a definition used elsewhere in same Act when omitted)
- Bates v. United States, 522 U.S. 23 (textualist principles against reading words into statutes)
- Polaroid Corp. v. C.I.R., 278 F.2d 148 (canon on applying noscitur a sociis requires a common denominator)