With the cost of skilling nursing care in Pennsylvania averaging almost $11,000 per month, most families are forced to rely on Medicaid to assist with the payment of care. To qualify for Medicaid in 2021, an applicant may have no more than $2,400 in countable assets in his or her name if his or her gross income is $2,382 or more per month. An applicant may have no more than $8,000 in countable assets if his or her income is less than $2,382 per month. However, if you are married and only one spouse requires care the spouse at home is typically allowed to keep half of the total available resources that the couple has in their names up to a maximum amount of $130,380 for 2021. This is often referred to as the Community Spouse Resource Allowance.
Once the couple determines the value of the countable assets and the Community Spouse Resource Allowance is calculated, the applicant must spend-down his or her one-half of the assets to be eligible for Medicaid benefits. The one-half of the countable assets must be spent down to the limit of $2,400 or $8,000 depending on the applicant’s gross income. Where the spend-down is not significant, the couple may purchase burial accounts, a new vehicle, or other spend-down items to qualify for Medicaid. However, where the spend-down is more significant it may be beneficial to purchase a Medicaid compliant annuity. For example, if the couple’s combined countable assets are $200,000, then the spouse in the community could keep $100,000 and the spouse applying for Medicaid would need to spend-down the other $100,000 to either $8,000 or $2,400 depending on his or her income.
A Medicaid compliant annuity can reduce the excess resources and provide an income stream for the spouse staying at home. Therefore, in the example used above, the extra $100,000 could be spent down by purchasing a Medicaid compliant annuity. A Medicaid annuity is an immediate annuity, the term cannot exceed the life expectancy of the spouse in the community, and the monthly payments are fixed. Additionally, the annuity is irrevocable and non-assignable. One catch is that the beneficiary of this annuity must be the Pennsylvania Department of Human Services to the extent that they have paid for the spouse’s care. Under Pennsylvania law, the community spouse is entitled to retain all his or her own income, regardless of how much it is. Therefore, as the Medicaid annuity pays to the spouse, the spouse is permitted to keep the full annuity payment.
The use of Medicaid compliant annuities is complex. Therefore, it is important to work with an experienced elder law attorney when applying for Medicaid and utilizing an annuity.
The legal advice in this column is general in nature, consult your attorney for advice to fit your particular situation.