Certified Medicaid Planner Designation

Congress proposes limits on Medicaid annuities

19 Feb

Congress proposes limits on Medicaid annuities

A recent bill proposed by Oklahoma Representative Mark Mullin seeks to put some limits on the over-use of annuities in Medicaid planning.  Ever since the passage of OBRA ’93 and the resulting HCFA Transmittal 64, excess resources have been allowed to be converted into a narrowly prescribed single premium immediate annuity (SPIA).  The bill, H.R. 181, has been approved by the House Energy and Commerce Committee as one of its first actions of the new Congress.

The bill’s primary purpose is to close the so-called annuity loophole which allows for annuitization by the community spouse of unlimited excess resources in order to qualify the institutional spouse for nursing homes.  In 48 states, the community spouse can have an unlimited income and does not need to support the institutional spouse’s monthly care costs once the couple has spent down assets below the community spouse resource allowance.  Because the purchase of the annuity is part of the federal safe harbor rules that exempt the purchase from transfer penalties, the purchase of large, short-duration annuities caught the attention of members of Congress who seek to impose some limits.

H.R. 181 would treat one-half of the annuity income received by the community spouse’s annuity as available to contribute towards the cost of care of the institutional spouse.  As this bill progresses, the CMP™ Governing Board will continue to keep tabs on its progress and support advocacy efforts to stop its enactment.  To visit our advocacy page to help defeat H.R. 181, click here.