What Is a Medicaid Compliant Annuity?

A Medicaid Compliant Annuity (MCA) is one of the most powerful Medicaid planning tools available. It is a single premium immediate annuity with specific constraints to meet Medicaid’s strict eligibility requirements. Essentially, an MCA is a contract with an insurance company that is funded with a lump sum of money in exchange for periodic payments that begin immediately. 

When properly structured, an MCA allows you to convert the excess countable assets that are preventing you from qualifying for Medicaid into an income stream with no cash value. By using an MCA, you can effectively preserve your nest egg and accelerate your eligibility for Medicaid benefits. 

How Does a Medicaid Compliant Annuity Work?

The strategies for using a Medicaid Compliant Annuity vary greatly by your circumstances, including your financial situation, marital status, at-risk assets, and other important considerations. The planning professional you work with will structure the annuity to provide the best economic benefit for you or your loved one. 

No matter the MCA strategy being used, however, the goal is the same: Preserve your hard-earned savings for your spouse or as an inheritance for future generations.

To Be Medicaid Compliant, an Annuity Must:

• Be irrevocable

  The payment amount, term, and parties of the annuity cannot be changed.

• Be non-assignable

  The contract may not be assigned or sold to another party.

• Be actuarially sound

  The term of the annuity must be fixed and equal to or shorter than the contract owner’s Medicaid life expectancy.

• Provide Equal Monthly Payments

  The annuity must provide equal monthly payments. No deferral or balloon payments are allowed.

• List the state as a beneficiary

  In most cases, the state Medicaid agency must be named primary death beneficiary up to the amount of benefits paid on behalf of the Medicaid recipient. Exceptions may apply in certain states and certain situations involving a married couple or a minor or disabled child.