A Medicaid-compliant annuity (MCA) turns a lump sum of savings into steady monthly income. It matters because Arizona's ALTCS program has strict limits on assets you can own. Buying an MCA takes those funds out of the count. This can help you qualify for Medicaid without spending down everything you have.
How ALTCS Asset Limits Work
To qualify for ALTCS, your countable assets must fall below a set limit. For a single person, that limit is roughly $2,000. For married couples, the healthy spouse can keep a larger share. But there are still caps.
Cash, savings, and most accounts count toward those limits. Long-term care can cost $7,000 to $12,000 per month or more. Spending down to meet the bar feels like a punishment for saving wisely. That is where an MCA can help.
What Makes an Annuity "Medicaid-Compliant"
Not every annuity qualifies. Under federal law and state Medicaid rules, the annuity must meet these rules:
- It must be locked in and cannot be signed over to someone else
- It must be based on sound math, meaning the payout period cannot outlast the buyer's life span
- It must pay in equal monthly amounts with no delays and no large final payment
- Arizona must be named to get any leftover funds, up to the amount of ALTCS benefits paid, if the buyer dies before full payout
These rules come from the Deficit Reduction Act of 2005. A poorly set up annuity can be treated as a bad transfer. That can trigger a penalty period.
How the Strategy Works in Practice
Here is a simple example. A married couple has $300,000 in countable assets. The healthy spouse is allowed to keep a portion. But the rest would need to be spent down.
Instead, the couple buys an MCA with the extra amount. The annuity turns that lump sum into monthly income for the healthy spouse. The lump sum is no longer a countable asset. The ill spouse now meets the limit and can apply for ALTCS. The healthy spouse gets monthly payments to cover living costs. This approach guards assets for the healthy spouse while the ill spouse gets needed care.
Why You Need an Elder Law Attorney
This is not a DIY plan. The Medicaid rules are complex and the stakes are high. Even small errors can lead to a denial or a penalty that delays your start date by months.
An elder law attorney who knows Arizona's ALTCS program can set up the annuity the right way. They also review the full money picture to decide if an MCA is the best tool or if other options make more sense.
According to AHCCCS, the state Medicaid agency, this approach is legal when set up the right way. The details must be exact. Working with a skilled elder law attorney is the safest path forward.
Do not wait until a health crisis to explore this option. The sooner you act, the more choices you have. A plan built today can protect your family's savings for years to come.