Hutcherson v. Arizona Health Care Cost Containment System Administration

Rebecca Hutcherson (plaintiff) was the daughter of John and Betty Hutcherson. Betty was in long-term residential care in a nursing facility. Betty applied for Medicaid long-term care coverage from the Arizona Health Care Cost Containment System Administration (AHCCCS) (defendant). To meet Arizona’s Medicaid eligibility requirements, Betty and John spent down assets by purchasing a $100,000 irrevocable, nontransferable annuity for John. The annuity gave John fixed monthly payments. AHCCCS was named as the annuity’s first remainder beneficiary. When John died, the annuity had $75,000 remaining. AHCCCS then used the monthly payments to cover Betty’s care. Because the monthly annuity payments exceeded Betty’s monthly care costs, AHCCCS used the excess funds to reimburse itself for the approximately $24,000 it had spent on Betty’s care before John’s death. After Betty stopped receiving Medicaid benefits, AHCCCS used the annuity funds to cover the remainder of Betty’s $24,000 balance then released the annuity to Rebecca. Rebecca sued AHCCCS, arguing that (1) AHCCCS could not use John’s annuity to cover Betty’s care costs; and (2) even if AHCCCS could use John’s annuity to cover Betty’s care costs, it could not use annuity funds for care costs Betty incurred after John’s death. The district court granted summary judgment to AHCCCS, holding the Medicaid Act allowed AHCCCS to use John’s annuity to cover all of Betty’s care costs. Rebecca appealed.