Congress Proposes Changes to Income from Medicaid Exempt Annuity
Recently, a bill was introduced by Representative Markwayne Mullin (R-OK) to make major changes to the way Medicaid will treat income received by an at home spouse (known as the community spouse) from their own Medicaid exempt annuity when the other spouse is in a nursing home. If passed, the bill will significantly reduce the amount of assets that can be protected for the at home spouse for their own future needs.
When one spouse enters a nursing home and applies for Medicaid benefits to help pay for their long term care costs, a married couple is currently allowed to keep approximately half of their assets, up to a maximum of $119,220.00, for the maintenance and care of the at home spouse. With respect to the couple’s remaining assets over the allowable amount, there are many strategies to also protect those funds for the at home spouse, including establishing a Medicaid exempt annuity. While this annuity must meet several criteria in order to be considered an exempt asset, the annuity is owned solely by the at home spouse and will pay income solely to the at home spouse.
For example, John and Mary are married and John is in a nursing home receiving long term care. John and Mary have saved their entire lives and currently have approximately $200,000.00 in assets. In order for John to qualify for Medicaid benefits, Mary will be allowed to keep approximately $100,000.00 of their life savings. The remaining $100,000.00 can be transferred to Medicaid exempt annuity, which will protect the lump sum and return the funds to Mary by distributing approximately $2,000.00 per month to her over the next four (4) years. With the current rules, by transferring their assets over the allowable limit to the Medicaid exempt annuity, Mary is able to protect their entire life savings as the annuity will pay her back in full.
Currently, the income received by the at home spouse, including the income from the at home spouse’s Medicaid exempt annuity, is exempt from Medicaid. This allows the at home spouse to keep their income in full and use it as they see fit, such as spending it for their own needs or even to save or re-invest. The income received by the spouse in the nursing home will generally be paid to the nursing home each month as a copayment (known as a Patient Pay Amount) for the care received, minus their health insurance premiums, a $60.00 personal allowance, and any contribution allowed to the at home spouse (this contribution is dependent on the at home spouse’s income and household expenses).
If the proposed bill passes, Medicaid will still consider the annuity to be an exempt asset but will no longer consider the income received by the at home spouse from the annuity to be fully exempt. Instead, Medicaid will assign half of the income received from the annuity to the spouse in the nursing home. The half assigned to the spouse in the nursing home will then be included in the monthly co-payment due to the nursing home.
Using the example above, if the proposed bill passes, half of the medicaid exempt annuity income will be assigned to John and will be paid to the nursing home as part of his monthly co-payment. Mary will no longer be able to protect their entire life savings as $50,000.00 from the medicaid exempt annuity will instead be paid to the nursing home, in addition to John’s monthly income.
With the ever growing list of proposed changes to the Medicaid laws, now, more than ever, it is imperative to put your plan in place before the unthinkable happens and you or your loved one needs nursing home care. With early planning, SSR Law Office can help you protect your life savings from the high cost of long term care and ensure that the spouse remaining at home will be able to maintain their current lifestyle and afford the cost of their own future needs.