Too Much Income? Medicaid May Still Be An Option

JUNE 9, 1997 VOLUME 4, NUMBER 49

Nursing home costs are high. In Tucson, the current price for a nursing home stay will typically be between $3,000 and $3,500 per month, and can increase above those levels if any “extra” care is required.

What about the patient who does not have income sufficient to pay $3,500 per month? She is expected to use up personal savings to make the difference. What happens when savings run out? Usually, the federal-state Medicaid program steps in to pick up the difference between income and nursing home costs.

Arizona is one of a minority of states (twenty, at last count) which also imposes an “income cap” on Medicaid eligibility. In other words, the nursing home resident who earns more than $1,452 per month in pension and Social Security will not qualify for assistance with nursing home care costs. That means that a disabled senior receiving, say, $1,500 in Social Security and pension income will not be able to pay the $3,500 monthly nursing home bill, and yet will not qualify for Medicaid assistance. What happens to such patients?

Prior to Congress’ adoption of the Omnibus Budget and Reconciliation Act of 1993 (“OBRA’93”), patients with “too much” income had few choices: move to one of the states without an income cap (like California), move out of the nursing home or rely on family to supplement payments. For the past three years there has been another option–the so-called “Miller” trust.

OBRA’93 required every state to formally recognize trusts established according to specific rules, and to ignore income assigned to such trusts when considering eligibility for Medicaid. The model for this kind of trust came from a 1990 Colorado case, Miller v. Ibarra, and so it is popularly referred to as “Miller” trusts, though they often go by the more formal names “Qualified Income” or “Income Cap” trust.

“Miller” trusts must provide that all income received be available to pay the patient’s personal needs allowance, family allowances and Medicaid share of cost. Upon the death of the Medicaid recipient, the leftover funds (if there are any, and there should not be) must revert to the state. But with these simple restrictions, the effect is magical: income assigned to the “Miller” trust is simply not income for Medicaid eligibility calculations.

Why doesn’t every over-income Medicaid candidate create a “Miller” trust? Many are unaware of the option, and make other arrangements for their care. In other words, family members take patients home and devote their lives to caretaking tasks they are not trained or qualified to perform, or move the patients to other states (and on to those states’ Medicaid rolls). Why doesn’t Arizona simply do away with the income cap? Because most people who could qualify do not know about “Miller” trusts, and the State saves hundreds of thousands of Medicaid dollars every year.

One other interesting wrinkle: Arizona takes the position that an assignment of income to a “Miller” trust can cause another kind of problem if the income is too high. Since there is a one-month period of ineligibility assessed for each $2,767.92 given away by a Medicaid applicant, Arizona argues that assigning income in excess of that amount to the “Miller” trust each month creates a perpetual state of ineligibility. There is no authority for this position, other than the State’s assertion, but it will require a Court challenge to invalidate Arizona’s rule. In the meantime, the income cap is effectively $2,767.92 in Arizona, at least for the well-informed.

What is involved in establishing a “Miller” trust? It is a fairly simple process, but it still usually requires the assistance of an experienced attorney. Medicaid rules are very strict regarding what terms must be included in the trust, and even how the trust’s bank account is established. At FLEMING & CURTI, we have considerable expertise with “Miller” trusts.

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