There are various types of Medicaid, each of which has at least somewhat different eligibility requirements.
A familiar type of Medicaid is based upon income. This type of Medicaid is often called “MAGI”, because the income eligibility is based upon what the federal government defines as modified adjusted gross income. This type of Medicaid pays for doctor visits and many prescription medications. About 30% of Ohioans have MAGI Medicaid.
Another type of Medicaid is often called institutional Medicaid. This type of Medicaid pays for long-term care in a nursing home. This type of Medicaid has two similar programs.
One program is called Assisted Living Waiver or ALW. ALW is like institutional Medicaid, except that ALW pays for long-term care in an assisted living facility.
Another program is called Passport. Passport is like ALW and institutional Medicaid, except that Passport pays for long-term care for people who remain living at home.
Institutional Medicaid, ALW and Passport have various eligibility requirements, which include a limitation on the value of assets, limitation on gifting to become asset-eligible and income limitations. This column has previously explained the $2,000 asset limit and the requirement that the applicant not have given anything away in the preceding five years to become that poor.
Institutional Medicaid and its sister programs that pay for long-term care also have an income limit/requirement, commonly called the “special income level.” However, the special income level is calculated and defined differently than the income limit for purposes of MAGI Medicaid eligibility.
If someone has a monthly income less than the current special income limit of $2,742, the person satisfies the income component of these types of Medicaid.
However, the special income limit is practically challenging for many long-term care Medicaid recipients.
For example, the monthly bill to pay for nursing home care out-of-pocket can cost $10,000 in some instances.
Let’s presume that a person with no assets has a monthly retirement income of more than the special income level but less than that person’s monthly out-of-pocket bill of $10,000. This person is in an impossible situation. This person has too much income to be eligible for institutional Medicaid, but this person also has too little income to pay for the person’s level of care necessary to simply live.
Importantly, Medicaid has a workaround in situations where an otherwise eligible applicant for Medicaid has too much monthly income. The workaround is for the applicant to create a special trust (called a “Miller” or “Qualified Income” Trust or “QIT”).
Although a trust, a QIT is essentially used for its separate bank account where the Medicaid recipient places a certain amount of income above the special income level every month. The QIT must specifically provide that the money in the QIT bank account will be used to reimburse Medicaid upon the Medicaid recipient’s death, up to the total medical assistance paid by Medicaid on the eligible recipient’s behalf.
Medicaid’s allowance of the use of a QIT provides a solution to a practical problem without undermining the program’s overall eligibility structure.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at [email protected] or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.
