Using Medicaid to Cover Services for Elderly Persons in Residential Care Settings: State Policy Maker and Stakeholder Views in Six States. Income Supplementation by Family Members or Trusts for Payment of Room and Board


When the beneficiary is unable to pay all room and board costs, family members may be willing to help pay them and other expenses not covered by Medicaid. A trust's funds may also be used to help pay for a beneficiary's costs not covered by Medicaid. However, families and trustees need to be aware of how any funds they contribute may affect beneficiaries' eligibility for various benefits (and therefore their net living standard). Any amount paid can reduce the recipient's SSI benefit--and in the worst-case scenario cause the recipient to lose SSI altogether, and with it potentially Medicaid as well. This is because SSI rules consider such supplementation in determining the individual's financial eligibility.

If the contribution is paid directly to the SSI beneficiary, it is counted as unearned income--the same as unearned income from any other source--and will reduce the individual's SSI benefit dollar for dollar. However, if the money is paid instead to the assisted living facility on a beneficiary's behalf, it is treated differently. SSI counts payment to the facility as "in-kind" income to the beneficiary and reduces the monthly Federal SSI benefit by up to one-third. Even if the "in-kind" contribution exceeds one-third of the SSI payment, the payment is only reduced by one-third. (See box.)

Medicaid rules follow SSI rules when families give money directly to an individual. That is, the money counts as income just like any other unearned income. Therefore, if the individual is in a Medicaid eligibility group expected to pay a share of the cost of medical services, all a family cash supplement accomplishes is to increase the individual's share and decrease Medicaid's share of that cost. In some cases, as noted, such supplements can result in the individual losing eligibility altogether.

Effect of Income Supplementation on SSI Benefit
Assume that:
  • Room and board charge is $800
  • Individual has no income from other sources
  • Full SSI benefit is $512
  • The first $20 of unearned income is disregarded.

The difference between the SSI benefit and the room and board charge is $288. If the family pays $288 directly to the individual, this amount (minus the $20 disregard) is subtracted from the individual's SSI benefit, leaving only $264. The individual will be even less able to pay room and board costs than without the family's payment.

If the family pays $288 to the facility, then the individual's SSI benefit is reduced by one-third to $341. The family would then have to pay the difference between $341 and $800 (the room and board cost), which is $459. The consequence of the one-third reduction, then, is that the family must increase its supplementation from $288 to $459.

Because the rule states that the SSI payment will be reduced by up to one third, there is no limit on the amount of money that can be paid to a facility on behalf of the SSI beneficiary. If a family chooses, they can subsidize services other than room and board, as well as pay for room and board costs in more expensive facilities, without jeopardizing an individual's eligibility for SSI.

Medicaid also follows SSI rules regarding payments made by the family directly to a facility for room and board. These payments are counted as "in-kind" income, the dollar value of which is determined under special SSI rules. Thus, like a family payment made directly to the individual, the family's payment to the facility can affect Medicaid eligibility as well as increase the individual's share of cost.

If families want to provide support to their family member who can cover room and board expenses, they should directly purchase anything other than food, clothing, and shelter. In an assisted living setting, for example, families could pay for any service not included in the facility rate or covered by Medicaid, such as cable television or personal phone service. In no such case may the state require supplementation.

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