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The New Rules in Indiana

by Kevin G. Harvey May, 2014

Lori and her spouse Marvin lived in a small apartment the last few years of Marvin’s life. With few assets, the couple paid their living expenses with Social Security and pension income. During those years, Lori developed dementia. It was Marvin’s care of Lori that enabled her to continue to live with him in their apartment.

After Marvin’s death, Lori’s children made the difficult decision to move her into a nursing home. Lori had less than $1,500 in assets, so her children thought she would qualify for Medicaid. However, during the admission process, they learned about the other Medicaid qualification issue: Lori’s monthly income could not exceed $2,163 per month. This was a problem, because with Social Security, her pension, and her survivor benefits from Marvin’s pension, Lori’s total monthly income was $2,430. But without Medicaid, how would Lori’s monthly nursing home bill of $5,500 be paid?

Until recently, this problem of excess income in Indiana would be resolved with a monthly “spend down”, meaning that the first $267 of Lori’s monthly income would be used to pay for her medical expenses to get her to the $2,163 level. The remaining $2,163 in monthly income would then be applied to the nursing home bill of $5,500, and the remainder of $3,337 would be paid to the nursing home by the Indiana Family Social Services Administration (the “FSSA”) through Indiana’s Medicaid program.

However, certain aspects of the Affordable Health Care Act have now enabled Indiana to move away from the income spend down model to the use of the “Miller trust”. A Miller trust, or qualified income trust, is a trust established to be the recipient of a person’s excess monthly income to enable Medicaid qualification. Instead of a monthly spend down, the excess monthly income is retained in the Miller trust. Upon the death of the Medicaid recipient, the balance in the Miller trust is then paid to the State of Indiana to reimburse the State for Medicaid benefits paid during the recipient’s life time. If any funds remain after that payment, the remaining funds can then be distributed consistent with the recipient’s estate plan.

The switch from the income spend down model to the use of the Miller trust is effective in Indiana on June 1, 2014. Thus, if you or a family member face admission into a long term care facility in the future and assets are not an issue for Medicaid qualification, but monthly income is in excess of $2,163, the establishment of a Miller trust will be required to qualify for Medicaid.

There will be changes to asset limitations for Medicaid qualification in Indiana effective June 1, 2014, as well. The asset limit of $1,500 for a single person will increase to $2,000, and the asset limit of $2,250 for a married couple (when both are receiving Medicaid) will increase to $3,000.

Indiana also has spousal impoverishment laws that protect a married couple when only one spouse requires long term care. If one spouse is in a long term care facility and the other still lives in the community, the “community” spouse can retain one-half of “non-exempt” assets up to a total of $117,240 or at least a minimum of $23,448 (effective January 1, 2014) – and the spouse in the long term care facility can retain up to $2,000 (effective June 1, 2014) and qualify for Medicaid. (A house, its contents, and one vehicle are “exempt” assets and do not count against the $117,240 limit for the community spouse).

The law firm of Allen Wellman Harvey Keyes Cooley, LLP, has attorneys who can assist you with establishing a Miller trust, to assist with your estate planning, and to advise you regarding issues you or your family may face if a loved one requires long term care assistance.