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Follow on Google News | Reinsuring the Risk - Medicaid Compliant Annuity or Promissory NoteGenerally speaking, after the Deficit Reduction Act of 2005, if a community spouse uses a Medicaid Compliant Annuity, or promissory note, to eliminate the spend-down amount an institutionalized spouse is immediately eligible for Medicaid benefits.
By: Dale M. Krause For example, assume that Alice resides in the community, and her husband Roger is in a nursing home. The monthly private pay rate for Roger's care is $6,500, while his monthly income is only $1,500. With a Medicaid per diem rate of $150, Roger's facility receives approximately $4,562 per month for a Medicaid resident. With Alice being 77 years of age she knows that her Medicaid life expectancy is 11.26 years/135 months. If she eliminates their $226,000 spend-down amount by purchasing a Medicaid Compliant Annuity she would receive $1,724 per month for 135 months. The total pay-out is $232,740. With Alice having a monthly maintenance needs allowance of $2,841, and monthly income of $2,224, Alice has a monthly income shortfall of $617. With that amount being shifted from Roger's monthly income, less his $35 monthly personal needs allowance, his Medicaid co-pay is $848. For each month that Roger is on Medicaid benefits, his Medicaid claim amount increases by $3,714. The $3,714 consists of the Medicaid rate of $4,562 being reduced by Roger's monthly co-pay of $848. If Roger dies after receiving 38 months of Medicaid benefits the Medicaid claim amount is fixed at $141,132. If Alice dies 24 months later, 73 monthly payments still remain in the Medicaid Compliant Annuity - residual balance of $125,857.11. To protect against such a result, at the commencement of the plan Alice could have purchased a term life insurance policy with a face value of $130,000. The policy would have had an annual cost of approximately $4,034.60 - assuming a standard rating. With a preferred rating, the annual cost of the policy would have been much less. Nonetheless, without any question the policy would have reinsured against a risk of a Medicaid claim. # # # Krause Financial Services specializes in helping families qualify for Medicaid benefits through the use of Medicaid Compliant Annuities, and Veterans Aid & Attendance benefits through the use of various life and annuity insurance products. End
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