Introduction
Monthly payouts from Social Security, pensions, retirement accounts, annuities and more all count toward Medicaid’s eligibility income limit. Some seniors end up over their limit, but not enough over it to pay for their own long-term care. It may seem like these seniors are stuck in a no-win situation, but they can still qualify for Medicaid and get the care they need by using a Qualified Income Trust or the Medically Needy Pathway.
To maintain their Medicaid eligibility using a Qualified Income Trust (QIT), seniors simply deposit their excess income into the trust on a monthly basis until they reach their income limit, which is $2,982/month for an individual in most states in 2026. Some states put a limit on how much income one can deposit into a QIT, while others do not. However, there is a pragmatic limit – seniors with enough income to pay for their own care should do so rather than try to qualify for Medicaid using a QIT.
For those who need nursing home care, that’s probably anywhere from $7,000 to $15,000 per month depending on location. For seniors receiving long-term care at home, they would need enough income to pay for their care and their living expenses, which can both vary dramatically by need and location. The cost of a nursing home includes room and board, as does Medicaid’s nursing home coverage. But room and board expenses are not covered by Medicaid’s Home and Community Based Services (HCBS) Waivers, which provide long-term care in beneficiaries’ homes and the homes of loved ones.
In some states, HCBS Waivers cover long-term care in assisted living facilities, adult group homes, adult foster homes and memory care units for Alzheimer’s disease and other dementias, but it does not pay for room and board in any of those locations, either.
The money in QITs can only be used for a few, specific purposes. It can pay for medical expenses not covered by Medicaid. It can provide the beneficiary with a Personal Needs Allowance, which is between $30 and $200 depending on the state. And, if applicable, it can be used to provide a low-income spouse with a Monthly Maintenance Needs Allowance, which could be up to $4,066.50/month in 2026 depending on the state and the couple’s financial situation. After the Medicaid beneficiary’s death, all of the money left in the QIT must be given to the state.
As we just mentioned, the state must be named the beneficiary in a QIT used for Medicaid purposes. These trusts also must be irrevocable and have a manager who is someone other than Medicaid applicant/beneficiary in order to meet Medicaid standards. QITs are called different names in some states, including Miller Trusts, Income Trusts, Income Cap Trusts, Income Diversion Trusts, Irrevocable Income Trusts and Income Only Trusts.
States that allow seniors to use QITs for Medicaid eligibility purposes are known as Income Cap States. As of 2026, these are – Alabama, Alaska, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Idaho, Indiana, Iowa, Kentucky, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas and Wyoming.
In states that offer the Medically Needy Pathway, seniors can spend down their excess income on medical bills to maintain their Medicaid eligibility. The amount of excess they must spend down depends on their income and their state’s Medically Needy Income Limit. Each state also has a spend down period, which is one or six months in most states.
The entire process works like an insurance deductible – seniors must spend down their required amount on medical bills during each spend down period in order to be eligible. After they meet their spend down amount, Medicaid covers their medical expenses for the rest of the period. And the process starts again the next period.
Seniors can spend on the following expenses to meet their spend down amount:
• Nursing home care
• Prescription medication
• Medical equipment
• Eyeglasses
• Assistance with the Activities of Daily Living (mobility, bathing, dressing, eating, toileting)
• Doctor bills
• Hospital services
• Therapies
• Transportation to medical appointments
Determining whether or not the Medically Needy Pathway makes sense for seniors over the income limit depends on several individual variables, like the beneficiary’s income, medical expenses, level of care needs and the Medically Needy Income Limit in their state. We recommend seniors consult with our team of professionals before attempting to determine if the Medically Needy Pathway is right for them.
The following states offer the Medically Needy Pathway as of 2026: Arkansas, California, Connecticut, Florida, Georgia, Hawaii, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Pennsylvania, Rhode Island, Utah, Vermont, Virginia, Washington, West Virginia and Wisconsin, as well as the District of Columbia.
The Medically Needy Pathway can be used with Medicaid’s nursing home coverage, HCBS Waivers, and/or regular Medicaid for seniors, depending on the state. Some states offer it to applicants/beneficiaries in all three programs, other states only make it available to applicants/beneficiaries in just one or two of those programs.
