Medicaid Life Settlements

Last updated on March 30, 2021 by Charles Mourani in Industry News, Life Settlements

Medicaid Life Settlements

Recent research by the US Department of Health and Human Services suggests that over half of Americans turning 65 today will develop a disability serious enough to require long term care. Most Americans will need some form assistance for at least two years.

According to Genworth – a provider of long term care insurance – the cost of long term care will continue to increase. In 2017, a private room in a nursing home cost nearly $100,000 a year, a 50% increase since 2004. With premiums for traditional long term care insurance higher than ever, fewer than 10% of Americans have long term care insurance today.

Enter the Medicaid program

This means that Medicaid is left to pick up the tab. According to the Center for Medicaid & Medicare Services, long term care accounts for nearly a third of all Medicaid expenses – $158 Billion in 2015.

As this generation of Baby Boomers enters retirement age, these figures are expected to keep rising. Today Medicaid provides health coverage to more than 4.6 million low-income seniors

Eligibility to Medicaid varies by state but is a combination of medical and financial qualifiers. Financial qualification is through a combination of income and asset limits. A candidate may qualify if they have:

Less than $500-1000 monthly income leftover after paying for care expenses


Less than $2000 in countable assets

Surrender your life insurance policy to qualify

While the definition of countable assets may vary by state, it often excludes a primary residence up to a small value and one car but it almost always includes life insurance policies.

Given that life insurance policies are considered an asset for Medicaid eligibility, candidates must surrender their policies to avoid being subject to asset recovery actions by Medicaid.

The US Government Accountability Office estimated in 2007 that nearly 4 out of every 10 Medicaid applicants abandoned a life insurance policy prior to qualifying.

Medicaid Life Settlement

Recognizing the financial harm caused by a large number of seniors lapsing or surrendering their life insurance policies several states have made changes. Recently passed bills now help define how these policies can be used to pay for long term care, and Texas has gone as far as exempting Medicaid Life Settlements from consideration when applying for Medicaid.

Under these laws, Medicaid-eligible seniors no longer need to surrender or lapse their policies. The bills ensure that value of the life insurance is not counted against a senior if they sell their policy in a medicaid life settlement. As long as the proceeds are earmarked to pay down long term care expenses.

A change in course?

The National Association of Insurance Commissioners (NAIC) adopted a study that recognized life settlements as a viable option to fund private long term care. This is highly unusual for the NAIC an association that has long been unfriendly to the life settlements industry given its historically close relationship with large life insurance carriers.

This highlights changing attitudes towards life settlements. There is increasing recognition that a Medicaid Life Settlement transaction can be key to a better financed retirement.

Want to know if you qualify for a life settlement? Get your estimate here.

Sources : Seniors & Medicare and Medicaid Enrollees |

Forbes: The Staggering Price of Long Term Care

Life Markets Association: Addressing the Medicaid Long Term Care Funding Crisis: Are Life Settlements the Answer? Long term services and supports for Older Americans: Risk & Financing Research Brief

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Charles Mourani
Charles Mourani is the chief technology officer of Mason Finance Inc. He holds an undergraduate degree in computer and communications engineering from the American University of Beirut and an MBA from Stanford University.

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