What is a Medicaid compliant annuity (MCA), and is it right for me? A Medicaid compliant annuity is a financial product that turns a countable asset into an income stream. If you and your spouse are contemplating a Medicaid application, an annuity contract may help you qualify for long-term care.
To avoid being classified as a disqualifying transfer or asset by Medicaid, the Medicaid annuity must meet strict criteria. The annuity cannot be a deferred annuity, meaning that annuity payments must start right away, and no lump-sum cash outs are allowed. The annuity cannot have a cash value, cannot be changed or canceled once established, and is non-assignable. The annuity must be actuarially sound, which means that it must pay out within the owner’s life expectancy. The most common type of Medicaid annuity is the Single Premium Immediate Annuity (SPIA), but not all SPIAs are Medicaid compliant. It is important to make sure that the annuity purchased is Medicaid compliant, because Medicaid will impose the five-year look-back period on any transfers that were not at market value.
The most common use of a Medicaid compliant annuity is when one spouse of a married couple is in need of nursing home care, and the other spouse wishes to remain in-home. Rather than spending down cash on care costs, the healthy spouse can purchase an annuity. The annuity purchaser is known as the annuitant, or the primary beneficiary. This countable cash then becomes a monthly income stream. These monthly payments can be used for expenses, but in some states, the payments can be saved as assets.
While Medicaid annuities are often an option for those seeking Medicaid benefits, proper estate planning and Medicaid planning can prevent the need for an annuity and save far more money. The staff at QMC are ready and willing to answer your FAQs about Medicaid eligibility, Medicaid programs, care planning, and options to pay for health care.