This article will focus on Medicaid Compliant Annuity Arizona.
Suddenly a loved one finds themselves needing long-term care due to a fall or other medical conditions.
As the family searches for needed care, they come to the rude awakening that extended care is expensive. “Real Expensive!”
They begin looking for care funding solutions like Arizona Medicaid or ALTCS, the Veterans Pension with Aid and Attendance for wartime veterans and their surviving spouses, reverse mortgages, personal savings, and other potential payor sources.
They even seek financial and caregiving help from family members and friends.
Interestingly, assisted living community staff and group care homeowners seem knowledgeable and will tell people they do not qualify for Arizona Medicaid or Veterans benefits because their assets or income are too high to qualify.
This information is misinformation; The truth is most could qualify for benefits with proper Arizona Medicaid Planning or ALTCS Planning.
How they can help to qualify for Arizona Medicaid or ALTCS, the income and asset limits for the program, and what you can do to prepare if you’re over the asset and income limits set by the Arizona Long-Term Care System or ALTCS, using a Medicaid Compliant Annuity,
Arizona’s long-term care program, is a state and federal-funded program providing long-term care services.
A person applying for Arizona Long-Term Care System benefits must be both, medically and financially qualified to be approved for benefits.
What are the Medicaid Medical and Financial Qualifications?
The Medicaid Medical Qualifications
To be medically qualified, you must need assistance from other individuals with activities of daily living.
These activities of daily living or ADLs are Walking, Transferring, Bathing, Dressing, Grooming, Eating, and Toileting.
To qualify medically, you must score 60 points from the PAS or PreAdmission Screening assessment by AHCCCS.
Each ADL has a possible score of fifteen points.
Scores range from zero to fifteen, so you will need help with a maximum score on at least four ADLs (4 times 15= 60 points) to achieve sixty points. Or a combination of all seven to be medically qualified.
Additional points for other medical conditions like incontinence are possible—extra points for bowel and bladder incontinence.
Hearing, vision, and the inability to express themselves can add points to the overall score, and the big one is Dementia or cognitive impairment, which can add up to 20 points on its own.
Just like Dementia, Parkinson’s can score points towards the sixty points needed, but Parkinson’s alone will not score sixty points.
Effectively you must be at a care level three or four to be medically eligible. Call the Arizona Medicaid Phoenix office and ask what the medical requirements are. They will tell you that you must be at a “nursing home” level of care to qualify medically for Arizona Medicaid.
I often hear, “But my father can not live alone; he has Dementia!” Again this condition alone will not get someone approved medically.
Our Certified Medicaid Planners can help in this process; they know what questions are asked during the interview. Our CMP can help you correctly answer questions to score the highest points possible.
Now, I am not suggesting that you lie about your care needs. What I am saying is don’t exarate about your health and tell them you do not need any help with your activities of daily living when you do.
A CMP can also help you talk with your loved one’s doctor so that they can help in the process too. That way, your need for care is in your medical records, supporting your need for extended care.
If you call our office, we can assess your care level before applying; we will do a basic medical assessment at no charge.
The 2023 Medicaid Financial Qualifications in Arizona
The 2023 Asset Limits
For someone to qualify, they can only have $2000 in countable assets. This limit is called the Personal Needs Allowance.
A married couple can keep a “Minimum Community Spouse Resource Allowance” of $29,724 to a “Maximum Community Spouse Resource Allowance” of $148,620 and still qualify.
Arizona is a 50% state, so the $148,620 assumes the married couple has double that or $274,800. (see example below)
The spouse needing care must spend the other half minus their Personal Needs Allowance or $2000. So they will need to pay $135,400.
The 2023 Arizona Medicaid Income Limit
The 2022 Arizona Medicaid income cap or limit is $2,742 for the applicant. An “Income Only Trust – Arizona Miller Trust” may be helpful if the applicant’s income is above the cap.
An “Income Only Trust” only works for qualifying for Medicaid in Arizona if the cost of care is above the person’s income applying for benefits income.
An “Income Only Trust” only works for qualifying for benefits if the cost of care is above the person’s income applying for benefits income.
With married couples, there are two ways to calculate the income cap or maximum.
The first-way income cap is calculated for a married couple:
If the total household income is less than $5,484, the applicant’s income can be higher than $2,724 and still qualify.
The second-way income cap is calculated for a married couple:
The non-institutional spouse can have unlimited income.
Yes, you read that correctly. The non-institutional spouse can have an unlimited monthly income, no cap, no limits. Unlimited!
A Spouse being able to have unlimited income is a critical point. A spouse can have unlimited income, so make a note of it.
At the same time, a spouse needing care or the spouse on Arizona Medicaid can only have up to $2,742 a month in income. (Again, see ‘Income Only Trust,” a.k.a Arizona Miller Trust if income exceeds the cap)
So the Income Only Trust or Arizona Miller Trust can be set up if income is above the cap and still qualify.
Wait, what if your assets are above the limit. What can you do besides spend it on care or what I refer to “unaffectionately “as SPEND DOWN?
I believe this spending down assets to qualify for Arizona Medicaid is well; let me soften what I am thinking, “It’s DUMB!”
As I often say, “Arizona Medicaid – ALTCS is for both the impoverished and the SMART!”
Here is what the Smart person does instead of spending all their assets on long-term care.
Here are examples of just a few ways to convert Countable Assets to Non-Countable Assets:
- Buy a new car. A car is an exempt asset, so you can buy a new car and reduce your countable assets.
- Make home improvements. Kitchen upgrades, and a new roof, make your home handicap accessible.
- Buy needed personal items.
- Pre-pay your final expenses.
- Pay off debt.
- Set up a Medicaid Asset Protection Trust and gift money to the trust.
- Pre-pay final expenses up to $15,000 with a Funeral Trust.
- Buy a Medicaid Friendly or Medicaid Compliant Annuity.
What is a Medicaid Compliant Annuity Arizona?
A Medicaid Compliant Annuity (MCA) is a Single Premium Immediate Annuity (SPIA, pronounced “speee-ah”).
The Medicaid Compliant Annuity, Single Premium Immediate Annuity, has only one real purpose. It is to convert countable assets into non-countable income to qualify for Medicaid long-term care in Arizona.
Once someone takes their savings, IRA, 401K, stocks, and bonds, all countable assets, and uses them to buy a Medicaid Compliant Annuity, the assets are no longer an asset. They become non-countable income.
So if someone takes $120,000 and buys an MCA, the asset suddenly vanishes and is now income. The asset is no longer countable.
Requirements of a Medicaid Compliant Annuity Arizona
This amazing financial tool commonly used in Medicaid planning converts your countable assets into a non-countable income stream. But, not all annuities are Medicaid compliant.
The Deficit Reduction Act of 2005 has set the guidelines for an annuity to become ‘Medicaid Compliant.’ Medicaid annuities must abide by these guidelines to be considered a non-countable asset.
Minimum investment and term duration: The individual investing in a Medicaid-friendly annuity must pay no less than $5,000 for a payment term of no less than two months.
The annuity should be irrevocable: The parties, terms, and payment amount of the Medicaid Compliant Annuity cannot be altered or revoked. This means once the money is paid, the annuity owner loses control over the countable asset.
The annuity should be non-assignable: The parties to the annuity contract cannot sell it in the secondary market or assign (or transfer) to another person.
We have all seen the commercials. “It is my money, and I want it now!” You can not sell the contract or income stream.
Fixed annuity term rule: The duration of the annuity and income payout term must be equal to or less than the life expectancy of the owner. The life expectancy should be the same as determined by Medicaid or the Chief Actuary of the Social Security Administration.
No balloon or deferral payments: The annuity payments must be equally distributed to the annuity owner.
Medicaid to be made the beneficiary: The annuity contract must name the state Medicaid agency Arizona Health Care Cost Containment System – AHCCCS as the primary beneficiary, equal to the amount spent as benefits on the Medicaid recipient.
If married, the spouse is the primary beneficiary, and AHCCCS is contingent. Meaning even when exceptions apply, the annuity owner must name the state Medicaid agency as the contingent beneficiary.
AHCCCS is only entitled to payments up to what they actually paid for care. The balance of payments would be paid to the estate of the Arizona Medicaid Applicant.
Medicaid Compliant Annuity Arizona Qualification
Let’s explore a few examples of how the Medicaid Compliant Annuity Arizona works to help you qualify for it.
Example One: A Case for a Married Couple to consider a Medicaid Compliant Annuity.
Take Mike and Maureen. They have total countable assets of $297,620.
Mike has advanced Dementia and needs to be in a memory care facility or directive care home for the cognitively impaired.
Mike’s income is $1850 per month, and Maureen has a pension and Social Security of $3,400 per month. So they have a combined income of $5,250 per month.
The average cost for a group home or memory care facility is $6,000 per month.
Maureen needs about $4,500 a month minimum to live on and realizes they will deplete their retirement savings in less than five years.
– $4,500 Maureen’s living expenses
$700 Total net income after living expenses
– $6,000 Cost of Assisted Living or Memory Care Facility
= $5,300 net negative income
$297,240 Retirement Savings ÷ $5,300 Negative income = 56 Mo.
The Medicaid Complaint Annuity – MCA, how can it help change this outcome? How can the MCA help by leaving the non-institutional spouse destitute and paying for her husband’s care?
Simple Spend Down Calculation
As you can see, the non-institutional spouse or community, well spouse, is allowed to keep $148,620, and the spouse needing care is $2,000, so the spend down required to qualify $146,620.
Now Maureen and Mike take the $146,620 and purchase a 48-month Medicaid Compliant Annuity.
The Medicaid Compliant Annuity – MCA will produce an exempt income of $2,849 paid to the non-institutional spouse.
( A MCA annuity can also be purchased for a shorter period of time. A 6-month payout would generate a $22,573 monthly income and end in 6 months. This can be advantageous if that asset is not qualified funds. Consult with a Certified Medicaid Planner; remember, Maureen can have unlimited income. )
The $146,620 countable asset is used to purchase the MCA and is exempt income.
Now Mike applies for Arizona Medicaid benefits – ALTCS and is approved for benefits.
Maureen is able to reaccumulate the assets and now has The $148,620 and the payments from the MCA – SPIA total assets preserved:
Community Spouse Resource Allowance = $148,620
Payments from the MCA $24,616.67 X 6 = $147,720
Personal Needs Allowance = $ 2,000
Total = $ 297,420
Minus planning, income only trust fees and MCA fees = -$7,000
Total assets preserved = $297,620
Asset shrinkage $274,800 – 267,838 = $7,000 !
(** Disclaimer there are essential steps that must be taken. These steps must be done in the proper order for this strategy to be successful. This is not a Do-it-Yourself project. Consult a Certified Medicaid Planner who fully understands this strategy and the steps needed.
Contact a Certified Medicaid Planner for Free Consultation!
The Single Applicant Needing Extended Care
Qualifying as a single individual is more of a challenge because they can not shift assets to a noninstitutional spouse. So they must do what is referred to as modern half-loaf planning.
Example Two: A case for someone Single to Purchase a Medicaid Compliant Annuity Arizona– MCA to qualify for Arizona Medicaid.
Take Bob. He recently lost his wife, Joan, of 50 years, due to complications with Dementia.
Bob and Joan sold their home and paid off all their debts. They had about $320,000 to live on for the rest of their lives. They moved to an Arizona senior retirement community in Sun City, where they planned to live for the rest of their lives.
About a year after they moved, Joan had a stroke, fell, and broke her hip.
The doctor told Bob that Joan would need to be in assisted living for the rest of her life. So the senior community offered both independent living and assisted living options. Bob and Joan moved to the assisted living side of the community, where Joan could get the care she needed.
The assisted living community management where they both lived told him that his wife didn’t qualify for benefits because they had too much money and needed to spend down to be eligible for benefits.
So they never looked into Medicaid in Arizona as a care funding solution.
They trusted the assisted living facility’s management, to tell the truth.
Three years later, Joan passed, and her care took its toll on their nest egg. As you saw in “Example One,” they could have preserved assets for Bob had they been introduced to a Certified Medicaid Planner at Care Funding Solutions.
Now Bob has about $120,000 left to his name. He needs care but does not want to spend all his assets on long-term care.
He does not want to make the assisted living or nursing facility his heir. Bob and his wife Joan wished to leave a legacy for their niece, whom they loved dearly.
Now Bob’s health has deteriorated, and he needs long-term care. His income is $3,200 per month, and the assisted living will be $6,200 per month or $3,000 per month more than his income.
Now Bob only has about $120,000 in his savings and checking due to the cost of caring for his wife, Joan.
Bob mentions this to the current management staff at the assisted living community in Arizona, where he and his wife have lived for the past several years.
Bob is a proud man but set that aside and told the community’s executive director that he is concerned that he might outlive his assets due to the high cost of long-term or extended care.
The new executive director (ED) told him the same thing the past manager did. In fact, almost the exact same words were used.
The ED said if he is going to be approved for Arizona Medicaid, he must spend down his assets to $2,000.
Bob’s niece contacted a Certified Medicaid Planner – CMP at Care Funding Solutions and asked about Arizona’s Medicaid long-term care benefits – ALTCS and wanted to know if her uncle Bob could qualify.
Here is the plan that the CMP developed for Bob.
Bob is already spending $3,000 a month more than his income on care.
So Bob can not gift the money to his niece and wait 60 months to apply for Arizona Medicaid. (60 X $3,000 = $180,000)
But the CMP explains that a partial gift to his niece and a Medicaid Compliant Annuity might be the answer.
Here is what the CMP helps Bob do.
- Bob uses $42,000 to buy a new car so that his niece can use it to pick him up and take him to lunch, the doctor, and family events. He puts his niece on the insurance as a non-owner driver.
The car is an exempt asset, and the State of Arizona AHCCCS does not make any recovery on it when Bob passes (make an heir sell the vehicle and reimburse what they paid for Bob’s extended care costs).
Now the $42,000 countable asset becomes a non-countable asset – a vehicle. This reduces Bob’s countable assets the $120,000 to $78,000. ($120,000 – $42,000= $78,000)
- Bob buys a Funeral Trust to pre-pay his final burial expenses. He only sets just enough to pay for the final costs, which he and his niece figure would be about $5,500.
This purchase of the Funeral Trust reduced Bob’s countable assets from $78,000 to $72,500. ($78,000 – $5,500 = $72,500)
Still, $70,500 is over the current 2022 Arizona Medicaid asset limit.
Step Three: Bob gifts $50,000 to his niece.
Funny thing, when Bob told the executive director that he was going to gift $50,000 to his niece so he could qualify for Medicaid, she told him, “That’s Illegal!”
It’s not! It only causes a period of ineligibility, that’s all.
Arizona Medicaid uses what is called a Divestment Penalty Divisor, which is used to calculate the period of ineligibility that is caused by a gift.
The current 2023 Arizona Medicaid Penalty Divisor is $8,912.70.
Here the gift from Bob of $50,000 to his niece will cause a little over a six-month period of time that Bob would be ineligible for Arizona Medicaid benefits.
($50,000 ÷ $8,912.706 = 5.61 mo. or 5 months and 22 days)
Now that leaves only $20,500 left to spend to be qualified for Arizona Medicaid.
( $70,500 – $50,000 = $20,500)
After the CMP fee for planning and application assistance and the setup fee for the Medicaid Compliant Annuity. (Call for fees and details at 800-543-0530)
This leaves $17,000 to purchase a Medicaid Compliant Annuity for a 6-month period that will generate about $2,840 per month for six months which is just short of what is needed to pay through the ineligibility period because of the $50,000.
Bob now has $2000 in countable assets and can apply and be approved for Arizona Medicaid long-term care.
Summary of the single plan discussed
Bob and Joan could have started a plan and preserved much of the assets that they had from the sale of their home had they been given the correct information about Arizona Medicaid, as you saw in example one.
Once Joan died, Bob’s niece contacted the CMPs at Care Funding Solutions for help.
With the help from the CMPs at Care Funding Solutions, Bob was able to preserve $99,500!
- Vehicle goes to his niece once he passes = $42,000
( She uses it now while Bob is still alive, this
pleases Bob to be able to help her with a new car.)
- Funeral Trust = $ 5,500
(Bob takes the burden of paying for final expenses
away from his niece, this too pleases Bob.)
- $50,000 gift to Bob’s niece = $50,000
(This makes Bob very happy, and he knows
Joan would have approved too.)
Total Assets preserved = $99,500
(** Disclaimer there are essential steps that must be taken. These steps must be done in the proper order for this strategy to be successful. This is not a Do-it-Yourself project. Consult a Certified Medicaid Planner who fully understands this strategy and the steps needed.)
(See “Gifting is not illegal” video link here)
Something to think about.
Do you not wonder why all the management, past and present at the assisted living facility, are so hell-bent on keeping Bob and Joan from going onto Arizona Medicaid?
Could it be the facility is not approved to accept Arizona Medicaid?
Could it be that the community takes Arizona Medicaid; But since the State of Arizona pays a lower rate than what the general public does to the assisted living community. Meaning that the community will make less money from Bob and Joan, hurting the corporate bottom line?
Could the community care more about its bottom line than its residents?
All good questions to ponder.
Here is what is sad, many assisted living facilities and group care homeowners will not say one word to their residents and potential residents about Medicaid in Arizona as a payor source.
I even had one facility in Central Phoenix that is certified to accept Arizona Medicaid, not telling residents that they might be able to get VA benefits or Medicaid Arizona.
I have personally gone by that location several times to get them to let me hold a seminar on VA Pension with Aid and Attendance and Arizona Medicaid benefits. I was told their residents are cared for and do not need this information.
In 2022, I was called by a granddaughter whose grandmother was a resident at the same facility; she was almost out of her life savings. This was after living there for over ten years and now was going to be evicted!
I helped this resident eventually move to a place where they take Medicaid in State of Arizona, and she is now receiving the care she needs without worrying about money.
Sad, really sad, shame on that facility!
Don’t let this be your story. Call us before it is too late and you run out of money.
How to Set Up a Medicaid Compliant Annuity Arizona?
Although converting a liquid asset into a regular income stream might sound simple, many complex issues are involved with these types of strategies, such as life expectancy, taxes, beneficiary, and payment rules.
Given the highly technical nature of Arizona Medicaid Planning, anyone interested in pursuing an Arizona Medicaid qualification strategy using a Medicaid Compliant Annuity Arizona should seek the guidance of a professional, Certified Medicaid Planner (CMP).
Only an Arizona Medicaid expert can help you correctly understand and guide you in structuring the annuity contract.
Thank you for reading my article about Medicaid Compliant Annuity Arizona.
Contact a Certified Medicaid Planner for Free Consultation!
Steve Dabbs is a Certified Medicaid Planner™, a VA Accredited Claims, accredited by the Dept. of Veterans Affairs, and an Accredited Investment Fiduciary®. He helps people to apply and qualify for ALTCS Arizona Long-Term Care and VA Aid and Attendance Benefits.
Applying for ALTCS or VA Aid and Attendance benefits can be complicated, but Steve Dabbs can save your Time and Money by reducing delays and claims denials.
He is a Fiduciary, so as a Fiduciary, he must do what is in the best interest of his Clients.