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  • Writer's pictureAmber Hinds

Medicaid Annuities: How They Work and Why You May Need One


As you or your loved one age, you may face the prospect of needing long-term care. Unfortunately, the costs of long-term care can be exorbitant, and for many, it can wipe out their savings. This is where Medicaid comes in. Medicaid is a joint state and federal program that pays for nursing home care and medical bills for those who meet its eligibility requirements.


However, not everyone is eligible for Medicaid, and there is often a strict “look-back” period that can disqualify some applicants. To address this issue, many turn to Medicaid-compliant annuities.


What is a Medicaid Annuity?


A Medicaid Annuity (MCA) is an insurance product that can accelerate eligibility for Medicaid. The Deficit Reduction Act of 2005 established guidelines defining an annuity contract’s characteristics as a noncountable asset and excludable from the five-year look back. This means that an annuity purchased according to the guidelines won’t affect your eligibility for Medicaid.


How Does a Medicaid Annuity Work?


An annuity purchaser gives a lump sum of money to an annuity company in exchange for equal amounts of monthly payments to a healthy spouse (the “community spouse”), while the other spouse receives medical assistance subsidized by Medicaid. This is meant to provide the annuity owner with an irrevocable income stream rather than giving the same liquid assets to home care or a qualified facility.


A Medicaid-compliant annuity is typically sought in a last-minute or “crisis” Medicaid planning situation, such as when a person is about to enter or is currently in a covered nursing home care facility. It “stops the bleeding” financially and redirects the income to the healthy spouse rather than long-term care costs.


It’s important to note that an ordinary immediate annuity is not Medicaid-compliant, and only a few companies offer a Medicaid-friendly annuity contract. This is why it’s essential to seek an experienced company who is fluent in your state’s Medicaid rules before considering a Medicaid-compliant annuity.


The healthy spouse (annuity owner) can collect income, while the unhealthy spouse can benefit from Medicaid to pay for extended care and nursing home benefits.


Is a Medicaid Annuity Right for You?


Whether a Medicaid annuity is right for you or your loved one depends on many factors. It’s a complex legal and financial tool.


While a Medicaid-compliant annuity can help you or your loved one receive Medicaid benefits while preserving assets for the healthy spouse, it may not be the best choice for everyone. For example, if you have long-term care insurance, it may not be necessary. Your elder law attorney and insurance agency can help you weigh the pros and cons and determine the best course of action.


In conclusion, a Medicaid-compliant annuity can be an effective tool in Medicaid planning, but it’s not a one-size-fits-all solution.


AshBer is an independent insurance agency specializing in Medicaid Compliant Annuities and long-term care insurance solutions. AshBer partners with attorneys and financial advisors across the country to deliver industry-leading service and premier insurance solutions to their clients offered by “A” rated insurance carriers.


Contact us today to learn more or get the process started!



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