When you spend a lump sum of money on an annuity for your spouse, your spouse is guaranteed a fixed income for a certain number of years. (Your spouse’s income is not counted toward Medicaid eligibility.) This is a great way to spend down assets if you’re married. But in order for an annuity to work as a way to spend down resources, it must meet certain requirements; for example, the annuity must be nontransferable and your state’s Medicaid agency must be listed as the primary beneficiary after the death of your spouse. For more information, see our article on using annuities for Medicaid long-term care planning.
What Is Medicaid Spend Down?
A Medicaid spend down is a portion of health coverage that an individual must pay for before Medicaid coverage begins. The exact amount of the spend down varies depending on the state in which you live, medical bills you have each month and other factors. Individuals who receive any portion of their income from Supplemental Security Income through Social Security are not required to pay a spend down for Medicaid.
“Spending Down” to Medicaid: How to Spend Down to Medicaid
Although I had been a financial planner and advisor for years, I had not come in contact with the Medicaid program personally or through clients, just through reading and seminars. I had learned that planning before acting is VERY important and that eligibility requirements vary by state. Those who specialize in this area, elder law attorneys, medical social workers, and state-employed case workers are your greatest resource to avoid delays and avoid creating periods of ineligibility requiring re-certification. They can keep you from running afoul of the more stringent divestiture rules, including a five-year look-back at transfers/gifts of assets, contained in the Deficit Reduction Act of 2005 passed by congress.
Medicaid Excess Income (“Spenddown” or “Surplus Income”) Program
People with disabilities who find it difficult to go into a DSS/Medicaid office have a right to fax in bills as a reasonable accommodation for a disability. In some districts, including New York City, anyone can fax in their bills. Ask your caseworker for a fax number and fax cover sheet, or for another procedure to accommodate your disability. The fax number in New York City is 917-639-0645. If you fax bills, you must include your name, case and CIN number, the amount of your excess income, and say which month(s) you want coverage. If you need help with producing your bills because of a disability, you can contact your local department of social services to see what reasonable accommodations can be made.
Private Pay or Medicaid? Long Term Care Benefit Qualifies for Both
Too often our company encounters seniors and their family who have owned a life insurance policy for many years that are about to lapse or surrender it for minimal value. They have contacted their life insurance company to ask them what they can do. The life insurance company will inform them that they really only have two options if they don’t pay their premium: surrender the policy for its cash value (if it has any) or let it lapse. Most people that receive a lapse notice have no cash value because it has already been drained by the carrier to make premium payments. That typically leaves the final option of pay or go away. The number of seniors that allow this to happen to a policy after paying premiums, sometimes for decades, is scandalously high. State law makers around the country have taken notice of this situation and are now taking action to make sure policy owners are informed of their options before abandoning their life insurance.