Medicaid and Nursing Home Costs

This article is an introduction to a method that will help to qualify someone for Medicaid - I have written more articles on the subject so please refer to the other articles for more complete information

Disclaimer for all except securities related articles

CONTENTS

The Name of The Strategy

What It Does

What It Does NOT Do

Who It Is For

Trust Requirements

Trust Formalities

Administration

Pictorial Overview of the Trust

I see, read, and quite often become exasperated by some of the comments from planners (CPA, Lawyer, Financial Planner, Insurance Agents, and Stock Brokers) about the Trust to qualify one for Medicaid.  (I will refer to some of the common names later in the article.)  When I find abuse in the promotion of strategies I start to reject the entire process.  These tools and strategies can be a very valuable methodology when used in the appropriate circumstances, for good reasons, and with professional disclosure to the client.

The articles I have written about this process will be an adequate start for you to understand the process and the conceptual framework of this tool.  Please read and understand my disclaimers and consult a professional adviser (Bob Parrish CPA is available) about this idea.

The Name of The Strategy

Many refer to this as "The Miller Trust".  The instrument is also commonly referred to as:

• Qualified Income Trust, or

• QIT

• Miller Trust

What It Does

In General

A Miller Trust is a mechanism to qualify for Nursing Home Medicaid benefits when one's income exceeds the Medicaid Income Limit (currently $1,656.00 per month in most states).

What It Does NOT Do

Miller Trust Shelters Income, Not Assets

Medicaid is a federally funded program run by the states. In addition to providing basic medical care for people on welfare, it pays for nursing home care when the patient qualifies. To qualify, the patient must meet four standards:

1. First, the patient must be 65 or older, be blind, or be disabled;

2. Second, the patient must be certified by a physician as needing either skilled or intermediate medical care. Medicaid will not pay for a patient who only needs help with feeding, bathing and the like;

3. Third, the patient must have income below $1410 per month. This is where the Miller Trust would come in; and

4. Fourth, the patient must have non-countable assets at or below $2000.

Who It Is For

This type of trust is designed for those over the income limit, but who do not receive enough monthly income to pay for their nursing care facility costs. These people are in what is sometimes called the “income gap.”  Read the "Example" above.

What can be done with savings? Savings can be spent on medical bills.  (There are some more sophisticated techniques, that are too complex to discuss in this article.)

Even when savings are legally gone, the Medicaid recipient only qualifies for Medicaid if his/her monthly income is below the qualified level. The income may not be enough to pay for his nursing home, but is too much to qualify for Medicaid’s help. What to do?

Now is when a Miller Trust is appropriate. An attorney must draft the trust. Then, the potential Medicaid recipient will open a bank account for it and will present the trust to Medicaid. Each month the income must be deposited to the Trust's checking account. Legally, Medicaid then ignores the money deposited to the trust. The  income is officially below the $1410 limit.

Because his income is now low enough, Medicaid will say he is qualified for benefits. At this time, the money in the Trust comes back into the calculations: it must be spent on his nursing home bill. Medicaid will then pick up the rest of the nursing home’s tab. The Miller Trust helped him meet the low income standard, but did not act as an asset shelter.
 

Trust Requirements

• It is a person’s GROSS income that is considered. Therefore, any deductions for Medicare premiums, tax withholdings, or anything else must be added back in to calculate income.

• Be composed only of pension, Social Security, and other income of that individual

• The trust can accumulate income

• The State must receive all amounts remaining in the trust upon the individual’s death up to an amount equal to the total assistance paid on behalf of that individual; and

• The state must be an income cap state

• Meet any other state-specific criteria which is not in conflict with federal law

Trust Formalities

Caveats

The Miller Trust is often established and administered improperly. Certain formalities must be followed, and the terms of the Trust Instrument must be followed.  Failure to follow the formalities and/or adhere to the terms of the Trust brings on the risk  that eligibility may be lost - even retroactively. There are numerous Administrative Rulings that have denied Medicaid benefits because of faulty trust language and/or Trust Administration. Retroactive denial will require the State be reimbursed, and the State has the authority to place an Administrative Tax Lien which will cover all property, savings, investments, etc.

The Medicaid Agency holds the authority for audits of the trust every 3 or 6 months. Therefore, proper maintenance is crucial to establishing and preserving the benefits of the Miller Trust.

Administration

This is summarized information as to how the Miller Trust should be maintained or how the trust bank accounts should be established and maintained.

First look at a graphical summary of the Miller Trust.

Pictorial Overview of the Miller Trust

Local rules differ - in some areas the amount funded into the Miller Trust might be required to be paid to the Nursing Home during the individual's lifetime.

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