For those seeking Medicaid coverage to pay for their care in a skilled care setting, like a nursing home, the Medicaid process can be daunting. For institutional Medicaid approval, an applicant must prove that they are categorically, medically, and financially eligible. In a skilled care setting, the first and second criteria tend to be easier to prove – if the applicant is a U.S. citizen and needs the skilled care, generally, they will be both categorically and medically eligible. However, financial eligibility often hinges on assistance from friends, family, and even facility staff. Without involved family and proper legal agents, nursing home residents are often ill-equipped to gather the proof that the state requires to show eligibility. For some, especially those who have diagnoses that limit their mental capacity, it can be impossible.
All applicants for institutional/nursing home Medicaid must prove that they are financially eligible by proving they are both “income” and “resource” eligible. In practice, this means that applicants must provide their state Medicaid agency with a bevy of documents – proof of gross income, bank statements, life insurance policies, settlement documents from real property sales, and anything else that the state may consider an asset. To prove “resource” eligibility, an applicant must prove that their total countable assets are below their respective state’s threshold, which varies but is generally between $2,000 and $4,000. To prove “income” eligibility, the applicant must prove that their monthly gross income is below the income limit, which is the same across most states. In 2025, the income limit in most states is $2,901. For those whose monthly income exceeds that limit, they are subject to their state’s income reduction method to become “income” eligible. Once the applicants’ income is established, they are required to pay their income, minus some deductions, toward their care each month. Medicaid covers the remaining balance at a rate set by the state.
Enter: the Miller Trust.
As of 2025, 18 states are known as “income-cap” states because they use an income-reduction methodology known as the Qualified Income Trust, or the Miller Trust. The latter name comes from the court case that created that type of trust, Miller v. Ibarra, 746 F. Supp 19 (D. Colo. 1990). At that time, some states did not offer any route to income eligibility for those whose income exceeded the limit. In Miller, the plaintiffs, four elderly, infirmed, mentally incompetent Medicaid applicants, through their representatives and attorneys, created a solution to what was then called the “Utah Gap.” As described by the Court, the “Utah Gap” is when applicants’ “incomes are too low to enable them to pay their own nursing home costs, but too high to qualify for Medicaid benefits…[they] are not allowed to pay as much as they can, and have Medicaid pay the balance, but instead are totally disqualified for any Medicaid assistance.” Miller at 20. Since 1990, these “income-cap” states require that any applicant who is above the income limit create a Miller Trust to become income eligible.
The trust functions by funneling a portion of the applicant’s income into the trust and then making payments toward their care at the nursing home directly from the trust. The amount in the trust must be enough so that the income that does not travel through the trust is below the income limit. That trust must be established and funded before the applicant is eligible to receive any benefits. For most of the population, this method is time and labor-intensive, but possible. The applicant can have an attorney, legal agent, or even family member serve as trustee, set up the trust in a local bank, and have their income deposited and withdrawn from that trust each month. However, this method only works when an applicant has both (1) a capable trustee, and (2) the mental competency to sign a trust agreement. When dealing with nursing home residents applying for Medicaid benefits, neither is a reliable assumption.
Our law firm represents long-term care facilities, and we often assist with securing Medicaid approval for residents at those facilities. Time and time again, I encounter residents without any friends or family involved in their care and with diagnoses that reduce or eliminate their decision-making capacity. These residents often have very little in the way of assets and no way to pay for their care. However, they might still receive Social Security Income and a small pension or retirement that puts them over the income limit. In income-cap states, that means they are not Medicaid eligible and can only become eligible if they create a Miller Trust. The problem is that, without mental capacity or a legal agent, the resident cannot create the trust. So, they do not receive benefits. The resident incurs a debt, the facility incurs substantial unpaid costs, and both parties are helpless to stop it. Often, the facility voluntarily takes on the cost of having a Guardian or Conservator appointed for the resident, just to sign the trust documents. The kicker is this: until the day that Guardian or Conservator signs the trust, that applicant is not eligible. Despite the applicant’s disability and the fact that the disability prevents him or her from taking the necessary action, these income-cap states will not grant retroactive coverage.
If you think this seems to fly in the face of the Americans with Disabilities Act, you are not alone. My colleagues and I have taken cases on appeal in several income-cap states for denied coverage for mentally incompetent, income-ineligible applicants. While we’ve made gains on individual cases, the administrative law in these states hasn’t changed and agencies and courts generally take the position that the Medicaid regulations are clear and do not allow exceptions or retroactive coverage in these circumstances.
As a result, the neediest applicants - those with no family, no funds, and limited cognitive capacity - become the riskiest admissions for skilled care facilities trying to minimize bad debt. When admitted, these residents often incur debt in the tens of thousands simply because they are prevented from complying with the state’s rigorous Medicaid requirements.
If not Miller, then what?
If Miller Trusts are not a viable solution to protect those who are most desperately in need of assistance, what is the possible alternative? Here, we look to the programs employed in the other 32 states and D.C., often referred to as “medically needy” states. While each of these states creates slightly different approaches to the problem, the thought process is the same: the more income applicants receive, the more they pay toward their care. In other words, if a nursing home resident is receiving Medicaid benefits and has $2,600 in income each month, she might pay about $2,500 toward her care. If another resident receives $4,600 in income, he would pay about $4,500. Astonishing creativity, right?
For anyone who practices in this area or works with Medicaid regularly, this solution is painfully obvious. The shell game that is the Miller Trust does not benefit the nursing home, does not benefit the applicant, and does not (at least, directly) benefit the state. Then, why do 18 states deny benefits unless the applicant navigates this convoluted prerequisite? One can only speculate, though it seems to be a feature, not a bug, that Medicaid denials for income-ineligibility are much higher in income-cap states. What is clear is that the use of the Miller Trust is unnecessary, inefficient, and burdensome for the most competent and prepared of applicants. For those institutionalized applicants who do not have a support system or the ability to make decisions for themselves, it is a punitive barrier to receiving the care and support that they desperately need. The Miller trust was designed as a limited and temporary stopgap measure – a rope bridge to help some applicants cross the Utah Gap. In income-cap states, applicants have spent 35 years traversing the fraying rope and missing planks in the Miller Trust bridge. It is time to fix the Gap for good.
