In Texas, Medicaid has an income cap. For 2020, the income cap is $2,349 per month. The applicant’s gross monthly income must be below the cap in order to qualify. The cap amount typically changes on annual basis to account for inflation and cost of living adjustments.
But how does Medicaid calculate a person’s income? To answer that question, we will first need to explore what Medicaid considers income. Medicaid policy defines income as “The receipt of any property or service a person can apply, either directly or by sale or conversion, to meet basic needs for food and shelter.”
Medicaid categorizes income types as either “earned” or “unearned.” Earned income is typically wages, net earnings from self-employment, or farm income. Unearned income is social security, retirement, annuities, pensions, interest, VA income, and insurance payments.
Income can also take the form of dividends, distributions, or interest payments from investments. If the person owns stocks, bonds, or mutual funds, payments the person receives throughout the year from these investments are typically counted as income. Similarly, payments the person receives from third parties under a loan agreement or promissory note (such as in an seller-financed sale of real estate) also count as income. Rent payments from rental properties the person owns also count as income.
There is an income limit for an unmarried applicant. As of January 2020, if a client’s total monthly income exceeds $2,349, they are ineligible for Medicaid unless they create a Qualified Income Trust or “QIT.” Medicaid also applies a $20 general exclusion to a client’s total income.
- Example: Joe requires long-term care Medicaid. His monthly income includes Social Security retirement of $1,289 and a pension of $1,072. At first glance, Joe’s total countable income is $2,361. This means Joe is income-ineligible for Medicaid. However, Medicaid will deduct the $20 general exclusion, bringing Joe’scountable income to $2,341. Joe is below the income cap and is eligible for Medicaid without a QIT.
“Applied income” is a technical term in Medicaid planning. It means Applicant’s net income of a after all permitted deductions. Typically, the applied income is what the person will pay the nursing home each month as a co-payment. Medicaid will pay the gap between applied income and the nursing home’s monthly charges.
Income for Married Couples
What if Joe had a spouse? Does Karen’s separate social security income and pension affect her husband Medicaid eligibility?
Medicaid allows what is called a spousal diversion. A spousal diversion is when the institutional spouse (Joe) gives the community spouse (Karen) all or a portion of his income so that Karen may live comfortably in the community. How much Karen gets to divert from Joe’s income is determined by Medicaid and subject to change at least annually. For 2020, the diversion amount may not exceed $3,216 per month.
Joe can still qualify for Medicaid even if Karen’s monthly income exceeds the $3,216 cap. But Joe cannot divert any of his income to Karen and must pay all his income (minus the $60 for his personal needs) to the facility as a monthly co-payment.
- Example: Joe’s countable total income from social security and his pension is $2,341. Karen’s total countable income from social secuirty and two pensions 401(k) is $4,270. Because Karen’s income exceeds the cap of $3,216, Joe cannot give Karen any of his monthly income. Joe’s nursing home co-payment is $2,281 ($2,341 - $60 = $2,281).
- Example: If Karen has only $1,005 in social security and no other income, Joe can make a spousal diversion. Joe may give Karen $2,211 per month ($3,216 - $1,005 = $2,211). This leaves Joe with $130 left a month in income. His nursing home co-payment would be$70 ($130 - $60 = $70).
Infrequent or irregular income
It is not uncommon for Medicaid applicants to have infrequent or irregular income. For example, a person may receive interest, dividends, or royalties sporadically throughout the year. This income typically counts towards the person’s monthly income limit. But in some cases the income is excluded – meaning it does not count for determining Medicaid eligibility. The amount of the income determines whether it counts towards eligibility. If the total amount of infrequent income from all sources per calendar quarter is greater than $30 for earned income or $60 or unearned income, Medicaid will count the amount that exceeds the $30 or $60 in determining eligibility.
The truth is, there are several different Medicaid policies regarding income that could apply to your case. Contact the Michels Law Firm today to speak to an experienced elder law attorney about how you and your loved one can qualify for Medicaid.