Reinsuring the Risk – Medicaid Compliant Annuity or Promissory Note

Typically talking, after the Deficit Discount Act of 2005, if a neighborhood partner makes use of a Medicaid Compliant Annuity, or promissory observe, to eradicate the spend-down quantity an institutionalized partner is instantly eligible for Medicaid advantages. After the acquisition, if the neighborhood partner’s revenue is lower than his or her month-to-month upkeep wants allowance the shortfall could be shifted from his or her institutionalized partner’s revenue previous to figuring out the Medicaid co-pay. Thus, maximizing the time period of the annuity to the total extent of the neighborhood partner’s Medicaid life expectancy ends in an revenue planning alternative. The one draw back of a maximized stretch is that if the neighborhood partner predeceases the time period, leaving a possibility for the state Medicaid company to get better from the residual advantages.

For instance, assume that Alice resides locally, and her husband Roger is in a nursing dwelling. The month-to-month non-public pay fee for Roger’s care is $6,500, whereas his month-to-month revenue is barely $1,500. With a Medicaid per diem fee of $150, Roger’s facility receives roughly $4,562 monthly for a Medicaid resident.

With Alice being 77 years of age she is aware of that her Medicaid life expectancy is 11.26 years/135 months. If she eliminates their $226,000 spend-down quantity by buying a Medicaid Compliant Annuity she would obtain $1,724 monthly for 135 months. The full pay-out is $232,740. With Alice having a month-to-month upkeep wants allowance of $2,841, and month-to-month revenue of $2,224, Alice has a month-to-month revenue shortfall of $617. With that quantity being shifted from Roger’s month-to-month revenue, much less his $35 month-to-month private wants allowance, his Medicaid co-pay is $848. For every month that Roger is on Medicaid advantages, his Medicaid declare quantity will increase by $3,714. The $3,714 consists of the Medicaid fee of $4,562 being lowered by Roger’s month-to-month co-pay of $848.

If Roger dies after receiving 38 months of Medicaid advantages the Medicaid declare quantity is fastened at $141,132. If Alice dies 24 months later, 73 month-to-month funds nonetheless stay within the Medicaid Compliant Annuity – residual steadiness of $125,857.11.

To guard in opposition to such a outcome, on the graduation of the plan Alice might have bought a time period life insurance coverage coverage with a face worth of $130,000. The coverage would have had an annual price of roughly $4,034.60 – assuming a normal score. With a most popular score, the annual price of the coverage would have been a lot much less. Nonetheless, with none query the coverage would have reinsured in opposition to a threat of a Medicaid declare.