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Falling Into the “Gap” – How A Qualified Income Trust Works

The Florida Institutional Care Program (ICP) is a Medicaid program that helps people in nursing facilities pay for the cost of their care while also providing general medical coverage.  In Florida, the ICP is managed by the Florida Department of Children and Families (DCF).  Services for ICP are provided by participating skilled nursing facilities that are reimbursed according to state formulas.  To qualify for Medicaid benefits for nursing home care under the ICP, an applicant must meet three eligibility requirements: categorical, resource, and income.

The categorical requirements for ICP are as follows: individuals must (1) be a U.S. citizen or resident alien, (2) be a Florida resident, and (3) have medical needs requiring skilled, care to be eligible to participate in the program.

The resource requirements for Medicaid eligibility provide that a Medicaid applicant cannot own countable resources over $2,000.  Resources, which are assets, are divided into two categories, countable and exempt.  Exempt resources are those assets which a person is allowed to own and the value of which is not counted in determining Medicaid eligibility.  Most assets are countable.  However, assets such as a personal residence, an automobile, limited amounts of personal property, small life insurance policies, burial plans, and income producing property may be exempt under the proper circumstances.

The income requirement provides that a Medicaid applicant’s gross monthly income cannot exceed $2,022 per month (the “income cap”).  If income exceeds this amount, the applicant falls into what is known as the”Gap” or the “Utah Gap.”  The “Gap” refers to a situation in which a Medicaid applicant has an income stream that is higher than the Medicaid income cap of $2,022 per month, yet is less than the monthly cost of a nursing home, which can often exceed $6,000 per month, depending on the facility and location.

If a Medicaid applicant’s income exceeds the $2,022 restriction, the answer to achieve qualification is the formation of a Florida “Qualified Income Trust” (QIT) or “Miller Trust.”  The QIT is designed to hold the monthly income of the Medicaid applicant that exceeds the eligibility criteria.  The trust income is then disposed of in accordance with the directives of the DCF after the applicant has applied for Medicaid and been approved.  Generally speaking, the applicant will be allowed to retain $35 per month of the trust income; may be entitled to divert some of the trust income to the community (well) spouse if the spouse’s monthly income is less than $1,822 per month; and may pay a fixed amount towards the patient’s responsibility for nursing home care.  In the event that there are excess funds remaining in the trust after the applicant dies, Florida Medicaid is named as a beneficiary and is entitled to reimbursement from those funds.

There are very specific rules that must be followed for the trust.  For example, the QIT must be properly managed and payments must be made each month to maintain eligibility.  To this end, it is not uncommon for the Florida Agency for Healthcare Administration (AHCA) to audit a QIT as often as every 3 to 6 months.  Unfortunately, the QIT is often established and administered improperly and there are numerous Fair Hearing Rulings that have denied Medicaid benefits due to faulty trust language and/or trust administration.  Sometimes, these rulings have denied benefits retroactively.  In other words, the individual or their family had to reimburse the State for the care they received.