Disclaimer: Since Medicaid rules and insurance regulations are updated regularly, past blog posts may not present the most accurate or relevant data. Please contact our office for up-to-date information, strategies, and guidance.
A Medicaid Compliant Annuity (MCA) is a powerful spend-down tool designed to help agents and advisors achieve Medicaid eligibility for their senior clients who are facing a costly nursing home stay. Technically speaking, an MCA is a single premium immediate annuity that converts assets into an income stream with zero cash value.
When properly structured, this annuity allows your clients to legally eliminate the excess countable assets preventing them from qualifying for Medicaid and accelerate their eligibility for benefits. In order to be considered Medicaid compliant, however, an annuity must meet five main requirements.
Requirements of an MCA
Be Irrevocable
The payment amount, term, and parties of the annuity contract cannot be altered.
Be Non-Assignable
The contract cannot be assigned to another party or sold on the secondary market.
Be Actuarially Sound
The term of the annuity must be fixed and equal to or shorter than the owner’s Medicaid life expectancy.
Make Equal Payments
The annuity must provide equal monthly payments with no deferral or balloon payments.
Name the State as Beneficiary
In most cases, the state Medicaid agency must be named the primary death beneficiary to the extent of benefits paid on behalf of the institutionalized individual.
Learn More: What You Need to Know about the Actuarially Sound Requirement
Who Should Use an MCA?
A Medicaid Compliant Annuity may be right for your client if they:
- Reside in a Medicaid-approved facility
- Have exhausted Medicare or long-term care insurance benefits
- Are paying out of pocket for care
- Have excess countable assets
To learn more about the requirements of an MCA or best practices for using this product, we invite you to schedule a call with one of our in-house advisors.
