How is the well-spouse's annuity counted during a Medicaid resource assessment?

Brit38 - The whole Spend-Down & Estate Recovery (MERP) has been a required part of Medicaid since 1990’s. What was done varied wildly. Some states did a cursory look back of just a few months; some states did almost zero after death estate recovery. In 2005, Bush signed Deficit Reduction Act. DRA required states to now have a codified asset/recovery program & uniform transfer penalty format for Medicaid. Within Medicaid application (& renewals) now there is some sort of “Acknowledgment of Participation Agreement” so by applying for and accepting Medicaid, you agree to MERP, spend-down, transfer penalty, etc. By applying for Medicaid, you allow an all access pass to your and your spouses finances. If there is a life insurance policy that has your estate as beneficiary, the state finds out that it's going to be a part of your estate eventually. Ditto for annuities, your home, etc.

Spend-down & MERP are understandable as LTC are budget busters for states and Medicaid is an "at-need" entitlement ("need" medically & financially) even from the grave

Based on posts on this site families & applicant do NOT fully realize what this means for assets/income. Spend-down & MERP gets to the heart of the issue of who should pay for long-term care -- the public through the tax-supported Medicaid program, &/or users of long-term care through their personal resources, including those remaining after death. Amounts collected from Medicaid recipients' estates are not insignificant in absolute terms. They do, however, pale next to total Medicaid spending for LTC.

At 79 & healthy, if you started planning soon, you would be outside of the look back before you turn 85. If your hubs is not quite as healthy as you, well 5 years can go by pretty fast. 2021 isn't that far away. Really please give some thought to meeting with a elder law atty to figure out what options you all could do now and towards being beyond look back by 2021.

thanks for response. I was saddened to read the example above stating that if Fred dies before the end of the annuity payout, the balance of that payout, up to what Fred owes Medicaid for covering his care costs, must be paid to the state. Mary gets to keep what's left. That is scary as it would mean Medicaid could still end up with most of our savings if I go that route and hubby dies :(

Brit - actuarial tables are going to determine what is allowed for timeframe for Medicaid compliant annuities.

Community spouses & SPIAs seem to work best when it's where a younger CS like in their 40's. The one I know of personally, she is early 40's with under 18 yr kids & the hubs had a terrible accident from which he was likely not to never ever recover from. Hubs late 60's successful self employed with assets. They reached limitations on their secondary health insurance policies. She sold their weekend place to raise $ too. Continuing to private pay for care would leave family penniless even with SS paid to kids till they finished lower school. The costs of a privatecpay soecialty rehab fwcility is astronomical. But by doing a SPIA on all $ over the amount allowed for the CS, hubs qualified for medicaid & went into a LTC facility that accepted Medicaid & dealt with his type of needs. Since she is youngish, she will more than likely outlive her income payout from SPIA annuity. It will not replace the income level they had when he was working but she wasnt impoverished and needing to be all Blanche DuBois (her words too, she never lost her wit!). The husband was vegetative state in a facility for a little over a year before he died. For her, a SPIA was a godsend.

Pam, nice example!

I'd like to add that a Medicaid compliant annuity is speciality underwriting. The vast majority of annuities touted to retirees and others are NOT medicaid compliant. Those "Protect your assets" seminars &/or free dinners are usually focused on traditional annuities with the usual & very profitable insurance agent commission, settlement terms, etc. and these are not medicaid compliant. State insurance commissioners (which regulate annuities as they are an insurance product) can structure the commission (like its much much lower & limited commission), policy terms, etc. on the medicaid compliant ones as the state must be the beneficiary. It's not as commission profitable for the agent doing these as opposed to the usual annuities. So most agents don't write them.

A NAELA elder law atty will know of brokers or Financial advisors who do them & do them correctly for medicaid.

The strategy is called a community spouse Medicaid annuity. Here's how it works. Suppose Fred and Mary divided up their $100,000 in resources each taking $50,000 when Fred applied for Medicaid. (In about half the states this division of assets might work somewhat differently and Mary could keep the entire $100,000). Fred has to spend his $50,000 down to less than $2,000 and then Medicaid will take over his uncovered nursing home costs. Instead, Fred transfers his $50,000 to Mary.

As far as Medicaid is concerned, the $50,000 still belongs to Fred even though Mary now owns it. But Mary can buy an income annuity with this $50,000 that meets certain Medicaid rules and this income annuity has turned the asset into a non-countable income stream. Fred is now eligible for Medicaid and Mary has additional income that can help her deal with her needs in the community. If Fred dies before the end of the annuity payout, the balance of that payout, up to what Fred owes Medicaid for covering his care costs, must be paid to the state. Mary gets to keep what's left.

as a community spouse 79y how short of a medicaid annuity can I get? Don't want the money tied up for years plus at my age (altho healthy) time is running out so don't want one that goes on forever with my money tied up.

Are you referring to a SPIA? If so, if it's done correctly it should be considered "income" of the CS. CS's income does not count. Income & assets differentiate as to what is counted for eligibility.

In addition to what Pam mentioned, if its a SPIA, it must have the state as the beneficiary.

Just a thiught, but If your still getting it done & you are on the younger side but healthy (& likely to live long) & it's a somewhat large SPIA, really look at the actuarial tables. Perhaps could have it extended so smaller income payout to lessen taxes but longer than period required by tables.

Medicaid only allows commercial annuities. In order to be approved for Medicaid purposes, this type of annuity must be fixed (all monthly payments the same), irrevocable (once signed, it cannot be revoked or changed), un-assignable (it cannot be sold or transferred to anyone else), and immediate (payments must start right away).