What is the Medicaid answer to excess income?
A law that has been in effect for almost three decades makes it possible for a person whose income is over the Medicaid income cap to qualify for long-term care Medicaid.
It is not difficult to imagine why this change in the law was needed. An individual whose income exceeded the Medicaid cap, but was insufficient to pay private nursing home rates, did not qualify for Medicaid, and their families had to come up with funds necessary to pay the nursing home.
Texas is an “incomecap state,” meaning that if gross monthly income exceeds the Medicaid cap ($2,523.00 in 2022), the individual is ineligible for Medicaid.
The problem with the income cap is that it is much lower than the monthly nursing home private rate (with costs ranging from $5,000 to over $8,000). But the above-referenced law resolves this dilemma.
The law provides for a mechanism known as a qualified income trust (“QIT”) or “Miller Trust” ( named for a Colorado court case involving a similar type trust).
Income that is directed to the QIT during the same calendar month in which it is received is not tested against the $2,523.00 income cap in determining Medicaid eligibility. The effect is to reduce “countable” income to an amount that is within the $2,523.00 income cap. However, all of the individual’s monthly income, whether or not it is directed to the QIT, is considered in calculating the co-payment (i.e., the individual’s monthly co-payment toward the costs of nursing home care, with Medicaid covering the balance).
Therefore, the QIT only makes the individual income-eligible for Medicaid, but it does not affect their co-payment toward nursing home costs.
Common sources of income are gross Social Security retirement benefits, Teacher Retirement System or other pension benefits, and, for some individuals, required minimum distributions from IRAs.
There are many requirements regarding the QIT. One is that the income received must be disbursed in that same calendar month, including the nursing home co-payment.
Another is that the trust must contain a Medicaid payback provision. This means that when the individual dies, the state Medicaid agency gets what is left in the trust up to the total amount of medical care paid by Medicaid.
In reality, however, as long as the QIT is managed appropriately, there is often little or nothing left for Medicaid to collect, because most amounts deposited to the trust get paid out as the co-payment to the nursing home and on other medical expenses.
The QIT or Miller Trust makes an individual income-eligible for Medicaid and eliminates the often catastrophic outcome stemming from the substantial gap between income and the cost of care.
But a caveat here is that this is only an income trust. Assets such as investments or cash reserves in a bank account cannot be placed in a QIT, except for a nominal amount necessary to set up the account.
For a person to be eligible for long-term care Medicaid, there are also citizenship, residency, and medical need requirements, in addition to limits on countable resources.
A QIT does not solve the problem of being over the countable resource limit. Other strategies—such as establishing different types of Medicaid-friendly trusts — exist to tackle this resource challenge.
The important point to remember is that Medicaid is a complicated aspect of the law.
Elder law attorneys are experts in this area and are very familiar with Qualified Income Trusts and other Medicaid-friendly trusts.
Common sources of income are gross Social Security retirement benefits, Teacher Retirement System or other pension benefits, and, for some individuals, required minimum distributions from IRAs.