The average nursing home costs across the state of Pennsylvania has now reached $11,000 per month. The average family cannot afford to pay for that cost of care. Qualifying for the Medicaid program may be their only option. A Medicaid annuity can help many families qualify for Medicaid while preserving their savings.
Medicaid (also known as Medical Assistance) is a Federal and state program that pays for the costs of your care if you enter a nursing home. It also has certain home and community benefits that pays for caregivers through the CHC Waiver Program. However, not everybody is eligible for long-term care benefits under the Medicaid program. Not only do you need the type of care that is provided in a nursing home, but you also need to financially qualify for the Medicaid program.
Medicaid has resource limitations. These available resources are typically your cash assets that can be used to pay for your care. There are unavailable resources such as your home one car your burial accounts and personal property. If you are single, the available resources are limited to a range between $2,400 and $8,000. If you are married, the available resources you can keep are typically equal to half the total available resources a couple has in their names. However, there is a maximum resource allowance that changes each year. In 2021, that maximum is just over $130,000. If a couple has savings over their resource allowance, they will have to spend down their savings until they reach that resource limitation. For those that are just slightly over the resource allowance they may be able to spend down on burial accounts a new car or other basic expenditures.
However, for those who are significantly over the resource allowance, spending options are not always available. For example, a couple who has $400,000 in available resources would be able to keep about $130,000 as the maximum resource allowance. They are over resourced by about $270,000 and would have to spend that down on nursing home costs before one of them would be eligible for Medicaid.
A Medicaid qualifying annuity can help them reduce these resources and provide for the spouse who was staying in the community. A Medicaid annuity is an immediate annuity that pays a monthly sum to the spouse who is staying in the community. The spouse will take the excess of $270,000 and buy an immediate annuity that begins paying the spouse a fixed amount every month for the term of the annuity. The term cannot exceed the life expectancy of the spouse in the community. The monthly payments are fixed, the annuity is irrevocable and non-assignable.
In addition, the beneficiary of this annuity must be the state Medicaid agency up to the amount of Medicaid that is paid to the spouse in the nursing home. If there are funds left in this annuity at the time the community spouse dies, the balance must be paid to the state Medicaid agency.
Annuities can also be used for a single person, but in a very different context. In these cases, the annuity payments are paid to this person who is in the nursing home. In most of these cases, a gift has been made that has rendered the person in the nursing home not eligible for Medicaid benefits.The Medicaid program has a look-back period of five years to determine if gifts have been made that can render a person not eligible for Medicaid. If a gift has been made, a notice will be issued that says the person is not eligible for Medicaid because they have given away assets within the last five years that have value. For example, you have a house worth $100,000 had been given away within the five years prior to applying for Medicaid, the ineligibility period for Medicaid benefits would be approximately nine months in 2021.
Hopefully, the individual who made this gift still has some savings. If so, they may be able to purchase a Medicaid annuity to pay through these nine months that they are not eligible for medical assistance. The Medicaid annuity along with the other sources of income will help pay the nursing home during the nine months the person has been determined not to be eligible for Medicaid benefits. This is a very helpful use of the Medicaid annuity and can shelter assets even if gifts are made within the five year look back period.
The use of Medicaid annuities is very complicated. You are advised to seek the counsel of an experienced elder law attorney to help you through the Medicaid qualification process.
Matthew J. Parker, Esquire is an attorney at the law firm of Marshall, Parker & Weber, LLC with offices in Williamsport, Jersey Shore and Plains. For more information visit www.paelderlaw.com or call 1-800-401-4552.