What Is a Medicaid Annuity?

What to Know About Single Premium Immediate Annuities (SPIAs)

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A Medicaid annuity is a lifetime payment that provides an income to one spouse while the other qualifies for long-term or nursing home care. It protects your financial assets while allowing you to qualify for Medicaid extended care benefits.

Definition and Example of a Medicaid Annuity

A Medicaid annuity is a financial tool to protect your assets while also qualifying for extended care or nursing home benefits through Medicaid. It creates a regular payment to the healthy spouse (the one who is not in care), which ensures that they won't spend all of their funds paying for the other spouse's care and be left with nothing to live on. By planning for this option before you need it, you can give yourself and your spouse the best chance of a healthy and financially sound long-term care plan.

A Medicaid annuity is structured as a single premium immediate annuity (SPIA). For an SPIA, you pay a single lump sum upfront (the premium, in bulk). In return, your insurer promises to give you monthly payouts of a certain amount for the rest of your life.

  • Alternate name: Single premium immediate annuity
  • Acronym: SPIA

Medicaid's use of the SPIA is a way to help people preserve their financial assets for the future, while they qualify for the program.

If structured in the right way and approved by a CPA or elder care legal expert, an SPIA may allow you or your spouse to receive extended care Medicaid payouts, within the bounds of the law. It also ensures that the spouse who does not receive care still has money left to fund their own costs of living.


SPIAs are in common use among experts in the field as well. Some long-term care planners and tax advisors use SPIAs to help people protect their assets while trying to secure funds for care at a nursing home or other long-term care facility.

It's wise to plan ahead if you expect to use an SPIA to help you or your spouse qualify for Medicaid.

How a Medicaid Annuity Works

Medicaid helps to pay for nursing homes and other forms of long-term care for those in need. A Medicaid annuity is a particular way to fund this type of care, particularly for the healthy spouse who is not applying for long-term care. Your wealth and assets will be used to figure out whether you are eligible for this type of aid.

Medicaid is designed to help people who are below a certain income threshold, but there are many rules that affect whether you are eligible. Not all who apply are approved. Some assets are "countable" toward the threshold. Medicaid takes a complete survey of your assets, including those that are held jointly, as well as those that are only in your or your spouse's name.

The Community Spouse Resource Allowance (CSRA) allows you to reserve a certain amount of assets for a healthy spouse (the spouse not applying for long-term care). Each state sets its own CSRA amount. The figure takes into account the living costs in that state, to ensure that the healthy spouse won't go broke due to caring for and paying for their ailing spouse's needs.

The total household assets (both joint and held by only one spouse) must be spent down before the spouse in need can receive funds from Medicaid. The assets that remain are saved under the CSRA for use by the healthy spouse.

The purchase of an SPIA can be helpful to those who are trying to qualify for Medicaid, because it may be counted as income and not as an asset. With an SPIA, the fund you purchase is immediately annuitized, which means that it starts paying out right away, per an installment plan based on the life expectancy of the annuitant. In that case, the healthy spouse would be the annuitant.

There are some strict rules around the timing of the SPIA purchase. (In fact, they can be quite tricky, so if you're in doubt, seek expert advice.) For example, you can't purchase an SPIA after a spouse starts using extended care and expect that asset to be protected under CSRA rules. All of this needs to be done sooner rather than later. SPIAs that comply with Medicaid rules often need to be planned far ahead of the time they start paying out.


Medicaid mandates that you disclose any annuities you have. You may also need to name Medicaid as a beneficiary so your state can cover the cost of caring for you or your spouse.

How to Get a Medicaid Annuity

Unless you are an expert or have done this work before, jumping right into Medicaid planning is not advised. You should never take a DIY approach when it comes to Medicaid planning or carrying out an SPIA strategy that works with the program.

A CPA or elder planning legal expert should always approve and sign off on your plan before you move forward with any product purchase, because the Medicaid system is complex. There are many details to take into account if you want to avoid triggering legal issues with the Internal Revenue Service (IRS) or Medicaid.


You can contact your local department of aging to find free or low-cost advisors who can help you manage your assets to qualify for Medicaid assistance.

For example, the CSRA-specific rules and asset levels must be followed exactly for the spouse who needs Medicaid funds to get approved without issue. Many other steps must be followed with extreme care as well, and the process can be very hard to navigate if you try to go it alone.

If you fail to structure or carry out your SPIA plan the right way, you may incur tax penalties. The look-back rule may also apply, which means your actions of the past five years are also under review. This look-back period is 60 months prior to the date you apply, except in California, where it is 30 months. Any assets you give away or transfer during that time can become part of your countable assets and could postpone your Medicaid eligibility.


The rules vary by state, so there's no single resource with all the answers. If you need help, you're best off speaking with a local advisor who is an expert on how these programs work where you live.

An SPIA is a simple and lawful risk-transfer tool. It can be the best way to solve for income needs now as well as in the future. SPIAs can add great value to your plan if used as part of your long-term care and estate planning. When done correctly, a Medicaid annuity plan that is put in place for one spouse can help ensure the financial well-being of the other spouse.

Key Takeaways

  • A Single Premium Immediate Annuity (SPIA) is a way to protect assets when qualifying for Medicaid extended care and nursing home benefits.
  • The intent of the program is to prevent the spouse who does not receive Medicaid funds from going broke while they take care of the other spouse.
  • Qualifying for Medicaid with an annuity in place is complex and should be guided by a CPA or an elder care legal expert.
  • A Medicaid annuity is part of a long-term strategy to pay for the care you and your spouse will need as you age.
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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. USAA Life Insurance Company. "Single Premium Immediate Annuity."

  2. Medicaid.gov. "Long Term Services and Supports."

  3. Medicaid.gov. "Eligibility."

  4. American Council on Aging. "Medicaid’s Community Spouse Resource Allowance (CSRA): Calculations & Limits."

  5. Illinois Legal Aid Online. "Community Spouse Rules for Medicaid."

  6. American Council on Aging. "Understand Medicaid’s Look-Back Period; Penalties, Exceptions & State Variances."

  7. Department of Health Care Services. "Medi-Cal Questions and Answers," Page 3.

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