There’s a common misperception that Medicaid is only for poor and low-income seniors. But actually, with a little proper and thoughtful estate planning, all but the very wealthiest people can often qualify for program benefits.
In 1965, Congress established the Medicare program to enhance insurance coverage and ensure greater financial solvency for seniors — regardless of income, current health status or past medical history. At the same time, they outlined parameters for Medicaid —a state-managed, means-based program to provide additional coverage to low-income and disabled individuals and families.
Unlike Medicare, however, Medicaid is not a federally run program. Operating within broad federal guidelines, each individual state decides its own Medicaid eligibility criteria, eligible coverage groups, services covered, administrative and operating procedures, and payment levels.
What makes the Medicaid program especially attractive, however, is its ability to cover long-term nursing home care costs and many home health care costs — things not covered by Medicare. Imagine working, saving and investing over a lifetime, only to see your wealth quickly wiped out by the costs of long-term care — assets that otherwise could provide a meaningful legacy to your family.
Strategies to meet income requirements
Given both the cost and growing need for long-term care, Medicaid has become a highly prized benefit, providing coverage for long-term nursing care as well as many home health services. But the current income limit for Medicaid waivers in most (but not all) states is $2,382/month ($28,584 per year) per individual.
If your income exceeds your state’s Medicaid eligibility threshold, there are two commonly used trusts that can be used to divert excess income in order to maintain your program eligibility:
- Qualified Income Trusts (QITs): Also known as a “Miller trust,” this is an irrevocable trust into which your income is deposited and subsequently controlled by a trustee whom you select. There are very tight restrictions on what the income placed in the trust can be used for (e.g., both a personal and if applicable a spousal “needs allowance,” as well as any medical care costs, including the cost of private health insurance premiums). But because the funds are legally owned by the trust (rather than you individually), they no longer count against your Medicaid income eligibility.
- Pooled Income Trusts: Similar to QITs, these are irrevocable trusts into which your “surplus income” can be diverted to maintain Medicaid eligibility. In order to take advantage of a pooled income trust, however, you must qualify as disabled. Your income is pooled …….