Summary Highlights

Have Questions? Contact us to learn more about Medicaid Annuities.

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  • Medicaid annuities are restricted period-certain annuities that couples can use to protect some of their assets from the government if one spouse is headed to a Medicaid-covered nursing home.
  • Typical clients have $200,000 to $300,000 in savings, are usually in their 70s or 80s and have no long-term care insurance.
  • Participants cannot sidestep asset restrictions by transferring assets to a child or other relative.
  • Medicaid annuities are irrevocable, non-assignable, have no cash value and cannot be written for a term longer than the life expectancy of the healthy spouse.


What is a Medicaid annuity?

A Medicaid annuity – formally called a Medicaid-compliant annuity – is a restricted period-certain annuity that couples can use if one of them is headed into a nursing home covered by Medicaid. The income from the annuity is not counted as income under Medicaid guidelines. Without a Medicaid annuity, the healthy spouse would have to exhaust the assets that would have funded the annuity before qualifying for Medicaid nursing home coverage.

What is the purpose of a Medicaid annuity?

The purpose is to protect the healthy spouse from impoverishment. Medicaid, unlike Medicare, pays for long-term care and can be a safety net for people who need long-term care but don’t have long-term care insurance or other resources to foot the bill. But most people who get long-term coverage from Medicaid do so only after they have depleted their financial resources, meeting a requirement to become sufficiently impoverished. This is bad for the healthy spouse, who could easily become destitute.

What are the basic requirements of these annuities?

They must be period-certain contracts, and they start only when the ill spouse is entering or already in the nursing home. The healthy spouse is the owner and annuitant, and the term of the annuity must be equal to the life expectancy of the healthy spouse. Medicaid is the primary beneficiary of the annuity. If the healthy spouse dies before the expiration of the term of the annuity, the state recovers its cost from the remaining annuity cash balance. If anything is left, it goes to secondary beneficiaries.

Are there any other important basics?

Yes. The Medicaid-compliant annuity must be drafted by an attorney who specializes in elder care.

Are there other noteworthy specifics?

Yes. There are asset and income exemptions. A couple can retain their home if it is valued no higher than $543,000 – or no higher than $786,000, in California, Connecticut, Massachusetts, Maine, New Jersey and New York. The healthy spouse can also have a car and, in most states, he or she may retain, outside the annuity, $117,240 or half the amount of their non-deductible assets, whichever is less.
In addition, the couple cannot have given away assets during the five-year period preceding entry into the nursing home. The term of the annuity also cannot exceed the projected lifespan of the healthy spouse. And the annuity also must be irrevocable and non-assignable and have no cash value.

As a general rule, insurance companies do not issue period-certain annuities with terms of less than five years. So a healthy spouse usually must have a minimum life expectancy of five years to qualify for a Medicaid annuity.

Who buys Medicaid annuities?

Primarily, clients are in their 70s or 80s, with no long-term care insurance and roughly $200,000 to $300,000 in savings.

Is nursing home care expensive without Medicaid or long-term care insurance?

Extremely. It some states, it can cost as much as $9,000 a month. It is common for a couple to accumulate respectable savings and then watch the money evaporate when long-term care is needed.

Do all insurance companies sell Medicaid annuities?

No. Different annuities are offered in different states, and only a handful of annuities are Medicaid-compliant. To determine whether a Medicaid annuity is appropriate for you and which insurance companies sell them in your state, call Annuity FYI at 866-223-2121 or go to and click on “Ask Annuity FYI by Email.”

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