A Golden Tool for Nursing Home Medicaid Eligibility

By Wesley E. Wright and Molly Dear Abshire
(originally published in the Houston Chronicle, 50 Plus Section, April 2001)

The Miller trust is the subject of much confusion in the area of elder law. A Miller trust is a device that is used to divert the income of a prospective applicant for Medicaid in order to make that person eligible for nursing home Medicaid benefits. It is appropriate for an applicant whose income is above the monthly income cap imposed by law for Medicaid eligibility, but where the income is still too low to pay for the monthly nursing home costs.

Texas is effectively an "income cap" state, which means that if an applicant's income for a given month exceeds the cap by one dollar, that applicant is ineligible for Medicaid benefits for the entire month. The cap in Texas is $1,635.00 for 2002. Therefore, if an applicant has, e.g., Social Security and pension income totaling $1,700.00, he or she is ineligible for Medicaid for the month, and will continue to be ineligible for every month thereafter in which his or her income exceeds the cap. Unfortunately, the average cost of nursing care in Texas is $3,500.00 which far exceeds the $1,635.00 cap. In the past, shortfalls like this have caused great hardship for persons in need of benefits.

There is now a solution to this income problem which is acceptable under federal Medicaid law and under Texas Medicaid rules--the Miller trust. The Miller trust is named after the lawsuit in which this type of trust originated. Basically, a Miller trust is used as a receptacle for the applicant's income. If the trust is properly drafted to meet all the legal requirements and to conform to TDHS policy, then the income placed in the trust does not count as income to the applicant. Thus, his or her income is below the cap, and he or she can qualify for Medicaid, assuming he or she meets all of the other requirements to be eligible for Medicaid.

Typically a family member of the Medicaid applicant is named as the trustee who has the responsibility of administering the trust bank account and the maintenance of adequate records. Each month, the trustee writes checks on the trust account according to the trust terms and guidelines provided by TDHS. The recipient is allowed a $60 personal needs allowance, so this amount will be distributed to him or her by the trustee. If the recipient has a spouse living in the community whose own income is below the minimum level recognized by TDHS, then the trustee may be authorized make a distribution to the spouse from the trust to bring the spouse's income up to the minimum level. Certain other distributions may be made in limited circumstances. The balance of the income, if there is any left, will be paid by the trustee to the nursing home as "applied income" toward the cost of care. Medicaid then pays the balance of the bill for care.

A new federal law was passed by Congress which codified the Miller trust and as a result, it is now also referred to as a Qualified Income Trust or QIT. People frequently get confused as to what the Miller trust will actually do for them. Pay close attention to the following and you will have the key to this mystery: A Miller trust is designed to solve only income problems. It is not effective to qualify a person who has excess resources as defined under Medicaid rules. Persons with excess resources must use other techniques to become eligible for Medicaid.