What Makes an Annuity Medicaid Compliant?

what makes an annuity Medicaid compliant question mark
Katie Camann
Katie Camann April 3, 2023

As Content Marketing Specialist, Katie drafts and edits content across multiple platforms, including blogs, Industry News, emails, videos, website pages, and more. She conducts research and gathers up-to-date information to keep our clients well-informed.

Disclaimer: With Medicaid, VA, and insurance regulations frequently changing, past blog posts may not be presently accurate or relevant. Please contact our office for information on current planning strategies, tips, and how-to's.

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.