A new change to Indiana Medicaid is set to take affect June 1, 2014.  This change requires Medicaid recipients earning a monthly income greater than $2,163 to establish a Qualified Income Trust, also called a Miller Trust, in order to remain eligible for Medicaid benefits.  The purpose of this trust is to meet the requirements of 42 U.S.C. 1396p(d)(4)(B), as a trust that receives special treatment to allow persons in income cap states to qualify for Medicaid benefits even though their income is in excess of the income cap.
With a Miller Trust, Medicaid recipients are required to place the portion of their gross income over $2,163 (for 2014) into a separate trust bank account each month.  The trust account will be used to pay Medicaid liabilities as well as any other medical expenses not covered by Medicaid or other insurance.  Using gross income (and stopping federal and state income tax withholding from pensions and other income sources) may pose a tax issue, but most Medicaid Nursing Home recipients’ medical expenses, including facility costs, are deductible for both federal and Indiana tax purposes.  In Indiana, a qualified Medicaid recipient may utilize the Human Services Tax Deduction.  For these reasons, it is recommended no estimated tax payments be made or taxes be withheld from monthly income.