For many older Ohio residents, nursing home care is necessary—and expensive. For those who are married, and whose spouses continue to live independently, this has created a huge financial problem. In order for the spouse in the nursing home to qualify for Medicaid to pay the monthly bill, the couple would have to "spend down" assets. Doing so would drastically reduce the assets available to the spouse outside of the nursing home (the community spouse) for living expenses.
Enter the Medicaid Qualified Annuity, also known as the Medicaid Compliant Annuity (MCA). A Medicaid Compliant Annuity is a long-term care planning tool offered by a few insurance companies. Like all immediate annuities, the MCA involves paying a lump sum to the insurance company in exchange for repayment with interest, in a series of smaller payments for a specified term of years.
The MCA operates by converting assets that would ordinarily need to be spent down in order to qualify for Medicaid into a stream of income for the community spouse. By converting these assets, which would otherwise be considered "countable" by Medicaid, the nursing home spouse becomes eligible immediately for Medicaid benefits. Therefore, 100% of the family's assets can oftentimes be preserved.
Until fairly recently, Ohio had more stringent restriction on the use of immediate annuities. As a result, it was more difficult to become Medicaid eligible with an immediate annuity in Ohio than in many other states. The Ohio Medicaid agency interpreted the law to mean that the purchase of an annuity was an improper transfer. However, in Hughes v. McCarthy, 734 f.3d 473 (6th Cir. 2013), the Court struck down the Ohio agency's interpretation and stated that the purchase of an immediate annuity after the institutionalized spouse is institutionalized is not an improper transfer.
While other states revised their laws to be in line with Hughes and other decisions, the Ohio Department of Medicaid initially refused to respect the 6th Circuit's decision as it pertained to Medicaid applicants other than Hughes. As a result, families who were Medicaid eligible under Hughes were denied Medicaid benefits.
Eventually, on February 26, 2016, after the filing of additional cases, the Ohio Department of Medicaid acquiesced and issued a Medicaid Eligibility Procedure Letter. While the Department's rules still require Ohio to be named a beneficiary of the annuity upon the death of the community spouse, the purchase of an immediate annuity for the benefit of the community spouse is no longer considered an improper transfer. This is a huge win for Ohio couples!
Medicaid Compliant Annuities can be a useful tool for Medicaid planning. However, the word "Compliant" in the name should give pause: if an annuity is not established in compliance with Ohio law, it will not achieve its intended goal of asset preservation. These annuities should be created only by a professional familiar with the law of MCAS, and reviewed by an experienced elder law attorney.
As a general rule, MCAs are a useful option when one spouse needs nursing home care, the other does not and does not expect to in the near future, and the couple has excess assets. To learn more about whether an MCA is right for you, we invite you to contact Gudorf Law Group online or call 1-937-898-5583 today for a free consultation.
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