Recently, the Division of Medical Assistance and Health Services (DMAHS), the division of the New Jersey government responsible for administering New Jersey’s Medicaid program, published informal rules implementing the biggest change to New Jersey’s Medicaid program to take place in the past twenty years. Medicaid is a health insurance program for needy individuals. Unlike private health insurance, Medicaid will pay for long-term care, such as care in a nursing home or assisted living residence.

In order to qualify for Medicaid benefits, a Medicaid beneficiary must have limited resources and income that is insufficient to pay for his care. For instance, if Mr. Smith were residing in a nursing home that cost $10,000 a month and his income were $3,000 a month, then his income would be insufficient to pay for his care.

Currently, New Jersey has two programs of Medicaid that will pay for long-term care in a nursing home, an assisted living residence, or at home—one program is called Medically Needy Medicaid and the other is called Medicaid Only Medicaid. The Medically Needy program permits a Medicaid beneficiary to retain up to $4,000 in assets and does not have an income cap. The Medicaid Only program permits a Medicaid beneficiary to retain up to $2,000 in assets and has an income cap of $2,163, meaning that the beneficiary’s monthly income cannot exceed $2,163 in order for him to qualify for the program.

The Medically Needy program will only pay for care in a nursing home. The Medicaid Only program will pay for care in a nursing home, an assisted living residence, or at home. So, under the current Medicaid programs, if an individual is residing at home or in an assisted living residence and his income exceeds $2,163 per month, then he cannot qualify for Medicaid benefits.

The big change that is coming to New Jersey’s Medicaid program is the elimination of the Medically Needy program and the implementation of a single program that permits the use of a Qualified Income Trust (QIT) for income that exceeds the income cap. A QIT permits a Medicaid beneficiary whose income exceeds $2,163 per month to place his income in the trust and qualify for Medicaid benefits. This change offers Medicaid benefits to a whole new category of people in this state.

For instance, assume Mr. Smith is residing in an assisted living residence and his income is $3,000 a month ($1,500 from Social Security and $1,500 from a pension). Under the current programs of Medicaid, he could not qualify for Medicaid benefits because his income exceeds $2,163 per month and Medically Needy Medicaid does not pay for care in an assisted living residence; however, once the QIT is implemented, he will be able to qualify because his pension income ($1,500) could be placed in the QIT and would not be counted against him any longer.

Recently, DMAHS published informal rules regarding QITs and provided a template trust document. This information can be found at http://www.state.nj.us/humanservices/dmahs/clients/mtrusts.html. If your income exceeds $2,163 and you are looking to qualify for Medicaid benefits, I encourage you to visit this site.

Medicaid rules and eligibility requirements can change quickly, often affecting long-term care planning strategies families have relied on for years. Staying informed about these changes early may help avoid unnecessary financial stress and last-minute planning decisions.