There are two particular pathways, or groups, that you should be aware of because they are the ones most commonly used to make people eligible for Medicaid long-term care services. These groups are the special income level group, and the medically needy.
To be eligible for Medicaid, you must have limited income and assets.
The amount of income you can have varies by state, and also varies depending on which eligibility groups each state covers. When the state determines your financial eligibility for Medicaid, the state will count some of your income, but not all of it. Your income includes these sources:
- Regular benefit payments such as Social Security retirement or disability payments
- Veterans benefits
- Interest from bank accounts and certificates of deposit
- Dividends from stocks and bonds
However, Medicaid generally does not count such things as:
- Nutritional assistance such as food stamps
- Housing assistance provided by the federal government
- Home energy assistance
- Some of your earnings if you have earned income from work you do
Medicaid will count payments to which you are entitled even if you don’t receive all of the payment. For example, if you have earnings from which income taxes are withheld, Medicaid will count the entire amount of your earnings, including the amount that is withheld for taxes. If you and your spouse receive joint payments, such as rental income, the state allocates half to you and half to your spouse.
Special Income Level Group
The special income level group is an optional group for states, meaning that states can choose to cover or not cover this group. Over 40 states have chosen to cover this group, though, so it is widely available as a pathway to receiving long-term care services under Medicaid. This is an important group for you to know about because it is aimed specifically at people who need long-term care services.
To be eligible under this group a person must meet the general eligibility requirements, such as being aged, blind or disabled. The person must also be in an institution such as a nursing home for at least 30 consecutive days.
The amount of income a person can have is quite high, up to $2,130 a month in 2013. That is three times higher than the amount of income a person can have ($710 a month in 2013) and be eligible for Medicaid because he or she is receiving SSI benefits. The amount of countable assets a person can have is similar to other pathways, about $2,000 for an individual.
Once a state has determined that someone is eligible under the special income level group, eligibility starts at the beginning of the 30 days the person must be in an institution. That means that Medicaid can pay for all of the care you receive from the beginning of your stay in the nursing home.
Although the special income level group is aimed at people who are in institutions such as nursing homes, states can use the same rules to make people eligible for home and community-based services. This means that people with higher incomes can get long-term care services while still living in their own homes.
Because the amount of income you can have under the special income level group is higher than other pathways to Medicaid eligibility, you may be required to pay for part of your long-term care services out of your own income. See the section titled “Share of Cost” for more information about this.
Like the special income level group, coverage of the medically needy is an option for states. Thirty-three states choose to cover the medically needy, which is not as many as cover the special income level group. But, this is still an important group for you to know about because in states which cover the medically needy, people with high incomes and high medical expenses can still be eligible for Medicaid long-term care services.
People who are eligible as medically needy have too much income to qualify for Medicaid through any other pathway. But, they can still qualify for Medicaid as medically needy by “spending down” the income that is above their state’s income limit.
Spending Down to Become Eligible as Medically Needy
A person spends down his or her excess income to the state’s medically needy limit by incurring medical expenses, such as doctor visits, prescription drugs, or anything else the state considers to be medical or remedial care. It is important to understand that the person does not actually have to pay an expense for it to count as an incurred expense. The person only has to incur the obligation to pay the expense.
The medical expenses the person has incurred are then subtracted from his or her income. If the remaining income does not exceed the state’s income limit, the person is eligible as medically needy.
The medically needy income limit varies considerably from state to state. In most of the states that cover the medically needy, the income limit for an individual is less than $500 a month.
As an example of how this works, Mr. George has income of $1,000, which is too high to qualify for Medicaid in his state unless he can qualify as medically needy. His state has a medically needy income limit of $400 a month. That means Mr. George has a spenddown liability, or spenddown amount, of $600, which is the difference between his income and the state’s income limit.
But, Mr. George also has incurred medical expenses of $600. The state will subtract that $600 in medical bills from his $1,000 in income, leaving him with $400 in countable income for the month. Since his countable income is no higher than the state’s income limit of $400, Mr. George can be eligible for Medicaid as medically needy.
For a person with high income, the spenddown liability can be considerable. But, a person receiving long-term care services, particularly as an inpatient in a nursing home, can incur enough expenses very quickly because nursing home care is very expensive.
It is important to understand that even though Mr. George is now eligible for Medicaid, the program will only pay for the medical care he receives after he has met his spenddown liability. In our example, Mr. George’s spenddown liability is $600. Medicaid cannot pay that $600 on behalf of Mr. George. However, Medicaid will pay for medical care beyond that $600.
Income-Only or Miller Trusts
In states that do not have an Medically Needy Program, Medicaid applicants often use a trust to effectively lower their countable income below the state limit. Income-only trusts, often called Miller trusts, are trusts that can be established by or for a person of any age, regardless of whether the person is disabled. The trust can be funded only with the person’s income, such as Social Security benefits, pensions, etc. It cannot be funded with assets such as money from a bank account or the sale of stocks or bonds. And, like a special needs trust or pooled trust, a Miller trust must contain a clause that says that upon the death of the person for whom the trust is established, any funds remaining in the trust must be paid to the state Medicaid program, up to the amount the program paid for services on behalf of the person.
Not all states recognize Miller trusts. If your state covers nursing home care for the medically needy, the state will not recognize a Miller trust. However, the other two trusts we described are recognized in all states.