Introduction
Seniors who are over their asset limit for Medicaid eligibility can still qualify and get the care they need by using a Medicaid Compliant Annuity. As long as these annuities follow state guidelines, they can reduce a Medicaid applicant’s asset total by converting a lump sum of their cash into income. Our team of professionals at Eldercare Resource Planning uses Medicaid Compliant Annuities on a regular basis, and these financial tools are especially useful in certain circumstances, which we will detail below.

Who Can Use a Medicaid Compliant Annuity?

Anyone applying for Medicaid long-term care can use a Medicaid Compliant Annuity (MCA) to help them reduce their assets, meet their asset limit and become financially eligible for Medicaid. This includes single and married seniors applying for Nursing Home Medicaid, Home and Community Based Services (HCBS) Waivers or Aged, Blind and Disabled (ABD) Medicaid. However, MCAs are especially helpful for certain applicants in certain situations, which we will discuss next.

Married Applicants with One Spouse Applying

Medicaid Compliant Annuities are most useful for married couples with just one spouse applying for either Nursing Home Medicaid or a HCBS Waiver. That’s because the assets of both spouses count toward the asset limit of the applicant, but the income of the non-applicant spouse does not count toward the income limit of the applicant when it comes to Nursing Home Medicaid or HCBS Waivers. So, the couple can reduce their asset total by purchasing an MCA, but they don’t have to worry about the annuity’s monthly payouts (which count as income for Medicaid purposes) pushing the applicant spouse over their income limit as long as the MCA is in the non-applicant’s name. In these cases, the monthly payouts from the annuity will go to the non-applicant spouse, and their income does not count toward the applicant’s income limit.

In most states in 2026, the individual income limit for Nursing Home Medicaid and HCBS Waivers is $2,982/month, and the individual asset limit is $2,000. However, it should be noted that when only one spouse in a married couple is applying for either of these programs, the non-applicant spouse is entitled to keep up to $162,660 in assets (in most states in 2026), thanks to the Community Spouse Resource Allowance (CSRA). So, couples with just one spouse applying who have less than $164,660 in assets ($162,660 for the CSRA + $2,000 for the individual asset limit, in most states) won’t need to reduce their assets to qualify.

When it comes to ABD Medicaid (which is also known as state or regular Medicaid for seniors), the income for both spouses is counted toward their income limit, even if only one spouse is applying. ABD Medicaid applicants can still use MCAs to help them reduce their assets in order to qualify, but the monthly payouts will be counted toward the applicant spouse’s income limit even if the MCA is in the name of the non-applicant spouse. It should also be noted that the Community Spouse Resource Allowance does not apply to ABD Medicaid applicants.

To find out if a senior is eligible for Medicaid, click here to use a free online test.

Single Applicants

Single applicants are allowed to use MCAs to reduce their assets in order to qualify for Medicaid, but the monthly payouts from the annuity will count toward their income limit. So, this can work for seniors with significant assets but little income, especially if they want to receive care at home or in assisted living and are applying for an HCBS Waiver or ABD Medicaid.

Since Nursing Home Medicaid beneficiaries are required to give almost all of their income to the state to help cover the cost of care, it’s rare for single applicants who need nursing home care to use MCAs to help them qualify. Nursing Home Medicaid beneficiaries are only allowed keep a small portion of their income, known as a Personal Needs Allowance, which ranges from $30 – $200/month, depending on the state.

Married Applicants with Both Spouses Applying

Married applicants with both spouses applying for Medicaid can use MCAs to help them become asset-eligible, but, as with single applicants, the monthly payouts will count toward their income limit. Each spouse would purchase their own MCA in most of these cases, but it depends on the state. Most states consider each spouse an individual applicant in these situations, but not every state.

Married couples with both spouses applying for long-term care in a nursing home will probably not want to use MCAs as a planning tool since they have to give most of their income to the state, minus their Personal Needs Allowance, as mentioned above.

What Makes an Annuity Medicaid Compliant?

There are many types of annuities, but only some of them can be classified as Medicaid Compliant Annuities (MCAs), which are also called Medicaid Qualified Annuities or Medicaid Friendly Annuities, or they might simply be referred to as a Single Premium Immediate Annuity (SPIA). To be Medicaid compliant, annuities must follow the rules in the state where the owner of the annuity is applying for Medicaid. These rules are fairly consistent across all states, but they don’t all apply in every state, so it’s important to know the exact rules in the applicant’s state before purchasing an annuity for Medicaid planning purposes. But all states do allow MCAs, and no states limit the amount of the annuity.

With that in mind, here are the general guidelines. MCAs must be:

• Fixed – Payments must be of equal value and must be received every month.
• Immediate – Payments must begin as soon as the annuity contract has been signed.
• Irrevocable – The annuity cannot be changed or canceled after it has been created.
• Non-transferable – The annuity cannot be transferred or sold to someone else.
• Return what was paid – The owner of the annuity (known as the annuitant) must be scheduled to get back, in monthly payouts, the full amount they paid for the annuity in the first place.
• Actuarially sound – The payment schedule cannot exceed the life expectancy of the annuitant, which in most states is based on the Social Security Administration’s life expectancy table.
• Name the state as beneficiary – The state will receive any money left in the annuity if the annuitant dies before they receive all of the payouts.

Again, these rules can all vary slightly by state. For example, many states allow MCAs with payment schedules that are shorter than the life expectancy of the annuitant, but not Oregon, which does not allow annuities under five years if the annuitant’s life expectancy is longer than five years.

Ideal Purchase Time and Amount for Medicaid Compliant Annuities

Applicants are allowed to purchase an MCA at any time without violating Medicaid’s Look-Back Period. In most states, the Look-Back Period is five years long, which means the state will “look back” into the applicant’s financial history for the five years before they applied for Medicaid to make sure they have not given away any assets or sold them at less than fair market value.

Since purchasing a MCA does not break any Look-Back Period rules, these annuities can be acquired at any time. However, the ideal time to purchase a MCA depends on the individual’s age, health and financial circumstances. Buying a MCA too soon could mean the senior will be tying up cash they might need otherwise. If the applicant waits too long, they may not be able to purchase an annuity that will reduce their assets below their asset limit for Medicaid eligibility and is actuarially sound (pay them back the full amount based on their life expectancy).

The ideal purchase amount or value of the annuity definitely depends on the applicant’s financial situation, but there are some guidelines regarding minimum and maximum amounts. Many states have a minimum purchase amount of $25,000-$30,000 when it comes to MCAs, but not all states. There is no maximum amount in any state, as mentioned above, and married couples with one spouse applying might want or need to purchase a MCA with a six-figure value. But if an individual can comfortably pay for their own long-term care without Medicaid, they would probably be advised to simply pay out-of-pocket for their care instead of spending hundreds of thousands of dollars to buy a MCA and try to qualify for Medicaid.

Impact of an Existing Annuity on Medicaid Eligibility

Applicants who own an existing annuity that is not Medicaid compliant can still qualify. In some cases, a non-compliant annuity can be converted into a compliant annuity. This process is complicated, however, and consulting with a professional is recommended.

If the annuity can’t be compliant, the annuitant will likely need to liquidate it and “spend down” the profits until they meet their asset limit. They could spend on almost anything – paying in advance for care, home repairs, paying off debt, taking a vacation – but if they spend on anyone other than themselves (or their spouse if they’re married) it would be a violation of the Look-Back Period and would result in their application being denied and a penalty period of ineligibility.

If the existing annuity happens to be Medicaid compliant, the annuitant would just need to be sure the monthly payouts do not put them over their income limit.