With the passing of the Deficit Reduction Act of 2005 (“DRA”), in order for an annuity to be considered “Medicaid Compliant”, the annuity must be irrevocable, non-assignable, actuarially sound, provide for equal payments, and name the State as the primary beneficiary to the extent of Medicaid benefits provided to the institutionalized individual.
In the case of an individual, I have found that a Stand Alone Medicaid Compliant Annuity (“MCA”) may not offer an economic advantage to the individual, or his or her family, except to immediately qualify the individual for LTC Medicaid benefits. If the individual lives long enough, any monthly payments remaining in the MCA would accrue to the benefit of the State Medicaid Program. This would not be the desired result for most families. In those cases, where the Medicaid applicant's actual life expectancy is short in light of his or her Medicaid life expectancy - terminal illness, a Long-Term MCA provides an excellent result in that the individual will immediately qualify for LTC Medicaid benefits, and after the re-payment to the State Medicaid Program, will allow for a residual benefit to his or her immediate family.
In the case of a husband and wife, I have found that a Stand Alone MCA in favor of the community spouse offers the best economic result, in immediately qualifying the institutionalized spouse for LTC Medicaid benefits. However, one question is always posed in these cases. If the community spouse predeceases the term of the MCA, doesn't the State Medicaid Program have the right to seek a reimbursement for any Medicaid expenses paid on behalf of the institutionalized spouse? The answer is, "yes." In light of this answer, most community spouses fear that they will not survive their Medicaid life expectancy, and thus opt for a shorter term - 24 to 36 months. Is this a good result? From my standpoint, in that I earn my living from commissions, and commissions are higher for longer term MCA's, my answer is "no." However, in order to satisfy the expectations of all the parties involved, it is my opinion that an MCA can have a shorter term, but the total income to be received by the community spouse, including that from the MCA, should be reasonable. In other words, the term of the MCA, and the anticipated monthly payment, should be reasonable in light of the circumstances. I do not want a community spouse to have total monthly income of $25,000.00, when their monthly income need is only $9,500.00.
