Have questions? Get answers for your unique situation.
CALL (844) 412-4222

Blog > Medicaid Planning > Medicaid Compliant Annuity: How to Become Medicaid Eligible

Medicaid Compliant Annuity: How to Become Medicaid Eligible

man turning pages in binder
March 9, 2022 Medicaid Planning

If you or a loved one are looking to become eligible for Medicaid to help pay for long-term care, you may wonder how you can spend down your excess assets. And if your loved one is already receiving care, Medicaid Compliant Annuities may be the answer you are looking for.

Medicaid Compliant Annuities

A Medicaid Compliant Annuity is an insurance contract between an individual and an insurance company. This annuity is typically a single premium immediate annuity with fixed terms over a very short period of time. A Medicaid Compliant Annuity essentially helps an individual or their spouse spend down to achieve Medicaid eligibility. 

How Do Medicaid Compliant Annuities Work?

When applying for Medicaid eligibility for long-term care, an individual will need to meet certain financial requirements in order to be approved. If this individual has more countable assets than allowed, they can use a Medicaid Compliant Annuity to spend down these assets without being penalized by Medicaid.

An individual will put most of their countable assets into a Medicaid Compliant Annuity and then the life expectancy of that individual will be calculated. From there, the monthly payments will be calculated which will be the monthly payment toward their long-term care. In many cases, this strategy can save someone hundreds if not thousands of dollars a month.

To see specific examples of an MCA in action, check out our planning examples for both single and married individuals.

Trying to figure out if a Medicaid Compliant Annuity or maybe a different planning product would be the best option for you? Find out which strategy works best for you by using our free planning wizard which will outline your planning options within minutes! 

MCA Requirements

There are many parts of the MCA that are required by Medicaid and while some will vary depending on the state in which you will receive care, the majority of these rules need to be followed:

  • Be Immediate: You must start receiving payments once the contract has been annuitized 
  • Be Actuarially Sound: Contract can’t last longer than the life expectancy of the individual who will receive the annuity payments.
  • Provide Equal Monthly Payments: The monthly annuity payment must be the same amount, every month.
  • List the state as Beneficiary: the state must be the beneficiary so they can receive any remaining funds
  • Be Irrevocable: Once created, the payment amount, term, and parties of the annuity can’t be changed or ended; the only way to receive the money is in the monthly payments.

Medicaid Friendly vs. MCA

A Medicaid Friendly annuity is NOT a Medicaid Compliant Annuity. If any financial professional tries to discuss a Medicaid Friendly annuity, know that this type of annuity is not the same as being compliant with Medicaid.

These types of annuities may appear like they can protect your assets from Medicaid but because they are simply “friendly” they could still be countable for Medicaid purposes.

How to Setup an MCA

We always recommend working with a Medicaid planner or financial advisor to help set up an MCA. Because of the detailed nature of this annuity and the very real possibility of not becoming eligible if done incorrectly, it’s better to be safe and seek an Elder Law attorney or the like who fully understands how to create these MCAs.

However, once the MCA is set up, you will, usually, immediately become eligible for Medicaid and avoid the penalty period.


Planning Guide

get more expert
insight with our
free planning guide!



"Paying for Long-Term Care - The Essential Senior Guidebook"

This guide takes a deep dive into the landscape of long-term care and how to pay for it without going broke, including the answers to your top questions surrounding Medicaid.

Planning Guides