I read with interest a recent federal court opinion involving a Medicaid issue. A colleague of mine sued the State after the Medicaid office in Camden County denied Medicaid benefits to his client based, in part, because the client purchased a Medicaid-complaint annuity.

I have used annuities on numerous occasions to hasten a client’s eligibility for Medicaid benefits. A properly structured annuity can be used to convert assets into a stream of income. Once assets are converted into a stream of income, eligibility for Medicaid benefits can be achieved more easily.

The State does not like how some elder law attorneys use annuities to achieve Medicaid eligibility for their clients. In some counties, the State continues to challenge the use of annuities, notwithstanding the fact that there are a great number of federal court cases throughout the country that uphold the use of annuities as a valid Medicaid planning technique.

Why the State cares about a handful of elder law attorneys using annuities to achieve eligibility for Medicaid, I have no idea. Quite frankly, there are so few attorneys who use this technique to help their clients, I would not need two hands to count them.

The economic impact this handful of elder law attorneys has on the State’s budget is extremely minimal. With the amount of Medicaid fraud that occurs in this state, it is amazing that the State wastes its time trying to suppress the legal efforts of a few attorneys.

But what I found interesting about this recent case is not the fact that it involved an annuity, it was the court’s discussion of an issue we lawyers call “mootness.” If a case is moot, meaning the wrong that the plaintiff seeks to remedy is no longer occurring, then the court cannot continue to hear the case and must dismiss the case.

Whenever you file a suit against the State involving a Medicaid issue, mootness is a concern because the State can just say “well, we decided to grant your client eligibility now.” Obviously, this result is good for the client but it’s a bit frustrating for the attorney who had to go through the time, trouble, and effort of filing a federal lawsuit against the State on the same issue, perhaps for the tenth time.

For instance, as I say, the State doesn’t like annuities and hasn’t liked annuities for the past twenty years. The State loves to give a client a hard time every time they use an annuity. If the lawyer has to file a suit against the State every time he uses an annuity, that is somewhat of a pain, especially when the State just say “never mind” after the suit is filed.

What the judge in this recent case made clear is, a case is not moot simply because the State says it will cease its illegal behavior if the State could simply change its mind, once again, at some point in the future. Since Medicaid benefits can always be ceased, for instance, the State could change its mind six months later and terminate benefits and even say it made a mistake when it originally granted eligibility, few cases can be mooted simply by the State saying “never mind” unless the State also say “never mind and we will never change our minds about this unless Congress changes the law.”

It is unlikely the State would ever say this, so the State will have to be careful about what it does unless it wants a great number of federal court judgments against it.