Medicaid eligibility is based on your medical and financial need, and you may be surprised by the low caps on income in Texas. Especially considering the high cost of long-term care facilities. If you need long-term care, you could find yourself with too much income to qualify for Medicaid but too few resources to afford the care you need. 

But you shouldn’t give up. Even if your income exceeds Medicaid thresholds you can get approved by using a Qualified Income Trust (or QIT, also called a “Miller Trust”). You can also use a QIT to become qualified even if you’ve already been denied Medicaid due to income. 

Medicaid for Long-Term Care

Standard health coverage and Medicare don’t typically cover the cost of long-term care; it’s not considered an acute medical need. If you need long-term care services, there are three potential means of covering the cost:

• Private pay
• Long-term care insurance
• Medicaid 

For many people, the first two options are out of reach. Medicaid is the only means of affording long-term care for most people. But, even if you can’t afford the cost of a nursing home or assisted living facility, Health and Human Services (HHS) may still regard your monthly income as too high to receive Medicaid coverage. 

In Texas, as of 2020, if you need long-term care the maximum income for Medicaid assistance is $2,349 per individual. This income cap includes any source of income including pensions, social security, or disability benefits (although certain Veterans Affairs (VA) benefits are treated differently). 

Single applying for Medicaid

Married, both spouses applying for Medicaid

Married, only one spouse applying for Medicaid

This table information is referenced to Texas Medicaid Eligibility: 2020 Income & Assets Limits

But with the cost long-term care at a skilled nursing facility averaging $4,000 – $9,000 per month, this may leave you caught in the middle: making too much for Medicaid but too little to afford support services. The Qualified Income Trust addresses the financial eligibility requirements for elder care and enables you to become qualified even if your income is above this cap. 

Calculate current and future costs of care using GenWorth.com Cost of Care Calculator

If your income exceeds these caps you can still become qualified by establishing a Qualified Income Trust.

What is a Qualified Income Trust?

The Qualified Income Trust (QIT) was designed to address the growing disparity between Medicaid caps and the high cost of long-term care for the elderly. It allows you to legally divert income into a Trust, reducing the amount of your income that gets counted against Medicaid caps. 

A QIT is a special type of trust for seniors in need of long-term care whose income exceeds Medicaid caps. A trust allows a third party (trustee) to hold assets on behalf of a beneficiary. 

Here, you set up a special account for the Trust which will receive the income necessary to make sure the applicant falls under the income eligibility limit. You deposit income to the Trust, and the Trust then directs how funds are dispersed each month—common disbursements of Trust funds include:

• A small personal needs allowance (currently $60). 
• Medical expenses not reimbursed by Medicaid.
• Minimum Monthly Need Amounts (MMNA) to a spouse, if applicable.
• Lastly, a nursing home co-payment.

Once the QIT is established the State will determine how much of your remaining income will be used to contribute to your long-term care as a co-pay, or “applied income amount.” 

Medicaid is considered a payor of last resort, so a Medicaid recipient is generally going to pay everything they have first and Medicaid will pay the difference. As with the fund, you are allowed a small personal needs allowance and a contribution toward a spouse’s MMNA. Upon death, the State becomes the beneficiary and uses any remaining funds to recover against Medicaid benefits paid out.

Without a QIT you won’t qualify for Medicaid if you have a monthly income above $2,349. But the monthly cost of a private nursing home can easily rise well above $6,000.

Putting your income into a Qualified Income Trust allows you to become qualified for Medicaid; so that you or your family are not scrambling for ways to make up the difference.

Let’s say, for example, that you have a pension and Social Security benefits that add up to $3,500 each month. If you can find a suitable nursing home that costs $6,500 per month (very affordable for a nursing home) you are still $3,000 short each month. But your monthly income (at $3,500) is higher than Medicaid limits and you will be turned down for assistance. 

But with a QIT, Medicaid will cover that $3,000 shortfall: the burden doesn’t fall on you or your family. 

If your income is above Medicaid limits, a QIT allows you to become eligible for Medicaid by lowering your countable income to within requirements. This reduces the costs of long-term care to you or your family considerably. So the QIT allows you to substantially ease the burden of residential care costs on your family and loved ones. 

Benefits of a Qualified Income Trust

• It allows you to become eligible for Medicaid, even if your income is above Medicaid caps.
• It provides a means to cover the gap between your income and the actual cost of long-term care. 
• Allows you to contribute a monthly allowance to a healthy spouse: If your spouse is still living at home you can contribute enough to bring their monthly income to $3,216.
• Removes the out-of-pocket burden from your family and loved ones.

Limitations of a Qualified Income Trust

• Does not address assets: Assets are considered separately. A QIT only addressed the income eligibility requirement. 
• “Practical limit” on funds deposited: In Texas, there is no rule limiting the amount of income you can place in a QIT but if your income is greater than the cost of care then a QIT probably won’t be helpful for you.

Common Questions and Answers about a Qualified Income Trust

Q: Do I have to deposit all of my income into the trust?

A: No, in Texas, you don’t have to deposit your entire income. You can deposit a portion of your income thereby bringing your eligible income below the cap. However, you do have to deposit the entirety of income from any single source. 

Q: What about any income I don’t deposit into the trust?

A: If you put only a portion of your income (enough to bring your remaining income below the eligibility requirements) into a QIT, you generally won’t be keeping the remainder. As with the fund, you are allowed a small personal needs allowance and a contribution to your spouse’s MMNA, but the rest is going to go towards your nursing home bill.

Q: Do nursing homes and assisted living communities accept Medicaid?

A: Yes, most nursing homes and assisted living facilities accept Medicaid. 

Q: Will a QIT help me protect my assets?

A: Not exactly. A QIT is a solution for income above Medicaid limits. Assets raise a separate issue. The QIT can help you avoid spending down your assets on care, but it’s not a way to “shelter” assets. 

There are a number of ways to manage assets outside of the QIT. A Ladybird deed, for example, allows you to transfer ownership interests in real estate upon the death of the owners and protect this interest from Medicaid recovery efforts. You might want to use options like this in conjunction with a QIT.

Q: What can I do if my assets are too high for Medicaid? 

A: If your assets are higher than the limits set by Medicaid then an estate planner (particularly one who specializes in Elder Law) can help tailor a plan to your specific needs. In Texas, assets generally can’t be transferred within 60 months of applying for Medicaid or they will still be counted. But there are certain exceptions such as the transfer of the home or transfers to a spouse. Also, note that some assets are not “countable” against Medicaid caps. For instance, up to $540,000 of the value of your primary residence.

Does a QIT make sense for me?

A QIT can be a great solution for many people who are worried about long-term care costs for themselves, their spouse, or for other family members. Medicare and other health insurance do not cover the cost of long-term care. Even if you have special long-term care insurance, it may not cover the full cost of care. But even in these cases, where you can’t afford the expense of long-term care, income may be a barrier to Medicaid eligibility.

In these circumstances, a QIT can ease the burden on you and your family by helping the patient qualify for the State’s Medicaid program.

If the patient has an income that is higher than Medicaid caps or has been turned down for Medicaid because of their income levels, you may worry that the only solution is to cover the cost of long-term care services out of your own pocket. But that’s not the case.

Two Common Long Term Care Situations

Your Spouse Needs Long-Term Care

A situation we see frequently is a healthy spouse whose husband or wife needs long-term care. The healthy spouse is devastated to learn that they receive too much income to qualify for Medicaid. This person worries that if they can’t get their spouse qualified for Medicaid they will have to spend down all the assets they have for the spouse’s care—leaving the healthy spouse penniless. 

Torn between the spouse’s need for care and concerns about insolvency in old age, the healthy spouse faces intense mental and emotional strain. For many people past the age of retirement, this is their ultimate fear. 

Solution: a QIT will divert some of the income they receive to the nursing home, and help get the spouse qualified for Medicaid, which will cover the remaining cost of the care. This is a huge relief to the healthy spouse, who is not forced to sell the house or spend down all their assets!

Your Parent Needs Long Term Care

Another scenario we often see is an adult child trying to find care for their single parent. They find out that the parent receives too much income to qualify for Medicaid, but the parent’s assets will only cover a few months of long-term care. The child is devoted to the parent, but now they are looking at taking out a second mortgage, early withdrawing from their own retirement account, or taking on the caregiving responsibilities themself—something for which they neither have the time nor expertise.

This puts enormous strain on the adult child. It often causes tension in their own household, family, and marriage. It also produces a trickle-down cycle of impoverishment from one generation to the next.

Solution: luckily, the QIT can qualify the parent for Medicaid. Some of the parent’s income will be diverted to the nursing home, and the adult child will not bear the large financial burden of paying for the care!

If you’re facing a situation like this—or any time income ‘disqualifies’ you or a loved one from Medicaid for long-term care—a QIT will allow you to qualify for Medicaid and preserve the assets you worked so hard to earn. 

What are my next steps?

If you would like to apply or reapply for Medicaid, your next step is to get a QIT.

Medicaid may cover past medical expenses, schedule a consultation to see if you can have those expenses reimbursed. If you have all the documentation, we can prepare your application in a matter of days.

If you need Medicaid for long-term care and don’t want to be denied, Holman Law provides expert advice on Qualified Income Trusts and long-term care planning. Schedule a free consultation today.