3 Medicaid Planning Strategies for Income and Assets

Medicaid provides health care to:

• Low-income adults
• Elderly adults
• Children
• Pregnant women

As of June 2023, 92,614,205 individuals are enrolled in Medicaid.¹ Because this is a joint federal and state program, eligibility requirements will differ from one state to another. One issue some applicants run into is that they have too many assets or that their income is too high for Medicaid. In fact, more than 1.4 million people lost coverage in 2023 because they no longer met requirements.² If you’re someone who wants to apply for Medicaid but don’t currently meet the requirements, there are a few strategies you can enlist to spend down. Use the list below to guide your efforts so you can secure the health care coverage you need.   

Financial strategies for Medicaid eligibility 

Exemption planning

Spending down is a strategy some individuals use to qualify for Medicaid. Under this program, there are certain permissible expenses that can be used to achieve this goal. These include: 

• Debt payoff. You can reduce your countable assets by paying off debt, like mortgages or loans. There are some requirements. For example, the debt must be the legal responsibility of either the applicant or the applicant’s spouse. 
• Home purchase or renovations. Purchasing a residence or making essential home repairs can be a strategic move in Medicaid exemption planning. Under Medicaid rules, a primary residence is typically considered an exempt asset, meaning its value doesn't count towards the eligibility threshold. By investing in a home or necessary repairs, individuals can potentially reduce their countable assets, making them more likely to meet the program’s financial criteria. 

Annuities 

Annuities can also play a significant role in Medicaid planning, particularly for individuals looking to protect their assets while qualifying for the program. These financial products provide regular, typically monthly, payments to an individual over a specified period, often for retirement income. A popular strategy is to convert countable assets, such as cash or investments, into an immediate annuity. This may make you eligible for Medicaid sooner. 

If you go this route, a financial advisor can help you adhere to Medicaid rules for annuities to ensure you don’t compromise your eligibility. For example, the purchase of annuities should occur within Medicaid's "look-back" period to avoid penalties, which is typically five years before applying for Medicaid benefits. 

Transfer planning 

Transfer planning for Medicaid involves strategic gifting or transferring of assets to reduce countable resources, aiming to meet Medicaid's asset eligibility requirements. This is another strategy that requires careful adherence to Medicaid's "look-back" period. A financial advisor can offer guidance on the specifics of gifting and tax filing requirements. 

You don’t have to navigate the complexities of Medicaid alone. For spending down strategies that involve annuities, consider meeting with a financial advisor. General Electric Credit Union (GECU) members can schedule a consultation with Investment Services, available through CUSO Financial Services, L.P. (CFS),³ to get started.