Medicaid Planning with Annuities for Married Couples

With the decision of the First District Court of Appeals in Koenig v. Dungey, Medicaid planning attorneys and their clients were given the confidence to employ annuities in Medicaid planning for married couples.


Community Spouses and the Community Spouse Resource Allowance (CSRA)
U.S. Congress sought to protect married individuals living in the community from financial hardship caused by their spouses’ institutionalization in a nursing-care facility by allowing community spouses to maintain some assets—the Community Spouse Resource Allowance—while still permitting institutionalized spouses to receive Medicaid. The Community Spouse Resource Allowance (“CSRA”) is calculated by taking a couple’s total countable resources as of the beginning of institutionalization, dividing it by two, and then subjecting that number to a minimum and maximum amount, adjusted for inflation, which will determine the CSRA.

If a couple’s resources exceed the CSRA amount, after setting aside a minimal amount for the institutionalized spouse, then those resources must be disposed of in order for the institutionalized spouse to qualify for Medicaid. Medicaid planning attorneys employ different planning methods to utilize a community spouse’s excess resources.


Using Annuities to Utilize the Community Spouse’s Excess Resources
Effective in 2006 with Congress’s passage of the Deficit Reduction Act of 2005, the purchase of an annuity by a community spouse will not affect the eligibility of the institutionalized spouse as long as certain criteria are met. The use of an annuity by a community spouse is valuable because it allows a healthy spouse to convert excess resources to income rather than forcing him to spend excess resources to obtain Medicaid for the spouse in a nursing home.

Despite this statute, the Ohio Department of Medicaid, which administers the Medicaid program in Ohio has denied applicant’s Medicaid coverage when community spouses purchased annuities after institutionalization, finding that the purchase of an annuity with a couple’s resources exceeding the CSRA was an improper transfer.

Thankfully, the court decision in Koenig v. Dungey as cited above, made it clear that the use of annuities by a community spouse, following certain criteria, is a permissible way to utilize resources in excess of the CSRA. The Court found that, as in the sixth district appellate case of Hughes v. McCarthy, 734 F.3d 473 (6th Cir.2013), the purchase of an annuity by a community spouse after her spouse’s institutionalization but preeligibility was not an improper transfer.


Purchasing an Annuity for Medicaid Planning
If a married couple is facing the need for long term care for one spouse, the ideal time to plan is before the unhealthy spouse enters the long term care facility, like a nursing home. However, even if the unhealthy spouse has already entered the nursing home, an annuity is a promising option for a community spouse with excess resources. The key to the effective use of an annuity and the avoidance of a penalty period for the institutionalized spouse, is to ensure that the annuity complies with all relevant law. For that reason, any annuity should only be purchased with the oversight of a Cleveland Medicaid planning lawyer.